-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MA9uAF3jfaN4T18FgJurpwDsDXPhFYRQ/BYoHVLgo7x+N2W9erSgIbugSYUwiUpo 0TRPDk7q3ARSuAQV9px7iw== 0001019781-96-000009.txt : 19961118 0001019781-96-000009.hdr.sgml : 19961118 ACCESSION NUMBER: 0001019781-96-000009 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19961114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN SKIING CO CENTRAL INDEX KEY: 0001019293 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AMUSEMENT & RECREATION SERVICES [7900] STATE OF INCORPORATION: MA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-09763 FILM NUMBER: 96663225 BUSINESS ADDRESS: STREET 1: SUNDAY RIVER ACCESS ROAD CITY: BETHEL STATE: MA ZIP: 04217 BUSINESS PHONE: 2078243000 S-4/A 1 S-4 November 12, 1996 Form S-4/A Amendment to Form S-4 filed August 8, 1996 The following are hereby filed electronically in connection with the amendment of the S-4. S-4A, 5.1, 5.2, 5.3, 8.1, 10.60, 10.61, 10.62, 10.63, 12.1, 23.1, 23.2 25.1, 99.1, 99.2, 99.3, 99.4 American Skiing Company Sunday River Skiway Corporation Sunday River Ltd. Perfect Turn, Inc. LBO Holding, Inc. Sunday River Transportation, Inc. Sugarbush Resort Holdings, Inc. Sugarbush Leasing Company Sugarbush Restaurants, Inc. Cranmore, Inc. Mountain Wastewater Treatment, Inc. LBO Hotel Co. S-K-I Limited Killington Ltd. Mount Snow Ltd. Waterville Valley Ski Area, Ltd. Sugarloaf Mountain Corporation Killington Restaurants, Inc. Dover Restaurants, Inc. Resorts Technologies, Inc. Resort Software Services, Inc. Mountainside Sugartech Deerfield Operating Company Pico Ski Area Management Company By: /s/ Leslie B. Otten President As filed with the Securities and Exchange Commission on November 12, 1996 Registration No. 333-9763 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________ AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ________________ AMERICAN SKIING COMPANY and Other Registrants (See Table of Other Registrants Below) (Exact name of each registrant as specified in its charter) Maine 7900 01-0503382 (State of (Primary standard (I.R.S. employer Incorporation) industrial classification identification code number) number) Sunday River Access Road Bethel, Maine 04217 (207) 824-3000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) THOMAS M. RICHARDSON American Skiing Company Sunday River Access Road Bethel, Maine 04217 (207) 824-3000 (Name, address, including zip code, and telephone number, including area code, of agents for service) Copy to: CHRISTOPHER E. HOWARD, ESQ. American Skiing Company Sunday River Access Road Bethel, Maine 04217 (207) 824-3000 ________________ Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: ________________ CALCULATION OF REGISTRATION FEE
Proposed Proposed Title of each Class of Amount Maximum Maximum Amount of Securities to be Registered to be Offering Aggregate Registration Registered Price Offering Price Fee Per (2) Unit(1) 12% Series B Senior $120,000,000 97.165% $116,598,000 $40,206.21 Subordinated Notes due 2006 Guarantees of the 12% Series B Senior Subordinated Notes due $120,000,000 None (2) None (2) None (2) 2006 133/4% Series B Subordinated $39,132,000 51.11% $20,000,365 $6,896.68 Discount Notes due 2007 Guarantees of the 133/4% Series B Subordinated Discount $39,132,000 None (2) None (2) None (2) Notes due 2007 Totals $136,598,365 $47,102.89
(1) Estimated solely for the purpose of computing the registration fee pursuant to Rule 457. (2) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee is payable for the Guarantees. ________________ The registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
Name of Corporation Jurisdiction Primary IRS Employer Address, of Standard Identification Including Zip Incorporation Industrial Number Code and Classificatio Telephone n Number Code Number Including Area Code, of Principal Executive Offices Sunday River Skiway Maine 7900 01-0261489 Sunday River Corporation Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Sunday River Ltd. Maine 6599 01-0456264 Sunday River Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Perfect Turn, Inc. Maine 7900 01-0458495 Sunday River Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 LBO Holding, Inc. Maine 7900 01-0488967 Sunday River Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Sunday River Maine 4000 01-0261489 Sunday River Transportation, Inc. Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Sugarbush Resort Vermont 7900 03-0344431 Sunday River Holdings, Inc. Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Sugarbush Leasing Vermont 7900 03-0344432 Sunday River Company Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Sugarbush Restaurants, Vermont 7900 03-0344820 Sunday River Inc. Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Cranmore, Inc. Maine 7900 02-0481418 Sunday River Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Mountain Wastewater Vermont 4990 03-0313610 Sunday River Treatment, Inc. Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 LBO Hotel Co. Maine 6550 01-0508236 Sunday River Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 S-K-I Limited Delaware 7900 03-0294233 Sunday River Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Killington Ltd. Vermont 7900 03-0195484 Sunday River Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Mount Snow Ltd. Vermont 7900 03-0265116 Sunday River Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Waterville Valley Ski New Hampshire 7900 02-0475701 Sunday River Area, Ltd. Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Sugarloaf Mountain Maine 7900 01-0232195 Sunday River Corporation Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Killington Vermont 7900 03-0218459 Sunday River Restaurants, Inc. Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Dover Restaurants, Vermont 7900 03-0264550 Sunday River Inc. Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Resort Technologies, Vermont 5008 99-0046530 Sunday River Inc. Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Resort Software Vermont 5008 03-0320098 Sunday River Services, Inc. Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Mountainside Maine 6500 01-0288053 Sunday River Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Sugartech Maine 7900 01-0390763 Sunday River Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Deerfield Operating Vermont 7900 03-0332575 Sunday River Company Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Pico Ski Area Vermont 8930 03-0322667 Sunday River Management Company Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000
AMERICAN SKIING COMPANY CROSS REFERENCE SHEET PURSUANT TO ITEM 501(b) OF REGULATION S-K AND RULE 404(a) SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS IN S-4
Registration Statement Item and Heading Prospectus Captions 1. Forepart of Registration Statement and Outside Front Cover Page of Prospectus Forepart of the Registration Statement; Outside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus Inside Front and Outside Back Cover Pages of Prospectus; Available Information 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information Summary; Risk Factors; Selected Historical Financial Data; Pro Forma Financial Data; Certain Federal Income Tax Consequences of the Exchange Offers 4. Terms of the Transaction Summary; The Exchange Offers; Description of Senior Subordinated Notes; Description of Subordinated Notes; Description of the Company's Capital Stock; Description of Other Indebtedness; Certain Federal Income Tax Considerations; Plan of Distribution 5. Pro Forma Financial Information Pro Forma Financial Data 6. Material Contacts with Company Being Acquired Not Applicable 7. Additional Information Required for Reoffering by Persons and Parties Deemed to Not Applicable be Underwriters 8. Interests of Named Experts and Counsel Not Applicable 9. Disclosure of Commission Position on Indemnification for Securities Act Indemnification Liabilities 10. Information With Respect to S-3 Registrants Not Applicable 11. Incorporation of Certain Information by Not Applicable Reference 12. Information with Respect to S-2 or S-3 Not Applicable Registrants 13. Incorporation of Certain Information by Not Applicable Reference 14. Information with Respect to Registrants Other than S-2 or S-3 Registrants Summary; Recent Developments; Risk Factors; Selected Historical Financial Data; Pro Forma Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Industry Overview; Business; Experts 15. Information with Respect to S-3 Companies Not Applicable 16. Information with Respect to S-2 or S-3 Not Applicable Companies 17. Information with Respect to Companies Other than S-2 or S-3 Companies Not Applicable 18. Information if Proxies, Consents or Authorizations are to be Solicited Not Applicable 19. Information if Proxies, Consents or Authorizations are not to be Solicited or in Management; The Exchange Offers an Exchange Offer
PROSPECTUS November 12, 1996 AMERICAN SKIING COMPANY Offer to Exchange its 12% Series B Senior Subordinated Notes due 2006 which have been registered under the Securities Act (Guaranteed by substantially all of its subsidiaries) for any and all of its 12% Series A Senior Subordinated Notes due 2006 (Guaranteed by substantially all of its subsidiaries) Offer to Exchange its 133/4% Series B Subordinated Discount Notes due 2007 which have been registered under the Securities Act (Guaranteed by substantially all of its subsidiaries) for any and all of its 133/4% Series A Subordinated Discount Notes due 2007 (Guaranteed by substantially all of its subsidiaries) Each Exchange Offer will expire at 5:00 p.m., New York Time, on January 15, 1997, unless such Exchange Offer is extended. American Skiing Company, a Maine corporation (the "Company" or "ASC"), hereby offers, upon the terms and subject to the conditions set forth in this Prospectus (as the same may be amended or supplemented from time to time, the "Prospectus") and the accompanying Letter of Transmittal relating to the Old Notes (as defined herein) (the "Notes Letter of Transmittal", which together constitute the "Notes Exchange Offer"), to exchange up to $120,000,000 aggregate principal amount of its 12% Series B Senior Subordinated Notes due 2006 (the "New Notes"), which will have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which this Prospectus is a part, for a like principal amount of its outstanding 12% Series A Senior Subordinated Notes due 2006 (the "Old Notes"), of which $120,000,000 aggregate principal amount are outstanding. The terms of the New Notes are identical in all material respects to the terms of the Old Notes except that (i) the New Notes will have been registered under the Securities Act and thus will not bear restrictive legends restricting their transfer pursuant to the Securities Act and will not be entitled to registration rights and (ii) holders of New Notes will not be entitled to liquidated damages for the Company's failure to register the Old Notes or New Notes under the Registration Rights Agreement (as defined herein). The New Notes will be issued under the same Indenture (as defined herein) as the Old Notes, and the New Notes and the Old Notes will constitute a single series of debt securities under the Indenture. In the event that the Notes Exchange Offer is consummated, any Old Notes which remain outstanding after consummation of the Notes Exchange Offer and the New Notes issued in the Notes Exchange Offer will vote together as a single class for purposes of determining whether holders of the requisite percentage in outstanding principal amount of Notes (as defined herein) have taken certain actions or exercised certain rights under the Indenture. The Old Notes and the New Notes are sometimes referred to herein collectively as the "Notes." THIS PROSPECTUS AND THE RELATED LETTERS OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION. HOLDERS OF OLD NOTES AND OLD SUBORDINATED NOTES (AS DEFINED HEREIN) ARE URGED TO READ THIS PROSPECTUS AND THE RELATED LETTERS OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR OLD NOTES OR OLD SUBORDINATED NOTES PURSUANT TO THE EXCHANGE OFFERS. ________________ See "Risk Factors", commencing on page 30 of this Prospectus, for a discussion of certain factors which should be considered in connection with the Exchange Offers and an investment in the New Notes and the New Subordinated Notes (as defined herein) offered hereby. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ________________ Until February 13, 1997 (90 days after commencement of the Exchange Offers), all dealers effecting transactions in the New Notes and the New Subordinated Notes, whether or not participating in the Exchange Offers, may be required to deliver a Prospectus. The Company also hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and the accompanying Letter of Transmittal relating to the Old Subordinated Notes (as defined herein) (the "Subordinated Notes Letter of Transmittal", which together constitute the "Subordinated Notes Exchange Offer"), to exchange up to $39,132,000 aggregate principal amount of its 133/4% Series B Subordinated Discount Notes due 2007 (the "New Subordinated Notes"), which will have been registered under the Securities Act, pursuant to a Registration Statement of which this Prospectus is a part, for a like principal amount of its outstanding 133/4% Series A Subordinated Discount Notes due 2007 (the "Old Subordinated Notes"), of which $39,132,000 aggregate principal amount are outstanding. The terms of the New Subordinated Notes are identical in all material respects to the terms of the Old Subordinated Notes except that (i) the New Subordinated Notes will have been registered under the Securities Act and thus will not bear restrictive legends restricting their transfer pursuant to the Securities Act and will not be entitled to registration rights and (ii) holders of New Subordinated Notes will not be entitled to liquidated damages for the Company's failure to register the Old Subordinated Notes or New Subordinated Notes under the Subordinated Note Registration Rights Agreement (as defined herein). The New Subordinated Notes will be issued under the same Subordinated Note Indenture (as defined herein) as the Old Subordinated Notes, and the New Subordinated Notes and the Old Subordinated Notes will constitute a single series of debt securities under the Subordinated Note Indenture. In the event that the Subordinated Notes Exchange Offer is consummated, any Old Subordinated Notes which remain outstanding after consummation of the Subordinated Notes Exchange Offer and the New Subordinated Notes issued in the Subordinated Notes Exchange Offer will vote together as a single class for purposes of determining whether holders of the requisite percentage in outstanding principal amount of Subordinated Notes (as defined herein) have taken certain actions or exercised certain rights under the Subordinated Note Indenture. The Old Subordinated Notes and the New Subordinated Notes are sometimes referred to herein collectively as the "Subordinated Notes." The Subordinated Notes Exchange Offer and the Notes Exchange Offer are sometimes referred to herein collectively as the "Exchange Offers." The New Notes (including the Subsidiary Guarantees (as defined)) and the New Subordinated Notes (including the Subordinated Note Subsidiary Guarantees (as defined)) are hereinafter collectively referred to as the "Securities." The Company will accept for exchange any and all Old Notes and any and all Old Subordinated Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on January 15, 1997, unless extended by the Company in its sole discretion (the "Expiration Date"). Tenders of Old Notes or Old Subordinated Notes may be withdrawn at any time prior to the Expiration Date. The Exchange Offers are subject to certain customary conditions. See "The Exchange Offers - Terms of the Exchange Offers." The New Notes and the New Subordinated Notes are being offered for exchange in the Exchange Offers in order to satisfy certain obligations of the Company under the Registration Rights Agreement (the "Registration Rights Agreement") and the Subordinated Note Registration Rights Agreement ("the "Subordinated Note Registration Rights Agreement"), each dated as of June 28, 1996 (collectively, the "Registration Rights Agreements") among the Company, the Guarantors (as defined) and the Initial Purchasers (as defined herein) of the Old Notes and Bear, Stearns & Co., Inc. ("Bear Stearns"), as initial purchaser of the Old Subordinated Notes, respectively. The Company is making the Exchange Offers in reliance on the position of the staff of the Division of Corporation Finance of the Securities and Exchange Commission (the "Commission") as set forth in certain interpretive letters addressed to third parties in other transactions. However, the Company has not sought its own interpretive letter and there can be no assurance that the staff of the Division of Corporation Finance of the Commission would make a similar determination with respect to the Exchange Offers, as it has in such interpretive letters to third parties. Based on these interpretations by the staff of the Division of Corporation Finance, and subject to the two immediately following sentences, the Company believes that New Notes and New Subordinated Notes issued pursuant to the Exchange Offers in exchange for Old Notes and Old Subordinated Notes may be offered for resale, resold and otherwise transferred by a holder thereof (holders of the Notes or Subordinated Notes are each individually hereinafter referred to as a "Holder" and collectively as the "Holders") (other than a Holder who is a broker-dealer) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Notes and New Subordinated Notes are acquired in the ordinary course of such Holder's business and that such Holder is not participating, and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of such New Notes or New Subordinated Notes. However, any Holder of Old Notes or Old Subordinated Notes who is an "affiliate" of the Company or who intends to participate in the Exchange Offers for the purpose of distributing New Notes or the New Subordinated Notes, or any broker-dealer who purchased Old Notes or Old Subordinated Notes from the Company to resell pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other available exemption under the Securities Act, (a) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the Commission set forth in the above-mentioned interpretive letters, (b) will not be permitted or entitled to tender such Old Notes or Old Subordinated Notes in the Exchange Offers and (c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of such Old Notes or Old Subordinated Notes unless such sale is made pursuant to an exemption from such requirements. In addition, if any broker-dealer holds Old Notes or Old Subordinated Notes acquired for its own account as a result of market-making or other trading activities and exchanges such Old Notes for New Notes or exchanges such Old Subordinated Notes for New Subordinated Notes, then such broker-dealer must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such New Notes or New Subordinated Notes. See "The Exchange Offers - Resales of New Notes and New Subordinated Notes." The New Notes will mature on July 15, 2006. Interest on the Notes will accrue at the rate of 12% per annum and will be payable semi-annually in arrears on January 15 and July 15 of each year, commencing January 15, 1997. The New Notes will be redeemable at the option of the Company, in whole or in part, at any time on and after July 15, 2001 at the redemption prices set forth herein, plus accrued and unpaid interest to the applicable redemption date. In addition, on or prior to July 15, 1999, the Company may redeem up to 25% in aggregate principal amount of the New Notes at a redemption price of 112% of the principal amount thereof, plus accrued and unpaid interest thereon to the redemption date, with the net proceeds of one or more Equity Offerings (as defined); provided that at least 75% in aggregate principal amount of the New Notes originally issued under the Indenture remains outstanding immediately after the occurrence of each such redemption. Upon the occurrence of a Change of Control (as defined), the Company will be required to make an offer to repurchase all or any part 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 thereon to the date of repurchase. Depending upon the circumstances prevailing at the time of such a Change of Control, there is a risk that the Company may be unable to satisfy such obligations. See "Description of Senior Subordinated Notes." The New Notes will be general unsecured obligations of the Company (with the sole exception of the security provided under the Pledge and Disbursement Agreement (as defined)), subordinated in right of payment to all existing and future Senior Debt (as defined) of the Company, including all borrowings of the Company under the Senior Credit Facility (as defined). The New Notes will be jointly and severally guaranteed (the "Subsidiary Guarantees") on an unsecured, senior subordinated basis by certain of the Company's subsidiaries and certain subsidiaries created after the issuance of the New Notes (the "Guarantors"). The Subsidiary Guarantees will be full and unconditional and will be subordinated in right of payment to all Senior Debt of the Guarantors. As of July 28, 1996, after giving pro forma effect to the Company's acquisition of the 49% minority interest in Sugarloaf not owned by it and the divestitures of the Waterville Valley and Mt. Cranmore resorts pursuant to a consent decree entered into between the Company and the U.S. Department of Justice, the aggregate amount of outstanding Senior Debt of the Company would have been $53.8 million. The Indenture will permit the Company and the Guarantors to incur additional Senior Debt, subject to certain limitations. See "The Acquisition; Antitrust Matters; Use of Proceeds," "Pro Forma Capitalization" and "Description of Senior Subordinated Notes." The New Subordinated Notes will mature on January 15, 2007. Interest on the New Subordinated Notes will not accrue prior to July 15, 2001. Thereafter, interest will accrue at the rate of 13 3/4 % per annum and will be payable semi-annually in arrears in cash on January 15 and July 15 of each year, commencing on January 15, 2002. The New Subordinated Notes will be redeemable at the option of the Company, in whole or in part, at any time on and after July 15, 2001 at the redemption prices set forth herein, plus accrued and unpaid interest to the applicable redemption date. In addition, on or prior to July 15, 1999, the Company may redeem the New Subordinated Notes, in whole or in part, at a redemption price of 113.75% of the Accreted Value (as defined) thereof, to the redemption date, with the net proceeds of one or more Equity Offerings. Upon the occurrence of a Change of Control, the Company will be required to make an offer to purchase all or any part of each Holder's New Subordinated Notes at an offer price in cash equal to 101% of the Accreted Value thereof (if prior to July 15, 2001), or 101% of the principal amount thereof (if on or after July 15, 2001), to the date of repurchase. Depending upon the circumstances prevailing at the time of such a Change of Control, there is a risk that the Company may be unable to satisfy such obligations. See "Description of Subordinated Notes." The New Subordinated Notes will be general unsecured obligations of the Company, subordinated in right of payment to all existing and future Subordinated Note Senior Debt (as defined) of the Company, including all borrowings of the Company under the Senior Credit Facility and all obligations of the Company with respect to the New Notes and any Old Notes remaining outstanding. The New Subordinated Notes will be jointly and severally guaranteed (the "Subordinated Note Subsidiary Guarantees") on an unsecured, subordinated basis by the Guarantors. The Subordinated Note Subsidiary Guarantees will be full and unconditional, and will be subordinated in right of payment to all Subordinated Note Senior Debt of the Guarantors. Any Old Notes and Old Subordinated Notes not tendered and accepted in the Exchange Offers will remain outstanding and will be entitled to all the same rights and will be subject to the same limitations applicable thereto under the Indenture and the Subordinated Note Indenture, respectively (except for those rights which terminate upon consummation of the Exchange Offers). Following consummation of the Exchange Offers, the Holders of Old Notes and Old Subordinated Notes will continue to be subject to the existing restrictions upon transfer thereof and the Company will have no further obligation to such Holders (other than to certain Holders under certain limited circumstances) to provide for registration under the Securities Act of the Old Notes and Old Subordinated Notes held by them. To the extent that Old Notes or Old Subordinated Notes are tendered and accepted in the Exchange Offers, a Holder's ability to sell untendered Old Notes or Old Subordinated Notes, as the case may be, could be adversely affected. See "Risk Factors - Consequences of Failure to Exchange" and "The Exchange Offers - Certain Consequences of a Failure to Exchange." This Prospectus, together with the Notes Letter of Transmittal or the Subordinated Notes Letter of Transmittal, as appropriate, is being sent to all registered Holders of Old Notes and Old Subordinated Notes as of November 25, 1996. AVAILABLE INFORMATION The Company has filed with the Commission a Registration Statement (which term shall include any amendments thereto) on Form S-4 under the Securities Act with respect to the securities offered by this Prospectus. This Prospectus, which constitutes a part of the Registration Statement, does not contain all the information set forth in the Registration Statement and the exhibits and schedules thereto, to which reference is hereby made. Each statement made in this Prospectus referring to a document filed as an exhibit or schedule to the Registration Statement is not necessarily complete and is qualified in its entirety by reference to the exhibit or schedule for a complete statement of its terms and conditions. In addition, upon the effectiveness of the Registration Statement filed with the Commission, the Company will be subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith the Company will file periodic reports and other information with the Commission relating to its business, financial statements and other matters. Any interested parties may inspect and/or copy the Registration Statement, its schedules and exhibits, and the periodic reports and other information filed in connection therewith, at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices located at Citicorp Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such materials can be obtained at prescribed rates by addressing written requests for such copies to the Public Reference Section of the Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Such material may also be accessed electronically by means of the Commission's home page on the Internet at http://www.sec.gov., which contains reports, proxy and information statements and other information regarding registrants, including the Company, that file electronically with the Commission. The obligations of the Company under the Exchange Act to file periodic reports and other information with the Commission may be suspended, under certain circumstances, if the New Notes and the New Subordinated Notes are each held of record by fewer than 300 holders at the beginning of any fiscal year and the New Notes and the New Subordinated Notes are not listed on a national securities exchange. The Company has agreed that, whether or not it is required to do so by the rules and regulations of the Commission, for so long as any of the Notes or Subordinated Notes remain outstanding it will furnish to the holders of the Notes and the Subordinated Notes and file with the Commission (unless the Commission will not accept such a filing) the financial information and management's discussion and analysis of financial condition and results of operations that would be included in all annual, quarterly and current reports that the Company is or would be required to file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act. In addition, for so long as any of the Old Notes or Old Subordinated Notes remain outstanding, the Company has agreed to make available to any prospective purchaser of the Old Notes or Old Subordinated Notes or beneficial owner of the Old Notes or Old Subordinated Notes in connection with any sale thereof the information required by Rule 144A(d)(4) under the Securities Act. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION WITH RESPECT TO ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY OR AN OFFER TO OR SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial data, including the financial statements and notes thereto, appearing elsewhere in this Prospectus. Unless the context otherwise requires, when used historically, the terms the "Company" or "ASC" refer to the combined businesses of the ski resorts and related properties owned by Leslie B. Otten, which were contributed to ASC simultaneously with the consummation of the acquisition of S-K-I Ltd. (including the financing thereof, the "Acquisition"), and when used in the present tense or prospectively, also include the business of S-K-I Ltd. acquired in the Acquisition. The Company will divest the Waterville Valley and Mt. Cranmore resorts pursuant to a consent decree (the "Consent") into which the Company has entered with the United States Department of Justice ("DOJ"). See "The Company," "The Acquisition; Antitrust Matters; Use of Proceeds" and "Pro Forma Financial Data." Unless otherwise specified, all data contained herein includes the Waterville Valley and Mt. Cranmore resorts. Data or other statements pertaining to the Company's EBITDA (as defined herein) may not be comparable to similarly titled data of other companies. References herein to a fiscal year refer to the fiscal year ended or ending on the last Sunday in July of such year with respect to the Company, and on July 31 of such year with respect to S-K-I Ltd. The Company Giving effect to the Acquisition, ASC is one of the largest mountain resort operators in North America, owning and operating eight ski resorts in the northeastern United States. ASC's properties now include Killington, Mt. Snow/Haystack and Sugarbush ski resorts in Vermont; Waterville Valley, Attitash/Bear Peak and Mt. Cranmore ski resorts in New Hampshire; and Sunday River and Sugarloaf/USA ski resorts in Maine. These resorts recorded over 3.3 million skier visits during the 1995/96 ski season, representing approximately 24% of total skier visits in the northeastern United States and approximately 6% of total skier visits nationally. ASC's ski resort properties offer approximately 4,000 acres of skiable terrain (of which approximately 82% are covered by snowmaking capability), 777 trails and 121 lifts. For the fiscal year ended July 28, 1996, after giving pro forma effect to the Acquisition, ASC generated approximately $187.6 million in total revenues, $3.8 million in net loss and $34.6 million in EBITDA, in each case including the Waterville Valley and Mt. Cranmore resorts, which are to be divested. Excluding Waterville Valley and Mt. Cranmore, ASC generated total revenues of $172.0 million, $3.8 million in net loss and $32.6 million in EBITDA over such period after giving pro forma effect to the Acquisition. The Company entered into the Consent with the DOJ in order to resolve the concerns identified by the DOJ in response to the Company's filing with the Federal Trade Commission under the Hart-Scott-Rodino Act. The United States filed a civil antitrust complaint through the DOJ alleging that the Acquisition would violate Section 7 of the Clayton Act due to a substantial increase in the concentration of ownership of ski resorts to which eastern New England residents (i.e., those in Maine, eastern Massachusetts, Connecticut and Rhode Island) practicably can go for weekend ski trips, and of those to which Maine residents practicably can go for day ski trips. The DOJ complaint alleged that the Acquisition threatened to raise the price of, or reduce discounts for, weekend and day skiing to consumers living in those areas in violation of Section 7 of the Clayton Act. Simultaneously with the filing of the complaint, the DOJ also filed the Consent as a proposed settlement that would permit the Company to complete the Acquisition, but will also require the divestiture of the Waterville Valley and Mount Cranmore resorts in order to preserve and enhance competition for skiers in eastern New England. On a combined basis, the Waterville Valley and Mt. Cranmore resorts recorded approximately 382,000 skier visits during the 1995-96 ski season (11.4% of total 1995-96 skier visits for the Company, after giving pro forma effect to the Acquisition) and, during the fiscal year ended July 28, 1996, generated approximately $15.6 million in total revenues, $0.0 million in net loss and $2.0 million in EBITDA (8.3%, (1.3)% and 5.8%, respectively, of the Company's revenues, net loss and EBITDA for such period after giving pro forma effect to the Acquisition). The net assets to be divested of these two resorts, as of July 28, 1996, aggregate approximately $16.7 million, or 5.6% of total assets of the Company as of such date, and they represent on a combined basis approximately 445 acres of skiable terrain, 90 trails and 19 lifts. See "The Acquisition; Antitrust Matters; Use of Proceeds" and "Pro Forma Financial Data." The Company has entered into a Purchase and Sale Agreement for the sale of the Waterville Valley and Mt. Cranmore resorts for a purchase price of $17,500,000 with closing anticipated to occur on or before November 27, 1996. See "Recent Developments." The Company has experienced consistent growth since its inception in 1980 when it acquired the Sunday River ski resort. Skier visits at Sunday River have grown from less than 50,000 in the 1980/81 ski season to approximately 589,000 in the 1995/96 ski season. The Company acquired Attitash/Bear Peak in fiscal 1994, and Sugarbush and Mt. Cranmore in fiscal 1995. Since their acquisition by the Company, skier visits have increased by 24% at Attitash/Bear Peak, 13% at Sugarbush and 32% at Mt. Cranmore. The Company has successfully implemented its operating strategy at the acquired resorts, and has realized significant increases in earnings and EBITDA for each of these resorts following its acquisition. The operations of S-K-I Ltd. ("SKI"), which were acquired by the Company in the Acquisition on June 28, 1996, include Killington, a six mountain resort which is the largest ski area in the Northeast; Mt. Snow/Haystack, Waterville Valley and Sugarloaf/USA ski resorts, which benefit from their proximity to New York (in the case of Mt. Snow/Haystack) and Boston. These properties recorded a total of over 2.0 million skier visits during the 1995/96 ski season. Management of the Company believes that ASC will realize growth in skier visits and profitability from (i) the implementation of the Company's successful operating strategy at the SKI resorts and the continued pursuit of that strategy at the Company's recently acquired resorts; (ii) operational synergies and economies of scale available to the Company as a result of the Acquisition; and (iii) coordinated marketing and promotion of each of the Company's resorts in a single region. See "Business." Management also believes that the Company is well positioned to benefit from certain trends in the North American ski industry, including the emergence of the "echo boom" generation (the children of the "baby boom" generation), continued consolidation, growing interest in snowboarding, and demand among families for vacation property ownership. As the cost of infrastructure to maintain competitiveness in the ski industry has grown, the number of U.S. ski areas has declined. There are currently 516 ski areas in operation in the nation as compared to over 700 in 1986, while skier visits have remained relatively stable over the same period. Management believes that the Company, as the largest mountain resort operator in North America, will be well positioned to continue its growth both internally and through acquisitions. Management also believes that the ski industry is poised for growth through increased participation in the sport, especially among the echo boom generation who are reaching their teen years, the prime entry age for skiing and snowboarding, over the next decade. The Company and other emerging multiple resort operators are expected to focus more of their marketing efforts on attracting new participants to the sport. Strategy The Company intends to pursue a strategic plan that mirrors the formula successfully employed at Sunday River and its recently acquired resorts. Invest in the Ski Experience. Management believes that the most efficient way to increase resort visitation is to provide the highest quality skiing available. The Company intends to improve the infrastructure at each property, emphasizing modernization and introducing at the SKI properties the snowmaking and trail grooming practices successfully developed at the Company's other ski areas. The largest portion of the capital budget is targeted for increasing lift capacity through the installation of high capacity lifts, including those with high speed drives and detachable chairs. The Company believes that modernizing lifts appeals to skiers because it allows a resort to transport larger numbers of skiers to the summit faster, reducing time spent in lift lines and on lifts. By improving snowmaking coverage, the Company will further reduce its reliance on natural snowfall and increase skiers' confidence that high quality conditions will be available notwithstanding the weather. Trail grooming further enhances the skiing experience by assuring a consistent surface under changing weather conditions. Management believes that the Company has developed a unique system for snowmaking and grooming that produces a higher quality, longer lasting trail surface than exists at most other ski areas. Emphasize Marketing. The Company's marketing program is designed to attract both day skiers and vacationers. Approximately 35 million people live within the Company's day skiing market, which includes Boston and New York. With the acquisition of SKI, the Company's marketing program will become more focused on the population centers located in Massachusetts, Connecticut, New York and New Jersey. The Company's marketing program promotes each resort's unique attributes and highlights the improvements made through the capital program (e.g., new lifts, increased snowmaking). In an effort to attract both new and existing skiers, the Company intends to expand its "Perfect Turn" skier development program, a proprietary ski instruction methodology which guarantees that new skiers will learn to ski in one day, and its "Edge Card" frequent skier program, which rewards frequent skiers with free lift tickets. With multiple resorts extending from southern Vermont to northern Maine, ASC believes that its cross-marketing programs will become even more effective in the future. In order to develop future generations of visitors, younger skiers are targeted through an emphasis on the Company's innovative snowboarding facilities. Snowboarding represents one of the fastest growing segments of the ski resort business. To draw families to its resorts, the Company has highlighted the availability of intermediate skiing terrain, which appeals to families wishing to ski together. Control Multiple Revenue Sources. The Company's revenues are derived from a diverse group of operations. In addition to lift ticket sales, which represented approximately 40% of total revenues for the fiscal year ended July 28, 1996, the Company generates revenues from equipment rentals, ski lessons, restaurant and retail sales, lodging services and real estate sales. Management believes that controlling multiple profit centers at its resorts enables the Company to maintain consistent quality standards for all elements of the guest experience while maximizing the revenues, net income and EBITDA generated by the Company's fixed asset base and marketing expenditures. Pursue Cost Saving Opportunities. Management believes that a significant element of the success to date at Sunday River, as well as at the recently acquired properties, is management's focus on cost controls. The Company expects to realize significant cost savings as it integrates the SKI operations with those of the Company through the elimination of certain redundant positions in the corporate staff and in the accounting, marketing, and information systems areas and reduces insurance expenses and costs associated with shareholder services. The Company expects to generate significant additional operating efficiencies and cost savings in such areas as purchasing and marketing. Selectively Develop Mountainside Real Estate. Mountainside real estate development permits the Company to generate increased revenues and profitability through real estate sales, while also increasing a resort's bed base and amenities to attract more vacationing skiers, which is the most profitable customer segment. For the fiscal years ended 1996, 1995 and 1994, the percentage of total revenues attributable to development of real estate was 13.5%, 14.5% and 20.1%, respectively. Such development, which is only pursued following significant pre-construction marketing and sales, has proven to be highly profitable for the Company. At Sunday River, the Company has developed and sold over 700 condominiums and, most recently, developed a quartershare condominium hotel known as the "Summit Hotel." The Summit Hotel is a condominium in which the Company retains ownership of the restaurants, commercial space, conference facilities and infrastructure facilities. Quartershare interests (13 weeks evenly divided over the year) in the hotel suites are sold to individual owners as residential condominiums. The Company operates the hotel and provides optional management of the quartershare units for individual owners. The Summit Hotel concept will be the focus of the Company's real estate development activities, with additional hotels planned for selected resort locations over the next several years. The number and location of projects will be based on market conditions at the time, determined primarily by the results of pre-construction marketing and sales programs. Expand Off-Season Activities. Each resort has developed off-season activities in order to improve utilization of facilities, retain quality employees and contribute to coverage of fixed operating costs. Sugarloaf, Killington, Mt. Snow and Sugarbush operate championship golf courses, and all the resorts offer a variety of summer outdoor recreational opportunities ranging from tennis and mountain biking to off-site activities such as whitewater rafting, canoeing, fishing and hiking in the surrounding mountains. Each resort has also begun to sponsor cultural programs during the summer that increase utilization of the existing bed base and conference and convention facilities. The Acquisition and the Divestiture On February 13, 1996, the Company entered into an agreement (the "Acquisition Agreement") to acquire SKI by merger resulting in a total purchase price of approximately $104.6 million plus assumed debt of $58.5 million as of June 28, 1996 (consisting of long-term debt of $20.1 million, current portion of long-term debt of $3.0 million, subordinated debentures of $10.9 million, and other current and long-term liabilities of $24.5 million). The Acquisition was consummated on June 28, 1996, whereupon S-K-I became a wholly-owned subsidiary of the Company. For the year ended July 28, 1996, the Company had total revenue of $73.4 million, net loss of $2.2 million, and EBITDA of $13.2 million, which include results of operations of SKI subsequent to the Acquisition on June 28, 1996. For the years ended July 31, 1995 and 1994, the Company had total revenues of $54.7 million and $33.2 million, net income of $5.1 million and $4.9 million, and EBITDA of $11.6 million and $8.3 million, respectively. For the years ended July 31, 1995 and 1994, SKI had total revenues of $114.0 million and $98.9 million, net income of $1.0 million and $4.6 million, and EBITDA of $19.9 million and $21.5 million, respectively. Simultaneously with the closing of the Acquisition, Leslie B. Otten contributed all of the outstanding capital stock of the corporations comprising Sunday River, Sugarbush, Attitash/Bear Peak and Mt. Cranmore to the Company. The net proceeds from the offerings of the Old Notes, the Old Subordinated Notes and the Common Stock (as defined) (the "Offerings"), together with borrowings under the Senior Credit Facility and available cash, were used to finance the Acquisition, repay certain indebtedness of the Company and SKI, fund the acquisition of the 49% interest in Sugarloaf not owned by SKI, fund a pledge account to secure the payment of the first two interest payments on the Notes (subject, in the case of the first such payment, to the subordination provisions of the Notes) and pay certain expenses relating to the Acquisition. See "The Acquisition; Antitrust Matters; Use of Proceeds." In connection with the consummation of the Acquisition, the Company and the Guarantors also entered into the following transactions: (1) A revolving credit facility in a principal amount of up to $65.0 million pursuant to the Senior Credit Facility. See "Description of Other Indebtedness - The Senior Credit Facility." (2) Issuance of Old Notes in the aggregate principal amount of $120.0 million. The Old Notes were initially purchased by Bear Stearns and SPP Hambro & Co., LLC (together with Bear Stearns, the "Initial Purchasers"). (3) Issuance of units (the "Units") consisting of Old Subordinated Notes in the aggregate principal amount of $39,132,000 and 39,132 shares of common stock, par value $.01 per share, of the Company (the "Common Stock" or the "Unit Shares") for $20,000,365. The Units were initially purchased by Bear Stearns. The principal executive offices of the Company are located at Sunday River Access Road, Bethel, Maine 04217, and its telephone number is (207) 824-3000. The Notes Exchange Offer
Registration Rights Agreement On June 28, 1996, the Old Notes were sold by the Company to the Initial Purchasers, which subsequently resold the Old Notes to qualified institutional buyers and/or institutional accredited investors. In connection with the issuance of the Old Notes, the Company, the Guarantors and the Initial Purchasers entered into the Registration Rights Agreement which grants the Holders of the Old Notes certain exchange and registration rights. This Notes Exchange Offer is intended to satisfy the Company's obligations under the Registration Rights Agreement. See "The Exchange Offers - Purpose and Effect of the Exchange Offers." The Notes Exchange Offer Up to $120,000,000 aggregate principal amount of New Notes are being offered in exchange for a like aggregate principal amount of Old Notes. Old Notes may be tendered for exchange in whole or in part in a principal amount of $1,000 and integral multiples thereof. The terms of the New Notes and the Old Notes are identical in all material respects. The Company will issue the New Notes to Holders on the earliest practical date following the Expiration Date. See "The Exchange Offers - Terms of the Exchange Offers." The Company is making the Notes Exchange Offer in reliance on the position of the staff of the Division of Corporation Finance of the Commission as set forth in certain interpretive letters addressed to third parties in other transactions. However, the Company has not sought its own interpretive letter and there can be no assurance that the staff of the Division of Corporation Finance of the Commission would make a similar determination with respect to the Notes Exchange Offer as it has in such interpretive letters to third parties. Based on interpretations by the staff of the Division of Corporation Finance, and subject to the two immediately following sentences, the Company believes that New Notes issued pursuant to the Notes Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by a Holder thereof (other than a Holder who is a broker-dealer) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Notes are acquired in the ordinary course of such Holder's business and that such Holder is not participating, and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of such New Notes. However, any Holder of Old Notes who is an "affiliate" of the Company or who intends to participate in the Notes Exchange Offer for the purpose of distributing New Notes, or any broker-dealer who purchased Old Notes from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act, (a) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the Commission set forth in the above-mentioned interpretive letters, (b) will not be permitted or entitled to tender such Old Notes in the Notes Exchange Offer and (c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of such Old Notes unless such sale is made pursuant to an exemption from such requirements. In addition, if any broker-dealer holds Old Notes acquired for its own account as a result of market- making or other trading activities and exchanges such Old Notes for New Notes, then such broker-dealer must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such New Notes. See "The Exchange Offers - Resales of New Notes and New Subordinated Notes." Expiration Date 5:00 p.m., New York City time, on January 15, 1997, unless the Exchange Offers are extended by the Company in its sole discretion, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offers are extended. See "The Exchange Offers - Terms of the Exchange Offers - Expiration Date; Extensions; Amendments." Conditions to the Notes Exchange Offer The Notes Exchange Offer is subject to certain customary conditions, which may be waived by the Company. See "The Exchange Offers - Terms of the Exchange Offers - Certain Conditions to the Exchange Offers." Procedures for Tendering the Old For the Old Notes to be validly Notes tendered pursuant to the Notes Exchange Offer, (i) the Notes Letter of Transmittal, or a facsimile thereof, properly completed, signed and dated in accordance with the instructions contained herein and therein, and mailed or otherwise delivered, together with any other required documentation, or an Agent's Message (as defined herein) in connection with a book-entry transfer of Old Notes must be received by, the Exchange Agent at the address set forth herein and either (a) the Old Notes to be tendered must be received by the Exchange Agent at such address or (b) such Old Notes must be transferred pursuant to the procedures for book-entry transfer described herein and a confirmation of such book-entry transfer must be received by the Exchange Agent, in each case prior to the Expiration Date or (ii) the guaranteed delivery procedures described herein must be complied with. Holders of Old Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee are urged to contact such person promptly if they wish to tender Old Notes pursuant to the Notes Exchange Offer. See "The Exchange Offers - Terms of the Exchange Offers - Procedures for Tendering Old Notes and Old Subordinated Notes." Notes Letters of Transmittal and certificates representing Old Notes should not be sent to the Company. Such documents should only be sent to the Exchange Agent. Questions regarding how to tender and requests for information should be directed to the Exchange Agent. See "The Exchange Offers - Terms of the Exchange Offers - Exchange Agent." By executing the Notes Letter of Transmittal, each Holder will represent to the Company that, among other things, (i) it is not an "affiliate" of the Company, (ii) any New Notes to be received by it are being acquired in the ordinary course of its business, (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Notes, and (iv) if such Holder is not a broker-dealer, such Holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such new Notes. Each broker- dealer that receives New Notes for its own account pursuant to the Notes Exchange Offer must acknowledge that it acquired the Old Notes for its own account as the result of market-making activities or other trading activities and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. See "The Exchange Offers - Resales of New Notes and New Subordinated Notes." Guaranteed Delivery Procedures Holders of Old Notes who wish to tender their Old Notes and whose Old Notes are not immediately available or who cannot deliver their Old Notes, the Notes Letter of Transmittal or any other documents required by the Notes Letter of Transmittal to the Exchange Agent prior to the Expiration Date or if the procedure for book-entry transfer cannot be completed before such date, must tender their Old Notes according to the guaranteed delivery procedures set forth under "The Exchange Offers - Terms of the Exchange Offers - Procedures for Tendering Old Notes and Old Subordinated Notes - Guaranteed Delivery." Withdrawal Rights Tenders may be withdrawn at any time prior to the Expiration Date by delivering a written notice of withdrawal to the Exchange Agent in conformity with certain procedures set forth under "The Exchange Offers - Terms of the Exchange Offers - Withdrawal Rights." Accrued Interest on the New Notes and Old Notes Each New Note will bear interest from its issuance date. Holders of Old Notes that are accepted for exchange will receive, in cash, accrued interest thereon to, but excluding, the issuance date of the New Notes. Such interest will be paid with the first interest payment on the New Notes. Interest on the Old Notes accepted for exchange will cease to accrue upon issuance of the New Notes. Acceptance of the Old Notes and Delivery of the New Notes The Company will accept for exchange any and all Old Notes which are properly tendered in the Notes Exchange Offer prior to the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered on the earliest practicable date following the Expiration Date. Any Old Notes not accepted for exchange for any reason will be returned to the tendering Holder thereof as promptly as practicable after the expiration or termination of the Notes Exchange Offer. See "The Exchange Offers - Terms of the Exchange Offers." Resales of New Notes by Participating Broker-Dealers Based on the position taken by the staff of the Division of Corporation Finance of the Commission in certain interpretive letters, the Company believes that broker-dealers who acquired Old Notes for their own accounts as a result of market-making activities or other trading activities ("Participating Broker-Dealers") may fulfill their prospectus delivery requirements with respect to resales of New Notes received upon exchange of such Old Notes (other than Old Notes which represent an unsold allotment from the original sale of the Old Notes), by delivering the Prospectus prepared for the Exchange Offers, so long as it contains a description of the plan of distribution with respect to the resale of such New Notes. A Participating Broker-Dealer who intends to use the Prospectus in connection with the resale of the New Notes received in exchange for Old Notes pursuant to the Notes Exchange Offer must notify the Company, or cause the Company to be notified, on or prior to the Expiration Date, that it is a Participating Broker-Dealer. See "The Exchange Offers - Resales of New Notes and New Subordinated Notes." Certain Federal Income Tax Considerations The Company believes that the exchange pursuant to the Notes Exchange Offer will not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Consequences of the Exchange Offers." Trustee Exchange Agent United States Trust Company of New York is serving as Trustee in connection with the Notes and as exchange agent (the "Exchange Agent") in connection with the Notes Exchange Offer.
Terms of the Notes The Notes Exchange Offer applies to $120,000,000 aggregate principal amount of Old Notes. The terms of the New Notes are identical in all material respects to the terms of the Old Notes except that (i) the New Notes will have been registered under the Securities Act and thus will not bear restrictive legends restricting their transfer pursuant to the Securities Act and will not be entitled to registration rights and (ii) Holders of New Notes will not be entitled to liquidated damages for the Company's failure to register the Old Notes or New Notes under the Registration Rights Agreement. The New Notes will be issued under the same Indenture as the Old Notes, and the New Notes and the Old Notes will constitute a single series of debt securities under the Indenture. See "Description of Senior Subordinated Notes." The Old Notes and the New Notes are hereinafter collectively referred to as the "Notes."
Maturity July 15, 2006. Interest Rate and Payment Dates The Notes bear interest at the rate of 12% per annum, payable semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 1997. Subsidiary Guarantees The New Notes will be, and the Old Notes remaining outstanding after the Notes Exchange Offer will continue to be, jointly and severally guaranteed, fully and unconditionally, on an unsecured, senior subordinated basis by certain of the Company's subsidiaries and certain subsidiaries created after the issuance of the Notes. Ranking The Notes are general unsecured obligations of the Company (with the sole exception of the security provided under the Pledge and Disbursement Agreement (as defined)), subordinated in right of payment to all existing and future Senior Debt of the Company, including all borrowings of the Company under the Senior Credit Facility. The Subsidiary Guarantees will be subordinated in right of payment to all Senior Debt of the Guarantors. As of July 28, 1996, after giving pro forma effect to the acquisition of the 49% interest in Sugarloaf not acquired in the Acquisition and the divestitures of Waterville and Cranmore pursuant to the Consent, the aggregate amount of outstanding Senior Debt of the Company would have been $53.8 million. See "The Acquisition; Antitrust Matters; Use of Proceeds," "Recent Developments," "Pro Forma Capitalization" and "Description of Senior Subordinated Notes." As of July 28, 1996 approximately $53.8 million of the Company's indebtedness and other obligations, including indebtedness and obligations of its subsidiaries, was secured by collateral, and there was no indebtedness or obligations ranked pari passu with, or junior to the Notes, except the Subordinated Notes. Optional Redemption The Notes are redeemable at the option of the Company, in whole or in part, at any time on and after July 15, 2001 at the redemption prices set forth herein, plus accrued and unpaid interest to the applicable redemption date. In addition, on or prior to July 15, 1999, the Company may redeem up to 25% in aggregate principal amount of the Notes at a redemption price of 112% of the principal amount thereof, plus accrued and unpaid interest thereon to the redemption date, with the net proceeds of one or more Equity Offerings; provided that at least 75% in aggregate principal amount of the Notes remains outstanding immediately after the occurrence of each such redemption. Change of Control Offer Upon the occurrence of a Change of Control, the Company will be required, within 30 days following the date of the Change of Control, to make an offer to repurchase all or any part 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 thereon to the date of purchase. Although, due to circumstances prevailing at the time of a Change of Control, the Company may be unable to fulfill such obligations, Mr. Otten, as the controlling stockholder of the Company, does not presently intend to effect or permit the occurrence of a Change of Control (to the extent that such an event is within his control) unless the Company were able to fulfill such obligations. See "Description of Senior Subordinated Notes -- Repurchase at the Option of Holders -- Change of Control." The occurrence of a Change of Control may, by virtue of the fact that an offer to purchase the Notes and the Subordinated Notes must thereupon be made, constitute a default under the Senior Credit Facility. All debt other than debt under the Senior Credit Facility (totalling $175.8 million) is (with the exception of the Notes and the Subordinated Notes debt of the Restricted Subsidiaries, rather than the Company. The maturity of most of such debt would accelerate upon a Change of Control resulting from bankruptcy, liquidation, dissolution, or sale of substantiallly all of the assets of the Restricted Subsidiary responsible for such debt. The bankruptcy, liquidation or dissolution of the Company would, in most instances, also involve the bankruptcy, liquidation or dissolution of its Restricted Subsidiaries and would likely, therefore, result in acceleration of such debt. Other Change of Control events involving only the Company would not, by themselves, result in the acceleration of the maturity of debt (other than the Notes, the Subordinated Notes and the Senior Credit Facility). Certain Covenants The Indenture contains certain covenants that, among other things, limit the ability of the Company and its Restricted Subsidiaries (as defined) to incur additional indebtedness, pay dividends or make other distributions, repurchase Equity Interests (as defined) or subordinated indebtedness, create certain liens, enter into certain transactions with affiliates, sell assets or enter into certain mergers and consolidations. Use of Proceeds; Interest Payment Pledge Account The net proceeds from the sale of Old Notes, together with the net proceeds from the sale of Units and borrowings under the Senior Credit Facility and available cash, were used to finance the Acquisition, repay certain indebtedness of the Company and SKI, fund the acquisition of the 49% interest in Sugarloaf not owned by SKI and pay certain expenses relating to the Acquisition. See "The Acquisition; Antitrust Matters; Use of Proceeds" and "Pro Forma Capitalization." In addition, approximately $15 million of the proceeds of the Offerings (the "Pledged Funds") were deposited into the Pledge Account (as defined). The Pledged Funds were invested in U.S. Treasury obligations maturing immediately prior to the January 15, 1997 and July 15, 1997 interest payment dates applicable to the Notes. The Company will be permitted to obtain release of the Pledged Funds only for the payment of interest on the Notes through July 15, 1997 (subject, in the case of interest payable on January 15, 1997, to the subordination provisions of the Notes). See "Description of Senior Subordinated Notes -- Interest Payment Pledge Account."
The Subordinated Notes Exchange Offer
Subordinated Notes Registration Rights Agreement On June 28, 1996, the Old Subordinated Notes were sold by the Company to Bear Stearns, which subsequently resold the Old Subordinated Notes to qualified institutional buyers and/or institutional accredited investors. In connection with the issuance of the Old Subordinated Notes, the Company, the Guarantors and Bear Stearns entered into the Subordinated Note Registration Rights Agreement which grants the Holders of the Old Subordinated Notes certain exchange and registration rights. This Subordinated Notes Exchange Offer is intended to satisfy the Company's obligations under the Subordinated Note Registration Rights Agreement. See "The Exchange Offers - Purpose and Effect of the Exchange Offers." The Subordinated Notes Exchange Offer Up to $39,132,000 aggregate principal amount of New Subordinated Notes are being offered in exchange for a like aggregate principal amount of Old Subordinated Notes. Old Subordinated Notes may be tendered for exchange in whole or in part in a principal amount of $1,000 and integral multiplies thereof. The terms of the New Subordinated Notes and the Old Subordinated Notes are identical in all material respects. The Company will issue the New Subordinated Notes to Holders on the earliest practicable date following the Expiration Date. See "The Exchange Offers - Terms of the Exchange Offers." The Company is making the Subordinated Notes Exchange Offer in reliance on the position of the staff of the Division of Corporation Finance of the Commission as set forth in certain interpretive letters addressed to third parties in other transactions. However, the Company has not sought its own interpretive letter and there can be no assurance that the staff of the Division of Corporation Finance of the Commission would make a similar determination with respect to the Subordinated Notes Exchange Offer as it has in such interpretive letters to third parties. Based on interpretations by the staff of the Division of Corporation Finance, and subject to the two immediately following sentences, the Company believes that New Subordinated Notes issued pursuant to the Subordinated Notes Exchange Offer in exchange for Old Subordinated Notes may be offered for resale, resold and otherwise transferred by a Holder thereof (other than a Holder who is a broker-dealer) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Subordinated Notes are acquired in the ordinary course of such Holder's business and that such Holder is not participating, and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of such New Subordinated Notes. However, any Holder of Old Subordinated Notes who is an "affiliate" of the Company or who intends to participate in the Subordinated Notes Exchange Offer for the purpose of distributing New Subordinated Notes, or any broker- dealer who purchased Old Subordinated Notes from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act, (a) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the Commission set forth in the above- mentioned interpretive letters, (b) will not be permitted or entitled to tender such Old Subordinated Notes in the Subordinated Notes Exchange Offer and (c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of such Old Subordinated Notes unless such sale is made pursuant to an exemption from such requirements. In addition, if any broker-dealer holds Old Subordinated Notes acquired for its own account as a result of market-making or other trading activities and exchanges such Old Subordinated Notes for New Subordinated Notes, then such broker-dealer must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such New Subordinated Notes. See "The Exchange Offers - Resales of New Notes and New Subordinated Notes." Expiration Date 5:00 p.m., New York City time, on January 15, 1997, unless the Exchange Offers are extended by the Company in its sole discretion, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offers are extended. See "The Exchange Offers - Terms of the Exchange Offers - Expiration Date; Extensions; Amendments." Conditions to the Subordinated Notes Exchange Offer The Subordinated Notes Exchange Offer is subject to certain customary conditions, which may be waived by the Company. See "The Exchange Offers - Terms of the Exchange Offers - Certain Conditions to the Exchange Offers." Procedures for Tendering the Old Subordinated Notes For Old Subordinated Notes to be validly tendered pursuant to the Subordinated Notes Exchange Offer, (i) the Subordinated Notes Letter of Transmittal, or a facsimile thereof, properly completed, signed and dated in accordance with the instructions contained herein and therein, and mailed or otherwise delivered, together with any other required documentation, or an Agent's Message (as defined herein) in connection with a book-entry transfer of Old Subordinated Notes must be received by the Exchange Agent, in each case prior to the Expiration Date or (ii) the guaranteed delivery procedures described herein must be complied with. Holders of Old Subordinated Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee are urged to contact such person promptly if they wish to tender Old Subordinated Notes pursuant to the Subordinated Notes Exchange Offer. See "The Exchange Offers - Terms of the Exchange Offers - Procedures for Tendering Old Notes and Old Subordinated Notes." Subordinated Notes Letters of Transmittal and certificates representing Old Subordinated Notes should not be sent to the Company. Such documents should only be sent to the Exchange Agent. Questions regarding how to tender and requests for information should be directed to the Exchange Agent. See "The Exchange Offers - Terms of the Exchange Offers - Exchange Agent." By executing the Subordinated Notes Letter of Transmittal, each Holder will represent to the Company that, among other things, (i) it is not an "affiliate" of the Company, (ii) any New Subordinated Notes to be received by it are being acquired in the ordinary course of its business, (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Subordinated Notes, and (iv) if such Holder is not a broker- dealer, such Holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such New Subordinated Notes. Each broker- dealer that receives New Subordinated Notes for its own account pursuant to the Subordinated Notes Exchange Offer must acknowledge that it acquired the Old Subordinated Notes for its own account as the result of market-making activities or other trading activities and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Subordinated Notes. See "The Exchange Offers - Resales of New Notes and New Subordinated Notes." Guaranteed Delivery Procedures Holders of Old Subordinated Notes who wish to tender their Old Subordinated Notes and whose Old Subordinated Notes are not immediately available or who cannot deliver their Old Subordinated Notes, the Subordinated Notes Letter of Transmittal or any other documents required by the Subordinated Notes Letter of Transmittal to the Exchange Agent prior to the Expiration Date or if the procedure for book-entry transfer cannot be completed before such date, must tender their Old Notes according to the guaranteed delivery procedures set forth under "The Exchange Offers - Terms of the Exchange Offers - Procedures for Tendering Old Notes and Old Subordinated Notes - Guaranteed Delivery." Withdrawal Rights Tenders may be withdrawn at any time prior to the Expiration Date by delivering a written notice of withdrawal to the Exchange Agent in conformity with certain procedures set forth under "The Exchange Offers - Terms of the Exchange Offers - Withdrawal Rights." Accrued Interest on the New Subordinated Notes and Old Subordinated Notes Each New Subordinated Note will bear interest from its issuance date. Holders of Old Subordinated Notes that are accepted for exchange will receive, in cash, accrued interest thereon to, but excluding, the issuance date of the New Subordinated Notes. Such interest will be paid with the first interest payment on the New Subordinated Notes. Interest on the Old Subordinated Notes accepted for exchange will cease to accrue upon issuance of the New Subordinated Notes. Acceptance of the Old Subordinated Notes and Delivery of the New The Company will accept for Subordinated Notes exchange any and all Old Subordinated Notes which are properly tendered in the Subordinated Notes Exchange Offer prior to the Expiration Date. The New Subordinated Notes issued pursuant to the Subordinated Notes Exchange Offer will be delivered on the earliest practicable date following the Expiration Date. Any Old Subordinated Notes not accepted for exchange for any reason will be returned to the tendering Holder thereof as promptly as practicable after the expiration or termination of the Subordinated Notes Exchange Offer. See "The Exchange Offers - Terms of the Exchange Offers." Resales of New Subordinated Notes by Participating Broker-Dealers Based on the position taken by the staff of the Division of Corporation Finance of the Commission in certain interpretive letters, the Company believes that broker-dealers who acquired Old Subordinated Notes for their own accounts as a result of market-making activities or other trading activities ("Participating Broker- Dealers") may fulfill their prospectus delivery requirements with respect to resales of New Subordinated Notes received upon exchange of such Old Subordinated Notes (other than Old Subordinated Notes which represent an unsold allotment from the original sale of the Old Subordinated Notes), by delivering the Prospectus prepared for the Exchange Offers, so long as it contains a description of the plan of distribution with respect to the resale of such New Subordinated Notes. A Participating Broker- Dealer who intends to use the Prospectus in connection with the resale of the New Subordinated Notes received in exchange for Old Subordinated Notes pursuant to the Subordinated Notes Exchange Offer must notify the Company, or cause the Company to be notified, on or prior to the Expiration Date, that it is a Participating Broker-Dealer. See "The Exchange Offers - Resales of New Notes and New Subordinated Notes. Certain Federal Income Tax Considerations The Company believes that the exchange pursuant to the Subordinated Notes Exchange Offer will not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Consequences of the Exchange Offers." Trustee; Exchange Agent United States Trust Company of New York is serving as Trustee in connection with the Subordinated Notes and as exchange agent (the "Exchange Agent") in connection with the Subordinated Notes Exchange Offer.
Terms of the Subordinated Notes The Subordinated Notes Exchange Offer applies to $39,132,000 aggregate principal amount of Old Subordinated Notes. The terms of the New Subordinated Notes are identical in all material respects to the terms of the Old Subordinated Notes except that (i) the New Subordinated Notes will have been registered under the Securities Act and thus will not bear restrictive legends restricting their transfer pursuant to the Securities Act and will not be entitled to registration rights and (ii) Holders of New Subordinated Notes will not be entitled to liquidated damages for the Company's failure to register the Old Subordinated Notes or New Subordinated Notes under the Subordinated Note Registration Rights Agreement. The New Subordinated Notes will be issued under the same Subordinated Note Indenture as the Old Subordinated Notes, and the New Subordinated Notes and the Old Subordinated Notes will constitute a single series of debt securities under the Subordinated Note Indenture. See "Description of Subordinated Notes." The Old Subordinated Notes and the New Subordinated Notes are hereinafter collectively referred to as the "Subordinated Notes."
Maturity January 15, 2007 Interest Rate and Payment Dates Interest on the Subordinated Notes will not accrue prior to July 15, 2001. Thereafter, interest will accrue at the rate of 13 3/4 % per annum and will be payable semi-annually in arrears in cash on January 15 and July 15 of each year, commencing on January 15, 2002. Subsidiary Guarantees The New Subordinated Notes will be, and the Old Subordinated Notes remaining outstanding after the Subordinated Notes Exchange Offer will continue to be, jointly and severally guaranteed, fully and unconditionally, on an unsecured, subordinated basis by certain of the Company's subsidiaries (after giving effect to the search Contribution (as defined herein)) and certain subsidiaries created after the issuance of the Subordinated Notes. Ranking The Subordinated Notes are general unsecured obligations of the Company, subordinated in right of payment to all existing and future Subordinated Note Senior Debt of the Company, including all borrowings of the Company under the Senior Credit Facility and all obligations of the Company with respect to the Notes. The Subordinated Note Subsidiary Guarantees are subordinated in right of payment to all Subordinated Note Senior Debt of the Guarantors, including the Guarantors' guarantees of the Notes. As of July 28, 1996, after giving pro forma effect to the acquisition of the 49% interest in Sugarloaf not acquired in the Acquisition and the divestitures of Waterville and Cranmore pursuant to the Consent, the aggregate amount of outstanding Subordinated Note Senior Debt of the Company would have been $170.4 million. See "The Acquisition; Antitrust Matters; Use of Proceeds," "Recent Developments," "Pro Forma Capitalization" and "Description of Subordinated Notes." As of July 28, 1996 approximately $53.8 million of the Company's indebtedness and other obligations, including indebtedness and obligations of its subsidiaries, was secured by collateral, and there was no indebtedness and other obligations ranked pari passu with the Subordinated Notes except the Notes. Optional Redemption The Subordinated Notes are redeemable at the option of the Company, in whole or in part, at any time on and after July 15, 2001 at the redemption prices set forth herein, plus accrued and unpaid interest to the applicable redemption date. In addition, on or prior to July 15, 1999, the Company may redeem the Subordinated Notes, in whole or in part, at a redemption price of 113.75% of the Accreted Value thereof, with the net proceeds of one or more Equity Offerings. Change of Control Offer Upon the occurrence of a Change of Control, the Company will be required to make an offer to purchase all or any part of each Holder's Subordinated Notes at an offer price in cash equal to 101% of the Accreted Value thereof (if prior to July 15, 2001), or 101% of the principal amount thereof, plus accrued and unpaid interest thereon (if on or after July 15, 2001), to the date of repurchase. Although, due to circumstances prevailing at the time of a Change of Control, the Company may be unable to fulfill such obligations, Mr. Otten, as the controlling stockholder of the Company, does not presently intend to effect or permit the occurrence of a Change of Control (to the extent such an event is within his control) unless the Company were able to fulfill such obligations. See "Description of Subordinated Notes -- Repurchase at the Option of Holders -- Change of Control." The occurrence of a Change of Control may, by virtue of the fact that an offer to purchase the Subordinated Notes must thereupon be made, constitute a default under the Senior Credit Facility. Apart from the debt evidenced by the Notes, all debt other than debt under the Senior Credit Facility (totalling $175.8 million) is (with the exception of the Notes and the Subordinated Notes) debt of the Restricted Subsidiaries, rather than the Company. The maturity of most of such debt would accelerate upon a Change of Control resulting from bankruptcy, liquidation, dissolution, or sale of substantially all of the assets of the Restricted Subsidiary responsible for such debt. The bankruptcy, liquidation or dissolution of the Company would, in most instances, also involve the bankruptcy, liquidation or dissolution of its Restricted Subsidiaries and would likely, therefore, result in acceleration of such debt. Other Change of Control events involving only the Company would not, by themselves, result in the acceleration of the maturity of debt (other than the Notes, the Subordinated Notes and the Senior Credit Facility). Certain Covenants The Subordinated Note Indenture contains certain covenants that, among other things, limit the ability of the Company and its Restricted Subsidiaries to incur additional indebtedness, pay dividends or make other distributions, repurchase Equity Interests or subordinated indebtedness, create certain liens, enter into certain transactions with affiliates, sell assets or enter into certain mergers and consolidations. Use of Proceeds The net proceeds from the sale of Subordinated Notes, together with the net proceeds from the sale of Notes and borrowings under the Senior Credit Facility and available cash, were used to finance the Acquisition, repay certain indebtedness of the Company and SKI, fund the acquisition of the 49% interest in Sugarloaf not owned by SKI and pay certain expenses relating to the Acquisition. See "The Acquisition; Antitrust Matters; Use of Proceeds" and "Pro Forma Capitalization."
RISK FACTORS See "Risk Factors" for a discussion of certain factors that investors should consider before exchanging Old Notes for New Notes or Old Subordinated Notes for New Subordinated Notes in the Exchange Offers. Summary Pro Forma Consolidated Financial Data The following unaudited summary pro forma consolidated financial data as of July 28, 1996 and for the year ended July 28, 1996 (except Other Financial and Operating Data) are derived from the historical financial data of the Company included elsewhere in this Prospectus and give pro forma effect to the Acquisition and the Offerings (with respect to statement of income data only) as if they had occurred on August 1, 1995 and the acquisition of the 49% interest of Sugarloaf, not acquired in the Acquisition, and the divestitures of the Waterville Valley and Mt. Cranmore resorts, pursuant to the Consent, as if the acquisition and divestitures had occurred on July 28, 1996 with respect to the balance sheet data, and as of August 1, 1995 with respect to the statement of income data. See "The Acquisition; Antitrust Matters; Use of Proceeds," "Recent Developments," and "Pro Forma Financial Data." The Pro Forma Financial Data is not intended to be indicative of either future results of operations or results that might have been achieved had such Acquisition and the Offerings and the acquisition of the 49% interest of Sugarloaf and the divestitures of the Waterville Valley and Mt. Cranmore resorts pursuant to the Consent actually occurred on the dates specified. See "Pro Forma Financial Data." Management believes that the following presentation will assist potential investors in evaluating the ability of the Company to meet debt service requirements. In the opinion of the Company's management, all adjustments necessary to present fairly such unaudited pro forma consolidated financial data have been made based upon the terms and structure of the Acquisition and the Offerings and the divestitures of the Waterville Valley and Mt. Cranmore resorts pursuant to the Consent. The unaudited summary pro forma consolidated financial data should be read together with the Selected Historical Financial Data and the financial statements and notes thereto included elsewhere in this Prospectus. See "The Acquisition; Antitrust Matters; Use of Proceeds," "Selected Historical Financial Data," "Pro Forma Financial Data" and the financial statements and notes thereto included elsewhere in this Prospectus. Summary Pro Forma Consolidated Financial Data (Continued)
(Unaudited) Year Ended July 28, 1996 (in thousands, except per share data, per skier visit data and ratios) Pro Forma Consolidated Statement of Operations Data: Revenues: Ski and lodging $161,733 Real estate 9,933 Total revenues 171,666 Operating Expenses: Cost of operations including 78,678 wages, maintenance and supplies Cost of real estate sold 5,849 Real estate and payroll taxes 9,595 Utilities 11,781 Insurance 7,643 Selling, general and 24,388 administrative Depreciation and amortization 16,857 Total operating expenses 154,799 Income from operations 16,875 Other income and expenses: Interet income 330 Commitment fee 1,447 Interest expense 22,406 Loss before income tax benefit (6,648) Income tax benefit (2,863) Net loss $(3,785) Net loss per share(1) $(3.87) Other Financial and Operating Data: EBITDA(2) $32,615 EBITDA to interest expense 1.5x EBITDA to cash interest 1.7x expense(3) Ratio of earnings to fixed -- charges(4) Skier visits (5) 3,339 Average revenue per skier $48.44 visit Pro Forma Consolidated Balance As of Sheet Data: July 28, 1996 Property and equipment, net $227,470 Total assets 285,063 Total debt 204,236 Stockholders' equity 22,395
_________________________________ (1) Pro forma net loss per share was computed giving consideration to the 978,300 common shares of the Company which were issued and outstanding on the Closing Date. (2) EBITDA represents earnings before interest expense, income tax expense (benefit), depreciation and amortization expense. 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 generally accepted accounting principles or as a measure of the Company's profitability or liquidity, and may not be comparable to other similarly titled data of other companies. The Company does not consider it feasible to calculate cash flows from operating, investing and financing activities on a pro forma basis. (3) Cash interest expense excludes interest on the Subordinated Notes which would not have been payable in cash during the periods presented. (4) The ratio of combined earnings to combined fixed charges represents the number of times combined fixed charges were covered by combined pre-tax earnings before provision for interest expense. Fixed charges consist of interest expense, capitalized interest, amortization of debt issuance costs, and a portion of operating lease rental expense deemed to be representative of the interest factor. Pro forma earnings were insufficient to cover pro forma fixed charges by $18.0 million for the year ended July 28, 1996. However, such results for the year ended July 28, 1996 included non-cash charges such as depreciation and amortization of $16.4 million and a loss on the sale of Bear Mountain in October 1995 of $4.7 million. (5) Each skier visit represents one skier visiting one ski resort for one day, including skiers using complimentary and season passes. Calculation of skier visits requires an estimation of visits by season pass holders. Although different ski resort operators may use different methodologies for making such estimations, management believes that any resulting differences in total skier visits are immaterial. Summary Historical Financial Data The Company The following summary historical financial data of the Company (except Other Financial and Operating Data) (i) as of and for the fiscal years ended July 30, 1995 and July 28, 1996 have been derived from the financial statements of the Company audited by Price Waterhouse LLP, independent accountants, and (ii) as of and for each of the three fiscal years ended July 31, 1994 have been derived from the financial statements of the Company audited by Berry, Dunn, McNeil & Parker, independent accountants. The following information includes Mt. Cranmore, which the Company acquired in June 1995 and will be divested. Additionally, the following information includes the accounts of S-K-I in the July 28, 1996 Balance Sheet Data and in the Statements of Operations and of Cash Flows Data of S-K-I from June 28, 1996 through July 28, 1996 pursuant to the Acquisition. Included in the S-K-I information is Waterville Valley, which will be divested. See "The Acquisition; Antitrust Matters; Use of Proceeds," "Recent Developments" and "Pro Forma Financial Data." The following information should be read in conjunction with the Unaudited "Pro Forma Financial Data," "Selected Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements of the Company and notes thereto included elsewhere in this Prospectus. Summary Historical Financial Data (Continued)
Year Ended (1) July July July July July 28, 26, 25, 30, 30, 1996 1992 1993 1994 1995 (in thousands, except per skier visit data and ratios) Statement of Operations Data: Revenues: Skiing and lodging $20,312 $23,645 $26,544 $46,794 $63,489 Real estate sales 304 6,103 6,682 7,953 9,933 Total revenues 20,616 29,748 33,226 54,747 73,422 Operating expenses: Cost of operations including wages, 7,936 10,045 11,505 21,730 31,137 maintenance and supplies Cost of real estate sold 101 3,245 3,179 3,994 5,844 Real estate and payroll 758 993 1,265 1,736 2,544 taxes Utilities 2,046 2,097 1,854 4,132 5,819 Insurance 1,162 1,570 1,163 2,127 2,299 Selling, general and administrative 3,010 4,718 5,940 9,394 11,289 Depreciation and 1,790 1,984 2,421 3,910 6,783 amortization Total Operating Expenses 16,803 24,652 27,327 47,023 65,715 Income from operations 3,813 5,096 5,899 7,724 7,707 Commitment fee -- -- -- -- 1,447 Interest Expense 776 849 1,026 2,205 4,699 Income before provision for income taxes and minority 3,037 4,247 4,873 5,519 1,561 interest in loss of subsidiary Provision for income taxes -- -- -- 400 3,906 Income (loss) before 3,037 4,247 4,873 5,119 (2,345) minority interest Minority interest in loss -- -- -- -- 108 of subsidiary Income (loss) before extraordinary gain from 3,037 4,247 4,873 5,119 (2,237) insurance claim Extraordinary gain from -- 1,592 -- -- -- insurance claim Net income (loss) $3,037 $5,839 $4,873 $5,119 $(2,237) Balance Sheet Data: Property and equipment, $27,580 $30,363 $41,871 $62,213 $227,470 net Total assets 32,256 40,550 51,784 72,434 298,732 Total long term debt, excluding current 10,317 14,150 19,103 27,169 187,827 portion Stockholders' equity 18,367 23,167 26,212 30,502 21,903 Statement of Cash Flows Data: Cash flows from operating $3,864 $2,667 $5,438 $ 12,5 $7,465 activities 93 Cash flows from investing (5,031) (4,432) (9,041) (13,84 (122,5 activities 3) 83) Cash flows from financing 1,372 1,559 3,764 2,399 116,941 activities Other Financial and Operating Data: Net (loss) per common share -- -- -- -- $(2.37) (2) EBITDA(3) $5,603 $7,080 $8,320 $11,634 $13,151 Capital expenditures 5,037 5,182 7,798 12,024 25,054 EBITDA to interest expense 7.2x 8.3x 8.1x 5.3x 2.8x Ratio of earnings to fixed 4.0x 4.4x 4.2x 2.9x 1.2x charges(4) Skier visits(5) 497 515 515 1,048 1,284 Average revenue per skier $40.87 $45.91 $51.54 $44.65 $49.45 visit
_____________________________ (1) The historical results of the Company reflect the acquisition of the Attitash/Bear Peak ski resort in July 1994, the lease of the Sugarbush ski resort beginning in October 1994, the acquisition of Sugarbush in May 1995, the acquisition of the Mt. Cranmore ski resort in June 1995, and the acquisition of S-K-I in June 1996. (2) At July 28, 1996, the computation of net loss per common share is based on the weighted average of shares outstanding during the year (942,200). Prior to June 28, 1996, all of the Company's outstanding common stock was owned by the same individual, and accordingly earnings per share has not been presented for the four fiscal years prior to 1996. (3) EBITDA represents earnings before interest expense, income tax expense, depreciation and amortization expense and extraordinary gain. 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 generally accepted accounting principles or as a measure of the Company's profitability or liquidity, and may not be comparable to other similarly titled data of other companies. (4) The ratio of earnings to fixed charges represents the number of times fixed charges were covered by pre-tax earnings before provision for interest expense. Fixed charges consist of interest expense, capitalized interest, amortization of debt issuance costs, and a portion of operating lease rental expense deemed to be representative of the interest factor. (5) Each skier visit represents one skier visiting one ski resort for one day, including skiers using complimentary and season passes. Calculation of skier visits requires an estimation of visits by season pass holders. Although different ski resort operators may use different methodologies for making such estimations, management believes that any resulting differences in total skier visits are immaterial. SKI The following summary historical financial data of SKI (except other financial and operating data) (i) as of and for each of the five fiscal years ended July 31, 1995 have been derived from the financial statements of SKI audited by Price Waterhouse LLP, independent accountants and (ii) as of and for the nine months ended April 30, 1995 and April 28, 1996 have been derived from unaudited interim financial statements of SKI which, in the opinion of SKI management, include all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of SKI's financial position and results of operations. SKI's fourth fiscal quarter ordinarily reflects a significant reduction in revenues as compared to the second and third quarters, as well as a less significant comparative expense reduction, ordinarily producing a loss for such quarter and reduced full fiscal year levels of net income and EBITDA as compared to the first nine months of the year. The following information includes Waterville Valley, which SKI acquired in October 1994 and will be divested. See "The Acquisition; Antitrust Matters; Use of Proceeds" and "Pro Forma Financial Data." The following information should be read in conjunction with the Unaudited "Pro Forma Financial Data," "Selected Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements of SKI and related notes thereto included elsewhere in this Prospectus.
Year Ended July 31, (1) Nine Months Ended April April 28, 30, 1991 1992 1993 1994 1995 1995 1996 (in thousands, except per share data, per skier visit data and ratios) Statement of Income Data: Revenues $83,007 $89,014 $96,708 $98,907 $113,960 $106,682 $106,752 Operating expenses: Cost of operations 34,480 36,956 39,903 42,560, 51,557, 45,310 47,885 including wages, maintenance and supplies Other taxes 5,989 7,002 7,632 8,016 8,600 7,544 7,541 Utilities 5,580 6,172 6,655 6,045 8,071 7,624 7,465 Insurance 4,325 5,041 5,115 5,518 6,635 6,220 5,692 Selling, general 13,666 14,048 16,872 15,298 19,495 16,377 17,061 and administrative expense Depreciation and 10,290 10,822 10,942 11,440 14,056 13,843 10,146 amortization Loss on sale of -- -- -- -- -- -- 4,737 Bear Mountain 74,330 80,041 87,119 88,877 108,414 96,918 100,527 Operating income 8,677 8,973 9,764 6,225 9,589 10,030 5,546 Interest expense 2,940 2,471 3,018 2,561 2,228 2,214 3,819 Income before 5,737 6,502 6,746 3,664 income taxes and 7,361 7,816 1,727 minority interest Income taxes 2,324 2,776 2,725 1,429 2,952 3,170 997 Income before 3,413 3,726 4,021 2,235 minority interest 4,409 4,646 730 Minority interest -- -- (193) (527) in loss (income) -- -- 299 of subsidiary Net income $3,413 $3,726 $3,828 $1,708 $4,409 $4,646 $1,029 Balance Sheet Data: Property and $83,154 $81,963 $124,110 $93,728 equipment, net $82,288 $94,771 $121,775 Total assets 90,288 93,531 138,730 118,454 99,182 106,790 136,721 Total long term 27,315 26,677 46,677 31,222 debt, excluding 28,119 29,167 50,190 current portion Stockholders' 45,972 49,190 60,337 58,563 equity 53,047 57,186 57,562 Statement of Cash Flows Data: Cash flows from $14,061 $15,903 $19,941 $19,089 operating $13,474 $17,464 $14,948 activities Cash flows from (11,408) (9,287) (33,502) 12,115 investing (12,181) (23,108) (30,925) activities Cash flows from (2,754) (1,787) 12,183 (21,967) financing 968 848 16,063 activities Other Financial and Operating Data: Net income per $.60 $.65 $.66 $.30 common and common $.77 $.81 $.18 equivalent share(2) EBITDA(3) $18,967 $20,531 23,607 $16,371(6) $19,795 $21,470 $19,602 Capital 12,279 9,566 18,982 6,020 expenditures 12,307 22,683 19,480 Ratio of earnings 2.6x 3.0x 2.6x 1.9x to fixed 3.5x 3.6x 1.3x charges(4) Skier visits(5) 1,679 1,783 2,104 2,055 1,863 1,854 2,113 Average revenue $49.44 $49.92 $50.70 $51.95 per skier visit $51.91 $53.35 $53.93
____________________________ (1) The historical results of SKI reflect the acquisitions of the Sugarloaf (51% interest) and Waterville Valley ski resorts in August 1994 and October 1994, respectively, and the divestiture of the majority of the ski resort and golf course assets of Bear Mountain in October 1995. (2) The computation of net income per common and common equivalent share amounts are based on the weighted average of shares outstanding during the year. Shares issuable upon the exercise of stock option grants have not been included in the per share computation because they would not have a material effect on earnings per share. The weighted average shares outstanding at the respective balance sheet dates used in the computation of net income per common and common equivalent share were 5,783,480 in 1995; 5,764,663 in 1994; 5,728,908 in 1993; 5,723,318 in 1992; 5,720,394 in 1991; 5,782,745 year to date April 30, 1995; and 5,788,592 year to date April 28, 1996. (3) EBITDA represents earnings before interest expense, income tax expense, depreciation and amortization expense. 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 generally accepted accounting principles or as a measure of SKI's profitability or liquidity, and may not be comparable to other similarly titled data of other companies. (4) The ratio of earnings to fixed charges represents the number of times fixed charges were covered by pre-tax earnings before provision for interest expense. Fixed charges consist of interest expense, capitalized interest, amortization of debt issuance costs, and a portion of operating lease rental expense deemed to be representative of the interest factor. (5) Each skier visit represents one skier visiting one ski resort for one day, including skiers using complimentary and season passes. Calculation of skier visits requires an estimation of visits by season pass holders. Although different ski resort operators may use different methodologies for making such estimations, management believes that any resulting differences in total skier visits are immaterial. (6) Includes loss of $4,737 realized in connection with the sale of Bear Mountain. THE ACQUISITION; ANTITRUST MATTERS; USE OF PROCEEDS The Acquisition. On February 13, 1996, LBO Resort Enterprises (the predecessor of the Company), LBO Acquisition Co. ("Newco"), its wholly owned subsidiary, and SKI entered into the Acquisition Agreement pursuant to which the Company agreed to acquire SKI through the merger of Newco with and into SKI, subject to the satisfaction or waiver of certain covenants and conditions. The Acquisition was consummated on June 28, 1996. Concurrently with the consummation of the Acquisition, Leslie B. Otten contributed to the Company all of the outstanding stock of the corporations comprising Sunday River, Sugarbush, Attitash/Bear Peak and Mt. Cranmore (the "Contribution"). In the merger of Newco with and into SKI, each of the issued and outstanding shares of common stock, par value $.10 per share, of SKI ("SKI Common Stock"), excluding any shares held in SKI's treasury or owned by the Company or any of its affiliates, were converted into the right to receive an amount in cash equal to $18.00 (the "Purchase Price Per Share"). Pursuant to the Acquisition Agreement, all outstanding stock options ("SKI Options") granted by SKI prior to the date of the Acquisition Agreement automatically became fully vested and the holders thereof became entitled to receive the Purchase Price Per Share less the exercise price of such SKI Option and any amount required by law to be withheld for taxes. The total cash purchase price payable in the Acquisition for the SKI Common Stock and the SKI Options was approximately $104.1 million ($104.6 million including certain transaction expenses). In connection with the Acquisition, the Company assumed or refinanced $58.5 million of debt as of June 28, 1996 (consisting of long-term debt of $20.1 million, current portion of long-term debt of $3.0 million, subordinated debentures of $10.9 million, and other current and long-term liabilities of $24.5 million). In connection with the Acquisition, the Company repaid certain indebtedness of the Company and SKI. The repaid indebtedness includes (i) all outstanding indebtedness under SKI's credit agreement with the First National Bank of Boston (the "SKI Credit Agreement"); (ii) all outstanding indebtedness under SKI's existing credit agreement with Teachers' Insurance and Annuity Association (the "TIAA Credit Agreement"); and (iii) all outstanding indebtedness under the Company's existing credit agreement with the First National Bank of Boston (the "ASC Credit Agreement"). On August 30, 1996, the Company repaid all outstanding indebtedness under Sugarloaf's existing credit agreement with the First National Bank of Boston (the "SMC Credit Agreement") and under Sugarloaf's existing term loan indebtedness to the Town of Carrabassett Valley, Maine (the "Town Debt"), contemporaneously with the consummation of the acquisition of the 49% minority interest in Sugarloaf which was not acquired by the Company in the Acquisition. Prior to the Acquisition, Sunday River delivered to Mr. Otten a demand note (the "Demand Note") in the principal amount of $5.2 million for the amounts expected to become payable by Mr. Otten in 1996 and 1997 as income taxes with respect to Sunday River's pre-Acquisition income as a Subchapter S Corporation. This note is unsecured and bears interest at 5.4% per annum, the applicable federal rate in effect at the time of issuance. Antitrust Matters Federal. The Company entered into the Consent with the DOJ in order to resolve the concerns identified by the DOJ in response to the Company's filing with the Federal Trade Commission under the Hart-Scott-Rodino Act. The United States filed a civil antitrust complaint through the DOJ alleging that the Acquisition would violate Section 7 of the Clayton Act due to substantial increase in the concentration of ownership of ski resorts to which eastern New England residents (i.e., those in Maine, eastern Massachusetts, Connecticut and Rhode Island) practicably can go for weekend ski trips, and of those to which Maine residents practicably can go for day ski trips. The DOJ complaint alleged that the Acquisition threatened to raise the price of, or reduce discounts for, weekend and day skiing to consumers living in those areas in violation of Section 7 of the Clayton Act. Simultaneously with the filing of the complaint, DOJ also filed the Consent as a proposed settlement that would permit the Company to complete the Acquisition, but would also require the divestiture of the Waterville Valley and Mount Cranmore resorts in order to preserve and enhance competition for skiers in eastern New England. The Company has resolved antitrust concerns of the DOJ raised by the Acquisition by entering into a consent decree. Specifically, the Company has agreed to divest the assets constituting the Waterville Valley and Mt. Cranmore resorts not later than December 1, 1996. The Consent (i) requires the Company to use its best efforts to complete the divestitures as expeditiously as possible, (ii) gives DOJ the ability, in its sole discretion, to extend the time period for completing the divestitures by an additional ninety days, and (iii) requires the Company to consent to the appointment of a trustee to accomplish the divestitures at the best price then obtainable upon a reasonable effort by the trustee in the event the divestitures have not been completed within the allotted period. Until the divestitures are accomplished, the consent decree requires the Company to take all steps necessary to assure that the resorts will be maintained and operated as on-going, economically viable resorts, including maintaining their usual and ordinary levels of marketing personnel and marketing activity, and maintaining the resorts' assets in operable condition based on normal maintenance, and prohibits the Company from taking any action that would jeopardize the divestiture of the resorts. On August 30, 1996 the Company entered into a Purchase and Sale Agreement with Booth Creek Ski Acquisition Corp. providing for the sale of all of the assets constituting the Waterville Valley and Mount Cranmore ski resorts for a total purchase price of $17.5 million. The sale of the resorts is scheduled to close on or before November 27, 1996. See "Recent Developments." In the event the sale to Booth Creek Ski Acquisition Corp. does not occur, no assurance can be given (i) that DOJ would extend the time limit for completion of the divestitures if requested to do so or (ii) as to the price or terms at which the divestitures will occur. State. The Maine Attorney General raised concerns that the Acquisition would result in increased concentration of the Company's market share within the State of Maine and could result in an elimination of discounts historically available to Maine resident skiers. The Maine Attorney General filed a Complaint under the State of Maine's antitrust laws (10 M.R.S.A. Sections 1102-A & 1104), together with a consent degree specifically addressing the Maine Attorney General's concerns with maintaining historical discounts available for Maine resident skiers. The consent decree requires that: (i) the Company maintain the same level of day lift ticket pricing discounts to Maine skiers as was in place during the 1995-96 season at the Sunday River and Sugarloaf resorts, which is expected to be accomplished by determining the blended average yield for both resorts on day tickets sold to Maine residents and to out-of-state residents, and maintaining a ratio of Maine resident day ticket yield to nonresident ticket yield at or below the ratio determined for the 1995-96 season, (ii) the gross amount of discounts on junior and teen season passes sold to Maine residents will not be reduced below the 1995- 96 season level for a period of three years, (iii) the Company establish procedures acceptable to the Maine Attorney General adequate to track the ratios and gross youth season pass discounts for each ski season and report those results to the Maine Attorney General at the conclusion of each fiscal year, and (iv) should the Company fail to achieve the required ratios in any season, it will take action necessary during the following season so that the required ratio will have been achieved when the two seasons are averaged. The Maine Attorney General has retained the right to audit the Company's results and to retain independent accountants or other experts in connection therewith at the Company's cost. The consent decree does not limit the Company's ability to establish prices, pricing discounts, or pricing or discount programs so long as the required ratios are satisfied. The consent decree will be reviewed every three years to determine if any modifications are necessary in light of then prevailing market conditions. The pricing controls imposed under the consent decree are consistent with the Company's current operations, and management believes that such controls will not have an adverse impact upon the Company's operations or financial condition. Use of Proceeds. The Company will not receive any cash proceeds from the Exchange Offers. In consideration for issuing the New Notes and the New Subordinated Notes in exchange for Old Notes and Old Subordinated Notes, respectively, as described in this Prospectus, the Company will receive Old Notes and Old Subordinated Notes in like principal amount. The Old Notes and Old Subordinated Notes surrendered in exchange for the New Notes and the New Subordinated Notes will be retired and canceled. Accordingly, the issuance of the New Notes and the New Subordinated Notes will not result in any change in the indebtedness of the Company. The Company applied the net proceeds of the Offerings, together with borrowings under the Senior Credit Facility and available cash, of $42.8 million and $10.9 million, respectively, to (i) fund the $104.6 million payable pursuant to the Acquisition, (ii) repay existing indebtedness (including accrued interest thereon) of the Company and of SKI, of $40.5 million and $20.5 million (which includes long-term debt, including the current portion thereof, and related accrued interest, and prepayment penalty associated with the TIAA Credit Agreement ($13.1 million), provide funding for the repayment of existing indebtedness of Sugarloaf under the SMC Credit Agreement ($3.4 million) and Town Debt ($4.0 million)), respectively, (iii) and for the acquisition of the minority interest in Sugarloaf not already owned by SKI (excluding certain outstanding warrants to acquire Sugarloaf common stock), at a price equal to $2.0 million in cash and earnings-based contingent purchase price of up to an additional $1 million, (iv) fund the Pledge Account with approximately $14.4 million to secure the first two interest payments on the Notes, and (v) pay fees and expenses associated with the Acquisition, the Offerings and the Senior Credit Facility in the amount of $8.3 million. See "Pro Forma Capitalization." The following table reflects the sources and uses of funds in connection with the Acquisition at June 28, 1996: (in millions) Sources: Senior Subordinated Notes $116.6 Units 20.0 Senior Credit Facility (1) 42.8 Cash (2) 10.9 Total $190.3 Uses: SKI acquisition, $104.6 outstanding shares and options Acquisition of Sugarloaf 2.0 minority interest (cash portion (3) Pledge Account 14.4 Repayment of existing indebtedness, including accrued interest (4): TIAA Credit Agreement 13.1 ASC Credit Agreement 40.5 SMC Credit Agreement 3.4 Town Debt 4.0 Transaction and financing 8.3 costs (5) Total $190.3 ________________________ (1) Under the Senior Credit Facility, a total of $65.0 million is available for borrowing by the Company, subject to compliance with the terms thereof. See "Description of Other Indebtedness -- The Senior Credit Facility." (2) Includes a $5.1 million deposit paid to SKI under the Acquisition Agreement in February 1996 (including accrued interest). (3) Certain former stockholders of Sugarloaf hold warrants to acquire approximately 15% of its outstanding Common Stock, on a fully diluted basis, at a price of $.66 per share, or an aggregate exercise price of approximately $737,000, at any time on or prior to June 30, 2002. (4) The TIAA Credit Agreement matures in 2003 and bears interest at 8.12% per annum. The ASC Credit Agreement matures in 2002 and bears interest at a rate equal to LIBOR plus 2.50% per annum, with a weighted average interest rate of 7.3% at June 28, 1996. The SMC Credit Agreement consists of two facilities, one of which matures on June 30, 1996 and bears interest at prime plus 2% per annum, and the other of which matures in 1998 and bears interest at prime plus .5% per annum. The Town Debt matures in 2013 and bears interest at a rate of 7.96% per annum as of June 28, 1996. (5) Represents the estimated fees and expenses related to the Acquisition, the Offerings and the Senior Credit Facility. RECENT DEVELOPMENTS Since July 28, 1996, the following transactions have occurred. Management considers these transactions to be material to the operation of the Company. Divestiture of Waterville Valley and Mt. Cranmore Resorts On August 30, 1996 the Company entered into a Purchase and Sale Agreement with Booth Creek Ski Acquisition Corp. providing for the sale of both the Waterville Valley and Mt. Cranmore resorts, as required in the DOJ Consent. The purchase price for the assets of those resorts is $17,500,000. The purchase price will be paid $14,750,000 in cash at closing and $2,750,000 in a subordinated promissory note bearing interest at 12% per annum payable in installments over 7.5 years. The closing of the purchase and sale is anticipated to occur on or before November 27, 1996. The closing is not subject to a financing contingency and an earnest money deposit with a value of $750,000 has been made by the purchaser. On October 22, 1996 the DOJ approved Booth Creek Ski Acquisition Corp. as a purchaser satisfying the requirements of the Consent. The net proceeds from the sale will be applied to reduce indebtedness under Senior Credit Facility. Acquisition of Sugarloaf Mountain Corporation 49% Minority Interest On August 29, 1996 the Company acquired the remaining 49% minority interest in the co mmon stock of Sugarloaf Mountain Corporation that it had not previously acquired through the Acquisition, thereby making it a wholly owned subsidiary of the Company (subject to the interests of warrant holders who collectively may purchase approximately 15% of the common stock of Sugarloaf for total consideration of $737,000 at any time on or prior to June 30, 2002). The 49% interest was purchased for a cash purchase price of $2 million. The Company entered into a commitment with the selling minority stockholders to pay up to an additional $1 million in purchase price based upon the Sugarloaf resort's EBITDA over the period 1997 through 2002. The performance- based purchase price will be calculated by multiplying annual EBITDA by a factor of .11, with that product then being multiplied by a factor of .49. Payments will be made on November 30 of each of the years 1997 through 2002. Grand Summit at Attitash/Bear Peak In August, 1996 the Company, through its wholly-owned subsidiary LBO Hotel Co., commenced construction of the Grand Summit at Attitash/Bear Peak. The Grand Summit at Attitash/Bear Peak is a quartershare condominium hotel and conference center located at the Attitash/Bear Peak Resort in Bartlett, New Hampshire. The first phase of the project consists of 105 condominium units (143 rooms) each divided into quartershare time intervals and a single commercial condominium unit, which will be owned and operated by LBO Hotel Co. The hotel features a 6,895 square foot grand ballroom, 8,100 square feet of conference space, a 125 seat restaurant, a 110 seat lounge and a 45 seat cafe, a three level atrium lobby, a health club with heated outdoor pool and associated retail, child care and entertainment amenities. The facility may ultimately contain two additional phases that are not currently under construction. At total build out the project will consist of 219 condominium units (300 rooms). The total cost for this facility is estimated at $13 million. LBO Hotel Co. established a construction/term financing arrangement with Key Bank of Maine on October 3, 1996 pursuant to which construction financing for $8,500,000 of total cost is being provided. The construction financing is guaranteed by the Company on a limited basis with the Company's liability under the guarantee limited to an aggregate amount of $4.5 million. The remainder of the construction cost is being funded by the Company through its Senior Credit Facility. As of the date of this Prospectus, the project has in excess of $4 million of quartershare interests committed under binding purchase and sale agreements. Eighty percent of the net proceeds of the sale of quartershare interests are applied to reduce the Key Bank of Maine construction/term project indebtedness and 20% is available to LBO Hotel Co. for its use. Summer 1996 Capital Improvement Program The Company undertook a capital improvement program during the summer and fall of 1996 resulting in total capital expenditures of approximately $18 million. The capital improvement program consisted of $7.8 million of new lifts, $3.2 million of expanded snowmaking capacity, $1.1 million of expanded trails, and $5.9 million in other improvements to resort amenities. These capital improvements were concentrated at the Mt. Snow and Killington resorts. The capital improvement program was funded through the Company's Senior Credit Facility and capital leases. Pico Mountain Ski Resort Acquisition The Company entered into a Purchase and Sale Agreement effective as of November 1, 1996 to purchase substantially all of the assets of the Pico Mountain Ski Resort located in Sherburne, Vermont. The purchase price is comprised of two components: (1) $3,350,000 of cash payable at closing and (2) $3,350,000 in contingent purchase price payable upon the occurrence of certain future events. The future events and the relevant portion of purchase price payable upon achieving those events are as follows: Future Events Purchase Price Component Issuance of regulatory approvals $325,000 for connection of a sewer line from the Killington Ski Resort base area facilities to the Alpine Pipeline, which provides a direct connection to the City of Rutland Wastewater Treatment Facilities Killington Ski Resort and Pico $325,000 Mountain Ski Resort generating, on a consolidated basis, at least 1,135,000 skier visits in a single season Sale of quartershare interests in $1,000 per quartershare any condominium hotel development unit sold for Pico at Pico Mountain Ski Resort or Mountain Development and Killington Ski Resort $500 per quartershare sold for Killington Resort development, up to an aggregate maximum of $700,000 Killington Ski Resort and Pico $2,000,000 payable in Mountain Ski Resort generating, equal annual on a consolidated basis (1) at installments of $200,000 least 4,000,000 skier visits on a each beginning March 1, cumulative basis from the closing 2000 and ending March 1, date through March 1, 2000 or (2) 2009 1,400,000 skier visits in a single season The Pico Mountain Ski Resort is currently owned and operated by four separate companies. The company responsible for the operation of the resort has filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code. The Company is not purchasing any of the assets of the operating company and is not assuming any liabilities of the operating company. The Company is purchasing substantially all of the assets of the remaining three companies, the principal business of which is the ownership of the real estate and improvements constituting the Pico Mountain Resort, which has historically been leased to the operating company. Financing for the cash portion of purchase price payable at closing is expected to be provided through the Senior Credit Facility, but availability of that credit is subject to both final approval by the lenders under the Senior Credit Facility and the closing of the divestiture of the Waterville Valley and Mt. Cranmore resorts. The Pico Mountain Resort is located adjacent to the Killington Ski Resort. Subject to receipt of necessary governmental permits and approvals, the Company intends to connect the two resorts by ski lifts and ski trails and operate the Pico Mountain Ski Resort as part of the Killington Ski Resort. RISK FACTORS In addition to the other matters described in this Prospectus, the following factors should be carefully considered by each Holder before accepting the Notes Exchange Offer or the Subordinated Notes Exchange Offer, although certain of the factors described below are equally applicable to the Old Notes and the Old Subordinated Notes. Leverage and Debt Service The Company is highly leveraged. At July 28, 1996, after giving pro forma effect to the acquisition of the 49% interest in Sugarloaf which was not acquired in the Acquisition and the divestitures of the Waterville Valley and Mt. Cranmore resorts, the Company's total indebtedness (including current maturities) and stockholders' equity would have been $204.2 million and $22.4 million, respectively, and the Company would have had an additional $30.6 million available to be borrowed under the Senior Credit Facility. The Company borrowed under the Senior Credit Facility in order to fund operating losses incurred in the fourth quarter of fiscal 1996 and the first quarter of fiscal 1997 (see "-- Dependence on Weather Conditions; Seasonality"); accordingly, borrowings under the Senior Credit Facility increased from the date of consummation of the Acquisition. As a result of the loss incurred on a pro forma basis for the fiscal year ended July 28, 1996 and July 30, 1995, after giving pro forma effect to the Aquisition, the acquisition of the 49% interest of Sugarloaf, and the divestiture of the Waterville and Mt. Cranmore resorts, earnings would have been insufficient to cover the indicated fixed charges. Earnings would not have covered fixed charges by $18.0 and $8.4 million for such years, respectively. However, such results for the fiscal year 1996 include non-cash charges such as depreciation and amortization of $16.4 million and a loss on the sale of Bear Mountain in October 1995 of $4.7 million. For the fiscal year 1995, non-cash charges include depreciation and amortization of $18.8 million. The Company's ability to make scheduled payments of the principal of, or interest on, or to refinance its indebtedness (including the Notes and the Subordinated Notes) depends on its future performance, which to a certain extent is subject to economic, financial, competitive and other factors beyond its control. The Company believes that its cash flow from operations following the Acquisition, together with borrowings under the Senior Credit Facility, will be adequate to meet its anticipated requirements for working capital, capital expenditures, interest payments and scheduled principal payments over the next several years. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." There can be no assurance, however, that the Company's business will continue to generate cash flow at or above current levels. If the Company is unable to generate sufficient cash flow from operations in the future to service its debt and make necessary capital expenditures, or if its future earnings are insufficient to make all required principal payments out of internally generated funds, the Company may be required to refinance all or a portion of its existing debt, sell assets or obtain additional financing. There can be no assurance that any such refinancing or asset sales would be possible or that any additional financing could be obtained on terms acceptable to the Company or at all, particularly in view of the Company's high level of debt following the Acquisition and the fact that substantially all of its assets (and those of certain of its Subsidiaries) will be pledged to secure the borrowings under the Senior Credit Facility and other secured obligations. See "Description of Other Indebtedness -- The Senior Credit Facility." The Company's high level of debt will have several important effects on its future operations, including the following: (a) the Company will have significant cash requirements to service debt, reducing funds available for operations, expansions and improvements and increasing the Company's vulnerability to adverse general economic and industry conditions; (b) the financial covenants and other restrictions contained in the Senior Credit Facility, the Indenture and other agreements relating to the Company's indebtedness require the Company to meet certain financial tests and restrict its ability to borrow additional funds and to dispose of assets; and (c) because of the Company's debt service requirements, funds available for working capital, capital expenditures, acquisitions and general corporate purposes may be limited. The Company's leveraged position may increase its vulnerability to competitive pressures and the cyclicality of the skiing and recreational industries. In addition, although management believes that capital expenditures above maintenance levels can be deferred to address cash flow or other constraints, such initiatives cannot be deferred for extended periods without adverse effects on skier visits, revenues and profitability. The Company's continued growth depends, in part, on its ability to maintain and expand its facilities and to engage in successful real estate development initiatives, and, therefore, to the extent it is unable to do so with internally generated cash, its inability to finance capital expenditures through borrowed funds could have a material adverse effect on the Company's future operations. Restrictions Under Debt Agreements The Indenture and the Subordinated Note Indenture contain covenants that, among other things, limit the ability of the Company and its Restricted Subsidiaries to incur additional indebtedness, sell assets, or enter into certain mergers and consolidations. In addition, the Senior Credit Facility contains restrictive covenants which, generally, are more restrictive than those contained in the Indenture and the Subordinated Note Indenture, and prohibits the Company from prepaying its subordinated indebtedness (including the Notes and the Subordinated Notes). The Senior Credit Facility also requires the Company to maintain specified consolidated financial ratios and satisfy certain consolidated financial tests. The consolidated financial ratios and tests consist of the following: Ratio of Consolidated Total Debt to Consolidated EBITDA. The Company must maintain a ratio of consolidated total debt to consolidated EBITDA measured on a rolling four quarter basis beginning at 7.25-to-1.00 commencing the first fiscal quarter of 1997 and declining on a graduated basis to 3.50-to-1.00 for the fourth fiscal quarter of 2001. Interim Fiscal Year 1997 Consolidated EBITDA. For the fiscal quarter ending October, 1996, the Company shall not incur negative consolidated EBITDA in excess of $6,000,000. For the two fiscal-quarter-period ending January, 1997, the Company must generate consolidated EBITDA of not less than $9,400,000. For the three fiscal-quarter- period ending April, 1997, the Company must generate consolidated EBITDA of not less than $37,300,000. Ratio of Consolidated Adjusted Cash Flow to Consolidated Debt Service. The Company must maintain as of the end of each fiscal quarter commencing with the fourth fiscal quarter of the 1997 fiscal year for the four-quarter period ending as of the last day of each fiscal quarter a ratio of consolidated adjusted cash flow to consolidated debt service of not less than the specified levels measured as of the end of any fiscal quarter beginning at 1.20-to- 1.00 for the 1997 fiscal year and increasing on a graduated basis to 2.00-to-1.00 for the 2001 fiscal year. Minimum Consolidated Tangible Net Worth. The Company must maintain minimum consolidated tangible net worth (a) as of the last day of each fiscal year of not less than the sum of (i) $25,000,000 plus (ii) 50% of cumulative consolidated net income (without deduction for any losses) for each fiscal year, commencing with the fiscal year ending July 1997 plus (iii) all amounts received after June 28, 1997 from the issuance of equity interests and (b) at all other times, of not less than $15,000,000 plus all amounts received after June 28, 1997 from the issuance of equity interests. The Company's ability to meet the foregoing financial ratios and financial tests can be affected by events beyond its control, and there can be no assurance that the Company will meet those ratios and tests. A breach of any of the covenants under the Senior Credit Facility, the Indenture or the Subordinated Note Indenture could result in a default under the Senior Credit Facility, the Indenture and/or the Subordinated Note Indenture. If an event of default occurs under the Senior Credit Facility, the lenders could elect to declare all amounts outstanding thereunder, together with accrued interest, to be immediately due and payable. If the Company is unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure that indebtedness. Substantially all the assets of the Company and certain of its Subsidiaries have been pledged as security under the Senior Credit Facility. See "Description of Senior Subordinated Notes," "Description of Subordinated Notes" and "Description of Other Indebtedness -- The Senior Credit Facility." Subordination of the Notes and the Subordinated Notes The payment of principal of, premium and interest on, and any other amounts owing in respect of, the Notes is subordinated to the prior payment in full of all existing and future Senior Debt of the Company, including indebtedness under the Senior Credit Facility, and each Subsidiary Guarantee is subordinated in right of payment to Senior Debt of the Guarantors. The payment of principal of, premium and interest on, and any other amounts owing in respect of, the Subordinated Notes is subordinated to the prior payment in full of all existing and future Subordinated Note Senior Debt of the Company, including indebtedness under the Senior Credit Facility and with respect to the Notes, and each Subordinated Note Subsidiary Guarantee is subordinated in right of payment to Subordinated Note Senior Debt of the Guarantors. As of July 28, 1996, after giving pro forma effect to the acquisition of the 49% interest in Sugarloaf and the divestitures of Waterville and Mt. Cranmore pursuant to the Consent, the aggregate outstanding amount of Senior Debt of the Company would have been approximately $53.8 million and the aggregate outstanding amount of Subordinated Note Senior Debt of the Company would have been approximately $1170.4 million. In addition, the Company would have had $30.6 million available for borrowing under the Senior Credit Facility. The Indenture and the Subordinated Note Indenture limit, but do not prohibit, the incurrence by the Company and the Guarantors of additional indebtedness which is Senior Debt or Subordinated Note Senior Debt, as the case may be. In the event of the bankruptcy, liquidation, dissolution, reorganization or other winding up of the Company, the assets of the Company will be available to pay obligations on the Notes only after all Senior Debt has been paid in full in cash, and the assets of the Company will be available to pay obligations on the Subordinated Notes only after all Subordinated Note Senior Debt has been paid in full in cash, and there may not be sufficient assets remaining to pay amounts due on any or all of the Notes or he Subordinated Notes. In addition, under certain circumstances, the Company may not pay principal of, premium or interest on, or any other amounts owing in respect of, the Notes or the Subordinated Notes, or purchase, redeem or otherwise retire the Notes or the Subordinated Notes, if a payment default or a non-payment default exists with respect to certain Senior Debt or Subordinated Note Senior Debt, as the case may be, and, in the case of a non-payment default, a payment blockage notice has been received by the Trustee (as defined) or the Subordinated Note Trustee (as defined), as the case may be. See "Description of Senior Subordinated Notes -- Subordination" and "Description of Subordinated Notes --Subordination." Holding Company Structure; Effects of Asset Encumbrances Virtually all of the Company's operating income will be generated by its subsidiaries. As a result, the Company is dependent on the earnings and cash flow of, and dividends and distributions or advances from, its subsidiaries to provide the funds necessary to meet its debt service obligations, including the payment of principal of and interest on the Notes and the Subordinated Notes. There can be no assurance that such subsidiaries will generate sufficient cash flow to dividend, distribute or advance funds to the Company. Should the Company fail to satisfy any payment obligation under the Notes or the Subordinated Notes, the holders thereof would have a direct claim therefor against the Guarantors pursuant to their Subsidiary Guarantees or their Subordinated Note Subsidiary Guarantees, as applicable. However, substantially all of the assets of the Guarantors have been pledged to secure the obligations of the Company and such subsidiaries under the Senior Credit Facility and other secured obligations. The Indenture and the Subordinated Note Indenture limit, but do not prohibit, the ability of the Company and its Restricted Subsidiaries to incur additional secured indebtedness. In the event of a default under the Senior Credit Facility (or any other secured indebtedness), the lenders thereunder would be entitled to a claim on the assets securing such indebtedness which is prior to any claim of the holders of the Notes (except to the extent provided under the Pledge and Disbursement Agreement) or the Subordinated Notes. Accordingly, there may be insufficient assets remaining after payment of prior secured claims (including claims of lenders under the Senior Credit Facility) to pay amounts due on the Notes or the Subordinated Notes. See "-- Leverage and Debt Service" and "--Subordination of the Notes and the Subordinated Notes." Risks of Expansion An element of the Company's business strategy is the development of new skiable terrain and the development, construction, operation and sale of interval ownership and condominium real estate units, and other related facilities at or near its ski resorts. See "Business -- Real Estate Development." Such efforts will be dependent upon, among other things, receipt of adequate financing on suitable terms and obtaining and maintaining the requisite permits and licenses. There can be no assurance as to whether, when or on what terms such financing, permits and licenses may be obtained. In addition, such efforts entail risks associated with development and construction activities, including cost overruns, shortages of materials or skilled labor, labor disputes, unforeseen environmental or engineering problems, work stoppages, and acts of God, any of which could delay construction and result in a substantial increase in cost to the Company. Because the real estate projects may be developed subject, in whole or in part, to later sales of units or other interests, the Company may face additional risks associated with marketing such units or interests after incurring substantial out-of-pocket costs or indebtedness. See "Business -- Real Estate Development" and "Business -- Environmental Matters." The Company may also grow through acquisitions; however, there can be no assurance that attractive acquisition candidates will be identified, or that any such acquisitions will be completed on terms acceptable to the Company, that necessary financing will be available on suitable terms, if at all, or that such acquisitions will be permitted under applicable antitrust laws. See "-- Leverage and Debt Service." Ability to Achieve Anticipated Cost Savings; Integration of SKI The Company faces risks associated with implementing its post-Acquisition strategy and integrating the operations of SKI into the operations of the Company. See "Business -- The Company -- Strategy." Management of the Company has estimated that substantial cost savings can be achieved as a result of integrating the operations of the Company and SKI. See "Pro Forma Financial Data" and "Business -- The Company - -- Strategy." The cost savings estimates have been prepared solely by members of the management of the Company based on information about SKI available to them, and have not been independently reviewed. The estimates necessarily make numerous assumptions as to future revenue levels and other operating results, the availability of funds for capital expenditures and general industry and business conditions and other matters, many of which are beyond the control of the Company. Investors are cautioned that the actual cost savings realized by the Company may vary considerably from the estimates contained herein and that undue reliance should not be placed upon such estimates. There also can be no assurance that unforeseen costs and expenses or other factors will not offset the anticipated cost savings in whole or in part. Regional and National Economic Conditions The skiing industry is cyclical in nature, and is particularly vulnerable to shifts in regional and national economic conditions. A significant portion of the Company's customers reside in the New England states. The economy in New England has been affected by substantial job losses in the manufacturing sector and in the defense industry, and has experienced other adverse economic trends. Although data indicate a stabilization of the New England economy, there can be no assurance that improvement will occur or that stagnation or declines in skier visits or real estate-related sales will not occur. Skiing is a discretionary recreational activity entailing relatively high costs of participation, and a worsening in the regional economy, or deteriorating national economic conditions, could adversely impact skier visits, and the Company's real estate and other revenues. Accordingly, the Company's financial condition, particularly in light of its highly leveraged condition, could be adversely affected by such a worsening in the regional or national economy. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Dependence on Weather Conditions; Seasonality Although the Company's facilities include high quality snowmaking equipment, its revenues and operating expenses continue to be heavily influenced by weather conditions. Adverse weather conditions lead to increased power and other operating costs associated with snowmaking, and can render snowmaking wholly or partially ineffective in maintaining quality skiing conditions. Moreover, it has been management's experience that, despite the presence of high quality snow on the mountains, unfavorable weather conditions in more highly populated areas can result in decreased skier visits. Prolonged adverse weather conditions, or the occurrence of such conditions during key periods of the ski season, can dramatically and adversely affect operating results. In addition, the Company's revenues are highly seasonal in nature, with the vast majority of its revenues historically being generated in the second and third fiscal quarters, of which a significant portion (as well as approximately 20% of annual skier days) is produced in two key weeks -- the Christmas and Presidents' Day vacation weeks. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- General." This high degree of seasonality of revenues exacerbates the potential effect on operating results of adverse weather and other developments of even moderate or limited duration. Competition The skiing industry is highly competitive and is characterized by high fixed operating expenses and heavy dependence upon marginal revenues and maintenance or improvement of skier visit levels. The Company's competitors include other major ski resorts in the northeastern United States, as well as in the western states, for its vacation business, and other ski areas in Maine, New Hampshire, Vermont, Massachusetts and upstate New York for weekend and day-skier traffic. The Company also competes with other non-ski-oriented major resorts. See "Business - --Competition." The Company believes that competition for skiers focuses on snow conditions, size, quality and variety of terrain, extent and quality of other facilities, quality of service, location and accessibility, and price. While the Company regularly monitors the activities of its principal competitors and modifies its marketing and operational strategies and techniques as necessary, there can be no assurance that its competitors will not be successful in capturing a material portion of the Company's present or potential customer base. Some of the Company's competitors have greater financial resources than the Company and could use these resources to take steps which could adversely affect the Company's competitive position. Such competitors may also be better positioned than the Company to withstand downturns in the skiing industry, adverse weather conditions, price and other forms of competition, and other negative developments. In addition, many of the Company's competitors in the western states have facilities offering more and longer trails with a greater variety of terrain and, as perceived by some, superior natural snow conditions. See "Business -- Competition." Risk Associated with Leased Property and Property Used Pursuant to Permits Portions of the land underlying certain of the Company's ski resorts are leased by the Company or used pursuant to permits or licenses from governmental and private entities. If any such lease were to be terminated as a result of a default by the lessee or holder thereunder, or if any such permit or license were to be terminated as a result of a default by the user thereunder or not renewed upon expiration or otherwise revoked prior to expiration, the Company would lose possession of the land subject thereto and any improvements thereon, perhaps making it impossible for the Company to operate the affected resort. Certain leases under which the Company is the tenant provide for renewal, but upon terms to be negotiated in the future. Therefore, the obligations of the Company may increase upon any such renewal. Special use permits granted by the United States Forest Service (the "USFS") are subject to termination if the federal government determines that the land is needed for a "higher public purpose." Such permits are granted subject to third party claims to the permitted land, if any, and the USFS reserves the right to use and permit others to use the permitted land so long as such use does not materially interfere with the rights and privileges authorized by the permits. Additionally, the USFS may impose additional conditions on the Company in connection with the Acquisition. For a description of such leases, permits and licenses, see "Business -- Properties." In addition, future expansion could subject the leases, permits or licenses to additional review under the federal National Environmental Policy Act ("NEPA") or other federal or state environmental laws. Environmental and Land Use Matters The Company is subject to a wide variety of federal, state, and local laws, regulations and policies relating to land use and development and to the use, storage, discharge, emission and disposal of hazardous materials. Failure to comply with such laws could result in the imposition of severe penalties or restrictions on operations including, without limitation, revocation of government issued special use permits, where applicable, that could adversely affect present and future operations, including both skiing and real estate development. The Company and SKI have recently completed Phase I environmental assessments at the properties owned or used by their respective subsidiaries. The reports included suggestions relative to certain conditions and areas of potential environmental concern. The reports did not, however, identify any environmental conditions or noncompliance, the remediation or correction of which management believes would have a material adverse impact on the business or financial condition, results of operations and cash flows of the Company at any of its resort areas. In addition, such laws, regulations and policies could change in a manner that materially and adversely affects the Company's ability to conduct its business as at present or to implement desired expansions and improvements to its facilities. See "Business -- Environmental Matters." Adequacy of Water Supply The Company's operations are heavily dependent upon its continued ability, under applicable laws, regulations, policies, permits, licenses, or contractual arrangements, including leases, reservations in deeds, easements and rights-of-way, to have access to adequate supplies of water with which to make snow and service the other needs of its facilities, including, in certain cases, the condominium developments at the properties and otherwise to conduct its operations. There can be no assurance that new applications of existing laws, regulations and policies, or changes in such laws, regulations and policies will not occur in a manner that could have an adverse effect on the Company, or that important permits, licenses or agreements will not be canceled, non-renewed, or renewed on terms materially less favorable to the Company. Additionally, the rights of the Company to use various water sources on or about its properties may be also subject to the rights of other riparian users and the public generally. See "Business -- Environmental Matters" and "Business --Properties." Antitrust The Company has resolved antitrust concerns of the DOJ raised by the Acquisition by entering into a consent decree. Specifically, the Company has agreed to divest the assets constituting the Waterville Valley and Mt. Cranmore resorts not later than December 1, 1996. The Consent (i) requires the Company to use its best efforts to complete the divestitures as expeditiously as possible, (ii) gives the DOJ the ability, in its sole discretion, to extend the time period for completing the divestitures by an additional ninety days, and (iii) requires the Company to consent to the appointment of a trustee to accomplish the divestitures at the best price then obtainable upon a reasonable effort by the trustee in event the divestitures have not been completed within the allotted period. If the transactions contemplated by the agreement established with Booth Creek Ski Acquisition Corp. to purchase these resorts (see "Recent Developments") are not timely consummated, no assurance can be given regarding the results of the sales, including the price to be received or the terms and conditions of the sales. No assurance can be given that the Company will complete the divestitures within the allotted time period or that the resorts will not be subject to sale by a trustee. Control of the Company Ninety-six percent (96%) of the Company's outstanding common stock is held by Leslie B. Otten; therefore, Mr. Otten has the ability unilaterally to control the affairs of the Company, subject only to such limitations as may be imposed under the Senior Credit Facility, the Indenture, the Subordinated Note Indenture or other existing or future contractual provisions. Dependence on Key Personnel The Company's success depends to a significant extent upon the performance and continued service of Mr. Otten, as well as several other key management and operational personnel. The loss of the services of Mr. Otten or of such other personnel could have a material adverse effect on the business and operations of the Company. Neither Mr. Otten nor any other executive officer is subject to an employment agreement with the Company or any of its subsidiaries. See "Management." Change of Control Upon a Change of Control, the Company will be required to offer to repurchase (i) all of the outstanding Notes at 101% of the principal amount thereof, plus accrued interest to the date of repurchase, and (ii) all of the Subordinated Notes at 101% of the Accreted Value or principal amount, as applicable, thereof, plus accrued interest to the date of repurchase. There can be no assurance that the Company will have sufficient funds available or will be permitted by its other debt agreements to repurchase the Notes and the Subordinated Notes upon the occurrence of a Change of Control. In addition, a Change of Control may cause a default under the Senior Credit Facility and other Senior Debt or Subordinated Note Senior Debt of the Company, in which case the subordination provisions of the Notes or the Subordinated Notes, as the case may be, would require payment in full of all such Senior Debt or Subordinated Note Senior Debt of the Company before repurchase of the Notes or the Subordinated Notes, as the case may be. See "Description of Senior Subordinated Notes - -- Subordination," "Description of Senior Subordinated Notes - -- Repurchase at the Option of Holders -- Change of Control," "Description of Subordinated Notes - --Subordination" and "Description of Subordinated Notes -- Repurchase at the Option of Holders -- Change of Control." The inability to repay Senior Debt or Subordinated Note Senior Debt of the Company, if accelerated, and to repurchase all of the tendered Notes or Subordinated Notes, would constitute an event of default under the Indenture or the Subordinated Note Indenture, as the case may be. Fraudulent Conveyance Risks Various fraudulent conveyance laws have been enacted for the protection of creditors and may be utilized by a court to subordinate or avoid the Notes, any Subsidiary Guarantee, the Subordinated Notes or any Subordinated Note Subsidiary Guarantee in favor of other existing or future creditors of the Company or a Guarantor. If a court in a lawsuit on behalf of any unpaid creditor of the Company or a representative of the Company's creditors were to find that, at the time the Company issued the Notes or the Subordinated Notes, the Company (x) intended to hinder, delay or defraud any existing or future creditor or contemplated insolvency with a design to prefer one or more creditors to the exclusion in whole or in part of others or (y) did not receive fair consideration or reasonably equivalent value for issuing such Notes or such Subordinated Notes, as applicable, and the Company (i) was insolvent, (ii) was rendered insolvent by reason of such distribution, (iii) was engaged or about to engage in a business or transaction for which its remaining assets constituted unreasonably small capital to carry on its business, or (iv) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured, such court could void such Notes or such Subordinated Notes, as applicable, and void such transactions. Alternatively, in such event, claims of the holders of such Notes or such Subordinated Notes, as applicable, could be subordinated to claims of the other creditors of the Company. The Company's obligations under the Notes and the Subordinated Notes have been guaranteed by the Guarantors. To the extent that a court were to find that (x) a Subsidiary Guarantee or Subordinated Note Subsidiary Guarantee was incurred by a Guarantor with intent to hinder, delay or defraud any present or future creditor or the Guarantor contemplated insolvency with a design to prefer one or more creditors to the exclusion in whole or in part of others or (y) such Guarantor did not receive fair consideration or reasonably equivalent value for issuing its Subsidiary Guarantee or Subordinated Note Subsidiary Guarantee and such Guarantor (i) was insolvent, (ii) was rendered insolvent by reason of the issuance of such Subsidiary Guarantee or Subordinated Note Subsidiary Guarantee, (iii) was engaged or about to engage in a business or transaction for which the remaining assets of such Guarantor constituted unreasonably small capital to carry on its business, or (iv) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured, the court could void or subordinate such Subsidiary Guarantee or Subordinated Note Subsidiary Guarantee in favor of the Guarantor's creditors. A legal challenge of a Subsidiary Guarantee or Subordinated Note Subsidiary Guarantee on fraudulent conveyance grounds may, among other things, focus on the benefits, if any, realized by the Guarantor as a result of the issuance by the Company of the applicable Notes or Subordinated Notes. To the extent any Subsidiary Guarantees or Subordinated Note Subsidiary Guarantees were avoided as a fraudulent conveyance or held unenforceable for any other reason, holders of the Notes or the Subordinated Notes, as the case may be, would cease to have any claim in respect of such Guarantor and would be creditors solely of the Company and any Guarantor whose Subsidiary Guarantee or Subordinated Note Subsidiary Guarantee was not avoided or held unenforceable. In such event, the claims of the holders of the applicable Notes or Subordinated Notes against the issuer of an invalid Subsidiary Guarantee or Subordinated Note Subsidiary Guarantee would be subject to the prior payment of all liabilities and preferred stock claims of such Guarantor. There can be no assurance that, after providing for all prior claims and preferred stock interests, if any, there would be sufficient assets to satisfy the claims of the holders of the applicable Notes relating to any voided portions of any of the Subsidiary Guarantees or Subordinated Note Subsidiary Guarantees. Based upon financial and other information currently available to it, management of the Company believes that the Notes, the Subsidiary Guarantees, the Subordinated Notes and the Subordinated Note Subsidiary Guarantees have been incurred for proper purposes and in good faith and that the Company and each Guarantor (i) is solvent and will continue to be solvent after issuing the Notes, the Subordinated Notes, its Subsidiary Guarantee or its Subordinated Note Subsidiary Guarantee, as the case may be, (ii) has sufficient capital for carrying on its business after such issuance, and (iii) will be able to pay its debts as they mature. See "Management's Discussions and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." Tax Considerations The Old Subordinated Notes were issued with significant original issue discount, and the Old Notes were issued with original issue discount, for federal income tax purposes, and the New Notes and the New Subordinated Notes will have similar original issue discount upon consummation of the Exchange Offers. Although interest will not accrue on the Subordinated Notes prior to July 15, 2001, and there will be no periodic payments of cash interest on the Subordinated Notes prior to January 15, 2002, original issue discount (i.e., the difference between the stated redemption price at maturity and the issue price of the Subordinated Notes) will accrue from the issue date of the Subordinated Notes. Original issue discount equal to such difference in the case of the Notes will accrue from the issue date of the Notes. Holders of the Subordinated Notes or the Notes will be required to include such original issue discount in gross income for federal income tax purposes over the term of such obligations in advance of the receipt of the cash payments to which the income is attributable. See "Certain Federal Income Tax Consequences." In addition, the Subordinated Notes constitute "applicable high yield discount obligations" for federal income tax purposes. As a result, the Company's deduction of original issue discount on the Subordinated Notes will be limited as follows: First, the "disqualified portion" of original issue discount on the Subordinated Notes will not be deductible by the Company. In general, the "disqualified portion" of original issue discount on the Subordinated Notes equals the percentage of such original issue discount obtained by dividing (a) the excess of the yield to maturity of the Subordinated Notes over the sum of the applicable federal rate for the month in which the Subordinated Notes are issued (6.92% for debt instruments issued in June 1996) plus six percentage points by (b) the yield to maturity of the Subordinated Notes. For purposes of the foregoing rules, the yield to maturity of the Subordinated Notes will be determined based on the "issue price" of the Subordinated Notes as determined for federal income tax purposes, which in general is the portion of the issue price of the Units allocated to the Subordinated Notes. See "Certain Federal Income Tax Consequences -- Original Issue Discount." Second, the remainder of the original issue discount on the Subordinated Notes will not be deductible by the Company until paid. If a bankruptcy case is commenced by or against the Company under the U.S. Bankruptcy Code after the issuance of the Subordinated Notes and the Notes, the claim of a holder of Subordinated Notes or Notes with respect to the principal amount thereof may be limited to an amount equal to the sum of (i) the initial offering price and (ii) that portion of the original issue discount that is not deemed to constitute "unmatured interest" for purposes of the U.S. Bankruptcy Code. Any original issue discount that was not amortized as of such bankruptcy filing would constitute "unmatured interest." See "Certain Federal Income Tax Considerations" for a more detailed discussion of the federal income tax consequences to the holders regarding the purchase, ownership and disposition of the Subordinated Notes and the Notes. Absence of Public Market The New Notes and the New Subordinated Notes are being offered exclusively to holders of the Old Notes and the Old Subordinated Notes, respectively. The Old Notes and the Old Subordinated Notes were issued to a limited number of institutional investors on June 28, 1996. There is no existing trading market for the Notes or the Subordinated Notes, and although the Company has been advised that Bear Stearns currently intends to make a market in the Notes and the Subordinated Notes, Bear Stearns is not obligated to do so and may discontinue any such market making at any time without notice. In addition, any market making activities in the Old Notes and the Old Subordinated Notes may be limited during the pendency of the Exchange Offers. There can be no assurance that an active trading market for the Notes or the Subordinated Notes will develop, or, if it develops, that it will continue. The Company does not intend to list the Notes or the Subordinated Notes on any securities exchange or to seek approval for quotation of the Notes or the Subordinated Notes through any automated quotation system. Future trading prices for the Notes and the Subordinated Notes will depend on many factors, including, among others, the Company's operating results, the market for similar securities and changes in prevailing interest rates. Consequences of Failure to Exchange Holders of Old Notes or Old Subordinated Notes who do not exchange for New Notes or New Subordinated Notes pursuant to the Exchange Offers will continue to be subject to the restrictions on transfer of such Old Notes or Old Subordinated Notes as set forth in the legend thereon as a consequence of the issuance of the Old Notes or the Old Subordinated Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes and the Old Subordinated 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. The Company does not currently anticipate that it will register the Old Notes or the Old Subordinated Notes under the Securities Act. New Notes and New Subordinated Notes issued pursuant to the Exchange Offers may be offered for resale, resold or otherwise transferred by Holders thereof (other than any such holder which is an "affiliate" of the Company or any Guarantor within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such New Notes or New Subordinated Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such notes. Each broker- dealer that receives New Notes or New Subordinated Notes for its own account pursuant to the Exchange Offers must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes or New Subordinated Notes. The Letter of Transmittal states that, by so acknowledging and delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning 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 New Notes or New Subordinated Notes received in exchange for Old Notes or Old Subordinated Notes where such Old Notes or Old Subordinated Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the effective date of this Prospectus, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." However, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes and New Subordinated Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdictions or an exemption from registration or qualification is available and is complied with. To the extent that Old Notes or Old Subordinated Notes are tendered and accepted in the Exchange Offers, the trading market for untendered and tendered but unaccepted Old Notes and Old Subordinated Notes will be adversely affected. THE EXCHANGE OFFERS Purpose and Effect of the Exchange Offers On June 28, 1996 (the "Closing Date"), the Old Notes were sold by the Company to the Initial Purchasers and the Old Subordinated Notes were sold by the Company to Bear Stearns. The Initial Purchasers and Bear Stearns subsequently resold the Old Notes and the Old Subordinated Notes, respectively, to qualified institutional buyers and/or institutional accredited investors. In connection with the issuance of the Old Notes and the Old Subordinated Notes, the Company and the Guarantors entered into the Registration Rights Agreements with the Initial Purchasers and Bear Stearns, respectively. Pursuant to the Registration Rights Agreements, the Company agreed (i) to file with the Commission a registration statement under the Securities Act with respect to the Exchange Offers no later than 45 days following the Closing Date, (ii) to use its best efforts to cause such registration statement to become effective under the Securities Act at the earliest practicable time, but in no event later than 150 days after the Closing Date, and (iii) upon effectiveness of the Registration Statement, to consummate the Exchange Offers within 30 business days. Copies of the Registration Rights Agreements have been filed as exhibits to the Registration Statement of which this Prospectus is a part. The Registration Statement is intended to satisfy the Company's obligations under the Registration Rights Agreements. As a result of the filing and the effectiveness of the Registration Statement of which this Prospectus is a part, payment of certain liquidated damages provided for in the Registration Rights Agreements will not occur. Following the consummation of the Exchange Offers, Holders of Old Notes or Old Subordinated Notes will not, in general, have any further registration rights and the Old Notes or Old Subordinated Notes will continue to be subject to certain restrictions on transfer except that certain Holders may have certain registration rights in certain limited circumstances. See "- Certain Consequences of a Failure to Exchange." Accordingly, the liquidity of the market for the Old Notes or Old Subordinated Notes could be adversely affected. Resales of New Notes and New Subordinated Notes The Company is making the Exchange Offers in reliance on the position of the staff of the Division of Corporation Finance of the Commission as set forth in certain interpretive letters addressed to third parties in other transactions. However, the Company has not sought its own interpretive letter and there can be no assurance that the staff of the Division of Corporation Finance of the Commission would make a similar determination with respect to the Exchange Offers as it has in such interpretive letters to third parties. Based on these interpretations by the staff of the Division of Corporation Finance, and subject to the two immediately following sentences, the Company believes that New Notes issued pursuant to the Notes Exchange Offer in exchange for Old Notes and New Subordinated Notes issued pursuant to the Subordinated Notes Exchange Offer in exchange for Old Subordinated Notes may be offered for resale, resold and otherwise transferred by a Holder thereof (other than a Holder who is a broker-dealer) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Notes and New Subordinated Notes are acquired in the ordinary course of such Holder's business and that such Holder is not participating, and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of such New Notes or New Subordinated Notes. However, any Holder of Old Notes or Old Subordinated Notes who is an "affiliate" of the Company or who intends to participate in the Exchange Offers for the purpose of distributing New Notes or the New Subordinated Notes, or any broker-dealer who purchased Old Notes or Old Subordinated Notes from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act (a) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the Commission set forth in the above-mentioned interpretive letters, (b) will not be permitted or entitled to tender such Old Notes or Old Subordinated Notes in the Exchange Offers, and (c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of such Old Notes or Old Subordinated Notes unless such sale is made pursuant to an exemption from such requirements. In addition, as described below, if any broker-dealer holds Old Notes or Old Subordinated Notes acquired for its own account as a result of market-making or other trading activities and exchanges such Old Notes for New Notes or exchanges such Old Subordinated Notes for New Subordinated Notes, then such broker-dealer must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such New Notes or New Subordinated Notes. Each Holder of Old Notes who wishes to exchange Old Notes for New Notes in the Notes Exchange Offer and each Holder of Old Subordinated Notes who wishes to exchange Old Subordinated Notes for New Subordinated Notes in the Subordinated Notes Exchange Offer will be required to represent that (i) it is not an "affiliate" of the Company, (ii) any New Notes or New Subordinated Notes to be received by it are being acquired in the ordinary course of its business, (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Notes or New Subordinated Notes, and (iv) if such Holder is not a broker- dealer, such Holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such New Notes or New Subordinated Notes. Each broker-dealer that receives New Notes or New Subordinated Notes for its own account pursuant to the Exchange Offers must acknowledge that it acquired the Old Notes or Old Subordinated Notes for its own account as the result of market-making activities or other trading activities and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes or New Subordinated Notes. The Notes Letter of Transmittal and the Subordinated Notes Letter of Transmittal state that by so acknowledging 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. Based on the position taken by the staff of the Division of Corporation Finance of the Commission in the interpretive letters referred to above, the Company believes that broker-dealers who acquired Old Notes or Old Subordinated Notes for their own accounts as a result of market-making activities or other trading activities ("Participating Broker-Dealers") may fulfill their prospectus delivery requirements with respect to New Notes or New Subordinated Notes received upon exchange of such Old Notes or Old Subordinated Notes, as the case may be (other than Old Notes or Old Subordinated Notes which represent an unsold allotment from the original sale of the Old Notes or Old Subordinated Notes, as the case may be), with a prospectus meeting the requirements of the Securities Act, which may be the prospectus prepared for an exchange offer so long as it contains a description of the plan of distribution with respect to the resale of such New Notes or New Subordinated Notes. Accordingly, this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer during the period referred to below in connection with resales of New Notes or New Subordinated Notes received in exchange for Old Notes or Old Subordinated Notes, as the case may be, where such Old Notes or Old Subordinated Notes, as the case may be, were acquired by such Participating Broker-Dealer for its own account as a result of market-making or other trading activities. Subject to certain provisions set forth in the Registration Rights Agreements, the Company has agreed that this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of such New Notes or New Subordinated Notes for the lesser of (i) a period of 180 days from the date on which the Registration Statement of which this Prospectus is a part is declared effective or (ii) such period of time as such Participating Broker-Dealer must comply with the prospectus delivery requirements of the Act in order to resell such New Notes or New Subordinated Notes (subject to extension under certain limited circumstances below). See "Plan of Distribution." Any Participating Broker-Dealer who is an "affiliate" of the Company may not rely on such interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. In that regard, each Participating Broker-Dealer who surrenders Old Notes or Old Subordinated Notes pursuant to the Exchange Offers will be deemed to have agreed, by execution of the Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal, as the case may be, that, upon receipt of advice from the Company 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, this Prospectus, or any supplement or amendment thereto, untrue, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements herein or therein not misleading or of the occurrence of certain other events specified in the Registration Rights Agreements, such Participating Broker- Dealer will suspend the sale of New Notes or New Subordinated Notes pursuant to this Prospectus until the Company has amended or supplemented this Prospectus to correct such untrue statement or make the statements herein or therein not misleading and has furnished copies of the amended or supplemented Prospectus to such Participating Broker-Dealer or the Company has advised such Participating Broker-Dealer in writing that the sale of the New Notes or New Subordinated Notes may be resumed, as the case may be. If the Company gives such notice to suspend the sale of New Notes or New Subordinated Notes, or if the Company delays or suspends the effectiveness of the Registration Statement of which this Prospectus is a part, under certain circumstances it shall extend the period referred to above during which Participating Broker-Dealers are entitled to use this Prospectus in connection with the resale of New Notes or New Subordinated Notes by the number of days during the period from and including the date of the giving of such notice to and including the date when Participating Broker-Dealers shall have received copies of the amended or supplemented Prospectus necessary to permit resales of the New Notes or New Subordinated Notes or to and including the date on which the Company has given the advice that the sale of New Notes or New Subordinated Notes may be resume, as the case may be. A Participating Broker-Dealer who intends to use the Prospectus in connection with the resale of the New Notes or New Subordinated Notes pursuant to the Exchange Offers must notify the Company, or cause the Company to be notified, on or prior to the Expiration Date that it is a Participating Broker-Dealer. Such notice may be given in the space provided for that purpose in the Letters of Transmittal or may be delivered to the Exchange Agent at the address set forth in the sections of this Prospectus entitled "- Terms of the Exchange Offers - Exchange Agent" and "Exchange Agent." Certain Consequences of a Failure to Exchange The Old Notes or Old Subordinated Notes have not been registered under the Securities Act or any state securities law and therefore may not be offered, sold or otherwise transferred except in compliance with the registration requirements of the Securities Act and any other applicable securities laws, or pursuant to an exemption therefrom or in a transaction not subject thereto, and in each case in compliance with certain other conditions and restrictions, including the Company's and the Trustee's rights in certain cases to require the delivery of opinions of counsel, certifications and other information prior to any such transfer. Old Notes or Old Subordinated Notes which remain outstanding after consummation of the Exchange Offers will continue to bear a legend reflecting such restrictions on transfer. In addition, upon consummation of the Exchange Offers, Holders of the Old Notes or Old Subordinated Notes which remain outstanding will not be entitled to any rights to have such Old Notes or Old Subordinated Notes registered under the Securities Act or to any similar rights under the Registration Rights Agreements (subject to certain limited exceptions, if applicable, which would entitle certain holders in limited circumstances to shelf registration rights with respect to the Old Notes or Old Subordinated Notes). The Company currently does not intend to register under the Securities Act any Old Notes or Old Subordinated Notes which remain outstanding after consummation of the Exchange Offers (subject to such limited exceptions, if applicable). To the extent that Old Notes or Old Subordinated Notes are tendered and accepted in the Exchange Offers, a Holder's ability to sell untendered Old Notes or untendered Old Subordinated Notes could be adversely affected. In addition, to the extent that Old Notes or Old Subordinated Notes are tendered and accepted in connection with the Exchange Offers, any trading market for Old Notes or Old Subordinated Notes, as the case may be, which remain outstanding after the Exchange Offers could be adversely affected. The New Notes and any Old Notes which remain outstanding after consummation of the Notes Exchange Offer will constitute a single series of debt securities under the Indenture and, accordingly, will vote together as a single class for purposes of determining whether holders of the requisite percentage in outstanding principal amount thereof have taken certain actions or exercised certain rights under the Indenture. See "Description of Senior Subordinated Notes." The New Subordinated Notes and any Old Subordinated Notes which remain outstanding after the consummation of the Subordinated Notes Exchange Offer will constitute a single series of debt securities under the Subordinated Note Indenture and, accordingly, will vote together as a single class for purposes of determining whether holders of the requisite percentage in outstanding principal amount thereof have taken certain actions or exercised certain rights under the Subordinated Note Indenture. See "Description of Subordinated Notes." The Registration Rights Agreements provide for liquidated damages in the event that certain events relating to the registration of the New Notes or New Subordinated Notes offered in the Exchange Offers does not occur within specified time parameters. See "- Purpose and Effect of the Exchange Offers." Following consummation of the Exchange Offers, the Old Notes and the Old Subordinated Notes will not be entitled to any liquidated damages thereon, except in certain limited circumstances, if applicable. The New Notes and the New Subordinated Notes will not be entitled to any such liquidated damages thereon. Terms of the Exchange Offers General The Company hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal, as applicable, to exchange up to $120,000,000 aggregate principal amount of New Notes for a like aggregate principal amount of Old Notes and up to $39,132,000 aggregate principal amount of New Subordinated Notes for a like aggregate principal amount of Old Subordinated Notes properly tendered on or prior to the Expiration Date (as defined below) and not properly withdrawn in accordance with the procedures described below. The Company will issue, promptly after the Expiration Date, an aggregate principal amount of up to $120,000,000 of New Notes in exchange for a like principal amount of outstanding Old Notes tendered and accepted in connection with the Notes Exchange offer and an aggregate principal amount of up to $39,132,000 of New Subordinated Notes in exchange for a like principal amount of outstanding Old Subordinated Notes tendered and accepted in connection with the Subordinated Notes Exchange Offer. Holders may tender their Old Notes and Old Subordinated Notes in whole or in part in a principal amount of $1,000 and integral multiples thereof. The Exchange Offers are not conditioned upon any minimum principal amount of Old Notes or Old Subordinated Notes being tendered. As of the date of this Prospectus, $120,000,000 aggregate principal amount of the Old Notes is outstanding and $39,132,000 aggregate principal amount of the Old Subordinated Notes is outstanding. Solely for reasons of administration (and for no other purpose), the Company has fixed the close of business on the date of this Prospectus as the record date for the Exchange Offers for purposes of determining the persons to whom this Prospectus and the Notes Letter of Transmittal or the Subordinated Notes Letter of Transmittal will be mailed initially. Only a registered Holder of the Old Notes (or such Holder's legal representative or attorney-in-fact) as reflected on the records of the registrar for the Notes may participate in the Notes Exchange Offer, and only a registered Holder of the Old Subordinated Notes (or such Holder's legal representative or attorney-in-fact) as reflected on the records of the registrar for the Subordinated Notes may participate in the Subordinated Notes Exchange Offer. There will be no fixed record date for determining registered Holders of the Old Notes or Old Subordinated Notes entitled to participate in the Exchange Offers. Holders of Old Notes or Old Subordinated Notes do not have any appraisal or dissenters' rights in connection with the Exchange Offers. Old Notes and Old Subordinated Notes which are not tendered for exchange or are tendered but not accepted in connection with the Exchange Offers will remain outstanding and be entitled to the benefits of the Indenture and the Subordinated Note Indenture, respectively, but will not, in general, be entitled to any further registration rights under the Registration Rights Agreements. If any tendered Old Notes or Old Subordinated Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, certificates for any such unaccepted Old Notes or Old Subordinated Notes will be returned, without expense, to the tendering Holder thereof promptly after the Expiration Date. Holders who tender Old Notes or Old Subordinated Notes in connection with the Exchange Offers will not be required to pay brokerage commissions or fees or, subject to the instructions in the Notes Letter of Transmittal and the Subordinated Notes Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes or Old Subordinated Notes in connection with the Exchange Offers. The Company will pay all charges and expenses, other than certain applicable taxes described below, in connection with the Exchange Offers. See "- Fees and Expenses." NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY RECOMMENDATION TO HOLDERS OF OLD NOTES OR OLD SUBORDINATED NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES OR OLD SUBORDINATED NOTES PURSUANT TO THE EXCHANGE OFFERS. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD NOTES OR OLD SUBORDINATED NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE NOTES EXCHANGE OFFERS AND, IF SO, THE AGGREGATE AMOUNT OF OLD NOTES OR OLD SUBORDINATED NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE NOTES LETTER OF TRANSMITTAL OR THE SUBORDINATED NOTES LETTER OF TRANSMITTAL, AS APPLICABLE, AND CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS. Expiration Date; Extensions; Amendments The term "Expiration Date" means 5:00 p.m., New York City time, on January 15, 1997, unless the Exchange Offers are extended by the Company (in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offers are extended). The Company expressly reserves the right in its sole and absolute discretion, subject to applicable law, at any time and from time to time, (i) to delay the acceptance of the Old Notes or Old Subordinated Notes for exchange, (ii) to terminate the Exchange Offers (whether or not any Old Notes or Old Subordinated Notes have theretofore been accepted for exchange) if the Company determines, in its sole and absolute discretion, that any of the events or conditions referred to under "- Certain Conditions of the Exchange Offers" have occurred or exist or have not been satisfied, (iii) to extend the Expiration Date of the Exchange Offers and retain all Old Notes or Old Subordinated Notes tendered pursuant to the Exchange Offers, subject, however, to the right of Holders of Old Notes or Old Subordinated Notes to withdraw their tendered Old Notes or Old Subordinated Notes as described under "- Withdrawal Rights," and (iv) to waive any condition or otherwise amend the terms of the Exchange Offers in any respect. If either Exchange Offer is amended in a manner determined by the Company to constitute a material change, or if the Company waives a material condition of either Exchange Offer, the Company will promptly disclose such amendment by means of a prospectus supplement that will be distributed to the registered Holders of the Old Notes or Old Subordinated Notes, as applicable, and the Company will extend such Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act. Any such delay in acceptance, extension, termination, or amendment will be followed promptly by oral or written notice thereof to the Exchange Agent and by making a public announcement thereof, and such announcement in the case of an extension will be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which the Company may choose to make any public announcement and subject to applicable law, the Company shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to the Dow Jones News Service. Acceptance for Exchange and Issuance of New Notes or New Subordinated Notes Upon the terms and subject to the conditions of the Exchange Offers, the Company will exchange and will issue to the Exchange Agent, New Notes for Old Notes, and New Subordinated Notes for Old Subordinated Notes, in each case validly tendered and not withdrawn (pursuant to the withdrawal rights described under "- Withdrawal Rights") promptly after the Expiration Date. In all cases, delivery of New Notes in exchange for Old Notes or of New Subordinated Notes in exchange for Old Subordinated Notes, tendered and accepted for exchange pursuant to the Exchange Offers will be made only after timely receipt by the Exchange Agent of (i) Old Notes or Old Subordinated Notes or a book-entry confirmation of a book- entry transfer of Old Notes or Old Subordinated Notes into the Exchange Agent's account at The Depository Trust Company ("DTC"), (ii) the Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal, as applicable (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, and (iii) any other documents required by the Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal, as applicable. The term "book-entry confirmation" means a timely confirmation of a book-entry transfer of Old Notes or Old Subordinated Notes into the Exchange Agent's account at DTC. Subject to the terms and conditions of the Exchange Offers, the Company will be deemed to have accepted for exchange, and thereby exchanged, Old Notes or Old Subordinated Notes validly tendered and not withdrawn as, if and when the Company gives oral or written notice to the Exchange Agent of the Company's acceptance of such Old Notes or Old Subordinated Notes for exchange pursuant to the Exchange Offers. The Exchange Agent will act as agent for the Company for the purpose of receiving tenders of Old Notes or Old Subordinated Notes, Notes Letters of Transmittal, Subordinated Notes Letters of Transmittal and related documents, and as agent for tendering Holders for the purpose of receiving Old Notes or Old Subordinated Notes, Notes Letters of Transmittal, Subordinated Notes Letters of Transmittal and related documents, and transmitting New Notes or New Subordinated Notes to validly tendering Holders. Such exchange will be made promptly after the Expiration Date. If for any reason whatsoever, acceptance for exchange or the exchange of any Old Notes or Old Subordinated Notes tendered pursuant to the Exchange Offers is delayed (whether before or after the Company's acceptance for exchange of Old Notes or Old Subordinated Notes) or the Company extends the Exchange Offers or is unable to accept for exchange or exchange Old Notes or Old Subordinated Notes tendered pursuant to the Exchange Offers, then, without prejudice to the Company's rights set forth herein, the Exchange Agent may, nevertheless, on behalf of the Company and subject to Rule 14e-1(c) under the Exchange Act, retain tendered Old Notes or Old Subordinated Notes and such Old Notes or Old Subordinated Notes, as the case may be, may not be withdrawn except to the extent tendering Holders are entitled to withdrawal rights as described under "- Withdrawal Rights." Pursuant to the Notes Letters of Transmittal and the Subordinated Notes Letters of Transmittal, a Holder of Old Notes or Old Subordinated Notes, respectively, will warrant and agree that it has full power and authority to tender, exchange, sell, assign, and transfer Old Notes or Old Subordinated Notes, that the Company will acquire good, marketable and unencumbered title to the tendered Old Notes or Old Subordinated Notes, free and clear of all liens, restrictions, charges, and encumbrances, and the Old Notes or Old Subordinated Notes tendered for exchange are not subject to any adverse claims or proxies. The Holder also will warrant and agree that it will, upon request, execute and deliver any additional documents deemed by the Company or the Exchange Agent to be necessary or desirable to complete the exchange, sale, assignment, and transfer of the Old Notes or Old Subordinated Notes tendered pursuant to the Exchange Offers. Procedures for Tendering Old Notes or Old Subordinated Notes Valid Tender. Except as set forth below, in order for Old Notes or Old Subordinated Notes to be validly tendered pursuant to the Exchange Offers, (i) a properly completed and duly executed Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal (or facsimile thereof), as applicable, with any required signature guarantees, or an Agent's Message (as defined herein) in connection with a book-entry transfer of Old Notes or Old Subordinated Notes, and any other required documents, must be received by the Exchange Agent at one of its addresses set forth under "- Exchange Agent," and either (a) tendered Old Notes or Old Subordinated Notes must be received by the Exchange Agent, or (b) such Old Notes or Old Subordinated Notes must be tendered pursuant to the procedures for book- entry transfer set forth below and a book-entry confirmation must be received by the Exchange Agent, in each case on or prior to the Expiration Date, or (ii) the guaranteed delivery procedures set forth below must be complied with. If less than all of the Old Notes or Old Subordinated Notes are tendered, a tendering Holder should fill in the amount of the Old Notes or Old Subordinated Notes being tendered in the appropriate box on the Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal. The entire amount of Old Notes or Old Subordinated Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. THE METHOD OF DELIVERY OF CERTIFICATES, THE NOTES LETTER OF TRANSMITTAL OR SUBORDINATED NOTES LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO NOTES LETTER OF TRANSMITTAL OR SUBORDINATED NOTES LETTER OF TRANSMITTAL SHOULD BE SENT TO THE COMPANY. Book-Entry Transfer. The Exchange Agent will establish accounts with respect to the Old Notes and Old Subordinated Notes at DTC for purposes of the Exchange Offers promptly after the date of this Prospectus. Any financial institution that is a participant in DTC's book- entry transfer facility system may make a book-entry delivery of the Old Notes or Old Subordinated Notes by causing DTC to transfer such Old Notes or Old Subordinated Notes into the Exchange Agent's applicable account at DTC in accordance with DTC's procedures for transfers. However, although delivery of Old Notes or Old Subordinated Notes may be effected through book-entry transfer into the Exchange Agent's applicable account at DTC pursuant to the DTC's Automated Tender Offer Program ("ATOP") procedures, the Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal (or facsimile thereof), as applicable, properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book- entry transfer, and any other required documents, must in any case be delivered to and received by the Exchange Agent at its address set forth under "- Exchange Agent" on or prior to the Expiration Date, or the guaranteed delivery procedure set forth below must be complied with. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. The term "Agent's Message" means a message, transmitted by DTC to, and received by, the Exchange Agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the participant in DTC tendering the Old Notes or Old Subordinated Notes which are the subject of such book-entry confirmation, that such participation has received and agrees to be bound by the terms of the Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal, as applicable, and that the Company may enforce such agreement against such participant. Signature Guarantees. Certificates for Old Notes or Old Subordinated Notes need not be endorsed and signature guarantees on the Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal are unnecessary unless (a) a certificate for the Old Notes or Old Subordinated Notes, as applicable, is registered in a name other than that of the person surrendering the certificate or (b) such registered Holder completes the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" in the Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal. In the case of (a) or (b) above, such certificates for Old Notes or Old Subordinated Notes must be duly endorsed or accompanied by a properly executed bond power, with the endorsement or signature on the bond power and on the Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal guaranteed by a firm or other entity identified in Rule 17Ad- 15 under the Exchange Act, as an "eligible guarantor institution," including (as such terms are defined therein): (i) a bank, (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer, (iii) a credit union, (iv) a national securities exchange, registered securities association or clearing agency, or (v) a savings association that is a participant in a Securities Transfer Association (an "Eligible Institution"), unless surrendered on behalf of such Eligible Institution. Guaranteed Delivery. If a Holder desires to tender Old Notes or Old Subordinated Notes pursuant to the Exchange Offers and the certificates for Old Notes or Old Subordinated Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent on or before the Expiration Date, or the procedures for book-entry transfer cannot be completed on a timely basis, such Old Notes or Old Subordinated Notes may nevertheless be tendered, provided that all of the following guaranteed delivery procedures are complied with: (i) such tenders are made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form accompanying the Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal, as applicable, is received by the Exchange Agent, as provided below, on or prior to the Expiration Date; (iii) the certificates (or a book-entry confirmation) representing all tendered Old Notes or Old Subordinated Notes, in proper form for transfer, together with a properly completed and duly executed Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal (or facsimile thereof) as applicable, with any required signature guarantees, or an Agent's Message in connection with a book- entry transfer of Old Notes or Old Subordinated Notes, and any other documents required by the Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal, as applicable, are received by the Exchange Agent within three business days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand, or transmitted by facsimile or mail to the Exchange Agent and must include a guarantee by an Eligible Institution in the form set forth in such notice. Notwithstanding any other provision hereof, the delivery of New Notes in exchange for Old Notes, or of New Subordinated Notes in exchange for Old Subordinated Notes, tendered and accepted for exchange pursuant to the Exchange Offers will in all cases be made only after timely receipt by the Exchange Agent of Old Notes or Old Subordinated Notes or of a book-entry confirmation with respect to such Old Notes or Old Subordinated Notes and a properly completed and duly executed Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal, as applicable. Accordingly, the delivery of New Notes or New Subordinated Notes might not be made to all tendering Holders at the same time, and will depend upon when Old Notes or Old Subordinated Notes, as applicable, book-entry confirmations with respect to Old Notes or Old Subordinated Notes, as applicable, and other required documents are received by the Exchange Agent. The Company's acceptance for exchange of Old Notes or Old Subordinated Notes tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering Holder and the Company upon the terms and subject to the conditions of the Exchange Offers. Determination of Validity. All questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tendered Old Notes or Old Subordinated Notes will be determined by the Company, in its sole discretion, whose determination shall be final and binding on all parties. The Company reserves the absolute right, in its sole and absolute discretion, to reject any and all tenders determined by it not to be in proper form or the acceptance of which, or exchange for, may, in the view of counsel to the Company, be unlawful. The Company also reserves the absolute right, subject to applicable law, to waive any of the conditions of the Exchange Offers as set forth under "-- Certain Conditions to the Exchange Offers" or any condition or irregularity in any tender of Old Notes or Old Subordinated Notes of any particular Holder whether or not similar conditions or irregularities are waived in the case of other Holders. The Company's interpretation of the terms and conditions of the Exchange Offers (including the Notes Letter of Transmittal, the Subordinated Notes Letter of Transmittal and the instructions thereto) will be final and binding. No tender of Old Notes or Old Subordinated Notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Neither the Company, any affiliates or assigns of the Company, the Exchange Agent nor any other person shall be under any duty to give any notification of any irregularities in tenders or incur any liability for failure to give any such notification. If any Notes Letter of Transmittal, Subordinated Notes Letter of Transmittal, endorsement, bond power, power of attorney, or any other document required by the Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and unless waived by the Company, proper evidence satisfactory to the Company, in its sole discretion, of such person's authority to so act must be submitted. A beneficial owner of Old Notes or Old Subordinated Notes that are held by or registered in the name of a broker, dealer, commercial bank, trust company or other nominee or custodian is urged to contact such entity promptly if such beneficial Holder wishes to participate in the applicable Exchange Offer. Withdrawal Rights Except as otherwise provided herein, tenders of Old Notes or Old Subordinated Notes may be withdrawn at any time on or prior to the Expiration Date. In order for a withdrawal to be effective a written, telegraphic, telex or facsimile transmission of such notice of withdrawal must be timely received by the Exchange Agent at one of its addresses set forth under "- Exchange Agent" on or prior to the Expiration Date. Any such notice of withdrawal must specify the name of the person who tendered the Old Notes or Old Subordinated Notes to be withdrawn, the aggregate principal amount of the Old Notes or Old Subordinated Notes to be withdrawn, and (if certificates for such Old Notes or Old Subordinated Notes have been tendered) the name of the registered Holder of the Old Notes or Old Subordinated Notes as set forth on the Old Notes or Old Subordinated Notes, if different from that of the person who tendered such Old Notes or Old Subordinated Notes. If Old Notes or Old Subordinated Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the physical release of such Old Notes or Old Subordinated Notes, the tendering Holder must submit the serial numbers shown on the particular Old Notes or Old Subordinated Notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Old Notes or Old Subordinated Notes tendered for the account of an Eligible Institution. If Old Notes or Old Subordinated Notes have been tendered pursuant to the procedures for book-entry transfer set forth in "- Procedures for Tendering Old Notes or Old Subordinated Notes," the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawal of Old Notes or Old Subordinated Notes, in which case a notice of withdrawal will be effective if delivered to the Exchange Agent by written, telegraphic, telex or facsimile transmission. Withdrawals of tenders of Old Notes or Old Subordinated Notes may not be rescinded. Old Notes or Old Subordinated Notes properly withdrawn will not be deemed validly tendered for purposes of the applicable Exchange Offer, but may be retendered at any subsequent time on or prior to the Expiration Date by following any of the procedures described above under "- Procedures for Tendering Old Notes or Old Subordinated Notes." All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Company, in its sole discretion, whose determination shall be final and binding on all parties. Neither the Company, any affiliates or assigns of the Company, the Exchange Agent nor any other person shall be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Old Notes or Old Subordinated Notes which have been tendered but which are withdrawn will be returned to the Holder thereof promptly after withdrawal. Interest on the New Notes, Old Notes, New Subordinated Notes, and Old Subordinated Notes. Each New Note and each New Subordinated Note will bear interest from its issuance date. Holders of Old Notes or Old Subordinated Notes that are accepted for exchange will receive, in cash, accrued interest thereon to, but excluding, the issuance date of the New Notes or New Subordinated Notes, as applicable. Such interest will be paid with the first interest payment on the New Notes or New Subordinated Notes, as applicable, Interest on the Old Notes or Old Subordinated Notes accepted for exchange will cease to accrue upon issuance of the New Notes or New Subordinated Notes, as applicable. Certain Conditions to the Exchange Offers Notwithstanding any other provision of the Exchange Offers or any extension of the Exchange Offers, the Company will not be required to accept for exchange, or to exchange, any Old Notes for any New Notes or any Old Subordinated Notes for any New Subordinated Notes and, as described below, may terminate the Exchange Offers (whether or not any Old Notes or Old Subordinated Notes have theretofore been accepted for exchange) or may waive any conditions to or amend the Exchange Offers, if any of the following conditions have occurred or exists or have not been satisfied. (a) either of the Exchange Offers or the making of any exchange by a Holder violates any applicable law or any applicable interpretation of the staff of the Commission; (b) any action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency or body with respect to either of the Exchange Offers which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with either of the Exchange Offers; (c) any law, statute, rule, or regulation shall have been adopted or enacted which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with either of the Exchange Offers; (d) a banking moratorium shall have been declared by United States federal or Maine or New York state authorities which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with either of the Exchange Offers; (e) trading on the New York Stock Exchange or generally in the United States over-the- counter market shall have been suspended by order of the Commission or any other governmental authority which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offers; or (f) a stop order shall have been issued by the Commission or any state securities authority suspending the effectiveness of the Registration Statement or proceedings shall have been initiated or, to the knowledge of the Company, threatened for that purpose. If the Company determines, in its reasonable judgment, that any of the foregoing events or conditions has occurred or exists or has not been satisfied, the Company may, subject to applicable law, terminate the Exchange Offers (whether or not any Old Notes or Old Subordinated Notes have theretofore been accepted for exchange) or may waive any such condition or otherwise amend the terms of the Exchange Offers in any respect. If such waiver or amendment constitutes a material change to the Exchange Offers, the Company will promptly disclose such waiver by means of a prospectus supplement that will be distributed to the registered Holders of the Old Notes or Old Subordinated Notes and the Company will extend the Exchange Offers to the extent required by Rule 14e-1 under the Exchange Act. Exchange Agent United States Trust Company of New York has been appointed as Exchange Agent for the Exchange Offers. Delivery of the Notes Letter of Transmittal, Subordinated Notes Letter of Transmittal and any other required documents, questions, requests for assistance, and requests for additional copies of this Prospectus or of the Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal should be directed to the Exchange Agent as follows: BY MAIL: (insured or registered BY OVERNIGHT EXPRESS: recommended) United States Trust Company of United States Trust Company of New York New York P.O. Box 843 770 Broadway, 13th Floor Peter Cooper Station New York, New York 10003 New York, New York 10276 Attention: Corporate Trust Attention: Corporation Trust Services Window BY HAND: United States Trust Company of New York 111 Broadway/Lower Level New York, New York 10005 Attention: Corporate Trust TO CONFIRM BY TELEPHONE OR FOR INFORMATION: (800) 548-6565 FACSIMILE TRANSMISSION: (for eligible institutions only) (212) 420-6152 Delivery to other than one of the above addresses or facsimile numbers will not constitute a valid delivery. Fees and Expenses The Company has agreed to pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The Company will also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this Prospectus and related documents to the beneficial owners of Old Notes or Old Subordinated Notes, and in handling or tendering for their customers. Holders who tender their Old Notes or Old Subordinated Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, New Notes or New Subordinated Notes are to be delivered to, or are to be issued in the name of, any person other than the registered Holder of the Old Notes or Old Subordinated Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of Old Notes or Old Subordinated Notes in connection with the Exchange Offers, then the amount of any such transfer taxes (whether imposed on the registered Holder or any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Notes Letter of Transmittal or Subordinated Notes Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering Holder. The Company will not make any payment to brokers, dealers or others soliciting acceptances of the Exchange Offers. PRO FORMA CAPITALIZATION The following table sets forth the capitalization of the Company as of July 28, 1996, on an actual historical basis and as adjusted to give effect to the acquisition of the remaining 49% interest in Sugarloaf and the divestitures of the Waterville Valley and Mt. Cranmore resorts, pursuant to the Consent. The following capitalization table should be read in conjunction with the unaudited "Pro Forma Financial Data" and "Selected Historical Financial Data" included elsewhere in this Prospectus. July 28, 1996 Consolidated Actual Pro Forma (in thousands) Total Debt: Senior Credit Facility (1) $40,301 $ 34,432 Other senior indebtedness 25,366 19,376 Senior Subordinated Notes 116,611 116,611 Subordinated Discount Notes 19,231 19,231 Other subordinated 14,586 14,586 indebtedness Total debt 216,095 204,236 Stockholders' equity 21,903 $ 22,395 Total capitalization 237,998 $ 226,631 ________________________ (1) Under the Senior Credit Facility, a total of $65.0 million is available for borrowing by the Company, subject to compliance with the terms thereof. See "Description of Other Indebtedness -- The Senior Credit Facility" for a description of the terms of the Senior Credit Facility. PRO FORMA FINANCIAL DATA The following unaudited pro forma financial data (the "Pro Forma Financial Data") is derived from the historical financial statements of the Company and SKI, in each case included elsewhere in this Prospectus, and have been prepared on a pro forma basis giving effect to the Acquisition and Offerings, the acquisition of the remaining 49% interest in Sugarloaf and the divestitures of the Waterville Valley and Mt. Cranmore resorts, pursuant to the Consent. The Pro Forma Financial Statements and accompanying notes should be read in conjunction with the historical financial statements and the notes thereto included elsewhere in this Prospectus. The unaudited pro forma statement of income data for the year ended July 28, 1996 gives effect to the Acquisition and Offerings, the acquisition of the remaining 49% interest in Sugarloaf and the divestitures of the Waterville Valley and Mt. Cranmore resorts, pursuant to the Consent, as if they had occurred on August 1, 1995. The unaudited pro forma balance sheet data as of July 28, 1996 give effect to the acquisition of the remaining 49% interest in Sugarloaf and the divestitures of the Waterville Valley and Mt. Cranmore resorts, pursuant to the Consent, as if they had occurred on such date. The Pro Forma Financial Data is not intended to be indicative of either future results of operations or results that might have been achieved had the Acquisition and Offerings and the divestitures of the Waterville Valley and Mt. Cranmore resorts, pursuant to the Consent, actually occurred on the dates specified. In the opinion of the Company's management, all adjustments necessary to present fairly such unaudited pro forma consolidated financial data have been made based upon the terms and structure of the Acquisition and Offerings and the divestitures of the Waterville Valley and Mt. Cranmore resorts, pursuant to the Consent. See "The Acquisition; Antitrust Matters; Use of Proceeds," "Recent Developments" and "Risk Factors--Antitrust." In addition to the cost reductions included in the pro forma data, management expects to realize further annual cost reductions following the Acquisition. These reductions will result largely from decreases in discretionary costs yet to be incurred and, therefore, have not been reflected in the pro forma adjustments. American Skiing Company Unaudited Pro Forma Consolidated Balance Sheet Data As of July 28, 1996 (in thousands)
Pro Forma Consolidated The Company Adjustments Pro Forma Cash $3,185 $150 a, b $3,335 Restricted cash 902 902 Investments held in escrow 14,497 14,497 Accounts receivable (net) 2,458 2,458 Inventory 5,025 5,025 Prepaid expenses 3,371 3,371 Prepaid loan fees 1,056 1,056 Properties developed for sale 1,331 1,331 Deferred tax assets 588 588 Assets held for sale 14,921 (14,921) b -- Total current assets 47,334 (14,771) 32,563 Property and equipment (net) 227,470 227,470 Long-term investment 4,343 4,343 Prepaid loan fees 7,911 7,911 Other assets 2,934 2,858 a,b 5,792 Assets held for sale 1,756 (1,756) -- Goodwill 6,540 6,540 Note receivable, affiliate 444 ________ 444 Total assets $298,732 ($13,669) $285,063 Line of credit and current $22,893 ($8,444) a, b $14,449 portion of long-term debt Accounts payable and accrued 13,406 (141) a 13,265 expenses Accrued leasehold 1,660 1,660 Accrued interest on subordinated 1,491 1,491 notes and debentures 1, Due to stockholder 175 175 Deposits and deferred revenue 3,541 3,541 Income taxes payable 671 331 b 1,002 Demand note, stockholder 5,200 5,200 Total current liabilities 49,037 (8,254) 40,783 Long-term debt, excluding current 41,035 (3,415) a 37,620 portion Subordinated notes and debentures 146,792 146,792 Other long-term liabilities 6,778 6,778 Minority interest 2,492 (2,492) a -- Deferred income taxes 30,695 30,695 Total liabilities 276,829 (14,161) 262,668 Total stockholders' equity 21,903 492 b 22,395 Total liabilities and $298,732 ($13,669) $285,063 stockholders' equity
The accompanying notes are an integral part of the unaudited pro forma consolidated financial data. American Skiing Company Unaudited Pro Forma Consolidated Financial Data Summary of ASC Pro Forma Adjustments -- Balance Sheet Data
Balance Sheet Account Not Adjustment July 28, 1996 e (in thousands) Cash a Purchase of 49% interest in ($2,600) Sugarloaf b Proceeds from sale of 14,750 Waterville & Cranmore b Application of proceeds from sale of Waterville & (12,000) Cranmore against the Senior Credit facility 150 Assets held for sale b Sale of Waterville & (16,677) Cranmore Other assets a Purchase of 49% interest in 108 Sugarloaf b Note receivable from sale 2,750 of Waterville & Cranmore 2,858 Effect on total ($13,669) assets Line of credit and a Paydown of SMC Credit ($2,575) current portion of Agreement and Town Debt long -term debt b Application of proceeds (12,000) from sale of Waterville & Cranmore against the Senior Credit Facility a Increase in Senior Credit Facility to paydown SMC 6,131 Credit Agreement and Town Debt (8,444) Accounts payable and a Retire accrued interest accruals associated with SMC Credit (25) Agreement a Retire accrued interest (116) associated with existing Town Debt (141) Income taxes payable b Income taxes on gain from 331 Waterville & Cranmore sale Long-term debt, a Paydown of Town Debt (3,415) excluding current portion Minority interest a Purchase of 49% interest in (2,492) Sugarloaf Effect on total ($14,161) liabilities Stockholders' equity b Gain on sale of Waterville $492 and Cranmore $0
American Skiing Company Unaudited Pro Forma Consolidated Statement of Income Data For the Year Ended July 28, 1996 (in thousands, except per share amounts)
Historical SKI Bear Mountain Cranmore The Company Acquisition Divestiture Divestiture (k) (l) (b) Revenues: Skiing & lodging $63,489 $114,175 ($292) ($4,161) Real estate sales 9,933 -- Total revenues 73,422 114,175 (292) (4,161) Expenses: Cost of operations including wages, maintenance and supplies 31,137 57,088 (509) (1,725) Cost of real estate sold 5,844 -- -- -- Real estate and payroll 2,544 8,082 (247) (176) taxes Utilities 5,819 7,547 (82) (565) Insurance 2,299 6,336 (205) (168) Selling, general and administrative 11,289 22,164 (404) (888) Loss on sale of Bear -- 4,737 -- -- Mountain Depreciation and 6,783 9,665 (34) (225) amortization Total expenses 65,715 115,619 (1,481) (3,747) Income (loss) from 7,707 (1,444) 1,189 (414) operations Other income and expenses: Interest income -- -- -- -- Commitment fee 1,447 -- -- -- Interest expense 4,699 4,593 -- (163) Income (loss) before income taxes and minority interest in loss of 1,561 (6,037) 1,189 (251) subsidiary Income tax expense 3,906 (2,354) 475 (101) (benefit) Minority interest in loss of subsidiary (108) (65) -- -- Net income (loss) ($2,237) ($3,618) $714 ($150) Net (loss) per share (o) ($2.37) -- -- -- Pro Forma Waterville ASC Other Consolidated Divestiture Adjustments Adjustments(n) Pro forma (b) Revenues: Skiing & lodging ($11,478) -- -- $161,733 Real estate sales -- -- -- 9,933 Total revenues (11,478) -- -- 171,666 Expenses: Cost of operations including wages, maintenance and (5,648) ($1,670)c $5 78,678 supplies Cost of real estate sold -- -- 5 5,849 Real estate and payroll (608) -- -- 9,595 taxes Utilities (938) -- -- 11,781 Insurance (395) (230) c 6 7,643 Selling, general and administrative (2,569) (5,204) m -- 24,388 Loss on sale of Bear -- -- (4,721) -- Mountain Depreciation and (1,127) 1,795 d,e -- 16,857 amortization Total expenses (11,285) 5,309 (5,023) 154,791 Income (loss) from (193) (5,309) (4,721) 16,875 operations Other income and expenses: Interest income -- 330 b -- 330 Commitment fee -- -- -- 1,447 Interest expense (396) 13,975 f,g,h (302) 22,406 Income (loss) before income taxes and minority interest in loss of 203 (8,336) 5,023 (6,648) subsidiary Income tax expense 4 (6,802) i, j 2,009 (2,863) (benefit) Minority interest in loss of -- 173 a -- -- subsidiary Net income (loss) $199 $1,707 $3,014 ($3,785) Net (loss) per share (o) -- -- -- ($3.87)
The accompanying notes are an integral part of the unaudited pro forma consolidated financial data. American Skiing Company Unaudited Pro Forma Consolidated Financial Data Summary of ASC Pro Forma Adjustments -- Statement of Income Data
Year Ended Income Statement Item Note Adjustment July 28, 1996 (in thousands) Interest income b Interest income from note $330 receivable Cost of operations c Staff reductions and elimination of redundant shareholder services (1,670) Insurance c Termination of a keyman life (230) insurance policy Selling, general and m Finder's fee (1,665) administrative m Employee stock options (1,404) m SKI TIAA Credit Agreement (635) prepayment penalty m Other non-recurring charges (1,500) (5,204) Depreciation and d Depreciation on property and 670 amortization equipment e Amortization of goodwill 150 d Amortization of deferred financing 975 costs 1,795 Interest expense f Interest on Mr. Otten Demand Note 257 g Senior and Junior Subordinated 16,118 Notes h Other interest adjustments (2,400) 13,975 Income taxes j Tax effect of pro forma adjustments (3,254) i Tax effect of S corporation income 2,004 i Reverse historical income tax expense recorded upon conversion of S corporations to C corporations (5,552) (6,802) Minority interest a Sugarloaf minority interest 173 Effect on net loss $(1,707)
(a) ASC acquired the remaining 49% interest in Sugarloaf on August 30, 1996 for a $2 million cash payment and a $600,000 prepayment penalty for previously issued debt. In connection with the acquisition of the minority interest, ASC paid the outstanding balances of the SMC Credit Agreement and the Town Debt with proceeds from the Senior Credit Facility. (b) ASC signed a purchase and sale agreement with Booth Creek Ski Acquisition Corp. to sell the Waterville Valley and Mt. Cranmore resorts for $17.5 million. The deal is expected to close in November, 1996. The terms of the agreement provide that the Company will receive $14,750,000 in cash and $2,750,000 in a promissory note with an interest rate of 12% per annum due in seven and one-half years. Under the Senior Credit Facility Agreement, a portion (which is expected to be $12 million) of the proceeds from the sale will be used to pay down the Senior Credit Facility; the reduction of interest expense from this paydown is reflected in the unaudited pro forma statement of income data. (c) Management has specifically identified certain costs which have been eliminated in connection with the Acquisition. These costs are primarily related to the salaries and fringe benefits of the SKI corporate staff positions which have been eliminated as a result of the Acquisition, and amount to approximately $1.57 million. In addition, the costs associated with SKI's shareholder reporting and relations, exchange listing, and corporate governance, which amounted to approximately $100,000, have been eliminated. The Company also realized insurance savings through the termination of a SKI executive's key man life insurance policy of $230,000. (d) The Acquisition of SKI by ASC resulted in the assets of SKI being written up to reflect the purchase price of the transaction. The purchase price of SKI was calculated as the sum of (i) the cash paid to the SKI shareholders, (ii) the fair value of any liabilities of SKI assumed, and (iii) the transaction costs incurred by ASC. Under the purchase accounting method, the acquisition cost is allocated to the assets and liabilities acquired based on their relative fair values. The excess of the purchase price over the relative fair values of the assets acquired was allocated to goodwill. Pro forma adjustments have been made to reflect the depreciation of these assets over their estimated useful lives and to amortize goodwill over forty years. The following table summarizes the purchase price allocation at the time of acquisition:
Shares of SKI outstanding at June 28, 5,736,882 1996* Purchase Price $ 18 103,264,000 SKI shares previously acquired 828,000 Cost of acquisition 528,000 Total Purchase Price $ 104,620,000 Purchase price allocation: Historical cost basis of acquired net $ 58,378,000 assets Identified value of property, plant and equipment in excess of historical 67,508,000 cost basis Goodwill 6,554,000 Deferred income taxes (27,820,000) $ 104,620,000
The deferred tax liability of $(27,820,000) was recorded as the tax effect at the effective rate of the difference between the book basis of the net assets acquired of $104 million and the tax basis of net assets acquired of $33 million. * Total shares of SKI outstanding at June 28, 1996, net of 54,000 shares owned by the Company prior to the Acquisition. The deferred tax liability of $(27,820,000) was recorded as the tax effect at the effective rate of the difference between the book basis of the net assets acquired of $104 million and the tax basis of net assets acquired of $33 million. (e) ASC incurred professional fees and various direct costs in connection with the issuance of Notes, Subordinated Notes and the establishment of the Senior Credit Facility which have been capitalized and will be amortized over their lives ranging from five to ten years. The accompanying pro forma income statement data includes adjustments reflecting the amortization associated with these costs. (f) The $5.2 million Demand Note was issued by the S Corporations, bearing interest at 5.4%, which represents the applicable federal rate in effect at June 19, 1996, the time of issuance. (g) Gives effect to the issuance of the Notes and the Subordinated Notes, at their respective issue prices, as well as related interest expense. Both the Notes and the Subordinated Notes were issued with original issue discount, therefore the effective interest rates exceed the stated interest rates. Pro forma interest expense with respect to the Notes for an 11 months period was $13,465,000 which was calculated using the effective interest method with an effective interest rate of approximately 12.50%. Pro forma interest expense with respect to the Subordinated Notes for the 11 month period was $2,653,000 which was calculated using the effective interest method with an effective interest rate of approximately 14.02%. Pro forma interest expense includes interest expense with respect to the Subordinated Notes of $3,096,000. Interest expense relating to the Subordinated Notes would not have been payable in cash during this period. (h) Gives effect to the Senior Credit Facility which was used to retire previously outstanding indebtedness. The seasonal Line of Credit and the Revolving Note were retired with the initial proceeds of the Senior Credit Facility. Certain obligations of Sugarloaf (see note a above) and SKI's TIAA Credit Agreement were also refinanced. A portion ($12 million) of the proceeds from the sale of the Waterville and Mt. Cranmore resorts is expected to be used to pay off the Senior Credit Facility. A 1/8th% fluctuation in interest rates would have an approximate $42,864 annual impact on interest expense and an approximate $25,633 impact on net income. As explained in the "Description of Senior Subordinated Notes," an investment was made on the Closing Date in the segregated Pledge Account to secure the payment of the first year's interest on the Notes. Due to the nature of these borrowings, the accompanying pro forma financial data does not include either interest income on the Pledge Account or interest expense on this incremental indebtedness. (i) Certain of the Company's operations were within corporations (the "S Corporations") for which Mr. Otten was personally liable for income taxes. The Company made distributions to Mr. Otten to pay the income taxes associated with these operations through the date of the Acquisition. The S Corporations have been converted to C Corporations pursuant to the Internal Revenue Code. As a result of this conversion, certain tax attributes of the S Corporations attributable directly to Mr. Otten have been transferred to the respective C Corporations. A $5,552,000 pro forma adjustment reflects the reversal of the historical income tax expense recorded upon conversion of the S corporations to C corporations on June 28, 1996. (j) All adjustments to the unaudited Pro Forma Consolidated Statement of Income Data have been tax- effected using the expected statutory rate. As discussed in "Certain Federal Income Tax Considerations," a portion of the interest on the Subordinated Notes is expected to be permanently disqualified for purposes of income tax deductions. It is expected that approximately 90% of the total interest will eventually be deductible, but none until actually paid. Consideration of the permanently disqualified portion has been given in the accompanying pro forma data. In addition, an adjustment has been made to tax-effect the earnings of the S-Corporations (see note (i) above). (k) Reflects the results of operations of SKI Ltd. prior to its acquisition by the Company on June 28, 1996. (l) Reflects the results of operations of Bear Mountain (a majority of the assets of which were sold by SKI in October 1995). (m) Reflects the elimination of SKI's nonrecurring charges which include a $1.6 million finder's fee, a $1.4 million stock option payment, $635,000 SKI TIAA Credit Agreement prepayment penalty, and $1.5 million of nonrecurring contingent liabilities. (n) Other pro forma adjustments give effect to the SKI divestiture of Bear Mountain discussed in note (l). The most significant adjustment relates to the realized loss on the sale of Bear Mountain by SKI. The effect of the proceeds of the sale were considered in the pro forma interest adjustments. All of the adjustments were tax effected at the applicable statutory rate. (o) Pro forma net (loss) per share was computed giving consideration to the 978,300 common shares of the Company outstanding at July 28, 1996. SELECTED HISTORICAL FINANCIAL DATA The Company The following selected historical financial data of the Company (except Other Financial and Operating Data) (i) as of and for the fiscal years ended July 30, 1995 and July 28, 1996 have been derived from the financial statements of the Company audited by Price Waterhouse LLP, independent accountants, and (ii) as of and for each of the three fiscal years ended July 31, 1994 have been derived from the financial statements of the Company audited by Berry, Dunn, McNeil & Parker, independent accountants. The following information includes Mt. Cranmore, which the Company acquired in June 1995 and must divest pursuant to the Consent. Additionally, the following information includes S- K-I subsequent to June 28, 1996. Included in S-K-I is Waterville Valley, which will be divested. See "The Acquisition; Antitrust Matters; Use of Proceeds," "Recent Developments" and "Pro Forma Financial Data." The following information should be read in conjunction with the Unaudited "Pro Forma Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements of the Company and notes thereto included elsewhere in this Prospectus.
Year Ended (1) July 26, July 25, July 31, July 30, July 28, 1992 1993 1994 1995 1996 Statement of Income Data Revenues: Skiing and $20,312 $23,645 $26,544 $46,794 $63,489 lodging Real estate 304 6,103 6,682 ` 7,953 9,933 sales Total 20,616 29,748 33,226 54,747 73,422 revenues Operating expenses: Cost of operations including 7,936 10,045 11,505 21,730 31,137 wages, maintenance and supplies Cost of 101 3,245 3,179 3,994 5,844 real estate sold Real estate 758 993 1,265 1,736 2,544 and payroll taxes Utilities 2,046 2,097 1,854 4,132 5,819 Insurance 1,162 1,570 1,163 2,127 2,299 Selling, general and 3,010 4,718 5,940 9,394 11,289 administrati ve Depreciation and 1,790 1,984 2,421 3,910 6,783 amortizat ion Total 16,803 24,652 27,327 47,023 65,715 expenses Income from 3,813 5,096 5,899 7,724 7,707 Operations Other expenses: Commitment -- -- -- -- 1,447 fee Interest 776 849 1,026 2,205 4,699 expense Income before provision 3,037 4,247 4,873 5,519 1,561 for income taxes and minority interest in less of subsidiary Provision -- -- -- 400 3,906 for income taxes Income -- -- -- -- (2,345) before minority interest Minority interest in -- -- -- -- 108 loss of subsidiary Income (loss) before 3,037 4,247 4,873 5,119 (2,237) extraordinar y gain from insurance claim Extraordinar y gain from -- 1,592 -- -- -- insurance claim Net income $3,037 $5,839 $4,873 $5,119 ($2,237) (loss) July 26, July 25, July 31, July 30, July 28, 1992 1993 1994 1995 1996 Balance Sheet Data: Property $27,580 $30,363 $41,871 $62,213 $227,470 and equipment, net Total 32,256 40,550 51,784 72,434 298,732 assets Total long term debt, 10,317 14,150 19,103 27,169 187,827 excluding current portion 18,367 23,167 26,212 30,502 21,903 Stockholder' s equity Statement of Cash Flows Data: Cash flows from $3,864 $2,667 $5,438 $12,593 7,465 operating activities Cash flows from (5,031) (4,432) (9,041) (13,843) (122,583 investing ) activities Cash flows from 1,372 1,559 3,764 2,399 116,941 financing activities Other Financial and Operating Data: EBITDA(2) $5,603 $7,080 $8,320 $11,634 $13,151 Capital 5,037 5,182 7,798 12,024 25,054 expenditures EBITDA to 7.2x 8.3x 8.1x 5.3x 2.8x interest expense Ratio of earnings to 4.0x 4.4x 4.2x 2.9x 1.2x fixed charges(3) Skier 497 515 515 1,048 1,284 visits(4) Average revenue per $40.87 $45.91 $51.54 $44.65 $49.45 skier visit
(1) The historical results of the Company reflect the acquisition of the Attitash/Bear Peak ski resort in July 1994, the lease of the Sugarbush ski resort beginning in October 1994 and the acquisition of Sugarbush in May 1995, the acquisition of the Mt. Cranmore ski resort in June 1995, and the acqusition of S-K-I in June 1996. (2) EBITDA represents earnings before interest expense, income tax expense, depreciation and amortization expense and extraordinary gain. 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 generally accepted accounting principles or as a measure of the Company's profitability or liquidity, and may not be comparable to other similarly titled data of other companies. The Company does not consider it feasible to calculate cash flows from operating, investing and financing activities on a pro forma basis. (3) The ratio of earnings to fixed charges represents the number of times fixed charges were covered by pre-tax earnings before provision for interest expense. Fixed charges consist of interest expense, capitalized interest, amortization of debt issuance costs, and a portion of operating lease rental expense deemed to be representative of the interest factor. (4) Each skier visit represents one skier visiting one ski resort for one day, including skiers using complimentary and season passes. Calculation of skier visits requires an estimation of visits by season pass holders. Although different ski resort operators may use different methodologies for making such estimations, management believes that any resulting differences in total skier visits are immaterial. SKI The following selected historical financial data of SKI (except Other Financial and Operating Data) (i) as of and for each of the five fiscal years ended July 31, 1995 have been derived from the financial statements of SKI audited by Price Waterhouse LLP, independent accountants and (ii) as of and for the nine months ended April 30, 1995 and April 28, 1996 have been derived from unaudited interim financial statements of SKI which, in the opinion of SKI management, include all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of SKI's financial position and results of operations. SKI's fourth fiscal quarter ordinarily reflects a significant reduction in revenues as compared to the second and third quarters, as well as a less significant comparative expense reduction, ordinarily producing a loss for such quarter and reduced full fiscal year levels of net income and EBITDA as compared to the first nine months of the year. The following information includes Waterville Valley, which SKI acquired in October 1994 and the Company must sell pursuant to the Consent. See "The Acquisition; Antitrust Matters; Use of Proceeds" and "Pro Forma Financial Data." The following information should be read in conjunction with the Unaudited "Pro Forma Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements of SKI and related notes thereto included elsewhere in this Prospectus.
Nine Months Ended Year Ended July 31,(1) April April 30 28 1991 1992 1993 1994 1995 1995 1996 (in thousands, except per share data, per skier visit data and ratios) Statement of Income Data: Revenues $83,007 $89,014 $96,708 $98,907 $113,960 $106,682 $106,75 2 Operating expenses: Cost of operations including wages, maintenance and 34,480 36,956 39,903 42,560 51,557 45,310 47,885 supplies Other taxes 5,989 7,002 7,632 8,016 8,600 7,544 7,541 Utilities 5,580 6,172 6,655 6,045 8,071 7,624 7,465 Insurance 4,325 5,041 5,115 5,518 6,635 6,220 5,692 Selling, general and administrative 13,666 14,048 16,872 15,298 19,495 16,377 17,061 expense Depreciation and 10,290 10,822 10,942 11,440 14,056 13,843 10,146 amortization Loss on sale of Bear -- -- -- -- -- -- 4,737 Mountain 74,330 80,041 87,119 88,877 108,414 96,918 100,527 Operating income 8,677 8,973 9,589 10,030 5,546 9,764 6,225 Interest expense 2,940 2,471 2,228 2,214 3,819 3,018 2,561 Income before income taxes and minority 5,737 6,502 7,361 7,816 1,727 6,746 3,664 interest Income taxes 2,324 2,776 2,952 3,170 997 2,725 1,429 Income before 3,413 3,726 4,409 4,646 730 4,021 2,235 minority interest Minority interest in income (loss) of -- -- -- -- 299 (193) (527) subsidiary Net income $3,413 $3,726 $4,409 $4,646 $1,029 $3,828 $1,708 Balance Sheet Data: Property and $83,154 $81,963 $82,288 $94,771 $121,775 $124,110 $93,728 equipment, net Total assets 90,288 93,531 99,182 106,790 136,721 138,730 118,454 Total long term debt, excluding 27,315 26,677 28,119 29,167 50,190 46,677 31,222 current portion Stockholders' equity 45,972 49,190 53,047 57,186 57,562 60,337 58,563 Statement of Cash Flows Data: Cash flows from $14,061 $15,903 $13,474 $17,464 $14,948 $19,941 $19,089 operating activities Cash flows from investing activities (11,408) (9,287) (12,181 (23,108) (30,925) (33,502) 12,115 ) Cash flows from financing activities (2,754) (1,787) 968 848 16,063 12,183 (21,967 ) Other Financial and Operating Data: Net income per common and common equivalent $.60 $.65 $.77 $.81 $.18 $.66 $.30 share(2) EBITDA(3) $18,967 $19,795 $20,531 $21,470 $19,602 $23,607 $16,371(6) Capital expenditures 12,279 9,566 12,307 22,683 19,480 18,982 6,020 Ratio of earnings to fixed charges (4) 2.6x 3.0x 3.5x 3.6x 1.3x 2.6x 1.9x Skier visits (5) 1,679 1,783 1,863 1,854 2,113 2,104 2,055 Average revenue per $49.44 $49.92 $51.91 $53.35 $53.93 $50.70 $51.95 skier visit
(1) The historical results of SKI reflect the acquisitions of the Sugarloaf and Waterville Valley ski resorts in August 1994 and October 1994, respectively, and the divestiture of the majority of the ski resort and golf course assets of Bear Mountain in October 1995. (2) The computation of net income per common and common equivalent share amounts are based on the weighted average of shares outstanding during the year. Shares issuable upon the exercise of stock option grants have not been included in the per share computation because they would not have a material effect on earnings per share. The weighted average shares outstanding at the respective balance sheet dates used in the computation of net income per common and common equivalent share were 5,783,480 in 1995; 5,764,663 in 1994; 5,728,908 in 1993; 5,723,318 in 1992; 5,720,394 in 1991; 5,782,745 year to date April 30, 1995; and 5,788,592 year to date April 28, 1996. (3) EBITDA represents earnings before interest expense, income tax expense, depreciation and amortization expense. 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 generally accepted accounting principles or as a measure of SKI's profitability or liquidity, and may not be comparable to other similarly titled data of other companies. (4) The ratio of earnings to fixed charges represents the number of times fixed charges were covered by pre-tax earnings before provision for interest expense. Fixed charges consist of interest expense, capitalized interest, amortization of debt issuance costs, and a portion of operating lease rental expense deemed to be representative of the interest factor. (5) Each skier visit represents one skier visiting one ski resort for one day, including skiers using complimentary and season passes. Calculation of skier visits requires an estimation of visits by season pass holders. Although different ski resort operators may use different methodologies for making such estimations, management believes that any resulting differences in total skier visits are immaterial. (6) Includes loss of $4,737 realized in connection with the sale of Bear Mountain. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The discussion and analysis below relates to (i) the historical financial statements and results of operations of the Company, (ii) the historical financial statements and results of operations of SKI, and (iii) the liquidity and capital resources of the Company after giving effect to the consummation of the Acquisition. The following discussion should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Prospectus. The Company has, over the past several years, undertaken the implementation of a strategy to differentiate its resorts from its competition by enhancing the quality and scope of on-mountain facilities and services, including improved lifts, trail design, snowmaking, grooming and base facilities, and to market these facilities and services aggressively, while maintaining ownership of all revenue sources connected with the resorts, including retail sales, food and beverage concessions, lodging and real estate development. This strategy has been coupled, in the last two years, with growth through acquisitions, reflected in the acquisitions of Attitash/Bear Peak resort in July 1994, Sugarbush resort in May 1995 and Mt. Cranmore resort in June 1995 and subsequent capital expenditures at those three resorts. See "Business -- The Company." These efforts have resulted in growth both in revenues and profitability. See "Selected Historical Financial Data -- The Company." Over the past five years, SKI has experienced relatively stable revenues from its core historical operations (Killington and Mt. Snow), and has augmented its revenues through the acquisitions in 1994 of Waterville Valley and Haystack resorts and a majority interest in Sugarloaf. Management believes it can more aggressively manage the SKI properties, including implementing the capital expansions and improvements that management believes are essential to revenue and profit growth. See "Business -- SKI Limited" and "Business -- The Company -- Strategy." Based on the historical success of the Company's strategic plan, management believes that the application of that strategy to SKI, and the continuation of the strategy with its existing resorts, will result in improvement in revenues and profitability on a combined basis. Management believes that approximately $1.9 million of annual cost savings are achievable following the Acquisition, resulting from management consolidations, elimination of shareholder service costs and a key man life insurance policy. See "Pro Forma Financial Data." Further savings may be attainable, in management's opinion, from centralized purchasing of other key inputs, including electricity, fuel, food and retail inventory, and from consolidation of marketing functions and the combined entity's enhanced buying power and desirability as a strategic marketing partner. See "Business -- The Company - --Strategy" and "Business -- Marketing." However, such estimates and expectations are inherently uncertain and are based on numerous assumptions which may not materialize, and there can be no assurance that such improvements in operating results and cost savings will in fact be realized. See "Risk Factors -- Ability to Achieve Anticipated Cost Savings; Integration of SKI." Historically, both the Company and SKI have generated the vast majority of their revenues in the second and third quarters of their respective fiscal years, of which a significant portion is produced in two key weeks -- the Christmas and Presidents' Day vacation weeks (during which approximately 20% of annual skier visits are generated). The fourth fiscal quarter ordinarily reflects a significant reduction in revenues as compared to the second and third quarters, as well as a less significant comparative expense reduction, ordinarily producing a loss for such quarter and reduced levels of net income and EBITDA for the full fiscal year as compared to the first nine month period. During the fourth and first fiscal quarters, the Company and SKI experience substantial reductions in utility expense, due to the absence of snowmaking and lift operation, while making significant expenditures for off-season maintenance, expansion and capital improvement activities in preparation for the ensuing ski season. Both the Company and SKI have consummated several significant acquisitions and SKI recently concluded the sale of one of its resorts. See "Selected Historical Financial Data," "Business -- Existing Operations" and "Business -- SKI Limited." In several instances, the operating results of the two entities reflect the impact of these transactions, and are therefore less meaningfully comparable to operating results for the prior or subsequent periods. In addition, operating results for the Company reflect no income tax expense for Sunday River as a consequence of its status as a Subchapter S corporation. Such expense will be incurred and reflected in future periods due to the conversion of Sunday River to a Subchapter C corporation in connection with the Acquisition. See "The Acquisition; Antitrust Matters; Use of Proceeds" and Notes to Financial Statements of the Company. Results of Operations of the Company The following table sets forth, for the periods indicated, certain operating data of the Company as a percentage of revenues. Year Ended July 31, July 30, July 28, 1994 1995 1996 Revenues Ski and 79.9 % 85.5 % 86.5 % lodging Real estate 20.1 14.5 13.5 Totalrevenues 100.0 100.0 100.0 ... Expenses Cost of operations 34.6 39.7 42.3 including wages, maintenance and supplies Cost of 9.6 7.3 7.9 real estate sold Real estate 3.8 3.2 3.5 and payroll taxes Utilities 5.5 7.5 7.9 Insurance 3.5 3.9 3.1 Selling, 17.9 17.2 15.4 general, and administrativ e 7.3 7.1 9.4 Depreciation and amortization Total other 82.2* 85.9 89.5 expenses Income from 17.8 14.1 10.5 operations Commitment 0.0 0.0 1.9 fee Interest 3.1 4.0 6.4 expense Income before provision for 14.7 10.1 2.2 income taxes and minority interest in loss of subsidiary Provision 0.0 0.7 5.3 for income taxes Income before -- -- (3.1) minority interest Minority -- -- .1 interest in loss of subsidiary Net income 14.7 % 9.4 % (3.0) % (loss) Fiscal 1996 compared to Fiscal 1995. Ski and lodging revenues increased by $16.7 million, or 35.7%, in the fiscal year ended July 28, 1996 ("Fiscal 1996") compared to the fiscal year ended July 30, 1995 ("Fiscal 1995"). This increase was due to (i) $4.0 million attributable to the acquisition of Mt. Cranmore in June 1995, (ii) an increase of approximately 19,000 skier visits, or approximately 10%, at Attitash/Bear Peak, (iii) an increase of approximately 42,000 skier visits, or approximately 13%, at Sugarbush, (iv) an increase in lift ticket prices, resulting in an increase in revenues per skier visit from $41.89 in Fiscal 1995 to $44.61 in the Fiscal 1996, (vi) an approximate 10% increase in season pass revenues, primarily due to the addition of a multi-resort season pass and (vii) $2.8 million attributable to the inclusion of SKI for the final month of Fiscal 1996. Real estate revenues increased by $2.0 million, or 24.9%, in Fiscal 1996 compared to Fiscal 1995. This increase was due to increased sales of quartershare units at the Summit Hotel at Sunday River and the sale of 16 additional townhouse units at Sunday River in Fiscal 1996 compared to Fiscal 1995, as well as higher average sales prices. Cost of operations increased by $9.4 million, or 43.3%, in Fiscal 1996 compared to Fiscal 1995. This increase was due to (i) $1.5 million attributable to the acquisition of Mt. Cranmore, (ii) incremental costs resulting from the increased skier visits, (iii) operating costs resulting from the increased snowmaking and lift capacity and skiable terrain that resulted from the $22.2 million of capital expenditures during Fiscal 1996 and (iv) $2.1 million attributable to the inclusion of SKI for the final month of Fiscal 1996. Cost of real estate sold increased by $1.9 million, or 46.3%, in Fiscal 1996 compared to Fiscal 1995 due to the increased real estate sales volume. Real estate and payroll taxes increased by $0.8 million, or 46.5%, in Fiscal 1996 compared to Fiscal 1995 primarily due to real estate and personal property taxes relating to the acquisition of Mt. Cranmore and Sugarbush and $388,000 attributable to the inclusion of SKI for the final month of Fiscal 1996. Utility expense increased by $1.7 million, or 40.8%, in Fiscal 1996 compared to Fiscal 1995 as a result of the acquisition of Mt. Cranmore and increased snowmaking capacity at the Company's resorts, including a 300% increase in snowmaking capacity at Sugarbush and $279,000 attributable to the inclusion of SKI for the final month of Fiscal 1996. Insurance expense decreased by $_0.2 million, or 8.1%, in Fiscal 1996 compared to Fiscal 1995 due to the consolidation of the Company's resorts under a single insurance policy, including $96,000 attributable to the inclusion of SKI for the final month of Fiscal 1996. Selling, general and administrative expense increased by $1.9 million, or 20.2%, in Fiscal 1996 compared to Fiscal 1995 due to (i) approximately $0.7 million attributable to the acquisition of Mt. Cranmore, (ii) an extensive marketing campaign following the significant improvements made at Sugarbush, (iii) expenses resulting from the acquisition of Mt. Cranmore and Sugarbush and (iv) $912,000 attributable to the inclusion of SKI for the final month of Fiscal 1996. Interest expense increased by $2.5 million, or 113.1%, in Fiscal 1996 compared to Fiscal 1995 due to (i) increased borrowings to support the Company's capital program, (ii) the acquisitions of Mt. Cranmore and Sugarbush and (iii) $206,000 attributable to the inclusion of SKI for the final month of Fiscal 1996. Depreciation and amortization increased by $2.9 million, or 73.5%, due to depreciation resulting from (i) the $24 million capital program completed prior to the 1995/96 ski season, (ii) the acquisitions of Mt. Cranmore and Sugarbush and (iii) $881,000 attributable to the inclusion of SKI for the final month of Fiscal 1996. Income tax expense increased $3.5 million in Fiscal 1996 compared to Fiscal 1995. The majority of the increase in the Company's income before provision for income taxes was attributable to the conversion of the former S corporations to C corporations, offset by an $805,000 benefit due to inclusion of SKI for the final month of Fiscal 1996. Fiscal 1995 compared to fiscal 1994. Ski and lodging revenues increased by $20.3 million, or 76%, in fiscal 1995 compared to fiscal 1994 primarily due to the acquisitions of Attitash/Bear Peak and Sugarbush. An increase in skier visits at Sunday River of approximately 20,000, or 4%, as well as an increase in realized revenue per skier visit, also contributed to this increase. Real estate revenues increased by $1.3 million, or 19%, in fiscal 1995 compared to fiscal 1994 due to the construction and sale of townhouse units at Sunday River and continued sales of quartershare units at the Summit Hotel at Sunday River. Cost of operations increased by $10.2 million, or 89%, in fiscal 1995 compared to fiscal 1994 due to the acquisitions of Attitash/Bear Peak and Sugarbush. Cost of real estate sold increased by $0.8 million, or 26%, in fiscal 1995 compared to fiscal 1994 due to the increased real estate sales volume. Real estate and payroll taxes increased by $0.5 million, or 37%, in fiscal 1995 compared to fiscal 1994 primarily due to the acquisitions of Attitash/Bear Peak and Sugarbush. Utility expense increased by $2.3 million, or 123%, in fiscal 1995 compared to fiscal 1994 primarily due to the acquisitions of Attitash/Bear Peak and Sugarbush. Insurance expense increased by $1.0 million, or 83%, due to the acquisitions of Attitash/Bear Peak and Sugarbush. Selling, general and administrative expense increased by $3.5 million, or 58%, in fiscal 1995 compared to fiscal 1994 due to the acquisitions of Attitash/Bear Peak and Sugarbush. Interest expense increased by $1.2 million, or 115% in fiscal 1995 compared to fiscal 1994 due to increased borrowing to finance the acquisitions of Attitash/Bear Peak and Sugarbush and the Company's capital program, as well as higher average interest rates. Depreciation and amortization increased by $1.5 million, or 62%, due to depreciation resulting from the acquisitions of Attitash/Bear Peak and Sugarbush and the Company's capital program. Provision for income taxes increased by $0.4 million in fiscal 1995 compared to fiscal 1994 due to income taxes due at Sugarbush. Accounts payable and accrued expenses increased $2,153,000 from July 31, 1994 to July 30, 1995 primarily due to accounts payable and accrued liabilities of approximately $2 million assumed in the acquisition of Sugarbush in May 1995. At July 30, 1995, other liabilities included $1,350,000 related to the purchase of Mt. Cranmore which was not paid as of July 30, 1995. Fiscal 1994 compared to fiscal 1993. Ski and lodging revenues increased by $2.9 million, or 12% in fiscal 1994 compared to fiscal 1993, primarily due to lodging revenues attributable to the opening of the South Wing at the Summit Hotel at Sunday River during fiscal 1994, as well as a 5% increase in average lift ticket prices. Real estate revenues increased $0.6 million, or 9%, in fiscal 1994 compared to fiscal 1993 due to increased sales and sale prices of quartershare units at the Summit Hotel at Sunday River. Cost of operations increased by $1.5 million, or 15% in fiscal 1994 compared to fiscal 1993 due to the expansion of lodging management operations at the Summit Hotel in connection with the opening of the South Wing and the commencement of operations of Sunday River's Silver Bullet Express train service, as well as increased costs of retail and food and concession inventory. Real estate and payroll taxes increased by $0.3 million, or 27%, in fiscal 1994 compared to fiscal 1993 due to real estate taxes attributable to unsold quartershare units at the Summit Hotel and tax expense attributable to the opening of the South Wing at the Summit Hotel and the commencement of train service at Sunday River. Utility expense decreased by $0.2 million, or 12%, in fiscal 1994 compared to fiscal 1993 due to a new power contract with Central Maine Power as a result of a new, more efficient compressor facility. Insurance expense decreased by $0.4 million, or 26%, in fiscal 1994 compared to fiscal 1993, due to the conversion of the Company's workers' compensation insurance to a self-insured program. Selling, general and administrative expense increased by $1.2 million, or 26%, in fiscal 1994 compared to fiscal 1993 due primarily to an 18% increase in marketing expenses to try to offset the unseasonably warm weather, as well as additional management expenses in connection with investigating potential acquisitions. Interest expense increased by $0.2 million, or 21%, in fiscal 1994 compared to fiscal 1993 due primarily to increased average interest rates. Depreciation and amortization expense increased by $0.4 million, or 22%, due to improvements made as part of the Company's capital program. In fiscal 1993, the Company recorded an extraordinary gain of $1.6 million as a result of insurance proceeds following a fire at Sunday River's compressor building. Results of Operations of SKI The following table sets forth, for the periods indicated, certain operating data of SKI as a percentage of revenues.
Year Ended July 31, Nine Months Ended April 30, 1993 1994 1995 1995 1996 Revenue 100.0 % 100.0 % 100.0 % 100.0 % 100.0% Expenses Cost of operations including wages, 41.3 43.0 45.3 42.5 44.9 maintenance and supplies Other taxes 7.9 8.1 7.5 7.1 7.1 Utilities 6.9 6.1 7.1 7.1 7.0 Insurance 5.3 5.6 5.8 5.8 5.3 Selling, general and administrative 17.4 15.5 17.1 15.4 16.0 expenses Depreciation and 11.3 11.6 12.3 13.0 9.5 amortization Loss on sale of Bear 0.0 0.0 0.0 0.0 4.4 Mountain 90.1 89.9 95.1 90.9 94.2 Operating income 9.9 10.1 4.9 9.1 5.8 Interest expense 2.3 2.2 3.4 2.8 2.4 Income before income taxes and minority 7.6 7.9 1.5 6.3 3.4 interest Income taxes 3.0 3.2 0.9 2.5 1.3 Income before minority 4.6 4.7 0.6 3.8 2.1 interest Minority interest 0.0 0.0 0.3 (0.2) (0.5) Net income 4.6 % 4.7 % 0.9 % 3.6 % 1.6 %
The following comparative discussions with respect to SKI have been taken from periodic reports filed by SKI with the Securities and Exchange Commission. Nine Months Ended April 28, 1996 Compared with Nine Months Ended April 30, 1995 Revenues of $106,752,000 for fiscal 1996 approximated the comparable fiscal 1995 revenues. After considering the reduction from the sale of Bear Mountain, revenue increased 13% reflecting an overall increase in skier visits, resulting in improved revenues from most operational areas including tickets, restaurants and bars, retail, rental, repair and ski school at all of SKI's ski areas. Cost of operations increased to $47,885,000 in fiscal 1996, from $45,310,000 in the comparable fiscal 1995 period. After considering the reduction resulting from the sale of Bear Mountain, cost of operations increased 17% in support of increased revenues. Additionally, in fiscal 1996, the Company entered into operating leases for its fleet of snow-grooming vehicles which resulted in incremental lease expense. In turn, SKI's depreciation expense was reduced as a result of having disposed of a majority of its former fleet of owned vehicles in July 1995. Other taxes of $7,541,000 were approximately equal to the comparable fiscal 1995 period. After considering the reduction resulting from the sale of Bear Mountain, other taxes increased 10% primarily due to increases in sales and meals and rooms tax resulting from higher revenues. Selling, general and administrative expenses increased to $17,061,000 in fiscal 1996 from $16,377,000 in fiscal 1995. After considering the reduction resulting from the sale of Bear Mountain, selling, general and administrative expense increased 17% primarily due to the higher costs of the "Peaks of Excitement" marketing program which was introduced in fiscal 1996. Additionally, SKI incurred certain expenditures for financial advisory and legal services relating to the impending acquisition by ASC. Interest decreased 15% due to reduction of debt levels principally relating to the sale of Bear Mountain assets. Depreciation and amortization expense decreased to $10,146,000 in fiscal 1996, from $13,843,000 in fiscal 1995. The reduction is principally attributable to the sale of Bear Mountain assets. Year Ended July 31, 1995 Compared to Year Ended July 31, 1994 Revenues on a consolidated basis increased 15% to $113,960,000 in fiscal 1995 over fiscal 1994. Real estate sales revenue for 1995 was $8,000 compared to zero in 1994. The additions of Waterville Valley Ski Area and Sugarloaf Mountain Corporation were the primary cause of increased revenues on a consolidated basis. Cost of operations increased 21% over 1994 due to increased operational costs related to the acquisitions of Waterville Valley and Sugarloaf ski areas. Other taxes increased 7% in 1995 due to the acquisitions of Waterville Valley and Sugarloaf ski areas. Utilities expense increased 34% in 1995 primarily due to the acquisitions of Waterville Valley and Sugarloaf ski areas. Both Killington and Mount Snow had slight increases over 1994 while Bear Mountain enjoyed a 23% decrease due to their abundance of early season natural snow. Insurance expense increased 20% in 1995 primarily due to the acquisitions of Waterville Valley and Sugarloaf ski areas. Both Killington and Mount Snow had decreases in their insurance expense while Bear Mountain had an increase of 28%. Selling, general and administrative expense increased 27% in 1995 primarily due to the acquisitions of Waterville Valley and Sugarloaf ski areas. Killington and Mount Snow had slight decreases while Bear Mountain increased by 28%. Interest expense increased by 72% in 1995 due primarily to the acquisition of Waterville Valley and Sugarloaf ski areas as well as the construction of the Killington Skyeship. Depreciation expense increased by 23% due primarily to the acquisitions of Waterville Valley and Sugarloaf ski areas. Killington and Mount Snow had slight increases in depreciation while Bear Mountain had a slight decrease. There was a significant increase in SKI's tax rate percentage in fiscal 1995 for two reasons. First, since SKI owns 51% of Sugarloaf, it does not file a consolidated tax return which includes Sugarloaf. SKI will reflect the tax benefit of Sugarloaf's loss only at such time as Sugarloaf actually earns a profit. Second, life insurance premiums are not deductible for tax purposes; and although the amounts of the premiums are relatively small, their effect on tax rates increases in a low profit year. Despite the high tax rate for book purposes, all of the taxes were deferred taxes and, therefore, did not affect cash flow. Net income decreased 78% in 1995 primarily due to poor market response both in the northeast as well as California. Year Ended July 31, 1994 Compared to Year Ended July 31, 1993 Revenues on a consolidated basis increased 2% to $98,907,000 in 1994 over 1993. There were no real estate sales revenues for 1994, which compared to $1,858,000 in 1993. Stronger all around operational revenue allowed for the increased revenues offsetting the 1993 real estate sale in the face of virtually equal skier day totals in 1994 and 1993. The average lift ticket price increased 6%. Cost of operations increased 7% over 1993 due to increased operational costs related to the increase in revenues. Other taxes increased 5% in 1994 due primarily to increases in payroll taxes and sales taxes incurred on increased revenues. Utilities expense decreased 9% due primarily to the abundant snowfalls allowing a reduction in snowmaking requirements. Insurance expense increased 8% over 1993, principally due to the favorable impact from the close-out of certain general liability years in 1993. Selling, general and administrative expense decreased 9% in 1994 due primarily to a bonus declared in 1993. Net income increased 5% to $4,646,000 from $4,409,000 in 1993 due to increased revenues and improved expense control. The margin on net revenue increased to 4.70% in 1994 from 4.56% in 1993. Liquidity and Capital Resources The Company's primary liquidity needs are to fund capital expenditures, service indebtedness and support seasonal working capital requirements. The Company's primary sources of liquidity will be cash flow from operations and borrowings under the Senior Credit Facility (under which approximately $42.8 million was drawn in connection with the Acquisition and $24.7 million remains available for future borrowing, subject to compliance by the Company with the provisions thereof, at July 28, 1996, as well as additional borrowings as permitted under the Senior Credit Facility, the Indenture and the Subordinated Note Indenture. See "Risk Factors -- Leverage and Debt Service," "Risk Factors - --Restrictions Under Debt Agreements," "Description of Senior Subordinated Notes," "Description of Subordinated Notes" and "Description of Other Indebtedness -- The Senior Credit Facility." The Company intends to use borrowings under the Senior Credit Facility to meet seasonal fluctuations in working capital requirements, primarily related to off-season operations and maintenance activities in the Company's first and fourth fiscal quarters, to fund capital expenditures for lifts, trail work, grooming equipment and other on-mountain equipment and facilities and to build retail and other inventories prior to the start of the skiing season. The Company's capital expenditures for the years ended July 30, 1995 and July 28, 1996 were $12.0 million and $25.0 million, respectively. SKI's capital expenditures for the year ended July 31, 1995 were $19.5 million. See "Business -- The Company -- Strategy." Management plans to fund these capital expenditures from available cash, vendor financing to the extent permitted under the Senior Credit Facility, the Indenture and the Subordinated Note Indenture, and borrowings under the Senior Credit Facility. Capital expenditures during the second and third quarters of fiscal 1997 are expected to be insignificant because most capital improvements are completed prior to the commencement of the ski season. Management expects capital expenditures to total approximately $50 million over the next three years, approximately 70% of which is targeted to be spent upgrading SKI properties. However, this budget will be reviewed annually and revised upward or downward to reflect the previous winter's operating results and available liquidity. Management believes that the minimum maintenance capital expenditure requirement for the Company will be approximately $6 million per year excluding the Mt. Cranmore and Waterville Valley resorts, which the Company has agreed to divest. Management also plans to complete its Grand Summit at Attitash/Bear Peak hotel development and undertake quartershare hotel development and construction activities in fiscal 1997 and 1998 at one or more of Sugarbush, Sunday River, Killington and Mt. Snow (see "Business -- Real Estate Development"). Each project is contingent upon satisfying pre-sale objectives required under the Indenture, receipt of necessary permits and approvals and establishing appropriate financing. If all four projects move forward the total cost is estimated at approximately $59 million. It is expected, however, that these activities will be conducted through the Real Estate Subsidiary with limited guarantees of associated indebtedness being provided by the Company, to the extent permitted by the Senior Credit Facility, the Indenture and the Subordinated Note Indenture. Liquidity will also be affected by the debt service requirements associated with such borrowings, as well as any required equity investments by the Company in such entities. Management believes that there is a considerable degree of flexibility in the timing (and, to a lesser degree, the scope) of its capital expenditure program, and even greater flexibility as to its real estate development objectives. While the 1996-97 capital expenditure program described above is regarded by management as important, both as to timing and scope, discretionary capital spending above maintenance levels can be deferred, in some instances for substantial periods of time, in order to address cash flow or other constraints. With respect to the Company's proposed real estate development program, management believes that such efforts will enhance ski revenues and will contribute independently to earnings, as has been the case historically at Sunday River. Nonetheless, existing lodging facilities in the vicinity of each resort are believed to be adequate to support current skier volumes, and a deferral or curtailment of these development efforts is not regarded by management as likely to adversely affect skier visits and ski revenues or profitability. Pursuant to the Consent, the Company has agreed to divest itself of the Mt. Cranmore and Waterville Valley resorts. The Company's negative cash flow associated with these resorts during the off-season is estimated by management to be $100,000 per month. A portion of the $14,750,000 cash proceeds received at closing from the sale of these resorts ($12 million) is expected be applied to reduce the amount outstanding under the Senior Credit Facility. Management believes that reduction will result in freeing up availability under the Senior Credit Facility, although there are no commitments to that effect. See "The Acquisition; Antitrust Matters; Use of Proceeds", "Recent Developments," "Risk Factors--Antitrust" and Note (b) to "Pro Forma Consolidated Financial Data." The Company's liquidity also will be affected by the substantial indebtedness it incurred in connection with the financing of the Acquisition, including the indebtedness evidenced by the Notes and the Senior Credit Facility. Such indebtedness will significantly increase the Company's cash requirements for debt service and will impose various restrictions on additional indebtedness, capital expenditures, creation of liens, sales of assets, permitted investments and mergers or other business reorganizations. See "Description of Senior Subordinated Notes," "Description of Subordinated Notes" and "Description of Other Indebtedness -- The Senior Credit Facility." In addition, upon the occurrence of a Change of Control, the Company may be required to repurchase the Notes and the Subordinated Notes at 101% of the principal amount thereof, plus accrued and unpaid interest. The occurrence of a change of control may also constitute a default under the Senior Credit Facility. See "Risk Factors -- Leverage and Debt Service," "Risk Factors -- Restrictions Under Debt Agreements," "Description of Senior Subordinated Notes -- Repurchase at the Option of Holders -- Change of Control" "Description of Senior Subordinated Notes -- Certain Covenants," "Description of Subordinated Notes -- Repurchase at the Option of Holders -- Change of Control," "Description of Subordinated Notes - Certain Covenants" and "Description of Other Indebtedness -- The Senior Credit Facility." As a result of the loss incurred on a pro forma basis for the fiscal year ended July 28, 1996 and July 30, 1995, after giving pro forma effect to the Aquisition, the acquisition of the 49% interest of Sugarloaf, and the divestiture of the Waterville and Mt. Cranmore resorts, earnings would have been insufficient to cover the indicated fixed charges. Earnings would not have covered fixed charges by $18.0 and $8.4 million for such years, respectively. However, such results for the fiscal year include non-cash charges such as depreciation and amortization of $16.4 million and a loss on the sale of Bear Mountain in October 1995 of $4.7 million. For the fiscal year 1995, non-cash charges include depreciation and amortization of $18.8 million. Management believes that the Company's cash flow from operations, combined with borrowings available under the Senior Credit Facility and additional borrowings to the extent permitted under the Senior Credit Facility, the Indenture and the Subordinated Note Indenture, will be sufficient to enable the Company to meet all of its cash operating requirements for the foreseeable future. The business of the Company is highly seasonal, with the vast majority of its annual revenues historically being generated in the second and third fiscal quarters, of which a significant portion being produced in two key weeks -- the Christmas and Presidents' Day vacation weeks, during which approximately 20% of annual skier visits are realized. Operating losses can be expected in the first and fourth fiscal quarters, and results of operations in the first quarter of the year typically will not be sufficient to cover fixed charges. See "Risk Factors -- Dependence on Weather Conditions; Seasonality." INDUSTRY OVERVIEW The U.S. ski market is a fragmented industry, with 516 ski areas in operation during the 1995-96 season. Over the past 15 years, participation in the sport of skiing has remained relatively stable, averaging approximately 50 million skier visits nationally. No single ski area accounted for more than approximately 3% of 1994-95 skier visits. The market is characterized by both regional and national competition. NATIONAL SKI AREAS ASSOCIATION REGIONS AND SKIER VISITS (In thousands)
SNortheast Southeast Midwest Rocky Mtn Pacific Total e West a s o n < s > 112,252 4,425 6,535 17,687 9,936 50,835 9 9 1 / 9 2 113,217 4,660 6,978 18,602 10,575 54,032 9 9 2 / 9 3 113,718 5,808 7,364 17,503 10,244 54,637 9 9 3 / 9 4 111,265 4,746 6,907 18,412 11,346 52,676 9 9 4 / 9 5 113,825 5,693 7,284 18,147 9,034 53,983 9 9 5 / 9 6
Northeast: CT, MA, ME, NH, NY, VT, RI Midwest: IA, IL, IN, MI, MN, MO, ND, NE, OH, SD, WI Pacific West: AK, AZ, CA, NV, OR, WA Southeast: AL, GA, KY, MD, NC, NJ, PA, TN, VA, WV Rocky Mountain: CO, ID, MT, NM, UT, WY Source: 1994/95 and 1995/96 KOTTKE NATIONAL END OF SEASON SURVEY, Seventeenth Edition, August 1996, published by the National Ski Areas Association and RRC Associates The ski industry is presently experiencing a period of consolidation and attrition, which is reflected in a significant decline in the total number of areas over the last ten years. Management believes that the driving forces behind both consolidation and attrition are the need to gain access to capital to maintain state-of-the-art facilities and the need to retain professional management, and the inability of numerous resorts to keep pace with the competition with respect to one or both of these market forces. The trend among leading resorts is toward investing in improving technology and infrastructure so as to deliver a more consistent, high quality product. The NSAA defines the Northeast ski resort market as encompassing the New England states and New York, although the Company believes its market extends as far as the Mid-Atlantic states and southeastern Canada. The Northeast market has averaged approximately 12 million annual skier visits over the last fifteen years. Within the Northeast region, skiers can choose from among over 50 major resorts. The region's major resorts are concentrated in the mountainous areas of New England and eastern New York, with the bulk of skiers coming from the population centers located in eastern Massachusetts, southern New Hampshire, Connecticut, eastern New York, New Jersey and the Philadelphia area. Data collected at Sunday River indicate that approximately 43% of its weekend skiers reside in Massachusetts. Similar data collected at Killington and Mt. Snow indicate that approximately 23% and 35% of their weekend skiers, respectively, reside in New York, with high concentrations from Massachusetts, Connecticut, New Jersey and Vermont. The Northeast ski market consists of essentially two segments: day skiing and vacationers. The day skiing market is comprised of skiers who live within a four hour driving radius of a particular resort. Day skiers may stay for one to two days in a single trip. Approximately 35 million people live within the Company's day skiing market, which includes the New York and Boston metropolitan areas. The vacation market is a national market for destination resorts. While the Northeast does not draw significant numbers of vacationing skiers from the Western regions of the country, it competes with the Rocky Mountain and Pacific Northwest areas for Eastern vacationing skiers. Over the last several years, the Company has begun to compete in certain international markets, with the U.K. market historically producing the highest levels of international skier visits. Management believes that certain demographic trends and trends in the U.S. ski industry will be favorable for the Company's business outlook. The "echo boom" generation is of prime age for introduction to skiing and snowboarding. The trend toward consolidation is expected to permit larger, multiple resort companies to concentrate more of their marketing efforts on attracting new participants to the sport. Improved snowmaking technology and grooming techniques assure visitors better quality and more consistent conditions. High speed chair lifts also increase the quality of the experience by permitting more skiing during a resort visit. As an active family sport, skiing benefits from the social trends toward family vacationing and health consciousness. Finally, management believes its success with the first Summit Hotel program is directly related to the desire for affordable vacation property ownership among a growing population of skiers. BUSINESS The Company General. Management estimates indicate ASC is one of the largest mountain resort operators in North America, owning and operating eight ski resorts in the northeastern United States, including seven of the largest resorts measured by annual skier visits, elevation, vertical drop and skiable terrain. ASC's properties include Killington, Mt. Snow/Haystack and Sugarbush ski resorts in Vermont; Waterville Valley, Attitash/Bear Peak and Mt. Cranmore ski resorts in New Hampshire; and Sunday River and Sugarloaf/USA ski resorts in Maine. These resorts recorded over 3.3 million skier visits during the 1995/96 ski season, representing approximately 24% of total skier visits in the northeastern United States and approximately 6% of skier visits nationally. ASC's ski resort properties offer approximately 4,000 acres of skiable terrain (of which approximately 82% are covered by snowmaking capability), 777 trails and 121 lifts. ASC generated approximately $187.6 million in revenues and approximately $3.8 million and $34.6 million in net loss and EBITDA, respectively, for the fiscal year ended July 28, 1996, on a pro forma basis reflecting the Acquisition and including the Waterville Valley and Mt. Cranmore resorts, which are to be divested. Excluding Waterville Valley and Mt. Cranmore, such total revenue were $172.0 million, and ASC generated $3.8 million in net loss and $32.6 million in EBITDA over such period after giving pro forma effect to the Acquisition. (Data concerning the Company's EBITDA may not be comparable to similarly titled data of other companies.) The Consent requires divestiture of the Waterville Valley and Mt. Cranmore resorts not later than December 1, 1996, subject to a 90 day extension at the discretion of DOJ. On a combined basis, these two resorts recorded approximately 382,000 skier visits during the 1995-96 ski season (11.4% of total 1995-96 skier visits for the Company, after giving pro forma effect to the Acquisition) and, during the fiscal year ended July 28, 1996, generated approximately $15.6 million in total revenues, $0.0 million in net loss and $2.0 million in EBITDA (8.3%, (1.3)% and 5.8%, respectively, of the Company's revenues, net loss and EBITDA for such period after giving pro forma effect to the Acquisition). The net assets to be divested of these two resorts, as of July 28, 1996, aggregate approximately $16.7 million, or 5.6% of total assets of the Company, as of such date, after giving pro forma effect to the Acquisition, and they represent on a combined basis approximately 445 acres of skiable terrain, 90 trails and 19 lifts. See "The Acquisition; Antitrust Matters; Use of Proceeds" and "Pro Forma Financial Data." On August 30, 1996 the Company entered into a Purchase and Sale Agreement with Booth Creek Ski Acquisition Corp. providing for the sale of all of the assets constituting the Waterville Valley and Mt. Cranmore ski resorts for a total purchase price of $17.5 million. The sale of the resorts is scheduled to close on or before November 27, 1996. See "Recent Developments." The Company has experienced consistent growth since its inception in 1980 when it acquired the Sunday River ski resort. Skier visits at Sunday River have increased from under 50,000 in the 1980/81 ski season to approximately 589,000 for the 1995/96 ski season. The Company acquired Attitash/Bear Peak in fiscal 1994, and Sugarbush and Mt. Cranmore in fiscal 1995. Since their acquisition by the Company, skier visits have increased by 24% at Attitash/Bear Peak, 13% at Sugarbush and 32% at Mt. Cranmore. Management believes that ASC will realize growth in skier visits and profitability from (i) implementation at the SKI resorts of the Company's successful operating strategy and the continued pursuit of that strategy at the Company's recently acquired resorts, (ii) operational synergies and economies of scale available to the Company as a result of the Acquisition, and (iii) coordinated marketing and promotion of eight resorts spanning a single region. Management also believes that the Company is well positioned to benefit from certain trends in the North American ski industry, including the emergence of the echo boom generation, continued consolidation, growing interest in snowboarding, and demand among families for vacation property ownership. As the cost of infrastructure to maintain competitiveness in the ski industry has grown, the number of U.S. ski areas has declined. There are currently 516 ski areas in operation in the nation as compared to over 700 in 1986, while skier visits have remained relatively stable over the same period. Management believes that the Company, as the largest ski resort operator in the U.S., is well positioned to continue its growth both internally and through acquisitions. Management also believes that the ski industry is poised for growth through increased participation in the sport, especially among the echo boom generation who will be reaching their teen years, the prime entry age for skiing, over the next decade. The Company and other emerging multiple resort operators are expected to focus more of their marketing efforts on attracting new participants to the sport. Resort Properties. The Company's multiple properties extend from southern Vermont to central Maine, enabling the Company to market its wide variety of skiing terrain and resort characteristics to residents of the northeastern U.S., including the New York and Boston metropolitan population centers. Management believes that the number and diversity of its resorts and their accessibility to these customer bases will increase the effectiveness of its marketing program and the likelihood of bringing new visitors to its resorts. Management intends to capitalize on this anticipated phenomenon by aggressively cross-marketing and inducing visitors, including those seeking varied resort experiences, to travel to its other resorts. See "-- Marketing." The following table summarizes certain key statistics of each of the Company's properties. American Skiing Company Resort Overview
Resort Skiable Vertical Trails Lifts Terrain Drop (Acres) Killington Sherburne, 918 3,150 165 1 Gondola Vermont 2 Detachable 15 Fixed Grip 2 Surface Sunday River Newry, Maine 640 2,300 120 3 Detachable 12 Fixed Grip 1 Surface Mount Snow/ Haystack 751 1,700 130 1 Detachable Dover, Vermont 20 Fixed Grip 3 Surface Sugarloaf Carrabassett 515 2,820 116 1 Gondola Valley, Maine 1 Detachable 11 Fixed Grip 1 Surface Sugarbush Warren, Vermont 413 2,600 111 4 Detachable 4 Surface 10 Fixed Grip Attitash/ Bear Peak 214 1,750 45 1 Detachable Bartlett, New Hampshire 7 Fixed Grip 2 Surface Subtotal-- Retained 3,451 -- 687 2 Gondola resorts 12 Detachable 75 Fixed Grip 13 Surface Waterville Valley 255 2,020 54 1 Detachable Waterville Valley, New 8 Fixed Grip Hampshire 4 Surface Mt. Cranmore North 190 1,167 36 1 Detachable Conway, New Hampshire 4 Fixed Grip 1 Surface Subtotal - Resorts to be 445 -- 90 2 Detachable divested 12 Fixed Grip 5 Surface Total 3,896 -- 777 2 Gondola 14 Detachable 87 Fixed Grip 18 Surface
Snowmaking Coverage Groomers Lodges 1994-95 1995-96 Skier Skier Visits Visits (000s) (000s) 60% 29 7 826 905 92% 11 4 535 589 84% 13 6 461 553 92% 11 1 312 349 74% 9 5 331 373 100% 5 2 182 201 80% 78 25 2,647 2,970 96% 6 3 207 257 100% 3 2 95 125 98% 9 5 302 382 82% 87 30 2,949 3,352
The following table summarizes the Company's existing lodging capabilities. With the exception of the Snow Cap Inn and Ski Dorm at Sunday River, the Sugarbush Inn at Sugarbush, the Villager Hotel at Killington and the Snowlake Lodge at Mt. Snow, all other lodging reflected in the following table is not owned by the Company, but is managed by the Company under contract with the owners of the facilities. Lodging Information 1995-96 Fiscal Year
Total Gross Company-Owned Rooms(2) Average Net Occupancy Lodging Location Daily Rate Average Percentage Daily Rate (1) Snow Cap Inn (3) Sunday River 67 $79.85 $79.85 73.06 % Ski Dorm (3) Sunday River 205 (4) 22.29 22.29 22.90 Sugarbush Inn Sugarbush 46 83.33 83.33 47.43 Villager Killington 80 68.81 68.81 53.77 Snowlake Lodge Mt. Snow 80 50.13 50.13 61.27 Managed Lodging Condominiums Sunday River 400 106.84 39.99 28.66 Condominiums Sugarbush 200 100.05 45.02 27.74 Condominiums Killington 510 142.63 64.18 34.10 Condominiums Mt. Snow 139 113.66 51.14 38.73 Condominiums Sugarloaf 290 148.30 57.54 26.98 Summit Hotel Sunday River 230 65.56 30.05 53.38 Sugarloaf Inn Sugarloaf 42 71.70 35.85 48.34
Explanatory Notes (1) Net Average Daily Rate means the portion of lodging revenue that is received by the resort under its management contract after deduction of the owner's portion of revenue, maintenance funds and related fees. (2) The number of condominiums under management varies throughout the year; therefore, the numbers of total rooms shown are estimates. (3) Ski Dorm and Snow Cap Inn are open 158 days per year from November 15 to April 20. (4) Ski Dorm figures are based on total beds because a "room" measurement does not apply to this style lodging. The Company has no plans to renovate any existing lodging facilities. Strategy. The Company intends to pursue a strategic plan that mirrors the formula successfully employed at Sunday River and its recently acquired resorts. Invest in Ski Experience. Management believes that the most efficient way to increase resort visitation is to provide the highest quality skiing available. The Company intends to continuously improve the infrastructure at each resort, emphasizing modernization and introducing at the SKI resorts the snowmaking and grooming successfully implemented at the Company's other ski areas. Management expects to invest approximately $50 million in improvements in lifts, snowmaking, grooming and trail design over the next three years, of which approximately 70% is designated for the SKI resorts. Up to half of the Company's three year capital improvement budget is for investment in lifts, with a substantial portion of that amount to be used to replace outmoded equipment at Killington and Mt. Snow. Investment in lifts achieves two goals. First, it provides increased carrying capacity, which is critical to attracting and retaining skiers by reducing or eliminating lift lines and reducing time spent on lifts. Second, lifts are the most visible form of improvement to the skiing public and are one of the Company's centerpieces in promoting new experiences at its resorts. Approximately 25% of the three year capital budget will be invested in snowmaking improvements during fiscal 1997 through 1999, targeting over 90% coverage at all of the Company's resorts. Expanded snowmaking reduces the Company's reliance on natural snowfall and increases skiers' confidence that high quality conditions will be available notwithstanding weather conditions. The expansion in water capacity and the improvements in snowmaking equipment at each of the Company's recently acquired resorts are indicative of its strategic commitment to delivering the highest quality skiing experience. Further expansion will be subject to the Company's ability under applicable laws, regulations, policies or contractual arrangements to have access to adequate supplies of water. See "Business--Environmental Matters." Since their acquisition by the Company, the Company has increased snowmaking capacity (measured in gallons per minute) by approximately 300% at Sugarbush, 100% at Attitash/Bear Peak, and 20% at Mt. Cranmore. As with the planned lift improvements, approximately 70% of the anticipated snowmaking investment will be dedicated to upgrading the SKI resorts. Grooming is also an essential element in producing a quality skiing surface. Management intends to upgrade surface quality principally through implementation of its unique grooming system at all its resorts. This slow grind process, in which grooming equipment works at half the normal speed and tilling the snow at twice the normal depths, improves the consistency of the snow. This grooming technique takes longer and is, therefore, more expensive; however, the Company believes the cost is justified by increased skier satisfaction. Management also plans to modernize the trail configuration at the SKI resorts by eliminating cross over trails and ensuring a higher quality skiing experience. This is particularly true at the older Killington and Mt. Snow resorts where trail design is more outdated. Approximately $2 million in trail improvements are included in the three year capital program. The Company has also identified several opportunities to expand certain of the trail systems at different resorts. Development of additional skiable terrain will be conditioned upon market demand, availability of funds and permitting. See "Business -- Existing Operations" and "Business -- SKI Limited" for a discussion of expansion possibilities. The final portion of the on-mountain capital program is an anticipated $6.5 million investment in new and improved base facilities. These improvements will focus on providing additional space for skier development, children's programs and other family oriented activities and services. Emphasize Marketing. The Company's marketing program is designed to attract both day skiers and vacationers. Approximately 35 million people live within the Company's day skiing markets, which include the Boston and New York metropolitan areas. With the acquisition of SKI, the Company's marketing program will become even more focused on the population centers located in Massachusetts, Connecticut, New York and New Jersey. The Company employs a two-tiered marketing program in which each resort develops a resort-specific marketing plan, and assists in the development of an integrated corporate marketing program. The individual marketing program for each resort focuses on the unique characteristics of that area and the demographics of its skier base. The corporate marketing program focuses on establishing a corporate identity and expanding the Company's market, both by building the image of New England skiing and by seeking to attract new participants to the sport. Corporate marketing includes specific programs, such as the successful "Perfect Turn" proprietary skier instructional and development program. Increased loyalty among day and overnight skiers is promoted through multi- resort affinity programs like the "Edge Card," which provides free lift tickets to frequent skiers. The Company plans to expand upon its existing marketing efforts by focusing on three distinct age groups in order to develop new skiers. The first targeted segment is the emerging echo boom generation, the children of the baby boom generation who are reaching the age at which recreational preferences begin to form. The Company will employ a high-energy multimedia approach tailored to this age group, emphasizing the fun and excitement of skiing and snowboarding. The second demographic segment to be pursued through marketing is the maturing baby boom generation, which is beginning to generate higher levels of disposable income. The third segment is the "X" generation. Management believes this age group (15-32) will respond favorably to the high energy levels of skiing and snowboarding. The Acquisition provides the Company with expanded marketing opportunities and efficiencies. With resorts reaching from southern Vermont to northern Maine, the Company believes that it is able to reach a wider population, due to its resorts' proximity to Northeastern population centers, and to cross-market its other resorts to visitors at each resort, capitalizing on skiers' interest in experiencing a diversity of skiing terrain and resort accommodations. See "Business -- Marketing." Control Multiple Revenue Sources. The Company controls multiple revenue sources at each resort, diversifying its income base and maximizing return from each property. For the fiscal year ended July 28, 1996, lift ticket revenues constituted approximately 46% of the Company's total ski and lodging revenues while lodging constituted approximately 19% of total ski and lodging revenues, with the balance produced by retail, food and beverage and other operations. The Company operates its own chain of resort retail ski shops under the name "Crisports," which provide ski rentals and repairs, and a complete line of ski equipment, clothing and accessories. Retail operations accounted for approximately 8% of ski and lodging revenues for the fiscal year ended July 28, 1996. Management expects to expand marketing of Company-specific private label clothing and accessories lines and increasingly controlling the production of its private label products, thus reducing its cost of goods sold. During that period, other important revenue sources included food and beverage, which accounted for approximately 11% of ski and lodging revenues; skier development, which accounted for approximately 5% of ski and lodging revenues; and summer activities, which contributed approximately 5% of such revenues. The remaining 6% is attributable to other revenues. Management continuously seeks to maximize contribution by reducing the costs associated with each source and identifying and exploiting opportunities to grow these enterprises. Pursue Cost Savings Opportunities. Management has identified approximately $1.9 million of net annual cost savings it believes are achievable following the Acquisition (see "Pro Forma Financial Data"), resulting from staff reductions, elimination of a key man life insurance policy, and elimination of shareholder service costs and related expenses. Several areas have been identified by the Company as providing the opportunity for additional cost savings including centralized purchasing of electricity, fuel, and food and retail inventory, and the combined entity's enhanced buying power and desirability as a strategic marketing partner. The anticipated savings are based on estimates and assumptions made by the Company that are inherently uncertain, though considered reasonable by the Company, and are subject to significant business, economic and competitive uncertainties and contingencies, all of which are difficult to predict and many of which are beyond the control of management. There can be no assurance that such savings will be achieved. See "Risk Factors -- Ability to Achieve Anticipated Cost Savings; Integration of SKI." Selectively Develop Mountainside Real Estate. In addition to more conventional slopeside condominium projects, the Company has developed a prototype year-round destination slopeside hotel. The hotel is a condominium in which the Company retains ownership of the core hotel properties consisting of restaurants, commercial space, conference facilities and infrastructure facilities. Quartershare interests (13 weeks evenly divided over the year) in the hotel suites are sold to individual owners as residential condominiums. The Company operates the hotel and provides optional management of the quartershare units for individual owners. The first of these hotels, called the "Summit Hotel," was successfully developed in two phases at Sunday River in 1992 and 1993. The project is fully sold, and has generated substantial profits for the Company. The Summit Hotel concept is expected to be the prototype for the Company's future real estate development activities, with additional hotels planned for selected resort locations over the next several years. The number, timing, and location of projects will be driven by demand, as determined through an extensive pre-construction marketing and sales program. Current plans provide for the development of one hotel at each resort, except Sugarloaf, during fiscal years 1997 through 2000. Initial cost is expected to be in the range of $12 to $15 million per hotel. In addition, subject to demand, management believes that an additional wing could be added to each hotel approximately two years after the initial construction at a cost of approximately $5-$6 million per hotel. See "Recent Developments" for discussion of recent hotel development. Expand Off-Season Activities. Each resort has developed off-season activities in order to improve utilization of facilities, retain quality employees and contribute to coverage of fixed operating costs. Sugarloaf, Killington, Mt. Snow and Sugarbush operate championship golf courses, with the Sugarloaf course, designed by Robert Trent Jones, recently being rated one of the top 25 courses in the country by Golf Digest magazine and Golf magazine. All the resorts offer a variety of other summer outdoor recreational opportunities ranging from tennis and mountain biking to off-site activities such as whitewater rafting, canoeing, fishing and hiking in the surrounding mountains. Each resort has also begun to sponsor cultural programs during the summer. All of these facilities and activities are intended to draw off-season visitors to the resorts' conference and convention facilities. Existing Operations The formation of the businesses comprising the Company began when Leslie B. Otten, ASC's chairman and chief executive officer, acquired Sunday River in fiscal 1981. During the 1980/81 ski season, Sunday River generated fewer than 50,000 annual skier visits. In contrast, the Company generated approximately 589,000 skier visits at Sunday River in the 1995/96 season, ranking second in New England only to Killington. Sunday River has achieved steady increases in skier visits by making significant expansions and improvements to trails, lifts, snowmaking, grooming and base lodge facilities and through aggressive marketing. Sunday River has enhanced profits through strict cost controls, and by maintaining control over multiple revenue sources at the resort. In order to provide a bed base to support the higher levels of skier visits and to generate additional cash flow to fund capital improvements, in the mid-1980s Sunday River began a program of limited condominium development. In 1992 and 1993, the Company constructed the Summit Hotel, its prototype quartershare hotel at the base of the mountain. The Company recognized an opportunity to replicate Sunday River's success at other ski resorts, and in 1994 and 1995 acquired the Attitash/Bear Peak, Mt. Cranmore and Sugarbush resorts. Implementing the strategy successfully developed at Sunday River, the Company has invested, since the respective date of acquisition by the Company, approximately $27.9 million in capital expenditures at these properties. The capital improvements at those resorts are reflected in the following table: Resort New New Lifts New New Trails New Base Snowmaking Grooming Facilities Machines Attitash/Bear 80 million 1 high 2 5 trails Bear Peak Base Peak gallon speed w/40 acres Lodge snowmaking detachable pond quad Sugarbush 63 million 7 lifts, 6 1 Addition to Gate gallon including House Base snowmaking 4 high Lodge; pond; new speed Renovation to 550-gun detachable Valley House snowmaking quads Base Lodge system Mt. Cranmore New stream 1 high -- 4 New ski shop; intake & speed Improved summit variable detachable restaurant pumping quad 1 capacity improved lift
Supported by aggressive marketing programs and better overall market conditions for the 1995/96 season, skier visits grew from pre-acquisition levels.
Skier Visits % Increase Resort Pre-Acquis First Year Second Since ition Year Acquisitio n Attitash/Bear Peak 162,602 182,449 201,458 24% Mt. Cranmore 95,000 125,143 N.A. 32% Sugarbush* 330,922 373,200 N.A. 13%
________________________*Managed by the Company beginning November, 1994 and acquired May, 1995. Sunday River. Extending over eight interconnected mountain peaks, Sunday River's facilities consist of 640 acres of skiable terrain and 120 trails. The resort has a 3,100 foot summit and a 2,300 foot vertical drop. Its eight mountains are serviced by 16 lifts, including three high-speed detachable quad lifts, five fixed grip quad lifts, seven triple or double lifts and one surface lift. The mountains are serviced by four base lodges, including one located at the top of North Peak. The resort's on-mountain bed base consists of more than 700 condominium units, the Summit Hotel's 230 quartershare units, and two other hotels providing housing for 5,400 skiers on slope. The off-mountain bed base in greater Bethel, Maine totals 1,500 beds. The resort's transportation network includes the Silver Bullet Express ski train, which provides rail service between Portland, Maine, and Bethel, Maine. The resort operates five ski shops, four full-service restaurants, four cafeteria-style restaurants, and four bars. The Company also owns and operates a 67 unit hotel, and manages the Summit Hotel as well as 704 condominium units. Sunday River has focused on producing high quality skiing conditions through emphasizing the quality and coverage of its snowmaking system, its unique grooming techniques, attention to trail design and lift capacity. Sunday River has one of the most modern lift systems in the Northeast, featuring 16 chairlifts with the most quads of any Eastern ski area. Sunday River is widely recognized for its dedication to producing new and different terrain on a regular basis, thus offering skiers a new and different experience each season. Management believes that Sunday River has significant growth potential. Over 300 acres of land at the base of the new Jordan Bowl area are earmarked for development of base facilities and a second Summit Hotel. There are approximately 10,000 acres of undeveloped land, either owned by the Company or under option, suitable for development as skiable terrain. The resort's capital improvement program provides for up to approximately $10 million in improvements to on-mountain facilities over fiscal years 1997 through 2001. Sugarbush Resort. Extending over six mountain peaks, Sugarbush's facilities consist of 413 acres of skiable terrain and 111 trails. The resort has a 4,135 foot summit and a 2,600 foot vertical drop. Its six mountains are serviced by 18 lifts, including four high-speed detachable quad lifts, two fixed grip quad lifts, seven triple or double lifts and three surface lifts. The mountains are serviced by five base lodges and two summit lodges. The resort's bed base consists of approximately 1,900 beds on-mountain and another 2,200 beds within the greater Warren, Vermont area. The resort operates three ski shops, four full-service restaurants, four cafeteria-style restaurants, and four bars. The Company also owns and operates the 46 unit Sugarbush Inn, manages approximately 200 condominium units and owns and operates a championship golf course as well as a sports center and a conference center. Sugarbush features the three highest mountain peaks of any single resort in the East (Mount Ellen at 4,135 feet, Lincoln Peak at 3,975 feet and Nancy Hanks at 3,812 feet). Its terrain is extremely diverse, featuring steep expert slopes, both narrow and wide, numerous long intermediate cruising trails, significant novice terrain as well as separate teaching and learning areas. The resort offers picturesque base facilities at both its north and south peaks. Following its acquisition by the Company in 1994, the Company invested $16 million in a major capital improvement program that included four high speed quad chairlifts, a 300% increase in snowmaking capacity and base area improvements. Management believes Sugarbush also has substantial growth potential. The Company has identified approximately 250 to 300 acres of its terrain for development as additional intermediate terrain. Future demands will require additional pipeline connections, which are included in the over $8 million in planned capital improvements to the resort's on-mountain facilities over fiscal years 1997 through 2001. Attitash/Bear Peak. Covering two mountain peaks, Attitash/Bear Peak facilities consist of 214 acres of skiable terrain and 45 trails. The resort has a 2,350 foot summit and a 1,750 foot vertical drop. Its two mountains are serviced by ten lifts, including one high-speed detachable quad lift, one fixed grip quad lift, four triple or double lifts and two surface lifts. The mountains are serviced by two base lodges. The resort has limited on-mountain bed base; however, it maintains 3,200 beds in its reservation system and draws from the 16,000 bed Mt. Washington Valley area. The resort operates two ski shops, two full-service restaurants, three cafeteria-style restaurants, and two bars. Attitash has been fully developed for some time. Bear Peak is a new area still under development by the Company. The most recent improvements include a new full scale base lodge and high speed quad. The resort is widely recognized as a family-oriented resort presenting a relaxed atmosphere and manageable size believed to be attractive to many families vacationing in the Mt. Washington Valley. Due to its location in the Mt. Washington Valley tourist area, it has developed a significant number of year-round activities including an alpine water slide, horseback riding and features several top level equestrian events. Management expects to continue to develop terrain at its new Bear Peak area. A Summit Hotel is under construction at the resort and scheduled for substantial completion by February 15, 1997. The resort's capital improvement program will provide for over $7 million in improvements to on-mountain facilities over fiscal years 1997 through 2001. Mt. Cranmore. Mt. Cranmore's facilities consist of 190 acres of skiable terrain, with 36 trails. The resort has a 1,714 foot summit and a 1,167 foot vertical drop. It is serviced by six lifts, including one high-speed detachable quad lift, four triple or double lifts and one surface lift. The mountain is serviced by two base lodges and a gourmet restaurant at the summit. The resort has no on-mountain bed base but is located near the center of Mt. Washington Valley's 16,000 bed base. The resort operates one ski shop, one rental shop, two full-service restaurants, two cafeteria-style restaurants, and one bar. The Company also manages 30 condominium units. Mt. Cranmore is one of the oldest continuously operated ski areas in the United States. Located within walking distance of the North Conway shopping district, the mountain offers a unique combination of quality skiing and immediate access to one of New England's largest retail and restaurant centers. Although Mt. Cranmore is the Company's smallest mountain, its location and amenities make it a unique and very attractive skiing alternative. The Company owns 800 acres and holds deeded rights to develop approximately 700 additional acres, at its sole discretion that are appropriately zoned for development as skiable terrain. The Company has entered into the Consent with the DOJ, which requires the sale of Mt. Cranmore. The Company has entered into an agreement for the sale of Mt. Cranmore with closing scheduled on or before November 27, 1996. See "The Acquisition; Antitrust Matters; Use of Proceeds" and "Recent Developments." SKI Limited SKI's operations consist of the Killington, Mt. Snow/Haystack, Waterville Valley and Sugarloaf ski resorts. SKI acquired Mt. Snow in 1977 and Haystack, Waterville Valley and its initial 51% interest in Sugarloaf in 1994, and the balance of the outstanding Sugarloaf stock in August, 1996. SKI's resorts comprise 2,439 acres of skiable terrain (of which approximately 77.6% are covered by snowmaking equipment), 465 trails, and 70 lifts, of which seven are high-speed detachable quads or gondolas. The Company believes that since the late 1980s, SKI's resorts have been characterized by a lack of significant capital investment, resulting in stagnant or declining skier visits, revenues, net income and EBITDA. Nonetheless, the resorts remain some of the finest in the Northeast, and the lack of capital investment over the last half decade presents a unique opportunity for the Company to maximize the value and earnings potential of those resorts through strategic capital investment and rigorous management techniques instituted at the Company's other recently acquired facilities. Killington Resort. Killington is a six-mountain resort, with a 4,241 foot summit and a 3,150 foot vertical drop. Killington's ski terrain is comprised of 918 acres with 165 trails and 20 lifts consisting of one gondola, seven quad lifts, ten triple or double lifts and two surface lifts. The resort's base facilities include seven full-service base lodges, including one located at the top of Killington Peak. Killington also owns and operates eight retail shops, six rental and repair shops, a travel and reservation agency, an 87-room motor lodge in Killington Village and a low-voltage television station. There is lodging capacity of 3,300 beds at the base of the mountains and approximately 12,000 beds in the greater Sherburne area. Killington is a year-round resort, offering complete golf amenities including an 18-hole golf course, a golf school, a pro shop and a driving range, as well as a tennis school. Killington is the largest ski resort in the Northeast. Its size and diversity of skiing terrain make it attractive to all segments of the market. The Killington access road is a highly developed retail, lodging and restaurant center known for its retail shopping, fine dining and night life. Surveys indicate that Killington is the most widely recognized of the Company's resorts. Management believes Killington's facilities can be enhanced through updating its snowmaking trail and lift systems and developing the real estate potential at its base area. The Company plans major on-mountain capital improvements over fiscal years 1997 through 2001. Management believes the Killington base area presents superior potential for development of a Summit Hotel. The Company has reached an agreement in principle with the State of Vermont to trade Company-owned land at higher elevations for base area land owned by the State. The agreement is subject to legislative approval and no assurances can be given regarding that approval. As a result of the land trade, the Company will own substantial undeveloped real estate at the Killington base, which the Company may develop, subject to receipt of necessary permits and obtaining necessary financing commitments. The two tracks of land are of approximately equivalent value in their existing undeveloped condition. The land trade has the added value of resolving a longstanding dispute with the Vermont Agency of Natural Resources and certain environmental groups regarding possible development of the land at higher elevations. The Company has agreed that the land it is trading will not be developed in exchange for a commitment from the State of Vermont that the land in the base area does not constitute necessary black bear habitat. Historically the black bear habitat issue has impeded development of that real estate. That barrier to development will be eliminated if the exchange is consummated. Although water supplies are adequate for current operations, management is negotiating to acquire the additional water supplies needed to accommodate the Company's snowmaking expansion plan. No assurances can be given regarding the results of those negotiations. Mount Snow/Haystack Resort. Mount Snow/Haystack resort covers two mountain peaks and has a 3,580 foot summit and a 1,700 foot vertical drop. The facilities consist of 130 trails and 751 acres of skiable terrain, serviced by 24 lifts. On-mountain facilities include six full-service base lodges, several retail shops, six rental and repair shops, a pro shop, a country club and a nightclub. Mount Snow also headquarters the Company-owned "Original Golf School," and operates an 18-hole golf course, golf schools in Vermont, Ocean City, Maryland and Crystal River, Florida, a mountain bike school, a 92-room hotel, and a low-voltage television station. Its bed base consists of 890 on-mountain beds and 7,821 beds in the greater Dover area. Mount Snow is the southernmost of the Company's resorts. Located in the Brattleboro, Vermont area, it is a convenient day drive from both New York City and Boston. A large percentage of Mount Snow's skier base derives from Massachusetts, Connecticut and New York. The resort consists of two separate mountains, separated by approximately six miles, which have been combined under single management. Together, the two mountains are serviced by one of the Northeast's most extensive lift systems. Management believes Mt. Snow's development potential includes reconfiguration of lifts and trails to increase the mountains' carrying capacity and interconnecting the Mt. Snow and Haystack areas. Additional property rights and permitting will be required in order to establish that connection, and no assurance can be given that this objective can be achieved. A petition is pending before the Vermont Water Resources Board to reclassify a section of a stream running between the Haystack area and the Mt. Snow area. This reclassification has the potential to restrict or prevent construction activities to connect the two areas. No assurance can be given regarding the outcome of this proceeding. The current capital program provides for substantial expenditures to improve outdated facilities and reconfigure and expand portions of the lift system over the next five years. The Mt. Snow base area has been identified by management as a potential site for construction of a Summit Hotel project. Management considers water supplies to be adequate to meet existing needs. Optimal snowmaking and future development will require additional water sources. The Company has identified potential additional sources of water believed to be adequate for Mt. Snow's anticipated needs; however, there can be no assurance that the requisite permits can be obtained. Sugarloaf Resort. Sugarloaf is a single mountain with 1,400 acres of terrain, 14 lifts and 116 trails covering 515 acres. There are approximately 895 acres of off-trail skiing terrain. The mountain has a 4,237 foot summit and a 2,820 foot vertical drop. Sugarloaf operates a year-round conference center and nordic ski facility. It leases, on a long term basis from the Town of Carrabassett Valley, an 18-hole golf course designed by Robert Trent Jones, Jr., which is ranked by Golf Digest and Golf magazine as one of the top 25 courses in the United States. The Original Golf School, which was developed at Mount Snow, was expanded during fiscal year 1995 to include Sugarloaf. Sugarloaf's slopeside ski village consists of its base lodge, two hotels, banquet facilities for 800 people, retail, rental and repair shops, a sports and fitness club, 900 condominium units, rental homes, shops, restaurants and an extensive recreational path network. Sugarloaf is located in Carrabassett Valley, Maine. Its remote location has driven its development as a self-contained destination resort. The resort offers one of the largest ski-in/ski-out base villages in the Northeast, containing numerous restaurants, retail shops and an abundance of lodging. Aside from its base development, Sugarloaf is widely recognized for its challenging terrain, including its snowfields, which represent the only lift-serviced above treeline skiing in the Northeast. Sugarloaf is a destination resort for many Maine skiers. Although it draws from areas as distant as New York, New Jersey and Pennsylvania, a significant segment of its skiers are Maine-based. Waterville Valley. Waterville Valley's facilities consist of two mountain peaks with 255 acres of terrain, including a separate 31 acre snowboard mountain, a 4,004 foot summit and 2,020 foot vertical drop, 54 trails and 13 lifts. Waterville operates a planned ski community with three lodges, a retail shop, a rental shop, and a repair shop. The resort has a year-round Base Camp Adventure Center offering mountain bikers, cross country skiers and hikers access to 60 miles of trails in the White Mountain National Forest. Other resort amenities include an ice skating arena, golf course, tennis center, sports and fitness center, and horseback riding. Waterville Valley's Conference Center has 17,000 square feet of meeting space and provides meeting and banquet facilities for up to 1,000. Waterville Valley has long been recognized as one of the largest ski resorts in New Hampshire. Its location immediately adjacent to Interstate 93 (a major north-south thoroughfare for skiers) makes it one of the most accessible of the Company's resorts. The area is adjacent to a picturesque New England village which contains most of the area's dining, shopping and entertainment. The village square and resort are serviced by a shuttle, and offer an integrated vacation experience characterized by both challenging skiing at one of New Hampshire's largest resorts and an immediately available off-mountain New England village offering some of the finest amenities in the area. Management believes the resort's proximity to the Boston market is a major underdeveloped asset, and that the resort has the potential to develop a larger day skiing base from that market through improved on-mountain facilities and aggressively marketing in the Boston metropolitan area. The Company has entered into the Consent with the DOJ, which requires the sale of Waterville Valley. The Company has entered into an agreement for the sale of Waterville Valley with closing scheduled on or before November 27, 1996. See "The Acquisition; Antitrust Matters; Use of Proceeds" and "Recent Developments." Marketing Staff. The Company maintains a full-time marketing staff of 117 persons. Each resort has its own marketing director who reports to the Company's vice president of marketing. The staff at each mountain is responsible for development of a resort-specific marketing plan, as well as participating in combining all of the resorts' marketing programs into an overall marketing program designed to develop a corporate branded identity. Management regularly sponsors marketing seminars and planning sessions designed to maximize the staff's professionalism and effectiveness. Strategy. The Company has established a dedicated group within its corporate marketing department, whose objective is to increase participation in the sport by promoting the fun and excitement of skiing and snowboarding. The group is developing an innovative ad campaign targeted to potential skiers and snowboarders in three broad customer profiles. The first two demographics are the emerging echo boom generation, and the "X" generation. Over the next five to ten years, management believes these generations of over 114 million younger Americans are going to be of the prime age for making what often become life-long recreational choices. The Company's marketing initiative is a high energy music and video ad campaign that is coupled with national and regional strategic advertising alliances intended to introduce skiing and snowboarding specifically to these generations by creating an image for skiing and snowboarding that is up-to-date and consistent with the generational mood, style and attitude. The third demographic is an older group (beginning in the early 30s) that is just beginning to earn sufficient disposable income that enables more expensive recreational pursuits. A similar marketing campaign focusing on the fun and excitement of skiing has been developed for this market segment, as well, using images most closely aligned with its demographic profile. The Company's resorts are located within manageable drive times from major Eastern metropolitan areas. The Company plans to highlight its close proximity to these population centers through its marketing program. The individual resort marketing programs are divided between those for the properties that attract a broader spectrum of skiers and snowboarders and those that appeal to more focused groups. The larger resorts market to all visitor segments, whether defined by skiing ability, affluence, marital status or family size, with each resort marketing its unique attributes. Killington is recognized for its size and diversity; Sunday River emphasizes its snow conditions, lift capacity and consistently new terrain; Mount Snow will promote its proximity to metropolitan New York and Boston; Sugarloaf is known as a destination resort with superior lodging, a relaxed rural Maine image and big mountain skiing; and Sugarbush promotes its classic, challenging terrain combined with its substantial new investment in lifts and snowmaking. Attitash/Bear Peak has distinct market appeal; located in the heart of the Mt. Washington Valley, Attitash/Bear Peak draws from its 16,000 bed lodging base and provides a family orientation, leveraging proximity to the North Conway retail and restaurant district, a prime location for families with non-skiers. Programs. The Company is subject to impulse consumer decisions to visit other resorts and ski areas. The Company has designed and implemented a series of initiatives to create a loyal customer base and increase the number of seasonal visits. Chief among these has been: Aggressive marketing of the corporate message. Customer affinity programs. School, group and business affiliations. Innovative skier development and services program. Strategic marketing alliances. Data based marketing programs. Aggressive marketing of the corporate message. The Company consistently focuses marketing messages on snow quality, terrain, on-mountain facilities and excitement. Beginning with midsummer mailings and continuing through seasonal TV and radio advertisements, this message enables the resorts to build a branded image relationship with consumers. An example of the Company's branded image is the "skycam," a unique marketing program that places real-time aerial views of resorts on selected television stations in the market to graphically depict quality skiing conditions to potential skiers in the target population centers where weather conditions may not be suggestive of skiing. Customer affinity programs. The Company is a leader in the development of "frequent skier" programs. These programs allow skiers to earn points through the purchase of lift tickets which can be exchanged for free lift tickets. The Company will introduce an enhanced affinity program that allows skiers to earn points at all Company resorts. The Company has developed a number of season pass programs allowing individuals, families, seniors and students to purchase passes that provide unlimited access during designated time periods. School, group and business affiliations. The Company will maintain a full time staff at each resort dedicated to developing special school, group and business affiliations. The school programs bring thousands of students to the resorts during five week-long programs in January and early February. These programs have proved to be an effective way of building name recognition and brand loyalty among the school-age populations. Surveys suggest that many of these students return to the resort with their families. Ski groups have emerged as the fastest and most profitable way of increasing midweek business. The group sales department provides year-round support to group leaders through the Unites States and Canada. Through an extensive Spring and Fall touring program, the resorts recruit new groups and potential group leaders. The group sales office provides technical support to potential group leaders and helps them develop and support their groups. The Company is developing the European group market by forming contacts with the major group vendors in England. Business affiliations are developed and maintained through corporate tickets programs, whereby participating businesses are given an opportunity to provide their employees with incentive-based pricing. Innovative skier development and services programs. Management believes that the Company has been a leader in the development of skier development and services. The Guaranteed Learn to Ski program was one of the first skier development programs to guarantee that a customer would learn to ski in one day. The success of this program led to the development of "Perfect Turn," which management believes is the first combined skier development and marketing program in the industry. Perfect Turn ski professionals receive specialized training in coaching, communication and skiing. The program uses ski pros to build relationships between improved skiing technique, special resort programs and fun. Perfect Turn is currently licensed to five resorts in the United States and Canada. Management believes that it is the only skier educational program in the industry to be licensed to other resorts. In the 1995/1996 season, the program began to develop special hard goods marketing programs designed to allow customers to test ride skis and snowboards with professionals, purchase their equipment from a professional and receive ongoing product and technical support through Perfect Turn. This program will be expanded to all of the Company's resorts. Strategic marketing alliances. Management expects to establish advertising sponsorships with several key sponsors, whereby a sponsor in a given product category is designated as the official provider of that product category for the Company's resorts. The Company has been approached by numerous high quality sponsors, and has entered into shared promotional advertising with Jeep/Eagle and Coca Cola, among others. Industries under active consideration for such sponsorships include automobile, sport utility vehicle, soft drink, juice drink, credit card, financial services, fuel dealers, communications, hair care, fast food, cereal manufacturers and film companies. Data based marketing programs. The Company maintains a well-developed data base of frequent skiers and lodging consumers. The Company has expanded its management systems for the specific purpose of developing new consumer profiles. Through the use of this technology, management believes that the marketing departments have been able to substantially increase the effectiveness of the Company's marketing programs. The Company has seen immediate cost savings and increased profits through the use of targeted "smart mailings," which are designed to provide the right consumer with the right vacation package offer at the right time. Real Estate Development Strategy. The Company views selective real estate development as a natural outgrowth of the on-mountain development of its resorts. Management believes that there is tremendous opportunity for synergy between real estate development and the ski experience. Development of real estate provides a three-fold benefit to the ski resorts. First, successful real estate development generates profits that have been historically reinvested in resort infrastructure. Second, signature properties like the Summit Hotel at Sunday River create an image for the resort that both attracts skiers to the area and provides a valuable marketing opportunity. Finally, real estate development enhances the bed base at the mountain, thereby contributing directly to maintaining, and increasing, skier days. The Company has traditionally taken a conservative approach toward real estate development and expects to continue this conservative philosophy. Throughout the 1980s and early 1990s, management required substantial levels of pre-construction sales before commencing construction of any of its projects, whether traditional condominiums or its Summit Hotel interval ownership project at Sunday River, providing a test of the market's appetite for the proposed product, while reducing risk to the Company and facilitating development financing. History. The Company's real estate development efforts to date have focused on Sunday River, and have consisted of the construction of condominiums and the Summit Hotel. A 105-unit quartershare hotel project is currently under construction at Attitash. See "Recent Developments." Development at the Company's other recently acquired resorts is now in the planning and permitting stages. Between 1992 and 1993, Sunday River successfully developed the Summit Hotel, a prototype year-round destination slopeside hotel. The hotel is a condominium consisting of six types of space: real estate, commercial, conference facilities, owners' amenities, infrastructure facilities and common space. Sunday River retains ownership of the core commercial and restaurant space, conference facilities and infrastructure facilities. The real estate space consists of the individual hotel condominiums, which are sold in quartershare interests. A quartershare interest is an interval ownership concept providing an owner with the right to use the unit for 13 weeks evenly divided over the year. There are six basic room designs that combine to create over 21 different condominium possibilities. The units can be configured to the desires of each purchaser. Quartershare owners participate in the Resort Condominium International ("RCI") exchange program, through which owners can exchange their right to use a Summit quartershare for interval stays at RCI properties located at resorts around the world. Sunday River operates the hotel and provides optional management of the quartershare units for individual owners through a management agreement with Sunday River under which its ski and lodging operations receive up to 45% of the rental revenues. There are eight conference facilities of varying sizes ranging from relatively small 500-square foot function rooms to a 5,900 square foot ballroom. Owner amenities consist of membership in the Gold Crown Club, which provides a range of exclusive goods and services to quartershare owners, as well as private owner lounges, a full-size swimming pool, tennis courts and private locker rooms and changing facilities. Marketing. Management uses a unique marketing program in which the hotel is sold in five phases. Each phase relates to a specific level of hotel development and targets a specific level of sales. Inventory of units is controlled and released on an incremental basis over the first four phases. The sales effort targets middle income buyers, with quartershare interests historically being offered at prices ranging from $25,000 to $45,000. Annual common area maintenance charges are approximately $1,500 per quartershare. Management believes that the presence of large numbers of potential buyers at the resort within targeted income categories has allowed the quartershare development to sell with relatively low marketing costs. Management believes that this marketing program can be successfully implemented in connection with real estate development activities at the Company's other resorts. Future Development. The Company is considering developing hotels at its other resorts using the Summit Hotel prototype, based upon its assessment of the market demand. Initial cost is expected to be in the range of $12 to $15 million per hotel. In addition, management believes that an additional wing could be added to each hotel, subject to market demand, approximately two years after the initial construction at a cost of approximately $5-$6 million per hotel. The Company has commenced construction of a hotel at the Attitash/Bear Peak resort. See "Recent Developments." Summit Hotels are in various stages of planning at several other resorts. At Sugarbush, the project is in the pre-construction marketing and sales stage while permits and all land rights are being finalized. Local approvals have been secured for the new Jordan Bowl Hotel at Sunday River, with final state approvals expected by management during early 1997. Locations for Summit Hotel projects have been identified at Killington and Mt. Snow resorts. Each of those locations is on property currently owned by the resort, and the permit process for hotel facilities and at each resort is underway. The Company will evaluate whether and when to begin each project based upon market demand. Management believes that the lack of recent real estate development at Killington, Mt. Snow and Sugarbush makes those locations particularly attractive markets for Summit Hotel-type projects. Management intends to limit development risk by implementing pre-construction sales programs at each location prior to commencement of construction. The financing for each project is expected to be arranged only after pre-construction sales targets are achieved. Other than with respect to Attitash/Bear Peak, the Company has no agreements, arrangements or understandings with respect to financing the development of any of the real estate projects discussed herein. Any future development would be subject to, among other things, the Company's ability to obtain the necessary financing and all necessary permits and approvals. No assurance can be given that the Company will develop successfully any additional properties or, if completed, any such properties will be successful. Sunday River is also engaged in the construction of a limited number of townhouse condominium projects. During 1996-1998, the Company's objective is to sell eight condominiums each year at Sunday River. Each condominium is planned to be offered for approximately $225,000. Mountain Operations Mountain operations consist of four basic components--snowmaking, grooming, lift operation and base operations. Each of these segments of mountain operations is described in summary fashion below. Snowmaking. Management believes that the Company operates some of the world's largest snowmaking facilities. The Company intends to introduce to each of its resorts the snowmaking process refined at its Sunday River resort over the past 20 years. The Company has designed, engineered and produces its own snowmaking guns, which it believes adds substantially to the quality of snow made at Sunday River. Through its engineering department, the Company has developed a snowmaking system that combines hardware developed by the Company with a computer control system that monitors weather conditions throughout the resort's eight mountains and automatically programs the pressure and water volume necessary in order to produce consistent, high quality snow. Management believes the snow produced at Sunday River is consistently dry and looks and skis like lightly packed natural snow and is qualitatively different from snow produced at other resorts. Grooming. In addition to producing high quality snow, the Company emphasizes careful grooming in order to maintain a high quality skiing surface. The Company's modern fleet of groomers located at each of its facilities employ a unique "slow tilling" grooming technique in which grooming equipment operates at one-half the normal speed, increasing the depth to which the snow is groomed and thereby replicating the feel of natural snowfall and extending the useful life of the manufactured snow. Lift Operation. Each of the Company's resorts employs qualified, well-trained engineers and lift operators to maintain the Company's extensive, modern lift systems. Under the direction of the Company's Senior Vice President of Mountain Operations, the Company's substantial investment in lifts is continually protected by on-ongoing maintenance programs and careful operation. Base Operations. Under the control of the Director of Base Operations, all of the Company's retail, food and beverage, rental and skier development area operations are administered on a coordinated basis. The Company's philosophy is to provide consistently high-quality service to its customers, while enabling each resort to exercise its own creativity in developing and administering base facilities in a fashion that best suits its needs and its customers' desires. Its business objectives with respect to these facilities are to retain full control over them, to impose rigorous cost controls and to creatively and aggressively seek to enhance revenues. Competition The Company faces strong competition from ski areas operating in the Northeast (which consists of Maine, New Hampshire, Vermont, Massachusetts, Connecticut and New York) competing for day and vacationing skiers, destination ski resorts competing on a national basis for vacationing skier visits, and non-ski related leisure and recreation destination resorts. On a regional basis, the Company's major markets are the major population centers in the Northeast, particularly eastern Massachusetts, northern Connecticut, New York and northern New Jersey. For example, skier origin data collected at Sunday River indicates that approximately 43% of its weekend skiers reside in Massachusetts. Similar data collected at Killington and Mt. Snow indicate that approximately 23% and 35% of their weekend skiers, respectively, reside in New York, with high concentrations from Massachusetts, Connecticut, New Jersey and Vermont, as well. In order to cover the high fixed costs of operation associated with the ski industry, the Company must maintain its regional skier base. The Company's ability to price product is directly impacted by the variety of acceptable alternatives presented to skiers in the Northeast region. The most significant competitors are resorts that have established a niche market or loyal clientele, such as mountains recognized as family-friendly resorts. Also, many resorts have made significant capital improvements, keeping them on the edge of the sport's technology and positioning them as keen competitors. Many of the Company's competitors have exhibited both the desire and ability to make on-mountain capital improvements and to develop real estate, thus sustaining competitive pressure in the region. Although many smaller areas offer fewer amenities and less diversity of terrain, often they are competitively priced and draw from nearby population centers, which form a part of the Company's market as well. On a national basis, the Company's resorts compete with well-capitalized, professionally managed resorts offering a variety of amenities. The Company, as well as other nationally-recognized resorts, will be competing on a broader scale for recreational and leisure dollars. These resorts offer a variety of activities and amenities including luxury accommodations, gourmet restaurants, extensive retail shops, spas, skating rinks and a variety of non-skiing activities. For example, many Western resorts are making major investments in non-alpine activities such as snowmobile trails, horseback riding, skating and retail and performing arts centers. Although Eastern skiing draws few skiers from Western regions, the Company competes with Western resorts to attract and retain Mid-Western, Mid-Atlantic and Northeast skiers. The Company also competes with large, well-capitalized Canadian resorts for the over seven million annual Eastern Canadian skier visits. Employees and Labor Relations The Company employs approximately 7,000 employees at peak season and approximately 2,000 persons full time. None of the Company's employees are covered by any collective bargaining agreements. The Company believes it has good relations with its employees. Environmental Matters The Company's resorts are subject to a wide variety of federal, state and local laws and regulations relating to land use, water resources, sewage disposal, and the use, storage, discharge, emission and disposal of wastes, and other environmental matters. While management believes that the Company's resorts are presently in material compliance with all land use and environmental laws, failure to comply with such laws could result in the imposition of severe penalties or restrictions on operations by government agencies or courts that could adversely affect operations. The Company has recently completed Phase I environmental assessments at all eight resort properties which were undertaken voluntarily by the Company prior to consummating the Acquisition. The reports identified areas of potential environmental concern, including the need to upgrade existing underground storage tanks at several facilities and to remediate potential petroleum releases. The reports did not identify any environmental conditions or non-compliance at any of the resorts, the remediation or correction of which management believes would have a material adverse impact on the business or financial condition of the Company or results of operations or cash flows. No additional phases have been scheduled. The Killington resort has been identified by the U.S. Environmental Protection Agency ("EPA") as a potentially responsible party at two sites pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA" or "Superfund"). Killington has entered into a settlement agreement with EPA at one of the sites, the Solvents Recovery Service of New England Superfund site in Southington, Connecticut. Killington recently rejected an offer to enter into a de minimis settlement with EPA for the other site, the PSC Resources Superfund site in Palmer, Massachusetts. The Company believes that its liability for these sites, individually and in the aggregate, will not have a material adverse effect on the business or financial condition of the Company or its results of operations or cash flows. The Company believes it has all permits, licenses and approvals from governmental authorities material to the operation of the resorts as currently configured. The Company has not received any notice of material non-compliance with permits, licenses or approvals necessary for the operation of its properties. The capital programs at the resorts will require permits and approvals from certain federal, state and local authorities. The Company's operations are heavily dependent upon its continued ability, under applicable laws, regulations, policies, permits, licenses or contractual arrangements, to have access to adequate supplies of water with which to make snow and service the other needs of its facilities, and otherwise to conduct its operations. There can be no assurance that new applications of existing laws, regulations and policies, or changes in such laws, regulations and policies will not occur in a manner that could have such an effect, or that important permits, licenses or agreements will not be canceled, non-renewed, or renewed on terms materially less favorable to the Company. Major expansions of any one or more resorts could require the filing of an environmental impact statement with the U.S. Forest Service under NEPA if it is determined that the expansion has a significant impact upon the environment. Although the Company has consistently been successful in implementing its capital expansion plans, no assurance can be given that necessary permits and approvals will be obtained. A petition is pending before the Vermont Water Resources Board to reclassify a section of a stream running between the Haystack area and the Mt. Snow area. This reclassification has the potential to restrict or prevent construction activities to connect the two areas. No assurance can be given regarding the outcome of this proceeding. Legal Proceedings The Company currently and from time to time is involved in litigation arising in the ordinary course of its business. The Company does not believe that it is involved in any litigation that will, individually or in the aggregate, have a material adverse effect on its financial condition or results of operations or cash flows. Each of the resort operating companies have pending and are regularly subject to suit with respect to personal injury claims related principally to skiing activities at each resort. Each of the operating companies maintains liability insurance that the Company considers adequate to insure claims related to usual and customary risks associated with the operation of a ski resort. SKI operates a captive insurance company authorized under the laws of the State of Vermont which provides liability and workers' compensation coverage for the SKI resorts located in Vermont. The Company has received confirmation from an internationally recognized actuarial firm that the insurance company's reserves are adequate to cover losses and loss adjustment expenses associated with all claims made through July 28, 1996. Properties The Company's operations are wholly dependent upon its ownership or control over the real estate constituting each resort. The following summarizes non-owned real estate critical to operations at each resort. Management believes each of the following leases, permits or agreements is in full force and effect and that the Company is entitled to the benefit of such agreements. Sunday River leases 1,500 acres, which constitute a substantial portion of its current skiable terrain, under a 50 year lease terminating on October 14, 2030. The lease renews automatically thereafter on a year-to-year basis unless terminated by either the lessor or lessee. The Sugarbush Resort has a license to use 1,915 acres of United States Forest Service land pursuant to a special use permit dated May 17, 1995. The permit has a 40 year term expiring April 30, 2035. Mt. Snow leases 1,315 acres which constitute a substantial portion of its skiable terrain. Of this total, approximately 900 acres is occupied by Mt. Snow pursuant to a special use permit granted by the United States Forest Service dated November 29, 1989. The permit has a 40 year term expiring December 31, 2029. Mt. Snow also leases 252 acres which constitute a portion of its skiable terrain from the Town of Wilmington, Vermont. The lease expires November 15, 2030. There are no renewal options. In addition, Mt. Snow leases approximately 200 acres from Sargent Inc. pursuant to a lease expiring March 31, 2025. The lease can be renewed for an additional 30 year term. Mt. Snow also has the option to purchase the leased property and a right of first refusal in the event Sargent Inc. receives a bona fide offer for the leased property. Attitash/Bear Peak uses 279 acres of its skiable terrain pursuant to a special use permit from the United States Forest Service dated July 19, 1994. The permit has a 40 year term expiring June 19, 2034. In addition, Attitash/Bear Peak leases its parking facilities under a lease expiring December 31, 2003. Attitash/Bear Peak has the option to purchase this leased property at any time during the lease term. The lease contains no renewal provisions. Killington leases 2,500 acres from the State of Vermont. A substantial portion of that property constitutes skiable terrain. The lease is for an initial 10 year term commencing in 1960 and contains nine 10-year renewal options. Killington exercised the renewal option in 1970, 1980 and 1990. Assuming continued exercise of Killington's renewal options, the lease will ultimately expire in the year 2060. The lease is subject to a buy-out option retained by the State of Vermont. At the conclusion of each 10 year term (or extended term), the state has the option to buy out the lease for an amount equal to Killington's adjusted capital outlay plus 10% of the gross receipts from the operation for the preceding three years. "Adjusted Capital Outlay" means total capital expenditures made by the tenant from 1956 to the date of exercise of the option, depreciated at 1% per annum, except that certain non-operable assets depreciate at 2% per annum. This buy-out option will next become exercisable in the year 2000. If exercised today, the exercise price would be approximately $72 million. Although the Company has not had direct confirmation from Vermont state officials, it has no reason to believe that the State intends to exercise the option in 2000. The Sugarloaf resort leases the Sugarloaf Golf Course from the Town of Carrabassett Valley, Maine pursuant to a lease dated June 3, 1987. The lease term expires December, 2003. Sugarloaf has an option to renew the lease for an additional 20 year term. In addition, Sugarloaf has an option to purchase the leased property at any time on or prior to June 3, 1997 at a purchase price equal to approximately $1.4 million, plus accrued and unpaid interest at the rate of 8% per year from 1984 (the commencement of Sugarloaf's original lease), plus the capital construction costs of any club house constructed on the premises, less all lease payments made to the Town, for a total estimated price of $2.7 million. Management has made no determination regarding exercising the option or extending the lease. Waterville Valley uses approximately 790 acres, which constitute a major portion of its skiable terrain, pursuant to a Special Use Permit granted by the United States Forest Service. The special use permit expires October 31, 2034. 94 MANAGEMENT The following table sets forth information with respect to the current director and executive officers of the Company.
Name Age Position Leslie B. Otten 47 Sole Director, President and Chief Executive Officer Burton R. Mills 42 Senior Vice President (Mountain Operations) Thomas M. Richardson 42 Chief Financial Officer, Treasurer and Senior Vice President (Finance) Christopher E. Howard 39 Chief Administrative Officer, General Counsel and Senior Vice President (Administration) G. Christopher Brink 42 Senior Vice President (Marketing and Sales) Allen Wilson 43 President (Sugarbush) Philip T. Gravink 60 President (Attitash/Mt. Cranmore) Jolan F. Ippolito 49 Vice President of Corporate Affairs (Sunday River) Leslie B. Otten, Director, President and Chief Executive Officer. Mr. Otten joined Sherburne Corporation, then the parent company of Sunday River, Killington and Mount Snow, in 1970. Mr. Otten joined Sunday River in 1972 as Assistant General Manager and became General Manager of Sunday River in 1974. In 1980, Mr. Otten purchased Sherburne's 90% interest in Sunday River and acquired the remaining 10% interest from the minority shareholders in 1989. He has been the sole director, President and Chief Executive Officer of the Company (or its predecessor) since 1980. Mr. Otten owns 96% of the outstanding stock of the Company. Mr. Otten is a director of the Portland Museum of Art, a director of the Maine Chamber and Alliance, a director of Maine Handicap Skiing, a trustee of Gould Academy and a director of Project Opportunity. Burton R. Mills, Senior Vice President of Mountain Operations. Mr. Mills has spent his entire 22 year career with the Company (or its predecessor), serving in his present capacities since 1993. Prior thereto, he served as Vice President of Mountain Operations. Thomas M. Richardson, Chief Financial Officer, Treasurer, Senior Vice President (Finance). Mr. Richardson joined the Company in the spring of 1993, and has served in his present capacity since then. Prior to joining the Company, from 1992 to 1993, he worked at Loon Mountain Recreation Corporation as treasurer and director of food, beverage and tickets. Prior thereto, Mr. Richardson worked at SKI from 1983 to 1992 as an internal auditor, accounting manager and division controller. Christopher E. Howard, Chief Administrative Officer, General Counsel and Senior Vice President (Administration). Mr. Howard joined the Company in October, 1996 after serving as its principal outside legal counsel. From 1982 to October, 1996, Mr. Howard practiced with Pierce Atwood, a Portland, Maine law firm, where he was a partner since 1988. G. Christopher Brink, Senior Vice President (Marketing and Sales). Mr. Brink has been with the Company in his present capacity since 1993. Prior to joining the Company, Mr. Brink served as Vice President for group sales and conference sales and Vice President of Marketing at Stratton Corp., Stratton, Vermont. Allen Wilson, President (Sugarbush). Mr. Wilson has served as President (Sugarbush) since 1994. Prior to assuming that position, he served in various capacities for SKI, including Vice President and Controller of Killington (1992-94) and as Chief Financial Officer of Bear Mountain, Ltd. (1988-92). Philip T. Gravink, President (Attitash/Mt. Cranmore). Mr. Gravink joined the company at the time Attitash was acquired in July of 1994, continuing in the same position he had held for the Mount Attitash Lift Corporation. Prior to joining Mount Attitash Lift Corporation in 1992, he served as Interim Director of skiing for the State of New Hampshire, overseeing the Cannon and Mount Sunapee ski resorts. Prior to that he was President and Chief Executive Officer of Loon Mountain Recreation Corporation for 14 years. Jolan F. Ippolito, Vice President of Corporate Affairs of Sunday River. Ms. Ippolito joined Sunday River in January of 1982, serving in her current position since 1993. Ms. Ippolito held various positions at the resort prior thereto. Executive Compensation The following table sets forth the annual compensation for the fiscal year ended July 28, 1996 of the Company's President and Chief Executive Officer and its other executive officers who received salary and bonuses in excess of $100,000 for the fiscal year ended July 28, 1996 from the Company. None of the Company's officers is subject to an employment agreement with the Company. 1996 SUMMARY COMPENSATION TABLE
Annual Compensation Name And Principal Position Salary Bonus Leslie B. Otten, President and Chief Executive Officer $104,000 $6,000 Thomas M. Richardson, Chief Financial Officer and Senior $112,000 $7,000 Vice President (Finance) Burton R. Mills, Senior Vice President (Mountain $155,000 $9,000 Operations) G. Christopher Brink, Senior Vice President (Marketing and $127,000 $7,000 Sales) Allen Wilson, President (Killington) $138,000 -- Blaise Carrig President (Sugarbush) $116,000 -- Philip T. Gravink, President (Attitash/Mt. Cranmore) $110,000 --
The Company expects to increase Mr. Otten's compensation to a salary of up to $350,000 and an annual performance-based bonus. The Company intends to develop and implement, during fiscal 1997, an incentive-based compensation plan for selected executive officers and key employees providing both EBITDA-based annual bonuses and equity-based longer term incentives. Report on Executive Compensation The Company does not have a compensation committee. Historically, all decisions with respect to the compensation of the Company's executive officers have been made by Mr. Otten, in his capacity as the sole stockholder, sole director and chief executive officer of each of the entities comprising the Company. Decisions with respect to executive compensation have been made on the basis of available information with respect to the compensation of individuals having comparable responsibilities at other major skiing and resort businesses, the recent performance and financial condition of the Company and the performance of the individual executive officers. Mr. Otten's compensation as described above has not, historically, been determined on the basis of such criteria, principally due to the fact that, as the Company's sole stockholder, he was entitled to receive, and has received, dividends in respect of his holdings of Common Stock based on the year-to-year profitability of the Company that more directly reflect its performance and financial condition. In the future, however, due to restrictions on the payment of dividends by the Company, contained in the Indenture, the Subordinated Note Indenture and the Senior Credit Facility, it is anticipated that Mr. Otten's compensation will be determined in a manner similar to that described above with respect to the Company's other executive officers. Leslie B. Otten Common Stock Ownership
Name and Address Amount and Nature Title of of Beneficial Owner of Beneficial Percent of Class Class Ownership Common Stock Leslie B. Otten 939,168 shares direct 96.0% c/o American Skiing ownership Company Sunday River Access Road Bethel, Maine 04217
Certain Transactions with Management In June, 1996, Sunday River issued to Mr. Otten a demand note bearing interest at the rate of 5.4% per annum obligating Sunday River to pay to Mr. Otten a total of $5.2 million, which amount equals the total amounts expected to become payable during 1996 and 1997 by Mr. Otten as income taxes with respect to Sunday River's pre-Acquisition income as a Subchapter S corporation. Christine Otten, Mr. Otten's spouse, is employed by the Company as its director of retail buying, and is principally responsible for its retail sales activities. During the fiscal years 1994, 1995 and 1996, Ms. Otten received total compensation of $54,575, $53,584 and $54,577, respectively. Western Maine Leasing Co., a corporation wholly owned by Mr. Otten, presently leases items of heavy equipment to Sunday River under short-term leases on terms believed by management to be comparable to those that could be obtained by Sunday River from unaffiliated lessors of such equipment. In fiscal 1994, 1995 and 1996, payments under such leases totaled $43,000, $34,000 and $36,000, respectively. The Company provides lodging management services for Ski Dorm, Inc., a corporation owned by Mr. Otten and his mother which owns a ski dorm located near the Sunday River resort, on terms believed by management to be not less favorable to the Company than those that would be offered by the Company to unaffiliated entities or that have been obtained from or offered by unaffiliated entities. In fiscal 1994, 1995 and 1996 payments by Ski Dorm, Inc. to Sunday River totaled $93,000, $83,000 and $0, respectively. DESCRIPTION OF SENIOR SUBORDINATED NOTES General The Old Notes were issued and the New Notes are to be issued pursuant to the Indenture between the Company and U.S. Trust Company of New York, as trustee (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 (the "Trust Indenture Act"). The Notes are subject to all such terms, and holders of Notes are referred to the Indenture and the Trust Indenture Act for a statement thereof. The following summary of the material provisions of the Indenture does not purport to be complete and is qualified in its entirety by reference to the Indenture and the forms of the certificates evidencing the Old Notes and the New Notes, including the definitions therein of certain terms used below, which documents have been filed as exhibits to the Registration Statement and are incorporated herein by reference. The definitions of certain terms used in the following summary are set forth below under "-- Certain Definitions." All of the Company's Subsidiaries are Restricted Subsidiaries, other than LBO Development Company, Ski Insurance Company, Mountain Water Company and Killington West Ltd., each of which is an Unrestricted Subsidiary. Under certain circumstances, the Company will be able to designate additional 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 Old Notes and the New Notes will constitute a single series of debt securities under the Indenture. If the Notes Exchange Offer is consummated, holders of the Old Notes who do not exchange their Old Notes for New Notes will vote together with the holders of the New Notes for all relevant purposes under the Indenture. In that regard, the Indenture requires that certain actions by holders thereunder (including acceleration following an Event of Default) must be taken, and certain rights must be exercised, by specified minimum percentages of the aggregate principal amount of the outstanding Notes. In determining whether holders of the requisite percentage in principal amount have given any notice, consent or waiver or taken any other action permitted under the Indenture, any Old Notes which remain outstanding after the Notes Exchange Offer will be aggregated with the New Notes and the holders of the Old Notes and New Notes will vote together as a single class for all such purposes. Accordingly, all references herein to specified percentages in aggregate principal amount of the outstanding Notes shall be deemed to mean, at any time after the Notes Exchange Offer is consummated, such percentage in aggregate principal amount of the Old Notes and New Notes then outstanding. The terms of the New Note are identical in all material respects to the terms of the Old Notes except that (i) the New Notes will have been registered under the Securities Act and thus will not bear restrictive legends restricting their transfer pursuant to the Securities Act and will not be entitled to registration rights and (ii) Holders of New Notes will not be entitled to liquidated damages for the Company's failure to register the Old Notes or New Notes under the Registration Rights Agreement, Holders of Old Notes should review the information set forth under "The Exchange Offers - Certain Consequences of a Failure to Exchange." The New Notes and the Old Notes are sometimes referred to as, collectively, the "Notes" and, individually, a "Note." Principal, Maturity and Interest The Notes will be limited in aggregate principal amount to $120.0 million and will mature on July 15, 2006. Interest on the Notes will accrue at the rate of 12% per annum and will be payable semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 1997, to Holders of record on the immediately preceding January 1 and July 1. 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, 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 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 Old Notes were, and the New Notes are to be issued in denominations of $1,000 and integral multiples thereof. Subordination The payment of principal of, premium, interest and Liquidated Damages, if any, on, and all other Obligations with respect to the Notes (other than the making of the interest payment payable on July 15, 1997 from the Pledge Account) will be subordinated in right of payment, as set forth in the Indenture, to the prior payment in full in cash of all Senior Debt of the Company, whether outstanding on the date of the Indenture or thereafter incurred. Upon any distribution of cash, securities or other property to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, in an assignment for the benefit of creditors or any marshaling 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 of all Obligations 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 with respect to the Notes (except for the interest payment payable on July 15, 1997 from the Pledge Account), and until all Obligations with respect to Senior Debt of the Company are paid in full in cash, any distribution to which the Holders of Notes would be entitled shall be made to the holders of such Senior Debt (except that Holders of Notes may receive the interest payment payable on July 15, 1997 from the Pledge Account, securities that are subordinated at least to the same extent as the Notes to Senior Debt and any securities issued in exchange for Senior Debt and payments made from the trust described under "-- Legal Defeasance and Covenant Defeasance"). The Company also may not make any payment upon or in respect of the Notes (except such interest payment such subordinated securities or from the trust described under "-- Legal Defeasance and Covenant Defeasance") if (i) a default in the payment of the principal of or premium or interest on Senior Debt of the Company occurs and is continuing 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 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 Senior Agent. Payments on the Notes may and shall be resumed (a) in the case of a payment default, upon the date on which such default is cured or waived and (b) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of such Senior Debt has been accelerated. 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. The Indenture further requires that the Company promptly notify holders of Senior Debt of the Company 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. As of July 28, 1996, after giving pro forma effect to the acquisition of the 49% interest in Sugarloaf and the divestitures of Waterville Valley and Cranmore, pursuant to the Consent, the amount of outstanding Senior Debt of the Company would have been approximately $53.8 million. The Indenture limits 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." Interest Payment Pledge Account The Indenture provides that the Company's obligations under the Notes to pay interest on January 15, 1997 and July 15, 1997 will be secured by funds held by the Collateral Agent under the Pledge and Disbursement Agreement, subject, in the case of the interest payment payable on January 15, 1997, to the subordination provisions of the Notes. See "--Subordination." Approximately $15 million, an amount sufficient to pay interest on the Notes through July 15, 1997, has been deposited in the Pledge Account, and has been invested in U.S. Treasury obligations maturing immediately prior to January 15, 1997 and July 15, 1997, pending disbursement. Following the July 15, 1997 interest payment on the Notes, any amounts remaining in the Pledge Account will be released to the Company and will thereafter remain subject to the applicable provisions of the Indenture. Subject to the foregoing, the Pledge and Disbursement Agreement provides for the grant by the Company to the Collateral Agent of a first priority security interest in the Pledge Account for the benefit of the Holders of the Notes to secure the payment of interest due with respect to the Notes on or prior to July 15, 1997. In addition to the subordination provisions applicable to the interest payment payable on January 15, 1997, the ability of Holders of Notes to realize upon any such funds or securities may be subject to certain bankruptcy law limitations in the event of a bankruptcy of the Company. Under the terms of the Indenture, the proceeds of the Pledge Account will be applied, first, to amounts owing to the Trustee in respect of fees and expenses of the Trustee and, second, to the Obligations under the Notes and the Indenture, subject to the subordination provisions described above. Subsidiary Guarantees The Company's payment Obligations under the Notes have been jointly and severally guaranteed (the "Subsidiary Guarantees") by the Guarantors. The Obligations of each Guarantor under its Subsidiary Guarantee are subordinated in right of payment to all Senior Debt of such Guarantor pursuant to subordination provisions substantially similar to those described above under "-- Subordination." The Indenture provides that no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another corporation, Person or entity, whether or not affiliated with such Guarantor, unless (i) subject to the provisions of the following paragraph, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all of 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; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; (iii) such Guarantor, or any Person formed by or surviving any such consolidation or merger, would have Consolidated Net Worth (immediately after giving effect to such transaction) equal to or greater than the Consolidated Net Worth of such Guarantor immediately preceding the transaction; and (iv) the Company would be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant described below under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock"; provided, however, that this provision shall not prohibit any merger or consolidation among the Company or one or more wholly owned Guarantors. The Indenture provides that, in the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of any Guarantor, such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all of the assets of such Guarantor) will be released and relieved of any Obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture. See "-- Repurchase at Option of Holders -- Asset Sales." In addition, the Indenture provides that, in the event the Board of Directors designates a Guarantor to be an Unrestricted Subsidiary, then such Guarantor will be released and relieved of any Obligations under its Subsidiary Guarantee; provided that such designation is conducted in accordance with the applicable provisions of the Indenture. Optional Redemption The Notes are not redeemable at the Company's option prior to July 15, 2001. Thereafter, 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, 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 July 15 of the years indicated below: Year Percenta ge 2001 106.250% 2002 104.688 2003 103.125 2004 101.563 2005 and thereafter 100.000 Notwithstanding the foregoing, on or prior to July 15, 1999, the Company may redeem up to 25% in aggregate principal amount of the Notes at a redemption price of 112% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the redemption date, with the net proceeds of one or more Equity Offerings; provided that at least 75% in aggregate principal amount of the Notes originally issued under the Indenture remains outstanding immediately after the occurrence of each such redemption; and provided, further, that notice of each such redemption shall have been given within 30 days after the date of the closing of such Equity Offering. 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. On and after the redemption date, interest ceases to accrue on Notes or portions of them 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, the Company will be required to make an offer (a "Change of Control Offer") to repurchase 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 repurchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company will mail a notice to each Holder describing the transaction that constitutes the Change of Control and offering to repurchase Notes pursuant to the procedures required by the Indenture and described in such notice; provided that, prior to complying with the provisions of this covenant, but in any event within 90 days following a Change of Control, the Company will either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this covenant. 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 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 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. 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. The occurrence of a Change of Control could result in a default under the Senior Credit Facility or other Senior Debt of the Company. In addition, the Senior Credit Facility or other Senior Debt could restrict the Company's ability to repurchase Notes upon a Change of Control. 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 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 make a Change of Control Offer or to repurchase Notes tendered in a Change of Control Offer would constitute an Event of Default under the Indenture, which could, in turn, constitute a default under the Senior Credit Facility or other Senior Debt. In such circumstances, the subordination provisions in the Indenture would likely restrict payments to the Holders of Notes. See "-- Subordination." Finally, the Company's ability to repurchase Notes upon a Change of Control may be limited by the Company's then existing financial resources. The Company will 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 the 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. Asset Sales The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, engage in 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 resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) 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 cash; provided that (x) 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 any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability and (b) any notes or other obligations received by the Company or such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) shall be deemed to be cash for purposes of this provision and (y) Asset Sales pursuant to the DOJ Divestiture shall not be subject to the 75% minimum cash requirement specified in clause (ii) of this paragraph, but such Asset Sales shall otherwise continue to be subject to this covenant and any cash proceeds resulting from the subsequent disposition of such non-cash consideration shall be subject to the provisions of this covenant. Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company or such Restricted Subsidiary may apply such Net Proceeds (a) to permanently reduce Senior Debt of the Company or such Restricted Subsidiary (and to correspondingly reduce commitments with respect thereto) or (b) to the making of capital expenditures or the acquisition of long-term assets in the same line of business as the Company or any Restricted Subsidiary was engaged immediately prior to such Asset Sale. Pending the final application of any such Net Proceeds, the Company may temporarily reduce Senior Debt or otherwise invest such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales in excess of $1.0 million in any fiscal year 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 $10.0 million, the Company will be required to make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of 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 amount of Notes 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 (subject to the restrictions of the Indenture). If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. Certain Covenants Restricted Payments The Indenture provides that the Company will not, and will 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 holder of the Company's Equity Interests in its capacity as such, other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or dividends or distributions payable to the Company or any Wholly Owned Restricted Subsidiary of the Company that is a Guarantor; (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any Subsidiary or other Affiliate of the Company, other than any such Equity Interests owned by the Company or any Wholly Owned Restricted Subsidiary of the Company that is a Guarantor; (iii) make any principal payment on, or purchase, redeem, defease or otherwise acquire or retire for value, prior to a scheduled mandatory sinking fund payment date or final maturity date, any Indebtedness that is subordinated to the Notes; 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 be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such Restricted Payment, to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant described below under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock"; and (c) such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Company and its Restricted Subsidiaries on or after the date of the Indenture, is less than the sum of (i) $5.0 million, plus (ii) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from July 29, 1996 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 (iii) 100% of the aggregate net cash proceeds received by the Company as capital contributions or from the issue or sale since the date of the Indenture of Equity Interests of the Company or of debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or convertible debt securities) sold to a Subsidiary of the Company and other than Disqualified Stock or debt securities that have been converted into Disqualified Stock), plus (iv) to the extent that any Restricted Investment is sold for cash or otherwise liquidated or repaid for cash, 100% of the net cash proceeds thereof (less the cost of disposition) (but only to the extent not included in subclause (ii) of this clause (c)); plus (v) to the extent that any Unrestricted Subsidiary is designated to be a Restricted Subsidiary, the fair market value (as determined in good faith by the Board of Directors) of the Company's Investment in such Subsidiary at the time of such designation (but only to the extent not included in subclause (ii) of this clause (c)); provided, however, that in the case of (1) the declaration or payment of any dividend or the making of any other payment or distribution on account of the Company's Common Stock or to any direct or indirect holder of the Company's Common Stock in its capacity as such or (2) the purchase, redemption or other acquisition or retirement for value of any Common Stock of the Company, (A) the Company may not include the $5.0 million set forth in subclause (i) of this clause (c) and may only include 25% of its Consolidated Net Income for purposes of subclause (ii) of this clause (c) in calculating the amount available pursuant to this clause (c) for the making of any such Restricted Payment if, after giving effect to such Restricted Payment, the Company's Leverage Ratio would exceed 70% and (B) Consolidated Net Income for purposes of this clause (c) shall exclude the first $5.0 million of Consolidated Net Income of the Company reported from July 29, 1996. The foregoing provisions will not prohibit (i) the payment of any dividend or other distribution 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; (ii) the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Company in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Subsidiary of the Company) of other Equity Interests of the Company (other than any Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement or other acquisition shall be excluded from clause (c) of the preceding paragraph; (iii) the defeasance, redemption or repurchase of subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Debt or the substantially concurrent sale (other than to a Subsidiary of the Company) of Equity Interests of the Company (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement or other acquisition shall be excluded from clause (c) of the preceding paragraph; (iv) Investments in Real Estate Subsidiaries in an amount not to exceed $10.0 million plus, to the extent that any such Investment is sold for cash or otherwise liquidated or repaid for cash, the net cash proceeds thereof (less the cost of disposition); provided that the amount of any such net cash proceeds shall be excluded from clause (c) of the preceding paragraph; (v) the acquisition of Equity Interests in Sugarloaf Mountain Corporation within six months after the consummation of the Acquisition; (vi) contributions of real estate not used in or essential to ski operations to Real Estate Subsidiaries for Permitted Real Estate Projects; (vii) conveyance of real estate not used in or essential to ski operations to Unrestricted Subsidiaries with an aggregate book value not in excess of $2.0 million; (viii) Guarantees of Indebtedness of Real Estate Subsidiaries to the extent that such Guarantees are permitted to be incurred by the covenant described under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock;" (ix) payments of principal of and interest on the Demand Note; (x) Investments received by the Company and its Restricted Subsidiaries as non-cash consideration from Asset Sales to the extent permitted by the covenant described under the caption "-- Repurchase at the Option of Holders -- Asset Sales"; and (xi) the repurchase of Subordinated Notes pursuant to a Subordinated Note Change of Control Offer (as defined). The Board of Directors 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 by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this covenant. All such outstanding Investments will be deemed to constitute Investments in an amount equal to the fair market value (as determined in good faith by the Board of Directors) of such Investments at the time of such designation. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The amount of all Restricted Payments (other than cash) shall be the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) on the date of the Restricted Payment of the asset(s) proposed to be transferred by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by the covenant "Restricted Payments" were computed, which calculations may be based upon the Company's latest available financial statements. Notwithstanding the foregoing, the Company and its Restricted Subsidiaries may not (i) transfer any property or assets that are a material part of the ski operations of the Company and its Restricted Subsidiaries to an Unrestricted Subsidiary or (ii) designate as an Unrestricted Subsidiary any Restricted Subsidiary of the Company that holds any property or assets that are a material part of the ski operations of the Company and its Restricted Subsidiaries. Incurrence of Indebtedness and Issuance of Preferred Stock The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and will not permit any of its Restricted Subsidiaries to issue any preferred stock; provided, however, that, so long as no Default or Event of Default has occurred and is continuing, the Company and its Restricted Subsidiaries that are Guarantors may incur Indebtedness (including Acquired Debt), and its Restricted Subsidiaries that are Guarantors may issue preferred stock, if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal quarterly financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such additional preferred stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the additional preferred stock had been issued at the beginning of such four-quarter period. The foregoing provisions will not apply to: (i) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness pursuant to the Bank Credit Agreements in an amount not to exceed the greater of (a) $65.0 million and (b) 1.5 times the Company's Consolidated Cash Flow for the most recently ended four full fiscal quarters for which internal quarterly financial statements are available immediately preceding the date on which such Indebtedness is incurred, less, in either case, the aggregate amount of all permanent reductions thereto pursuant to the covenant described under "-- Repurchase at the Option of Holders -- Asset Sales"; (ii) the incurrence by the Company and its Restricted Subsidiaries of Existing Indebtedness; (iii) the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes, the Subsidiary Guarantees, the Indenture, the Subordinated Notes, the Subordinated Note Subsidiary Guarantees and the Subordinated Note Indenture; (iv) the incurrence of intercompany Indebtedness between or among the Company and any of its Wholly Owned Restricted Subsidiaries (other than Real Estate Subsidiaries); provided 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 Wholly Owned Restricted Subsidiary of the Company, or any sale or other transfer of any such Indebtedness to a Person that is neither the Company nor a Wholly Owned Restricted Subsidiary of the Company, shall be deemed to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be; (v) the incurrence by the Company or any of its Restricted Subsidiaries of purchase money Indebtedness to finance the purchase of property or assets to be used in the ski operations of the Company and its Restricted Subsidiaries or a related business in an aggregate amount at any one time outstanding not to exceed the lesser of (a) the purchase price of such property or assets and (b) $15.0 million; (vi) the incurrence by the Company and its Restricted Subsidiaries of Guarantees of Indebtedness of Real Estate Subsidiaries in an amount not to exceed $15.0 million at any one time outstanding in connection with Permitted Real Estate Projects, provided that the total purchase price for the hotel, condominium, interval ownership or other units comprising the development to be constructed, in whole or in part, with the proceeds of the Indebtedness so guaranteed, that have been contracted for sale (evidenced by executed purchase agreements and security deposits from credit-approved purchasers), equals at least 35% of the estimated total cost of construction (as determined in good faith by the Board of Directors) of the Permitted Real Estate Projects (except for the development of the Summit Hotel at the Attitash resort, for which such total purchase price must equal at least 25% of the estimated total cost of construction (as determined in good faith by the Board of Directors)); (vii) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Debt in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund Indebtedness that was permitted by the Indenture to be incurred; (viii) the incurrence by Real Estate Subsidiaries of Non-Recourse Real Estate Debt, provided that if any such Indebtedness ceases to be Non-Recourse Real Estate Debt of a Real Estate Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company that is not a Real Estate Subsidiary; (ix) the incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Debt, provided that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company; and (x) the incurrence by the Company and its Restricted Subsidiaries of additional Indebtedness in an amount not to exceed $25.0 million at any one time outstanding, provided that such Indebtedness is expressly subordinated in right of payment to the Notes at least to the same extent as the Notes are subordinated in right of payment to Senior Debt of the Company. Liens The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien 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 the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any 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 on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, or (b) pay any indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or advances to the Company or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of: (a) Existing Indebtedness as in effect on the date of the Indenture; (b) applicable law; (c) any instrument governing Indebtedness or Capital Stock 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 was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; (d) by reason of customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (e) 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; (f) any instrument governing Non-Recourse Real Estate Indebtedness of a Real Estate Subsidiary, which encumbrance or restriction is not applicable to any Person or the properties or assets of any Person other than such Real Estate Subsidiary or the property or assets of such Real Estate Subsidiary; (g Senior Debt of the Company and Indebtedness of Guarantors, provided that such Indebtedness was permitted to be incurred pursuant to the Indenture; and (h) Permitted Liens. 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 entity), 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 corporation, Person or entity, unless (i) the Company is the surviving entity or the entity 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 corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or 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 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 Wholly Owned Restricted Subsidiary of the Company, the Company or the entity or 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 Fixed Charge 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." Transactions with Affiliates The Indenture provides the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, 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 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 the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction 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 consideration in excess of $0.5 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, an opinion as to the fairness to the Company of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing; provided that (1) any employment agreement or arrangement in existence on the date of the Indenture or entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary, (2) transactions between or among the Company and its Restricted Subsidiaries and (3) Restricted Payments and Permitted Investments that are permitted by the provisions of the Indenture described above under the caption "--Restricted Payments," in each case, shall not be deemed Affiliate Transactions. Independent Board of Directors The Indenture provides that at least one member of the Board of Directors of the Company shall be a disinterested director. The Indenture further provides that the Company shall use its best efforts to have a disinterested member of the Board of Directors by July 31, 1996. Limitation on Other Senior Subordinated Debt The Indenture provides that neither the Company nor any Guarantor will incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that, in accordance with the terms of the instrument pursuant to which it was created, is subordinate or junior in right of payment to any Senior Debt of the Company or such Guarantor, as the case may be, and senior in any respect in right of payment to the Notes or such Guarantor's Subsidiary Guarantee. Additional Subsidiary Guarantees The Indenture provides that if the Company or any of its Restricted Subsidiaries shall acquire or create another Subsidiary after the date of the Indenture, then such newly acquired or created Subsidiary shall execute a Subsidiary Guarantee and deliver an opinion of counsel in accordance with the terms of the Indenture; provided, that this covenant shall not apply to any Subsidiary that has been properly designated as an Unrestricted Subsidiary in accordance with the Indenture for so long as it continues to constitute an Unrestricted Subsidiary. Payments for Consent The Indenture provides that the Company will not, and will not permit any of its Restricted 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 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, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its Restricted Subsidiaries 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 has agreed that, for so long as any Notes remain outstanding, it will 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. 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 the Notes (whether or not prohibited by the subordination provisions of the Indenture); (ii) default in payment when due of the principal of or premium or Liquidated Damages, if any, on the Notes (whether or not prohibited by the subordination provisions of the Indenture); (iii) failure by the Company to comply with the provisions described under the captions "-- Change of Control," "-- Asset Sales," "-- Restricted Payments" or "-- Incurrence of Indebtedness and Issuance of Preferred Stock"; (iv) failure by the Company for 30 days after notice to comply with any of its other agreements in the Indenture or the Notes; (v) a continuing 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 Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (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 $5.0 million or more; (vi) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0 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; and (vii) certain events of bankruptcy or insolvency with respect to the Company or any of its Restricted 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 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, any Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary of 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 or interest) 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 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 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. If an Event of Default occurs prior to July 15, 2001 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to such date, then the premium specified in the Indenture shall also become 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 the principal of or premium, interest or Liquidated Damages 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 and Shareholders No director, officer, employee, incorporator or shareholder of the Company, as such, shall have any liability for any Obligations of the Company under the Notes or 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, 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, without reinvestment, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of and premium, 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 date of the Indenture, 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 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) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of 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 funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (vii) 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 with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (viii) the Company shall have delivered 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. 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 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). 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 redemption of the Notes (other than provisions relating to the covenants described above under the caption "--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the time for payment of interest or Liquidated Damages on any Note, (iv) waive a Default or Event of Default in the payment of principal of or premium, interest or Liquidated Damages 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) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, interest or Liquidated Damages on the Notes, (vii) waive a redemption payment with respect to any Note (other than a payment required by one of the covenants described above under the caption "-- Repurchase at the Option of Holders") or (viii) make any change in the foregoing amendment and waiver provisions. In addition, any amendment to the provisions of Article 10 of the Indenture (which relate to subordination) requires the consent of the Holders of at least 75% in aggregate principal amount of the Notes then outstanding if such amendment would adversely affect the rights of Holders of the Notes. Notwithstanding the foregoing, without the consent of any Holder of Notes, the Company and the Trustee may amend or supplement the Indenture or 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 obligations to Holders of Notes in the case of a merger or consolidation, 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, or to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. Concerning the Trustee 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, 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 it against any loss, liability or expense. Book-Entry, Delivery and Form Except as set forth in the next paragraph, the Notes were initially issued in the form of one Global Note (the "Global Note"). The Global Note was deposited on the date of the closing of the sale of the Old Notes (the "Closing Date") with, or on behalf of, The Depository Trust Company (the "Depositary") and registered in the name of Cede & Co., as nominee of the Depositary (such nominee being referred to herein as the "Global Note Holder"). Notes that are issued as described below under "-- Certificated Securities" will be issued in the form of registered definitive certificates (the "Certificated Securities"). Upon the transfer of Certificated Securities, such Certificated Securities may, unless the Global Note has previously been exchanged for Certificated Securities, be exchanged for an interest in the Global Note representing the principal amount of Notes being transferred. The Depositary is a limited-purpose trust company that was created to hold securities for its participating organizations (collectively, the "Participants" or the "Depositary's Participants") and to facilitate the clearance and settlement of transactions in such securities between Participants through electronic book-entry changes in accounts of its Participants. The Depositary's Participants include securities brokers and dealers (including the Initial Purchasers), banks and trust companies, clearing corporations and certain other organizations. Access to the Depositary's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the "Indirect Participants" or the "Depositary's Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Persons who are not Participants may beneficially own securities held by or on behalf of the Depositary only thorough the Depositary's Participants or the Depositary's Indirect Participants. The Company expects that pursuant to procedures established by the Depositary ownership of the Notes evidenced by the Global Note will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depositary (with respect to the interests of the Depositary's Participants), the Depositary's Participants and the Depositary's Indirect Participants. Prospective purchasers are advised that the laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer Notes evidenced by the Global Note will be limited to such extent. So long as the Global Note Holder is the registered owner of any Notes, the Global Note Holder will be considered the sole Holder under the Indenture of any Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the Global Note will not be considered the owners or Holders thereof under the Indenture for any purpose, including with respect to the giving of any directions, instructions or approvals to the Trustee thereunder. Neither the Company nor the Trustee will have any responsibility or liability for any aspect of the records of the Depositary or for maintaining, supervising or reviewing any records of the Depositary relating to the Notes. Payments in respect of the principal of and premium, interest and Liquidated Damages, if any, on any Notes registered in the name of the Global Note Holder on the applicable record date will be payable by the Trustee to or at the direction of the Global Note Holder in its capacity as the registered Holder under the Indenture. Under the terms of the Indenture, the Company and the Trustee may treat the persons in whose names Notes, including the Global Note, are registered as the owners thereof for the purpose of receiving such payments. Consequently, neither the Company nor the Trustee has or will have any responsibility or liability for the payment of such amounts to beneficial owners of Notes. The Company believes, however, that it is currently the policy of the Depositary to immediately credit the accounts of the relevant Participants with such payments, in amounts proportionate to their respective holdings of beneficial interests in the relevant security as shown on the records of the Depositary. Payments by the Depositary's Participants and the Depositary's Indirect Participants to the beneficial owners of Notes will be governed by standing instructions and customary practice and will be the responsibility of the Depositary's Participants or the Depositary's Indirect Participants. Certificated Securities Subject to certain conditions, any person having a beneficial interest in the Global Note may, upon request to the Trustee, exchange such beneficial interest for Notes in the form of Certificated Securities. Upon any such issuance, the Trustee is required to register such Certificated Securities in the name of, and cause the same to be delivered to, such person or persons (or the nominee of any thereof). All such certificated Notes would be subject to the legend requirements described herein under "Notice to Investors." In addition, if (i) the Company notifies the Trustee in writing that the Depositary is no longer willing or able to act as a depositary and the Company is unable to locate a qualified successor within 90 days or (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Notes in the form of Certificated Securities under the Indenture, then, upon surrender by the Global Note Holder of its Global Note, Notes in such form will be issued to each person that the Global Note Holder and the Depositary identify as being the beneficial owner of the related Notes. Neither the Company nor the Trustee will be liable for any delay by the Global Note Holder or the Depositary in identifying the beneficial owners of Notes and the Company and the Trustee may conclusively rely on, and will be protected in relying on, instructions from the Global Note Holder or the Depositary for all purposes. Same-Day Settlement and Payment The Indenture requires that payments in respect of the Notes represented by the Global Note (including principal, premium, interest and Liquidated Damages, if any) be made by wire transfer of immediately available funds to the accounts specified by the Global Note Holder. With respect to Certificated Securities, the Company will make all payments of principal, premium, interest and Liquidated Damages, if any, by wire transfer of immediately available funds to the accounts specified by the Holders thereof or, if no such account is specified, by mailing a check to each such Holder's registered address. The Notes represented by the Global Note are expected to be eligible to trade in the Depositary's Same-Day Funds Settlement System, and any permitted secondary market trading activity in such Notes will, therefore, be required by the Depositary to be settled in immediately available funds. The Company expect that secondary trading in the Certificated Securities will also be settled in immediately available funds. 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 of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Restricted 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; provided that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "Asset Sale" means (i) the sale, lease, conveyance or other disposition of any rights, property or assets (including, without limitation, by way of a sale and leaseback), other than sales of inventory, sales of obsolete or unused equipment and sales by Real Estate Subsidiaries of hotel, condominium, interval ownership or other units, in each case, in the ordinary course of business consistent with past practices (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption "-- Change of Control" and/or the provisions described above under the caption "-- Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sale covenant), and (ii) the issue or sale by the Company or any of its Subsidiaries of Equity Interests of any of the Company's Subsidiaries, 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 $1.0 million or (b) for net proceeds in excess of $1.0 million. Notwithstanding the foregoing: (i) a transfer of assets by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary, (iii) issuances of Equity Interests by Sugarloaf pursuant to warrants outstanding on the date of the Indenture, and (iv) a Restricted Payment that is permitted by the covenant described above under the caption "-- Restricted Payments" will not be deemed to be Asset Sales. "Bank Credit Agreements" means (i) the Senior Credit Facility, (ii) any other credit, loan, reimbursement or other similar agreement among the Company, any Subsidiary and any bank, insurance company, finance company or other institutional lender, (iii) each instrument pursuant to which Obligations under any of the agreements described in clause (i) or (ii) above are amended, deferred, extended, renewed, replaced, refunded or refinanced, in whole or in part, and (iv) each instrument now or hereafter evidencing, governing, guarantying or securing any Indebtedness under any agreements described in clause (i), (ii) or (iii) above, in each case, as modified, amended, restated or supplemented from time to time. "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, partnership 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 (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above and (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within one year after the date of acquisition. "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries, taken as a whole, to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than the Permitted Holders, (ii) the adoption of a plan relating to the liquidation or dissolution of the Company, (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that the Permitted Holders cease to be the "beneficial owners" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act) of an aggregate of at least 51% of the common stock of the Company and at least 51% of the voting power of the Capital Stock of the Company, (iv) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as such term is used in Section 13(d)(3) of the Exchange Act), other than the Permitted Holders, becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 35% of the common stock of the Company or more than 35% of the voting power of the Capital Stock of the Company and (v) the first day on which more than one-third of the members of the board of directors of the Company are not Continuing Directors. 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 a developing body of 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. "Collateral Agent" means U.S. Trust Company of New York, as Collateral Agent for the benefit of Holders of Notes under the Pledge and Disbursement Agreement, or any successor thereto appointed pursuant to such Agreement. "Consolidated Cash Flow" 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 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 of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of 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) 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) of such Person and its Restricted Subsidiaries for such period, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation and amortization of, a Restricted Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent (and in same proportion) that the Net Income of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders. "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 Real Estate Subsidiaries or of any Person that is not a Restricted Subsidiary 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 to the referent Person or a Wholly Owned Restricted Subsidiary thereof (other than a Real Estate Subsidiary), (ii) the Net Income of any Restricted Subsidiary that is not a Guarantor shall be excluded to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such 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 sum of (i) the consolidated equity of the common equity holders of such Person and its consolidated Restricted Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred equity (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends or other distributions unless such dividends or other distributions may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred equity, less (a) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the date of the Indenture in the book value of any asset owned by such Person or a consolidated Restricted Subsidiary of such Person, (b) all investments as of such date in unconsolidated Subsidiaries and in Persons that are not Restricted Subsidiaries (except, in each case, Permitted Investments), and (c) all unamortized debt discount and expense and unamortized deferred charges as of such date, all of the foregoing determined 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 the board of directors on the date of the Indenture or (ii) was nominated for election to the board of directors with the approval of at least two-thirds of the Continuing Directors who were members of the board of directors at the time of such nomination or election. "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. "Demand Note" means the promissory note of Sunday River Skiway Corporation payable to Leslie B. Otten in the original principal amount of $5.2 million, as in effect on the date of the Indenture. "Designated Senior Debt" of any Person means such Person's Obligations under the Bank Credit Agreements and any other Senior Debt of such Person permitted to be incurred by such Person under the terms of the Indenture the principal amount of which is $25.0 million or more and that has been designated by the board of directors of such Person as "Designated Senior Debt" by notice to the Trustee from both such Person and the Senior Agent. "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), 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. "DOJ Divestiture" means the divestiture of the Waterville Valley and Mount Cranmore resorts, whether effected by way of sale, lease, conveyance or other disposition of any rights, property or assets, or by way of a sale of the Capital Stock of Waterville Valley Ski Area, Ltd. or Cranmore, Inc., or a merger, consolidation or other reorganization, effected in compliance with the United States Department of Justice consent decree applicable 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 a public or private sale of common stock of the Company that results in net proceeds of at least $25.0 million to the Company. "Existing Indebtedness" means Indebtedness of the Company and its Restricted Subsidiaries in existence on the date of the Indenture, until such amounts are repaid. "Fixed Charges" means, with respect to any Person for any period, the sum 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 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) and (ii) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period and (iii) any interest expense on Indebtedness of another Person to the extent that such Indebtedness 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) and (iv) the product of (a) all cash dividend payments or other distributions (and non-cash dividend payments in the case of a Person that is a Restricted Subsidiary) on any series of preferred equity of such Person, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "Fixed Charge Coverage Ratio" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, 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) 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, 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 Cash Flow 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, and (ii) the Consolidated Cash Flow attributable to Real Estate Subsidiaries, Unrestricted Subsidiaries, 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 Fixed Charges attributable to Real Estate Subsidiaries, Unrestricted Subsidiaries, discontinued operations (as determined in accordance with GAAP) and operations or businesses disposed of prior o the Calculation Date shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries (other than Real Estate Subsidiaries) following the Calculation Date and, in the case of Real Estate Subsidiaries, only to the extent that the obligations giving rise to such Fixed Charges consist of Non-Recourse Real Estate Debt. "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 from time to time. "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. "Guarantors" means each of (i) Sunday River Skiway Corporation, Sunday River Ltd., Perfect Turn Inc., LBO Holding, Inc., Sunday River Transportation, Inc., Sugarbush Resort Holdings, Inc., Sugarbush Leasing Company, Sugarbush Restaurants, Inc., Cranmore, Inc., S-K-I Limited, Killington Ltd., Mount Snow Ltd., Waterville Valley Ski Area, Ltd., Sugarloaf Mountain Corporation, Killington Restaurants, Inc., Dover Restaurants, Inc., Resort Technologies, Inc., Pico Ski Area Management Company, Mountain Wastewater Treatment, Inc., Deerfield Operating Company and Resort Software Services, Inc. and (ii) any other subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of the Indenture, and their respective successors and assigns. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest and currency rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest or currency exchange 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 banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property 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), (iii) Disqualified Stock of such Person, (iv) preferred stock of any Restricted Subsidiary of such Person (other than Preferred Stock held by such Person or any of its Wholly Owned Restricted Subsidiaries) and (v) to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person. "Investments" means, with respect to any Person, all investments by such Person in other Persons 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; provided that an acquisition of assets, Equity Interests or other securities by the Company or any of its Restricted Subsidiaries for consideration consisting of common equity securities of the Company shall not be deemed to be an Investment. "Leverage Ratio" means, as of any date of determination, the ratio of (i) the total indebtedness of the Company as shown on the Company's most recent balance sheet, as adjusted to give effect to any repayment or incurrence of indebtedness subsequent to the balance sheet date through such date of determination, to (ii) the sum of (a) the total indebtedness of the Company, calculated pursuant to clause (i), plus (b) total stockholders' equity of the Company as shown on the Company's most recent balance sheet, as adjusted to give effect to any capital contributions or issuances of Equity Interests of the Company, any dividends or other distributions with respect to any Equity Interests of the Company, or any repurchase or redemption of Equity Interests of the Company, subsequent to the balance sheet date through such date of determination. "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, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Net Income" means, with respect to any Person for any period, the net income (loss) of such Person for such period, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not 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 Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "Net Proceeds" means the aggregate cash 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), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions), any relocation expenses incurred as a result thereof, any taxes paid or payable by the Company or any of its Restricted Subsidiaries as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender, (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Non-Recourse Real Estate Debt" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries, other than Real Estate Subsidiaries, (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise) or (c) constitutes the lender, (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against a Real Estate Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries, other than Real Estate Subsidiaries, to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries, other than Real Estate Subsidiaries, except, in each case, to the extent permitted by the covenant described under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock." "Obligations" means, with respect to any instrument or agreement, any and all principal, interest (including post petition interest), penalties, premiums, fees (including without limitation, to the extent provided for in such instrument or agreement, fees and expenses of counsel), indemnifications, reimbursements, damages and other charges, obligations and liabilities existing from time to time under such instrument or agreement, whether direct or indirect, joint or several, actual, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, including any obligations or liabilities to repay, redeem, repurchase, retire, acquire or defease any Indebtedness under such instrument or agreement, or any obligation to establish a sinking fund for any such purpose. "Permitted Holders" means Leslie B. Otten (or, in the event of his incompetence or death, his estate and his and his estate's heirs, executor, administrator, committee or other representative (collectively, "Heirs")) and any Person in which Leslie B. Otten and his Heirs, directly or indirectly, have an 80% controlling interest. "Permitted Investments" means (i) any Investment in the Company or in a Wholly Owned Restricted Subsidiary of the Company that is a Guarantor; (ii) any Investment in Cash Equivalents; (iii) any Investment by the Company or any of its Restricted Subsidiaries in a Person if, as a result of such Investment, (a) such Person becomes a Wholly Owned Restricted Subsidiary of the Company and 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 Wholly Owned Restricted Subsidiary of the Company that is a Guarantor; (iv) any Restricted 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;" and (v) Guarantees of Indebtedness permitted to be made pursuant to clause (vi) of the covenant described above under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock." "Permitted Liens" means (i) Liens securing Senior Debt of the Company and its Restricted Subsidiaries; (ii) Liens securing Indebtedness that is pari passu in right of payment with the Notes, provided that the Notes are equally and ratably secured, (iii) Liens in favor of the Company or any of its Restricted Subsidiaries; (iv) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any of its Restricted Subsidiaries, provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or any such Restricted Subsidiary; (v) Liens on property existing at the time of acquisition thereof by the Company or any of its Restricted Subsidiaries, provided that such Liens were in existence prior to the contemplation of such acquisition; (vi) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (vii) Liens to secure Indebtedness permitted by clause (v) of the second paragraph of the covenant entitled "Incurrence of Indebtedness and Issuance of Preferred Stock" covering only the assets acquired with such Indebtedness; (viii) Liens existing on the date of the Indenture; (ix) 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 therefor; (x) Liens incurred in the ordinary course of business of the Company or any of its Restricted Subsidiaries with respect to obligations that do not exceed $2.0 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 any such Restricted Subsidiary; (xi) Liens on assets of Real Estate Subsidiaries securing Non-Recourse Real Estate Debt; and (xii) Liens on the Pledge Account in favor of the Collateral Agent. "Permitted Real Estate Project" means a project relating to one or more of the purposes for which Real Estate Subsidiaries may be formed. "Permitted Refinancing Debt" 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 of the Company or any such Restricted Subsidiary; provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of 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 no earlier 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, such Permitted Refinancing Indebtedness has a final maturity date no earlier than the final maturity date of, and is subordinated in right of payment to, the Notes 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 only by the Company or the Restricted Subsidiary that is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Pledge Account" means the Pledge Account held by the Collateral Agent for the benefit of Holders of Notes for the initial deposit of U.S. Treasury obligations maturing immediately prior to the January 15, 1997 and the July 15, 1997 interest payment dates under the Notes acquired with approximately $15 million of borrowings under the Senior Credit Facility and net proceeds from the Note Offering which have been pledged by the Company to secure such interest payments under the Pledge and Disbursement Agreement. "Pledge and Disbursement Agreement" means the Pledge and Disbursement Agreement, dated as of the date of the Indenture, by and between the Collateral Agent and the Company, governing the establishment and maintenance of, and disbursement from, the Pledge Account. "Real Estate Subsidiary" means a Restricted Subsidiary of the Company that was formed for the purpose of developing, constructing and marketing hotel, condominium, interval ownership and other residential real estate projects, together with commercial and other space functionally related or complementary thereto, and that is designated by the Board of Directors as a Real Estate Subsidiary. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" of a Person means any Subsidiary of such Person that is not an Unrestricted Subsidiary. "Senior Agent" means (i) until all Indebtedness under the Bank Credit Agreements is paid in full, the agent (or the institution performing similar functions) under the Bank Credit Agreement under which the greatest aggregate principal amount of Indebtedness is outstanding and (ii) if all Indebtedness under the Bank Credit Agreements has been paid in full, the Person (or representative thereof) holding the greatest amount of Senior Debt. "Senior Debt" of any Person means and includes all principal of, premium and interest on and other Obligations with respect to (i) the Bank Credit Agreements and (ii) any other Indebtedness of such Person (other than as otherwise provided in this definition), whether outstanding on the date of issuance of the Notes or thereafter incurred; provided, however, that Senior Debt shall not include (a) any Indebtedness which by the terms of the instrument creating or evidencing the same is subordinated or junior in right of payment to any other Senior Debt in any respect or (b) that portion of any Indebtedness incurred in violation of the Indenture. Notwithstanding the foregoing, Senior Debt shall not include (1) Indebtedness evidenced by the Notes, (2) Indebtedness which when incurred and without respect to any election under Section 1111(b) of the United States Bankruptcy Code is without recourse to such Person, (3) any liability for foreign, federal, state, local or other taxes owed or owing by such Person, (4) Indebtedness of such Person to the extent such liability constitutes Indebtedness to a Subsidiary or any other Affiliate of such Person or any of such Affiliate's subsidiaries, (5) Indebtedness for the purchase of goods or materials in the ordinary course of business except purchase-money Indebtedness secured by a security interest in or Lien upon the goods or materials purchased or (6) Indebtedness owed by such Person for compensation to employees or for services. "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 Act, as such Regulation is in effect on the date hereof. "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 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 such 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 of one or more Subsidiaries of such Person (or any combination thereof). "Unrestricted Subsidiary" means any Subsidiary (i) 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 (i) has no Indebtedness other than Non-Recourse Debt, (ii) is not party to any agreement, contract, arrangement or understanding with the Company or any of its Restricted Subsidiaries unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company, (iii) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results (except, in the case of Ski Insurance Company, for the indirect obligation to maintain adequate reserves and capital as required by the State of Vermont), (iv) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries and (v) has at least one disinterested member of its board of directors. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by the covenant described above under the caption "Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption "Incurrence of Indebtedness and Issuance of Preferred Stock," the Company shall be in default of such covenant). The Board of Directors 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 under the covenant described under the caption "Incurrence of Indebtedness and Issuance of Preferred Stock" and (ii) no Default or Event of Default would be in existence following such designation; and, provided, further, that such Subsidiary shall execute a Subsidiary Guarantee and deliver an opinion of counsel in accordance with the terms of the Indenture. "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. "Wholly Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person and the Wholly Owned Restricted Subsidiaries of such Person. DESCRIPTION OF SUBORDINATED NOTES General The Old Subordinated Notes were issued and the New Subordinated Notes are to be issued pursuant to the Subordinated Note Indenture between the Company and U.S. Trust Company of New York, as trustee (the "Subordinated Note Trustee"). The terms of the Subordinated Notes include those stated in the Subordinated Note Indenture and those made part of the Subordinated Note Indenture by reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The Subordinated Notes are subject to all such terms, and holders of Subordinated Notes are referred to the Subordinated Note Indenture and the Trust Indenture Act for a statement thereof. The following summary of the material provisions of the Subordinated Note Indenture does not purport to be complete and is qualified in its entirety by reference to the Subordinated Note Indenture and the forms of the certificates evidencing the Old Subordinated Notes and the New Subordinated Notes, including the definitions therein of certain terms used below, which documents have been filed as exhibits to the Registration Statement and are incorporated herein by reference. The definitions of certain terms used in the following summary are set forth below under "-- Certain Definitions." All of the Company's Subsidiaries are Restricted Subsidiaries, other than LBO Development Company, Ski Insurance Company and Killington West Ltd., each of which is an Unrestricted Subsidiary. Under certain circumstances, the Company will be able to designate additional current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the restrictive covenants set forth in the Subordinated Note Indenture. The Old Subordinated Notes and the New Subordinated Notes will constitute a single series of debt securities under the Subordinated Note Indenture. If the Subordinated Notes Exchange Offer is consummated, holders of the Old Subordinated Notes who do not exchange their Old Subordinated Notes for New Subordinated Notes will vote together with the holders of the New Subordinated Notes for all relevant purposes under the Subordinated Note Indenture. In that regard, the Subordinated Note Indenture requires that certain actions by holders thereunder (including acceleration following an Event of Default) must be taken, and certain rights must be exercised, by specified minimum percentages of the aggregate principal amount of the outstanding Subordinated Notes. In determining whether holders of the requisite percentage in principal amount have given any notice, consent or waiver or taken any other action permitted under the Indenture, any Old Subordinated Notes which remain outstanding after the Subordinated Notes Exchange Offer will be aggregated with the New Subordinated Notes and the holders of Old Subordinated Notes and New Subordinated Notes will vote together as single class for all such purposes. Accordingly, all references herein to specified percentages in aggregate principal amount of the outstanding Subordinated Notes shall be deemed to mean, at any time after the Subordinated Notes Exchange Offer is consummated, such percentage in aggregate principal amount of the Old Subordinated Notes and New Subordinated Notes then outstanding. The terms of the New Subordinated Notes are identical in all material respects to the terms of the Old Subordinated Notes except that (i) the New Subordinated Notes will have been registered under the Securities Act and thus will not bear restrictive legends restricting their transfer pursuant to the Securities Act and will not be entitled to registration rights and (ii) Holders of New Subordinated Notes will not be entitled to liquidated damages for the Company's failure to register the Old Subordinated Notes or New Subordinated Notes under the Subordinated Notes Registration Rights Agreement. Holders of Old Subordinated Notes should review the information set forth under "The Exchange Offers - Certain Consequences of a Failure to Exchange." The New Subordinated Notes and the Old Subordinated Notes are sometimes referred to as, collectively, the "Subordinated Notes" and, individually, a "Subordinated Note." Principal, Maturity and Interest The Subordinated Notes were issued in a principal amount sufficient to generate approximately $20.0 million of gross proceeds to the Company and will mature on January 15, 2007. Interest on the Subordinated Notes will not accrue prior to July 15, 2001. Thereafter, interest will accrue at the rate of 13 3/4 % per annum and will be payable semi-annually in arrears in cash on January 15 and July 15 of each year, commencing on January 15, 2002, to holders of record on the immediately preceding January 1 and July 1. 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 July 15, 2001. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Principal of and premium, interest and Liquidated Damages, if any, on the Subordinated 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 Subordinated Notes at their respective addresses set forth in the register of Holders of Subordinated Notes; provided that all payments with respect to Subordinated 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 Subordinated Note Trustee maintained for such purpose. The Old Subordinated Notes were, and the New Subordinated Notes are to be, issued in denominations of $1,000 principal amount and integral multiples thereof. Subordination The payment of principal of, premium, interest and Liquidated Damages, if any, on, and all other Obligations with respect to the Subordinated Notes will be subordinated in right of payment, as set forth in the Subordinated Note Indenture, to the prior payment in full in cash of all Subordinated Note Senior Debt of the Company (including, without limitation, the Company's obligations with respect to the Senior Credit Facility and the Notes), whether outstanding on the date of the Subordinated Note Indenture or thereafter incurred. Upon any distribution of cash, securities or other property to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, in an assignment for the benefit of creditors or any marshaling of the Company's assets and liabilities, the holders of Subordinated Note Senior Debt of the Company will be entitled to receive payment in full in cash of all Obligations due in respect of such Subordinated Note Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Subordinated Note Senior Debt) before the Holders of Subordinated Notes will be entitled to receive any payment with respect to the Subordinated Notes, and until all Obligations with respect to Subordinated Note Senior Debt of the Company are paid in full in cash, any distribution to which the Holders of Subordinated Notes would be entitled shall be made to the holders of such Subordinated Note Senior Debt (except that Holders of Subordinated Notes may receive securities that are subordinated at least to the same extent as the Subordinated Notes to Subordinated Note Senior Debt and any securities issued in exchange for Subordinated Note Senior Debt and payments made from the trust described under "-- Legal Defeasance and Covenant Defeasance"). The Company also may not make any payment upon or in respect of the Subordinated Notes (except in such subordinated securities or from the trust described under "-- Legal Defeasance and Covenant Defeasance") if (i) a default in the payment of the principal of or premium or interest on Subordinated Note Senior Debt of the Company occurs and is continuing or (ii) any other default occurs and is continuing with respect to Designated Subordinated Note Senior Debt of the Company that permits holders of the Designated Subordinated Note Senior Debt as to which such default relates to accelerate its maturity and the Subordinated Note Trustee receives a notice of such default (a "Payment Blockage Notice") from the Subordinated Note Senior Agent. Payments on the Subordinated Notes may and shall be resumed (a) in the case of a payment default, upon the date on which such default is cured or waived and (b) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of such Subordinated Note Senior Debt has been accelerated. 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 Subordinated Note Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice. The Subordinated Note Indenture further requires that the Company promptly notify holders of Subordinated Note Senior Debt of the Company if payment of the Subordinated 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 Subordinated Notes may recover less ratably than creditors of the Company who are holders of Subordinated Note Senior Debt. As of April 28, 1996, after giving pro forma effect to the Acquisition, the amount of outstanding Subordinated Note Senior Debt of the Company would have been approximately $167.6 million. The Subordinated Note Indenture limits the amount of additional Indebtedness, including Subordinated Note Senior Debt, that the Company and its Restricted Subsidiaries can incur. See "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock." Subsidiary Guarantees The Company's payment Obligations under the Subordinated Notes have been jointly and severally guaranteed (the "Subordinated Note Subsidiary Guarantees") by the Guarantors. The Obligations of each Guarantor under its Subordinated Note Subsidiary Guarantee are subordinated in right of payment to all Subordinated Note Senior Debt of such Guarantor pursuant to subordination provisions substantially similar to those described above under "--Subordination." The Subordinated Note Indenture provides that no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another corporation, Person or entity, whether or not affiliated with such Guarantor, unless (i) subject to the provisions of the following paragraph, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all of the Obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Subordinated Note Trustee, under the Subordinated Notes and the Subordinated Note Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; (iii) such Guarantor, or any Person formed by or surviving any such consolidation or merger, would have Consolidated Net Worth (immediately after giving effect to such transaction) equal to or greater than the Consolidated Net Worth of such Guarantor immediately preceding the transaction; and (iv) the Company would be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant described below under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock"; provided, however, that this provision shall not prohibit any merger or consolidation among the Company or one or more wholly owned Guarantors. The Subordinated Note Indenture provides that, in the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of any Guarantor, such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all of the assets of such Guarantor) will be released and relieved of any Obligations under its Subordinated Note Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Subordinated Note Indenture. See "-- Repurchase at Option of Holders -- Asset Sales." In addition, the Subordinated Note Indenture provides that, in the event the Board of Directors designates a Guarantor to be an Unrestricted Subsidiary, then such Guarantor will be released and relieved of any Obligations under its Subordinated Note Subsidiary Guarantee; provided that such designation is conducted in accordance with the applicable provisions of the Indenture. Optional Redemption The Subordinated Notes are not redeemable at the Company's option prior to July 15, 2001. Thereafter, the Subordinated 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, 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 July 15 of the years indicated below: Year Percentage 2001 106.875% 2002 105.156 2003 103.438 2004 101.719 2005 and thereafter 100.000 Notwithstanding the foregoing, on or prior to July 15, 1999, the Company may redeem the Subordinated Notes, in whole or in part, at a redemption price of 113.75% of the Accreted Value thereof, plus accrued and unpaid Liquidated Damages, if any, thereon to the redemption date, with the net proceeds of one or more Equity Offerings; provided that notice of each such redemption shall have been given within 30 days after the date of the closing of such Equity Offering. Selection and Notice If less than all of the Subordinated Notes are to be redeemed at any time, selection of Subordinated Notes for redemption will be made by the Subordinated Note Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Subordinated Notes are listed, or, if the Subordinated Notes are not so listed, on a pro rata basis, by lot or by such method as the Subordinated Note Trustee shall deem fair and appropriate; provided that no Subordinated Notes of $1,000 principal amount 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 Subordinated Notes to be redeemed at its registered address. If any Subordinated Note is to be redeemed in part only, the notice of redemption that relates to such Subordinated Note shall state the portion of the principal amount thereof to be redeemed. A new Subordinated 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 Subordinated Note. On and after the redemption date, interest ceases to accrue on Subordinated Notes or portions of them 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 Subordinated Notes. Repurchase at the Option of Holders Change of Control Upon the occurrence of a Change of Control, the Company will be required to make an offer (a "Subordinated Note Change of Control Offer") to repurchase all or any part (equal to $1,000 principal amount or an integral multiple thereof) of each Holder's Subordinated Notes at an offer price in cash equal to 101% of the Accreted Value thereof, plus accrued and unpaid Liquidated Damages, if any, thereon (if prior to July 15, 2001), or 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon (if on or after July 15, 2001), to the date of repurchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company will mail a notice to each Holder describing the transaction that constitutes the Change of Control and offering to repurchase Subordinated Notes pursuant to the procedures required by the Subordinated Note Indenture and described in such notice; provided that, prior to complying with the provisions of this covenant, but in any event within 90 days following a Change of Control, the Company will either repay all outstanding Subordinated Note Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Subordinated Note Senior Debt to permit the repurchase of Subordinated Notes required by this covenant. 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 Subordinated 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 Subordinated Notes or portions thereof properly tendered pursuant to the Subordinated Note Change of Control Offer, (ii) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Subordinated Notes or portions thereof so tendered and (iii) deliver or cause to be delivered to the Subordinated Note Trustee the Subordinated Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Subordinated Notes or portions thereof being purchased by the Company. The Paying Agent will promptly mail to each Holder of Subordinated Notes so tendered the Change of Control Payment for such Subordinated Notes, and the Subordinated Note Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Subordinated Note equal in principal amount to any unpurchased portion of the Subordinated Notes surrendered, if any; provided that each such new Subordinated Note will be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Subordinated Note Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. Except as described above with respect to a Change of Control, the Subordinated Note Indenture does not contain provisions that permit the Holders of the Subordinated Notes to require that the Company repurchase or redeem the Subordinated Notes in the event of a takeover, recapitalization or similar transaction. The occurrence of a Change of Control could result in a default under the Senior Credit Facility or other Subordinated Note Senior Debt of the Company. In addition, the Senior Credit Facility or other Subordinated Note Senior Debt could restrict the Company's ability to repurchase Subordinated Notes upon a Change of Control. In the event a Change of Control occurs at a time when the Company is prohibited from repurchasing Subordinated Notes, the Company could seek the consent of its lenders to the repurchase of Subordinated Notes or could attempt to refinance 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 Subordinated Notes. In such case, the Company's failure to make a Subordinated Note Change of Control Offer or to repurchase Subordinated Notes tendered in a Subordinated Note Change of Control Offer would constitute an Event of Default under the Subordinated Note Indenture, which could, in turn, constitute a default under the Senior Credit Facility or other Subordinated Note Senior Debt. In such circumstances, the subordination provisions in the Subordinated Note Indenture would likely restrict payments to the Holders of Subordinated Notes. See "--Subordination." Finally, upon a Change of Control, the Company will be obligated to offer to repurchase the Notes, and the Company's ability to repurchase Subordinated Notes upon a Change of Control may be limited by the Company's then existing financial resources. The Company will not be required to make a Subordinated Note Change of Control Offer upon a Change of Control if a third party makes the Subordinated Note Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Subordinated Note Indenture applicable to a Subordinated Note Change of Control Offer made by the Company and purchases all Subordinated Notes validly tendered and not withdrawn under such Subordinated Note Change of Control Offer. Asset Sales The Subordinated Note Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, engage in 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 resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Subordinated Note Trustee) 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 cash; provided that (x) 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 any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Subordinated Notes) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability and (b) any notes or other obligations received by the Company or such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) shall be deemed to be cash for purposes of this provision and (y) Asset Sales pursuant to the DOJ Divestiture shall not be subject to the 75% minimum cash requirement specified in clause (ii) of this paragraph, but such Asset Sales shall otherwise continue to be subject to this covenant and any cash proceeds resulting from the subsequent disposition of such non-cash consideration shall be subject to the provisions of this covenant. Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company or such Restricted Subsidiary may apply such Net Proceeds (a) to permanently reduce Subordinated Note Senior Debt of the Company or such Restricted Subsidiary (and to correspondingly reduce commitments with respect thereto) or (b) to the making of capital expenditures or the acquisition of long-term assets in the same line of business as the Company or any Restricted Subsidiary was engaged immediately prior to such Asset Sale. Pending the final application of any such Net Proceeds, the Company may temporarily reduce Subordinated Note Senior Debt or otherwise invest such Net Proceeds in any manner that is not prohibited by the Subordinated Note Indenture. Any Net Proceeds from Asset Sales in excess of $1.0 million in any fiscal year that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Subordinated Note Excess Proceeds." When the aggregate amount of Subordinated Excess Proceeds exceeds $10.0 million, the Company will be required to make an offer to all Holders of Subordinated Notes (a "Subordinated Note Asset Sale Offer") to purchase the maximum principal amount of Subordinated Notes that may be purchased out of the Subordinated Note Excess Proceeds, at an offer price in cash in an amount equal to 100% of the Accreted Value thereof, plus accrued and unpaid Liquidated Damages, if any, thereon (if prior to July 15, 2001), or 100% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon (if on or after July 15, 2001), to the date of purchase, in accordance with the procedures set forth in the Subordinated Note Indenture. To the extent that the aggregate amount of Subordinated Notes tendered pursuant to a Subordinated Note Asset Sale Offer is less than the Subordinated Note Excess Proceeds, the Company may use any remaining Subordinated Note Excess Proceeds for general corporate purposes (subject to the restrictions of the Subordinated Note Indenture). If the aggregate principal amount of Subordinated Notes surrendered by Holders thereof exceeds the amount of Subordinated Note Excess Proceeds, the Subordinated Note Trustee shall select the Subordinated Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Subordinated Note Excess Proceeds shall be reset at zero. Certain Covenants Restricted Payments The Subordinated Note Indenture provides that the Company will not, and will 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 holder of the Company's Equity Interests in its capacity as such, other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or dividends or distributions payable to the Company or any Wholly Owned Restricted Subsidiary of the Company that is a Guarantor; (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any Subsidiary or other Affiliate of the Company, other than any such Equity Interests owned by the Company or any Wholly Owned Restricted Subsidiary of the Company that is a Guarantor; (iii) make any principal payment on, or purchase, redeem, defease or otherwise acquire or retire for value, prior to a scheduled mandatory sinking fund payment date or final maturity date, any Indebtedness that is subordinated to the Subordinated Notes; 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 be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such Restricted Payment, to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant described below under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock"; and (c) such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Company and its Restricted Subsidiaries on or after the date of the Subordinated Note Indenture, is less than the sum of (i) $5.0 million, plus (ii) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from July 29, 1996 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 (iii) 100% of the aggregate net cash proceeds received by the Company as capital contributions or from the issue or sale since the date of the Subordinated Note Indenture of Equity Interests of the Company or of debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or convertible debt securities) sold to a Subsidiary of the Company and other than Disqualified Stock or debt securities that have been converted into Disqualified Stock), plus (iv) to the extent that any Restricted Investment is sold for cash or otherwise liquidated or repaid for cash, 100% of the net cash proceeds thereof (less the cost of disposition) (but only to the extent not included in subclause (ii) of this clause (c)); plus (v) to the extent that any Unrestricted Subsidiary is designated to be a Restricted Subsidiary, the fair market value (as determined in good faith by the Board of Directors) of the Company's Investment in such Subsidiary at the time of such designation (but only to the extent not included in subclause (ii) of this clause (c)); provided, however, that in the case of (1) the declaration or payment of any dividend or the making of any other payment or distribution on account of the Company's Common Stock or to any direct or indirect holder of the Company's Common Stock in its capacity as such or (2) the purchase, redemption or other acquisition or retirement for value of any Common Stock of the Company, (A) the Company may not include the $5.0 million set forth in subclause (i) of this clause (c) and may only include 25% of its Consolidated Net Income for purposes of subclause (ii) of this clause (c) in calculating the amount available pursuant to this clause (c) for the making of any such Restricted Payment if, after giving effect to such Restricted Payment, the Company's Leverage Ratio would exceed 70% and (B) Consolidated Net Income for purposes of this clause (c) shall exclude the first $5.0 million of Consolidated Net Income of the Company reported from July 29, 1996. The foregoing provisions will not prohibit (i) the payment of any dividend or other distribution 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 Subordinated Note Indenture; (ii) the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Company in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Subsidiary of the Company) of other Equity Interests of the Company (other than any Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement or other acquisition shall be excluded from clause (c) of the preceding paragraph; (iii) the defeasance, redemption or repurchase of subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Debt or the substantially concurrent sale (other than to a Subsidiary of the Company) of Equity Interests of the Company (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement or other acquisition shall be excluded from clause (c) of the preceding paragraph; (iv) Investments in Real Estate Subsidiaries in an amount not to exceed $10.0 million plus, to the extent that any such Investment is sold for cash or otherwise liquidated or repaid for cash, the net cash proceeds thereof (less the cost of disposition); provided that the amount of any such net cash proceeds shall be excluded from clause (c) of the preceding paragraph; (v) the acquisition of Equity Interests in Sugarloaf Mountain Corporation within the six months following the consummation of the Acquisition; (vi) contributions of real estate not used in or essential to ski operations to Real Estate Subsidiaries for Permitted Real Estate Projects; (vii) conveyance of real estate not used in or essential to ski operations to Unrestricted Subsidiaries with an aggregate book value not in excess of $2.0 million; (viii) Guarantees of Indebtedness of Real Estate Subsidiaries to the extent that such Guarantees are permitted to be incurred by the covenant described under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock;" (ix) payments of principal of and interest on the Demand Note; and (x) Investments received by the Company and its Restricted Subsidiaries as non-cash consideration from Asset Sales to the extent permitted by the covenant described under the caption "-- Repurchase at the Option of Holders -- Asset Sales." The Board of Directors 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 by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this covenant. All such outstanding Investments will be deemed to constitute Investments in an amount equal to the fair market value (as determined in good faith by the Board of Directors) of such Investments at the time of such designation. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The amount of all Restricted Payments (other than cash) shall be the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Subordinated Note Trustee) on the date of the Restricted Payment of the asset(s) proposed to be transferred by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later than the date of making any Restricted Payment, the Company shall deliver to the Subordinated Note Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by the covenant "Restricted Payments" were computed, which calculations may be based upon the Company's latest available financial statements. Notwithstanding the foregoing, the Company and its Restricted Subsidiaries may not (i) transfer any property or assets that are a material part of the ski operations of the Company and its Restricted Subsidiaries to an Unrestricted Subsidiary or (ii) designate as an Unrestricted Subsidiary any Restricted Subsidiary of the Company that holds any property or assets that are a material part of the ski operations of the Company and its Restricted Subsidiaries. Incurrence of Indebtedness and Issuance of Preferred Stock The Subordinated Note Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and will not permit any of its Restricted Subsidiaries to issue any preferred stock; provided, however, that, so long as no Default or Event of Default has occurred and is continuing, the Company and its Restricted Subsidiaries that are Guarantors may incur Indebtedness (including Acquired Debt), and its Restricted Subsidiaries that are Guarantors may issue preferred stock, if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal quarterly financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such additional preferred stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the additional preferred stock had been issued at the beginning of such four-quarter period. The foregoing provisions will not apply to: (i) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness pursuant to the Bank Credit Agreements in an amount not to exceed the greater of (a) $65.0 million and (b) 1.5 times the Company's Consolidated Cash Flow for the most recently ended four full fiscal quarters for which internal quarterly financial statements are available immediately preceding the date on which such Indebtedness is incurred, less, in either case, the aggregate amount of all permanent reductions thereto pursuant to the covenant described under "-- Repurchase at the Option of Holders -- Asset Sales"; (ii) the incurrence by the Company and its Restricted Subsidiaries of Existing Indebtedness; (iii) the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes, the Subsidiary Guarantees, the Indenture, the Subordinated Notes, the Subordinated Note Subsidiary Guarantees and the Subordinated Note Indenture; (iv) the incurrence of intercompany Indebtedness between or among the Company and any of its Wholly Owned Restricted Subsidiaries (other than Real Estate Subsidiaries); provided 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 Wholly Owned Restricted Subsidiary of the Company, or any sale or other transfer of any such Indebtedness to a Person that is neither the Company nor a Wholly Owned Restricted Subsidiary of the Company, shall be deemed to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be; (v) the incurrence by the Company or any of its Restricted Subsidiaries of purchase money Indebtedness to finance the purchase of property or assets to be used in the ski operations of the Company and its Restricted Subsidiaries or a related business in an aggregate amount at any one time outstanding not to exceed the lesser of (a) the purchase price of such property or assets and (b) $15.0 million; (vi) the incurrence by the Company and its Restricted Subsidiaries of Guarantees of Indebtedness of Real Estate Subsidiaries in an amount not to exceed $15.0 million at any one time outstanding in connection with Permitted Real Estate Projects, provided that the total purchase price for the hotel, condominium, interval ownership or other units comprising the development to be constructed, in whole or in part, with the proceeds of the Indebtedness so guaranteed, that have been contracted for sale (evidenced by executed purchase agreements and security deposits from credit-approved purchasers), equals at least 35% of the estimated total cost of construction (as determined in good faith by the Board of Directors) of the Permitted Real Estate Projects (except for the development of the Summit Hotel at the Attitash resort, for which such total purchase price must equal at least 25% of the estimated total cost of construction (as determined in good faith by the Board of Directors)); (vii) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Debt in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund Indebtedness that was permitted by the Subordinated Note Indenture to be incurred; (viii) the incurrence by Real Estate Subsidiaries of Non-Recourse Real Estate Debt, provided that if any such Indebtedness ceases to be Non-Recourse Real Estate Debt of a Real Estate Subsidiary, such event shall be deemed to constitute an incurrence of Subordinated Note Indebtedness by a Restricted Subsidiary of the Company that is not a Real Estate Subsidiary; (ix) the incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Debt, provided that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company; and (x) the incurrence by the Company and its Restricted Subsidiaries of additional Indebtedness in an amount not to exceed $25.0 million at any one time outstanding, provided that such Indebtedness is expressly subordinated in right of payment to the Notes at least to the same extent as the Notes are subordinated in right of payment to Senior Debt of the Company. Dividend and Other Payment Restrictions Affecting Subsidiaries The Subordinated Note Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any 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 on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, or (b) pay any indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or advances to the Company or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of: (a) Existing Indebtedness as in effect on the date of the Subordinated Note Indenture; (b) applicable law; (c) any instrument governing Indebtedness or Capital Stock 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 was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; (d) by reason of customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (e) 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; (f) any instrument governing Non-Recourse Real Estate Indebtedness of a Real Estate Subsidiary, which encumbrance or restriction is not applicable to any Person or the properties or assets of any Person other than such Real Estate Subsidiary or the property or asset of such Real Estate Subsidiary; (g) Subordinated Note Senior Debt of the Company and Indebtedness of Guarantors, provided that such Indebtedness was permitted to be incurred pursuant to the Subordinated Note Indenture; and (h) Permitted Liens. Merger, Consolidation, or Sale of Assets The Subordinated Note Indenture provides that the Company may not consolidate or merge with or into (whether or not the Company is the surviving entity), 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 corporation, Person or entity, unless (i) the Company is the surviving entity or the entity 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 corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or 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 Subordinated Notes and the Subordinated Note Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Subordinated Note Trustee; (iii) immediately after 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 Wholly Owned Restricted Subsidiary of the Company, the Company or the entity or 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 Fixed Charge 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." 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 a developing body of 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 Subordinated Notes to require the Company to repurchase such Subordinated 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. Transactions with Affiliates The Subordinated Note Indenture provides the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, 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 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 the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction with an unrelated Person and (ii) the Company delivers to the Subordinated Note Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $0.5 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, an opinion as to the fairness to the Company of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing; provided that (1) any employment agreement or arrangement in existence on the date of the Indenture or entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary, (2) transactions between or among the Company and its Restricted Subsidiaries and (3) Restricted Payments and Permitted Investments that are permitted by the provisions of the Indenture described above under the caption "--Restricted Payments," in each case, shall not be deemed Affiliate Transactions. Independent Board of Directors The Subordinated Note Indenture provides that at least one member of the Board of Directors of the Company shall be a disinterested director. The Subordinated Note Indenture further provides that the Company shall use its best efforts to have a disinterested member of the Board of Directors by July 31, 1996. Additional Subsidiary Guarantees The Subordinated Note Indenture provides that if the Company or any of its Restricted Subsidiaries shall acquire or create another Subsidiary after the date of the Subordinated Note Indenture, then such newly acquired or created Subsidiary shall execute a Subordinated Note Subsidiary Guarantee and deliver an opinion of counsel in accordance with the terms of the Indenture; provided, that this covenant shall not apply to any Subsidiary that has been properly designated as an Unrestricted Subsidiary in accordance with the Subordinated Note Indenture for so long as it continues to constitute an Unrestricted Subsidiary. Payments for Consent The Subordinated Note Indenture provides that the Company will not, and will not permit any of its Restricted 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 Subordinated Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Subordinated Note Indenture or the Subordinated Notes unless such consideration is offered to be paid or is paid to all Holders of the Subordinated 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 Subordinated Note Indenture provides that, whether or not required by the rules and regulations of the Commission, so long as any Subordinated Notes are outstanding, the Company will furnish to the Holders of Subordinated 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, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its Restricted Subsidiaries 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 has agreed that, for so long as any Subordinated Notes remain outstanding, it will 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. Events of Default and Remedies The Subordinated Note 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 the Subordinated Notes (whether or not prohibited by the subordination provisions of the Subordinated Note Indenture); (ii) default in payment when due of the principal of or premium or Liquidated Damages, if any, on the Subordinated Notes (whether or not prohibited by the subordination provisions of the Subordinated Note Indenture); (iii) failure by the Company to comply with the provisions described under the captions "-- Change of Control," "-- Asset Sales," "-- Restricted Payments" or "-- Incurrence of Indebtedness and Issuance of Preferred Stock"; (iv) failure by the Company for 30 days after notice to comply with any of its other agreements in the Subordinated Note Indenture or the Subordinated Notes; (v) a continuing 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 Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (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 $5.0 million or more; (vi) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0 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; and (vii) certain events of bankruptcy or insolvency with respect to the Company or any of its Restricted Subsidiaries. If any Event of Default occurs and is continuing, the Subordinated Notes Trustee or the Holders of at least 25% in principal amount of the then outstanding Subordinated Notes may declare all the Subordinated Notes 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, any Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary of the Company, all outstanding Subordinated Notes will become due and payable without further action or notice. Holders of the Subordinated Notes may not enforce the Subordinated Notes Indenture or the Subordinated Notes except as provided in the Subordinated Note Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Subordinated Notes may direct the Subordinated Note Trustee in its exercise of any trust or power. The Subordinated Notes Trustee may withhold from Holders of the Subordinated Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) 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 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 Subordinated Notes pursuant to the optional redemption provisions of the Subordinated Notes Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Subordinated Notes. If an Event of Default occurs prior to July 15, 2001 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Subordinated Notes prior to such date, then the premium specified in the Subordinated Notes Indenture shall also become immediately due and payable to the extent permitted by law upon the acceleration of the Subordinated Notes. The Holders of a majority in aggregate principal amount of the Subordinated Notes then outstanding by notice to the Subordinated Note Trustee may on behalf of the Holders of all of the Subordinated Notes waive any existing Default or Event of Default and its consequences under the Subordinated Note Indenture except a continuing Default or Event of Default in the payment of the principal of or premium, interest or Liquidated Damages on the Subordinated Notes. The Company is required to deliver to the Subordinated Note Trustee annually a statement regarding compliance with the Subordinated Note Indenture, and the Company is required, upon becoming aware of any Default or Event of Default, to deliver to the Subordinated Note Trustee a statement specifying such Default or Event of Default. No Personal Liability of Directors, Officers, Employees and Shareholders No director, officer, employee, incorporator or shareholder of the Company, as such, shall have any liability for any Obligations of the Company under the Subordinated Notes or the Subordinated Note Indenture or for any claim based on, in respect of, or by reason of, such Obligations or their creation. Each Holder of Subordinated Notes by accepting a Subordinated Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Subordinated 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 Subordinated Notes ("Legal Defeasance") except for (i) the rights of Holders of outstanding Subordinated Notes to receive payments in respect of the principal of and premium, interest and Liquidated Damages, if any, on the Subordinated Notes when such payments are due from the trust referred to below, (ii) the Company's obligations with respect to the Subordinated Notes concerning issuing temporary Subordinated Notes, registration of Subordinated Notes, mutilated, destroyed, lost or stolen Subordinated 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 Subordinated Note Trustee, and the Company's obligations in connection therewith and (iv) the Legal Defeasance provisions of the Subordinated Note 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 Subordinated Note 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 Subordinated 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 Subordinated Notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the Company must irrevocably deposit with the Subordinated Note Trustee, in trust, for the benefit of the Holders of the Subordinated Notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, without reinvestment, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of and premium, interest and Liquidated Damages, if any, on the outstanding Subordinated Notes on the stated maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Subordinated 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 Subordinated Note Trustee an opinion of counsel in the United States reasonably acceptable to the Subordinated Note 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 date of the Subordinated Note Indenture, 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 Subordinated 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 Subordinated Note Trustee an opinion of counsel in the United States reasonably acceptable to the Subordinated Note Trustee confirming that the Holders of the outstanding Subordinated Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject t 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) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of 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 Subordinated Note 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 Subordinated Note 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; (vii) the Company shall have delivered to the Subordinated Note Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Subordinated 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 shall have delivered to the Subordinated Note 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. Transfer and Exchange A Holder may transfer or exchange Subordinated Notes in accordance with the Subordinated Note Indenture. The Registrar and the Subordinated Note 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 Subordinated Note Indenture. The Company is not required to transfer or exchange any Subordinated Note selected for redemption. Also, the Company is not required to transfer or exchange any Subordinated Note for a period of 15 days before a selection of Subordinated Notes to be redeemed. The registered Holder of a Subordinated 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 Subordinated Note Indenture or the Subordinated Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Subordinated Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Subordinated Notes), and any existing default or compliance with any provision of the Subordinated Note Indenture or the Subordinated Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Subordinated Notes (including consents obtained in connection with a tender offer or exchange offer for Subordinated Notes). Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Subordinated Notes held by a non-consenting Holder): (i) reduce the principal amount of Subordinated Notes whose Holders must consent to an amendment, supplement or waiver, (ii) reduce the principal of or change the fixed maturity of any Subordinated Note or alter the provisions with respect to the redemption of the Subordinated Notes (other than provisions relating to the covenants described above under the caption "-- Repurchase at the Option of Holders"), (iii) reduce the rate of or change the time for payment of interest or Liquidated Damages on any Subordinated Note, (iv) waive a Default or Event of Default in the payment of principal of or premium, interest or Liquidated Damages on the Subordinated Notes (except a rescission of acceleration of the Subordinated Notes by the Holders of at least a majority in aggregate principal amount of the Subordinated Notes and a waiver of the payment default that resulted from such acceleration), (v) make any Subordinated Note payable in money other than that stated in the Subordinated Notes, (vi) make any change in the provisions of the Subordinated Note Indenture relating to waivers of past Defaults or the rights of Holders of Subordinated Notes to receive payments of principal of or premium, interest or Liquidated Damages on the Subordinated Notes, (vii) waive a redemption payment with respect to any Subordinated Note (other than a payment required by one of the covenants described above under the caption "--Repurchase at the Option of Holders") or (viii) make any change in the foregoing amendment and waiver provisions. In addition, any amendment to the provisions of Article 10 of the Subordinated Note Indenture (which relate to subordination) requires the consent of the Holders of at least 75% in aggregate principal amount of the Subordinated Notes then outstanding if such amendment would adversely affect the rights of Holders of the Subordinated Notes. Notwithstanding the foregoing, without the consent of any Holder of Subordinated Notes, the Company and the Subordinated Note Trustee may amend or supplement the Subordinated Note Indenture or the Subordinated Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Subordinated Notes in addition to or in place of certificated Subordinated Notes, to provide for the assumption of the Company's obligations to Holders of Subordinated Notes in the case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of Subordinated Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with requirements of the Commission in order to effect or maintain the qualification of the Subordinated Note Indenture under the Trust Indenture Act. Concerning the Subordinated Note Trustee The Subordinated Note Indenture contains certain limitations on the rights of the Subordinated Note 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 Subordinated Note Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. The Holders of a majority in principal amount of the then outstanding Subordinated Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Subordinated Note Trustee, subject to certain exceptions. The Subordinated Note Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Subordinated Note 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 Subordinated Note Trustee will be under no obligation to exercise any of its rights or powers under the Subordinated Note Indenture at the request of any Holder of Subordinated Notes, unless such Holder shall have offered to the Subordinated Note Trustee security and indemnity satisfactory to it against any loss, liability or expense. Book-Entry, Delivery and Form Except as set forth in the next paragraph, the Subordinated Notes were initially issued in the form of one Global Subordinated Note (the "Global Subordinated Note"). The Global Subordinated Note was deposited on the date of the closing of the sale of the Old Subordinated Notes (the "Closing Date") with, or on behalf of, The Depository Trust Company (the "Depositary") and registered in the name of Cede & Co., as nominee of the Depositary (such nominee being referred to herein as the "Global Subordinated Note Holder"). Subordinated Notes that are issued as described below under "--Certificated Securities" will be issued in the form of registered definitive certificates (the "Certificated Securities"). Upon the transfer of Certificated Securities, such Certificated Securities may, unless the Global Subordinated Note has previously been exchanged for Certificated Securities, be exchanged for an interest in the Global Subordinated Note representing the principal amount of Notes being transferred. The Depositary is a limited-purpose trust company that was created to hold securities for its participating organizations (collectively, the "Participants" or the "Depositary's Participants") and to facilitate the clearance and settlement of transactions in such securities between Participants through electronic book-entry changes in accounts of its Participants. The Depositary's Participants include securities brokers and dealers (including Bear Stearns), banks and trust companies, clearing corporations and certain other organizations. Access to the Depositary's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the "Indirect Participants" or the "Depositary's Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Persons who are not Participants may beneficially own securities held by or on behalf of the Depositary only through the Depositary's Participants or the Depositary's Indirect Participants. The Company expects that pursuant to procedures established by the Depositary ownership of the Subordinated Notes evidenced by the Global Subordinated Note will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depositary (with respect to the interests of the Depositary's Participants), the Depositary's Participants and the Depositary's Indirect Participants. Prospective purchasers are advised that the laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer Subordinated Notes evidenced by the Global Subordinated Note will be limited to such extent. So long as the Global Subordinated Note Holder is the registered owner of any Subordinated Notes, the Global Subordinated Note Holder will be considered the sole Holder under the Subordinated Note Indenture of any Subordinated Notes evidenced by the Global Subordinated Note. Beneficial owners of Subordinated Notes evidenced by the Global Subordinated Note will not be considered the owners or Holders thereof under the Subordinated Note Indenture for any purpose, including with respect to the giving of any directions, instructions or approvals to the Subordinated Note Trustee thereunder. Neither the Company nor the Subordinated Note Trustee will have any responsibility or liability for any aspect of the records of the Depositary or for maintaining, supervising or reviewing any records of the Depositary relating to the Subordinated Notes. Payments in respect of the principal of and premium, interest and Liquidated Damages, if any, on any Subordinated Notes registered in the name of the Global Subordinated Note Holder on the applicable record date will be payable by the Subordinated Note Trustee to or at the direction of the Global Subordinated Note Holder in its capacity as the registered Holder under the Subordinated Note Indenture. Under the terms of the Subordinated Note Indenture, the Company and the Subordinated Note Trustee may treat the persons in whose names Subordinated Notes, including the Global Subordinated Note, are registered as the owners thereof for the purpose of receiving such payments. Consequently, neither the Company nor the Subordinated Note Trustee has or will have any responsibility or liability for the payment of such amounts to beneficial owners of Subordinated Notes. The Company believes, however, that it is currently the policy of the Depositary to immediately credit the accounts of the relevant Participants with such payments, in amounts proportionate to their respective holdings of beneficial interests in the relevant security as shown on the records of the Depositary. Payments by the Depositary's Participants and the Depositary's Indirect Participants to the beneficial owners of Subordinated Notes will be governed by standing instructions and customary practice and will be the responsibility of the Depositary's Participants or the Depositary's Indirect Participants. Certificated Securities Subject to certain conditions, any person having a beneficial interest in the Global Note may, upon request to the Subordinated Note Trustee, exchange such beneficial interest for Subordinated Notes in the form of Certificated Securities. Upon any such issuance, the Subordinated Note Trustee is required to register such Certificated Securities in the name of, and cause the same to be delivered to, such person or persons (or the nominee of any thereof). All such certificated Subordinated Notes would be subject to the legend requirements described herein under "Notice to Investors." In addition, if (i) the Company notifies the Subordinated Note Trustee in writing that the Depositary is no longer willing or able to act as a depositary and the Company is unable to locate a qualified successor within 90 days or (ii) the Company, at its option, notifies the Subordinated Note Trustee in writing that it elects to cause the issuance of Subordinated Notes in the form of Certificated Securities under the Subordinated Note Indenture, then, upon surrender by the Global Subordinated Note Holder of its Global Subordinated Note, Subordinated Notes in such form will be issued to each person that the Global Subordinated Note Holder and the Depositary identify as being the beneficial owner of the related Subordinated Notes. Neither the Company nor the Subordinated Note Trustee will be liable for any delay by the Global Subordinated Note Holder or the Depositary in identifying the beneficial owners of Subordinated Notes and the Company and the Subordinated Note Trustee may conclusively rely on, and will be protected in relying on, instructions from the Global Subordinated Note Holder or the Depositary for all purposes. Same-Day Settlement and Payment The Subordinated Note Indenture requires that payments in respect of the Subordinated Notes represented by the Global Subordinated Note (including principal, premium, interest and Liquidated Damages, if any) be made by wire transfer of immediately available funds to the accounts specified by the Global Subordinated Note Holder. With respect to Certificated Securities, the Company will make all payments of principal, premium, interest and Liquidated Damages, if any, by wire transfer of immediately available funds to the accounts specified by the Holders thereof or, if no such account is specified, by mailing a check to each such Holder's registered address. The Subordinated Notes represented by the Global Subordinated Note are expected to be eligible to trade in the Depositary's Same-Day Funds Settlement System, and any permitted secondary market trading activity in such Subordinated Notes will, therefore, be required by the Depositary to be settled in immediately available funds. The Company expect that secondary trading in the Certificated Securities will also be settled in immediately available funds. Certain Definitions Set forth below are certain defined terms used in the Subordinated Note Indenture. Reference is made to the Subordinated Note Indenture for a full disclosure of all such terms. Capitalized terms not defined below have the respective meanings assigned to them under "Description of Senior Subordinated Notes -- Certain Definitions." "Accreted Value" means, as of any date of determination, the sum of (a) the initial offering price of each Unit and (b) the portion of the excess of the principal amount of each Subordinated Note over such initial offering price which shall have been accreted thereon through such date of determination, such amount to be so accreted daily on a semi-annual bond equivalent basis on January 15 and July 15 of each year, at the rate of 13 3/4 % per annum. "Designated Subordinated Note Senior Debt" means (i) Subordinated Note Senior Debt incurred under the Bank Credit Agreements and (ii) any other Subordinated Note Senior Debt designated by the Company as "Designated Subordinated Note Senior Debt" as permitted under the Bank Credit Agreement by written notice to the Trustee signed by both the Company and the Subordinated Note Senior Agent. "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), 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 Subordinated Notes mature. "Permitted Refinancing Debt" 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 of the Company or any such Restricted Subsidiary; provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of 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 no earlier 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 Subordinated Notes, such Permitted Refinancing Indebtedness has a final maturity date no earlier than the final maturity date of, and is subordinated in right of payment to, the Subordinated Notes on terms at least as favorable to the Holders of Subordinated Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred only by the Company or the Restricted Subsidiary that is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Subordinated Note Senior Agent" means (i) until all Indebtedness under the Bank Credit Agreements is paid in full, the agent (or the institution performing similar functions) under the Bank Credit Agreement under which the greatest aggregate principal amount of Indebtedness is outstanding and (ii) if all Indebtedness under the Bank Credit Agreements has been paid in full, the Person (or representative thereof) holding the greatest amount of Subordinated Note Senior Debt. "Subordinated Note Senior Debt" of any Person means and includes all principal of, premium and interest on and other Obligations with respect to (i) the Bank Credit Agreements, (ii) the Notes and (iii) any other Indebtedness of the Company (other than as otherwise provided in this definition), whether outstanding on the date of issuance of the Subordinated Notes or thereafter incurred; provided, however, that Subordinated Note Senior Debt shall not include (a) any Indebtedness which by the terms of the instrument creating or evidencing the same is pari passu with or subordinated or junior in right of payment to the Subordinated Notes or the Subordinated Note Subsidiary Guarantees or (b) that portion of any Indebtedness incurred in violation of the Subordinated Note Indenture. Notwithstanding the foregoing, Subordinated Note Senior Debt shall not include (1) Indebtedness evidenced by the Subordinated Notes, (2) Indebtedness which when incurred and without respect to any election under Section 1111(b) of the United States Bankruptcy Code is without recourse to such Person, (3) any liability for foreign, federal, state, local or other taxes owed or owing by such Person, (4) Indebtedness of such Person to the extent such liability constitutes Indebtedness to a Subsidiary or any other Affiliate of such Person or any of such Affiliate's subsidiaries, (5) Indebtedness for the purchase of goods or materials in the ordinary course of business except purchase-money Indebtedness secured by a security interest in or Lien upon the goods or materials purchased or (6) Indebtedness owed by such Person for compensation to employees or for services. DESCRIPTION OF THE COMPANY'S CAPITAL STOCK The authorized capital stock of the Company consists of 10,000,000 shares of Common Stock of which 978,300 shares of Common Stock are outstanding, 939,168 shares of which are owned by Leslie B. Otten and 39,132 shares of which are owned by purchasers of the Units. The holders of Common Stock are entitled to one vote per share on all matters to be voted upon by the shareholders. The holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available for that purpose. In the event of a liquidation, dissolution or winding up of the Company, the holders of the Common Stock are entitled to share ratably in all assets remaining after payment of liabilities. The Common Stock has no preemptive or conversion rights or other subscription rights. All outstanding shares of Common Stock are fully paid and nonassessable. Neither the Articles of Incorporation nor the Bylaws of the Company provide for cumulative voting in the election of directors. The Articles of Incorporation and the Bylaws of the Company may be amended by the vote of the holders of a majority of the outstanding Common Stock. DESCRIPTION OF OTHER INDEBTEDNESS In addition to the Notes and the Subordinated Notes, the Company and its subsidiaries, after giving effect to the acquisition of the 49% interest in Sugarloaf and the divestitures of the Waterville Valley and Mt. Cranmore resorts, pursuant to the Consent, at July 28, 1996 would have outstanding indebtedness totaling approximately $68.4 million. This indebtedness includes (i) $34.4 million in borrowings under the Senior Credit Facility (under which approximately $30.6 million would have been available for future borrowing), (ii) an estimated $15.7 million of pre-existing indebtedness of SKI and its subsidiaries, and (iii) $13.1 million of pre-existing indebtedness of the Company. See Note 3 to Consolidated Financial Statements of SKI and Note 8 to Financial Statements of the Company. In addition to such senior indebtedness, Sunday River has outstanding a demand note in an original principal amount of $5.2 million payable to Mr. Otten. This obligation is more fully described under "Management -- Certain Transactions with Management." The Senior Credit Facility The following is a summary of the Senior Credit Facility, which does not purport to be complete and is qualified in its entirety by reference to such Senior Credit Facility, which document has been filed as an exhibit to the Registration Statement and is incorporated hereby by reference. On the closing of the Acquisition, the Company entered into the Senior Credit Facility with financial institutions for whom Fleet National Bank ("Fleet") is acting as agent. The Senior Credit Facility provides for a $65.0 million revolving credit facility (which includes a $3.5 million sub-facility for letters of credit) under which approximately $42.8 million was drawn in connection with the Acquisition and $24.7 million remained available for future borrowing at July 28, 1996. The initial advances under the Senior Credit Facility, proceeds from the issuance of the Notes and available cash were used to pay the cash purchase price payable in the Acquisition, to retire existing indebtedness of the Company and SKI, to acquire the minority interest in Sugarloaf, to fund the Pledge Account and to pay fees and expenses in connection with the Acquisition. See "The Acquisition; Antitrust Matters; Use of Proceeds." Subsequent advances may be applied to fund capital expenditures and the Company's seasonal working capital needs. Amounts available for borrowing under the Senior Credit Facility will incrementally decline to $50.0 million over the period ending July 1, 2000. The Senior Credit Facility will mature on or about December 31, 2001. The Company's obligations under the Senior Credit Facility are guaranteed by the Guarantors, and substantially all of the assets of the Guarantors have been pledged to secure such guarantee obligations. Borrowings under the Senior Credit Facility will bear interest at a rate equal to Fleet's LIBOR Rate (as defined) plus a margin of 1.5% to 2.5% per annum (dependent upon the Company's Applicable Leverage Ratio) or Fleet's Base Rate (as defined) plus a margin of up to 1.5% per annum (dependent upon the Company's Applicable Leverage Ratio (as defined)), in each case as selected by the Company. Applicable interest rates will be increased by 2.0% per annum during the continuance of any specified event of default under the Senior Credit Facility. In addition to customary fronting and other fees, the Company will pay a commitment fee of 0.5% per annum on unused availability under the Senior Credit Facility. The Company is required to pay down the amounts outstanding under the Revolving Credit Facility each year, commencing in 1997, for a 45-day period which must include March 31, to an amount declining from $25 million in 1997 to $10 million in 2000 and 2001. The Company also may make optional prepayments, in full or in part, on the Senior Credit Facility, upon up to three business days' notice. The obligation of the lenders under the Senior Credit Facility to advance funds is subject to the satisfaction of certain conditions customary in agreements of this type. In addition, the Company is subject to certain customary affirmative and negative covenants contained in the Senior Credit Facility, including, without limitation, covenants that restrict, subject to specified exceptions, (i) incurrence of additional indebtedness and other obligations; (ii) a merger or consolidation with any other person (other than pursuant to the Acquisition Agreement); (iii) asset sales; (iv) granting of liens to secure any other indebtedness (including the Notes); (v) prepayment or modification of the terms of other indebtedness (including the Notes); (vi) engaging in transactions with affiliates; (vii) giving a negative pledge in favor of any person other than the lenders; (viii) engaging in sale and leaseback transactions; (ix) amending leases, licenses and similar agreements or instruments; (x) investing funds of the Company; and (xi) making capital expenditures. Many of these covenants are more restrictive than those in favor of holders of the Notes as described herein and as set forth in the Indenture and those in favor of holders of Subordinated Notes as described herein and as set forth in the Subordinated Note Indenture. In addition, the Senior Credit Facility requires that the Company adhere to certain specified financial covenants, including minimum interest and fixed charge coverage ratios, maximum leverage ratio, minimum net worth levels and ceilings tied to the Company's Leverage Ratio (as defined) on real estate investments and real estate financing guarantees, expenditures on ski resort acquisitions and capital expenditures. The Senior Credit Facility also provides for customary events of default. Occurrence of any of such events of default could result in acceleration of the Company's obligations under the Senior Credit Facility and foreclosure on the collateral securing such obligations, with material adverse results to holders of the Notes. See "Risk Factors--Subordination of the Notes and the Subordinated Notes." The Senior Credit Facility provides for the DOJ Divestiture by requiring that all or a specified portion of the cash proceeds of the sale, including cash realized from any non-cash consideration received from the sale, be applied to permanently reduce the availability under the Senior Credit Facility. In the event the proceeds from the sale do not total an amount specified in the Senior Credit Facility, Mr. Otten will be required to contribute up to a specified amount of cash equity to the Company to be applied to reduce the amounts outstanding and available under the Senior Credit Facility. The purchase price in the existing agreement to sell both resorts exceeds this requirement. CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The following discussion is a summary of the material federal income tax considerations relevant to the purchase, ownership and disposition of the Notes and the Subordinated Notes (collectively, the "Offered Notes") by holders acquiring Offered Notes on original issue for cash, but does not purport to be a complete analysis of all potential tax effects. The discussion is based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations, Internal Revenue Service ("IRS") rulings and pronouncements and judicial decisions all in effect as of the date hereof, all of which are subject to change at any time, and any such change may be applied retroactively in a manner that could adversely affect a holder of the Offered Notes. The discussion does not address all of the federal income tax consequences that may be relevant to a holder in light of such holder's particular circumstances or to holders subject to special rules, such as certain financial institutions, insurance companies, dealers in securities, foreign corporations, nonresident alien individuals and persons holding the Offered Notes as part of a "straddle," "hedge" or "conversion transaction." Moreover, the effect of any applicable state, local or foreign tax laws is not discussed. The discussion deals only with Offered Notes held as "capital assets" within the meaning of section 1221 of the Code. The Company has not sought and will not seek any rulings from the IRS with respect to the positions of the Company discussed below. There can be no assurance that the IRS will not take a different position concerning the tax consequences of the purchase, ownership or disposition of the Offered Notes or that any such position would not be sustained. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW TO THEIR PARTICULAR SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS. Stated Interest on the Offered Notes Stated interest on the Notes will be taxable to a holder as ordinary interest income at the time it accrues or is received in accordance with the holder's method of accounting for federal income tax purposes. As discussed below, stated interest on the Subordinated Notes will be treated as original issue discount and will be included in income as such. Original Issue Discount The Offered Notes will be issued with original issue discount for federal income tax purposes. A holder generally is required to include original issue discount, if any, in gross income as it accrues, regardless of the holder's method of accounting for federal income tax purposes. Accordingly, each holder will be required to include amounts in gross income in advance of the receipt of the cash to which such income is attributable. The amount of original issue discount with respect to each Offered Note is equal to the excess of the "stated redemption price at maturity" of such Offered Note over the "issue price" of the Offered Note. The stated redemption price at maturity of each Offered Note will include all cash payments required to be made thereunder until maturity, other than payments of "qualified stated interest," which is defined generally as interest that is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually at a single fixed rate. Because there will be no periodic payments of cash interest on the Subordinated Notes prior to January 15, 2002, none of the interest paid on the Subordinated Notes will constitute qualified stated interest. The issue price of a Note will be equal to the first price at which a substantial amount of Notes is sold to the public for money (excluding sales to underwriters, placement agents or wholesalers, etc.). The issue price of a Subordinated Note will be equal to that portion of the issue price of the Unit of which such Subordinated Note is a part that is allocable to the Subordinated Note as described in the next paragraph. Accordingly, each Subordinated Note will be issued subject to a substantial amount of original issue discount. Because the original purchasers of the Subordinated Notes also acquired Unit Shares, each Subordinated Note is likely to be treated for federal income tax purposes as having been issued as part of an "investment unit" consisting of the Subordinated Note and associated Unit Share. The issue price of an investment unit consisting of the Subordinated Note and associated Unit Share will be the first price at which a substantial amount of Units are sold to the public for money (excluding sales to underwriters, placement agents or wholesalers, etc.). The "issue price" of an investment unit is allocated between its component parts based on their relative fair market values. The Company will allocate the issue price of the Units between the Subordinated Notes and the Unit Shares in accordance with their relative fair market values on the issue date; that allocation is not, however, binding on the IRS. A holder of a Unit must use the Company's allocation unless the holder discloses on its federal income tax return that it plans to use an allocation that is inconsistent with the issuer's allocation. Taxation of Original Issue Discount Each holder of an Offered Note will be required to include in gross income an amount equal to the sum of the "daily portions" of the original issue discount of the Offered Note for all days during each taxable year in which the holder holds the Offered Note. The daily portions of original issue discount will be determined on a constant interest rate basis by allocating to each day during the taxable year in which the holder holds the Offered Note a pro rata portion of the original issue discount thereon that is attributable to the "accrual period" in which such day is included. The amount of the original issue discount attributable to each full accrual period will be the product of the "adjusted issue price" of the Offered Note at the beginning of such accrual period and the "yield to maturity" of the Offered Note (adjusted to reflect the length of the accrual period), less the amount of any qualified stated interest allocable to the accrual period. The adjusted issue price of an Offered Note at the beginning of an accrual period is the original issue price of the Offered Note plus the aggregate amount of original issue discount that has accrued in all prior accrual periods, less any cash payments on the Offered Note on or before the first day of such accrual period (other than payments of qualified stated interest). The yield to maturity is the discount rate that, when used in computing the present value of all principal and interest payments to be made on the Offered Note, produces an amount equal to its issue price. The accrual period generally is the six-month period ending on the day in each calendar year corresponding to the day before the maturity date of the Offered Note or the date six months before such date. The initial accrual period of an Offered Note is the short period beginning on the issue date and ending on the day before the first day of the first full accrual period. The amount of original issue discount attributable to an initial short accrual period may be computed under any reasonable method. Sale or Retirement of an Offered Note In general, a holder of an Offered Note will recognize gain or loss upon the sale, retirement or other taxable disposition of such Offered Note in an amount equal to the difference between (a) the amount of cash and the fair market value of property received in exchange therefor (except to the extent attributable to the payment of accrued interest or original issue discount, which generally will be taxable to a holder as ordinary income) and (b) the holder's adjusted tax basis in such Offered Note. A holder's tax basis in an Offered Note generally will be equal to the price paid for such Offered Note, increased by the amount of original issue discount included in gross income prior to the date of disposition, and decreased by the amount of any payments on such Offered Note (other than payments of qualified stated interest) prior to disposition. Any gain or loss recognized on the sale, retirement, or other taxable disposition of an Offered Note generally will be capital gain or loss. Such capital gain or loss generally will be long-term capital gain or loss if the Offered Note had been held for more than one year. Holders should be aware that the resale of an Offered Note may be affected by the "market discount" rules of the Code under which a subsequent purchaser of an Offered Note acquiring the Offered Note at a market discount generally would be required to include as ordinary income a portion of the gain realized upon the disposition or retirement of such Offered Note to the extent of the market discount that has accrued while the debt instrument was held by such subsequent purchaser. Backup Withholding and Information Reporting A holder of an Offered Note may be subject to backup withholding at a rate of 31% with respect to interest and original issue discount on and gross proceeds upon sale or retirement of an Offered Note unless such holder (i) is a corporation or other exempt recipient and, when required, demonstrates that fact, or (ii) provides, when required, a correct taxpayer identification number, certifies that backup withholding is not in effect and otherwise complies with applicable requirements of the backup withholding rules. Backup withholding is not an additional tax; any amounts so withheld are creditable against the holder's federal income tax, provided the required information is provided to the IRS. The Company is required to furnish certain information to the IRS, and will furnish annually to record holders of Offered Notes, information with respect to interest and original issue discount accruing during the calendar year. That information will be based upon the adjusted issue price of the Offered Note as if the holder were the original holder of the Offered Note. Holders who purchase Offered Notes for an amount other than the adjusted issue price and/or on a date other than the end of an accrual period will be required to determine for themselves the amount of original issue discount, if any, they are required to include in gross income for federal income tax purposes. Deductibility of Original Issue Discount The deduction by the Company in respect of original issue discount accrued with respect to the Subordinated Notes will be limited in part and deferred in part because the Subordinated Notes will be "applicable high yield discount obligations." The Subordinated Notes are applicable high yield discount obligations because, among other things, the yield to maturity of the Subordinated Notes exceeds the sum of the applicable federal long-term rate (a rate published by the IRS each month for application during the following calendar month) in effect at the time of issuance of the Subordinated Notes (the "AFR") plus five percentage points. Accordingly, (i) if the yield to maturity of the Subordinated Notes exceeds the sum of the AFR plus six percentage points (such excess referred to below as the "Disqualified Yield"), the deduction for interest (including original issue discount) accrued on the Subordinated Notes will be permanently disallowed to the extent such interest or original issue discount is attributable to the Disqualified Yield, and such interest (including original issue discount) will be treated as dividends to corporate holders of the Subordinated Notes for purposes of the dividends- received deduction (to the extent that such amounts would have been treated as dividends had they been distributions made by the Company with respect to its stock) and (ii) the remainder of the original issue discount on the Subordinated Notes will not be deductible by the Company until paid. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFERS In the opinion of Pierce Atwood, counsel to the Company ("Counsel"), the following sets forth the material anticipated federal income tax consequences of the Exchange Offers. The following summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the final, temporary and proposed regulations promulgated thereunder, and administrative rulings and judicial decisions now in effect, all of which are subject to change (possibly with retroactive effect) or different interpretations. Holders should note that Counsel's opinion is not binding on the Internal Revenue Service (the "Service") and there can be no assurance that the Service will take a similar view with respect to the tax-consequences described below. No ruling has been or will be requested by the Company from the Service on any tax matters relating to the New Notes or the New Subordinated Notes. This summary is not intended to be applicable to all categories of investors, some of which, such as dealers in securities, banks, insurance companies, tax-exempt organizations and foreign persons, may be subject to special rules. ALL HOLDERS OF NOTES AND/OR SUBORDINATED NOTES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF EXCHANGING OLD NOTES FOR NEW NOTES AND/OR OLD SUBORDINATED NOTES FOR NEW SUBORDINATED NOTES. The exchange of the New Notes for the Old Notes and the exchange of the New Subordinated Notes for the Old Subordinated Notes pursuant to the Exchange Offers should not give rise to taxable income to the respective Holders thereof for federal income tax purposes. For a summary of the material anticipated federal income tax consequences of the purchase, ownership and disposition of the Notes and the Subordinated Notes, see "Certain Federal Income Tax Considerations." PLAN OF DISTRIBUTION Each broker-deal that receives New Notes or New Subordinated Notes for its own account in connection with either of the Exchange Offers must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes or New Subordinated Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by Participating Broker- Dealers during the period referred to below in connection with resales of New Notes or New Subordinated Notes received in exchange for Old Notes or Old Subordinated Notes, as applicable, if such Old Notes or Old Subordinated Notes were acquired by such Participating Broker-Dealers for their own accounts as a result of market-making activities or other trading activities. The Company has agreed that this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker- Dealer in connection with resales of such New Notes or New Subordinated Notes for the lesser of (i) a period of 180 days from the date on which the Registration Statement of which this Prospectus is a part is declared effective or (ii) such period of time as such Participating Broker-Dealers must comply with the prospectus delivery requirements of the Securities Act in order to resell such New Notes or New Subordinated Notes received in exchange for Old Notes or Old Subordinated Notes acquired for their own accounts as a result of such market-making or other trading activities (subject to extension under certain limited exceptions described herein). See "The Exchange Offers - Resales of New Notes and New Subordinated Notes." The Company will not receive any cash proceeds from the issuance of the New Notes and New Subordinated Notes offered hereby. New Notes and New Subordinated Notes received by broker-dealers for their own accounts in connection with either of the Exchange Offers 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 New Notes or New Subordinated 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 New Notes or New Subordinated Notes. Any broker-dealer that resells New Notes or New Subordinated Notes that were received by it for its own account in connection with either of the Exchange Offers and any broker or dealer that participates in a distribution of such New Notes or New Subordinated Notes may be deemed to be an "underwriter" within the meaning of the Securities Act, and any profit on any such resale of New Noes or New Subordinated Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. Each of the Notes Letter of Transmittal and the Subordinated Notes 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. LEGAL MATTERS The legality under state law of the New Notes and the New Subordinated Notes (if and when issued) will be passed upon for the Company by Pierce Atwood, Portland, Maine. The legality of the Guarantees being issued in connection with the Exchange Offers will be passed upon for the Guarantors as follows: as to matters of Maine law and Delaware law, by Pierce Atwood, Portland, Maine; as to matters of New Hampshire law, by Wadleigh, Starr, Peters, Dunn & Chiesa, and as to matters of Vermont law, by Reiber, Kenlan, Schwiebert, Hall & Facey. EXPERTS The consolidated balance sheet of the Company as of July 30, 1995 and July 28, 1996 and the consolidated statements of income, of changes in stockholders' equity and of cash flows of the Company for the two years ended July 28, 1996 included herein have been so included in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The combined statements of income, stockholder's equity and cash flows of the Company for the year ended July 31, 1994 included herein have been so included in reliance on the report of Berry, Dunn, McNeil & Parker, independent accountants, given on the authority of said firm as experts in auditing and accounting. The consolidated balance sheet of SKI as of July 31, 1994 and 1995, and the consolidated statements of income, stockholders' equity and cash flows of SKI for each of the three years in the period ended July 31, 1995 included herein have been so included in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The consolidated statements of operations, stockholder's equity and cash flows of Sugarbush Resort Corporation for the period from June 1, 1994 through May 15, 1995 and for the years ended May 31, 1994 and May 31, 1993 included herein have been so included in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. As of September 1, 1995, the Company and its independent accountants, Berry, Dunn, McNeil & Parker, mutually agreed that the engagement of such accounting firm would be terminated, based on their shared views as to the Company's rapidly expanding needs for accounting, tax and related services. Such firm's reports on the Company's financial statements for the two years preceding such decision did not contain any adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the two fiscal years of the Company immediately preceding such decision and during the subsequent interim period prior to such decision, there were no disagreements with such firm on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. Price Waterhouse LLP was engaged as the Company's independent accountants on September 1, 1995. INDEMNIFICATION The Company is a Maine corporation. Section 719 of the Maine Business Corporation Act (13-A M.R.S.A. 101, et seq.) authorizes the indemnification by a Maine corporation of any person who is a party or is threatened to be made a party to any action, suit or proceeding by reason of that person's status as a director, officer, employee or agent of the corporation; provided that no such indemnification may be provided for any person if he or she shall have been finally adjudicated (i) not to have acted honestly or in the reasonable belief that his or her action was in or not opposed to the best interests of the corporation or its shareholders, or (ii) in any criminal proceeding, to have had reasonable cause to believe his or her conduct was unlawful. In the case of actions brought by or on behalf of the corporation, indemnification may only be provided if the court determines that such person is fairly and reasonably entitled to the requested indemnification. Indemnification must be provided to the extent that a director, officer, employee or agent has been successful, on the merits or otherwise, in defense of an action of the type described in the second sentence of this paragraph. The Bylaws of the Company provide that it shall indemnify any person who is made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he or she is or was a director or officer of the Company, and may indemnify any employee or agent of the Company in such circumstances, against expenses, including attorneys fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding. No indemnification may be provided for any person who shall have been finally adjudicated not to have acted honestly or in the reasonable belief that his or her action was in or not opposed to the best interests of the Company or who had reasonable cause to believe that his or her conduct was unlawful. Indemnification must be provided to any director, officer, employee or agent of the Company to the extent such person has been successful, on the merits or otherwise, in defense of any action or claim described above. Any indemnification under this provision of the Bylaws, unless required under the Bylaws or ordered by a court, can be made only as authorized in each specific case upon a determination by a majority of disinterested directors or by independent legal counsel or by the shareholders that such indemnification is appropriate under the standard set forth in the preceding sentence. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. OTHER MATTERS No person has been authorized to give any information or to make any representations, other than those contained in this Prospectus. If given or made, such information or representation may not be relied upon as having been authorized by the Company. The Company is not aware of any jurisdiction in which the making of the Exchange Offers is not in compliance with applicable law. If the Company becomes aware of any jurisdiction in which the making of the Exchange Offers would not be in compliance with applicable law, the Company will make a good faith effort to comply with such law. If, after such good faith effort, the Company cannot comply with any such law, the Notes Exchange Offer or the Subordinated Notes Exchange Offer, as applicable, will not be made to (nor will tenders be accepted from or on behalf of) holders of the Old Notes or Old Subordinated Notes, as applicable, residing in such jurisdictions. Neither the delivery of this Prospectus nor any distribution of securities hereunder shall under any circumstances create any implication that the information contained herein is correct as of any time subsequent not the date hereof or that there has been no change in the information set forth herein or in the affairs of the Company since the date hereof. EXCHANGE AGENT Holders of Old Notes or Old Subordinated Notes who qualify to participate in the Exchange Offers and who wish to accept the applicable Exchange Offer should either (a) request their broker, dealer, commercial bank, trust company or nominee to effect the transaction for them or (b) complete and sign the applicable Letter of Transmittal, having their signatures guaranteed if required by the applicable Letter of Transmittal, and forward such Letter of Transmittal together with such Old Notes or Old Subordinated Notes, as the case may be, and all other documents required by the applicable Letter of Transmittal to the Exchange Agent at the following address: BY MAIL: (insured or registered recommended) United States Trust Company of New York P.O. Box 843 Peter Cooper Station New York, New York 10276 Attention: Corporation Trust BY OVERNIGHT EXPRESS: United States Trust Company of New York 770 Broadway, 13th Floor New York, New York 10003 Attention: Corporate Trust Services Window TO CONFIRM BY TELEPHONE OR FOR INFORMATION: (800) 548-6565 FACSIMILE TRANSMISSION: (for eligible institutions only) (212) 420-6152 [THIS PAGE INTENTIONALLY LEFT BLANK] INDEX TO FINANCIAL STATEMENTS
Page American Skiing Company Report of Independent Accountants -- July 30, 1995 and F-2 July 28, 1996 and for the years then ended Report of Independent Accountants -- For the year ended F-3 July 31, 1994 Consolidated Balance Sheet -- July 30, 1995 and July 28, F-4 1996 Consolidated Statement of Operations -- For the years F-5 ended July 31, 1994, July 30, 1995, and July 28, 1996 Consolidated Statement of Changes in Stockholders' Equity - -- For the years ended July 31, 1994, July 30, 1995, and F-6 July 28, 1996 Consolidated Statement of Cash Flows -- For the years ended July 31, 1994, July 30, 1995, and July 28, F-7 1996 Notes to Consolidated Financial Statements F-8 S-K-I Ltd. Report of Independent Accountants F-27 Consolidated Balance Sheet -- July 31, 1994 and 1995 F-28 Consolidated Statement of Income -- For the years ended F-29 July 31, 1993, 1994, and 1995 Consolidated Statement of Changes in Stockholders' Equity - -- F-30 For the three years ended July 31, 1995, Consolidated Statement of Cash Flows -- For the years F-31 ended July 31, 1993, 1994, and 1995 Notes to Consolidated Financial Statements F-32 Consolidated Balance Sheet -- April 28, 1996 (unaudited) F-39 Consolidated Statement of Income -- For the nine months ended April 30, 1995 F-40 and April 28, 1996 (unaudited) Consolidated Statement of Cash Flows -- For the nine months ended April 30, 1995 F-41 and April 28, 1996 (unaudited) Notes to (Unaudited) Condensed Consolidated Financial F-42 Statements Sugarbush Resort Corporation Report of Independent Accountants F-44 Consolidated Statement of Operations - For the two years ended May 31, 1994 F-45 and the period from June 1, 1994 through May 15, 1995 Consolidated Statement of Stockholder's Equity - For the two years ended May 31, 1994 and the period from June 1, F-46 1994 through May 15, 1995 Consolidated Statement of Cash Flows - For the two years ended May 31, 1994 F-47 and the period from June 1, 1994 through May 15, 1995 Notes to Consolidated Financial Statements F-48
Report of Independent Accountants To The Stockholders of American Skiing Company In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of changes in stockholders' equity and of cash flows present fairly, in all material respects, the financial position of American Skiing Company and its subsidiaries at July 28, 1996 and July 30, 1995, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Boston, MA October 28, 1996 REPORT OF INDEPENDENT ACCOUNTANTS To The Stockholders of American Skiing Company We have audited the accompanying combined statements of income, stockholder's equity and cash flows of American Skiing Company for the year ended July 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits of the combined statements of income, stockholder's equity and cash flows provide a reasonable basis for our opinion. In our opinion the combined statements of income, stockholder's equity and cash flows referred to above present fairly, in all material respects, the results of operations and cash flows of American Skiing Company for the year ended July 31, 1994 in conformity with generally accepted accounting principles. BERRY, DUNN, McNEIL & PARKER Portland, Maine December 22, 1995 American Skiing Company Consolidated Balance Sheet
July 30, 1995 July 28, 1996 Assets Current assets Cash $1,362,000 $3,185,000 Restricted cash 309,000 902,000 Investments held in escrow -- 14,497,000 Accounts receivable, net 1,314,000 2,458,000 Inventory 1,381,000 5,025,000 Prepaid expenses 570,000 3,371,000 Prepaid loan fees -- 1,056,000 Property developed for sale 3,854,000 1,331,000 Assets held for sale -- 14,921,000 Deferred tax assets 95,000 588,000 Total current assets 8,885,000 47,334,000 Property and equipment, net 62,213,000 227,470,000 Goodwill -- 6,540,000 Prepaid loan fees -- 7,911,000 Long-term investments -- 4,343,000 Other assets -- 2,934,000 Assets held for sale -- 1,756,000 Note receivable, affiliate 387,000 444,000 Deferred tax assets 949,000 -- Total assets $ 72,434,000 $ 298,732,000 Liabilities and Stockholders' Equity Current liabilities Line of credit and current portion of $ 7,887,000 $ 22,893,000 long-term debt Accounts payable and accrued expenses 4,010,000 13,406,000 Accrued leasehold 490,000 1,660,000 Accrued interest on subordinated -- 1,491,000 notes and debentures Other liabilities 1,350,000 -- Due to Stockholder 186,000 175,000 Deposits and deferred revenue 537,000 3,541,000 Income taxes payable 303,000 671,000 Demand note, stockholder -- 5,200,000 Total current liabilities 14,763,000 49,037,000 Deferred income taxes -- 30,695,000 Long-term debt, excluding current 27,169,000 41,035,000 portion Subordinated notes and debentures -- 146,792,000 Other long-term liabilities -- 6,778,000 Minority interest -- 2,492,000 Total liabilities 41,932,000 276,829,000 Stockholders' Equity Common stock (See Note 2). 116,000 10,000 Additional paid-in capital 1,660,000 3,762,000 Retained earnings 28,726,000 18,131,000 Total stockholders' equity 30,502,000 21,903,000 Total liabilities and $ 72,434,000 $ 298,732,000 stockholders'equity Total liabilities and stockholders' equity
The accompanying notes are an integral part of these financial statements. American Skiing Company Consolidated Statement of Operations
Year Ended July 31, 1994 July 30, 1995 July 28, 1996 Revenues: Ski and lodging $ 26,544,000 $ 46,794,000 $63,489,000 Real estate 6,682,000 7,953,000 9,933,000 Total revenues 33,226,000 54,747,000 73,422,000 Expenses: Cost of operations including 11,505,000 21,730,000 31,137,000 wages, maintenance and supplies Cost of real estate sold 3,179,000 3,994,000 5,844,000 Real estate and payroll 1,265,000 1,736,000 2,544,000 taxes Utilities 1,854,000 4,132,000 5,819,000 Insurance 1,163,000 2,127,000 2,299,000 Selling, general and 5,940,000 9,394,000 11,289,000 administrative Depreciation and 2,421,000 3,910,000 6,783,000 amortization Total operating 27,327,000 47,023,000 65,715,000 expenses Income from operations 5,899,000 7,724,000 7,707,000 Other Expenses: Commitment fee -- -- 1,447,000 Interest expense 1,026,000 2,205,000 4,699,000 Income before provision for income taxes and 4,873,000 5,519,000 1,561,000 minority interest in loss of subsidiary Provision for income taxes -- (400,000) (3,906,000) Minority interest in loss of subsidiary -- -- 108,000 Net income (loss) $ 4,873,000 $ 5,119,000 $(2,237,000 ) Net loss per weighted average share outstanding (942,200 shares). (See Note 3). $ (2.37)
The accompanying notes are an integral part of these financial statements. American Skiing Company Consolidated Statement of Changes in Stockholders' Equity
Additional Common stock Paid-in Retained Total capital earnings Balance at July 25, $ 116,000 $722,000 $22,316,000 $ 23,154,000 1993 Net income -- -- 4,873,000 4,873,000 Distributions to -- -- (2,728,000) (2,728,000) stockholder Contributions -- 913,000 -- 913,000 Balance at July 31, 1994 116,000 1,635,000 24,461,000 26,212,000 Net income -- -- 5,119,000 5,119,000 Distributions to -- -- (854,000) (854,000) stockholder Contributions -- 25,000 -- 25,000 Balance at July 30, 1995 116,000 1,660,000 28,726,000 30,502,000 Net loss -- -- (2,237,000) (2,237,000) Distributions to -- -- (8,358,000) (8,358,000) stockholder Contributions -- 1,020,000 -- 1,020,000 Conversion of affiliate companies common stock to American Skiing Company common stock (106,000) 106,000 -- -- Issuance of shares of common stock (See Note 10). -- 976,000 -- 976,000 Balance at July 28, 1996 $ 10,000 $3,762,000 $18,131,000 $ 21,903,000 The accompanying notes are an integral part of these financial statements.
American Skiing Company Consolidated Statement of Cash Flows Year ended July 31, 1994 July 30, 1995 July 28, 1996 Cash flows from operating activities Net income (loss) $ 4,873,000 $5,119,000 $(2,237,000) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Minority interest in net loss of -- -- (108,000) subsidiary Depreciation and amortization 2,543,000 3,910,000 6,783,000 Amortization of debt discount -- -- 435,000 Income tax expense on conversion of S corporations to C corporations C corporations -- -- 5,552,000 Deferred income taxes, net -- (488,000) (1,940,000) Decrease (increase) in assets: Accounts receivable (202,000) (684,000) 481,000 Inventory (226,000) (876,000) (373,000) Prepaid expenses 65,000 (324,000) (648,000) Properties developed for (662,000) 3,377,000 2,523,000 resale Note receivable and other 2,000 54,000 (836,000) assets Increase (decrease) in liabilities: Accounts payable and accrued (847,000) 2,157,000 (3,606,000) expenses Other liabilities -- -- 490,000 Deposits and deferred revenue (108,000) 45,000 944,000 Income taxes payable -- 303,000 5,000 Net cash provided by operating 5,438,000 12,593,000 7,465,000 activities Cash flows from investing activities Payments for purchases of (3,060,000) (1,819,000) (97,079,000) businesses, net of cash acquired Proceeds from insurance settlement 1,817,000 -- -- Long-term investments -- -- (450,000) Capital expenditures (7,798,000) (12,024,000) (25,054,000) Net cash used by investing (9,041,000) (13,843,000) (122,583,000) activities Cash flows from financing activities Net proceeds from senior credit -- -- 40,301,000 facility Net proceeds from (payments of) line (6,961,000) 2,820,000 (5,776,000) of credit Net proceeds from (payments of) 15,915,000 1,150,000 (17,101,000) revolving credit line Proceeds from subordinated notes and debentures, net of -- -- 121,126,000 investments held in escrow Prepaid loan fees -- -- (8,485,000) Proceeds from long-term debt 671,000 84,000 1,819,000 Payments of long-term debt (3,758,000) (765,000) (13,625,000) Payments to former stockholders (57,000) (61,000) (156,000) Distributions to stockholder (2,277,000) (854,000) (3,158,000) Capital contribution 231,000 25,000 1,020,000 Issuance of shares of common stock -- -- 976,000 Net cash provided by financing 3,764,000 2,399,000 116,941,000 activities Net increase in cash 161,000 1,149,000 1,823,000 Cash, beginning of year 52,000 213,000 1,362,000 Cash, end of year $ 213,000 $1,362,000 $ 3,185,000 Cash paid for interest $ 1,192,000 $1,056,000 2,408,000 Cash paid for income taxes $ -- $ -- 15,000 Supplemental Disclosure of Noncash Activities: Property acquired under capitalized $ 646,000 $1,050,000 $ 435,000 leases Liabilities assumed associated with $ 2,616,000 $9,254,000 $ 58,497,000 purchased companies Deferred tax liability associated $ -- $ -- $ 28,372,000 with purchased companies Land contributed by stockholder $ 682,000 $ -- $ -- Note payable issued for distribution $ -- $ -- $ 5,200,000 to stockholder
The accompanying notes are an integral part of these financial statements. 1. Basis of Presentation American Skiing Company (the "Company") is a group of companies whose primary function is to develop and operate ski areas. The Company operates predominantly in a single industry segment, which is the development and operation of ski areas. American Skiing Company provides ski recreation and related services to skiers, a single customer group. Prior to the acquisition of S-K-I Limited, Inc. on June 28, 1996 (See Note 3), the Company was a combined group which included the following companies: Sunday River Skiway Corporation ("SRSC", a Maine C corporation), operates the Sunday River Ski Resort in Newry, Maine. SRSC also engages in real estate development at the ski resort as a means of establishing the necessary lodging amenities required in a destination resort, as well as to generate supplemental income. Sunday River Ltd. ("SRL", a Maine C corporation), operates the Summit Hotel at Sunday River. Perfect Turn, Inc. ("PT", a Maine C corporation), operates the skier development programs at each of the Company's ski resorts and franchises the program to other nonaffiliated resorts. Sunday River Transportation Co. ("SRTC", a Maine C corporation), operates the Silver Bullet train. Sugarbush Resorts Holdings, Inc. ("SRHI", a Vermont C corporation), operates the ski resort, golf course and inn at the Sugarbush Resort in Warren, Vermont. Club Sugarbush, Inc. ("CS", a Vermont C corporation), operates a health club at the Sugarbush Resort. CS is a wholly owned subsidiary of SRHI. Sugarbush Leasing Company (a Vermont C corporation), is an inactive wholly owned subsidiary of SRHI. Sugarbush Restaurants, Inc. (a Vermont C corporation), owns various operating licenses for Sugarbush operations and is a wholly owned subsidiary of SRHI. Mountain Water Co. ("MWC", a Vermont C corporation), operates a water utility at the Sugarbush Resort. MWC is a wholly owned subsidiary of SRHI. Mountain Waste Water Co. ("MWWC", a Vermont C corporation), operates a sewage treatment plant at the Sugarbush Resort. MWWC is a wholly owned subsidiary of SRHI. LBO Holding, Inc. ("LBO", a Maine C corporation), operates the Attitash/Bear Peak Ski Resort in Bartlett, New Hampshire. Cranmore, Inc. ("Cranmore", a Maine C corporation), operates the Mt. Cranmore Ski Resort in North Conway, New Hampshire. Cranmore is a wholly owned subsidiary of LBO. See Notes 3 and 4. On June 28, 1996, the Company consummated a transaction with S-K-I Limited, Inc. ("S-K-I") in which the Company purchased from the former shareholders all of the shares of outstanding S- K-I common stock for $18.00 per share. Simultaneous with the acquisition of S-K-I and the contribution of all of the outstanding capital stock of the corporations comprising Sunday River, Sugarbush, Attitash/Bear Peak and Mt. Cranmore to the Company, the Company became a consolidated entity. See Note 3. 1. Basis of Presentation (continued) The acquired S-K-I companies which are included in the Company's consolidated financial statements as of July 28, 1996 include: S-K-I Limited ("S-K-I", a Delaware C corporation) is the corporate holding company for the former S-K-I entities. Killington, Ltd. ("Killington", a Vermont C corporation) operates the ski resort, golf course, and lodging facilities of Killington Resort in Killington, Vermont. Mount Snow Ltd. ("Mt. Snow", a Vermont C corporation) operates the ski resort, golf course, and lodging facilities of the Mt. Snow/Haystack Resort in Brattleboro, Vermont. Waterville Valley Ski Area, Ltd. ("Waterville", a New Hampshire C corporation) operates the Waterville Valley Ski resort and lodging facilities in Waterville Valley, NH. See Note 3. Sugarloaf Mountain Corporation ("Sugarloaf", a Maine C corporation) operates the ski resort, golf course, and lodging facilities of Sugarloaf Resort in Carrabassett Valley, Maine. Killington, Mt. Snow, and Waterville are each wholly-owned subsidiaries of S-K-I at July 28, 1996, and Sugarloaf is a 51% owned subsidiary at that date. The Company purchased the remaining 49% minority interest in Sugarloaf on August 30, 1996. See Note 3. 2. Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of American Skiing Company (see Note 1). All significant intercompany accounts and transactions have been eliminated. Significant accounting policies followed in preparing these consolidated financial statements are presented below. Fiscal Year The Company's fiscal year is a fifty-two week or fifty-three week period ending on the Sunday nearest the end of July. The periods for 1994, 1995 and 1996 consisted of fifty-three, fifty- two and fifty-two weeks, respectively. Restricted Cash Restricted cash represents amounts held in escrow for the buyers of properties developed for resale. The cash will be available to the Company when the properties are sold. Marketable Securities Included in other assets are U.S. Government and Agency obligations and corporate obligations. It is management's intent to hold these securities until maturity. These securities are carried at amortized cost, which approximates quoted market values at July 28, 1996. 2. Summary of Significant Accounting Policies (continued) Investments Held in Escrow Investments held in escrow consist of U.S. Treasury Notes maturing on January 15, and July 15, 1997 for payment of interest on Subordinated Notes. These T-Notes are classified as held to maturity and are carried at amortized cost which approximates quoted market values at July 28, 1996. See Note 10. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market, and consist primarily of retail goods, food and beverage products and mountain operating supplies. Property and Equipment Property and equipment are recorded at cost and are depreciated by the straight-line method over the assets' estimated useful lives which generally range from 9 to 40 years for buildings, 3 to 12 years for machinery and equipment and 10 to 50 years for leasehold improvements, lifts, lift lines and trails. Assets under capital lease are depreciated over the shorter of their useful lives or the respective lease lives. Intangibles Resulting from Business Acquisitions The Company has classified as goodwill the cost in excess of fair value of the net assets (including tax attributes) of companies acquired in purchase transactions. Goodwill is being amortized using the straight-line method over 40 years. Amortization of goodwill charged to continuing operations amounted to $14,000 for 1996. Prepaid loan fees are amortized on a straight-line basis over their loan terms ranging from five to ten years. Amortization expense of prepaid loan fees amounted to $81,000 for 1996. Revenue Recognition The Company recognizes revenue at the point of service, except for real property sales (see Note 5). Revenue includes sales of lift tickets, tuition from ski schools, sales from restaurants, bars and retail shops, and real estate rentals and sales of real property. Interest Interest is expensed as incurred except when it is capitalized in conjunction with major capital additions and development of properties for resale. The amounts of interest capitalized are determined by applying current interest rates to the funds required to finance the construction. Employee Benefits SRSC has a profit sharing plan pursuant to Section 401(k) of the Internal Revenue Code, whereby participants may contribute a percentage of compensation. SRSC will match ten percent of participant contributions up to one percent of participant compensation and may also make profit-sharing contributions to the plan at the discretion of the Board of Directors. LBO temporarily assumed a defined contribution plan of the former Mt. Attitash Lift Corporation. Subsequent to July 31, 1995 the plan was terminated. Former employees were paid out and existing employee benefits were rolled into a separate savings plan pursuant to Section 401(k) of the Internal Revenue Code which the employees of SRHI were already able to participate in. Pursuant to this plan, which LBO and SRHI employees are now both eligible to participate in, the employer will match twenty-five percent of employee contributions up to 4% of annual salary. The plans' 1994, 1995 and 1996 contribution expenses of $16,000, $107,000 and $87,000, respectively, are included in "cost of operations including wages, maintenance, and supplies". 2. Summary of Significant Accounting Policies (continued) S-K-I has a trusteed noncontributory profit sharing retirement plan covering substantially all of its full-time employees. There have been no contributions made to the plan and charged to operations for 1996. S-K-I has a savings plan under Section 401(k) of the Internal Revenue Code. The plan allows all full-time employees to defer up to 15% of their income in an amount up to $9,240 on a pretax basis. Advertising Costs Advertising costs are expensed the first time the advertising takes place. The amount charged to advertising expense for the years ended July 31, 1994, July 30, 1995 and July 28, 1996 was $1,042,000, $4,518,000 and $5,693,000, respectively. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the financial statements. Actual results could differ from those estimates. Seasonality The occurrence of adverse weather conditions during key periods of the ski season could adversely affect the Company's operating results. In addition, the Company's revenues are highly seasonal in nature, with the majority of its revenues historically being generated in the second and third quarters, of which a significant portion is produced in two weeks - the Christmas and Presidents' Day vacation weeks. Earnings Per Share At July 28, 1996 there are 10,000,000 shares of common stock ($.01 par value) authorized, 978,300 shares issued and outstanding. For the year ended July 28, 1996, the computation of net loss per common share is based on the weighted average of shares outstanding during the year (942,200 for the year ended July 28, 1996). Prior to June 28, 1996, all of the Company's outstanding common stock was owned by the same individual (the "Stockholder"), and accordingly earnings per share has not been presented for fiscal years ended 1994 and 1995. Income Taxes The Company utilizes the asset and liability method of accounting for income taxes, as set forth in Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities, utilizing currently enacted tax rates. The effect of any future change in tax rates is recognized in the period in which the change occurs. As described in Note 13, certain of the Company's subsidiaries had previously elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code of 1986, as amended, with income or loss and credits passed through to the stockholder. Concurrent with the acquisition of S-K-I, these subsidiaries' election to be treated as S corporations terminated (see Note 13). The companies will continue to file separate tax returns. Recent Accounting Pronouncements 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" was recently issued and its adoption is required for fiscal years beginning after December 15, 1995. SFAS No. 121 mandates specific methodologies to be used for identifying and measuring the impairment of long-lived assets. Adoption of SFAS No. 121 is not expected to materially impact the Company's financial statements. 3. Acquisition of S-K-I On June 28, 1996, the Company acquired S-K-I (the "Acquisition") for a total purchase price, including direct costs, of $104.6 million plus liabilities assumed (excluding deferred taxes) of $58.5 million for all of the shares outstanding of S-K-I common stock. Pursuant to the transaction, S-K-I became a wholly-owned subsidiary of the Company. The acquisition was accounted for using the purchase accounting method. The consolidated financial statements contained herein reflect the results of operations of the acquired S-K-I entities subsequent to June 28, 1996 and include the balance sheet accounts of the acquired S-K-I entities at July 28, 1996. The purchase price was allocated to the fair values of S-K-I's assets and liabilities at the date of acquisition as follows:
Fair Value of Net Assets Acquired Cash $ 7,540,000 Accounts receivable, net 1,625,000 Inventory 3,271,000 Prepaid expenses 2,153,000 Property and equipment, net 163,745,000 Long-term investments 3,893,000 Goodwill 6,554,000 Other assets 2,156,000 Total assets $ 190,937,000 Accounts payable and accrued $ (16,567,000) expenses Other liabilities (5,301,000) Minority interest (2,600,000) Debt acquired (34,029,000) Deferred income taxes (27,820,000) Total liabilities $ (86,317,000) Total $ 104,620,000 Concurrent with the Acquisition, the stockholder contributed all of his outstanding capital stock of the corporations comprising Sunday River, Sugarbush, Attitash/Bear Peak and Mt. Cranmore to the Company. Pursuant to a consent decree with the U.S. Department of Justice in connection with the Merger, the Company has signed a sales agreement to divest the assets constituting the Waterville Valley and Mt. Cranmore resorts for $17.5 million. The divestitures are expected to be consummated no later than December 1, 1996. The assets held for sale of the Mt. Cranmore resort included in the accompanying consolidated balance sheet as of July 28, 1996 are approximately $4.4 million and the net income for the year ended July 28, 1996 of the Mt. Cranmore resort included in the accompanying consolidated statement of operations is approximately $251,000. The assets held for sale of the Waterville resort included in the accompanying consolidated balance sheet as of July 28, 1996 are approximately $12.3 million and the net loss for the period June 28 through July 28, 1996 of the Waterville resort included in the accompanying consolidated statement of operations is approximately $269,000. 3. Acquisition of S-K-I (continued) On August 30, 1996, the Company purchased the remaining 49% minority interest in Sugarloaf for $2.0 million cash and payment of a $600,000 prepayment penalty related to certain indebtedness of Sugarloaf. Up to $1 million additional purchase price may be paid pursuant to an earnings based formula covering the period from August 31, 1996 through November 30, 2002. The following unaudited pro forma summary presents the consolidated results of operations as if the acquisition of S-K-I, the divestitures of Waterville Valley and Mt. Cranmore, the purchase of the minority interest of Sugarloaf, and the termination of the S corporation status of the S corporations (which reflects the estimated results of operations as if SRSC, SRL, PT and SRTC had been subject to corporate income taxes) had occurred on July 31, 1995 and August 1, 1994: Year Ended Year Ended July 30, July 28, 1995 1996 Revenues $149,031,000 $171,996,000 Expenses 157,164,000 175,779,000 Net Loss $ (8,133,000) $ (3,783,000) The unaudited pro forma summary for the year ended July 30, 1995 presents the consolidated results of operations as if the acquisitions of SRHI and LBO had occurred on August 1, 1994. See Note 4. The pro forma financial information is not intended to be indicative of the results of operations that actually would have occurred had the transactions taken place at the beginning of the years presented or of future results of operations. 4. Other Business Developments and Acquisitions In July of 1994, LBO Holding, Inc. acquired substantially all of the outstanding common stock of Mt. Attitash Lift Corporation. Subsequent to this transaction, LBO merged Mt. Attitash Lift Corporation into itself, resulting in LBO's assumption of all of the assets and liabilities at the ski resort known as Attitash/Bear Peak. The purchase price of the stock was approximately $6,139,000, including direct costs of the acquisition. In May of 1995, Sugarbush Resort Holding, Inc. acquired the operating assets of the Sugarbush Resort from its former owner, Claneil Enterprises Incorporated (Claneil). In connection with this transaction, SRHI also acquired the issued and outstanding shares of stock of MWC, MWWC and CS. The purchase price of the assets acquired and liabilities assumed was approximately $8,670,000, including direct costs of the acquisition. From November of 1994 through the closing date, SRHI operated the resort and the related supporting functions pursuant to an operating lease with the seller. In connection with the SRHI acquisition, Sugarbush Land Corp. (an affiliate of American Skiing Company) acquired certain developmental land parcels adjacent to the resort from Claneil for $2,973,000. No development or sales of these parcels have occurred. 4. Other Business Developments and Acquisitions (continued) On June 30, 1995, LBO acquired the assets of Mt. Cranmore from Cranmore Country Corp. (a wholly owned subsidiary of BayBank (a Massachusetts Trust Company)). The purchase price of the assets acquired and liabilities assumed was approximately $2,403,000, including direct costs of the acquisition. The purchase price included an amount of $1,350,000 which was not paid as of July 30, 1995, and is included in other liabilities in the accompanying financial statements. This amount was paid during the year ended July 28, 1996. Each acquisition was accounted for using the purchase accounting method, and in each case virtually all of the purchase price was allocated to property and equipment. The combined financial statements contained herein reflect the operations of each acquired business subsequent to its respective acquisition date. The following unaudited pro forma summary presents the combined results of operations as if the acquisitions of SRHI and LBO occurred on July 26, 1993: Revenues $ 56,177,000 Expenses 53,036,000 Net income $ 3,141,000 5. Real Estate Operations Incidental to its ski operations, the Company engages in various real estate activities including rental services and the development of property for resale. During development, real estate taxes, insurance, interest, planning and permitting costs are capitalized. Such costs were determined based upon an allocation methodology and are relieved on a specific identification methodology as sales occur. Profit is recognized from the sale of such property at the time of closing, at which time the Company has no ongoing involvement in the specific property sold, and at least 10% (of the sales value) cash down payment has been received. The carrying value of the property developed for resale is reduced to net realizable value, if the asset carrying value is determined not to be recoverable through expected undiscounted future cash flows. Properties developed for resale consist of the following:
July 30, 1995 July 28,1996 Summit hotel units $2,848,000 $36,000 Locke mountain - 603,000 Other condominiums 1,006,000 692,000 $3,854,000 $1,331,000
6. Property and Equipment The following reflects the combination of both owned property and equipment as well as assets acquired pursuant to capital leases.
July 30, 1995 July 28, 1996 Buildings and grounds $ 16,904,000 $ 62,301,000 Machinery and equipment 21,749,000 53,422,000 Lifts and lift lines 16,858,000 56,370,000 Trails 7,441,000 11,064,000 Land improvements 2,427,000 10,819,000 65,379,000 193,976,000 Less - accumulated depreciation and amortization 14,756,000 20,737,000 50,623,000 173,239,000 Land 6,729,000 50,685,000 Construction-in-process 4,861,000 3,546,000 Net property and equipment $ 62,213,000 $227,470,000
Property and equipment includes approximately $2,422,000 and $3,518,000 of machinery and equipment held under capital leases at July 30, 1995 and July 28, 1996, respectively. Related accumulated amortization at July 30, 1995 and July 28, 1996 on property and equipment under capital leases was approximately $599,000 and $1,026,000, respectively. Amortization expense for property and equipment under capital leases and included in depreciation expense was approximately $82,000, $406,000 and $493,000 for 1994, 1995 and 1996, respectively. Depreciation expense was $2,421,000, $3,805,000 and $6,688,000 for 1994, 1995 and 1996, respectively. 7. Note Receivable, Affiliate The note receivable in the amount of $250,000 at July 30, 1995 and $265,000 at July 28, 1996 is from Ski Dorms, Inc., a company which is principally owned by the Stockholder of the Company, and is secured by a mortgage on land and building. Interest is charged at the bank's prime rate plus 1 1/2% and principal and any unpaid interest are due in December, 1999. Accrued interest receivable on this note at July 30, 1995 and July 28, 1996 was $137,000 and $179,000, respectively. 8. Demand Note, Stockholder In June 1996, prior to the Merger, SRSC delivered to the Stockholder a demand note in the principal amount of $5.2 million for the amount expected to become payable by the Stockholder in 1996 and 1997 for income taxes with respect to SRSC's pre-Merger income as an S corporation. The demand note is unsecured and bears interest at 5.4% per annum, the applicable federal rate in effect at the time of issuance. 9. Long-Term Debt Long-term debt consists of:
July 30,1995 July 28, 1996 American Skiing Company Senior Credit Facility (See Note 11) $ -- $40,301,000 Sunday River Corporation Note payable to bank with interest at bank's base rate plus 1/2%, 9.25% at July 30, 1995; the loan is a charge revolving credit loan with a maximum amount available of $17,250,000. In connection with the Merger, this note payable was paid in full with 17,101,000 -- certain proceeds from the Senior Credit Facility. Promissory note in the amount of $576,000 issued to KeyCorp Leasing Ltd. by SRTC. Principal and interest at 8.73% are payable monthly, and the final payment is due in the year 2003. The note is collateralized by an - 547,000 airplane. LBO Holding, Inc. Subordinated debentures issued to the former shareholders in Mt. Attitash Lift Corporation by LBO, with an original face value of $2,151,000 (a discount has been reflected based on the Company's incremental borrowing rate at the time). The initial coupon rate is 6% per annum, to be adjusted annually based on the revenues of LBO, as defined in the agreement. Interest is payable annually on May 1st, beginning in 1995. LBO may prepay the outstanding principal balance from time to time. Any prepayment prior to April 30, 1999 is subject to a discount, as described in the agreement. Holders of the debentures have certain redemption rights prior to May 1 of each year, subject to 1,636,000 1,709,000 limitation and discount as described in the agreement. Coupons redeemable for single day ski passes at Attitash and Sunday River issued to former shareholders of Mt. Attitash Lift Corporation by LBO, with a face value of $777,000 (a discount has been reflected based upon the coupons' cash equivalent basis at the date of issuance). The coupons expire at various dates, beginning July 31, 1996 through July 567,000 440,000 31, 2001. July 30,1995 July 28, 1996 Sugarbush Resorts Holdings, Inc. Promissory note issued to Snowridge, Inc. by SRHI, with a face value of $6,120,000 (a discount has been reflected based on an imputed interest rate of 9.5%) and an interest rate of 6.25%. Interest is payable quarterly beginning June 30, 1995. A principal payment of $620,000 is due November 1, 1995 and the remaining principal and all accrued interest outstanding are due on December 31, 1999. The note is collateralized by certain assets (as defined in the loan $5,482,000 $4,984,000 agreement) of Sugarbush. Promissory note in the amount of $2,311,000 issued to LHC Corporation (an affiliate of Snowridge, Inc.) by MWWC, which is secured by the stock of MWC and MWWC as well as letters of credit in the amount of $100,000. The note bears interest at 9% or prime plus 1%, which is due June 1 of each year beginning in 1995. Principal payments of $154,000 are due each June 1, beginning in 1997, with the balance due on June 1, 2003. 2,311,000 2,311,000 A bank mortgage payable to Chittenden Bank by MWC in the amount of $135,000. Principal and interest at 6.25% are payable monthly, and the final payment is due in the year 2000. The loan is collateralized by equipment. 105,000 86,000 A bank mortgage payable to the Howard Bank by SRHI in the amount of $96,000. Principal and adjustable rate interest are payable monthly for thirty years, with the balance due in December of 2024. The loan is collateralized by a 83,000 81,000 residential condominium in Warren, Vermont. 9. Long-Term Debt (continued) July 30,1995 July 28, 1996 S-K-I, Inc. Vermont Industrial Development Bonds, fluctuating interest rates, 1995 -3.89% - 4.66%; 1996 -3.56% to 4.83%; due in varying installments through 1999, secured by certain machinery and equipment and real estate. $-- $2,695,000 Town of Carrabassett Valley, Maine, $3,700,000 term loan due 8/27/13 in serial maturities, interest at rates ranging from 5.0% to 8.5%, secured by first mortgages on -- 3,515,000 property, plant and equipment. First National Bank of Boston, $1,600,000 revolving loan due 8/31/96 interest at prime plus .5% (8.75%) at 7/28/96. -- 1,600,000 Fleet Bank of Maine, 10% unsecured promissory note due in varying installments through 7/31/02, interest and principal payments commencing -- 450,000 7/31/96. Boston Concessions Group, Inc. 10 % unsecured promissory note due in varying installments through 7/31/02, interest and principal payments commencing on 7/31/96. -- 208,000 Boston Concessions Group, Inc. 10% note due 7/31/01, secured by assignment of concession revenues -- 161,000 Peoples Heritage Bank, 10% note due 8/13/01 secured by a mortgage on commercial property. -- 171,000 Other Obligations under capital leases 1,431,000 1,301,000 Other notes payable 336,000 3,368,000 29,052,000 63,928,000 9. Long-Term Debt (continued) July 30,1995 July 28, 1996 Less: current portion $1,883,000 $22,893,000 Long-term debt, excluding current portion $27,169,000 $41,035,000 The non-current portion of long-term debt matures as follows: 1998 $3,332,000 $7,189,000 1999 2,926,000 12,185,000 2000 2,732,000 5,884,000 2001 8,161,000 10,575,000 2002 and thereafter 11,231,000 6,322,000 Interest related to capitalized leases (103,000) (77,000) Debt discount $(1,110,000) $(1,043,000) $27,169,000 $41,035,000
The carrying values of the above debt instruments approximate their respective fair values in all material respects, determined by discounting future cash flows at current market interest rates as of July 28, 1996. Subordinated debentures (included in subordinated notes and debentures on the accompanying consolidated balance sheet) of Killington of $10,950,000 at July 28, 1996 are due as follows: Year Interest Amount 1999 6% $455,000 2000 6% 673,000 2001 8% 525,000 2002 8% 549,000 2003 8% 1,074,000 2004 8% 1,466,000 2010 8% 1,292,000 2012 6% 1,155,000 2013 6% 1,065,000 2015 6% 1,500,000 2016 6% 1,196,000 $10,950,000 During 1994, 1995 and 1996, American Skiing Company incurred total interest cost of $1,208,000, $2,429,000 and $5,143,000, respectively of which $182,000, $224,000 and $444,000, respectively, has been capitalized to property and equipment and properties held for sale. 9. Long-Term Debt (continued) At July 28, 1996, SRSC had letters of credit outstanding totaling $2,607,000, while S-K-I had letters of credit outstanding totaling $1,000,000. 10. Subordinated Notes On June 25, 1996, in connection with the Acquisition, the Company issued $120,000,000 of 12% senior subordinated notes (the "Notes") and 39,132 units consisting of $39,132,000 of 13.75% subordinated discount notes (the "Subordinated Notes") and 39,132 shares of common stock in a private placement. The Notes and Subordinated Notes are general unsecured obligations of the Company, subordinated in right of payment to all existing and future debt of the Company, including all borrowings of the Company under the Senior Credit Facility (see Note 11). The Notes and Subordinated Notes mature July 15, 2006 and January 15, 2007, respectively, and will be redeemable at the option of the Company, in whole or in part, at any time after July 15, 2001. In issuing these notes, the Company incurred approximately $7,536,000 of prepaid loan fees which are being amortized over 10 years, the terms of the Notes. Pursuant to a registration rights agreement, the Company has filed a registration statement with respect to an offer to exchange the Notes for a new issue of notes of the Company registered under the Securities Act of 1933, with identical terms. This registration statement is not yet effective. The Notes were issued with an original issue discount of $3,402,000, and as a result the effective interest rate exceeds the stated interest rate. Interest on the Notes is payable semiannually on January 15 and July 15 of each year, commencing on January 15, 1997. Interest expense on the Notes amounted to $1,121,000 in 1996. The Subordinated Notes were issued with an original issue discount of $19,025,000. Interest on the Subordinated Notes will not accrue prior to July 15, 2001; thereafter, interest will accrue at the rate of 13.75% per annum and will be payable semi-annually on January 15 and July 15 of each year, commencing on January 15, 2002. Interest expense on the Subordinated Notes amounted to $206,000 in 1996. The shares, which represent 4% of the total common stock outstanding, were valued at $976,000 as of June 28, 1996. At the time of issuance of the Notes, a portion of the proceeds were invested into a segregated pledge account (the "Pledge Account") to secure the payment of the first year's interest on the Notes. At July 28, 1996, the balance of the Pledge Account was $14,497,000 and was invested in U.S. Treasury obligations. Following the July 15, 1997 interest payment, any amounts remaining in the Pledge Account will be released to the Company. 11. Senior Credit Facility On June 25, 1996, the Company entered into the Senior Credit Facility with Fleet National Bank ("Fleet"). The Senior Credit Facility provides for a $65 million revolving credit facility (which includes a $3.5 million sub-facility for letters of credit). The Company's obligations under the Senior Credit Facility are guaranteed by substantially all of the assets of the Company and its subsidiaries. The Senior Credit Facility will bear interest at a rate equal to Fleet's LIBOR rate plus 1.5% to 2.5% per annum or Fleet's Base rate plus up to 1.5% per annum. The Company will pay a commitment fee of 0.5% per annum on unused availability under the credit facility. Amounts available for borrowing under the Senior Credit Facility will incrementally decline to $50 million over the period ending July 1, 2000, and the Senior Credit Facility will mature on or about December 31, 2001. The Company is required to pay down the amounts outstanding each year, commencing in 1997, for a 45-day period which must include March 31, to an amount declining from $25 million in 1997 to $10 million in 2000 and 2001. As of July 28, 1996, the outstanding balance of the Senior Credit Facility amounted to $40,301,000. In establishing the Senior Credit Facility, the Company incurred approximately $1,512,000 of prepaid loan fees which are being amortized over 5 years, the term of the credit facility. 11. Senior Credit Facility (continued) The credit facility contains a number of covenants, representations and events of default typical of a credit facility of this size and nature, including financial covenants related to the level and nature of total debt outstanding. The Senior Credit Facility requires that certain of the cash proceeds from the sale of Waterville Valley and Mt. Cranmore be applied to permanently reduce the availability under the credit facility. See Note 3. Prior to June 28, 1996, the Company maintained a $6 million Seasonal Line of Credit and $35 million Revolving Note which were paid off by the Senior Credit Facility. The Seasonal Line of Credit and Revolving Note were collateralized by a first mortgage on virtually all of the corporate assets of the Company, with the exception of certain "non-skiing" assets of SRHI, assignment of various land leases and assignment of $7.5 million in life insurance policies on the life of the Stockholder. The outstanding balance of the Line of Credit at July 30, 1995 was $6,004,000, including accrued interest. 12. Guarantors of Debt The Notes and Subordinated Notes are fully and unconditionally guaranteed by ASC and all of its subsidiaries with the exception of LBO Development Company, Ski Insurance Company, Killington West Ltd, Mountain Water Company, and Club Sugarbush, Inc., (the "NonGuarantors"). Prior to the Acquisition and issuance of the notes on June 28, 1996, the American Skiing Company bank loan agreements were collateralized by virtually all of the assets of the companies comprising American Skiing Company. The Guarantor Subsidiaries are wholly-owned subsidiaries of ASC and the guarantees are full, unconditional, and joint and several. The Non-Guarantors are individually and in the aggregate not significant to the financial position and results of operations of the Company. Following is summarized combined information regarding such Non-Guarantors:
As of As of July 30, 1995 July 28, 1996 Current assets $ 106,000 $ 1,380,000 Non-current assets 382,000 7,200,000 Total assets $ 488,000 $ 8,580,000 Current liabilities $ 93,000 $ 1,226,000 Non-current liabilities 86,000 4,847,000 Total liabilities $ 179,000 $ 6,073,000 For the For the Year Year Ended Ended July 30, July 28, 1995 1996 Revenues $ 215,000 $ 280,000 Cost of Sales 123,000 147,000 Operating Income $ 92,000 $ 133,000 Net Income $ 29,000 $ 67,000 12. Guarantors of Debt (continued) There were no non-guarantor subsidiaries of American Skiing Company for the year ended July 31, 1994. The summarized information shown above for the Non-Guarantors as of July 28, 1996 and for the year then ended gives effect to the acquisition of the Non-Guarantors of S-K-I, which were acquired by the Company on June 28, 1996 (See Note 3). Following is the summarized historical information for the Non-Guarantors for the two years and the eleven month period preceding their acquisition by the Company:
As of As of July 31, 1994 July 31, 1995 Current assets $ 2,756,000 $ 3,256,000 Non-current assets 760,000 1,962,000 Total assets $ 3,516,000 $ 5,218,000 Current liabilities $ -- $ -- Non-current liabilities 3,280,000 4,859,000 Total liabilities $ 3,280,000 $ 4,859,000
For the Year For the Period For the Year Ended Ended August 1, Ended July 31, 1995 1995 to July 31, 1994 June 28, 1996 Revenues $ 2,432,000 $ 2,644,000 $ 3,005,000 Cost of sales 1,991,000 2,268,000 2,191,000 Operating income $ 441,000 $ 376,000 $ 814,000 Net income $ 247,000 $ 124,000 $(1,072,000)
13. Income Taxes Prior to June 28, 1996, certain companies comprising American Skiing Company (SRSC, SRL, PT and SRTC) had elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code of 1986, as amended. Accordingly, no income tax provision or liability has been made for these companies for the year ended July 30, 1995 and the period from August 1, 1995 to June 28, 1996. For federal and state income tax purposes, taxable income, losses and tax credits are passed through to the Stockholder, who is individually responsible for reporting his share of such items. The Company distributed to the Stockholder amounts sufficient to pay his personal income taxes based on the S corporations' earnings. In conjunction with the acquisition of all of the common stock of S-K-I (see Note 3), the S corporations (SRSC, SRL, PT and SRTC) changed from S corporation status to C corporation status. As a result, the income or loss of SRSC, SRL, PT and SRTC subsequent to June 28, 1996 will be subject to corporate income tax. The income tax provision described below for the year ended July 28, 1996 includes the income taxes related to SRSC, SRL, PT and SRTC since June 28, 1996. At the time of conversion of the S corporations to C corporations, a net deferred tax liability of $5,552,000 was recorded through the income tax provision. This deferred tax liability was primarily comprised of the tax effect of the cumulative book and tax basis differences of property and equipment. 13. Income Taxes (continued) The provision for income taxes charged to continuing operations was as follows:
Year ended July 30, July 28, 1995 1996 Current tax expense Federal $ 248,000 $ -- State 55,000 -- 303,000 -- Deferred tax expense Federal 77,000 (1,330,000) State 20,000 (316,000) 97,000 (1,646,000) Change in tax status from S -- 5,552,000 corp. to C corp. Total provision $ 400,000 $ 3,906,000
Deferred income taxes reflect the tax impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. Under SFAS 109, the benefit associated with future deductible temporary differences and operating loss or credit carryforwards is recognized if it is more likely than not that a benefit will be realized. Deferred tax expense (benefit) represents the change in the net deferred tax asset or liability balance. Deferred tax liabilities (assets) are comprised of the following at July 30, 1995 and July 28, 1996:
Year ended July 30, 1995 July 28, 1996 Property, plant and equipment basis $ 623,000 $ differential 36,917,000 Other 23,000 753,000 Gross deferred tax liabilities 646,000 37,670,000 Tax loss and credit carryforwards (1,572,000) (11,414,000) Capitalized costs -- (1,473,000) Other (118,000) (1,764,000) Gross deferred tax assets (1,690,000) (14,651,000) Valuation allowance -- 7,369,000 (1,044,000) 30,388,000 Less: Net deferred tax liability related to assets held for sale -- (see Note 3) 281,000 $ (1,044,000) $ 30,107,000
The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate of 35% to pretax income from continuing operations as a result of the following differences: 13. Income Taxes (continued)
Year ended July 30, 1995 July 28, 1996 Income tax provision at the $ 1,932,000 $ 546,000 statutory U.S. tax rates Increase (decrease) in rates resulting from: Change in tax status from S -- 5,552,000 corp. to C corp. Income from S corporations not taxable for (1,679,000) (2,371,000) corporate income tax purposes State taxes, net 115,000 -- Nondeductible items 32,000 41,000 Other -- 138,000 Income tax provision at the $ 400,000 $ 3,906,000 effective tax rates
The Company currently contemplates that it will file a consolidated Federal income tax return adopting a January year end for tax purposes. The Company incurred a consolidated Federal income tax loss of approximately $4.7 million for the one-month period ended July 28, 1996. Management believes the tax benefits of such interim tax loss will be realized in the Company's first consolidated return for the tax year ended January 1997. At July 28, 1996, the Company has net operating loss carryforwards for Federal tax purposes of approximately $6 million from the separate return years of LBO ($5 million) and SRSC ($1 million) that expire in varying amounts through the year 2011 and may only offset each company's contribution to consolidated taxable income in future years. In addition, due to an ownership change that occurred when LBO acquired the Attitash/Bear Peak resort in July 1994, approximately $3.3 million of the LBO net operating loss carryforward is subject to an annual limitation ($185,000) of the amount of LBO's separate company taxable income that may be reduced by such carryforward. Approximately $213,000 of investment tax credit carryforwards that expire in varying amounts through the year 2001 and that are also subject to an annual limitation of the amount of LBO's separate company tax that may be reduced by such carryforward. Subsequent changes in ownership could further affect the limitation in future years. At July 28, 1996, Sugarloaf was not a member of the Company's affiliated group that files a consolidated Federal income tax return. At July 28, 1996, Sugarloaf has net operating loss carryforwards for Federal tax purposes of approximately $17 million that expire in varying amounts through the year 2009. Due to an ownership change that occurred in 1992, approximately $16 million of Sugarloaf's net operating loss carryforward is subject to an annual limitation ($110,000) of its separate company taxable income that may be reduced by such carryforward. Approximately $209,000 of investment tax credit carryforwards that expire in varying amounts through the year 2000 are also subject to an annual limitation of the amount of its tax that may be reduced by such carryforward. Subsequent changes in ownership could further offset the limitation in future years. A valuation allowance is provided when it is more likely than not that some portion of all of the deferred tax assets will not be realized. Management believes that the valuation allowance of $7.4 million is appropriate as the realization of the majority of the tax benefits of the Sugarloaf net operating loss, (some portion of the LBO net operating loss and investment tax carryforwards) and all investment tax credit carryforwards is not more likely than not. 14. Related Party Transactions Sunday River Skiway Corporation has guaranteed amounts outstanding under subordinated debentures due in 2002 that were issued by LBO Holdings, Inc., as part of the acquisition of Mt. Attitash Lift Corporation. Payments under the guarantee are subordinated to all secured indebtedness of SRSC to any bank, thrift institution or other institutional lender. American Skiing Company collects receipts and advances amounts on behalf of its subsidiaries during its normal operations. During 1994, 1995 and 1996, SRSC paid Western Maine Leasing, Inc., (a Maine Corporation owned by the Stockholder) $43,000, $34,000 and $37,000, respectively, for the use of construction equipment. 15. Commitments, Lease Contingencies and Contingent Liabilities SRSC leases substantially all of the land presently used for skiing terrain at Sunday River under a lease expiring in 2030. Charges to operations for this lease were $486,000, $490,000 and $539,000 in 1994, 1995 and 1996, respectively. Lease payments are computed as a percentage of gross profits from property sales and as a percentage of other revenues. LBO leases 264.5 acres of the approximately 600 acres it uses to operate the Attitash/Bear Peak Ski Resort area from the U. S. Forest Service. A Term Special Use Permit covering 44.5 acres expires in 2010 and may be renewed by mutual agreement. A revocable permit, covering approximately 220 acres, is terminable at any time at the discretion of the U.S. Forest Service. LBO does not feel this permit will be revoked in the near future. The leases call for annual rental payments based on a percentage of gross revenue. Total rent expense under these operating leases was $20,000 and $15,000 in 1995 and 1996, respectively. LBO also leases a water slide for use under an operating lease during the summer months at Attitash/Bear Peak. The rental payment, a percentage of gross receipts, was $51,000 and $52,000 in 1995 and 1996, respectively. SRHI leases approximately 262 of the approximately 413 skiable acres it uses to operate the Sugarbush Ski Resort area from the U.S. Forest Service. The Special Use Permit expires in 2035 and may be renewed by mutual agreement. Annual rental payments are based on a percentage of gross revenue. Total rent expense under this lease was $58,000 and $138,000 in 1995 and 1996, respectively. Killington Ltd. leases from the State of Vermont certain portions of land and facilities it uses known as the Killington section of the Calvin Coolidge State Forest. The leases together with extensions run to the year 2060. All installments affixed to the land become the property of the State. Mount Snow Ltd. and Waterville Valley operate certain portions of the skiing terrain under special use permits granted by the U.S. Forest Service. Amounts payable under these leases and permits are measured in terms of percentages of revenues from certain activities. Charges for these leases and permits are included in cost of operations. In addition to the leases described above, the companies comprising the American Skiing Company are committed under several operating and capital leases for various equipment. Rent expense under all operating leases was $803,000, $1,007,000 and $994,000 for the years ended 1994, 1995 and 1996, respectively. 15. Commitments, Lease Contingencies and Contingent Liabilities (continued) Future minimum lease payments for lease obligations at July 28, 1996 are as follows:
Capital Operating Leases Leases 1997 $ 781,000 $ 3,638,000 1998 552,000 3,347,000 1999 101,000 2,955,000 2000 31,000 579,000 2001 1,000 403,000 Total payments $ 1,466,000 $ 10,922,000 Less interest 165,000 Present value of net 1,301,000 minimum payments Less current portion 694,000 Long-term obligations $ 607,000
Certain claims, suits and complaints associated with the ordinary course of business are pending or may arise against the companies comprising the American Skiing Company. 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. 16. Proceeds from Insurance Claim In February 1993, the Company experienced a fire which destroyed compressors and other snowmaking equipment at Sunday River Skiway Corporation with a net book value of $975,000. These assets were insured for replacement cost which amounted to $2,567,000. The Company received proceeds for the replacement cost of $750,000 in 1993 and $1,817,000 in 1994. The Company recorded a gain in 1993 of $1,592,000 for the difference between the insurance proceeds and the net book value of the destroyed equipment. 17. Subsequent Event (Unaudited) The Company entered into a Purchase and Sale Agreement in October 1996 to purchase substantially all of the assets of the Pico Mountain Ski Resort located in Sherburne, Vermont. The purchase price is divided into two components (1) $3,350,000 of cash payable at closing and (2) $3,350,000 in contingent purchase price payable upon the occurrence of certain future events. Results of operations of Pico are not expected to be material to the consolidated financial statements of the Company. REPORT OF INDEPENDENT ACCOUNTANTS To The Board of Directors of S-K-I Ltd. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of changes in stockholders' equity and of cash flows present fairly, in all material respects, the financial position of S-K-I Ltd. and its subsidiaries at July 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended July 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Hartford, Connecticut August 31, 1995
S-K-I LTD. CONSOLIDATED BALANCE SHEET July 31, July 31, 1994 1995 Assets Current assets: Cash and short-term investments (at cost, which approximates market value) $2,704,302 $2,790,645 Accounts receivable, net (Note 1) 1,423,430 2,677,434 Notes receivable 371,739 244,775 Inventories 3,472,492 3,955,722 Prepaid expenses 1,456,222 1,360,460 Total Current Assets 9,428,185 11,029,036 Property and equipment, at cost: Buildings and grounds 32,730,561 41,557,838 Machinery and equipment 71,690,813 73,123,058 Leasehold improvements 39,066,623 48,082,570 Lifts, liftlines and trails on corporate property 16,162,939 33,787,212 159,650,936 196,550,678 Less--accumulated depreciation and amortization 86,638,454 89,929,914 73,012,482 106,620,764 Construction in progress 8,996,570 1,684,442 Land and development costs 12,762,352 13,469,642 Net Property and Equipment 94,771,404 121,774,848 Long-term investments (Note 1) 464,663 1,628,477 Other assets (Note 1) 2,125,756 2,289,152 Total Assets $106,790,008 $136,721,513 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt and subordinated debentures $955,746 $3,858,184 (Note 3) Accounts payable 1,741,131 1,617,621 Income taxes payable (Note 5) 257,684 272,252 Accrued lease payments--Vermont (Note 4) 1,171,865 1,039,366 Accrued wages, profit sharing and incentive compensation 464,907 529,874 (Note 8) Deposits and other unearned revenue 695,328 1,706,017 Other accrued expenses (Note 1) 4,184,664 5,157,743 Total Current Liabilities 9,471,325 14,181,057 Long-term debt (Note 3) 17,766,857 38,790,032 Subordinated debentures (Note 3) 11,400,000 11,400,000 Deferred income taxes (Note 5) 7,478,492 8,479,956 Other long-term liabilities (Note 1) 3,487,042 4,432,027 Minority interest -- 1,876,188 Total Liabilities 49,603,716 79,159,260 Commitments (Notes 3 and 4) Stockholders' equity (Notes 3, 6 and 7): Common stock $.10 par value (12,500,000 shares authorized, 5,785,932 shares in 1995, 5,781,432 shares in 1994) 578,144 578,594 Paid-in capital 6,577,440 6,617,551 Retained earnings 50,030,708 50,366,108 Total Stockholders' Equity 57,186,292 57,562,253 Total Liabilities and Stockholders' Equity $106,790,008 $136,721,513 See accompanying notes to consolidated financial statements.
S-K-I LTD CONSOLIDATED STATEMENT OF INCOME
Year Ended July 31 1993 1994 1995 Revenues (Note 1): Resort services $60,441,799 $62,532,813 $74,252,723 Sale of goods 19,832,479 21,008,869 23,648,797 Rental and other income 16,434,113 15,365,537 16,058,192 96,708,391 98,907,219 113,959,712 Expenses: Cost of operations including wages, maintenance and supplies: Resort services 21,070,994 22,483,982 29,611,497 Sale of goods 11,658,737 12,729,442 15,146,037 Rental and other expense 7,173,101 7,346,163 6,799,809 Other taxes 7,632,343 8,015,487 8,599,706 Utilities 6,655,016 6,044,889 8,070,911 Insurance 5,115,333 5,518,243 6,634,837 Selling, general and 16,871,496 administrative expenses 15,298,138 19,494,655 Interest 2,228,385 2,214,309 3,818,893 Depreciation and amortization 10,941,869 (Note 1) 11,440,122 14,055,796 89,347,274 91,090,775 112,232,141 Income before income taxes and 7,361,117 minority interest 7,816,444 1,727,571 Income taxes (Note 5) 2,952,310 3,169,956 997,123 Net income before minority 4,408,807 interest 4,646,488 730,448 Minority interest in loss of -- -- subsidiary 298,949 Net Income $4,408,807 $4,646,488 $1,029,397 Net income per common and common equivalent share: 5,783,480 in 1995, $0.77 $0.81 5,764,663 in 1994, $0.18 5,728,908 in 1993 (Note 6) See accompanying notes to consolidated financial statements.
S-K-I LTD. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholder of Sugarbush Resort Corporation In our opinion, the accompanying consolidated statements of operations, of stockholder's equity and of cash flows present fairly, in all material respects, the results of Sugarbush Resort Corporation's operations and its cash flows for the period from June 1, 1994 through May 15, 1995 and for the years ended May 31, 1994 and 1993 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Boston, MA June 11, 1996 Sugarbush Resort Corporation Consolidated Statement of Operations Period Year ended from June 1, 1994 through May 31, May 31, May 15, 1994 1993 1995 Revenues: Ski related $82,000 $8,688,000 $7,685,000 Property management and 1,779,000 4,524,000 4,180,000 lodging Utility fees and 265,000 751,000 783,000 services Other 412,000 942,000 870,000 Total revenues 2,538,000 14,905,000 13,518,000 Expenses: Cost of operations including 2,015,000 10,210,000 8,956,000 wages, maintenance and supplies Selling, general and 2,550,000 5,635,000 6,121,000 administrative Interest 128,000 356,000 281,000 Depreciation 822,000 764,000 522,000 Total expenses 5,515,000 16,965,000 15,880,000 Net loss $(2,997,000) $(2,060,000) $(2,362,000) The accompanying notes are an integral part of these financial statements. Sugarbush Resort Corporation Consolidated Statement of Stockholder's Equity
Additiona l Accumulat Paid in ed Shares Amount Capital Deficit Total Balance May 31, 100 $ -- $60,000,0 $(56,635, $ 3,365,000 1992 00 000) Advances from 3,350,000 3,350,000 Parent Net loss for the year ended (2,362,00 (2,362,000) May 31, 1993 0) Balance May 31, 100 -- 63,350,00 (58,997,0 4,353,000 1993 0 00) Advances from 4,050,000 4,050,000 Parent Net loss for the year ended (2,060,00 (2,060,000) May 15, 1994 0) Balance May 31, 100 -- 67,400,00 (61,057,0 6,343,000 1994 0 00) Advances from 2,025,000 2,025,000 Parent Net loss for the period (2,977,00 (2,977,000) ended May 15, 0) 1995 Balance May 15, 100 $ -- $69,425,0 $(64,034, $ 5,391,000 1995 00 000)
The accompanying notes are an integral part of these financial statements. Sugarbush Resort Corporation Consolidated Statement of Cash Flows
Period from June 1, 1994 through May 31, May 31, May 15, 1994 1993 1995 Cash flows from operating activities: Net loss $(2,977, $(2,060,0 $ (2,362,000) 000) 00) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and 844,000 816,000 723,000 amortization Gain on disposal of assets, -- (8,000) (71,000) net (Increase) decrease in 713,000 (45,000) 26,000 accounts receivable (Increase) decrease in 152,000 (14,000) (23,000) inventory (Increase) decrease in 901,000 (167,000) 418,000 prepaid expenses Increase (decrease) in accounts payable and accrued (961,900) 101,000 (526,000) expenses Increase (decrease) in (174,000) 45,000 54,000 deferred income Net cash used in operating (1,502,9 (1,332,00 (1,761,00 activities 00) 0) 0) Cash flows from investing activities: Capital expenditures (893,000) (3,265,00 (1,555,00 0) 0) Proceeds from disposal of -- 101,000 139,000 assets Purchase of other assets -- (18,000) -- Net cash used in investing (893,000) (3,182,00 (1,416,00 activities 0) 0) Cash provided by financing activities: Increase in notes payable -- 754,000 -- and long-term debt Repayment of long-term debt (17,100) (365,000) (245,000) Advances from parent 2,025,000 4,050,000 3,350,000 Net cash provided by 2,007,900 4,439,000 3,105,000 financing activities Net decrease in cash (388,000) (75,000) (72,000) Cash at beginning of year 388,000 463,000 535,000 Cash at end of year $ -- $388,000 $ 463,000
Cash paid for interest amounted to $139,100, $300,000 and $289,000 in 1995, 1994 and 1993, respectively. The accompanying notes are an integral part of these financial statements. Sugarbush Resort Corporation Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies Basis of Consolidation The accompanying consolidated financial statements include the accounts of Sugarbush Resort Corporation (a Delaware corporation) and its wholly-owned subsidiaries, Snowridge, Inc., Sugar Ridge, Inc., The Sugarbush Inn Corporation, and their respective subsidiaries, all of which are Vermont corporations (collectively referred to as the "Company"). The Company was a wholly owned subsidiary of Claneil Enterprises, Inc. (the "Parent"). The Company operates predominantly in a single industry segment, which is the development and operation of the Sugarbush Ski Resort in Warren, Vermont providing ski recreation and related services to skiers, a single customer group. All significant intercompany balances and transactions have been eliminated. Fiscal Year The accompanying consolidated financial statements are presented based on the Company's fiscal year ended May 31, which differs from the Company's tax year-end of February 28. Property and Equipment Property and equipment is recorded at cost and is depreciated by the straight-line method over the assets' estimated useful lives which generally range from 9 to 40 years for buildings, 3 to 12 years for machinery and equipment and 10 to 50 years for leasehold improvements, lifts, lift lines and trails. Expenditures for maintenance and repairs are expensed as incurred. Depreciation expense for 1995, 1994 and 1993 amounted to $822,000, $764,000 and $522,000, respectively. Intangible Assets Intangible assets relate to organizational fees and are amortized by the straight-line method over sixty months. Amortization expense related to these assets was approximately $22,000, $52,000 and $201,000 during 1995, 1994 and 1993, respectively. Revenue Recognition The Company recognizes revenue at the point of service, except for brokerage commissions which are recognized as income upon the consummation of the sale. Revenue includes sales of lift tickets, tuition from ski schools, sales from restaurants, bars and retail shops, real estate rentals and sales of real property. Interest Interest is expensed as incurred except when it is capitalized in conjunction with major capital additions. The amount of interest capitalized is determined by applying current interest rates to the funds required to finance the construction. Employee Benefits The Company participates in a savings plan (the "Plan") administered by an affiliate. To qualify for the Plan, employees must work for one year and have attained the age of twenty-one. Company contributions to the Plan are based on employee contributions and compensation. The Company contributed $17,200, $34,000 and $31,000 for 1995, 1994 and 1993, respectively. Advertising Costs Advertising costs are expensed the first time the advertising takes place. The amount charged to advertising expense during 1995, 1994, and 1993 was $656,000, $1,019,000 and $520,000, respectively. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the financial statements. Actual results could differ from those estimates. Sugarbush Resort Corporation Notes to Consolidated Financial Statements (continued) 1. Summary of Significant Accounting Policies (continued) Income Taxes The operations of the Company were included in the consolidated income tax return of its ultimate parent (Claneil Enterprises, Inc.). It is the parent's policy not to allocate income tax amounts to the Company. Accordingly, no provision or benefit for income taxes has been recorded in the accompanying consolidated financial statements. Recent Accounting Pronouncements 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," was recently issued and its adoption is required for fiscal years beginning after December 15, 1995. SFAS No. 121 mandates specific methodologies to be used for identifying and measuring the impairment of long-lived assets. Adoption of SFAS No. 121 is not expected to materially impact the Company's consolidated financial statements. 2. Related Party Transactions The Company received cash advances in the form of contributions of capital of $2,025,000, $4,050,000 and $3,350,000 during 1995, 1994 and 1993, respectively, from its Parent to meet its operating and capital needs. Such advances are non-interest bearing. 3.Commitments, Lease Contingencies and Contingent Liabilities The Company leases air compression, automotive and other equipment and certain office facilities under operating leases with terms ranging from less than one year to five years. Future minimum lease payments for lease obligations at May 15, 1995 are as follows: 1996 $163,000 1997 123,000 1998 74,000 1999 29,000 $389,000 Total rent expense for all operating leases was $82,700, $263,000 and $173,000 during 1995, 1994 and 1993, respectively. Certain portions of the skiing terrain are operated under a ten year Special Use Permit granted by the U.S. Forest Service which expires in 1998. Annual rental payments are based on a percentage of gross revenue from certain activities. Total rent expense under this permit was $10,000, $66,000 and $48,000 during 1995, 1994 and 1993, respectively. The Company maintains employment agreements with three officers. The employment agreements contain change in control provisions that would entitle each of the officers to receive an amount equal to their annual salary if there is a change in control of the Company as defined in the agreement. In addition, there is a termination provision which provides for one times the annual salary if an officer is terminated without cause. During 1993, the Company paid $150,000 upon termination of employment of two such officers. During fiscal year 1994, litigation against the Company relating to respective parties rights on utility improvements resulted in charges to operations of $703,000, which includes legal fees, payments to customers and interest. Sugarbush Resort Corporation Notes to Consolidated Financial Statements (continued) 3.Commitments, Lease Contingencies and Contingent Liabilities (continued) The Company is a co-defendant in a $3 million civil suit alleging violations of the anti-trust and trademark laws of the United States, and Vermont statutory and common law. Management believes the allegations are without merit and that the outcome of this matter will not have a material effect on its financial position, results of operations or cash flows. Certain claims, suits and complaints associated with the ordinary course of business are pending or may arise against the companies comprising Sugarbush Resort Corporation. In the opinion of management, all matters are adequately covered by insurance or, if not covered, are without merit or are of such kind, or involve such amounts as would not have a material effect on the financial position, results of operations or cash flows of the Company if disposed of unfavorably. 4. Subsequent Event On May 16, 1995, the Company's Parent sold substantially all of the assets of the Company. Effective October 15, 1994 through May 15, 1995, the buyer of the Company operated the ski resort under a lease agreement with the Company's ultimate parent. The accompanying financial statements do not reflect any adjustments that might arise as a result of this transaction. No person has been authorized to give any information or make any representations not contained in this Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Company. The Exchange Offers are not being made to, nor will the Company accept surrenders for exchange from, Holders of Old Notes or Old Subordinated Notes in any jurisdiction in which the relevant Exchange Offer or the acceptance thereof would not be in compliance with the securities or blue sky laws of such jurisdiction. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create an implication that there has not been any change in the facts set forth in this Prospectus or in the affairs of the Company since the Date hereof. ________________________ Summary The Acquisition; Antitrust Matters; Use of Proceeds Recent Developments Risk Factors The Exchange Offers Pro Forma Capitalization Pro Forma Financial Data Selected Historical Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Industry Overview Business Management Description of Senior Subordinated Notes Description of Subordinated Notes Description of the Company's Capital Stock Description of Other Indebtedness Certain Federal Income Tax Considerations Certain Federal Income Tax Consequences of the Exchange Offers Plan of Distribution Legal Matters Experts Indemnification Other Matters Exchange Agent Index to Financial Statements AMERICAN SKIING COMPANY Offer to Exchange its 12% Series B Subordinated Notes due 2006 which have been registered under the Securities Act (Guaranteed by substantally all of its subsidiaries) for any and all of its 12% Series A Subordinated Notes due 2006 (Guaranteed by substantially all of its subsidiaries) Offer to Exchange its 13 3/4% Series B Subordinated Discount Notes due 2007 which have been registered under the Securities Act (Guaranteed by substantially all of its subsidiaries) for any and all of its 13 3/4% Series A Subordinated Discount Notes due 2007 (Guaranteed by substantially all of its subsidiaries) ________________________ PROSPECTUS ________________________ November 12, 1996 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 20. Indemnification of Directors and Officers The Company is a Maine corporation. Section 719 of the Maine Business Corporation Act (13-A M.R.S.A. 101, et seq.) authorizes the indemnification by a Maine corporation of any person who is a party or is threatened to be made a party to any action, suit or proceeding by reason of that person's status as a director, officer, employee or agent of the corporation; provided that no such indemnification may be provided for any person if he or she shall have been finally adjudicated (i) not to have acted honestly or in the reasonable belief that his or her action was in or not opposed to the best interests of the corporation or its shareholders, or (ii) in any criminal proceeding, to have had reasonable cause to believe his or her conduct was unlawful. In the case of actions brought by or on behalf of the corporation, indemnification may only be provided if the court determines that such person is fairly and reasonably entitled to the requested indemnification. Indemnification must be provided to the extent that a director, officer, employee or agent has been successful, on the merits or otherwise, in defense of an action of the type described in the second sentence of this paragraph. The Bylaws of the Company provide that it shall indemnify any person who is made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he or she is or was a director or officer of the Company, and may indemnify any employee or agent of the Company in such circumstances, against expenses, including attorneys fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding. No indemnification may be provided for any person who shall have been finally adjudicated not to have acted honestly or in the reasonable belief that his or her action was in or not opposed to the best interests of the Company or who had reasonable cause to believe that his or her conduct was unlawful. Indemnification must be provided to any director, officer, employee or agent of the Company to the extent such person has been successful, on the merits or otherwise, in defense of any action or claim described above. Any indemnification under this provision of the Bylaws, unless required under the Bylaws or ordered by a court, can be made only as authorized in each specific case upon a determination by a majority of disinterested directors or by independent legal counsel or by the shareholders that such indemnification is appropriate under the standard set forth in the preceding sentence. Item 21. Exhibits and Financial Statement Schedules (a) Exhibits Exhibit No. Description 2.1 Agreement and Plan of Merger, dated as of February 13, 1996, by and among LBO Resort Enterprises (the predecessor of the Company), LBO Acquisition Co. and S-K-I Limited* 3.1 Articles of Incorporation of the Company* 3.2 Bylaws of the Company* 3.3 Articles of Incorporation of Sunday River Skiway Corporation* 3.4 Bylaws of Sunday River Skiway Corporation* 3.5 Articles of Incorporation of Sunday River Ltd.* 3.6 Bylaws of Sunday River Ltd.* 3.7 Articles of Incorporation of Perfect Turn, Inc.* 3.8 Bylaws of Perfect Turn, Inc.* 3.9 Articles of Incorporation of LBO Holding, Inc.* 3.10 Bylaws of LBO Holding, Inc.* 3.11 Articles of Incorporation of Sunday River Transportation, Inc.* 3.12 Bylaws of Sunday River Transportation, Inc.* 3.13 Articles of Incorporation of Sugarbush Resort Holdings, Inc.* 3.14 Bylaws of Sugarbush Resort Holdings, Inc.* 3.15 Articles of Incorporation of Sugarbush Leasing Company* 3.16 Bylaws of Sugarbush Leasing Company* 3.17 Articles of Incorporation of Sugarbush Restaurants, Inc.* 3.18 Bylaws of Sugarbush Restaurants, Inc.* 3.19 Articles of Incorporation of Cranmore, Inc.* 3.20 Bylaws of Cranmore, Inc.* 3.21 Certificate of Incorporation of S-K-I Ltd.* 3.22 Bylaws of S-K-I Ltd.* 3.23 Articles of Association of Killington Ltd.* 3.24 Bylaws of Killington Ltd.* 3.25 Articles of Association of Mount Snow Ltd.* 3.26 Bylaws of Mount Snow Ltd.* 3.27 Articles of Incorporation of Waterville Valley Ski Area, Ltd.* 3.28 Bylaws of Waterville Valley Ski Area, Ltd.* 3.29 Articles of Incorporation of Sugarloaf Mountain Corporation* 3.30 Bylaws of Sugarloaf Mountain Corporation* 3.31 Articles of Association of Killington Restaurants, Inc.* 3.32 Bylaws of Killington Restaurants, Inc.* 3.33 Articles of Association of Dover Restaurants, Inc.* 3.34 Bylaws of Dover Restaurants, Inc.* 3.35 Articles of Association of Resort Technologies, Inc.* 3.36 Bylaws of Resort Technologies, Inc.* 3.37 Articles of Association of Resort Software Services, Inc.* 3.38 Bylaws of Resort Software Services, Inc.* 3.39 Articles of Incorporatoin of LBO Hotel Co.* 3.40 Bylaws of LBO Hotel Co.* 3.41 Articles of Association of Mountain Wastewater Treatment, Inc.* 3.42 Bylaws of Mountain Wastewater Treatment, Inc.* 3.43 Articles of Incorporation of Mountainside* 3.44 Bylaws of Mountainside* 3.45 Articles of Incorporation of Sugartech* 3.46 Bylaws of Sugartech* 3.47 Articles of Incorporation of Deerfield Operating Company* 3.48 Bylaws of Deerfield Operating Company* 3.49 Articles of Association of Pico Ski Area Management Company* 3.50 Bylaws of Pico Ski Area Management Company* 4.1 Indenture among the Company, the Guarantors and United States Trust Company of New York, relating to the Old Notes and the New Notes, dated as of June 28, 1996.* 4.2 Indenture among the Company, the Guarantors and United States Trust Company of New York, relating to the Old Subordinated Notes and the New Subordinated Notes, dated as of June 28, 1996.* 4.3 Registration Rights Agreement dated June 28, 1996 among the Company, the Guarantors and the Initial Purchasers.* 4.4 Purchase Agreement dated June 25, 1996 among the Company, certain of the Guarantors and the Initial Purchasers.* 4.5 Registration Rights Agreement dated June 28, 1996 among the Company, the Guarantors and Bear Stearns.* 4.6 Pledge and Disbursement Agreement, dated as of June 28, 1996, by and among the Company, the Guarantors and United States Trust Company of New York, as collateral agent.* 4.7 Shareholders' Agreement dated June 28, 1996, among Leslie B. Otten, the Company and Bear Stearns* 5.1 Opinion of Pierce Atwood, including consent 5.2 Opinion of Reiber, Kenlan, Schwiebert, Hall & Facey, including consent 5.3 Opinion of Wadleigh, Starr, Peters, Dunn & Chiesa, including consent 8.1 Opinion of Pierce Atwood with regard to federal income tax consequences of the Exchange Offers. 10.1 Credit Agreement dated as of June 28, 1996, among the Company, its Subsidiaries, parties thereto and Fleet.* 10.2 Security Agreement dated June 28, 1996, among the Company, its Subsidiaries, parties thereto and Fleet.* 10.3 Revolving Credit Notes dated June 28, 1996, issued by the Company and certain Subsidiaries to Fleet in the aggregate principal amount of $65,000,000.* 10.4 Swing Line Note dated June 28, 1996, issued by the Company and certain Subsidiaries to Fleet in the aggregate principal amount of $5,000,000.* 10.5 Fee and Leasehold Mortgage, Assignment of Leases and Rents and Security Agreement, each dated as of June 28, 1996, by and between each of Sunday River Skiway Corporation, Sunday River, Ltd., LBO Holding, Inc., Cranmore, Inc., Sugarbush Resort Holdings, Inc., Mountain Water Company, Mountain Wastewater Treatment, Inc., Killington, Ltd., Mount Snow Ltd. and Waterville Valley Ski Area Ltd. and Fleet.* 10.6 Collateral Assignments of Leases and Rents, each dated as of June 28, 1996, by and between each of Sunday River Skiway Corporation, Sunday River, Ltd., LBO Holding, Inc., Cranmore, Inc., Sugarbush Resort Holdings, Inc., Mountain Water Company, Mountain Wastewater Treatment, Inc., Killington, Ltd., Mount Snow Ltd. and Waterville Valley Ski Area Ltd. and Fleet.* 10.7 Assignment in Trust, dated as of June 28, 1996, between Waterville Valley Ski Area, Ltd. and Fleet* 10.8 Assignment in Trust, dated as of June 28, 1996, between LBO Holding, Inc. and Fleet.* 10.9 Assignment of Agreements, Permits and Contracts, among the Company, certain Subsidiaries and Fleet* 10.10 Assignment of Trademarks and Service Marks (U.S.), dated June 28, 1996, among the Company, certain Subsidiaries and Fleet.* 10.11 Hazardous Materials Indemnification Agreement, dated June 28, 1996, among the Company, certain Subsidiaries and Fleet.* 10.12 Guaranty Agreement dated June 28, 1996, by LBO Hotel Co., in favor of Fleet.* 10.13 Guaranty Agreement dated June 28, 1996, by Sugarloaf Mountain Corporation in favor of Fleet.* 10.14 Intercreditor Agreement dated as of June 20, 1996, among the Company, certain Subsidiaries, Doppelmayr USA, Inc. and Fleet.* 10.15 Intercreditor Agreement, dated as of June 28, 1996, among the Company, certain Subsidiaries, Snowridge, Inc. (for itself and as agent for Innacq Corporation) and Fleet.* 10.16 Loan and Security Agreement, dated as of October 1, 1984, among the State of Vermont, acting by and through the Vermont Industrial Development Authority, Sherburne Corporation (predecessor to Killington, Ltd.), Proctor Bank and The First National Bank of Boston* 10.17 Loan and Security Agreement, dated as of October 1, 1984, among the State of Vermont, acting by and through the Vermont Industrial Development Authority, Mt. Snow, Proctor Bank and The First National Bank of Boston* 10.18 Form of Subordinated Note, dated as of June 30, 1992, from Sugarloaf Mountain Corporation to certain note holders* 10.19 Indenture, dated October 24, 1990, among Killington, Ltd. and The Howard Bank, as trustee (representative of indentures with respect to similar indebtedness aggregating approximately $2,995,000, in original principal amount and maturing at various times from 2015 to 2016)* 10.20 Indenture, dated September 25, 1986, among Killington, Ltd. and The Howard Bank, as trustee (representative of indentures with respect to similar indebtedness aggregating approximately $10,873,500, in original principal amount and maturing at various times from 1997 to 2013)* 10.21 Restated Concession Agreement, dated April 30, 1992, between Sugarloaf Mountain Corporation and Boston Concessions Group, Inc., together with Amendment thereto, Loan Agreement, and $150,000 Promissory Notes, each dated July 31, 1995* 10.22 $500,000 Note, dated August 27, 1993, from Sugarloaf Mountain Corporation and Warren Cook to Fleet Bank of Maine* 10.23 Doppelmayr Ski Lift Supply and Installation Agreement, dated July 7, 1995, by and between Doppelmayr USA, Inc., and Sunday River Skiway Corporation* 10.24 Doppelmayr Ski Lift Supply and Installation Agreement, dated September 4, 1995, by and between Doppelmayr USA, Inc., and Sugarbush Holdings, Inc. (Gate House Chair)* 10.25 Doppelmayr Ski Lift Supply and Installation Agreement, dated September 26, 1995, by and between Doppelmayr USA, Inc., and Sugarbush Holdings, Inc.* 10.26 Doppelmayr Ski Lift Supply and Installation Agreement, dated September 4, 1995, by and between Doppelmayr USA, Inc., and Sugarbush Resort Holdings, Inc. (Sugar Bravo Lift)* 10.27 Lift Relocation Agreement, dated September 4, 1995, by and between Doppelmayr USA, Inc., and Sugarbush Resort Holdings, Inc. (North Link Chair)* 10.28 Lift Relocation Agreement, dated September 4, 1995, by and between Doppelmayr USA, Inc., and Sugarbush Resort Holdings, Inc. (North Ridge Chair)* 10.29 Doppelmayr Ski Lift Supply and Installation Agreement, dated September 4, 1995, by and between Doppelmayr USA, Inc., and Sugarbush Resort Holdings, Inc. (Green Mountain Chair)* 10.30 Doppelmayr Ski Lift Supply and Installation Agreement, dated July 14, 1995, by and between Doppelmayr USA, Inc., and LBO Holding, Inc., d/b/a Attitash/Bear Peak.* 10.31 Doppelmayr Ski Lift Supply and Installation Agreement, dated July 14, 1995, by and between Doppelmayr USA, Inc., and LBO Holding, Inc., d/b/a Cranmore, Inc.* 10.32 $2,311,838 Promissory Note from Mountain Wastewater Treatment, Inc. to LHC Corporation dated May 16, 1995.* 10.33 $6,120,000 Promissory Note, Senior Mortgage, and Junior Mortgage from Sugarbush Resort Holdings, Inc. to Snowridge, Inc. and Sugarbush, Inc. dated May 16, 1995* 10.34 Form of Subordinated Debenture due 2002 from LBO Holding, Inc. to former shareholders of Mt. Attitash Lift Corporation* 10.35 Purchase and Sale Agreement, dated April 13, 1994, among Mt. Attitash Lift Corporation and LBO Holding, Inc. for purchase of Attitash/Bear Peak Ski Resort* 10.36 Stock Purchase Agreement, dated August 16, 1994, for purchase of 51% interest in Sugarloaf Ski Resort, among Sugarloaf Mountain Corporation and S-K-I, Ltd.* 10.37 Purchase and Sale Agreement, dated August 30, 1994, among Waterville Company, Inc., and S-K-I, Ltd. for purchase of Waterville Valley Ski Resort* 10.38 Purchase and Sale Agreement, dated May 16, 1995, among Sugarbush Resort Holdings, Inc., Sugarbush Resort Corporation, Snowridge, Inc., Sugar Ridge, Inc., Sugarbush Inn Corporation and Bev Ridge, Inc. for purchase of Sugarbush Ski Resort* 10.39 Purchase and Sale Agreement among Cranmore Country Corp. and Sunday River Skiway Corporation for purchase of Cranmore Ski Resort* 10.40 Lease, dated October 15, 1980, among H. Donald Penley, Joseph Penley, Albert Penley and Sunday River Skiway Corporation* 10.41 Lease, dated July 19, 1984, between John Blake and LBO Holding, Inc.* 10.42 Lease, dated July 1, 1993, between Snowridge, Inc. and Mountain Water Company* 10.43 Lease, dated March 1, 1988, between Snowridge, Inc. and Mountain Wastewater Treatment, Inc.* 10.44 Lease, dated November 10, 1960, between the State of Vermont and Sherburne Corporation (predecessor to Killington, Ltd.)* 10.45 Lease, dated February 20, 1990, between Pico Pond Associates and Killington, Ltd.* 10.46 Lease, dated June 21, 1994, between the Town of Wilmington and Mt. Snow, Ltd.* 10.47 Lease, dated April 24, 1995, between Sargent, Inc. and Mt. Snow, Ltd.* 10.48 United States Forest Service Special Use Permit No. 4040/01 issued November 29, 1989, to Mt. Snow, Ltd.* 10.49 United States Forest Service Special Use Permit No. 4059/01 issued July 19, 1994, to LBO Holding, Inc.* 10.50 United States Forest Service Special Use Permit No. 4002/01 issued October 31, 1994, to Waterville Valley Ski Area, Ltd.* 10.51 United States Forest Service Special Use Permit No. 4041 issued May 15, 1995, to Sugarbush Resort Holdings, Inc.* 10.52 Lease, dated September 10, 1984, between the Inhabitants of the Town of Carrabassett Valley and Mountain Greenery* 10.53 Turnkey Sales Agreement, dated June 5, 1992, between POMA of America and Killington, Ltd.* 10.54 Agreement between S-K-I, Ltd., and Henry B. Lunde* 10.55 Agreement, dated July 26, 1995, between Bombardier Corporation, Killington, Ltd., Mt. Snow, Ltd., Waterville Valley Ski Area, Ltd., Bear Mountain, Ltd., and Sugarloaf Mountain Corporation* 10.56 Agreement dated June 3, 1996, between the Company and Eastern Resorts Company, LLC* 10.57 Warren Cook Employment Agreement* 10.58 Partnership Agreement, dated March 1993 relating to Sugarloaf Land Partners I* 10.59 Partnership Agreement, dated March 1993 relating to Sugarloaf Land Partners II* 10.60 Limited Guaranty of Payment and Performance from the Company to Key Bank of Maine dated October 3, 1996 10.61 Purchase and Sale Agreement between Waterville Valley Ski Area, Ltd., Cranmore, Inc., American Skiing Company and Booth Creek Ski Acquisition Corp., dated as of August 30, 1996 10.62 Purchase and Sale Agreement between Sherburne Pass Mountain Properties, LLC, Pico Mountain Sports Center, LLC, Pico Mountain Operating Company, LLC, Harold L. and Edith Herbert, and Pico Ski Area Management Company dated October 16, 1996 10.63 Letter Agreement between S- K-I Limited and Sugarloaf Minority Shareholders dated August 22, 1996 12.1 Statement re Computation of Ratio of Earnings to Fixed Charges 16.1 Letter from Berry, Dunn, McNeil & Parker re change in certifying accountants* 21.1 Subsidiaries of the Company* 23.1 Consent of Price Waterhouse LLP 23.2 Consent of Berry, Dunn, McNeil & Parker 23.3 Consents of Pierce Atwood (included in Exhibits 5.1 and 8.1) 23.4 Consent of Reiber, Kenlan, Schwiebert, Hall & Facey (included in Exhibit 5.2) 23.5 Consent of Wadleigh, Starr, Peters, Dunn & Chiesa (included in Exhibit 5.3) 24.1 Powers of Attorney (see pages II-9 through II-34 of this Registration Statement)* 25.1 Statement of Eligibility of United States Trust Company of New York, as trustee under the Indenture filed as Exhibits 4.1 and 4.2, on Form T-1 (filed under separate cover). 99.1 Form of Notes Letter of Transmittal to be used in connection with the Notes Exchange Offer. 99.2 Form of Subordinated Notes Letter of Transmittal to be used in connection with the Subordinated Notes Exchange Offer. 99.3 Notice of Guaranteed Delivery regarding Old Notes 99.4 Notice of Guaranteed Delivery regarding Old Subordinated Notes * Previously filed Item 22. Undertakings The undersigned registrants hereby undertake with respect to the securities offered by them: 1. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Act") may be permitted as to directors, officers and controlling persons of any Registrant pursuant to the provisions described in Item 20 or otherwise, the Registrants have been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Act and is, therefore unenforceable. In the event a claim for indemnification against such liabilities (other than the payment by any Registrant of expenses incurred or paid by a director, officer or controlling person of such Registrant 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, such Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 2. The Registrants hereby undertake 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, 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. 3. The undersigned Registrants hereby undertake 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. The undersigned registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) promulgated under the Securities Act of 1933 if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment 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. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. AMERICAN SKIING COMPANY, a Maine corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. SUNDAY RIVER SKIWAY CORPORATION, a Maine corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. SUNDAY RIVER LTD., a Maine corporation By:`/s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. PERFECT TURN INC., a Maine corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. LBO HOLDING, INC., a Maine corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. SUNDAY RIVER TRANSPORTATION, INC., a Maine corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. SUGARBUSH RESTAURANTS, INC., a Vermont corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) Roger Amidon By: /s/ Thomas M. Richardson Director November 12, 1996 Thomas M. Richardson Acting under Power of Attorney Dated August 6, 1996 Allen Wilson By: /s/ Thomas M. Richardson Director November 12, 1996 Thomas M. Richardson Acting under Power of Attorney Dated August 6, 1996 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. SUGARBUSH LEASING COMANY, a Vermont corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. SUGARBUSH RESORT HOLDINGS, INC., a Vermont corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. CRANMORE, INC., a Maine corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. S-K-I LIMITED, a Delaware corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. KILLINGTON LTD., a Vermont corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. MOUNT SNOW LTD., a Vermont corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. WATERVILLE VALLEY SKI AREA, LTD., a New Hampshire corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. SUGARLOAF MOUNTAIN CORPORATION, a Maine corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) Burton Mills By: /s/ Thomas M. Richardson Director November 12, 1996 Thomas M. Richardson Acting under Power of Attorney Dated August 6, 1996 Christopher Brink By: /s/ Thomas M. Richardson Director November 12, 1996 Thomas M. Richardson Acting under Power of Attorney Dated August 6, 1996 Warren C. Cook By: /s/ Thomas M. Richardson Director November 12, 1996 Thomas M. Richardson Acting under Power of Attorney Dated August 6, 1996 William Haggett By: /s/ Thomas M. Richardson Director November 12, 1996 Thomas M. Richardson Acting under Power of Attorney Dated August 6, 1996 Joseph O'Donnell By: /s/ Thomas M. Richardson Director November 12, 1996 Thomas M. Richardson Acting under Power of Attorney Dated August 6, 1996 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. KILLINGTON RESTAURANTS, INC., a Vermont corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) Roger Amidon By: /s/ Thomas M. Richardson Director November 12, 1996 Thomas M. Richardson Acting under Power of Attorney Dated August 6, 1996 Allen Wilson By: /s/ Thomas M. Richardson Director November 12, 1996 Thomas M. Richardson Acting under Power of Attorney Dated August 6, 1996 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. DOVER RESTAURANTS, INC., a Vermont corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) Roger Amidon By: /s/ Thomas M. Richardson Director November 12, 1996 Thomas M. Richardson Acting under Power of Attorney Dated August 6, 1996 Allen Wilson By: /s/ Thomas M. Richardson Director November 12, 1996 Thomas M. Richardson Acting under Power of Attorney Dated August 6, 1996 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. RESORT TECHNOLOGIES, INC., a Vermont corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. PICO SKI AREA MANAGEMENT COMPANY, a Vermont corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. MOUNTAIN WASTEWATER TREATMENT, INC., a Vermont corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. DEERFIELD OPERATING COMPANY, a Vermont corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. RESORT SOFTWARE SERVICES, INC., a Vermont corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. LBO HOTEL CO., a Maine corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. MOUNTAINSIDE, a Maine corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine on the 12th day of November, 1996. SUGARTECH, a Maine corporation By: /s/ Leslie B. Otten Leslie B. Otten Chief Executive Officer and President 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. Signature Title Date /s/ Leslie B. Otten Director, November 12, 1996 Leslie B. Otten Chief Executive Officer and President /s/ Thomas M. Richardson Chief Financial November 12, 1996 Thomas M. Richardson Officer and Treasurer (Principal Financial and Accounting Officer) Registration No. 33-9763 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________ EXHIBITS TO Form S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _________________________ American Skiing Company EXHIBIT INDEX
Exhibit Description Page No. No. 2.1 Agreement and Plan of Merger, dated as of February 13, 1996, by and among LBO Resort Enterprises (the predecessor of the Company), LBO Acquisition Co. and S-K-I Limited* 3.1 Articles of Incorporation of the Company* 3.2 Bylaws of the Company* 3.3 Articles of Incorporation of Sunday River Skiway Corporation* 3.4 Bylaws of Sunday River Skiway Corporation* 3.5 Articles of Incorporation of Sunday River Ltd. * 3.6 Bylaws of Sunday River Ltd. * 3.7 Articles of Incorporation of Perfect Turn, Inc. * 3.8 Bylaws of Perfect Turn, Inc. * 3.9 Articles of Incorporation of LBO Holding, Inc. * 3.10 Bylaws of LBO Holding, Inc. * 3.11 Articles of Incorporation of Sunday River Transportation, Inc. * 3.12 Bylaws of Sunday River Transportation, Inc. * 3.13 Articles of Incorporation of Sugarbush Resort Holdings, Inc. * 3.14 Bylaws of Sugarbush Resort Holdings, Inc. * 3.15 Articles of Incorporation of Sugarbush Leasing Company* 3.16 Bylaws of Sugarbush Leasing Company* 3.17 Articles of Incorporation of Sugarbush Restaurants, Inc. * 3.18 Bylaws of Sugarbush Restaurants, Inc. * 3.19 Articles of Incorporation of Cranmore, Inc. * 3.20 Bylaws of Cranmore, Inc. * 3.21 Certificate of Incorporation of S-K-I Ltd. * 3.22 Bylaws of S-K-I Ltd. * 3.23 Articles of Association of Killington Ltd. * 3.24 Bylaws of Killington Ltd. * 3.25 Articles of Association of Mount Snow Ltd. * 3.26 Bylaws of Mount Snow Ltd. * 3.27 Articles of Incorporation of Waterville Valley Ski Area, Ltd. * 3.28 Bylaws of Waterville Valley Ski Area, Ltd. * 3.29 Articles of Incorporation of Sugarloaf Mountain Corporation* 3.30 Bylaws of Sugarloaf Mountain Corporation* 3.31 Articles of Association of Killington Restaurants, Inc. * 3.32 Bylaws of Killington Restaurants, Inc. * 3.33 Articles of Association of Dover Restaurants, Inc. * 3.34 Bylaws of Dover Restaurants, Inc. * 3.35 Articles of Association of Resort Technologies, Inc. * 3.36 Bylaws of Resort Technologies, Inc. * 3.37 Articles of Association of Resort Software Services, Inc. * 3.38 Bylaws of Resort Software Services, Inc. * 3.39 Articles of Incorporatoin of LBO Hotel Co. * 3.40 Bylaws of LBO Hotel Co. * 3.41 Articles of Association of Mountain Wastewater Treatment, Inc. * 3.42 Bylaws of Mountain Wastewater Treatment, Inc. * 3.43 Articles of Incorporation of Mountainside* 3.44 Bylaws of Mountainside* 3.45 Articles of Incorporation of Sugartech* 3.46 Bylaws of Sugartech* 3.47 Articles of Incorporation of Deerfield Operating Company* 3.48 Bylaws of Deerfield Operating Company* 3.49 Articles of Association of Pico Ski Area Management Company* Page No. 3.50 Bylaws of Pico Ski Area Management Company* 4.1 Indenture among the Company, the Guarantors and United States Trust Company of New York, relating to the Old Notes and the New Notes, dated as of June 28, 1996. * 4.2 Indenture among the Company, the Guarantors and United States Trust Company of New York, relating to the Old Subordinated Notes and the New Subordinated Notes, dated as of June 28, 1996. * 4.3 Registration Rights Agreement dated June 28, 1996 among the Company, the Guarantors and the Initial Purchasers. * 4.4 Purchase Agreement dated June 25, 1996 among the Company, certain of the Guarantors and the Initial Purchasers. * 4.5 Registration Rights Agreement dated June 28, 1996 among the Company, the Guarantors and Bear Stearns. * 4.6 Pledge and Disbursement Agreement, dated as of June 28, 1996, by and among the Company, the Guarantors and United States Trust Company of New York, as collateral agent. * 4.7 Shareholders' Agreement dated June 28, 1996, among Leslie B. Otten, the Company and Bear Stearns* 5.1 Opinion of Pierce Atwood, including consent 5.2 Opinion of Reiber, Kenlan, Schwiebert, Hall & Facey, including consent 5.3 Opinion of Wadleigh, Starr, Peters, Dunn & Chiesa, including consent 8.1 Opinion of Pierce Atwood with regard to federal income tax consequences of the Exchange Offers. 10.1 Credit Agreement dated as of June 28, 1996, among the Company, its Subsidiaries, parties thereto and Fleet. * 10.2 Security Agreement dated June 28, 1996, among the Company, its Subsidiaries, parties thereto and Fleet. * 10.3 Revolving Credit Notes dated June 28, 1996, issued by the Company and certain Subsidiaries to Fleet in the aggregate principal amount of $65,000,000. * 10.4 Swing Line Note dated June 28, 1996, issued by the Company and certain Subsidiaries to Fleet in the aggregate principal amount of $5,000,000. * 10.5 Fee and Leasehold Mortgage, Assignment of Leases and Rents and Security Agreement, each dated as of June 28, 1996, by and between each of Sunday River Skiway Corporation, Sunday River, Ltd., LBO Holding, Inc., Cranmore, Inc., Sugarbush Resort Holdings, Inc., Mountain Water Company, Mountain Wastewater Treatment, Inc., Killington, Ltd., Mount Snow Ltd. and Waterville Valley Ski Area Ltd. and Fleet. * 10.6 Collateral Assignments of Leases and Rents, each dated as of June 28, 1996, by and between each of Sunday River Skiway Corporation, Sunday River, Ltd., LBO Holding, Inc., Cranmore, Inc., Sugarbush Resort Holdings, Inc., Mountain Water Company, Mountain Wastewater Treatment, Inc., Killington, Ltd., Mount Snow Ltd. and Waterville Valley Ski Area Ltd. and Fleet. * 10.7 Assignment in Trust, dated as of June 28, 1996, between Waterville Valley Ski Area, Ltd. and Fleet* 10.8 Assignment in Trust, dated as of June 28, 1996, between LBO Holding, Inc. and Fleet. * 10.9 Assignment of Agreements, Permits and Contracts, among the Company, certain Subsidiaries and Fleet* 10.10 Assignment of Trademarks and Service Marks (U.S.), dated June 28, 1996, among the Company, certain Subsidiaries and Fleet. * 10.11 Hazardous Materials Indemnification Agreement, dated June 28, 1996, among the Company, certain Subsidiaries and Fleet. * Page No. 10.12 Guaranty Agreement dated June 28, 1996, by LBO Hotel Co., in favor of Fleet. * 10.13 Guaranty Agreement dated June 28, 1996, by Sugarloaf Mountain Corporation in favor of Fleet. * 10.14 Intercreditor Agreement dated as of June 20, 1996, among the Company, certain Subsidiaries, Doppelmayr USA, Inc. and Fleet. * 10.15 Intercreditor Agreement, dated as of June 28, 1996, among the Company, certain Subsidiaries, Snowridge, Inc. (for itself and as agent for Innacq Corporation) and Fleet. * 10.16 Loan and Security Agreement, dated as of October 1, 1984, among the State of Vermont, acting by and through the Vermont Industrial Development Authority, Sherburne Corporation (predecessor to Killington, Ltd.), Proctor Bank and The First National Bank of Boston* 10.17 Loan and Security Agreement, dated as of October 1, 1984, among the State of Vermont, acting by and through the Vermont Industrial Development Authority, Mt. Snow, Proctor Bank and The First National Bank of Boston* 10.18 Form of Subordinated Note, dated as of June 30, 1992, from Sugarloaf Mountain Corporation to certain note holders* 10.19 Indenture, dated October 24, 1990, among Killington, Ltd. and The Howard Bank, as trustee (representative of indentures with respect to similar indebtedness aggregating approximately $2,995,000, in original principal amount and maturing at various times from 2015 to 2016) * 10.20 Indenture, dated September 25, 1986, among Killington, Ltd. and The Howard Bank, as trustee (representative of indentures with respect to similar indebtedness aggregating approximately $10,873,500, in original principal amount and maturing at various times from 1997 to 2013) * 10.21 Restated Concession Agreement, dated April 30, 1992, between Sugarloaf Mountain Corporation and Boston Concessions Group, Inc., together with Amendment thereto, Loan Agreement, and $150,000 Promissory Notes, each dated July 31, 1995* 10.22 $500,000 Note, dated August 27, 1993, from Sugarloaf Mountain Corporation and Warren Cook to Fleet Bank of Maine* 10.23 Doppelmayr Ski Lift Supply and Installation Agreement, dated July 7, 1995, by and between Doppelmayr USA, Inc., and Sunday River Skiway Corporation* 10.24 Doppelmayr Ski Lift Supply and Installation Agreement, dated September 4, 1995, by and between Doppelmayr USA, Inc., and Sugarbush Holdings, Inc. (Gate House Chair) * 10.25 Doppelmayr Ski Lift Supply and Installation Agreement, dated September 26, 1995, by and between Doppelmayr USA, Inc., and Sugarbush Holdings, Inc. * 10.26 Doppelmayr Ski Lift Supply and Installation Agreement, dated September 4, 1995, by and between Doppelmayr USA, Inc., and Sugarbush Resort Holdings, Inc. (Sugar Bravo Lift) * 10.27 Lift Relocation Agreement, dated September 4, 1995, by and between Doppelmayr USA, Inc., and Sugarbush Resort Holdings, Inc. (North Link Chair) * 10.28 Lift Relocation Agreement, dated September 4, 1995, by and between Doppelmayr USA, Inc., and Sugarbush Resort Holdings, Inc. (North Ridge Chair) * Page No. 10.29 Doppelmayr Ski Lift Supply and Installation Agreement, dated September 4, 1995, by and between Doppelmayr USA, Inc., and Sugarbush Resort Holdings, Inc. (Green Mountain Chair)* 10.30 Doppelmayr Ski Lift Supply and Installation Agreement, dated July 14, 1995, by and between Doppelmayr USA, Inc., and LBO Holding, Inc., d/b/a Attitash/Bear Peak. * 10.31 Doppelmayr Ski Lift Supply and Installation Agreement, dated July 14, 1995, by and between Doppelmayr USA, Inc., and LBO Holding, Inc., d/b/a Cranmore, Inc. * 10.32 $2,311,838 Promissory Note from Mountain Wastewater Treatment, Inc. to LHC Corporation dated May 16, 1995. * 10.33 $6,120,000 Promissory Note, Senior Mortgage, and Junior Mortgage from Sugarbush Resort Holdings, Inc. to Snowridge, Inc. and Sugarbush, Inc. dated May 16, 1995* 10.34 Form of Subordinated Debenture due 2002 from LBO Holding, Inc. to former shareholders of Mt. Attitash Lift Corporation* 10.35 Purchase and Sale Agreement, dated April 13, 1994, among Mt. Attitash Lift Corporation and LBO Holding, Inc. for purchase of Attitash/Bear Peak Ski Resort* 10.36 Stock Purchase Agreement, dated August 16, 1994, for purchase of 51% interest in Sugarloaf Ski Resort, among Sugarloaf Mountain Corporation and S-K-I, Ltd. * 10.37 Purchase and Sale Agreement, dated August 30, 1994, among Waterville Company, Inc., and S-K-I, Ltd. for purchase of Waterville Valley Ski Resort* 10.38 Purchase and Sale Agreement, dated May 16, 1995, among Sugarbush Resort Holdings, Inc., Sugarbush Resort Corporation, Snowridge, Inc., Sugar Ridge, Inc., Sugarbush Inn Corporation and Bev Ridge, Inc. for purchase of Sugarbush Ski Resort* 10.39 Purchase and Sale Agreement among Cranmore Country Corp. and Sunday River Skiway Corporation for purchase of Cranmore Ski Resort* 10.40 Lease, dated October 15, 1980, among H. Donald Penley, Joseph Penley, Albert Penley and Sunday River Skiway Corporation* 10.41 Lease, dated July 19, 1984, between John Blake and LBO Holding, Inc. * 10.42 Lease, dated July 1, 1993, between Snowridge, Inc. and Mountain Water Company* 10.43 Lease, dated March 1, 1988, between Snowridge, Inc. and Mountain Wastewater Treatment, Inc. * 10.44 Lease, dated November 10, 1960, between the State of Vermont and Sherburne Corporation (predecessor to Killington, Ltd.) * 10.45 Lease, dated February 20, 1990, between Pico Pond Associates and Killington, Ltd. * 10.46 Lease, dated June 21, 1994, between the Town of Wilmington and Mt. Snow, Ltd. * 10.47 Lease, dated April 24, 1995, between Sargent, Inc. and Mt. Snow, Ltd. * 10.48 United States Forest Service Special Use Permit No. 4040/01 issued November 29, 1989, to Mt. Snow, Ltd. * 10.49 United States Forest Service Special Use Permit No. 4059/01 issued July 19, 1994, to LBO Holding, Inc. * 10.50 United States Forest Service Special Use Permit No. 4002/01 issued October 31, 1994, to Waterville Valley Ski Area, Ltd. * Page No. 10.51 United States Forest Service Special Use Permit No. 4041 issued May 15, 1995, to Sugarbush Resort Holdings, Inc. * 10.52 Lease, dated September 10, 1984, between the Inhabitants of the Town of Carrabassett Valley and Mountain Greenery* 10.53 Turnkey Sales Agreement, dated June 5, 1992, between POMA of America and Killington, Ltd. * 10.54 Agreement between S-K-I, Ltd., and Henry B. Lunde* 10.55 Agreement, dated July 26, 1995, between Bombardier Corporation, Killington, Ltd., Mt. Snow, Ltd., Waterville Valley Ski Area, Ltd., Bear Mountain, Ltd., and Sugarloaf Mountain Corporation* 10.56 Agreement dated June 3, 1996, between the Company and Eastern Resorts Company, LLC* 10.57 Warren Cook Employment Agreement* 10.58 Partnership Agreement, dated March 1993 relating to Sugarloaf Land Partners I* 10.59 Partnership Agreement, dated March 1993 relating to Sugarloaf Land Partners II* 10.60 Limited Guaranty of Payment and Performance from the Company to Key Bank of Maine dated October 3, 1996 10.61 Purchase and Sale Agreement between Waterville Valley Ski Area, Ltd., Cranmore, Inc., American Skiing Company and Booth Creek Ski Acquisition Corp., dated as of August 30, 1993 10.62 Purchase and Sale Agreement between Sherburne Pass Mountain Properties, LLC, Pico Mountain Sports Center, LLC, Pico Mountain Operating Company, LLC, Harold L. and Edith Herbert, and Pico Ski Area Management Company dated October 16, 1996 10.63 Letter Agreement between S-K-I Limited and Sugarloaf Minority Shareholders dated August 22, 1996 12.1 Statement re Computation of Ratio of Earnings to Fixed Charges 16.1 Letter from Berry, Dunn, McNeil & Parker re change in certifying accountants* 21.1 Subsidiaries of the Company* 23.1 Consent of Price Waterhouse LLP 23.2 Consent of Berry, Dunn, McNeil & Parker 23.3 Consents of Pierce Atwood (included in Exhibits 5.1 and 8.1) 23.4 Consent of Reiber, Kenlan, Schwiebert, Hall & Facey (included in Exhibit 5.2) 23.5 Consent of Wadleigh, Starr, Peters, Dunn & Chiesa (included in Exhibit 5.3) 24.1 Powers of Attorney (see pages II- 9 through II-34 of this Registration Statement) * 25.1 Statement of Eligibility of United States Trust Company of New York, as trustee under the Indenture filed as Exhibits 4.1 and 4.2, on Form T-1 (filed under separate cover). 99.1 Form of Notes Letter of Transmittal to be used in connection with the Notes Exchange Offer. 99.2 Form of Subordinated Notes Letter of Transmittal to be used in connection with the Subordinated Notes Exchange Offer. 99.3 Notice of Guaranteed Delivery regarding Old Notes 99.4 Notice of Guaranteed Delivery regarding Old Subordinated Notes
_______________________________________ * Previously filed EX-5 2 EXHIBIT 5 [LETTERHEAD OF PIERCE ATWOOD] November 12, 1996 American Skiing Company P.O. Box 450 Bethel, ME 04217 Re: Registration Statement on Form S-4 - -- File No. 333-9763 Ladies and Gentlemen: We have acted as counsel to American Skiing Company in connection with the issuance of the New Notes and New Subordinated Notes by American Skiing Company, and the Subsidiary Guarantees and Subordinated Note Subsidiary Guarantees of such obligations by certain of the Guarantors (as those terms are defined in the Prospectus). In that capacity, we render the following opinion: The New Notes and the New Subordinated Notes will, when sold, be legally issued, fully paid and nonassessable, and will be binding obligations of American Skiing Company, and the Subsidiary Guarantees and the Subordinated Note Subsidiary Guarantees issued with respect to the New Notes and the New Subordinated Notes, respectively, by those Guarantors which are organized under the laws of the State of Maine and the State of Delaware will, when issued, be legally issued, fully paid and will represent legally binding obligations of such Guarantors. The foregoing opinion is subject to the following qualification: the enforceability of any obligation of American Skiing Company or any Guarantor (including the New Notes, New Subordinated Notes, Subsidiary Guarantees and Subordinated Note Subsidiary Guarantees) may be limited by bankruptcy, insolvency, reorganization, moratorium, or other laws or rules of law or equity affecting the enforcement generally of creditors rights and remedies, the discretion of the court before which equitable relief is requested, and laws relating to fraudulent transfers or conveyances, preferences and equitable subordination. We consent to being named in the above-captioned Registration Statement and related Prospectus under the caption "Legal Matters" as counsel who are passing upon the validity of issuance of the New Notes and the New Subordinated Notes and such Subsidiary Guarantees and Subordinated Note Subsidiary Guarantees and to your filing copies of this letter as an Exhibit to such Registration Statement. PIERCE ATWOOD By: /s/ PIERCE ATWOOD Its Partner EX-5 3 EXHIBIT 5 [Letterhead of Reiber, Kenlan, Schwiebert, Hall & Facey] November 12, 1996 American Skiing Company P.O. Box 450 Bethel, ME 04217 Re: Registration Statement on Form S-4 - -- File No. 333-9763 Ladies and Gentlemen: We have acted as special local Vermont counsel to Sugarbush Resort Holdings, Inc., Sugarbush Leasing Company, Sugarbush Restaurants, Inc., Killington, Ltd., Mount Snow, Ltd., Mountain Wastewater Treatment, Inc., Killington Restaurants, Inc., Dover Restaurants, Inc., Resorts Technologies, Inc., Resort Software Services, Inc., Deerfield Operating Company, and Pico Ski Area Management Company, each a Vermont corporation (the "Subsidiaries" and each a "Subsidiary") in connection with the issuance of the Subsidiary Guarantees and the Subordinated Note Subsidiary Guarantees by certain of the Guarantors of the obligations of American Skiing Company as evidenced by the New Notes and the New Subordinated Notes. Terms in the opinion given herein are defined in the Registration Statement dated August 8, 1996 pertaining to the American Skiing Company $120,000,000 12% Senior Subordinated Notes due 2006 and $39,132,000 of 13 3/4% Subordinated Discount Notes due 2007 (the "Notes"). We call your attention to the fact that the Indenture and Subordinated Note Indenture provide that the internal law of the State of New York shall govern and be used to construe the Indentures, Notes, and Subsidiary Guarantees and Subordinated Note Subsidiary Guarantees, respectively, and that we are not rendering any opinion with respect to New York law. Therefore, we have not examined the question of what law would govern the interpretation or enforcement of the Indentures, Notes, Subsidiary Guarantees and the Subordinated Note Subsidiary Guarantees, and our opinion is based on the assumption that the internal laws of the State of Vermont would govern the matters upon which we are opining herein. We note that, if the Indentures, Notes, Subordinated Notes, Subsidiary Guarantees and the Subordinated Note Subsidiary Guarantees are not in fact legal, valid, binding and enforceable under the laws of New York, the Subsidiary Guarantees and Subordinated Note Subsidiary Guarantees may not be enforced by a Vermont court under applicable legal principles, including conflict of law principles. The opinion given herein is retrospective as of June 28, 1996 and is limited to the laws of the State of Vermont. We express no opinion with respect to federal laws. We express no opinion with respect to anti-fraud provisions of any state or federal securities law or any state or federal anti-trust law, and no opinion is rendered regarding the accuracy of the Registration Statement or the Prospectus. Further, we express no opinion with respect to the enforceability of any rights, remedies or waivers contained in the Subsidiary Guarantees and the Subordinated Note Subsidiary Guarantees. In rendering the following opinion, we have examined the following documents: (i) A copy of the Subsidiary Guarantee attached as Exhibit D to a copy of the executed Indenture and Article 11 of the Indenture; (ii) A copy of the Subordinated Note Subsidiary Guarantee attached as Exhibit D to a copy of the executed Subordinated Note Indenture and Article 11 of the Subordinated Note Indenture; (iii) A copy of the Articles of Incorporation of each of the Subsidiaries and all amendments thereto (the "Articles"), as certified by the Clerk of each of the Subsidiaries as of June 28, 1996; (iv) A copy of the By-Laws of each of the Subsidiaries (the "By- laws"), as certified by the Clerk of each of the Subsidiaries as of June 28, 1996; (v) A copy of the Unanimous Consent of the sole director of each of the Subsidiaries, certified by the Clerk of each of the Subsidiaries as being adopted on June 28, 1996, with respect to the authority to issue, and the execution and delivery of the documents necessary to guaranty the indebtedness incurred by American Skiing Company; (vi) A certification by the Treasurer of each of the Subsidiaries with respect tot he consideration for the Subsidiary Guarantees and the Subordinated Note Subsidiary Guarantees; and (vii) A certification by the Treasurer of American Skiing Company to the effect that American Skiing Company received full consideration for the Notes and the Subordinated Notes and no further consideration for the Notes and the Subordinated Notes is due from American Skiing Company therefor. In rendering the following opinion, we have made the following assumptions: (a) The Trustee has, or as of the delivery thereof shall have, authenticated the Notes, the Subordinated Notes, the New Notes and the New Subordinated Notes; and (b) The Subsidiary Guarantees and the Subordinated Note Subsidiary Guarantees have been executed in the form of the copies presented to and reviewed by us. Based upon the foregoing and subject to the further qualifications set forth below, we render the following opinion: The Subsidiary Guarantees and the Subordinated Note Subsidiary Guarantees issued with respect to the New Notes and the New Subordinated Notes, respectively, by each of the Subsidiaries, will, when issued, be legally issued, and will represent legally binding obligations of each of the Subsidiaries. The foregoing opinion is subject to the following qualification: the enforceability of any obligation of any Subsidiary (including the Subsidiary Guarantees and the Subordinated Note Subsidiary Guarantees) may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws or rules of law or equity affecting the enforcement generally of creditors rights and remedies, the discretion of the court before which equitable relief is requested, and laws related to fraudulent transfers or conveyances, preferences and equitable subordination. We consent to being named in the above-captioned Registration Statement and Prospectus under the caption "Legal Matters" as counsel who are passing upon the validity of issuance of such Subsidiary Guarantees and Subordinated Note Subsidiary Guarantees by each of the Subsidiaries and to your filing copies of this letter as an Exhibit to such Registration Statement. REIBER, KENLAN, SCHWIEBERT, HALL & FACEY, P.C. By: /s/ REIBER, KENLAN, SCHWIEBERT, HALL & FACEY, P.C. Its Partner EX-5 4 EXHIBIT 5 [Letterhead of Wadleigh, Starr, Peters, Dunn & Chiesa] November 12, 1996 American Skiing Company P.O. Box 450 Bethel, ME 04217 Re: Registration Statement on Form S-4 - - - File No. 333-9763 Ladies and Gentlemen: We have acted as special local New Hampshire counsel to Waterville Valley Ski Area Ltd., a New Hampshire corporation in connection with the issuance of the Subsidiary Guarantees and the Subordinated Note Subsidiary Guarantees by certain of the Guarantors of the obligations of American Skiing Company as evidenced by the New Notes and the New Subordinated Notes. Terms in the opinion given herein are defined in the Registration Statement dated August 8, 1996 pertaining to the American Skiing Company $120,000,000 12% Senior Subordinated Notes due 2006 and $39,132,000 of 13 3/4% Subordinated Discount Notes due 2007 (the "Notes"). We call your attention to the fact that the Indenture and Subordinated Note Indenture provide that the internal law of the State of New York shall govern and be used to construe the Indentures, Notes, Subordinated Notes, and Subsidiary Guarantees and Subordinated Note Subsidiary Guarantees, respectively, and that we are not rendering any opinion with respect to New York law. Therefore, we have not examined the question of what law would govern the interpretation or enforcement of the Indentures, the Notes, the Subsidiary Guarantees and the Subordinated Note Subsidiary Guarantees, and our opinion is based on the assumption that the internal laws of the State of New Hampshire would govern the matters upon which we are opining herein. We note that, if the Indentures, Notes, Subordinated Notes, Subsidiary Guarantees and the Subordinated Note Subsidiary Guarantees are in fact legal, valid, binding and enforceable under the laws of New York, the Subsidiary Guarantees and Subordinated Note Subsidiary Guarantees may not be enforced by a New Hampshire court under applicable legal principles, including conflicts-of-law principles. The opinion given herein is retrospective as of June 28, 1996 and is limited to the laws of the State of New Hampshire. We express no opinion with respect to federal laws. We express no opinion with respect to anti-fraud provisions of any state or federal securities law or any state or federal anti-trust law, and no opinion is rendered regarding the accuracy of the Registration Statement. Further, we express no opinion with respect to the enforceability of any rights, remedies or waivers contained in the Subsidiary Guarantees and the Subordinated Note Subsidiary Guarantees. We have examined the following documents: (i) A copy of the Subsidiary Guarantee attached as Exhibit D to a copy of the executed Indenture and Article 11 of the Indenture; (ii) A copy of the Subordinated Note Subsidiary Guarantee attached as Exhibit D to a copy of the executed Subordinated Note Indenture and Article 11 of the Subordinated Note Indenture; (iii) A copy of the Articles of Incorporation of Waterville Valley Ski Area Ltd., and all amendments thereto (the "Articles"), on file in the office of the Secretary of State for the State of New Hampshire, as certified by said Secretary of State attesting to the continued corporate existence of Waterville Valley Ski Area Ltd., as of October 28, 1996; (iv) A copy of the By-Laws of Waterville Valley Ski Area Ltd., as certified by its Clerk as of June 28, 1996 (the "By- Laws"); (v) A copy of the Unanimous Consent of the sole director of Waterville Valley Ski Area Ltd., certified by its Clerk as being adopted on June 28, 1996, with respect to the authority to issue, and the execution and delivery of the documents necessary to guaranty the indebtedness incurred by American Skiing Company; (vi) A certification by the Treasurer of Waterville Valley Ski Area Ltd. with respect to the consideration for the Subsidiary Guarantees and the Subordinated Note Subsidiary Guarantees; and (vii) A certification by the Treasurer of American Skiing Company to the effect that American Skiing Company received full consideration for the Notes and no further consideration is due to American Skiing Company therefor In rendering the following opinion, we have made the following assumptions: (a) The Trustee has, or as of the delivery thereof shall have, authenticated the Notes and the New Notes; and (b) The Subsidiary Guarantees and the Subordinated Note Subsidiary Guarantees have been executed in the same form of the copies presented to and reviewed by us. Based upon the foregoing and subject to the further qualifications set forth below, we render the following opinion: The Subsidiary Guarantees and the Subordinated Note Subsidiary Guarantees issued with respect to the New Notes and the New Subordinated Notes, respectively, by Waterville Valley Ski Area Ltd., a New Hampshire corporation, will, when issued, be legally issued, and will represent legally binding obligations of Waterville Valley Ski Area Ltd. The foregoing opinion is subject to the following qualification: the enforceability of any obligation of Waterville Valley Ski Area Ltd. (including the Subsidiary Guarantees and Subordinated Note Subsidiary Guarantees) may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws or rules of law or equity affecting the enforcement generally of creditors rights and remedies, the discretion of the court before which equitable relief is requested, and laws related to fraudulent transfers or conveyances, preferences and equitable subordination. We consent to being named in the above-captioned Registration Statement and Prospectus under the caption "Legal Matters" as counsel who are passing upon the validity of issuance of such Subsidiary Guarantees and Subordinated Note Subsidiary Guarantees by Waterville Valley Ski Area Ltd. and to your filing copies of this letter as an Exhibit to such Registration Statement. WADLEIGH, STARR, PETERS, DUNN & CHIESA By: WADLEIGH, STARR, PETERS, DUNN & CHIESA Partner EX-8 5 EXHIBIT 8 [LETTERHEAD OF PIERCE ATWOOD] November 12, 1996 American Skiing Company P.O. Box 450 Bethel, ME 04217 Re: Registration Statement on Form S-4 - -- File No. 333-9763 Ladies and Gentlemen: We have acted as counsel to American Skiing Company in connection with the issuance of the New Notes and New Subordinated Notes by American Skiing Company, and the Subsidiary Guarantees and Subordinated Note Subsidiary Guarantees of such obligations by certain of the Guarantors (as those terms are defined in the Prospectus). In that capacity, we render the following opinion as to the material anticipated federal income tax consequences of the Exchange Offers (as that term is defined in the Prospectus). The following opinion is based upon the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the final, temporary and proposed regulations promulgated thereunder, and administrative rulings and judicial decisions now in effect, all of which are subject to change (possibly with retroactive effect) or different interpretations. Holders should note that our opinion is not binding on the Internal Revenue Service (the "Service") and there can be no assurance that the Service will take a similar view with respect to the tax consequences described below. No ruling has been or will be requested by the Company from the Service on any tax matters relating to the New Notes or the New Subordinated Notes. This opinion is not intended to be applicable to all categories of investors, some of which, such as dealers in securities, banks, insurance companies, tax-exempt organizations and foreign persons, may be subject to special rules. All holders of Notes and/or Subordinated Notes are advised to consult their own tax advisors regarding the federal, state, local and foreign tax consequences of exchanging Old Notes for New Notes and/or Old Subordinated Notes for New Subordinated Notes. In the capacity set forth above and subject to the foregoing limitations and restrictions, it is our opinion that the exchange of the New Notes for the Old Notes and the exchange of the New Subordinated Notes for the Old Subordinated Notes pursuant to the Exchange Offers should not give rise to taxable income to the respective Holders thereof for federal income tax purposes. PIERCE ATWOOD By: /S/ PIERCE ATWOOD Its Partner EX-10 6 EXHIBIT 10 -- LIMITED GUARANTY OF PAYMENT AND PERFORMANCE GUARANTY by AMERICAN SKIING COMPANY, a Maine corporation (the "Guarantor"), in favor of KEY BANK OF MAINE, a Maine bank with its head office at One Canal Plaza, Portland, Maine 04101 (the "Lender"). In consideration of the Lender's giving, in its discretion, time, credit or banking facilities or accommodations to LBO HOTEL CO., a Maine corporation, (together with its successors, the "Customer"), the Guarantor agrees as follows: 1. LIMITED GUARANTY OF PAYMENT AND PERFORMANCE. Subject to the limitations of Section 3 below, the Guarantor hereby guarantees to the Lender the full and punctual payment when due (whether at maturity, by acceleration or otherwise), and the performance, of a Construction Term Loan Agreement of even or recent date and a Note of even or recent date in the amount of up to Eight Million Five Hundred Thousand Dollars ($8,500,000.00) together with interest, fees and other amounts as therein provided, all together with any and all renewals, modifications, consolidations and extensions thereof, and all other agreements and other obligations of the Customer to the Lender which evidence, govern or secure the foregoing loan agreement and note and/or any and all renewals, modifications, consolidations and extensions thereof (collectively the "Obligations"). Subject to the limitations of Section 3 below, this Guaranty is an absolute, unconditional and continuing guaranty of the full and punctual payment and performance of the Obligations and not of their collectibility only and is in no way conditioned upon any requirement that the Lender first attempt to collect any of the Obligations from the Customer or resort to any security or other means of obtaining their payment. Should the Customer default in the payment or performance of any of the Obligations, the obligations of the Guarantor hereunder shall become immediately due and payable to the Lender, without demand or notice of any nature, all of which are expressly waived by the Guarantor. Payments by the Guarantor hereunder may be required by the Lender on any number of occasions. 2. GUARANTOR'S AGREEMENT TO PAY. Subject to the limitations of Section 3 below, the The Guarantor further agrees, as the principal obligor and not as a guarantor only, to pay to the Lender, on demand, (a) all costs and expenses (including court costs and legal expenses, including reasonable attorneys' and paralegal fees) incurred or expended by the Lender in connection with the Obligations and the enforcement thereof, together with interest on amounts recoverable under this Guaranty from the time such amounts become due until payment, at the highest rate per annum provided in the Obligations, and (b) all costs and expenses (including court costs and legal expenses, including reasonable attorneys' and paralegal fees) incurred or expended by the Lender in connection with the Guaranty and the enforcement thereof together with interest on amounts recoverable under this Guaranty from the time such amounts become due until payment, at the highest rate per annum provided in the Obligations. 3. AMOUNT OF GUARANTY. The aggregate liability of the Guarantor under this Guaranty, including amounts due amounts due under Section 2(a) above, shall be limited to FOUR MILLION DOLLARS ($4,000,000.00) plus, if this Guaranty is not paid when due, an additional FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) with respect to amounts due under Section 2(b) above (all collectively the "Cap Amount"). Furthermore, upon the satisfaction of all of the following conditions, (i) the substantial completion of Phase I at the Borrower's Summit Hotel at Mt. Attitash/Bear Peak project consisting of 105 quartershare units plus the commercial unit (the "Project") with certificates of occupancy issued for the Project so that the closing of individual quartershare unit sales may occur and (ii) the reduction of the outstanding balance on the Note to Three Million Five Hundred Thousand Dollars ($3,500,000.00) or less, (iii) if the then outstanding balance of the Note does not exceed forty percent (40%) of the fair market value of the remaining unsold inventory of quartershare units in the Project available for sale to third parties, and (iv) the Obligations are not otherwise in default, then upon receipt of Guarantor's written request this Guaranty shall be released. The liability on this Guaranty is separate from and independent of the Guarantor's obligation to contribute equity to Borrower consisting of: (i) $5,000,000 in cash and prepaid expenses, and in addition, (ii) land and related easements with value of $650,000, and in connection therewith further reference being made to a separate Debt Subordination Agreement of even or recent date between Guarantor and Lender. 4. WAIVERS BY GUARANTOR; BANK'S FREEDOM TO ACT. The Guarantor agrees that the Obligations will be paid and performed strictly in accordance with their respective terms regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Lender with respect thereto. The Guarantor waives presentment, demand, protest, notice of acceptance, notice of Obligations incurred and all other notices of any kind, all defenses which may be available by virtue of any valuation, stay, moratorium law or other similar law now or hereafter in effect, any right to require the marshalling of assets of the Customer, and all suretyship defenses generally. Without limiting the generality of the foregoing, the Guarantor agrees to the provisions of any instrument evidencing, securing or otherwise executed in connection with any Obligation and agrees that the obligations of the Guarantor hereunder shall not be released or discharged, in whole or in part, or otherwise affected by (i) the failure of the Lender to assert any claim or demand or to enforce any right or remedy against the Customer; (ii) any extensions or renewals of any Obligation; (iii) any rescissions, waivers, amendments or modifications of any of the terms or provisions of any agreement evidencing, securing or otherwise executed in connection with any Obligation; (iv) the substitution or release of any entity primarily or secondarily liable for any Obligation; (v) the adequacy of any rights the Lender may have against any collateral or other means of obtaining repayment of the Obligations; (vi) the impairment of any collateral securing the Obligations, including without limitation the failure to perfect or preserve any rights the Lender might have in such collateral or the substitution, exchange, surrender, release, loss or destruction of any such collateral; or (vii) any other act or omission which might in any manner or to any extent vary the risk of the Guarantor or otherwise operate as a release or discharge of the Guarantor, all of which may be done without notice to the Guarantor. 5. UNENFORCEABILITY OF OBLIGATIONS AGAINST CUSTOMER. If for any reason the Customer has no legal existence or is under no legal obligation to discharge any of the Obligations, or if any of the Obligations have become irrecoverable from the Customer by operation of law or for any other reason, this Guaranty shall nevertheless be binding on the Guarantor to the same extent as if the Guarantor at all times had been the principal obligor on all such Obligations. In the event that acceleration of the time for payment of the Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Customer, or for any other reason, all such amounts otherwise subject to acceleration under the terms of any agreement evidencing, securing or otherwise executed in connection with any Obligation shall be immediately due and payable by the Guarantor. 6. SUBROGATION; SUBORDINATION. Until the payment and performance in full of all Obligations of the Customer to the Lender, the Guarantor shall not exercise any rights against the Customer arising as a result of payment by the Guarantor hereunder, by way of subrogation, exoneration, or otherwise, and will not prove any claim in competition with the Lender in respect of any payment hereunder in bankruptcy or insolvency proceedings of any nature; the Guarantor will not claim any set-off or counterclaim against the Customer in respect of any liability of the Guarantor to the Customer; and the Guarantor waives any benefit of and any right to participate in any collateral which may be held by the Lender. The payment of any amounts due with respect to any indebtedness of the Customer now or hereafter held by the Guarantor is hereby subordinated to the prior payment in full of the Obligations, provided that so long as no default in the payment or performance of the Obligations has occurred and is continuing, or no demand for payment of any of the Obligations has been made that remains unsatisfied, the Customer may make, and the Guarantor may demand and accept, any scheduled payments of principal of and interest on such subordinated indebtedness in the amounts, at the rates and on the dates specified in such instruments, securities or other writings as shall evidence such subordinated indebtedness. The Guarantor agrees that after the occurrence of any default in the payment or performance of the Obligations, the Guarantor will not demand, sue for or otherwise attempt to collect any such indebtedness of the Customer to the Guarantor until the Obligations shall have been paid in full. If, notwithstanding the foregoing sentence, the Guarantor shall collect, enforce or receive any amounts in respect of such indebtedness, such amounts shall be collected, enforced and received by the Guarantor as trustee for the Lender and be paid over to the Lender on account of the Obligations without affecting in any manner the liability of the Guarantor under the other provisions of this Guaranty. 7. FURTHER ASSURANCES/FINANCIAL STATEMENTS/AUTHORITY. The Guarantor agrees that it will, from time to time at the request of the Lender, provide to the Lender its internal quarterly and annual audited financial statements, and related statements of income and changes in financial condition, together with such other information relating to the business and affairs of the Guarantor as the Lender may reasonably request. The Guarantor also agrees to do all such things and execute all such documents, as the Lender may consider necessary or desirable to give full effect to this Guaranty and to perfect and preserve the rights and powers of the Lender hereunder or under the accompanying loan documents. Guarantor represents and warrants to Lender that Guarantor's execution and delivery of this Guaranty and the accompanying Debt Subordination Agreements and the transactions contemplated hereby by Guarantor (i) are within the authority of Guarantor, (ii) have been duly authorized by all necessary proceedings on the part of Guarantor, (iii) do not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which Guarantor is subject or any judgment, order, writ, injunction, license or permit applicable to Guarantor or any indebtedness to which Guarantor is a party and (iv) do not conflict with any provision of the articles of incorporation or bylaws of, or any agreement or other instrument binding upon, Guarantor, including without limitation, Guarantor's obligations under: (i) the Credit Agreement entered into among Guarantor, Guarantor's affiliates and Fleet National Bank as Agent for itself, The First National Bank of Boston and Lender under its loan dated on or about June 28, 1996 or to United States Trust Company as Trustee under certain Senior Subordinated Debentures dated on or about June 28, 1996 and (ii) the Indenture among Guarantor, Guarantor's affiliates and United States Trust Company pursuant to which Guarantor issued its $120,000,000 12% Senior Subordinated Notes due 2006 and its 13.75% Subordinated Discount Notes due 2007 8. TERMINATION; REINSTATEMENT. This Guaranty shall remain in full force and effect until the Lender is given written notice of the Guarantor's termination of this Guaranty specifically referring to this Section, notwithstanding any intermediate or temporary payment or settlement of the whole or any part of the Obligations. No such notice shall be effective unless received and acknowledged by an officer of the Lender at its head office or at the branch of the Lender where this Guaranty is given. No such notice shall affect any rights of the Lender or of any affiliate hereunder including, without limitation, the rights set forth in Sections 4 and 6, with respect to Obligations incurred prior to the receipt of such notice or Obligations incurred pursuant to any contract or commitment in existence prior to such receipt, and all checks, drafts, notes, instruments (negotiable or otherwise) and writings made by or for the account of the Customer and drawn on the Lender or any of its agents purporting to be dated on or before the date of receipt of such notice, although presented to and paid or accepted by the Lender after that date, shall form part of the Obligations. This Guaranty shall continue to be effective or be reinstated, notwithstanding any such notice, if at any time any payment made or value received with respect to an Obligation is rescinded or must otherwise be returned by the Lender upon the insolvency, bankruptcy or reorganization of the Customer, or otherwise, all as though such payment had not been made or value received. 9. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the Guarantor, its successors and assigns, and shall inure to the benefit of and be enforceable by the Lender and its successors, transferees and assigns. Without limiting the generality of the foregoing sentence, the Lender may assign or otherwise transfer any agreement or any note held by it evidencing, securing or otherwise executed in connection with the Obligations, or sell participations in any interest therein, to any other person or entity, and such other person or entity shall thereupon become vested, to the extent set forth in the agreement evidencing such assignment, transfer or participation, with all the rights in respect thereof granted to the Lender herein. 10. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of this Guaranty nor consent to any departure by the Guarantor therefrom shall be effective unless the same shall be in writing and signed by the Lender. No failure on the part of the Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. 11. NOTICES. All notices and other communications called for hereunder shall be made in writing and, unless otherwise specifically provided herein, shall be deemed to have been duly made or given when delivered by hand or mailed first class mail postage prepaid or, in the case of telegraphic or telexed notice, when transmitted, answer back received, addressed as follows: if to the Guarantor, at the address set forth herein, and if to the Lender, at One Canal Plaza, Portland, Maine 04101, Attention: Senior Commercial Loan Officer, or at such address as either party may designate in writing. 12. GOVERNING LAW; CONSENT TO JURISDICTION. This Guaranty is intended to take effect as a sealed instrument and shall be governed by, and construed in accordance with, the laws of the State of Maine. The Guarantor agrees that any suit for the enforcement of this Guaranty may be brought in the courts of the States of Maine or New Hampshire or any Federal Court sitting therein and consents to the non-exclusive jurisdiction of such court and to service of process in any such suit being made upon the Guarantor by mail at the address specified in Section 1112 hereof. The Guarantor hereby waives any objection that it may now or hereafter have to the venue of any such suit or any such court or that such suit was brought in an inconvenient court. 13. MISCELLANEOUS. This Guaranty and a separate Debt Subordination Agreement of even or recent date constitutes the entire agreement of the Guarantor with respect to the matters set forth herein. The rights and remedies herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this Guaranty shall be in addition to any other guaranty of the Obligations. The invalidity or unenforceability of any one or more sections of this Guaranty shall not affect the validity or enforceability of its remaining provisions. Captions are for the ease of reference only and shall not affect the meaning of the relevant provisions. The meanings of all defined terms used in this Guaranty shall be equally applicable to the singular and plural forms of the terms defined. 14. Waiver of Right of Set-Off. Lender affirmatively waives any right of common law set-off against any accounts of Guarantor with Lender, but this waiver shall not restrict Lender's rights to prejudgment trustee process and attachment nor shall it limit Lender's rights to recover on any judgment against Guarantor. 1514. JURY WAIVER. THE LENDER (BY ITS ACCEPTANCE HEREOF) AND THE GUARANTOR AGREE THAT NEITHER OF THEM, INCLUDING ANY ASSIGNEE OR SUCCESSOR SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE BASED UPON, OR ARISING OUT OF, THIS GUARANTY, ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM. NEITHER THE LENDER NOR THE GUARANTOR SHALL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE LENDER AND THE GUARANTOR, AND THESE PROVISIONS SHALL NOT BE SUBJECT TO ANY EXCEPTIONS. NEITHER LENDER NOR THE GUARANTOR HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. 1617. NOTICE: Under Maine law, no promise, contract or agreement to lend money, extend credit, forebear from collection of a debt or make any other accommodation for the repayment of a debt for more than $250,000 may be enforced in court against the Lender unless the promise, contract, or agreement is in writing and signed by the Lender. Accordingly the Guarantor cannot enforce any oral promise unless it is contained in a Loan Document signed by the Lender, nor can any change, forbearance other accommodation relating to the Obligations or any other loan document be enforced unless it is in writing signed by the Lender. Guarantor also understands that all future promises, contracts and agreements of the Lender relating to any other transactions between the Guarantor or Customer and the Lender cannot be enforced in court unless they are in writing and signed by the Lender. IN WITNESS WHEREOF, the Guarantor has executed this Guaranty under seal at _____________ __________, Maine as ofon October 3___, 1996. AMERICAN SKIING COMPANY _____________________________ by: ______________________________ Witness its ____________________________ GUARAN.DOC XXX 0, 0000 0:00 AM10/04/96 2:02 PM10/04/96 9:11 AM EX-10 7 EXHIBIT 10 PURCHASE AND SALE AGREEMENT by and between WATERVILLE VALLEY SKI AREA, LTD. and CRANMORE, INC. ("Sellers") AMERICAN SKIING COMPANY ("American SKI") and BOOTH CREEK SKI ACQUISITION CORP. ("Buyer") dated as of August 30, 1996 PURCHASE AND SALE AGREEMENT THIS AGREEMENT is made and entered into as of this 30th day of August 1996, among Waterville Valley Ski Area, Ltd., a New Hampshire corporation with a principal place of business at Waterville Valley, New Hampshire ("WVSAL"), Cranmore, Inc., a Maine corporation with a principal place of business at North Conway, New Hampshire ("CI") (WVSAL and CI being collectively referred to as the "Sellers", American Skiing Company, a Maine corporation with a principal place of business at Bethel, Maine ("American SKI") and Booth Creek Ski Acquisition Corp., a Delaware corporation with a principal place of business at Vail, Colorado.("Buyer"), all of the issued and outstanding stock of which is beneficially owned by George N. Gillett, Jr. of Vail, Colorado. RECITALS 1. WVSAL owns and operates the Waterville Valley Ski Resort located in Waterville Valley, New Hampshire (the "WVSAL Resort") and CI owns and operates the Mount Cranmore Ski Resort located in North Conway, New Hampshire (the "CI Resort"). The WVSAL Resort and CI Resort are hereinafter collectively referred to as the "Ski Areas". 2. WVSAL and CI wish to sell to Buyer, and Buyer wishes to purchase and acquire from WVSAL and CI the Ski Areas and all WVSAL's assets located in Waterville Valley, New Hampshire and all CI's assets located in North Conway, New Hampshire. 3. The sale and purchase and the other transactions contemplated hereby will be subject to the approval of the United States Department of Justice ("USDOJ") as provided in the Stipulation and Final Judgment in the proceeding entitled United States of America v. American Skiing Company and S-K-I Limited, United States District Court, District of Columbia, Docket No. 96- 1308 (the "Consent Decree"). AGREEMENT NOW, THEREFORE, in consideration of the mutual agreements herein contained, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I PURCHASED ASSETS Subject to the terms and conditions of this Agreement, Sellers agree to sell, convey, transfer, set over, assign and deliver to Buyer, and Buyer agrees to purchase and accept from Sellers all right, title and interest in and to the assets, real, personal and mixed, tangible and intangible, of every kind, nature and description pertaining to or used or useful in the operations of the Ski Areas (excluding, however, the Excluded Assets), including without limitation the following assets (the "Purchased Assets"): 1.01 Real Property. The real property consisting of: (a) All real property owned by WVSAL, together with all buildings and other improvements located thereon, including those described in Schedule 1.01(a) (the "WVSAL Real Estate"); (b) All real property owned by CI, together with all buildings and other improvements located thereon, including those described in Schedule 1.01(b) (the "CI Real Estate"); and (c) All easements, rights, privileges, rights of way and appurtenances belonging to Sellers, whether or not appurtenant to, adjoining or adjacent to the WVSAL Real Estate and/or the CI Real Estate and all buildings, fixtures and improvements thereon, including any interest in adjoining or adjacent highways, roads, streets and lanes, whether public or private, used by Sellers for the benefit of the WVSAL Real Estate and/or the CI Real Estate, and including all development rights owned by either WVSAL or CI, including but not limited to those described in Schedule 1.01(c) (the "Easements"); the WVSAL Real Estate, CI Real Estate and Easements being hereinafter referred to as the "Sellers' Real Estate". Without limiting the foregoing, the Sellers' Real Estate shall include the Waterville Valley Conference Center, the Mt. Cranmore Mountain Club and those certain recreational easements pertaining to Black Cap Mountain described on Schedule 1.01(c). 1.02 United States Forest Service Permits. WVSAL's rights under the United States Forest Service Permit No. 4008-01 dated October 31, 1994 ("USFS Permit") for alpine skiing on Mt. Tecumseh and Snow's Mountain and cross-country skiing, all taking place on White Mountain National Forest lands in Waterville Valley, New Hampshire. 1.03 Ski Areas Improvements. All buildings, structures, lifts, snowmaking equipment, fixtures and other improvements owned by Sellers which are utilized in any way in the operation of the Ski Areas, including, but not limited to, the parking lots, lifts, snowmaking systems, snowmaking compressor and pumphouse buildings, services buildings and base lodges, including those described in Schedule 1.03 (the "Ski Areas Improvements"). 1.04 Personal Property. All inventory, supplies, materials, computers, phone equipment, vehicles, machinery and equipment, furniture and other personal property owned by Sellers which are utilized in any way in the operation of the Ski Areas, including without limitation the personal property described in Schedule 1.04 (the "Personal Property"). 1.05 Licenses and Permits. To the extent assignable by Sellers, all of Sellers' rights under all governmental licenses, authorizations and permits relating to operation of the Ski Areas, including but not limited to the licenses, authorizations and permits listed on Schedule 1.06 ("Assumed Permits"). 1.06 Books and Records. All Sellers' books, records, reports, studies, documents, data and other information relating to the Purchased Assets or the Sellers ("Records"). 1.07 Intellectual Property. All rights to any trademarks, tradenames, servicemarks (whether or not registered), registrations thereof, applications for registration, copyrights (whether or not registered) and any other intangible assets or property, and any applications for registration thereof, used in connection with Sellers' operation of the Ski Areas, including without limitation as listed on Schedule 1.07 ("Intellectual Property Rights"). 1.08 Contract Rights. All of the contracts, agreements leases and commitments, and all amendments, extensions, renewals, substitutions and replacements thereof, necessary for or used or useful in the operations of the Ski Resorts. 1.09 Claims, Suits, etc. All claims, suits, and causes of action that either Seller has against third parties with respect to the Ski Resorts, including without limitation, any rights or claims arising from manufacturer warranties with respect to machinery and equipment included in the Purchased Assets. 1.10 Accounts Receivable; Deposits. All of Sellers' accounts receivable for services to be performed or products to be delivered on or after the Closing and all deposits, prepaid expenses and refunds (including deposits received in connection with the 1996-7 ski season and any ski season thereafter), excepting those that are prorated as of Closing in accordance with the standards set forth on Schedule 1.10. 1.11 Cash. All of the Sellers' cash on hand and any cash equivalents in the form of bank accounts, investment securities and other deposits, prepaid expenses and refunds, which specifically relate to the sale of a ski pass for the 1996-1997 season or any season thereafter for use at either Ski Area. 1.12 Going Concern The business of the Ski Resorts as a going concern. ARTICLE II EXCLUDED ASSETS The assets listed below shall be excluded from the Purchased Assets (the "Excluded Assets"): 2.01 Cash. All of the Sellers' cash on hand and any cash equivalents in the form of bank accounts, investment securities and other deposits, prepaid expenses and refunds, excepting those that specifically relate to the sale of a ski pass for the 1996-1997 season or any season thereafter for use at either Ski Area and excepting those that are prorated as of the Closing in accordance with Section 1.10. 2.02 Accounts Receivable. All of Sellers' accounts receivable for services performed or products delivered on or prior to the Closing, the collection of which is addressed in Section 13.20 hereof. ARTICLE III NO ASSUMPTION OF LIABILITIES 3.01 No Assumption by Buyer. Except for the liabilities of Sellers assumed by Buyer as described in Schedule 3.01 hereof ("Assumed Liabilities"), Buyer does not, and shall not be obligated to, assume or become liable for any of Sellers' liabilities, obligations, debts, contracts or other commitments whatsoever, whether known or unknown, fixed or contingent, now existing or hereafter existing. 3.02 No Assumption by Sellers. Nothing in the foregoing shall be deemed to constitute an assumption by Sellers of any of Buyer's liabilities, obligations, debts, contracts or other commitments whatsoever, whether known or unknown, fixed or contingent, now existing or hereafter arising which relate to Buyer's ownership of or the operation, or removal by Buyer of any of, the Purchased Assets after the Closing Date other than those liabilities, obligation, debts, contracts or other commitments, whether known or unknown, which exist or shall be deemed to have occurred prior to Buyer's ownership and operation of the Ski Areas and which were not specifically assumed by Buyer pursuant to Section 3.01. ARTICLE IV PURCHASE AND SALE 4.01 Determination of Purchase Price. (a) In consideration of Sellers' sale, assignment and transfer of the Purchased Assets to Buyer and Sellers' agreement to perform the terms, covenants and provisions of this Agreement on its part to be performed, at Closing (as hereinafter defined) Buyer will assume the Assumed Liabilities, and will pay to Sellers an amount equal to Seventeen Million Five Hundred Thousand Dollars ($17,500,000) minus the Adjustment (as defined in this Section 4.01(a)) (the "Purchase Price"). The "Adjustment" shall be the amount of the diminution in value in excess of $500,000 of the Purchased Assets, the business of the Sellers and or the Ski Areas resulting from (i) any breach or breaches of a representation or warranty by either of the Sellers or (ii) one or more failures by either of the Sellers to comply with any of the other provisions of this Agreement. In the event that the diminution referred to above is greater than $1,500,000 (in which case the Adjustment would be greater than $1,000,000) and the Buyer requests an Adjustment in excess of $1,000,000, the Sellers and Buyer shall have the right to terminate this Agreement under this Section 4.01(a), it being understood that the Sellers shall not have the right to terminate this Agreement under this Section 4.01(a) if the Buyer does not request an Adjustment in excess of $1,000,000 and the Buyer shall not have the right to terminate this Agreement under this Section 4.01(a) if the diminution referred to above is not greater than $1,500,000. (b) If the Buyer believes that any Adjustment is necessary, the Buyer shall provide prompt notice thereof to Sellers prior to Closing (the "Buyer's Adjustment Notice") for each such Adjustment, which notice shall contain an explanation of the Buyer's basis for the Adjustment. The Sellers shall have five (5) business days from receipt of such Buyer's Adjustment Notice to accept or disapprove thereof. If Seller shall approve of the Adjustment provided in such Buyer's Adjustment Notice, or shall fail to notify Buyer of Sellers' disapproval thereof within said five (5) business day period, then the Adjustment shown in such Buyer's Adjustment Notice shall be the amount of the Adjustment for such Buyer's Adjustment Notice. If Sellers shall disapprove of the amount of the Adjustment as shown on such Buyer's Adjustment Notice, Sellers shall so notify Buyer within such five (5) business day period and shall accompany such notice with Sellers' calculation of the Adjustment (the "Sellers' Calculation"). The Buyer and Sellers shall negotiate in good faith to resolve any dispute over the amount or existence of any Adjustment arising from each Buyer's Adjustment Notice. If the Buyer and Sellers cannot resolve their differences over the proposed Adjustment for any Buyer's Adjustment Notice within ten (10) business days following receipt by Buyer of the Sellers' Calculation, then the Sellers and the Buyer shall submit their disagreement to Sno Engineering whose determination on the matter shall be final and conclusive and binding on the parties hereto. 4.02 Deposit. Upon the execution of this Agreement Seven Hundred Fifty Thousand Dollars ($750,000.00) (the "Deposit") shall be deposited with the Sellers either in cash or in the form of an assignment of Vail Resorts, Inc. common stock sufficient to generate a value of $750,000. Buyer shall initially place 25,000 shares of Vail Resorts, Inc. common stock on deposit with the Escrow Agent. In the event the Sellers are entitled to retain the Deposit in accordance with the terms of this Agreement and the Deposit Escrow Agreement referred to below, then the number of shares, together with any cash portion of the Deposit, necessary to generate a Deposit value of $750,000 shall be determined using the procedure set forth below as of the date of the termination of this Agreement which entitles the Sellers to retain the Deposit. Notwithstanding anything herein to the contrary, the number of shares of Vail Resorts, Inc. common stock to be deposited with the Escrow Agent or to be retained by the Sellers shall not exceed 25,000. The value of Vail Resorts, Inc. common stock shall be determined using the following procedure, in the order of priority specified: (1) By mutual agreement of the parties; (2) By independent appraisal performed by Bear, Stearns & Co. Inc., which independent appraisal shall be final, binding and conclusive as to the per share value of Vail Resorts, Inc. common stock. Any common stock remaining in the Deposit after application of the number of shares necessary to achieve a $750,000 Deposit value shall be reassigned to Buyer. The Deposit shall be made pursuant to and in accordance with the terms of the Deposit Escrow Agreement to be entered into by the Buyer, the Sellers, George N. Gillett, Jr. and an escrow agent. The Deposit Escrow Agreement shall be entered into on the date and in accordance with the terms provided for in that certain Letter Agreement dated as of the date hereof by and among the Buyer and the Sellers. The Escrow Agent under the Deposit Escrow Agreement shall be acceptable to Buyer and Sellers (the "Escrow Agent"). The Deposit shall be applied as follows: (a) If the Closing shall occur, the cash portion of the Deposit together with any earnings thereon to the Closing Date (as defined in Article V) shall be applied as a credit against the Purchase Price as provided in Section 4.03(a). The parties hereto acknowledge that any Vail Resorts, Inc. stock assigned pursuant to this Section 4.02 shall not be credited against the Purchase Price at Closing, but rather shall be re- assigned by Sellers to Buyer upon payment of the full Purchase Price. (b) If the Closing shall not occur by reason of a material breach of this Agreement by Buyer, including by failing to close the transactions contemplated hereby upon satisfaction by Sellers of the conditions set forth in Article VIII hereof, and the Sellers are not in material breach of this Agreement any and all of which breaches, if measurable as a diminution in value, do not result in an Adjustment under Section 4.01 in excess of $1,000,000, then upon termination of this Agreement Sellers shall be entitled to retain the Deposit, together with any earnings thereon, for their own account as liquidated damages in lieu of all claims, actions or remedies which Sellers may have against Buyer arising out of such breach. (c) If the Closing shall not occur for any reason other than pursuant to clause (b) of this Section 4.02 (it being understood that termination of this Agreement by Buyer or Sellers pursuant to Section 4.01(a) of this Agreement shall be deemed pursuant to this Section 4.02(c), and not Section 4.02(b)), then upon termination of this Agreement the Deposit, together with any earnings thereon, shall be returned to Buyer. 4.03 Payment of Purchase Price. (a) The Deposit, together with any earnings thereon, shall be credited as a payment against the Purchase Price; provided that any Vail Resorts, Inc. stock assigned pursuant to Section 4.02 shall not be credited against the purchase price at Closing, but rather shall be re-assigned by Sellers to Buyer upon payment of the full purchase price. (b) (i) Fourteen Million Seven Hundred Fifty Thousand Dollars ($14,750,000), less .50 times the aggregate of any Adjustments and less the credit provided for in Section 4.03(a) shall be paid by Buyer in cash by wire transfer or other acceptable means of delivering same day good funds; and (B) Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000) less .50 times the aggregate of any Adjustments shall be paid by a promissory note from Buyer to Sellers. The note shall bear interest at the rate of 12% per annum, provide for a seven and one-half year maturity with the principal due according to the schedule below, and contain semi- annual interest payment dates, with the first interest payment date occurring on the six month anniversary of the Closing. The note will be secured by a second mortgage lien, security interest or collateral assignment (as applicable) in all Purchased Assets, junior only to Purchaser's senior credit facilities, Purchaser's purchase money financing and certain other customary permitted liens, all to the extent consented to by the senior lenders of Buyer. The note shall contain customary terms and provisions including provision for payment of costs and collection. The required principal payments shall be as follows: Date Amount 11/30/96 $250,000.00 1/31/98 100,000.00 1/31/99 150,000.00 1/31/00 200,000.00 1/31/01 250,000.00 1/31/02 300,000.00 1/31/03 350,000.00 Maturity Remaining Date Principal. 4.04 Adjustment for Taxes, Prepayments and Deposits. Real property taxes, personal property taxes, other ad valorem taxes, any governmental levies, charges or assessments, utilities, water, sewer and any other charges attributable to the Purchased Assets for the fiscal year during which the Closing Date occurs as well as any other prepayments and deposits with respect to the Purchased Assets shall be prorated and adjusted as of the Closing Date. All of such taxes, prepayments and deposits are listed on Schedule 4.02. If the real property taxes or personal property taxes for the fiscal year during which the Closing Date occurs are not finally determined, then such taxes for the immediately prior fiscal year shall be used for the purposes of prorating taxes on the Closing Date, with a further adjustment to be made after the Closing Date as soon as such taxes are finalized. Installments of special taxes or assessments with respect to the Purchased Assets which are payable for the fiscal period in which the Closing Date occurs shall be prorated as of the Closing Date. Sellers' and Buyer's obligation to make post- Closing Date adjustments for taxes, prepayments and deposits shall survive the Closing. 4.05 Adjustment for Utilities. Sellers shall cause all meters for electricity, gas, water, sewer and other utility usage at the Ski Areas to be read on the Closing Date, and Sellers shall pay all charges for such utilities which have accrued on or prior to the Closing Date. If the utility companies are unable or refuse to read the meters on the Closing Date, all charges for such utilities to the extent unpaid shall be prorated and adjusted as of the Closing Date based on the most recent bills therefor. The Sellers shall provide notice to Buyer within three (3) days before the Closing Date setting forth (i) whether utility meters will be read as of the Closing Date and (ii) a copy of the most recent bill for any utility charges which are to be prorated and adjusted as of the Closing Date. If the meters cannot be read as of the Closing Date and, therefore, the most recent bill is used to prorate and adjust as of the Closing Date, then to the extent that the amount of such prior bill proves to be more or less than the actual charges for the period in question, a further adjustment shall be made after the Closing Date as soon as the actual charges for such utilities are available, which Buyer shall have read as soon as possible after the Closing Date. Sellers' and Buyer's obligation to make such post-Closing Date adjustments for utilities shall survive the Closing. 4.06 Transfer Taxes. Buyer, on the one hand, and the Sellers, on the other hand, shall each pay 50% of any state or local transfer tax, deed excise tax (or any other tax based upon the transfer of the Purchased Assets) and the recording fee for all deeds imposed in connection with the purchase and sale. 4.07 Adjustment Payment. Within five (5) days of the date upon which the amount of each adjustment is finally determined pursuant to this Article IV, payments required thereby will be made by check or wire transfer payable to the appropriate party. ARTICLE V CLOSING The closing (the "Closing") of the transaction contemplated by this Agreement will take place at Pierce Atwood, One Monument Square, Portland, Maine, at 10:00 a.m. local time on the fifth business day following the date upon which all of the conditions precedent set forth in Articles VIII and IX of this Agreement are satisfied or waived by the appropriate party hereto, subject to Article XII of this Agreement, or at such other time and place as the parties may agree in writing. The date of Closing is sometimes referred to herein as the "Closing Date". ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SELLERS Sellers hereby represent and warrant to Buyer as follows: 6.01 Corporate Organization. WVSAL is a corporation duly organized, validly existing and in good standing under the laws of the State of New Hampshire. CI is a corporation duly organized, validly existing and in good standing under the laws of the State of Maine. American SKI is a corporation duly organized, validly existing and in good standing under the laws of the State of Maine, Sellers and American SKI have full power and authority to own or lease their properties and to carry on their businesses as now conducted and to execute and deliver this Agreement and to carry out the terms hereof. 6.02 Authorization of Agreement. The execution and delivery of this Agreement and the agreements contemplated hereby (the "Related Agreements") by Sellers and American SKI the performance by Sellers and American SKI of the obligations to be performed hereunder and thereunder have been duly authorized by all necessary and appropriate action by the Board of Directors and stockholders of Sellers and American SKI. The execution and delivery of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby do not and will not (i) conflict with, or result in a breach of, or default under, or permit acceleration of any obligation under, any of the terms, conditions, or provisions of any note, bond, mortgage, indenture, license, material agreement or other material instrument or obligation (including without limitation its Articles of Incorporation and By-laws) to which Sellers or American SKI are a party, or by which it or any of its properties or assets may be bound or affected or (ii) violate any order, writ, injunction, decree or statute, or any rule, regulation, permit, license or conditions thereto (excepting the necessity of obtaining the approvals, transfers and reissuances of Licenses and Permits described in Section 6.04 below), or (iii) result in the creation or imposition of any lien, charge or encumbrance of any nature upon any of the Purchased Assets. This Agreement and the Related Agreements are valid and binding obligations of Sellers and American SKI enforceable in accordance with their terms, subject to equitable principles and applicable bankruptcy and other creditors' rights laws, regulations and rulings. 6.03 Compliance with Laws. Except as set forth in Schedule 6.03, Sellers are not in violation of any applicable federal, state and local laws, rules, regulations, ordinances, codes or orders ("Laws") governing the Purchased Assets and the operation of the Ski Areas and has not received written notification of any asserted past or present failure by it to operate the Ski Areas in accordance with any such law, ordinance or regulation and to Sellers' knowledge no event has occurred which with notice or the passage of time would constitute such a default. 6.04 Licenses and Permits. (a) No permits, licenses, approvals, clearances or other governmental consents are required for the transfer of the Purchased Assets to Buyer pursuant to the terms of this Agreement except for: (i) a receipt of all necessary approvals from the USDOJ pursuant to the Consent Decree; (ii) reissuance by the U.S. Forest Service of the USFS Permit to Buyer; (iii) the transfer or reissuance of the other governmental licenses, permits, authorizations, approvals and certificates listed in Schedule 1.05 and 6.04 ("Licenses and Permits") from Sellers to Buyer. (b) The Sellers have not disposed of or permitted to lapse any license, permit or other authorization from any federal, state or local authorities related to the Purchased Assets or the operation of the Ski Areas. (c) The Licenses and Permits listed on Schedule 6.04 are all of the governmental licenses, permits, authorizations, approvals and certificates known to Sellers which are needed to operate the Ski Areas at full capacity. 6.05 Environmental Matters; Health and Safety. (a) Except as disclosed in Schedule 6.05, there are no outstanding or, to Sellers' knowledge, threatened actions, claims, proceedings, determinations or judgments by any party, including, but not limited to, any governmental authority or agency, against or involving the Sellers, arising under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. 9601 et. seq. ("CERCLA") or any other federal, state, local or other environmental, health or safety law, regulation, order or requirement. Except as listed in Schedule 6.05, there are no outstanding or to Sellers' knowledge threatened orders, determinations or notices of violation issued by any federal, state, local or other governmental authority administering environmental or health and safety laws in connection with operation of the Ski Areas which have not been complied with or resolved to the satisfaction of such governmental authority. (b) Except as set forth in Schedule 6.05, Sellers are operating the Ski Areas in compliance with all applicable federal, state, and local environmental or health and safety laws, regulations and ordinances governing the Ski Areas. 6.06 Title. Except as set forth in Schedules 1.01(a) through 1.01(c), Sellers hold good and clear record and marketable title to the Sellers' Real Estate, free of all liens, restrictions and encumbrances, except applicable zoning and land use laws, regulations, rules and ordinances and the sale of the Sellers' Real Estate does not require the consent of any person or entity other than those listed in Section 6.04. Except for those listed on Schedule 6.13, Sellers have no outstanding leases, licenses, occupancy agreements or any contracts or agreements with respect to the Sellers' Real Estate. 6.07 Title to Other Purchased Assets. Except as set forth in Schedule 6.07, Sellers hold and will transfer to the Buyer good and marketable title to all Purchased Assets, other than Sellers' Real Estate, free and clear of all encumbrances, liens, charges or other restrictions of any kind. Except for those listed on Schedule 6.07, Sellers have no outstanding contracts or agreements with respect to or affecting the Purchased Assets. None of the contracts or agreements listed in Schedule 6.07 shall be binding upon Buyer, unless listed in Schedule 3.01. 6.08 Applicable Zoning and Use. The existing operations of the Ski Areas are permitted uses within the zoning districts in which they are located or otherwise permitted under the USFS Permit and other Licenses and Permits held by Sellers. 6.09 Litigation. Except as provided in Schedule 6.09, there is no action, suit, proceeding at law or in equity by any person or entity, or any arbitration or any administrative or other proceeding by or before any governmental or other instrumentality or agency, pending, or, to Sellers' knowledge, threatened, against either of Sellers with respect to their respective businesses or any of the Purchased Assets. 6.10 Warranty of Purchased Assets. (a) Except as provided in Schedule 6.01(a), all of the Purchased Assets to be purchased, sold or otherwise transferred or assigned pursuant to this Agreement, are in good condition and repair, ordinary wear and tear excepted, and suitable for their intended use. (b) Except as provided in Schedule 6.01(b), all of the rights, properties and assets utilized or required by the Sellers in connection with the ownership or operation of the Purchased Assets or the Ski Areas are included fully in the Purchased Assets. 6.11 Sellers Not "Foreign Persons". Sellers are not "foreign persons" as defined in Internal Revenue Code (the "Code") Section 1445, and Sellers will execute and deliver to Buyer at Closing an affidavit in compliance with Code Section 1445(b)(2). 6.12 Taxes. Except as described in Schedule 6.12, Sellers have timely filed all tax returns, tax information returns and reports required to be filed through the Closing Date which relate to the Purchased Assets and have paid all taxes and other charges which have become due pursuant to such returns and reports, or pursuant to any assessment received by it, except for any taxes the validity of which Sellers may be contesting in good faith in appropriate proceedings. Sellers are not delinquent in the payment of any tax assessment or governmental charge which relates to any of the Purchased Assets, no deficiencies for any taxes which relate to any of the Purchased Assets have been proposed, threatened, asserted or assessed against Sellers, and no requests for waivers of the time to assess or pay any such tax are pending. There are no tax liens upon any of the Purchased Assets and no such liens will arise as a result of the transaction contemplated hereby. For the purposes of this Agreement, the term "Tax" shall include all federal, state, local and foreign income, property, sales, excise and other taxes of any nature whatsoever. Sellers have withheld all required amounts from their employees, agents, contractors, and nonresidents and remitted such amounts to the proper agencies and have paid all employer contributions and premiums in compliance with applicable laws, including ERISA and the Code. 6.13 Contracts and Commitments. Schedule 6.13 sets forth a description of all contracts, agreements and commitments of Sellers, with respect to or affecting the Purchased Assets. Each executed contract or commitment set forth in Schedule 6.13 hereto is in full force and effect and, except as set forth in Schedule 6.13, the Sellers are not in default under any such contract or commitment. 6.14 Intellectual Property. Attached as Schedule 1.07 is a list of Sellers' trademarks (whether or not registered), tradenames, servicemarks (whether or not registered), copyrights (whether or not registered), trademark and service mark registrations (and pending applications therefor). Sellers have not granted any outstanding licenses or other rights to use any Intellectual Property Rights, and Sellers are not liable, nor have Sellers made any contract or arrangement whereby it may become liable, to any person for any royalty or other compensation for the use of any Intellectual Property Rights. None of the rights of Sellers in, to or under any Intellectual Property Rights will be adversely affected by the consummation of the transactions contemplated hereby. Use of the Intellectual Property Rights in the operation of the Ski Areas in the manner conducted by Sellers prior to the Closing will not infringe any patent or copyright of any third party, nor constitute a misappropriation of the trade secrets or other proprietary rights of any third party. 6.15 Employee Benefit Plans. All of the pension, retirement, profit sharing, savings, stock option, severance, bonus, fringe benefit, insurance or other employee benefit plan or arrangement of Sellers or applicable to their employees is listed in Schedule 6.15. Each of the above plans has been operated and administered in accordance with applicable laws, including ERISA and the Code. 6.16 Labor and Employee Relations. There are no agreements between any union, labor organization or other bargaining agent in respect of any employee of Sellers who is employed in Sellers' operation of the Ski Areas business ("Employee"). To the best knowledge of the Sellers, (i) there are no labor trouble, dispute, grievance, strike or request for union representation pending or threatened and (ii) none of the Sellers' management personnel have given notice of resignation or threatened to resign. At the Closing Date, all Employees will be free of all employment obligations to Sellers and will be free to become the employees of Buyer if Buyer so desires. 6.17 Absence of Certain Developments. Since the Balance Sheet Date the Sellers each has conducted its business only in the ordinary course and has not: (a) declared or paid any dividend or otherwise declared, paid or distributed to any shareholder any property of any type or nature, other than in cash, or purchased, redeemed, or otherwise acquired or agreed to purchase, redeem, or otherwise acquire, any of its shareholders' capital stock other than for cash prior to the Closing; (b) made any loans or advances to, or guarantees for the benefit of, any Person other than guarantees shown on Schedule 6.13 to be discharged at Closing; (c) except as provided in Schedule 6.17(c), increased the annualized level of compensation of or granted any bonuses, benefits or other forms of direct or indirect compensation to any employee, officer, director, employee, agent or consultant other than routine increases in the ordinary course of business, or increased any bonus, percentage compensation, service award or other like benefit, granted made or agreed to for any such officer, director, employee, agent or consultant, or increased any welfare, pension, retirement or similar payment or arrangement made or agreed to which is greater than any such bonus, percentage compensation, service award or other like benefit or any welfare, pension retirement or similar payment or arrangement existing or made pursuant to arrangements, agreements, or plans existing at the Balance Sheet Date; (d) experienced any theft, damage, destruction or loss of or to any property or properties owned or used by it, whether or not covered by insurance, adversely affecting the properties or business of either Seller; (e) changed its accounting methods or practices (including, without limitation, any change in depreciation or amortization methods, policies, or rates or income recognition methods); (f) entered into, amended or terminated any contract, commitment, lease, license, collective bargaining agreement, employee benefit plan, or any other material agreement, to which it is a party, or by which it or any of its assets or properties are bound, except, in the ordinary course of business; (g) waived, canceled or released any right, claim or debts, except in the ordinary course of business; (h) except as provided in Schedule 6.17(h), received notice of any violation of any law, rule or regulation, of any governmental entity or agency; (i) received any claim for damages arising out of actual or alleged negligence or other tort, or breach of contract not fully covered by insurance; (j) sold, assigned, mortgaged, pledged, leased, transferred, or disposed of any of its assets, properties, or rights (tangible or intangible) except in the ordinary course of business consistent with past practices; (k) except the collateral interests established in connection with American Ski's acquisition of S- K-I Limited, which are shown on Schedule 6.13 as to be discharged at Closing, mortgaged, pledged, or subjected to any lien, charge, or other encumbrance, any of its assets, except liens for current property taxes not yet due and payable; (l) except as provided in Schedule 6.17(l), made any capital expenditures or commitments therefor that aggregate in excess of $100,000; (m) revalued any of its assets; or (n) agreed to do any of the things described in the preceding clauses (a) through (m). 6.18 Affiliate Transactions. Except as set forth in Schedule 6.18, neither of the Sellers has any business relationship with any of their affiliates. 6.19 Financial Statements and Related Matters. (a) The Financial Statements were prepared in accordance with generally accepted accounting principles consistently applied and present fairly the financial position and results of operations of Sellers at the dates and for the periods indicated therein. (b) On the Balance Sheet Date, Seller had no liability of any nature (whether accrued, absolute, contingent or otherwise) of the type which should be reflected in balance sheets (including the notes thereto) prepared in accordance with generally accepted accounting principles, which was not fully disclosed, reflected or reserved against in the Balance Sheet; and except for liabilities which have been incurred since the Balance Sheet Date in the ordinary and regular course of the business of the Ski Areas or which are set forth in Schedule 6.19, since the Balance Sheet Date, Sellers have not incurred any liability of any nature (whether accrued, absolute, contingent or otherwise). (c) "Financial Statements" shall mean the financial statements for WVSAL and CI for the twelve months ended April 28, 1996. The "Balance Sheet Date" shall be April 28, 1996. The "Balance Sheet" shall be the balance sheet contained in the Financial Statements. ARTICLE VII REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby represents and warrants to Sellers as follows: 7.01 Corporate Organization. Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware with full power and authority to own or lease its property and to carry on its businesses as now conducted. 7.02 Authorization of Agreement. The execution and delivery of this Agreement and the Related Agreements by Buyer and the performance by Buyer of the obligations to be performed hereunder and thereunder have been duly authorized by all necessary and appropriate action by the directors of Buyer and no shareholder approval is required in connection therewith. The execution and delivery of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby do not and will not conflict with or result in a breach of, or constitute a default under, the terms and conditions of Buyer's Certificate of Incorporation, By-Laws, any court or administrative order or process by which Buyer is bound, any agreement or instrument to which Buyer is a party or by which any is bound, or any statute or regulation of any governmental agency. This Agreement and the Related Agreements are the valid and binding obligations of Buyer, enforceable in accordance with their terms, subject to equitable principles and applicable bankruptcy and other creditors' rights, laws, regulations and rulings. 7.03 Regulatory Approvals. Except as described in Section 6.04 to Buyer's knowledge no consents, approvals, authorizations and other requirements prescribed by any law, rule or regulation are required to be obtained or satisfied by Buyer in connection with the execution, delivery or performance by Buyer of this Agreement or any documents to be executed and delivered by Buyer in connection herewith. Buyer will make an application as expeditiously as possible to the United States Forest Service to have the USFS Permit reissued to Buyer in lieu of WVSAL and to all other governmental agencies and authorities required in order to effect the transfer or reissuance of the Licenses and Permits described in Section 6.04. ARTICLE VIII CONDITIONS PRECEDENT TO CLOSING BY BUYER ON THE CLOSING DATE The obligations of Buyer to consummate the transactions contemplated by this Agreement are subject to the satisfaction of each of the following conditions precedent being satisfied on or before the Closing Date, subject to the right of Buyer to waive any one or more of such conditions: 8.01 Closing Documents. Sellers shall have delivered or caused to be delivered to Buyer, or Buyer shall have otherwise received, on or before the Closing Date, in a form reasonably satisfactory to Buyer: (a) Consents, waivers and authorizations of any Person to the Assumption of the Assigned Contracts and other Purchased Assets by Buyer and to the transactions contemplated by this Agreement, except for the USFS Permit and the Assigned Permits, for which provision is made in Section 8.04. (b) Deeds to Buyer conveying good and clear record and marketable title to the Sellers' Real Estate, free and clear of any liens or encumbrances except as described in Schedules 1.01(a) through 1.01(c) and except for those leases, licenses, or occupancy agreements or other instruments which have been assumed by the Buyer as Assumed Liabilities. (c) An owner's or leasehold title insurance policy, issued at Buyer's expense, dated the Closing Date on such ALTA Forms as are reasonably acceptable to Buyer and its counsel with coverage identical in all respects to the title coverage described in Schedules 1.01(a) through 1.01(c), covering the Sellers' Real Estate, and Sellers shall have provided all statements, affidavits, certificates, surveys (which surveys shall be at Buyer's expense) and indemnity agreements, which are customarily required of sellers by title insurance companies in order for the title insurance company to provide Buyer with each of the title insurance policies (and related endorsements) described in this Agreement. (d) Bills of Sale conveying all Purchased Assets to Buyer duly executed by Sellers (Sellers and Buyer hereby agreeing that neither the representations and warranties nor the rights and remedies of any party hereunder shall be deemed to be enlarged, modified or altered in any way by such Bills of Sale); (e) Certified copies of the resolutions adopted by Sellers' Board of Directors (and stockholders where required) authorizing the sale of the Purchased Assets to Buyer in accordance with this Agreement and Sellers' execution and delivery of this Agreement; (f) An affidavit, under penalty of perjury, indicating Seller's United States taxpayer identification number and stating that Sellers are not a foreign person, in a form sufficient to exempt Buyer from the withholding provisions of Section 1445 of the Code; and (g) A good standing certificate from the State of New Hampshire of recent date for WVSAL, a good standing certificate of recent date from the State of Maine for CI, and incumbency certificates of Sellers, together with a certified copy of each Sellers' Certificates of Incorporation and By-Laws. (h) An opinion of counsel to Sellers in form and substance acceptable to Buyer's counsel. (i) An Agreement to be entered into by Buyer, Sellers and American Ski relating to the certain administrative and services to be provided to Buyer on a transition basis, which services shall relate, without limitation, to the Smart Ticket Technology, the AS 400 System and Ski Areas' Reservation Systems. (j) Within seven (7) business days after the date hereof, Buyer shall be, in its reasonable judgment, satisfied with the management of the Sellers, including their willingness to be employed by Buyer after the Closing. 8.02 Failure to Deliver the Purchased Assets by the Closing Date. If Sellers are unable to deliver the Purchased Assets in accordance with terms and conditions of this Agreement and in a condition substantially similar to their condition as of the date hereof on the Closing Date because of damage by fire or casualty, then Buyer shall have the right to terminate this Agreement at any time thereafter. 8.03 Litigation and Regulatory Action. No litigation or regulatory action shall have been filed or brought against Sellers or the Purchased Asset which forbids or restricts the transactions contemplated hereby. 8.04 Permits and Licenses. Sellers shall have delivered or caused to be delivered to Buyer, or Buyer shall have otherwise received, on or before the Closing Date, in a form reasonably satisfactory to Buyer: (a) All necessary USDOJ approvals of Buyer and the transaction contemplated hereby under the Consent Decree. (b) Reissuance of the USFS permit to Buyer upon Buyer's application therefor, Buyer hereby agreeing to exercise its best efforts to obtain such reissuance. (c) All necessary agreements, waivers, authorizations and consents to the assignments or reissuances of all Assigned Permits, and all other consents, approvals, transfers and reissuances of Licenses and Permits required in the operation of the Ski Areas or in connection with the Purchased Assets. 8.05 Other Documents. All such other documents as are required to be delivered in connection with the consummation of this transaction by Sellers hereunder or as Buyer or its counsel may reasonably request to carry out the purpose of this Agreement have been so delivered. ARTICLE IX CONDITIONS PRECEDENT TO CLOSING BY SELLERS ON THE CLOSING DATE The obligations of Sellers to consummate the transactions contemplated by this Agreement are subject to the satisfaction of each of the following conditions precedent being satisfied on or before the Closing Date, subject to the right of Sellers to waive any one or more of such conditions: 9.01 Compliance. The representations and warranties of Buyer contained in this Agreement or in any of the Schedules attached hereto or in any agreement or document delivered in connection herewith shall be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date. The Buyer shall have performed and complied with all of its obligations and covenants required to be performed or complied with on or before the Closing Date. 9.02 Closing Documents. Buyer shall have delivered to Sellers, in a form reasonably satisfactory to counsel for Sellers: (a) certified copies of the resolutions adopted by Buyer's Board of Directors (and stockholders where required) authorizing the purchase of the Purchased Assets from Sellers in accordance with this Agreement and Buyer's execution and delivery of this Agreement; (b) an assumption agreement or agreements in form acceptable to Sellers with respect to the Assumed Liabilities; (c) the promissory note required pursuant to Section 4.01(a)(ii) hereof and to the extent applicable, such mortgages, security agreements, collateral assignments and other documents and agreements, in form and substance satisfactory to Sellers, as may be required by Sellers to establish and perfect the mortgage liens, security interests and collateral assignments described in Section 4.03(b) hereof; and (d) such other documents and certificates as are contemplated hereby or as Sellers or their counsel may reasonably request. (e) an opinion of Buyer's counsel in form and substance acceptable to Seller's counsel. 9.03 Payment of Money. Buyer shall have paid the cash portion of the Purchase Price to the Sellers as provided in Section 4.03. ARTICLE X COVENANTS OF SELLERS AS TO INTERIM OPERATION Sellers hereby covenant and agree with Buyer as follows: 10.01 Conduct of Business. From the date hereof to the Closing Date, Sellers will carry on its Ski Area businesses and activities in substantially the same manner as they have previously been carried out, in the ordinary course of business, and will not employ methods of manufacture, purchase, sale, lease, management, accounting, or operation that vary from those methods used by Sellers outside of the ordinary course of business consistent with past practices recognizing that American Ski has owned WVSAL since only June 28, 1996. Without limiting the foregoing except as specifically contemplated in this Agreement, from the date of this Agreement to the Closing, Sellers will: (a) not engage in any transaction which would be inconsistent with any representation, warranty or covenant of Sellers set forth herein or which would cause a breach of any such representation, warranty or covenant; (b) except as provided on Schedule 10.01(b) and in the ordinary course of business, not sell, transfer, convey, assign, lease, license or otherwise dispose of any of the Purchased Assets; (c) not mortgage, pledge, subject to a lien, or grant a security interest in, or otherwise encumber, any of the Purchased Assets; (d) use reasonable efforts (without making any commitments on behalf of Buyer) to keep its business organizations intact, keep available its present employees and to preserve its present relationships with customers, suppliers, employees and others having business relationships with Sellers; (e) not cause a breach of any contract or commitment, collective bargaining agreement, employee benefit plan, or any other material agreement to which either Seller is a party, or by which it or any of its assets or properties are bound; (f) not violate or fail to comply with laws applicable to it or its properties or business; (g) furnish within fifteen (15) days after the end of a fiscal month an unaudited consolidated balance sheet and income statement of the Sellers for such period, each such balance sheet and income statement to be prepared in a manner consistent with the preparation of the Financial Statements (subject to normal year- end adjustments); (h) not amend, change, terminate or otherwise modify any lease, contract, agreement or commitment other than in the ordinary course of business; (i) not enter into, or become obliged under, any contract, agreement, lease or other commitment relating to the Ski Areas, other than any contract, agreement, lease or other commitment having a term of one (1) year or less and involving a payment by or to either Seller of less than $25,000 which is entered into in the ordinary course of business; (j) not commit any act or permit the occurrence of any event or the existence of any condition of the type described in clauses (a) through (n) of Section 6.17 hereof; (k) upon obtaining knowledge of the existence of any matter specific to Sellers' business or the Purchased Assets that could reasonably likely result in a diminution of the Purchased Assets and or the business of Sellers and or the Ski Areas , the Sellers shall promptly inform Buyer of such matter; (l) agree not to do any of the acts listed above (other than pursuant to clauses (d), (g) and (k) or under the circumstances specified above). 10.02 Risk of Loss. Sellers shall bear the risk of loss, damage or destruction with respect to the Purchased Assets from any casualty until the successful consummation of the sale and purchase of the Purchased Assets on the Closing Date. In the event of any such loss, damage or destruction, the proceeds of any claim for any loss payable under any insurance policy covering such loss shall be payable to Sellers. In the event of any such material loss or damage, Sellers shall specify in writing to Buyer with particularity the loss or damage incurred, the cause thereof, if known or reasonably ascertainable, and the extent to which restoration, replacement and repair of the Purchased Assets lost or destroyed will be reimbursed under any insurance policy with respect thereto. Buyer's right to terminate this Agreement in such circumstances shall be governed by Section 8.02 of this Agreement. To the extent that Buyer determines not to terminate this Agreement, it shall be entitled to any insurance proceeds provided with respect to such loss to the extent not used by Sellers to restore the Purchased Assets. 10.03 Access to Information. From the date hereof to the Closing Date, Sellers will afford to the representatives of Buyer, including its counsel, auditors, and potential lenders and other sources of financing to Buyer, during normal business hours, access to any and all of the Purchased Assets to the end that Buyer may have a reasonable opportunity to make such a full investigation of the Purchased Assets and of Sellers' Ski Area businesses in advance of the Closing Date as it shall reasonably desire, and the officers of Sellers will confer with representatives of Buyer and will furnish to Buyer, either orally or by means of such records, documents, and memoranda as are available such information as Buyer may reasonably request, and Sellers will furnish to Buyer's auditors all consents and authority that they may reasonably request in connection with any examination by Buyer. 10.04 Consent of Third Parties. Sellers shall use their best efforts to obtain, as soon as practicable after the date hereof, but in any event prior to the Closing Date, the consent in writing of all necessary persons to the transactions contemplated by this Agreement, including but not limited to any and all governmental authorities as set forth in Section 6.04; provided, however, that the parties hereto understand and agree that, with respect to those authorities which require the reissuance of permits to Buyer such as the USFS and the State Liquor Commission, Buyer must initiate the application process for reissuance and Sellers shall be deemed to be using its "best efforts" to the extent that it provides all cooperation which Buyer reasonably requests. 10.05 Insurance Coverage. Existing insurance coverages for the Purchased Assets shall be maintained in effect by Sellers between the date hereof and the Closing Date. 10.06 Maintenance of Purchased Assets. At all times from the execution of this Agreement to the Closing Date, Sellers agree to maintain the Purchased Assets in good operation, condition and repair, except for ordinary wear and tear. Sellers shall (i) not alter, disassemble or remove any Purchased Assets from the Property or take any other action in connection with the Purchased Assets which is inconsistent with the transactions contemplated by this Agreement (except for removal of lift towers resulting from the shortening of the High Country lift) and (ii) maintain in full force and effect any and all contracts, permits and licenses which are Purchased Assets or Assumed Liabilities. Sellers shall notify Buyer promptly of any material change in the condition of the Purchased Assets. 10.07 No Solicitation; Break-Up Fee. (a) Sellers shall not invite proposals concerning, or entertain, solicit, encourage, cooperate with or facilitate (by way of furnishing information, or otherwise) or accept or discuss any inquiries or proposals (other than the transaction contemplated hereby) from any Person for the acquisition of the stock, assets or business of, either Seller or the Ski Areas or any proposed business combination or other extraordinary business transaction involving either Seller or the Ski Areas (any such individually or collectively shall be herein referred to as a "Company Sale"). The Sellers and their respective officers, directors, representatives, agents and affiliates immediately shall cease and cause to be terminated all existing discussions, conversations, negotiations and other communications with any Persons heretofore conducted with respect to any of the foregoing. (b) If in breach this Agreement Sellers terminate or abandon this Agreement in connection with, as a result of, or at a time in which there exists a proposal of a Company Sale made to the Sellers or American Ski, or either Sellers or American Ski accept any such Company Sale proposal and within one (1) year of such termination or abandonment either Seller, American Ski or its stockholders shall consummate or agree to consummate a Company Sale with a third party, then the Sellers shall promptly pay to Buyer a fee equal to excess of the purchase price received in such third party sale over the Purchase Price. 10.08 Further Assurances. From and after the Closing Date, Sellers shall execute and deliver to Buyer all such further assignments, endorsements and other documents as Buyer may reasonably request for the purpose of effecting transfer of Sellers' title to the Purchased Assets and/or carrying out the provisions of this Agreement. ARTICLE XI INDEMNIFICATION 11.01 Indemnification By Sellers and American SKI. Subject to the provisions of Sections 11.03 through 11.06 hereof, Sellers and American SKI shall, jointly and severally, indemnify and hold Buyer harmless from and against all losses, liabilities, costs and expenses, including reasonable attorneys' fees, actually suffered, incurred, paid or required under penalty of law to be paid by Buyer (collectively referred to as "Buyer's Damages") resulting in whole or in part from (i) any breach or violation of this Agreement by Sellers, (ii) any inaccuracy in or breach of any representation, warranty or covenant made by Sellers herein or in the Schedules attached hereto; (iii) any inaccuracy or misrepresentation in the Schedules attached hereto or in any certificate, document, instrument or affidavit delivered by Sellers in accordance with the provisions of this Agreement; and (iv) any and all claims, debts, liabilities, taxes and other obligations of Sellers or the Ski Resorts whether accrued, absolute, contingent or otherwise, not expressly agreed to be assumed or undertaken by the Buyer pursuant to Section 3.01 of this Agreement. 11.02 Indemnification By Buyer. Subject to the provisions of Sections 11.03 through 11.06 hereof, Buyer shall indemnify and hold Sellers harmless from and against all losses, liabilities, costs and expenses, including reasonable attorneys' fees, actually, suffered, incurred, paid or required under penalty of law to be paid by Sellers (collectively referred to as "Sellers' Damages") resulting in whole or in part from (i) any breach or violation of this Agreement by Buyer, (ii) any inaccuracy in or breach of any representation, warranty or covenant made by Buyer herein or in the Schedules attached hereto; (iii) any inaccuracy or misrepresentation in the Schedules attached hereto or in any certificate, document, instrument or affidavit delivered by Buyer in accordance with the provisions of this Agreement; and (iv) any and all claims, debts, liabilities, taxes and other obligations assumed by Buyer pursuant to Section 3.01 of this Agreement. 11.03 Notification of Claim. The party seeking indemnification (the "Indemnitee"), upon obtaining knowledge of any claim or demand which has given rise to, or could reasonably give rise to, a claim for identification hereunder, shall in writing notify the other party (the "Indemnitor") of such claim, shall provide the Indemnitor with a copy of such claim or other documents received, and shall otherwise make available to the Indemnitor all relevant information material to the defense of such claim and within the Indemnitee's possession. Subject to the limitations set forth in Section 11.05, no failure or delay by the Indemnitee in the performance of the foregoing shall reduce or otherwise affect the obligation of the Indemnitor to indemnify and hold the Indemnitee harmless, except to the extent that such failure or delay shall have adversely affected Indemnitor's ability to defend against, settle or satisfy any liability, loss, damage, expense, claim or demand for which Indemnitee is entitled to indemnification hereunder. If the claim or demand set forth in the notice given by Indemnitee is a claim or demand asserted by a third party, Indemnitor shall have thirty (30) days after receipt of such notice to notify Indemnitee in writing of its election to defend, at its sole cost and expense, against such claim, either in its own name or in the name of the Indemnitee, as may be required, and the Indemnitee, at its sole cost and expense, shall have the right to participate in such defense. If Indemnitor elects to defend such third party claim or demand, the Indemnitor shall have the right to settle any such claim, except where such settlement would have an adverse effect on the Indemnitee in which case the Indemnitor shall have the right to settle any such claim only after obtaining the written consent of Indemnitee thereto. If the Indemnitor elects not to defend such third party claim or demand or does not defend such third party claim or demand in good faith, the Indemnitee may, at Indemnitor's expense, elect to defend such third party claim or demand; provided, however, that Indemnitee shall not have any obligation to participate in the defense of or defend any such third party claim or demand and Indemnitee's defense of or participation in the defense of any such third party claim or demand shall not in any way diminish or lessen the obligations of Indemnitor under the agreements of indemnification set forth herein. The Indemnitor shall have the right to provide a defense under a reservation of rights regarding entitlement to indemnity. The Indemnitee shall not settle or compromise the claim unless (a) it shall first obtain the written consent of the Indemnitor, (b) suit shall have been instituted against the Indemnitee and the Indemnitor shall have failed, after the lapse of a reasonable time (not to exceed 20 days) after written notice to it of such suit, to take action to defend the same, or (c) Indemnitor shall have failed to notify Indemnitee in writing of its intention to contest the claim within twenty (20) days after the above notice from Indemnitee to Indemnitor. 11.04 Buffer. Except as provided in the following two sentences, notwithstanding anything to the contrary contained hereinabove in this Article XI, no claims for indemnification shall be made by one party against the other except to the extent that all such claims by one party for the other party's payment of indemnification claims hereunder shall aggregate in excess of Five Hundred Thousand Dollars ($500,000.00), whereupon such parties shall be entitled to indemnification hereunder for indemnification claims for all losses, damages or expenses suffered in excess of such amount. The provisions of the immediately preceding sentence shall not apply with respect to any Buyer's Damages arising from a breach by the Sellers of the representations set forth in Sections 6.05 and 6.12 of this Agreement or a breach by Sellers of the provisions of Section 3.01 of this Agreement. The Buyer shall be entitled to indemnification hereunder from the Sellers and American Ski for one-half of all Buyer's Damages arising from a breach by the Sellers of the representation set forth in Section 6.05 of this Agreement without regard to (a) the unlimited scope of the indemnity described in Section 11.01, or (b) the $500,000 threshold set forth above. 11.05 Time Limitations. No claim may be asserted under this Article XI after the lapse of twelve (12) months from the Closing Date, except (a) any claim arising from a breach of the representation, warranties and covenants set forth in Section 6.12 hereof, in which case Buyer shall not be entitled to assert any right of indemnification after the expiration of the statute of limitations (including any extensions thereof) imposed by the Code, or any other applicable law with respect to foreign, federal or state tax liability of Sellers for all taxable years or periods ending on or prior to the Closing Date, (b) any claim arising from a breach of the warranty, representation and covenants contained in Section 6.05 hereof, in which case Buyer shall be entitled to assert any indemnification claim relating thereto at any time prior to the three year anniversary of the Closing Date, and (c) if there shall then be pending any dispute, claim, proceeding or action at the end of the twelve (12) month period from the Closing Date or, in the case of indemnification claims arising from Sections 6.12 or 6.05 hereof, at the expiration of the applicable statute of limitations or at the time of the three year anniversary of the Closing Date, respectively, in which case Buyer shall continue to have the right to be indemnified with respect to such indemnification, dispute, claims, proceeding or action. 11.06 Limitation. Anything in this Article XI to the contrary notwithstanding, the Sellers shall not be liable to the Buyer under Section 11.01 or otherwise for any loss, cost, damage or expense of the Buyer arising after the Closing and arising from the continuation by the Buyer of any course of dealing or non- compliance with law or other commitments practiced by the Sellers prior to the Closing, whether or not the Sellers' description thereof and this Agreement and the Schedules attached hereto constituted a breach of a representation or warranty. 11.07 Mitigation of Damages. The Buyer and the Sellers shall be obligated to take all reasonable steps consistent with sound business practices (as determined by Buyer or Sellers in its or their reasonable discretion) necessary to mitigate their losses, costs, damages and expense, and nothing in this Article XI shall excuse Buyer or Sellers from such obligation to mitigate such loss, cost, damage or expense. 11.08 Intentional Misrepresentations. Nothing contained in the foregoing provisions shall relieve any officer, member, shareholder, or director of Buyer or Sellers of any liability which it may have on account of the delivery by one party hereto to the other party of any certificate required to be delivered by any party hereto under the terms hereof which said certificate is untrue in any respect and which is at the Closing known by such person executing and delivering the same to be untrue. ARTICLE XII TERMINATION 12.01 Termination. This Agreement may be terminated at any time prior to Closing: (a) By the mutual written consent of Buyer and Sellers; (b) By Buyer, upon written notice to Sellers, if the Closing Date has not occurred on or before October 31, 1996 (which date shall be automatically extended to November 27, 1996 to the extent necessary to satisfy the condition precedent set forth in Section 8.04 hereof), or such later date as the parties may agree in writing, provided that the Buyer is not in breach or default under this Agreement; (c) By Sellers, upon written notice to Buyer, if the Closing Date has not occurred on or before October 31, 1996 (which date shall be automatically extended to November 27, 1996 if so extended under clause (b) of this Section 12.01), or such later date as the parties may agree in writing, provided that the Sellers are not in breach or default under this Agreement; (d) By Sellers or Buyer pursuant to Section 4.01(a); (e) By Buyer pursuant to Section 8.02 hereof; provided, however, that no party shall have the right to terminate this Agreement unilaterally if the event giving rise to such right is primarily attributable to such party or to any affiliated party, and, provided further, that the party terminating this Agreement shall give notice of its election to terminate and shall specify in such notice the reason(s) therefor. 12.02 Effect of Obligations. Termination of this Agreement pursuant to this Article shall terminate all obligations of the parties hereunder, except for the obligations under Sections 4.02, 10.07, 13.02 and 13.15 and the Escrow Agreement. 12.03 Waiver. At any time prior to the Closing, any party hereto may (a) extend the time for performance of any of the obligations or other acts of any other party hereto or (b) waive compliance with any of the agreements of any other party or with any conditions to its own obligations, in each case only to the extent such obligations, agreements and conditions are intended for its benefit. ARTICLE XIII MISCELLANEOUS 13.01 Consents to Assignment by Third Parties. This Agreement shall not constitute an agreement to assign any asset, claim, contract, permit, franchise, license or similar agreement or right if any attempted assignment of the same without the consent of the other party thereto would constitute a breach thereof or in any way affect the rights of Sellers or Buyer thereunder. 13.02 Confidentiality. Buyer acknowledges that in the course of preparing this Agreement, Buyer has obtained information concerning the business of Sellers which is of a confidential and/or proprietary nature (the "Confidential Information"). Buyer (including the directors, officers, employees and agents thereof) agrees to retain in confidence and not to disclose any of the Confidential Information of Sellers to any third party (other than Buyer's advisors, counsel, accountants and potential financing sources) and if this Agreement is terminated and the transactions contemplated hereby are not concluded, to promptly return all such Confidential Information to Sellers and not retain or use any Confidential Information or copies thereof for any purpose, except as disclosure may be required by law or government regulation or order or regulatory process or unless the information sought to be disclosed or used (i) is publicly known as of the date hereof or becomes publicly known though no fault of Buyer, or (ii) is lawfully received by Buyer from a third party not bound in a confidential relationship to any party whose confidential information is to be protected hereunder. 13.03 Brokers. Each of Buyer and Sellers represents and warrants to the other that they have not engaged any brokers and there are no brokerage or finders' fees payable in connection with the transactions contemplated hereby resulting from any actions taken by them. 13.04 Representations and Warranties. Sellers and Buyer hereby agree that statements made in the Schedules attached hereto and the certificates delivered in connection herewith shall be representations and warranties for purposes of this Agreement. The representations and warranties made in this Agreement shall only survive the Closing to the extent specifically described herein. 13.05 Further Assurances. From and after the Closing Date, upon the reasonable request of Buyer from time to time, and at Buyer's expense, Sellers shall execute and deliver all documents, make all rightful oaths, testify in any proceedings and do all other acts which may be reasonably necessary or desirable in the opinion of Buyer to protect or defend the right, title or interest of Buyer in and to the Purchased Assets. 13.06 Tax Matters. The aggregate purchase price for the Purchased Assets paid by Buyer in accordance with this Agreement will be allocated among the Purchased Assets by Buyer and Sellers in accordance with Section 1060 of the Code and the regulations thereunder, as set forth in Schedule 13.06 attached hereto. Buyer and Sellers covenant and agree that the Buyer and Sellers shall each timely file (with the appropriate Internal Revenue Service) Form 8594 in substantially the form attached to Schedule 13.06. The covenants and agreements of the Buyer and Sellers set forth in this Section shall survive the Closing and shall continue so long as the Buyer or Sellers (as the case may be) is obligated under the Internal Revenue Code of 1986, as amended or the regulations or rulings promulgated thereunder, to file Form 8594, including any Supplemental Statement under Part IV of Form 8594. Buyer and Sellers will furnish each other with a copy of the purchase price allocation information they submit to the Internal Revenue Service, in connection with the filing of their fiscal 1996 federal income tax returns. [Subject to review]. 13.07 Amendment. This Agreement may not be amended except by written agreement of Sellers and Buyer. 13.08 Governing Law; Severability. This Agreement shall be construed in all respects in accordance with, and governed by, the internal laws (as opposed to conflicts of laws provisions) of Maine. If any provision, clause or part of this Agreement, or the application thereof under certain circumstances, is held invalid, the remainder of this Agreement, or the applications of each provision, clause or part under other circumstances, shall not be affected thereby. 13.09 Retention of Books and Records. Buyer and Sellers shall retain for a period of three (3) years from the Closing all of their books and records (including such records as may be stored in computer databases) relating to the Purchased Assets. During such three-year period, each party will make such books and records available to the other for purposes of inspection and copying, upon a proper purpose being stated. If any party requires the original of any document in possession of the other, such party shall provide the same, if available, subject to the providing party's right to inspect and copy it. Each party will have the right to destroy such books and records at any time after the end of such three-year period; provided, however, that it shall give written notice to the other party prior to the time it intends to destroy such books and records so that if the other party wishes to take possession of all or some part of such books and records it may do so, at its expense. 13.10 Waiver. The failure of Sellers or Buyer to insist, in any one or more instances, upon performance of any of the terms or conditions of this Agreement, shall not be construed as a waiver or relinquishment of any rights granted hereunder or the future performance of any such term, covenant or condition. 13.11 Headings. The descriptive headings in this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 13.12 Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. 13.13 Notices. Any notice to be given hereunder shall be given in writing and delivered or mailed by registered or certified mail, return receipt requested, in the case of Sellers, to: American Skiing Company Sunday River Access Road P.O. Box 450 Bethel, ME 04217 Attention: Michael Krongel with a copy to: Christopher E. Howard, Esq. Pierce Atwood One Monument Square Portland, ME 04101 and, in the case of Buyer, to Booth Creek Ski Acquisition Corp. 1000 South Frontage Road, Suite 100 Vail, CO 81657 Attention: George N. Gillett, Jr. with a copy to: Bruce A. Toth, Esq. Winston & Strawn 35 West Wacker Drive Chicago, IL 60601-9703 or to such other address as Sellers or Buyer may designate by notice in writing to the other, provided that no party may designate that notices be sent to more than two locations at any particular time. 13.14 Benefit. This Agreement may not be transferred, assigned, pledged or hypothecated by any party hereto without the prior written consent of the other parties hereto other than by Buyer to financing sources. Upon prior written consent being obtained, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 13.15 Expenses. Subject to the provisions of Section 10.07, all expenses incurred by, on behalf of, or for the benefit of Sellers or Buyer in connection with the closing of transactions contemplated hereby, including without limitation, engineering, legal, advisory, investment banking and accounting fees, shall be the responsibility of and for the account of the party or parties who ordered or for whose benefit the particular service or particular expense was incurred. 13.16 Public Announcement. Except as required by law, prior to the Closing Date, no public announcement of the transactions contemplated hereby shall be made by way of press release, disclosure to the trade or otherwise, except as mutually agreed upon by the parties hereto. Sellers may inform the citizens of the Towns of Waterville Valley and North Conway of the existence of the Agreement and the identity of Buyer. 13.17 Third Party Beneficiaries. Each party hereto intends that this Agreement shall not benefit or create any right or cause of action in or on behalf of any person other than the parties hereto or their permitted assigns. 13.18 Entire Agreement. This Agreement and the related closing documents executed and delivered in connection herewith constitute the entire agreement between Sellers and Buyer with respect to the transactions contemplated hereby, superseding all prior understandings and agreements among Sellers and Buyer with respect to the subject matter hereof. 13.19 Solicitation of Employees. None of the Sellers or American SKI will prior to June 30, 1997 solicit for hire or hire any individual employed as of the date of this Agreement by either of the Sellers or subsequently employed by either of the Sellers. 13.20 Collection of Accounts Receivable. Sellers and Buyer shall each cooperate in the other's attempts and efforts to collect the accounts receivable belonging to such party under the terms of this Agreement. Upon receipt by either Seller or American Ski of any payments of the accounts receivable which constitute Purchased Assets under Section 1.10 hereof, whether such payments were received prior to or after the Closing, Sellers and American Ski shall transfer such payments to Buyer. Upon receipt by Buyer of any payments of the accounts receivable which constitute Excluded Assets under Section 2.02 hereof, Buyer shall transfer such payments to Sellers. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed under seal as of the day and year first above written. BOOTH CREEK SKI ACQUISITION CORP. By: Its: WATERVILLE VALLEY SKI AREA, LTD. By: Its: AMERICAN SKIING COMPANY By: Its: CRANMORE, INC. By: Its: EX-10 8 EXHIBIT 10 PURCHASE AND SALE AGREEMENT by and between SHERBURNE PASS MOUNTAIN PROPERTIES, LLC PICO MOUNTAIN SPORTS CENTER, LLC PICO MOUNTAIN OPERATING COMPANY, LLC (collectively "Sellers") HAROLD L. AND EDITH HERBERT ("Herberts") and PICO SKI AREA MANAGEMENT COMPANY ("Buyer") dated as of October 16, 1996 PURCHASE AND SALE AGREEMENT THIS AGREEMENT is made and entered into as of this 16th day of October, 1996, among Sherburne Pass Mountain Properties, LLC, ("Real Estate Co."), Pico Mountain Sports Center, LLC ("Sports Center Co."), Pico Mountain Operating Company, LLC ("Equipment Co."), all Vermont limited liability companies with a place of business in Sherburne, Vermont (collectively referred to as the "Sellers") and Harold L. and Edith Herbert of Milltown, New Jersey ("Herberts") and Pico Ski Area Management Company, a Vermont corporation with a principal place of business at Sherburne, Vermont ("Buyer"). RECITALS 1. Real Estate Co. owns the real property used in the operation of the Pico Mountain Ski Resort, all buildings at the resort (except the Sports Center and certain residential condominium units), all commercial space in condominium buildings, all ski lifts and associated equipment and the other real and personal property more specifically identified in this Agreement. 2. Sports Center Co. owns the real and personal property constituting the Sports Center at the Pico Mountain Ski Resort, as more specifically identified in this Agreement. 3. Equipment Co. owns certain machinery, furniture, fixtures and equipment located at and used in the operation of the Pico Mountain Ski Resort and more specifically identified in this Agreement. 4. Sellers wish to sell to Buyer, and Buyer wishes to purchase and acquire from Sellers all assets owned by Sellers and located in Sherburne, Vermont, which consists principally of the Pico Mountain Ski Resort. AGREEMENT NOW, THEREFORE, in consideration of the mutual agreements herein contained, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I PURCHASE AND SALE Subject to the terms and conditions of this Agreement, Sellers agree to sell, convey, transfer, set over, assign and deliver to Buyer, and Buyer agrees to purchase and accept from Sellers all of Sellers' right, title and interest in and to the following assets (the "Purchased Assets"): 1.01 Real Property. All real property owned by any one or more of the Sellers located anywhere within Sherburne, Vermont, together with all buildings and other improvements located thereon, including without limitation the real property described in Schedule 1.01; together with all easements, rights of way, water or riparian rights and appurtenances and beneficial interests of any nature belonging to Sellers, which are appurtenant to, adjoining or adjacent to such real estate, including any interest in adjoining or adjacent highways, roads, streets and lanes, whether public or private, used by any of Sellers for the benefit of such real estate, and including all development rights owned by any of the Sellers, including but not limited to those described in Schedule 1.01; together with any and all rights of Sellers in, to and under any and all declarations of condominium at, adjacent or proximate to the real estate described herein and in the Declaration of Protective Covenants and Easements affecting the Pico Planned Unit Development, as well as all easements and other beneficial interests associated therewith (all such real estate being hereinafter referred to as the "Sellers' Real Estate"). Sellers and Buyer acknowledge and agree that attached hereto as Schedule 1.01 are descriptions of the Sellers' real estate as currently known to Sellers and Buyers. Prior to closing Buyer and Sellers will conduct a comprehensive asset search to identify all real estate interests of any nature whatsoever owned by any one or more of Sellers and detailed descriptions of such real estate shall be prepared and used in any and all deeds or other conveyancing documents necessary and appropriate to fully convey any and all interests Sellers may have in and to such real estate interests at Closing. 1.02 Stock and Wastewater Disposal Units. All right, title and interest of any one or more of the Sellers in and to: (a) The capital stock of Upland Water Company, Inc.; and (b) The capital stock of and all wastewater disposal units issued by Alpine Pipeline Company. 1.03 Ski Areas Improvements. All buildings (including, without limitation, lift buildings, base lodges, sports center, commercial condominium units, service buildings and pumphouse buildings), structures, lifts, towers, snowmaking equipment, fixtures and other improvements owned by any one or more of Sellers which are either utilized in any way in the operation of the Pico Peak Ski Resort or located in Sherburne, Vermont, all as described in Schedule 1.03 (the "Ski Area Improvements"). 1.04 Personal Property. All inventory, rental inventory, supplies, materials, computers, phone equipment, vehicles, groomers, machinery and equipment, furniture and other personal property of any nature whatsoever (including any leasehold interests in the same) owned by any one or more of Sellers which are either utilized in any way in the operation of the Ski Areas or located in Sherburne, Vermont, including without limitation the personal property described in Schedule 1.04 (the "Personal Property"). Sellers and Buyer acknowledge and agree that in addition to the available inventory of personal property attached hereto as Schedule 1.04, Sellers and Buyer shall perform a comprehensive inventory on a pre-closing basis and prepare an itemized list of all personal property falling within the foregoing description and such lists shall be used as an exhibit to the bill of sale conveying Sellers' interest in Personal Property at Closing. 1.05 Licenses and Permits. All right, title and interest in, and all rights and benefits under, any and all governmental licenses, permits and approvals relating to the Purchased Assets or any businesses, activities or enterprises operated or engaged in at, or in any way involving, the Purchased Assets ("Ski Area Use"), including but not limited to the licenses and permits listed on Schedule 1.05 ("Assumed Permits"). 1.06 Books and Records. All books, records, reports, studies, data and other information owned by or under the control of one or more Sellers relating in any way to the Purchased Assets or the Ski Area Use ("Records"). 1.07 Intellectual Property. All rights to any trademarks, tradenames, servicemarks (whether or not registered), registrations thereof, applications for registration, copyrights (whether or not registered) and any applications for registration, relating to or associated with the Ski Area Use, including without limitation as listed on Schedule 1.07 ("Intellectual Property Rights"). 1.08 Contract Rights. All of the right, title and interest of any one or more of Sellers in, to or under any and all contracts, agreements, leases and commitments, and all amendments, extensions, renewals, substitutions and replacements thereof, necessary for or relating to, the Purchased Assets or any Ski Area Use. 1.09 Claims, Suits, etc. All claims, suits, and causes of action that any one or more Sellers has against third parties with respect to the Ski Area Use, including, without limitation, any rights or claims arising from manufacturer warranties with respect to machinery and equipment included in the Purchased Assets. 1.10 Accounts Receivable; Deposits. All of Sellers' accounts receivable for services to be performed or use of any of the Purchased Assets on or after the Closing and all deposits, prepaid expenses and refunds. It is the intention of Sellers and Buyer that the foregoing description of the Purchased Assets be construed broadly so as to identify any and all real, personal or mixed property and property interests, of any nature whatsoever, owned by any one or more of Sellers that either (a) constitutes, relates to or is in any way associated with the Ski Area Use, or (b) constitutes, relates to or is in any way associated with property owned by any or more of Sellers located in Sherburne, Vermont. Sellers hereby acknowledge and agree that Buyer will undertake a comprehensive asset search prior to Closing and shall refine the descriptions of the Purchased Assets set forth above and attached hereto in the Schedules identified above, and the more comprehensive asset descriptions shall be used in transferring and conveying Sellers' right, title and interest in and to Purchased Assets at the Closing. ARTICLE II EXCLUDED ASSETS The assets listed below shall be excluded from the Purchased Assets (the "Excluded Assets"): 2.01 Cash. All of the Sellers' cash on hand and any cash equivalents in the form of bank accounts, investment securities and other deposits, prepaid expenses and refunds, excepting those identified in Section 1.10. 2.02 Accounts Receivable. All of Sellers' accounts receivable for services performed or use of any of the Purchased Assets on or prior to the Closing. 2.03 Other Assets. Assets listed on Schedule 2.03, if any. ARTICLE III NO ASSUMPTION OF LIABILITIES 3.01 No Assumption by Buyer. Except for the liabilities of Sellers assumed by Buyer as described in Schedule 3.01A hereof ("Assumed Liabilities"), Buyer does not, and shall not be obligated to, assume or become liable for any of Sellers' liabilities, obligations, debts, contracts or other commitments whatsoever, whether known or unknown, fixed or contingent, now existing or hereafter arising. Sellers acknowledge and agree that the Purchased Assets are not currently a going concern and have no going concern value. Buyers are acquiring the Purchased Assets at a time when such assets are not being operated as a going concern and, absent a sale to a third party, are not anticipated to be operated for the 1996-1997 ski season. Seller and Buyer acknowledge and agree that the Purchased Assets were previously leased to or used by Pico Mountain, Inc., which operated the Purchased Assets, together with assets owned by Pico Mountain, Inc., as a ski resort, and that Pico Mountain, Inc. has filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code. Buyer is not continuing the operation of Purchased Assets by Pico Mountain, Inc. and shall have no liability or responsibility arising out of prior operations involving the Purchased Assets. Buyer is not purchasing any assets owned by Pico Mountain, Inc., a schedule of which is attached hereto as Schedule 3.01B. ARTICLE IV PURCHASE AND SALE 4.01 Purchase Price. In consideration of Sellers' sale, assignment and transfer of the Purchased Assets to Buyer and Sellers' agreement to perform the terms, covenants and provisions of this Agreement on its part to be performed, at Closing, (as hereinafter defined), Buyer will assume the Assumed Liabilities, and will pay to Sellers the following amounts in the manner and upon the conditions specified below (the "Purchase Price"): (a) Deposit. Upon the execution of this Agreement Two Hundred Fifty Thousand Dollars ($250,000.00) (the "Deposit") shall be deposited with Fleet National Bank, as Escrow Agent, pursuant to the Deposit Escrow Agreement dated as of the date hereof among Buyer, Sellers and Fleet National Bank. (i) If the Closing shall occur, the Deposit together with any earnings thereon to the Closing Date (as defined in Article V) shall be paid to Sellers at Closing. (ii) If the Closing shall not occur by reason of a material breach of this Agreement by Buyer, including by failing to close the transaction contemplated hereby upon satisfaction by Sellers of the conditions set forth in Article VIII hereof, and the Sellers are not in breach of this Agreement in any material respect, then upon termination of this Agreement Sellers shall be entitled to retain the Deposit, together with any earnings thereon, for their own account as liquidated damages in lieu of all claims, actions or remedies which Sellers may have against Buyer arising out of such breach. (iii) If the Closing shall not occur for any reason other than as set forth in clause (ii) of this Section 4.01(a), then upon termination of this Agreement the Deposit, together with any earnings thereon, shall be returned to Buyer. (b) Cash at Closing. At Closing Buyer shall pay to Sellers the amount of Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000.00), plus the amount of the Deposit, together with any earnings thereon, in cash by wire transfer or other acceptable means of delivering same day good funds. (c) Earn-Out Purchase Price. Buyer agrees to pay to Sellers the amounts specified below upon the occurrence of the events described below: (i) Three Hundred Twenty-Five Thousand Dollars ($325,000) within 10 days after issuance of all Act 250 approvals for connection by pipeline of the base area facilities at the Killington Ski Resort to the Alpine Pipeline, which approvals Buyer agrees to diligently pursue. (ii) Three Hundred Twenty-Five Thousand Dollars ($325,000) at such time as the Killington Ski Resort and the Pico Mountain Ski Resort have, on a consolidated basis, generated at least 1,135,000 skier visits in a single season after Closing. A "skier visit" shall mean a single skier purchasing a ticket to ski at either or both resorts for any portion of one day for a fee. A season's pass for either or both resorts shall be counted as 20 skier visits per year. The number of skier visits credited to multi-day lift tickets shall be equal to the number of days covered by the ticket. Multi- area tickets and passes allowing access to all American Skiing Company resorts located in Vermont shall be included only if purchased at or processed through or allocated to the Killington or Pico Mountain resorts, consistent with industry practice. Buyer will provide Seller with an accounting of skier visits within 60 days following the close of skiing at the resort. Seller shall have the right to audit Buyer's records relevant to the skier visit calculation during normal business hours upon reasonable advance notice. (iii) One Thousand Dollars ($1,000.00) shall be paid to Sellers at the closing of the sale of each quartershare interest in any condominium hotel development at the Pico Mountain Ski Resort undertaken by Buyer, or any affiliate of Buyer, whether or not actually located on real property purchased hereunder or on adjacent property owned or hereafter acquired by Buyer, or any affiliate of Buyer. Five Hundred Dollars ($500.00) shall be paid to Sellers at the closing of the sale of each quartershare interest in any condominium hotel development at the Killington Ski Resort undertaken by Buyer, or any affiliate of Buyer. The maximum amount payable under this subsection 4.01(c)(iii) shall be Seven Hundred Thousand Dollars ($700,000), in the aggregate, including developments at either or both resorts. Payment of the amounts listed in this Section 4.01(c) shall be guaranteed by American Skiing Company, a Maine corporation. (d) Contingent Installment Payments. At such time as the Killington and Pico Mountain Ski Resorts generate either (i) at least 4,000,000 skier visits (as defined above) on a cumulative basis from the Closing through March 1, 2000 or (ii) 1,400,000 skier visits (as herein defined) in any single ski season following the Closing, then Buyer shall pay to Seller the amount of Two Million Dollars ($2,000,000) in equal annual installments of Two Hundred Thousand Dollars ($200,000) each, beginning as of the March 1st following the season in which such condition is satisfied, and continuing on each March 1 thereafter until paid in full. Payment of the foregoing amounts is to be guaranteed by American Skiing Company, a Maine corporation. In the event Buyer fails to operate the ski resort for any period of 10 consecutive days during the period December 15 to March 15 for each ski season, then for purposes of calculation of skier visits, the resort shall have attributed to it 5,000 skier visits for each 10 consecutive day period the resort is closed to skiing during such period. Buyer will provide Seller with an accounting of skier visits within 60 days following the close of skiing at the resort. Seller shall have the right to audit Buyer's records relevant to the skier visit calculation during normal business hours upon reasonable advance notice. (e) Assumption of Condominium Obligation. Buyer will assume the obligation secured by the lien on the Purchased Assets in favor of the Village Square at Pico Condominium Owners Association in an amount not to exceed $40,032.47. (f) Certain Real Estate Sales. (i) Buyer will exercise its best efforts to sell the asset listed below to the parties identified below, and turn over the net proceeds of such sales remaining after deducting all reasonable expenses of such sales, reasonable fees and expenses associated with resolving any disputes relating to such sales, and all taxes associated with such sales (including allowance for federal and state income taxes due to the gain realized on such sales) to Sellers.
Asset Purchaser Well No. 4 currently Upland Water leased, licensed or Company, Inc. otherwise made available to Upland Water Company, Inc., as more particularly described in Schedule 4.01(f)
(ii) Buyer shall purchase the tower site described in Schedule 4.01(f) for an amount equal to $350,000 payable in cash at Closing. (g) POMA and CTEC Resolution. Buyer shall undertake all action necessary to cause CTEC Garavanta, Inc. and POMA of America, Inc. to release and discharge any and all claims each creditor may have against Sellers, the Purchased Assets, the Herberts or Pico Mountain, Inc. for payment of amounts due for services rendered or materials supplied, including without limitation payment of any such claims by Buyer. 4.02 Purchase Price Adjustment. (a) The Purchase Price payable to Sellers shall be reduced on a dollar-for-dollar basis by the amount necessary to deliver free, clear and unencumbered title to all Purchased Assets. Initially, the adjustment will be made by deducting such amounts from cash payable at Closing to reflect amounts paid, incurred or required to discharge all liens and encumbrances, and satisfy all liabilities that have been identified as of the Closing Date which could mature or otherwise be perfected into or result in the establishment of a lien or encumbrance upon, or a claim to or against any of the Purchased Assets, or a claim against Buyer as the owner of the Purchased Assets. (b) All Purchase Price payable to Sellers on a post-Closing basis, together with amounts payable under the Consulting Agreement, shall be subject to reduction on a dollar- for-dollar basis by the amount paid by Buyer to satisfy any further or additional liens or encumbrances upon, or claims to or against the Purchased Assets, or claims against Buyer as the owner of the Purchased Assets, or any liabilities or obligations imposed upon Buyer as the purchaser of the Purchased Assets in order to obtain free, clear and unencumbered title to all Purchased Assets, or any such claims, causes of action, liabilities, penalties, costs, charges or expenses as may otherwise result from pre- Closing operations of Sellers for which Buyer is or becomes responsible (provided that no assumption of such obligations, liabilities or responsibilities is hereby implied). Any reduction in Purchase Price shall be effected in accordance with the following procedure. Prior to effecting any reduction in Purchase Price, Buyer shall provide Sellers with written notice of the claim, liability or encumbrance resulting in the reduction, which shall (i) describe the claimant or creditor; (ii) provide a brief description of the nature of the claim, and (iii) state the amount of the claim. Sellers shall have a period of ten (10) days following receipt of such notice to advise Buyer in writing whether Sellers dispute the amount, validity or any other matter with respect to the claim. Notwithstanding anything to the contrary in the foregoing, Buyer may not compromise or pay any claim or liability, or agree with any claimant to do the same unless any of the following conditions exist: (i) such claim, liability or encumbrance is reduced to a judgment, lien, claim, encumbrance, other interest or right ("Creditor Interest") that is or becomes, or with the passage of time or giving of notice, or both, would be or become, immediately enforceable against either the Purchased Assets, or any portion thereof, or the Buyer, (ii) Sellers fail to contest the amount or validity thereof in good faith by appropriate proceedings within the period provided by applicable law, rule, regulation or ordinance to commence proceedings to appeal or contest and the enforcement of such Creditor Interest is not stayed or suspended at all times pending the completion of the proceedings to appeal or contest, or (iii) the full amount thereof is neither bonded by the Sellers nor secured by other collateral posted by the Sellers with the Buyer in an amount and of a character such as to provide reasonably adequate security for all claims and liabilities. Buyer agrees to use reasonable efforts to cooperate and assist in the defense or contest of such claims by the Sellers, at the Sellers' expense, including in proceedings where the Buyer or the Purchased Assets, or any portion thereof in rem, are parties to the proceedings; provided, that nothing herein shall be construed to authorize Sellers to act on Buyer's behalf in respect of such claims. Sellers may not act for or on behalf of Buyer in attempting to resolve such disputes or claims, but rather shall contest, dispute or resolve such claims at Sellers' sole cost and expense, and in Sellers' name. Nothing set forth herein shall in any way prevent, prohibit or restrict Buyer from taking any action, or refraining from any action, Buyer deems necessary or appropriate to defend, protect or advance its interests with respect to such claims, whether or not consistent with Sellers' position as to such matters. (c) Buyer agrees to establish at Closing, and maintain in a segregated account, an escrow to fund the liens, encumbrances and other liabilities identified in Schedule 4.02. Sellers shall be afforded an opportunity to resolve any and all disputes with respect to the liens, encumbrances and other liabilities identified in Schedule 4.02; provided, however, that Buyer reserves the right to apply the escrowed proceeds to pay such claims and receive a discharge of any such liens, encumbrances or other liabilities at any time, and in any manner, Buyer deems appropriate, in Buyer's sole discretion, in order to preserve and protect its property interest in the Purchased Assets. Sellers may not act for or on behalf of Buyer in attempting to resolve such disputes or claims, but rather shall contest, dispute or resolve such claims at Sellers' sole cost and expense and in Sellers' name. Nothing set forth herein shall in any way prevent, prohibit or restrict Buyer from taking any action, or refraining from any action, Buyer deems necessary or appropriate to defend, protect or advance its interests with respect to such claims, whether or not consistent with Sellers' position as to such matters. (d) In the event Sellers do not receive at least One Million Dollars ($1,000,000) in cash at Closing net of any reduction under Section 4.02(a), Sellers may terminate this Agreement, in which case Buyer will receive a refund of its deposit and the parties agree to negotiate in good faith a restructuring of the transaction described herein. 4.03 Consulting Agreement. Separate and apart from, and in addition to, the Purchase Price, as a condition of Closing, Buyer shall enter into a consulting agreement with a partnership to be formed by William and Harold Herbert pursuant to which the partnership shall agree to provide consulting services to Buyer on a basis acceptable to both Buyer and Seller for a period of five years following the Closing. Consideration to be paid to the partnership for such services shall total Five Hundred Thousand Dollars ($500,000.00) paid in five equal annual installments of One Hundred Thousand Dollars ($100,000.00). Payments will commence on the first anniversary of the Closing and conclude on the fifth anniversary of the Closing. 4.04 Adjustment for Taxes, Prepayments and Deposits. Real property taxes, personal property taxes, other ad valorem taxes, any governmental levies, charges or assessments, utilities, water, sewer and any other charges attributable to the Purchased Assets for the fiscal year during which the Closing Date occurs as well as any other prepayments and deposits with respect to the Purchased Assets shall be prorated and adjusted as of the Closing Date. If the real property taxes or personal property taxes for the fiscal year during which the Closing Date occurs are not finally determined, then such taxes for the immediately prior fiscal year shall be used for the purposes of prorating taxes on the Closing Date, with a further adjustment to be made after the Closing Date as soon as such taxes are finalized. Installments of special taxes or assessments with respect to the Purchased Assets which are payable for the fiscal period in which the Closing Date occurs shall be prorated as of the Closing Date. Sellers' and Buyer's obligation to make post-Closing Date adjustments for taxes, prepayments and deposits shall survive the Closing. Sellers' obligations hereunder not funded separately by Sellers at Closing shall be deducted from cash payable to Sellers at Closing and paid by Buyer. 4.05 Adjustment for Utilities. Sellers shall cause all meters for electricity, gas, water, sewer and other utility usage related to the Purchased Assets to be read on the Closing Date, and Sellers shall pay all charges for such utilities which have accrued on or prior to the Closing Date. If the utility companies are unable or refuse to read the meters on the Closing Date, all charges for such utilities to the extent unpaid shall be prorated and adjusted as of the Closing Date based on the most recent bills therefor. The Sellers shall provide notice to Buyer within three (3) days before the Closing Date setting forth (i) whether utility meters will be read as of the Closing Date and (ii) a copy of the most recent bill for any utility charges which are to be prorated and adjusted as of the Closing Date. If the meters cannot be read as of the Closing Date and, therefore, the most recent bill is used to prorate and adjust as of the Closing Date, then to the extent that the amount of such prior bill proves to be more or less than the actual charges for the period in question, a further adjustment shall be made after the Closing Date as soon as the actual charges for such utilities are available, which Buyer shall have read as soon as possible after the Closing Date. Sellers' and Buyer's obligation to make such post- Closing Date adjustments for utilities shall survive the Closing. Sellers' obligations hereunder not funded separately by Sellers at Closing shall be deducted from cash payable to Sellers at Closing. 4.06 Transfer Taxes. Buyer shall pay all state or local transfer tax, deed excise tax (or any other tax based upon the transfer of the Purchased Assets) and the recording fee for all deeds imposed in connection with the purchase and sale. Sellers shall pay any Vermont Land Gain Tax due upon sale of the Purchased Assets. Sellers' obligations hereunder not funded separately by Sellers at Closing shall be deducted from cash payable to Sellers at Closing and paid by Buyer. 4.07 Adjustment Payment. Within five (5) days after the date upon which the amount of each adjustment which is permitted to be made after the Closing is finally determined pursuant to this Article IV, payments required thereby will be made by check or wire transfer payable to the appropriate party. ARTICLE V CLOSING The closing (the "Closing") of the transaction contemplated by this Agreement will take place at the offices of Killington, Ltd. or such other location in the Rutland or Sherburne, Vermont area as Buyer may designate at 10:00 a.m. local time on the fifth business day following the date upon which all of the conditions precedent set forth in Articles VIII and IX of this Agreement are satisfied or waived by the appropriate party hereto, subject to Article XII of this Agreement, or at such other time and place as the parties may agree in writing. The date of Closing is sometimes referred to herein as the "Closing Date". In the event the Closing has not occurred on or before November 15, 1996, this Agreement shall terminate and the Deposit shall be refunded to Buyer. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SELLERS Sellers hereby represent and warrant to Buyer as follows: 6.01 Corporate Organization. Real Estate Co., Sports Center Co. and Equipment Co. are limited liability companies duly organized and legally and validly existing under the laws of the State of Vermont. Sellers each have full power and authority to own or lease their properties and to carry on their businesses as now conducted and to execute and deliver this Agreement and to carry out the terms hereof. 6.02 Authorization of Agreement. The execution and delivery of this Agreement and the agreements contemplated hereby (the "Related Agreements") by Sellers and the performance by Sellers of the obligations to be performed hereunder and thereunder have been duly authorized by all necessary and appropriate action by Sellers under their Operating Agreements. The execution and delivery of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby do not and will not (i) conflict with, or result in a breach of, or default under, or permit acceleration of any obligation under, any of the terms, conditions, or provisions of any note, bond, mortgage, indenture, license, material agreement or other material instrument or obligation to which Sellers are a party, or by which it or any of its properties or assets may be bound or affected or (ii) violate any order, writ, injunction, decree or statute, or any rule, regulation, permit, license or conditions thereto, or (iii) result in the creation or imposition of any lien, charge or encumbrance of any nature upon any of the Purchased Assets. This Agreement and the Related Agreements are valid and binding obligations of Sellers enforceable in accordance with their terms, subject to equitable principles and applicable bankruptcy and other creditors' rights laws, regulations and rulings. 6.03 Compliance with Laws. Except as set forth in Schedule 6.03 to the best of Sellers' knowledge Sellers are not in violation of any applicable federal, state and local laws, rules, regulations, ordinances, codes or orders ("Laws") governing the Purchased Assets and the operation of the Ski Areas and have not received written notification of any asserted material past or present failure by any of them to operate the Purchased Assets and Ski Area Business in accordance with any such law, ordinance or regulation and no event has occurred which with notice or the passage of time would constitute such a default. 6.04 Licenses and Permits. (a) No permits, licenses, approvals, clearances or other governmental consents are required for the transfer of the Purchased Assets to Buyer pursuant to the terms of this Agreement except for the transfer or reissuance of the governmental licenses, permits, authorizations, approvals and certificates identified in Section 1.05 from Sellers to Buyer. (b) The Sellers have not disposed of or permitted to lapse any license, permit or other authorization from any federal, state or local authorities related to the Purchased Assets or the operation of the Ski Area Business. (c) Except as reported in Schedule 1.05, the Licenses and Permits listed on Schedule 1.05 are all of the governmental licenses, permits, authorizations, approvals and certificates known to Sellers which are required for use of the Purchased Assets for the Ski Area Use at full capacity. 6.05 Environmental Matters; Health and Safety. (a) Except as disclosed in Schedule 6.05, there are no outstanding or, to Sellers' knowledge, threatened actions, claims, proceedings, determinations or judgments by any party, including, but not limited to, any governmental authority or agency, against or involving the Sellers, arising under the Clear Air Act, the Federal Water Pollution Control Act of 1972, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Solid Waste Disposal Act, the Resource Conservation and Recovery Act and the Toxic Substances Control Act, and any amendments or extensions of the foregoing statutes, and all other applicable environmental requirements or any other federal, state, local or other environmental, health or safety law, regulation, order or requirement requiring the remediation or removal of an existing condition or substance. Except as listed in Schedule 6.05, there are no outstanding or, to the best of Sellers' knowledge, threatened orders, determinations or notices of violation issued by any federal, state, local or other governmental authority administering environmental or health and safety laws in connection with operation of the Purchased Assets or the Ski Area Business, which have not been complied with or resolved to the satisfaction of such governmental authority. (b) Except as set forth in Schedule 6.05, the Purchased Assets and the Ski Area Business is in compliance with all applicable federal, state, and local environmental or health and safety laws, regulations and ordinances. 6.06 Title. Except as set forth in Schedules 1.01, Sellers hold and shall convey to Buyer at Closing good and marketable title to the Sellers' Real Estate, free of all liens, restrictions and encumbrances, except such encumbrances as will be discharged at Closing in accordance with Section 4.02, applicable zoning and land use laws, regulations, rules and ordinances and such restrictions as do not interfere with the use of the Purchased Assets for Ski Area Use, and the sale of the Sellers' Real Estate does not require the consent of any person or entity. Except for those listed on Schedule 6.13, Sellers have no outstanding leases, licenses, occupancy agreements or any contracts or agreements with respect to the Sellers' Real Estate. 6.07 Title to Other Purchased Assets. Except as set forth in Schedule 6.07 and such encumbrances as will be discharged at Closing in accordance with Section 4.02, Sellers have and shall convey to Buyer at Closing good and marketable title to all Purchased Assets, other than Sellers' Real Estate, free and clear of all encumbrances, liens, charges or other restrictions of any kind, except such restrictions as do not interfere with the use of the Purchased Assets for Ski Area Use. Except for those listed on Schedule 6.13, Sellers have no outstanding contracts or agreements with respect to or affecting the Purchased Assets. None of the contracts or agreements listed in Schedule 6.13 shall be binding upon Buyer, unless listed in Schedule 3.01. 6.08 Applicable Zoning and Use. The existing uses of the Purchased Assets are permitted uses within the zoning districts in which they are located and otherwise permitted under the Assumed Permits held by Sellers. 6.09 Litigation. Except as provided in Schedule 6.09, there is no action, suit, proceeding at law or in equity by any person or entity, or any arbitration or any administrative or other proceeding by or before any governmental or other instrumentality or agency, pending, or, to Sellers' knowledge, threatened, against any of Sellers with respect to the Ski Area Business or any of the Purchased Assets. 6.10 Warranty of Purchased Assets. Except as provided in Schedule 6.10(a), all of the Purchased Assets consisting of buildings, machinery and equipment and other tangible personal property or improvements to real estate are in good condition and repair, ordinary wear and tear excepted, and suitable for their intended use. 6.11 Sellers Not "Foreign Persons". Sellers are not "foreign persons" as defined in Internal Revenue Code (the "Code") Section 1445, and Sellers will execute and deliver to Buyer at Closing an affidavit in compliance with Code Section 1445(b)(2). 6.12 Taxes. Except as described in Schedule 6.12, Sellers have timely filed all tax returns, tax information returns and reports required to be filed through the Closing Date which relate to the Purchased Assets and Sellers' activities, and have paid all taxes and other charges which have become due pursuant to such returns and reports, or pursuant to any assessment received by it, except for any taxes the validity of which Sellers may be contesting in good faith in appropriate proceedings. Sellers are not delinquent in the payment of any tax assessment or governmental charge which relates to any of the Purchased Assets, no deficiencies for any taxes which relate to any of the Purchased Assets have been proposed, threatened, asserted or assessed against Sellers, and no requests for waivers of the time to assess or pay any such tax are pending, except such as are listed in Schedule 6.12 and will be paid and discharged at Closing. There are no tax liens upon any of the Purchased Assets and no such liens will arise as a result of the transaction contemplated hereby. For the purposes of this Agreement, the term "tax" shall include all federal, state, local and foreign income, property, sales, excise and other taxes of any nature whatsoever. 6.13 Contracts and Commitments. Schedule 6.13 sets forth a description of all material contracts, agreements and commitments of Sellers, constituting or affecting the Purchased Assets. Each executed contract or commitment set forth in Schedule 6.13 hereto is in full force and effect and, except as set forth in Schedule 6.13, the Sellers are not in default under any such contract or commitment. 6.14 Intellectual Property. Attached as Schedule 1.07 is a list of Sellers' trademarks (whether or not registered), tradenames, servicemarks (whether or not registered), copyrights (whether or not registered), trademark and service mark registrations (and pending applications therefor). Sellers have not granted any outstanding licenses or other rights to use any Intellectual Property Rights, and Sellers are not liable, nor have Sellers made any contract or arrangement whereby it may become liable, to any person for any royalty or other compensation for the use of any Intellectual Property Rights. None of the rights of Sellers in, to or under any Intellectual Property Rights will be adversely affected by the consummation of the transactions contemplated hereby. To the best of Sellers' knowledge, the use of the Intellectual Property Rights in the manner conducted by Sellers during the 1995-1996 ski season will not infringe any patent or copyright of any third party, nor constitute a misappropriation of the trade secrets or other proprietary rights of any third party. 6.15 Employee Benefit Plans. All of the pension, retirement, profit sharing, savings, stock options, severance bonus, fringe benefit, insurance or other employee benefit plan or arrangement of Sellers or applicable to their employees is listed in Schedule 6.15. Each of the above plans has been operated and administered in accordance with applicable laws, including ERISA and the Code. Buyers assume no responsibility, liability or obligation with respect to such plans and such plans shall be administered by Sellers following the Closing. 6.16 Labor and Employee Relations. Seller has no ongoing employment relationships. No persons have employment obligations to Sellers that will restrict their freedom to become the employees of Buyer if Buyer so desires. Buyer is under no obligation to employ any of Sellers' employees. 6.17 Ski Passes. No tickets or passes for skiing at the Pico Mountain Ski Resort for all of any portion of the 1996- 1997 ski season have been issued, sold or otherwise distributed by Sellers, or to the best of Sellers knowledge, by any other parties. ARTICLE VII REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby represents and warrants to Sellers as follows: 7.01 Corporate Organization. Buyer is a corporation duly organized, validly existing and in good standing under the laws of Vermont with full power and authority to own or lease its property and to carry on its businesses as now conducted and to execute, deliver and perform its obligations hereunder and under the Related Agreements. 7.02 Authorization of Agreement. The execution and delivery of this Agreement and the Related Agreements by Buyer and the performance by Buyer of the obligations to be performed hereunder and thereunder have been duly authorized by all necessary and appropriate action by the directors of Buyer and no shareholder approval is required in connection therewith. The execution and delivery of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby do not and will not conflict with or result in a breach of, or constitute a default under, the terms and conditions of Buyer's Certificate of Incorporation, By-Laws, any court or administrative order or process by which Buyer is bound, or any agreement or instrument to which Buyer is a party or is bound. This Agreement and the Related Agreements are the valid and binding obligations of Buyer, enforceable in accordance with their terms, subject to equitable principles and applicable bankruptcy and other creditors' rights, laws, regulations and rulings. ARTICLE VIII CONDITIONS PRECEDENT TO CLOSING BY BUYER ON THE CLOSING DATE The obligations of Buyer to consummate the transactions contemplated by this Agreement are subject to the satisfaction of each of the following conditions precedent being satisfied on or before the Closing Date, subject to the right of Buyer to waive any one or more of such conditions: 8.01 Compliance. The representations and warranties of Sellers contained in this Agreement or in any of the Schedules attached hereto or any agreement or document delivered in connection herewith shall be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date. The Sellers shall have performed and complied with all of its obligations and covenants required to be performed or complied with on or before the Closing Date. 8.02 No Material Adverse Change. There shall have been no material adverse change in the condition of the Purchased Assets from the date of this Agreement. 8.03 Closing Documents. Sellers shall have delivered or caused to be delivered to Buyer, or Buyer shall have otherwise received, on or before the Closing Date, in a form reasonably satisfactory to Buyer: (a) Consents, waivers and authorizations of any person to the assumption of the Assigned Contracts and other Purchased Assets by Buyer and to the transactions contemplated by this Agreement, except for the Assigned Permits, for which provision is made in Section 8.04. (b) Warranty deeds to Buyer conveying good and marketable title to the Sellers' Real Estate as described in Section 6.06 and except for those leases, licenses, or occupancy agreements or other instruments which have been assumed by the Buyer as Assumed Liabilities. (c) An owner's title insurance policy dated the Closing Date on such ALTA Forms as are reasonably acceptable to Buyer and its counsel with extended coverage guaranteeing over the standard exceptions to title customarily contained in such policies and the Endorsements, covering the Sellers' Real Estate issued by a title insurance company acceptable to Buyer, at Buyer's expense, insuring the fee simple of Sellers in such real property in the amount of at least $6 million; and Sellers shall have provided all statements, affidavits, and certificates which are customarily required of sellers by title insurance companies in order for the title insurance company to provide Buyer with the title insurance policies (and related endorsements) described in this Agreement, which Buyer shall exercise its best efforts to obtain. (d) Bills of Sale conveying all Purchased Assets to Buyer duly executed by Sellers (Sellers and Buyer hereby agreeing that neither the representations and warranties nor the rights and remedies of any party hereunder shall be deemed to be enlarged, modified or altered in any way by such Bills of Sale); (e) Certified copies of the authorization by each of Sellers of the sale of the Purchased Assets to Buyer in accordance with this Agreement and Sellers' execution and delivery of this Agreement; (f) An affidavit, under penalty of perjury, indicating Seller's United States taxpayer identification number and stating that Sellers are not a foreign person, in a form sufficient to exempt Buyer from the withholding provisions of Section 1445 of the Code; (g) A certificate of legal existence from the State of Vermont for each of Sellers and incumbency certificates of Sellers, together with a certified copy of each of Sellers' Operating Agreement and other organizational documents; (h) An opinion of counsel to Sellers addressing such matters as Buyer may reasonably require and in form and substance acceptable to Buyer; (i) An environmental assessment or assessments of the Purchased Assets confirming that Sellers' Real Estate, Ski Area Improvements and Personal Property do not contain, or otherwise have present in, on, at or under such properties, any conditions, substances or circumstances, the presence of which presently has, or could in the future have, a material adverse affect upon (a) the value of any such properties, (b) the Buyer's ability to use and develop such properties on a continuing basis following the Closing as a first class ski resort, (c) Buyer's ability to effectively utilize such properties as collateral to finance its purchase of the Purchased Assets, or (d) once owned by the Buyer, the Buyer's financial condition all as determined by Buyer in its reasonable judgment; and (j) A written statement from the Vermont Department of Revenue certifying that each of the Corporate Sellers has no past-due state income or employment tax liability, except such as will be satisfied at Closing with the proceeds of the sale. 8.04 Permits and Licenses. Sellers shall have delivered or caused to be delivered to Buyer, or Buyer shall have otherwise received, on or before the Closing Date, in a form reasonably satisfactory to Buyer, all necessary agreements, waivers, authorizations and consents to the transfer, assignment or reissuance of all Assumed Permits required for the ownership and operation of the Purchased Assets as a four season resort consistent with its historical operations. 8.05 Failure to Deliver the Purchased Assets by the Closing Date. If Sellers are unable to deliver any material portion of the Purchased Assets in accordance with terms and conditions of this Agreement and in a condition substantially similar to their condition as of the date hereof on the Closing Date because of damage by fire or casualty, then Buyer shall have the right to terminate this Agreement at any time thereafter. In the event of casualty loss involving any of the Purchased Assets which either does not result in a termination of this Agreement, Seller shall pay over to Buyer all proceeds of insurance, or claims therefor, relating to any such casualty loss. 8.06 Litigation and Regulatory Action. No litigation or regulatory action shall have been filed, brought or otherwise commenced against any of Sellers, Buyer or the Purchased Assets which forbids, prohibits or in any way restricts the transactions contemplated hereby, including without limitation the inclusion, incorporation or joinder of Buyer, any of the Sellers or the Purchased Assets in any pending proceedings. 8.07 Closing Waterville Valley and Cranmore. Closing the sale of the Waterville Valley Ski Resort and the Cranmore Ski Resort to Booth Creek Ski Acquisition Corp. pursuant to a Purchase and Sale Agreement between such parties dated as of August 30, 1996. ARTICLE IX CONDITIONS PRECEDENT TO CLOSING BY SELLERS ON THE CLOSING DATE The obligations of Sellers to consummate the transactions contemplated by this Agreement are subject to the satisfaction of each of the following conditions precedent being satisfied on or before the Closing Date, subject to the right of Sellers to waive any one or more of such conditions: 9.01 Compliance. The representations and warranties of Buyer contained in this Agreement or in any of the Schedules attached hereto or in any agreement or document delivered in connection herewith shall be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date. The Buyer shall have performed and complied with all of its obligations and covenants required to be performed or complied with on or before the Closing Date. 9.02 Closing Documents. Buyer shall have delivered to Sellers, in a form reasonably satisfactory to counsel for Sellers: (a) certified copies of the resolutions adopted by Buyer's Board of Directors (and stockholders where required) authorizing the purchase of the Purchased Assets from Sellers in accordance with this Agreement and Buyer's execution and delivery of this Agreement; certified copies of the resolutions adopted by American Skiing Company's Board of Directors authorizing the guaranty set forth at the conclusion of this Agreement; (b) an assumption agreement or agreements in form acceptable to Sellers with respect to the Assumed Liabilities; (c) a guaranty of Buyer's obligations under subsection 4.01(c) (d) hereof by American Skiing Company in form reasonably acceptable to Sellers and Buyer; (d) such other documents and certificates as are contemplated hereby or as Sellers or their counsel may reasonably request; and (e) an opinion of counsel to Buyer and American Skiing Company addressing such matters as Sellers may reasonably require and in form and substance acceptable to Sellers. 9.03 Payment of Money. Buyer shall have paid the Deposit as provided in Section 4.01(a) and the cash portion of the Purchase Price to the Sellers as provided in Section 4.01(b). ARTICLE X COVENANTS OF SELLERS AS TO INTERIM OPERATION Sellers hereby covenant and agree with Buyer as follows: 10.01 Conduct of Business. From the date hereof to the Closing Date, Sellers will carry on its activities in substantially the same manner as they have previously been carried out, in the ordinary course of business, and will not employ methods of manufacture, purchase, sale, lease, management, accounting, or operation that vary from those methods used by Sellers outside of the ordinary course of business consistent with past practices and as reflected in paragraph 3.01 recognizing that the ski area is not currently being operated. Without limiting the foregoing except as specifically contemplated in this Agreement, from the date of this Agreement to the Closing, Sellers will: (a) not engage in any transaction which would be inconsistent with any representation, warranty or covenant of Sellers set forth herein or which would cause a breach of any such representation, warranty or covenant; (b) except as provided on Schedule 10.01(b) and in the ordinary course of business, not sell, transfer, convey, assign, lease, license or otherwise dispose of any of the Purchased Assets; (c) not mortgage, pledge, subject to a lien, or grant a security interest in, or otherwise encumber, any of the Purchased Assets; (d) use reasonable efforts (without making any commitments on behalf of Buyer) to keep its business organizations intact, keep available its present employees and to preserve its present relationship with customers, suppliers, employees and other having business relationships with Sellers; (e) not cause a breach of any material contract or commitment, collective bargaining agreement, employee benefit plan, or any other material agreement to which either Sellers are a party, or by which it or any of its assets or properties are bound; (f) not violate or fail to comply with laws applicable to it or its properties or business if such violation will have or is reasonably likely to have a material adverse affect upon the ability to continue the Ski Area Use or develop any of Sellers' Real Estate for resort purposes; (g) not amend, change, terminate or otherwise modify any lease, contract, agreement or commitment other than in the ordinary course of business; (h) not enter into, or become obliged under, any contract, agreement, lease or other commitment relating to the Purchased Assets or Ski Area Use, other than any contract, agreement, lease or other commitment entered into in the ordinary course of business consistent with past practice; and (i) upon obtaining knowledge of the existence of any matter specified to Sellers' business or the Purchased Assets that could reasonably likely result in a diminution of the Purchased Assets and or the Ski Area Use, the Sellers shall promptly inform Buyer of such matter. 10.02 Risk of Loss. Sellers shall bear the risk of loss, damage or destruction with respect to the Purchased Assets from any casualty until the successful consummation of the sale and purchase of the Purchased Assets on the Closing Date. In the event of any such loss, damage or destruction, the proceeds of any claim for any loss payable under any insurance policy covering such loss shall be payable to Sellers. In the event of any such material loss or damage, Sellers shall specify in writing to Buyer with particularity the loss or damage incurred, the cause thereof, if known or reasonably ascertainable, and the extent to which restoration, replacement and repair of the Purchased Assets lost or destroyed will be reimbursed under any insurance policy with respect thereto. Buyer's right to terminate this Agreement in such circumstances shall be governed by Section 8.05 of this Agreement. To the extent that Buyer determines not to terminate this Agreement and the Closing occurs, it shall be entitled to any insurance proceeds provided with respect to such loss to the extent not used by Sellers to restore the Purchased Assets. 10.03 Access. (a) From the date hereof to the Closing Date, Sellers will afford to the representatives of Buyer, including its counsel and auditors, during normal business hours, access to any and all of the Purchased Assets to the end that Buyer may have a reasonable opportunity to make such a full investigation of the Purchased Assets and of Sellers' Ski Area Business in advance of the Closing Date as it shall reasonably desire, and the officers of Sellers will confer with representatives of Buyer and will furnish to Buyer, either orally or by means of such records, documents, and memoranda as are available such information as Buyer may reasonably request, and Sellers will furnish to Buyer's auditors all consents and authority that they may reasonably request in connection with any examination by Buyer. (b) From the date hereof to the Closing Date, Buyer shall have the right, at its expense, to enter upon the Sellers' Real Estate and undertake all such actions as may be necessary to prepare the Purchased Assets to open for the 1996-7 ski season, including all maintenance, making improvements, acquiring or updating permits and approvals and any such other actions as may be required, and to operate the Purchased Assets for Buyer's own account and at Buyer's sole expense (although no obligation to undertake any such action is hereby implied). Buyer shall indemnify and hold Sellers harmless from and against any claims, liability, loss, cost or expense resulting from any bodily injury, death or property damage occurring as a proximate result of Buyer's use of the Purchased Assets or action, or failure to act, at the Sellers' Real Estate. Buyer shall extend the same liability insurance as is currently in place at the Killington Ski Resort to the Sellers' Real Estate during the period of Buyer's use or occupancy of the same under this Section 10.03(b), and shall have the Sellers named as an additional insured on such policy(s) of insurance. In the event the transaction contemplated hereby does not close for any reason, Buyer shall have, for a reasonable period, the right to remove any and all improvements made by Buyer to the Purchased Assets; provided however, that Buyer shall have no claim against Sellers for the value of any improvements made to the Purchased Assets. 10.04 Consent of Third Parties. Sellers shall use their best efforts to obtain, as soon as practicable after the date hereof, but in any event prior to the Closing Date, the consent in writing of all persons whose consent is required to consummate to the transactions contemplated by this Agreement, including but not limited to any and all governmental authorities as set forth in Section 1.05. 10.05 Insurance Coverage. Existing insurance coverages for the Purchased Assets shall be maintained in effect by Sellers between the date hereof and the Closing Date. 10.06 Maintenance of Purchased Assets. At all times from the execution of this Agreement to the Closing Date, Sellers agree to maintain the Purchased Assets in substantially the same condition as of the date of this Agreement, provided that Sellers shall not be required to spend any money on maintenance, repair or replacement of any Purchased Assets. Sellers shall (i) not alter, disassemble or remove any Purchased Assets from the Property or take any other action in connection with the Purchased Assets which has or is likely to have a material adverse affect upon the value of, or beneficial use of, the Purchased Assets or the ability to continue to engage in the Ski Area Use, and (ii) maintain in full force and effect any and all contracts, permits and licenses which are Purchased Assets or Assumed Liabilities. Sellers shall notify Buyer promptly of any material change in the condition of the Purchased Assets. 10.07 No Solicitation; No Publicity. Sellers hereby covenant and agree to hold and maintain the discussions between Sellers and Buyer, the existence of this Agreement, the terms and provisions of this Agreement and any and all further discussions, relationships or arrangements by and between Buyer and Sellers in confidence and not disclose the same to any parties, private, public or governmental (including without limitation the news media) without the express prior written consent of Buyer; provided, however, that Sellers may disclose information relating to this Agreement on an as needed basis to Sellers' legal and financial advisors and as necessary in order to obtain required consents and approvals for the transaction contemplated hereby. Buyer agrees to work in cooperation with Sellers to discuss the existence and terms and provisions of this Agreement with certain private parties necessary in order to forestall foreclosure on all or any portion of the Purchased Assets provided adequate assurances of confidentiality are established with such parties. Sellers shall not entertain, discuss, invite, encourage, solicit, accept or facilitate any competing offers for the Purchased Assets during the term of this Agreement. The foregoing covenants and agreements are of the essence of this Agreement. Violation of the foregoing will give rise to Buyer's right to terminate this Agreement. 10.08 Further Assurances. From and after the Closing Date, Sellers shall execute and deliver to Buyer all such further assignments, endorsements and other documents as Buyer may reasonably request for the purpose of effecting transfer of Sellers' title to the Purchased Assets and/or carrying out the provisions of this Agreement. ARTICLE XI INDEMNITY 11.01 Sellers' Indemnity. Sellers shall, jointly and severally, indemnify and hold harmless Buyer and its directors, officers and employees from and against all expenses, claims, costs, damages or liabilities, including reasonable attorneys' fees (each an "Indemnified Expense"), arising out of or relating to (i) the untruth or inaccuracy of any representation or warranty made by any of Sellers or the Herberts in this Agreement, (ii) any breach of Sellers' or Herberts' covenants contained herein, (iii) the existence, operations or other conduct of Sellers or the Herberts prior to the Closing, including without limitation, any liabilities arising under federal or state environmental laws and liabilities arising under federal or state plant closing, employee termination or similar laws, except to the extent the same are assumed hereunder, (iv) any and all claims, obligations, liabilities or other amounts paid or incurred by Buyer described in Section 4.02(b) hereof and (v) any and all actions, suits, proceedings, demands, assessments, judgments, costs and legal fees and other expenses associated with any of the foregoing. Without in any way limiting the remedies of Buyer hereunder, Buyer shall be entitled to offset any Indemnified Expense against any of the payments of Purchase Price to be made to Sellers under Article IV of this Agreement and/or against payments under the Consulting Agreement described in Section 4.03. Sellers shall have no obligation to indemnify Buyer with respect to an Indemnified Expense unless notice of the Indemnified Expense is provided to Sellers on or before the seventh anniversary of the Closing Date; provided, however, that the foregoing limitation shall not apply to Indemnified Expenses resulting from federal, state or local tax liability of Sellers or the Herberts relating to any period ended on or before Closing. 11.02 Buyer's Indemnity. Buyer shall indemnify and hold harmless Sellers, their directors, officers and employees from and against all expenses, claims, costs, damages or liabilities, including reasonable attorneys' fees (each an "Indemnified Expense"), arising exclusively out of or relating exclusively to the operation of the Purchased Assets by Buyer following the Closing. Sellers hereby acknowledge and agree that nothing set forth in this Section 11.02 shall in any way limit or restrict their obligations under Section 11.01 and 4.02 hereof. ARTICLE XII MISCELLANEOUS 12.01 Consents to Assignment by Third Parties. This Agreement shall not constitute an agreement to assign any asset, claim, contract, permit, franchise, license or similar agreement or right if any attempted assignment of the same without the consent of the other party thereto would constitute a breach thereof or in any way affect the rights of Sellers or Buyer thereunder. 12.02 Confidentiality. Buyer acknowledges that in the course of preparing this Agreement, Buyer has obtained information concerning the business of Sellers which is of a confidential and/or proprietary nature (the "Confidential Information"). Buyer (including the directors, officers, employees and agents thereof) agrees to retain in confidence and not to disclose any of the Confidential Information of Sellers to any third party and if this Agreement is terminated and the transactions contemplated hereby are not concluded, to promptly return all such Confidential Information to Sellers and not retain or use any Confidential Information or copies thereof for any purpose, except as disclosure may be required by law or government regulation or order or unless the information sought to be disclosed or used (i) is publicly known as of the date hereof or becomes publicly known though no fault of Buyer, or (ii) is lawfully received by Buyer from a third party not bound in a confidential relationship to any party whose confidential information is to be protected hereunder. 12.03 Brokers. Each of Buyer and Sellers represents and warrants to the other that they have not engaged any brokers and there are no brokerage or finders' fees payable in connection with the transactions contemplated hereby resulting from any actions taken by them. 12.04 Representations and Warranties. Sellers and Buyer hereby agree that statements made in the Schedules attached hereto and the certificates delivered in connection herewith shall be representations and warranties for purposes of this Agreement. 12.05 Further Assurances. From and after the Closing Date, upon the reasonable request of Buyer from time to time, and at Buyer's expense, Sellers shall execute and deliver all documents, make all rightful oaths, testify in any proceedings and do all other acts which may be reasonably necessary or desirable in the opinion of Buyer to protect or defend the right, title or interest of Buyer in and to the Purchased Assets. 12.06 Tax Matters. The aggregate purchase price for the Purchased Assets paid by Buyer in accordance with this Agreement will be allocated among the Purchased Assets by Buyer and Sellers in accordance with Section 1060 of the Code and the regulations thereunder, as set forth in Schedule 12.06 attached hereto. Buyer and Sellers covenant and agree that the Buyer and Sellers shall each timely file (with the appropriate Internal Revenue Service) Form 8594 in substantially the form attached to Schedule 12.06. The covenants and agreements of the Buyer and Sellers set forth in this Section shall survive the Closing and shall continue so long as the Buyer or Sellers (as the case may be) is obligated under the Internal Revenue Code of 1986, as amended or the regulations or rulings promulgated thereunder, to file Form 8594, including any Supplemental Statement under Part IV of Form 8594. Buyer and Sellers will furnish each other with a copy of the purchase price allocation information they submit to the Internal Revenue Service, in connection with the filing of their fiscal 1996 federal income tax returns. 12.07 Amendment. This Agreement may not be amended except by written agreement of Sellers and Buyer. 12.08 Governing Law; Severability. This Agreement shall be construed in all respects in accordance with, and governed by, the internal laws (as opposed to conflicts of laws provisions) of Maine. The parties agree that the state and federal courts located in Maine shall have jurisdiction with respect to all matters arising under this Agreement and hereby submit to such jurisdiction. If any provision, clause or part of this Agreement, or the application thereof under certain circumstances, is held invalid, the remainder of this Agreement, or the applications of each provision, clause or part under other circumstances, shall not be affected thereby. 12.09 Retention of Books and Records. Buyer and Sellers shall retain for a period of three (3) years from the Closing all of their books and records (including such records as may be stored in computer databases) relating to the Purchased Assets. During such three-year period, each party will make such books and records available to the other for purposes of inspection and copying, upon a proper purpose being stated. If any party requires the original of any document in possession of the other, such party shall provide the same, if available, subject to the providing party's right to inspect and copy it. Each party will have the right to destroy such books and records at any time after the end of such three-year period; provided, however, that it shall give written notice to the other party prior to the time it intends to destroy such books and records so that if the other party wishes to take possession of all or some part of such books and records it may do so, at its expense. 12.10 Waiver. The failure of Sellers or Buyer to insist, in any one or more instances, upon performance of any of the terms or conditions of this Agreement, shall not be construed as a waiver or relinquishment of any rights granted hereunder or the future performance of any such term, covenant or condition. 12.11 Headings. The descriptive headings in this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 12.12 Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. 12.13 Notices. Any notice to be given hereunder shall be given in writing and delivered or mailed by registered or certified mail, return receipt requested, in the case of Sellers, to: William Herbert 12 Nassau Court Skillman, NJ 08558 with a copy to: Victor S. Elgort, Esq. Norris, McLaughlin & Marcus P.O. Box 1018 Somerville, NJ 08876-1018 and, in the case of Buyer, to Michael J. Krongel Sunday River Skiway Corporation P.O. Box 450 Bethel, ME 04217 with a copy to: Christopher E. Howard, Esq. Pierce Atwood One Monument Square Portland, ME 04101 or to such other address as Sellers or Buyer may designate by notice in writing to the other, provided that no party may designate that notices be sent to more than two locations at any particular time. 12.14 Benefit. This Agreement may not be transferred, assigned, pledged or hypothecated by any party hereto without the prior written consent of the other parties hereto. Upon prior written consent being obtained, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 12.15 Expenses. All expenses incurred by, on behalf of, or for the benefit of Sellers or Buyer in connection with the closing of transactions contemplated hereby, including without limitation, engineering, legal, advisory, investment banking and accounting fees, shall be the responsibility of and for the account of the party or parties who ordered or for whose benefit the particular service or particular expense was incurred. 12.16 Public Announcement. Except as required by law, prior to the Closing Date, no public announcement of the transactions contemplated hereby shall be made by way of press release, disclosure to the trade or otherwise, except as mutually agreed upon by the parties hereto. 12.17 Third Party Beneficiaries. (Remainder of this page left intentionally blank) Each party hereto intends that this Agreement shall not benefit or create any right or cause of action in or on behalf of any person other than the parties hereto or their permitted assigns. 12.18 Entire Agreement. This Agreement and the related closing documents executed and delivered in connection herewith constitute the entire agreement between Sellers and Buyer with respect to the transactions contemplated hereby, superseding all prior understandings and agreements among Sellers and Buyer with respect to the subject matter hereof. ARTICLE XIII HERBERT JOINDER 13.01 Representation and Warranty. The Herberts hereby represent and warrant to Buyer that the Herberts do not own or have any ownership interest in any real, personal or mixed assets of any nature that (a) constitute a portion of, (b) have previously constituted a portion of, (c) are or were used in the operation of or in connection with the operation of or (d) would be useful in the operation or development of or are in any way appurtenant, associated, related, used, useful or otherwise connected with the Purchased Assets or the Ski Area Use. 13.02 Quitclaim Bill of Sale. The Herberts shall execute and deliver at Closing a quitclaim deed or bill of sale, as appropriate, conveying to Buyer any and all interest the Herbert's may have, residual or otherwise, in and to the assets described in Section 13.01. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed under seal as of the day and year first above written. SHERBURNE PASS MOUNTAIN PROPERTIES, LLC By: Its PICO MOUNTAIN SPORTS CENTER, LLC By: Its PICO MOUNTAIN OPERATING COMPANY, LLC By: Its ________________ Harold Herbert ________________ Edith Herbert PICO SKI AREA MANAGEMENT COMPANY By: Its GUARANTY COMMITMENT American Skiing Company, a Maine corporation with a principal place of business at Newry, Maine ("ASC") does hereby agree to guaranty the obligations of Buyer set forth in Sections 4.01(c) and (d) of the foregoing Agreement. In connection therewith, ASC covenants and agrees as follows: ASC is a corporation duly organized, validly existing and in good standing under the laws of Maine with full power and authority to own or lease its property and to carry on its businesses as now conducted. The execution and delivery of this Agreement and the Related Agreements by ASC and the performance by ASC of the obligations to be performed hereunder and thereunder have been duly authorized by all necessary and appropriate action by the directors of ASC and no shareholder approval is required in connection therewith. The execution and delivery of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby do not and will not conflict with or result in a breach of, or constitute a default under, the terms and conditions of ASC's Certificate of Incorporation, By-Laws, any court or administrative order or process by which ASC is bound, or any agreement or instrument to which ASC is a party or is bound. This Agreement and the Related Agreements are the valid and binding obligations of ASC, enforceable in accordance with their terms, subject to equitable principles and applicable bankruptcy and other creditors' rights, laws, regulations and rulings. AMERICAN SKIING COMPANY By: Its: SCHEDULE 12.06 Buyer and Sellers covenant and agree that the Purchase Price shall be allocated among the Purchased Assets as follows:
Assets Amount Allocate d Sports Equipment Real Center Co. Estate Co. Co. Class Cash I Demand Deposits Class CD's II Government Securities Marketable Securities Class Furniture 100,000 III Land 4,500,00 100,000 0 Buildings 590,000 200,000 Equipment 650,000 50,000 200,000 Class Customer IV List and Records/ Expirations Covenant Not to Compete Goodwill
Form 8594 shall be prepared in a form acceptable to Buyer and Seller based upon actual balances and allocations at closing. COR:89362-1.DOC LIST OF SCHEDULES Schedule 1.01 Property Description 1.03 Ski Area Improvements 1.04 Personal Property 1.05 Assumed Permits 1.07 Intellectual Property Rights 2.03 Assets 3.01A Assumed Liabilities 3.01B Excluded Assets 4.01(f) Well No. 4 Site 4.02 Liens, Encumbrances and Other Liabilities 6.03 Compliance with Laws 6.05 Environmental Matters 6.07 Title to Other Purchased Assets 6.09 Litigation 6.10(a) Warranty of Purchased Assets 6.12 Taxes 6.13 Contracts and Commitments 6.15 Employee Benefit Plans 10.01(b) Ordinary Course of Business 12.06 Tax Matters EX-10 9 EXHIBIT 10 Page 7 August 22, 1996 S-K-I Limited Post Office Box 450 Bethel, Maine 04217 August 22, 1996 Warren C. Cook Boston Concessions Group, Inc. Diversified Credit Extension Trust Fred M. Seed Annuity Trust William E. Haggett Jordan Lumber Company James M. Seed c/o Warren C. Cook Sugarloaf USA RR 1, Box 5000 Carrabassett Valley, ME 04947 Re: Additional Performance-Based Purchase Price for Minority Shares Under Shareholders' Agreement Dated August 24, 1994 Ladies and Gentlemen: By letter dated June 28, 1996 we notified you that S-K-I Limited ("S-K- I") consummated a merger transaction through which all of the issued and outstanding stock of S-K-I Limited became owned by American Skiing Company (the "Company"). That letter provided notice of S-K-I Limited's exercise of its right to purchase the shares of common stock of Sugarloaf Mountain Corporation owned by each of you pursuant to Sections 2(b) and 3 of the Shareholders' Agreement dated August 24, 1994 for an aggregate purchase price of $2 million. Since the exercise of S-K-I Limited's option to purchase, we have been discussing with Warren Cook a commitment from S-K-I Limited to pay an additional performance-based purchase price for such shares. This letter constitutes S-K-I Limited's commitment to pay an additional performance-based purchase price for such shares as more particularly described below. 1. No Legal Commitment. S-K-I Limited is not legally obligated to pay any purchase price above the $2 million option price specified in the Shareholders' Agreement. This additional performance-based purchase price is being paid in an effort to generate a sense of goodwill within the Sugarloaf community and to be certain that Mr. Cook and his investors feel well treated by the Company. 2. Formula. S-K-I Limited commits to pay to the shareholders whose stock is acquired through the exercise of the purchase option described in Section 3 of the Shareholders Agreement (the "Minority Group") additional purchase price for shares purchased (the "Minority Shares") based upon the future EBITDA of Sugarloaf Mountain Corporation. For purposes of this calculation, EBITDA shall mean for each fiscal year beginning with the fiscal year ended July 31, 1997 (a) net income or loss of Sugarloaf Mountain Corporation determined in accordance with generally accepted accounting principles without giving effect to extraordinary gains or losses from sales, exchanges or other dispositions of property not in the ordinary course of business, and non-recurring items, plus, to the extent deducted in calculating net income, (b) the sum of, without duplication (i) depreciation expense, (ii) amortization expense, (iii) interest expense, (iv) income tax expense, and (v) other non-cash items. For purposes of this calculation "interest expense" shall mean interest expense on Sugarloaf Mountain Corporation's indebtedness, as determined in accordance with generally accepted accounting principles consistently applied, which shall include all obligations for borrowed money however evidenced, all obligations for deferred purchase price of property or services, all capital lease obligations, all debt of others secured by any lien, mortgage security interest or pledge of any property or revenues of Sugarloaf Mountain Corporation, all debt of other guaranteed by Sugarloaf Mountain Corporation and all obligations of Sugarloaf Mountain Corporation, contingent or otherwise in respect of letters of credit, bankers acceptances and similar instruments. The additional purchase price formula shall be annual EBITDA multiplied by a factor of .11, with that product then being multiplied by a factor of 49%. The product of the foregoing formula shall constitute the total annual additional performance-based purchase price payable to the Minority Group. The amount payable to each shareholder shall be determined on a per share basis by dividing the total aggregate performance-based additional purchase price by the number of shares owned by each member of the Minority Group. Payments shall be made on or before November 30 of each of the years 1997 through 2002. The total amount of additional performance-based purchase price shall be limited to $1 million. At such time as the total amount of additional performance-based purchase price paid to Minority Shareholders equals $1 million no further payments shall be made. Attached hereto as Exhibit A is an illustration of the results of the foregoing formula based upon an approximate 10% growth in EBITDA. This example is provided for illustrative purposes only and is not intended to reflect amounts anticipated to be earned or paid based upon the foregoing formula. 3. Calculations. Calculation of the additional performance-based purchase price shall be performed by S- K-I based upon Sugarloaf Mountain Corporation's results of operations for each fiscal year as reported in American Skiing Company's annual audited financial statement. S-K-I's calculation of additional performance- based purchase price shall be final and binding upon S-K-I and the Minority Group, absent manifest error. For purposes of the foregoing calculation, Sugarloaf Mountain Corporation's allocable share of S-K- I's corporate overhead and American Skiing Company's corporate overhead shall be made on a basis consistent with allocation of corporate overhead to all subsidiaries of American Skiing Company and S-K-I Limited. The corporate overhead allocation methodology within the American Skiing Company group of subsidiaries has not been determined as of this date, and may change, from time to time, throughout the period over which the additional performance-based purchase price is payable. S-K-I's commitment is to allocate corporate overhead in an equitable manner pursuant to a formula or methodology that is the same in all material respects as that applied to all other American Skiing Company subsidiaries. 4. Coordination with Warrant Exercise. Under the Shareholder's Agreement, any shares of common stock of Sugarloaf Mountain Corporation purchased through the exercise of warrants prior to the closing on S-K-I Limited's exercise of its option to acquire the Minority Shares are automatically included in the Minority Shares and are therefore subject to purchase under the option at no additional purchase price. The closing on the exercise of S-K-I Limited's option is scheduled for August 30, 1996. Contemporaneously with the execution and delivery of this letter, information explaining the terms of this letter and the exercise of S-K-I Limited's option is being provided to the warrant holders. In order to provide the warrant holders with sufficient time to evaluate whether or not to exercise their warrants, S-K-I Limited and the Minority Group hereby agree to provide the warrant holders until September 24, 1996 to inform Sugarloaf Mountain Corporation whether they intend to exercise their warrants and have the shares of common stock received as a result of that exercise included in the Minority Shares for purposes of S- K-I Limited's option. As a result of extending that grace period to the warrant holders, S-K-I Limited and the Minority Group hereby agree that $530,978 of the $2,000,000 in cash payable to the Minority Group at the closing of the exercise of the option will be escrowed until the number of warrant holders exercising their warrants on or before September 24, 1996 is finally determined. At that time, a final determination of the cash portion of the purchase price of the Minority Shares (including shares acquired by warrant holders through the exercise of their warrants) will be determined and a final payment of purchase price will be made. Investment earnings, if any, on the escrowed funds shall be included in the purchase price for purposes of determining amounts payable. 5. Priority of Payment. The payment of additional performance- based purchase price pursuant to paragraph 2 above, if any, is hereby subordinated in right of payment to the prior payment in full in cash of all Debt of S-K-I and the Company, whether outstanding as of the date hereof or hereafter incurred. Upon any distribution of cash, securities or other property to creditors of S-K-I and the Company in a liquidation or dissolution of S-K-I and the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to S-K-I and the Company or its property, in an assignment for the benefit of creditors or any marshaling of S-K-I and the Company's assets and liabilities, the holders of all Debt of S-K-I and the Company will be entitled to receive payment in full in cash of all Debt (including interest after the commencement of any such proceeding at the rate applicable to the Debt) before the Minority Group will be entitled to receive any payment of additional performance- based purchase price hereunder, and until all Debt of S-K-I and the Company is paid in full in cash, any distribution to which the Minority Group would be entitled hereunder shall be made to the holders of such Debt. S-K-I and the Company also may not make and the Minority Group may not accept or seek to enforce any payment hereunder if (a) a default in the payment of the principal of, premium if any, or interest on any Debt of S-K-I and the Company occurs and is continuing or (ii) any other default occurs and is continuing with respect to any Debt or any agreements, lease, indenture, mortgage or other instrument relating thereto that permits holders of such Debt as to which such default relates to accelerate its maturity. Payments hereunder may and shall be resumed upon the date on which such default is cured or waived so long as no other default exists. For purposes of the preceding paragraph the term "Debt" means, as of each date of determination, without duplication (a) all obligations of S-K- I Limited and/or the Company for borrowed money whether evidenced by bonds, debentures, notes or similar instruments, including, without limitation, all principal, interest, fees, costs, enforcement expenses (including legal fees and disbursements), collateral protection expenses and other reimbursement and indemnity obligations; (b) all obligations of S-K-I Limited and/or the Company for the deferred purchase price of property or services (including without limitation deferred payment obligations which are part of the consideration provided for in agreements not to compete), except trade accounts payable and accrued liabilities arising in the ordinary course of business which are not overdue by more than sixty days or which are being contested in good faith by appropriate proceedings; (c) all capital lease obligations of S-K-I Limited and/or the Company; (d) all Debt of others secured by any lien, mortgage, security interest or pledge on or involving any properties, assets or revenues of S-K-I Limited and/or the Company; (e) all Debt of others guaranteed by S-K-I Limited and/or the Company; and (f) all obligations of S- K-I Limited and/or the Company, contingent or otherwise, in respect of letters of credit or bankers' acceptances or similar instruments. 6. Skiing Privileges. S-K-I Limited hereby commits to the Minority Shareholders, as additional purchase price, to make available to each member of the Minority Group ("Minority Shareholder") beginning with the 1996-1997 ski season the following privileges: (a) A lifetime, non-transferable 30% discount on all non-sale items in all ski shops owned by Sugarloaf Mountain Corporation; (b) A lifetime, non-transferable pass for the Minority Shareholder, the Minority Shareholder's spouse, the Minority Shareholder's children and their spouse to the Sugarloaf Mountain Corporation's health and fitness facility; plus (c) The number of transferable lifetime adult skiing passes (or two transferable lifetime children's skiing passes) for the Sugarloaf resort specified for each Minority Shareholder listed below: William E. Haggett 11 Fred M. Seed Annuity Trust 8 Boston Concessions Group, Inc. 8 Warren C. Cook 5 Jordan Lumber Company 0 Diversified Credit Extension Trust 0 James M. Seed 0 (d) Each Minority Shareholder (or designee if a Minority Shareholder is not an individual) shall also be entitled for his or her lifetime to purchase non- transferable seasons passes for the Sugarloaf resort for the holder's spouse and children for $100 per pass per year. Such lifetime passes, discounts and rights to purchase passes will be valid for the greater of: (i) the lifetime of the Minority Shareholder (or for the life of a person designated by the Minority Shareholder thereof if such holder is not an individual), or (ii) six (6) years after the date hereof. If such Minority Shareholder or designee should die before the lapsing of such six (6) year period, the personal representative of the estate of such person shall be entitled to exercise such person's rights hereunder for the balance of such six (6) year period. Such individual will be entitled annually during his lifetime to designate the name(s) of the person(s) entitled to utilize the passes described in subparagraph (c) above. (e) Each Minority Shareholder shall have the right, for six (6) years following the date hereof, to exchange any two (2) transferable season's passes for the Sugarloaf resort for two non- transferable season's passes to all American Skiing Company resorts. 7. Status of Commitment. This commitment modifies the terms and provisions of Sections 2(b) and 3 of the Shareholders' Agreement regarding determination of purchase price payable upon the exercise of S-K-I's option to purchase the Minority Shares. Except as specifically provided herein, the remaining terms and conditions of the Shareholders' Agreement shall continue in full force and effect as originally set forth in the Shareholders' Agreement. 8. Miscellaneous Provisions. (a) This letter sets forth S-K-I Limited's entire commitment with respect to the subject matter hereof and, together with the Shareholders' Agreement and its June 28, 1996 letter exercising its right to purchase the minority shares, constitutes the entire agreement with respect to the subject matter hereof and supersedes any and all prior oral or written agreements or understandings with respect thereto. (b) This commitment shall be governed by and construed in accordance with the laws of the State of Maine, excluding conflict of laws principles. (c) This commitment may not be assigned by the Minority Stockholders without the express prior written consent of S-K-I Limited. Very truly yours, S-K-I LIMITED By: Leslie B. Otten Its President /kas Minority Shareholder Consent The undersigned, representing at least 66 2/3% of the outstanding shares of common stock of Sugarloaf Mountain Corporation, do hereby agree to the foregoing modification of the Shareholders Agreement pursuant to Section 8 thereof. EXHIBIT A [For Demonstrative Purposes Only]
11/30/97- 02 Pmt. Aggrega Per Fiscal te Former Year EBITDA< Fact Factor Minorit Minority Ended F1> or Total y Share Share at 49% 7/97 2,530,0 .11 278,300 136,367 .04415 00 7/98 2,783,0 .11 306,130 150,003 .04855 00 7/99 3,061,3 .11 336,743 165,004 .05342 00 7/00 3,367,4 .11 370,417 181,504 .05876 30 7/01 3,704,1 .11 407,459 199,654 .06464 73 7/02 4,074,5 .11 334,936 167,468 .05422 90 1,000,0 .32378 00 Assumes approximately 10% growth per annum Assumes minority shares of 3,088,428 11/30/02 payment limited due to $1,000,000 aggregate payment ceiling
EX-12 10 EXHIBIT 12 American Skiing Company Calculation of Earnings to Fixed Charges For the Year ended 7/28/96
Year Ended July 28, 1996 Histori Histori Histori Pro Pro cal ASC cal S-K- cal Forma Forma I Combine Adjustme Combined d nts Calculation 1,562,0 (6,036, (4,474, (13,114, (17,588, of earnings 00 000) 000) 000) 000) Pre-tax income from continuing operations Add fixed 4,997,0 11,177, 13,114,0 charges 00 6,180,0 000 00 24,291,0 less 00 00 capitalized interest Add PY's cap'lized 5,000 25,000 30,000 30,000 int., amortized during period Earnings as 6,564,0 0 defined 00 169,000 6,733,0 6,733,00 00 0 Calculation 4,699,0 13,114,0 of fixed 00 4,593,0 9,292,0 00 22,406,0 charges 00 00 00 Interest expense plus amort. of debt disc. and prem. (b) Capitalized interest 444,000 21,000 465,000 465,000 Rental expense 298,000 1,587,0 1,885,0 1,885,00 representin 00 00 0 g interest (a) Fixed 5,441,0 11,642, 13,114,0 charges as 00 6,201,0 000 00 24,756,0 defined 00 00 Ratio of earnings to 12.64% fixed charges Deficiency (6,032, (4,909, (18,023, of earnings 000) 000) 000) to fixed charges
American Skiing Company Calculation of Earnings to Fixed Charges Pro Forma Basis
Year Ended July 30, 1996 Histor Histor Histor Pro Forma Pro Forma ical ical S- ical Adjustmen Combined LBO K-I Combin ts ed Calculatio n of earnings $5,519 $1,727 $7,246 ($15,226, ($7,979,42 Pre-tax ,000 ,571 ,571 000) d 9) income from continuing operations Add fixed 22,517,147 charges 2,612, 4,679, 7,291, 15,226,00 less 000 147 147 0 capitalize d d interest Add PY's 21,979 cap'lized 5,000 16,979 21,979 int., amortized during period Earnings 14,559 0 as defined 8,136, 6,423, ,697 14,559,697 000 697 Calculatio n of fixed charges Interest expense 2,205, 3,818, 6,023, 15,226,00 21,249,893 000 893 893 0 d Capitalize d interest 224,00 215,53 439,53 439,536 0 6 6 Amort. of debt 105,00 27,480 132,48 132,480 expense, 0 0 disc. or prem. (b) Rental expense 302,00 832,77 1,134, 1,134,774 representi 0 4 774 ng interest (a) Fixed $2,836 $4,894 $7,730 $15,226,0 $22,956,68 charges as ,000 ,683 ,683 00 3 defined Ratio of 188.34 earnings 286.88 131.24 % to fixed % % charges Deficiency ($8,396,98 of 6) earnings to fixed charges
EX-23 11 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-4 of American Skiing Company of our report dated October 28, 1996 relating to the financial statements of American Skiing Company, which appears in such Prospectus. We also consent to the references to us under the headings "Experts," "Summary Historical Financial Data" and "Selected Historical Financial Data" in such Prospectus. However, it should be noted that Price Waterhouse LLP has not prepared or certified such "Summary Historical Financial Data" or "Selected Historical Financial Data." We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-4 of American Skiing Company of our report dated June 11, 1996 relating to the financial statements of Sugarbush Resort Corporation, which appears in such Prospectus. We also consent to the reference to us under the headings "Experts" in such Prospectus. We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-4 of American Skiing Company of our report dated August 31, 1995 relating to the financial statements of S-K-I Ltd., which appears in such Prospectus. We also consent to the references to us under the headings "Experts," "Summary Historical Financial Data" and "Selected Historical Financial Data" in such Prospectus. However, it should be noted that Price Waterhouse LLP has not prepared or certified such "Summary Historical Financial Data" or "Selected Historical Financial Data." Boston, MA November 12, 1996 EX-23 12 EXHIBIT 23 [LETTERHEAD OF BERRY, DUNN, MCNEIL & PARKER] CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-4 of American Skiing Company of our report dated December 22, 1995 relating to the financial statements of American Skiing Company, which appears in such Prospectus. We also consent to the references to us under the headings "Experts," "Summary Historical Financial Data" and "Selected Historical Financial Data" in such Prospectus. However, it should be noted that Berry, Dunn, McNeil & Parker has not prepared or certified such "Summary Historical Financial Data" or "Selected Historical Financial Data." BERRY, DUNN, MCNEIL & PARKER Portland, Maine November 7, 1996 EX-25 13 EXHIBIT 25 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) UNITED STATES TRUST COMPANY OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-3818954 (Jurisdiction of incorporation (I. R. S. Employer if not a U. S. national bank) Identification No.) 114 West 47th Street 10036-1532 New York, New York (Zip Code) (Address of principal executive offices) AMERICAN SKIING COMPANY (and the other obligors named in the attached schedule) Maine 01-0503382 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Sunday River Access Road Bethel, Maine 04217 (207) 824-3000 (Address of principal executive offices) 12% Series B Senior Subordinated Notes Due 2006 13-3/4% Series B Subordinated Discount Notes Due 2007 GENERAL 1. General Information Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Reserve Bank of New York (2nd District), New York, New York (Board of Governors of the Federal Reserve System). Federal Deposit Insurance Corporation, Washington, D. C. New York State Banking Department, Albany, New York (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. 2. Affiliations with the Obligor If the obligor is an affiliate of the trustee, describe each such affiliation. None. 3. Voting Securities of the Trustee 2,999,020 shares of Common Stock - - par value $5 per share 4. Trusteeships under Other Indentures Not applicable. 5. Interlocking Directorates and Similar Relationships with the Obligor or Underwriters Not applicable. 6. Voting Securities of the Trustee Owned by the Obligor or its Officials Not applicable. 7. Voting Securities of the Trustee Owned by Underwriters or their Officials Not applicable. 8. Securities of the Obligor Owned or Held by the Trustee Not applicable. 9. Securities of Underwriters Owned or Held by the Trustee Not applicable. 10. Ownership or Holdings by the Trustee of Voting Securities of Certain Affiliates or Securities Holders of the Obligor Not applicable. 11. Ownership or Holdings by the Trustee of any Securities of a Person Owning 50 Percent or More of the Voting Securities of the Obligor Not applicable. 12. Indebtedness of the Obligor to the Trustee Not applicable. 13. Defaults by the Obligor Not applicable. 14. Affiliations with the Underwriters Not applicable. 15. Foreign Trustee Not applicable. 16. List of Exhibits T-1.1 -- Organization Certificate, as amended, issued by the State of New York Banking Department to transact business as a Trust Company, is incorporated by reference to Exhibit T- 1.1 to Form T-1 filed on October 6, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 in an amended filing to an original Registration Statement filed on August 28, 1995 (Registration No. 33- 96262). T-1.2 - Included in Exhibit T-1.1. T-1.3 -- Included in Exhibit T-1.1. T-1.4 -- The By- Laws of United States Trust Company of New York, as amended, is incorporated by reference to Exhibit T- 1.4 to Form T-1 filed on October 6, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 in an amended filing to an original Registration Statement filed on August 28, 1995 (Registration No. 33- 96262). T-1.6 -- The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990. T-1.7 -- A copy of the latest report of condition of the trustee pursuant to law or the requirements of its supervising or examining authority. NOTE As of August 9, 1996, the trustee had 2,999,020 shares of Common Stock outstanding, all of which are owned by its parent company, U. S. Trust Corporation. The term "trustee" in Item 2, refers to each of United States Trust Company of New York and its parent company, U. S. Trust Corporation. In answering Item 2 in this statement of eligibility, as to matters peculiarly within the knowledge of the obligor or its directors, the trustee has relied upon information furnished to it by the obligor and will rely on information to be furnished by the obligor and the trustee disclaims responsibility for the accuracy or completeness of such information. Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, United States Trust Company of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York, and State of New York, on the 9th day of August, 1996. UNITED STATES TRUST COMPANY OF NEW YORK, Trustee By: John Guiliano Vice President JG/pg Exhibit T-1.6 The consent of the trustee required by Section 321(b) of the Act. United States Trust Company of New York 114 West 47th Street New York, NY 10036 September 1, 1995 Securities and Exchange Commission 450 5th Street, N.W. Washington, DC 20549 Gentlemen: Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the limitations set forth therein, United States Trust Company of New York ("U.S. Trust") hereby consents that reports of examinations of U.S. Trust by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. Very truly yours, UNITED STATES TRUST COMPANY OF NEW YORK By: S/Gerard F. Ganey Senior Vice President EXHIBIT T-1.7 UNITED STATES TRUST COMPANY OF NEW YORK CONSOLIDATED STATEMENT OF CONDITION MARCH 31, 1996 ($ IN THOUSANDS) ASSETS Cash and Due from Banks $ 47,046 Short-Term Investments 50 Securities, Available for Sale758,118 Loans 1,221,210 Less: Allowance for Credit Losses 13,113 Net Loans 1,208,097 Premises and Equipment 58,360 Other Assets 125,979 Total Assets $2,197,650 LIABILITIES Deposits: Non-Interest Bearing $ 387,509 Interest Bearing 1,446,148 Total Deposits 1,833,657 Short-Term Credit Facilities 82,285 Accounts Payable and Accrued Liabilities 128,745 Total Liabilities $2,044,687 STOCKHOLDER'S EQUITY Common Stock 14,995 Capital Surplus 42,394 Retained Earnings 96,511 Unrealized Gains on Securities Available for Sale (Net of Taxes) (937) Total Stockholder's Equity 152,963 Total Liabilities and Stockholder's Equity $2,197,650 I, Richard E. Brinkman, Senior Vice President & Comptroller of the named bank do hereby declare that this Statement of Condition has been prepared in conformance with the instructions issued by the appropriate regulatory authority and is true to the best of my knowledge and belief. Richard E. Brinkman, SVP & Controller June 7, 1996 Schedule of Obligors Name of Jurisdict IRS Address, Corporation ion of Employer Including Zip Incorpora Identificat Code and tion ion # Telephone Number Including Area Code, of Principal Executive Offices Sunday River Maine 01-0261489 Sunday River Skiway Access Road Corporation P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Sunday River Maine 01-0456264 Sunday River Ltd. Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Perfect Maine 01-458495 Sunday River Turn, Inc. Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 LBO Holding, Maine 01-0488967 Sunday River Inc. Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Sunday River Maine 01-0261489 Sunday River Transportati Access Road on, Inc. P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Sugarbush Vermont 03-034431 Sunday River Resort Access Road Holdings, P.O. Box 450 Inc. Bethel, ME 04217 (207) 824-3000 Sugarbush Vermont 03-034432 Sunday River Leasing Access Road Company P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Sugarbush Vermont 03-0344820 Sunday River Restaurants, Access Road Inc. P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Cranmore, Maine 02-0481418 Sunday River Inc. Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Mountain Vermont 03-0313610 Sunday River Wastewater Access Road Treatment, P.O. Box 450 Inc. Bethel, ME 04217 (207) 824-3000 LBO Hotel Maine 01-0508236 Sunday River Co. Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 S-K-I Delaware 03-0294233 Sunday River Limited Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Killington Vermont 03-0195484 Sunday River Ltd. Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Mount Snow Vermont 03-0265116 Sunday River Ltd. Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Waterville New 02-0475701 Sunday River Valley Ski Hampshire Access Road Area, Ltd. P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Sugarloaf Maine 01-0232195 Sunday River Mountain Access Road Corporation P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Killington Vermont 03-0218459 Sunday River Restaurants, Access Road Inc. P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Dover Vermont 03-0264550 Sunday River Restaurants, Access Road Inc. P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Resort Vermont 99-0046530 Sunday River Technologies Access Road , Inc. P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Resort Vermont 03-0320098 Sunday River Software Access Road Services, P.O. Box 450 Inc. Bethel, ME 04217 (207) 824-3000 Mountainside Maine 01-0288053 Sunday River Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Sugartech Maine 01-0390763 Sunday River Access Road P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Deerfield Vermont 03-0332575 Sunday River Operating Access Road Company P.O. Box 450 Bethel, ME 04217 (207) 824-3000 Pico Ski Vermont 03-0322667 Sunday River Area Access Road Management P.O. Box 450 Company Bethel, ME 04217 (207) 824-3000
EX-99 14 EXHIBIT 99S LETTER OF TRANSMITTAL AMERICAN SKIING COMPANY Offer for all Outstanding 12% Series A Senior Subordinated Notes Due 2006 in Exchange for 12% Series B Senior Subordinated Notes Due 2006 which Have Been Registered Under the Securities Act of 1933, As Amended, Pursuant to the Prospectus, dated November 12, 1996 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON JANUARY 15, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. Delivery To: United States Trust Company of New York, Exchange Agent By Mail: United States Trust Company of New York P.O. Box 844 Peter Cooper Station New York, New York 10276 By Hand: United States Trust Company of New York 111 Broadway Lower Level Corporate Trust Window New York, New York 10005 By Overnight Courier: United States Trust Company of New York 770 Broadway, 13th Floor New York, New York 10003 Attn: Corporate Trust Services Window By Facsimile: (212) 420-6152 Confirm by Telephone: (800) 548-6565 Delivery of this instrument to an address other than as set forth above, or transmission of instructions via facsimile other than as set forth above, will not constitute a valid delivery. The undersigned acknowledges that he or she has received and reviewed the Prospectus, dated November 12, 1996 (the "Prospectus"), of American Skiing Company, a Maine corporation (the "Company"), and this Letter of Transmittal (the "Letter"), which together constitute the Company's offer (the "Exchange Offer") to exchange an aggregate principal amount of up to $120,000,000 of its 12% Series B Senior Subordinated Notes Due 2006, which have been registered under the Securities Act of 1933, as amended (the "New Notes"), of the Company for a like principal amount of the issued and outstanding 12% Series A Senior Subordinated Notes Due 2006 (the "Old Notes") of the Company from the holders (the "Holders") thereof. For each Old Note accepted for exchange, the Holder of such Old Note will receive a New Note having a principal amount equal to that of the surrendered Old Note. The New Notes will bear interest from the most recent date to which interest has been paid on the Old Notes or, if no interest has been paid on the Old Notes, from June 28, 1996. Accordingly, registered holders of New Notes on the relevant record date for the first interest payment date following the consummation of the Exchange Offer will receive interest accruing from the most recent date to which interest has been paid or, if no interest has been paid, from June 28, 1996. Old Notes accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer. Holders whose Old Notes are accepted for exchange will not receive any payment in respect of interest on such Old Notes otherwise payable on any interest payment date the record date for which occurs on or after consummation of the Exchange Offer. This Letter is to be completed by a Holder of Old Notes either if certificates are to be forwarded herewith or if a tender of certificates for Old Notes, if available, is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in "The Exchange Offers -- Book-Entry Transfer" section of the Prospectus. Holders of Old Notes whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender of their Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other documents required by this Letter to the Exchange Agent on or prior to the Expiration Date, must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offers -- Guaranteed Delivery" section of the Prospectus. See Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. The undersigned has completed the appropriate boxes below and signed this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the aggregate principal amount of Old Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of the Company all right, title and interest in and to such Old Notes as are being tendered hereby. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Old Notes tendered hereby and that the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Company. The undersigned hereby further represents that any New Notes acquired in exchange for Old Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such New Notes, whether or not such person is the undersigned, that neither the Holder of such Old Notes nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes and that neither the Holder of such Old Notes nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"), of the Company. The undersigned also acknowledges that this Exchange Offer is being made in reliance on interpretations by the staff of the Securities and Exchange Commission (the "SEC"), as set forth in no-action letters issued to third parties, that the New Notes issued in exchange for the Old Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such Holders' business and such Holders have no arrangement with any person to participate in the distribution of such New Notes. However, the SEC has not considered the Exchange Offer in the context of a no- action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in other circumstances. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes and has no arrangement or understanding to participate in a distribution of New Notes. If any Holder is an affiliate of the Company, is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such Holder (i) could not rely on the applicable interpretations of the staff of the SEC and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes, it represents that the Old Notes to be exchanged for the New Notes were acquired by it as a result of market- making activities or other trading activities and acknowledges that it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offers - Withdrawal Rights" section of the Prospectus. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, please deliver the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) in the name of the undersigned, or in the case of a book-entry delivery of Old Notes, please credit the account indicated above maintained at the Book- Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, please send the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) to the undersigned at the address shown above in the box entitled "Description of Old Notes." THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS SET FORTH IN SUCH BOX ABOVE. List below the Old Notes to which this Letter relates. If the space provided below is inadequate, the certificate numbers and principal amount of Old Notes should be listed on a separate signed schedule affixed hereto.
DESCRIPTION OF 1 2 3 OLD NOTES Names(s) and Certificate Aggreg Principal Address(es) of Number(s)* ate Amount Registered Princi Tendered* Holders(s) pal * (Please fill in, Amount if blank) of Old Note(s ) Total * Need not be completed if Old Notes are being tendered by book-entry transfer. ** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Notes represented by the Old Notes indicated in column 2. See Instruction 2. Old Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. See Instruction 1.
__ CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution ______________ Account Number _________________ Transaction Code Number _____________ __ CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s)___________________ Window Ticket Number (if any)_______________________________ _____________ Date of Execution of Notice of Guaranteed Delivery___________________________ _____________ Date of Institution which guaranteed delivery___________________________ _____________ If Delivery by Book-Entry Transfer, Complete the Following: Account Number_______________________ Transaction Code Number_________ __ CHECK HERE IF YOU ARE A BROKER- DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ___________________________________ ______ Address:___________________________ _____________ If the undersigned is not a broker- dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an underwriter within the meaning of the Securities Act of 1933, as amended. SPECIAL ISSUANCE INSTRUCTIONS (See Instructions 3 and 4) To be completed ONLY if certificates for Old Notes not exchanged and/or New Notes are to be issued in the name of and sent to someone other than the person or persons whose signature(s) appear(s) on this Letter above, or if Old Notes delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above. Issue: New Notes and/or Old Notes to: Name(s)_________________________________ ____ (Please Type or Print) ________________________________________ ____ (Please Type or Print) Address_________________________________ ____ ________________________________________ ____ (Zip Code) (Complete Substitute Form W-9) __ Credit unexchanged Old Notes delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below. _______________________ (Book-Entry Transfer Facility) Account Number, if applicable) SPECIAL DELIVERY INSTRUCTIONS (See Instructions 3 and 4) To be completed ONLY if certificates for Old Notes not exchanged and/or New Notes are to be sent to someone other than the person or persons whose signature(s) appear(s) on this Letter above or to such person or persons at an address other than shown in the box entitled "Description of Old Notes" on this Letter above. Mail: New Notes and/or Old Notes to: Name(s)_________________________________ ___ (Please Type or Print) ________________________________________ __ (Please Type or Print) Address_________________________________ ___ ________________________________ (Zip Code) IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX ABOVE. PLEASE SIGN HERE (TO BE COMPLETED BY ALL TENDERING HOLDERS) Dated:__________ ____, 1996 x_____________________, 1996 x____________________, 1996 Signature(s) of Owners Date Area Code and Telephone Number ________________________ If a holder is tendering any Old Notes, this letter must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Old Notes or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3. Name(s):________________________________ __________ ________________________________________ _________ (Please Type or Print) Capacity:_______________________________ ___________ Address:________________________________ __________ (Including Zip Code) SIGNATURE GUARANTEE (if required by Instruction 3) Signature(s) Guaranteed by an Eligible Institution:____________________________ ___ (Authorized Signature) ________________________________________ _________ (Title) ________________________________________ _________ (Name and Firm) Dated: ____________________, 1996 INSTRUCTIONS Forming Part of the Terms and Conditions of the Exchange Offer for the 12% Series A Senior Subordinated Notes due 2006 to Exchange for the 12% Series B Senior Subordinated Notes Due 2006 of American Skiing Company which Have Been Registered Under the Act of 1933, As Amended 1. Delivery of this Letter and Notes; Guaranteed Delivery Procedures. This Letter is to be completed by holders of Old Notes either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in "The Exchange Offers -- Book-Entry Transfer" section of the Prospectus. Certificates for all physically tendered Old Notes, or Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter (or manually signed facsimile hereof) and any other documents required by this Letter, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Old Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. Holders whose certificates for Old Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Old Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offers -- Guaranteed Delivery" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Letter (or a facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Company (by telegram, telex, facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered stating that the tender is being made thereby and guaranteeing that within five New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Old Notes, or a Book- Entry Confirmation, and any other documents required by the Letter will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the certificates for all physically tendered Old Notes, in proper form for transfer, or Book-Entry Confirmation, as the case may be, and all other documents required by this Letter, are received by the Exchange Agent within five NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. The method of delivery of this Letter, the Old Notes and all other required documents is at the election and risk of the tendering holders, but the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If Old Notes are sent by mail, it is suggested that the mailing be made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange Offers" section of the Prospectus. 2. Partial Tenders (not applicable to noteholders who tender by book-entry transfer). If less than all of the Old Notes evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Old Notes to be tendered in the box above entitled "Description of Old Notes -- Principal Amount Tendered." A reissued certificate representing the balance of nontendered Old Notes will be sent to such tendering holder, unless otherwise provided in the appropriate box on this Letter, promptly after the Expiration Date. All of the Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. 3. Signatures on this Letter, Bond Powers and Endorsements, Guarantee of Signatures. If this Letter is signed by the registered holder of the Old Notes tendered hereby, the signature must correspond exactly WITH the name as written on the face of the certificates without any change whatsoever. If any tendered Old Notes are owned of record by two or more joint owners, all of such owners must sign this Letter. If any tendered Old Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as may separate copies of this Letter as there are different registrations of certificates. When this Letter is signed by the registered holder or holders of the Old Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the New Notes are to be issued, or any untendered Old Notes are to be reissued, to a person other than the registered holder, then endorsements of any certificates transmitted hereby or separate bond powers are required. Signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter is signed by a person other than the registered holder or holders of any certificate(s) specified herein, such certificate(s) must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the certificate(s) and signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted. Endorsements on certificates for Old Notes or signatures on bond powers required by this Instruction 3 must be guaranteed by a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company having an office or correspondent in the United States (an "Eligible Institution"). Signatures on this Letter need not be guaranteed by an Eligible Institution, provided the Old Notes are tendered: (i) by a registered holder of the Old Notes ( which term, for purposes of the Exchange Offer, includes any participant in the Book-Entry Tender Facility system whose name appears on a security position listing as the holder of such Old Notes) who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter, or (ii) for the account of an Eligible Institution. 4. Special Issuance and Delivery Instructions. Tendering holders of Old Notes should indicate in the applicable box the name and address to which New Notes issued pursuant to the Exchange Offer and/or substitute certificates evidencing Old Notes not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. Noteholders tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such noteholder may designate hereon. If no such instructions are given, such Old Notes not exchanged will be returned to the name or address of the person signing this Letter. 5. Tax Identification Number. Federal income tax law generally requires that a tendering holder whose Old Notes are accepted for exchange must provide the Company (as payor) with such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below, which in the case of a tendering holder who is an individual, is his or her social security number. If the Company is not provided with the current TIN or an adequate basis for an exemption, such tendering holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery to such tendering holder of New Notes may be subject to backup withholding in an amount equal to 31% of all reportable payments made after the exchange. If withholding results in an overpayment of taxes, a refund may be obtained. Exempt holders of Old Notes (including, among others, all corporations and certain foreign individuals) are not subject to those backup withholding and reporting requirements. See the enclosed Guidelines of Certificate of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for additional instructions. To prevent backup withholding, each tendering holder of Old Notes must provide its correct TIN by completing the Substitute Form W-9 set forth below, certifying that the TIN provided is correct (or that such holder is awaiting a TIN) and that (i) the holder is exempt from backup withholding, or (ii) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. If the tendering holder of Old Notes is a nonresident alien or foreign entity not subject to backup withholding, such holder must give the Company a completed Form W-8, Certificate of Foreign Status. These forms may be obtained from the Exchange Agent. If the Old Notes are in more than one name or are not in the name of the actual owner, such holder should consult the W-9 Guidelines for information on which TIN to report. If such holder does not have a TIN, such holder should consult the W-9 Guidelines on applying for a TIN, check the box in Part 2 of the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note: Checking this box and writing "applied for" on the form means that such holder has already applied for a TIN or that such holder intends to apply for one in the near future. If such holder does not provide its TIN to the Company within 60 days, backup withholding will begin and continue until such holder furnishes its TIN to the Company. 6. Transfer Taxes. The Company will pay all transfer taxes, if any, applicable to the transfer of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New Notes and/or substitute Old Notes not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of any person other than the person signing this Letter, or if a transfer tax is imposed for any reason other than the transfer of Old Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Old Notes specified in this Letter. 7. Waiver of Conditions. The Company reserves the absolute right to waive satisfaction of any or all conditions enumerated in the Prospectus. 8. No Conditional Tenders. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Old Notes, by execution of this Letter, shall waive any right to receive notice of the acceptance of their Old Notes for exchange. Neither the Company, the Exchange Agent nor any person is obligated to give notice of any defect or irregularity with respect to any tender of Old Notes nor shall any of them incur any liability for failure to give any such notice. 9. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 10. Requests for Assistance or Additional Copies. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter, may be directed to the Exchange Agent, at the address and telephone number indicated above. TO BE COMPLETED BY ALL TENDERING HOLDERS (See Instruction 5) PAYOR'S NAME: AMERICAN SKIING COMPANY
SUBSTITUTE Part 1 - PLEASE TIN:___________ Form W-9 PROVIDE YOUR TIN __________ IN THE BOX AT Social Security RIGHT AND CERTIFY Number or BY SIGNING AND Employer DATING BELOW. Identification Number Department of the Treasury Internal Part 2 - TIN Applied for __ Revenue Service Payer's Request for Taxpayer Identification Number ("TIN") and Certification CERTIFICATION - UNDER PENALTIES OF PERJURY, I CERTIFY THAT: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me.) (2) I am not subject to backup withholding either because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and (3) any other information provided on this form is true and correct. SIGNATURE. ___________ DATE ______________ You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to backup withholding because of underreporting of interest or dividends or your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of the exchange, 31 percent of all reportable payments made to me thereafter will be withheld until I provide a number. _______________________________________________ Signature Date AMERICAN SKIING COMPANY Offer for all Outstanding 12% Series A Senior Subordinated Notes Due 2006 in Exchange for 12% Series B Senior Subordinated Notes Due 2006 which Have Been Registered Under the Securities Act of 1933, As Amended To: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: American Skiing Company (the "Company") is offering, upon and subject to the terms and conditions set forth in the Prospectus, dated November 12, 1996 (the "Prospectus"), and the enclosed Letter of Transmittal (the "Letter of Transmittal"), to exchange (the "Exchange Offer") its 12% Series B Senior Subordinated Notes Due 2006, which have been registered under the Securities Act of 1933, as amended, for its outstanding 12% Series A Senior Subordinated Notes Due 2006 (the "Old Notes"). The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated June 28, 1996, by and among the Company, the Guarantors named therein and the initial purchasers referred to therein. We are requesting that you contact your clients for whom you hold Old Notes regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Old Notes registered in your name or in the name of your nominee, or who hold Old Notes registered in their own names, we are enclosing the following documents: 1. Prospectus dated November 12, 1996; 2. The Letter of Transmittal for your use and for the information of your clients; 3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer if certificates for Old Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date (as defined below) or if the procedure for book- entry transfer cannot be completed on a timely basis; 4. A form of letter which may be sent to your clients for whose account you hold Old Notes registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 6. Return envelopes addressed to U.S. Trust Company of New York, the Exchange Agent for the Old Notes. Your prompt action is requested. The Exchange Offer will expire at 5:00 p.m., New York City time, on January 15, 1997, unless extended by the Company (the "Expiration Date"). Old Notes not tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date. To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other required documents, should be sent to the Exchange Agent and certificates representing the Old Notes should be delivered to the Exchange Agent, all in accordance with the instructions set forth in the Letter of Transmittal and the Prospectus. If holders of Old Notes wish to tender, but it is impracticable for them to forward their certificates for Old Notes prior to the expiration of the Exchange Offer or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under "The Exchange Offers -- Guaranteed Delivery." The Company will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding the Prospectus and the related documents to the beneficial owners of Old Notes held by them as nominee or in a fiduciary capacity. The Company will pay or cause to be paid all stock transfer taxes applicable to the exchange of Old Notes pursuant to the Exchange Offer, except as set forth in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Exchange Offer, or requests for additional copies of the enclosed materials, should be directed to United States Trust Company of New York, the Exchange Agent for the Old Notes, at its address and telephone number set forth on the front of the Letter of Transmittal. Very truly yours, American Skiing Company NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL. Enclosures AMERICAN SKIING COMPANY Offer for all Outstanding 12% Series A Senior Subordinated Notes Due 2006 in Exchange for 12% Series B Senior Subordinated Notes Due 2006 which Have Been Registered Under the Securities Act of 1933, As Amended To Our Clients: Enclosed for your consideration is a Prospectus, dated November 12, 1996 (the "Prospectus"), and the related Letter of Transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") of American Skiing Company (the "Company") to exchange its 12% Series B Senior Subordinated Notes Due 2006, which have been registered under the Securities Act of 1933, as amended (the "New Notes"), for its outstanding 12% Series A Senior Subordinated Notes Due 2006 (the "Old Notes"), upon the terms and subject to the conditions described in the Prospectus and the Letter of Transmittal. The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated June 28, 1996, by and among the Company, the Guarantors named therein and the initial purchasers referred to therein. This material is being forwarded to you as the beneficial owner of the Old Notes carried by us in your account but not registered in your name. A tender of such Old Notes may only be made by us as the holder of record and pursuant to your instructions. Accordingly, we request instructions as to whether you wish us to tender on your behalf the Old Notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal. Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the Old Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City time, on January 15, 1997, unless extended by the Company. Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for any and all Old Notes. 2. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned "The Exchange Offers -- Certain Conditions to the Exchange Offers." 3. Any transfer taxes incident to the transfer of Old Notes from the holder to the Company will be paid by the Company, except as otherwise provided in the Instructions in the Letter of Transmittal. 4. The Exchange Offer expires at 5:00 p.m., New York City time, on January 15, 1997, unless extended by the Company. If you wish to have us tender your Old Notes, please so instruct us by completing, executing and returning to us the instruction form on the back of this letter. The Letter of Transmittal is furnished to you for information only and may not be used directly by you to tender Old Notes. INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer made by American Skiing Company with respect to its Old Notes. This will instruct you to tender the Old Notes held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and the related Letter of Transmittal. Please tender the Old Notes held by you for my account as indicated below. Aggregate Principal Amount of Old Notes 12% Series A Senior Subordinated Notes Due 2006 ___________________________________ __ Please do not tender any Old Notes held by you for my account. Dated:_______________________________, 1996 ________________________________________ ______ Signature(s) ________________________________________ _______ Please print name(s) here ________________________________________ _______ Address(es) ________________________________________ _______ Area Code and Telephone Number ________________________________________ _______ Tax Identification or Social Security No(s). None of the Old Notes held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all the Old Notes held by us for your account. LETTER OF TRANSMITTAL AMERICAN SKIING COMPANY Offer for all Outstanding 13-3/4% Series A Subordinated Discount Notes Due 2007 in Exchange for 13-3/4% Series B Subordinated Discount Notes Due 2007 which Have Been Registered Under the Securities Act of 1933, As Amended, Pursuant to the Prospectus, dated November 12, 1996 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON JANUARY 15, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. Delivery To: United States Trust Company of New York, Exchange Agent By Mail: United States Trust Company of New York P.O. Box 844 Peter Cooper Station New York, New York 10276 By Hand: United States Trust Company of New York 111 Broadway Lower Level Corporate Trust Window New York, New York 10005 By Overnight Courier: United States Trust Company of New York 770 Broadway, 13th Floor New York, New York 10003 Attn: Corporate Trust Services Window By Facsimile: (212) 420-6152 Confirm by Telephone: (800) 548-6565 Delivery of this instrument to an address other than as set forth above, or transmission of instructions via facsimile other than as set forth above, will not constitute a valid delivery. The undersigned acknowledges that he or she has received and reviewed the Prospectus, dated November 12, 1996 (the "Prospectus"), of American Skiing Company, a Maine corporation (the "Company"), and this Letter of Transmittal (the "Letter"), which together constitute the Company's offer (the "Exchange Offer") to exchange an aggregate principal amount of up to $39,132,000 of its 13-3/4% Series B Subordinated Discount Notes Due 2007, which have been registered under the Securities Act of 1933, as amended (the "New Notes"), of the Company for a like principal amount of the issued and outstanding 13-3/4% Series A Subordinated Discount Notes Due 2007 (the "Old Notes") of the Company from the holders (the "Holders") thereof. For each Old Note accepted for exchange, the Holder of such Old Note will receive a New Note having a principal amount equal to that of the surrendered Old Note. Neither the Old Notes nor the New Notes will accrue interest prior to July 15, 2001, but such Notes do gain in Accreted Value (as defined in the Prospectus) from the date of issuance to July 15, 2001. Old Notes accepted for exchange will cease to experience any increase in Accreted Value from and after the date of consummation of the Exchange Offer. Holders whose Old Notes are accepted for exchange will not receive any payment in connection with the Exchange Offer in respect of any increase in the Accreted Value thereof which may be deemed to have occurred prior to the consummation of the Exchange Offer. This Letter is to be completed by a Holder of Old Notes either if certificates are to be forwarded herewith or if a tender of certificates for Old Notes, if available, is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in "The Exchange Offers -- Book-Entry Transfer" section of the Prospectus. Holders of Old Notes whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender of their Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other documents required by this Letter to the Exchange Agent on or prior to the Expiration Date, must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offers -- Guaranteed Delivery" section of the Prospectus. See Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. The undersigned has completed the appropriate boxes below and signed this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the aggregate principal amount of Old Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of the Company all right, title and interest in and to such Old Notes as are being tendered hereby. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Old Notes tendered hereby and that the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Company. The undersigned hereby further represents that any New Notes acquired in exchange for Old Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such New Notes, whether or not such person is the undersigned, that neither the Holder of such Old Notes nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes and that neither the Holder of such Old Notes nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"), of the Company. The undersigned also acknowledges that this Exchange Offer is being made in reliance on interpretations by the staff of the Securities and Exchange Commission (the "SEC"), as set forth in no-action letters issued to third parties, that the New Notes issued in exchange for the Old Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such Holders' business and such Holders have no arrangement with any person to participate in the distribution of such New Notes. However, the SEC has not considered the Exchange Offer in the context of a no- action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in other circumstances. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes and has no arrangement or understanding to participate in a distribution of New Notes. If any Holder is an affiliate of the Company, is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such Holder (i) could not rely on the applicable interpretations of the staff of the SEC and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes, it represents that the Old Notes to be exchanged for the New Notes were acquired by it as a result of market- making activities or other trading activities and acknowledges that it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offers - Withdrawal Rights" section of the Prospectus. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, please deliver the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) in the name of the undersigned, or in the case of a book-entry delivery of Old Notes, please credit the account indicated above maintained at the Book- Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, please send the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) to the undersigned at the address shown above in the box entitled "Description of Old Notes." THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS SET FORTH IN SUCH BOX ABOVE. List below the Old Notes to which this Letter relates. If the space provided below is inadequate, the certificate numbers and principal amount of Old Notes should be listed on a separate signed schedule affixed hereto.
DESCRIPTION OF 1 2 3 OLD NOTES Names(s) and Certificate Aggreg Principal Address(es) of Number(s)* ate Amount Registered Princi Tendered* Holders(s) pal * (Please fill in, Amount if blank) of Old Note(s ) Total * Need not be completed if Old Notes are being tendered by book-entry transfer. ** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Notes represented by the Old Notes indicated in column 2. See Instruction 2. Old Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. See Instruction 1.
__ CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution________________________ _____________ Account Number____________________ Transaction Code Number_____________________________ _______ __ CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s)__________________________ _____________ Window Ticket Number (if any)_______________________________ _____________ Date of Execution of Notice of Guaranteed Delivery___________________________ _____________ Date of Institution which guaranteed delivery___________________________ _____________ If Delivery by Book-Entry Transfer, Complete the Following: Account Number_______________________ Transaction Code Number_____________________________ _ __ CHECK HERE IF YOU ARE A BROKER- DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ___________________________________ ______ Address:___________________________ _____________ If the undersigned is not a broker- dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an underwriter within the meaning of the Securities Act of 1933, as amended. SPECIAL ISSUANCE INSTRUCTIONS (See Instructions 3 and 4) To be completed ONLY if certificates for Old Notes not exchanged and/or New Notes are to be issued in the name of and sent to someone other than the person or persons whose signature(s) appear(s) on this Letter above, or if Old Notes delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above. Issue: New Notes and/or Old Notes to: Name(s)_________________________________ ____ (Please Type or Print) ________________________________________ ____ (Please Type or Print) Address_________________________________ ____ ________________________________________ ____ (Zip Code) (Complete Substitute Form W-9) __ Credit unexchanged Old Notes delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below. _______________________ (Book-Entry Transfer Facility) Account Number, if applicable) SPECIAL DELIVERY INSTRUCTIONS (See Instructions 3 and 4) To be completed ONLY if certificates for Old Notes not exchanged and/or New Notes are to be sent to someone other than the person or persons whose signature(s) appear(s) on this Letter above or to such person or persons at an address other than shown in the box entitled "Description of Old Notes" on this Letter above. Mail: New Notes and/or Old Notes to: Name(s)_________________________________ ___ (Please Type or Print) ________________________________________ __ (Please Type or Print) Address_________________________________ ___ ________________________________ (Zip Code) IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX ABOVE. PLEASE SIGN HERE (TO BE COMPLETED BY ALL TENDERING HOLDERS) Dated:__________ ____, 1996 x_____________________, 1996 x____________________, 1996 Signature(s) of Owners Date Area Code and Telephone Number ________________________ If a holder is tendering any Old Notes, this letter must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Old Notes or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3. Name(s):________________________________ __________ ________________________________________ _________ (Please Type or Print) Capacity:_______________________________ ___________ Address:________________________________ __________ (Including Zip Code) SIGNATURE GUARANTEE (if required by Instruction 3) Signature(s) Guaranteed by an Eligible Institution:____________________________ ___ (Authorized Signature) ________________________________________ _________ (Title) ________________________________________ _________ (Name and Firm) Dated: ____________________, 1996 INSTRUCTIONS Forming Part of the Terms and Conditions of the Exchange Offer for the 13 3/4% Series A Subordinated Discount Notes due 2007 to Exchange for the 13 3/4% Series B Subordinated Discount Notes Due 2007 of American Skiing Company which Have Been Registered Under the Act of 1933, As Amended 1. Delivery of this Letter and Notes; Guaranteed Delivery Procedures. This Letter is to be completed by holders of Old Notes either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in "The Exchange Offers -- Book-Entry Transfer" section of the Prospectus. Certificates for all physically tendered Old Notes, or Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter (or manually signed facsimile hereof) and any other documents required by this Letter, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Old Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. Holders whose certificates for Old Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Old Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offers -- Guaranteed Delivery" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Letter (or a facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Company (by telegram, telex, facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered stating that the tender is being made thereby and guaranteeing that within five New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Old Notes, or a Book- Entry Confirmation, and any other documents required by the Letter will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the certificates for all physically tendered Old Notes, in proper form for transfer, or Book-Entry Confirmation, as the case may be, and all other documents required by this Letter, are received by the Exchange Agent within five NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. The method of delivery of this Letter, the Old Notes and all other required documents is at the election and risk of the tendering holders, but the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If Old Notes are sent by mail, it is suggested that the mailing be made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange Offers" section of the Prospectus. 2. Partial Tenders (not applicable to noteholders who tender by book-entry transfer). If less than all of the Old Notes evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Old Notes to be tendered in the box above entitled "Description of Old Notes -- Principal Amount Tendered." A reissued certificate representing the balance of nontendered Old Notes will be sent to such tendering holder, unless otherwise provided in the appropriate box on this Letter, promptly after the Expiration Date. All of the Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. 3. Signatures on this Letter, Bond Powers and Endorsements, Guarantee of Signatures. If this Letter is signed by the registered holder of the Old Notes tendered hereby, the signature must correspond exactly WITH the name as written on the face of the certificates without any change whatsoever. If any tendered Old Notes are owned of record by two or more joint owners, all of such owners must sign this Letter. If any tendered Old Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as may separate copies of this Letter as there are different registrations of certificates. When this Letter is signed by the registered holder or holders of the Old Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the New Notes are to be issued, or any untendered Old Notes are to be reissued, to a person other than the registered holder, then endorsements of any certificates transmitted hereby or separate bond powers are required. Signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter is signed by a person other than the registered holder or holders of any certificate(s) specified herein, such certificate(s) must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the certificate(s) and signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted. Endorsements on certificates for Old Notes or signatures on bond powers required by this Instruction 3 must be guaranteed by a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company having an office or correspondent in the United States (an "Eligible Institution"). Signatures on this Letter need not be guaranteed by an Eligible Institution, provided the Old Notes are tendered: (i) by a registered holder of the Old Notes ( which term, for purposes of the Exchange Offer, includes any participant in the Book-Entry Tender Facility system whose name appears on a security position listing as the holder of such Old Notes) who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter, or (ii) for the account of an Eligible Institution. 4. Special Issuance and Delivery Instructions. Tendering holders of Old Notes should indicate in the applicable box the name and address to which New Notes issued pursuant to the Exchange Offer and/or substitute certificates evidencing Old Notes not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. Noteholders tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such noteholder may designate hereon. If no such instructions are given, such Old Notes not exchanged will be returned to the name or address of the person signing this Letter. 5. Tax Identification Number. Federal income tax law generally requires that a tendering holder whose Old Notes are accepted for exchange must provide the Company (as payor) with such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below, which in the case of a tendering holder who is an individual, is his or her social security number. If the Company is not provided with the current TIN or an adequate basis for an exemption, such tendering holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery to such tendering holder of New Notes may be subject to backup withholding in an amount equal to 31% of all reportable payments made after the exchange. If withholding results in an overpayment of taxes, a refund may be obtained. Exempt holders of Old Notes (including, among others, all corporations and certain foreign individuals) are not subject to those backup withholding and reporting requirements. See the enclosed Guidelines of Certificate of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for additional instructions. To prevent backup withholding, each tendering holder of Old Notes must provide its correct TIN by completing the Substitute Form W-9 set forth below, certifying that the TIN provided is correct (or that such holder is awaiting a TIN) and that (i) the holder is exempt from backup withholding, or (ii) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. If the tendering holder of Old Notes is a nonresident alien or foreign entity not subject to backup withholding, such holder must give the Company a completed Form W-8, Certificate of Foreign Status. These forms may be obtained from the Exchange Agent. If the Old Notes are in more than one name or are not in the name of the actual owner, such holder should consult the W-9 Guidelines for information on which TIN to report. If such holder does not have a TIN, such holder should consult the W-9 Guidelines on applying for a TIN, check the box in Part 2 of the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note: Checking this box and writing "applied for" on the form means that such holder has already applied for a TIN or that such holder intends to apply for one in the near future. If such holder does not provide its TIN to the Company within 60 days, backup withholding will begin and continue until such holder furnishes its TIN to the Company. 6. Transfer Taxes. The Company will pay all transfer taxes, if any, applicable to the transfer of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New Notes and/or substitute Old Notes not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of any person other than the person signing this Letter, or if a transfer tax is imposed for any reason other than the transfer of Old Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Old Notes specified in this Letter. 7. Waiver of Conditions. The Company reserves the absolute right to waive satisfaction of any or all conditions enumerated in the Prospectus. 8. No Conditional Tenders. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Old Notes, by execution of this Letter, shall waive any right to receive notice of the acceptance of their Old Notes for exchange. Neither the Company, the Exchange Agent nor any person is obligated to give notice of any defect or irregularity with respect to any tender of Old Notes nor shall any of them incur any liability for failure to give any such notice. 9. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 10. Requests for Assistance or Additional Copies. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter, may be directed to the Exchange Agent, at the address and telephone number indicated above. TO BE COMPLETED BY ALL TENDERING HOLDERS (See Instruction 5) PAYOR'S NAME: AMERICAN SKIING COMPANY
SUBSTITUTE Part 1 - PLEASE TIN:___________ Form W-9 PROVIDE YOUR TIN __________ IN THE BOX AT Social Security RIGHT AND CERTIFY Number or BY SIGNING AND Employer DATING BELOW. Identification Number Department of the Treasury Internal Part 2 - TIN Applied for __ Revenue Service Payer's Request for Taxpayer Identification Number ("TIN") and Certification CERTIFICATION - UNDER PENALTIES OF PERJURY, I CERTIFY THAT: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me.) (2) I am not subject to backup withholding either because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and (3) any other information provided on this form is true and correct. SIGNATURE. ___________ DATE ______________ You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to backup withholding because of underreporting of interest or dividends or your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of the exchange, 31 percent of all reportable payments made to me thereafter will be withheld until I provide a number. ________________________________________ _______ Signature Date AMERICAN SKIING COMPANY Offer for all Outstanding 13-3/4% Series A Subordinated Discount Notes Due 2007 in Exchange for 13-3/4% Series B Subordinated Discount Notes Due 2007 which Have Been Registered Under the Securities Act of 1933, As Amended To: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: American Skiing Company (the "Company") is offering, upon and subject to the terms and conditions set forth in the Prospectus, dated November 12, 1996 (the "Prospectus"), and the enclosed Letter of Transmittal (the "Letter of Transmittal"), to exchange (the "Exchange Offer") its 13-3/4% Series B Subordinated Discount Notes Due 2007, which have been registered under the Securities Act of 1933, as amended, for its outstanding 13-3/4% Series A Subordinated Discount Notes Due 2007 (the "Old Notes"). The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated June 28, 1996, by and among the Company, the Guarantors named therein and Bear, Stearns & Co., Inc., as initial purchaser. We are requesting that you contact your clients for whom you hold Old Notes regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Old Notes registered in your name or in the name of your nominee, or who hold Old Notes registered in their own names, we are enclosing the following documents: 1. Prospectus dated November 12, 1996; 2. The Letter of Transmittal for your use and for the information of your clients; 3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer if certificates for Old Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date (as defined below) or if the procedure for book- entry transfer cannot be completed on a timely basis; 4. A form of letter which may be sent to your clients for whose account you hold Old Notes registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 6. Return envelopes addressed to U.S. Trust Company of New York, the Exchange Agent for the Old Notes. Your prompt action is requested. The Exchange Offer will expire at 5:00 p.m., New York City time, on January 15, 1997, unless extended by the Company (the "Expiration Date"). Old Notes not tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date. To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other required documents, should be sent to the Exchange Agent and certificates representing the Old Notes should be delivered to the Exchange Agent, all in accordance with the instructions set forth in the Letter of Transmittal and the Prospectus. If holders of Old Notes wish to tender, but it is impracticable for them to forward their certificates for Old Notes prior to the expiration of the Exchange Offer or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under "The Exchange Offers -- Guaranteed Delivery." The Company will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding the Prospectus and the related documents to the beneficial owners of Old Notes held by them as nominee or in a fiduciary capacity. The Company will pay or cause to be paid all stock transfer taxes applicable to the exchange of Old Notes pursuant to the Exchange Offer, except as set forth in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Exchange Offer, or requests for additional copies of the enclosed materials, should be directed to United States Trust Company of New York, the Exchange Agent for the Old Notes, at its address and telephone number set forth on the front of the Letter of Transmittal. Very truly yours, American Skiing Company NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL. Enclosures AMERICAN SKIING COMPANY Offer for all Outstanding 13-3/4% Series A Subordinated Discount Notes Due 2007 in Exchange for 13-3/4% Series B Subordinated Discount Notes Due 2007 which Have Been Registered Under the Securities Act of 1933, As Amended To Our Clients: Enclosed for your consideration is a Prospectus, dated November 12, 1996 (the "Prospectus"), and the related Letter of Transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") of American Skiing Company (the "Company") to exchange its 13-3/4% Series B Subordinated Discount Notes Due 2007, which have been registered under the Securities Act of 1933, as amended (the "New Notes"), for its outstanding 13- 3/4% Series A Subordinated Discount Notes Due 2007 (the "Old Notes"), upon the terms and subject to the conditions described in the Prospectus and the Letter of Transmittal. The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated June 28, 1996, by and among the Company, the Guarantors named therein and Bear, Stearns & Co., Inc., as initial purchaser. This material is being forwarded to you as the beneficial owner of the Old Notes carried by us in your account but not registered in your name. A tender of such Old Notes may only be made by us as the holder of record and pursuant to your instructions. Accordingly, we request instructions as to whether you wish us to tender on your behalf the Old Notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal. Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the Old Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City time, on January 15, 1997, unless extended by the Company. Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for any and all Old Notes. 2. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned "The Exchange Offers -- Certain Conditions to the Exchange Offers." 3. Any transfer taxes incident to the transfer of Old Notes from the holder to the Company will be paid by the Company, except as otherwise provided in the Instructions in the Letter of Transmittal. 4. The Exchange Offer expires at 5:00 p.m., New York City time, on January 15, 1997, unless extended by the Company. If you wish to have us tender your Old Notes, please so instruct us by completing, executing and returning to us the instruction form on the back of this letter. The Letter of Transmittal is furnished to you for information only and may not be used directly by you to tender Old Notes. INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer made by American Skiing Company with respect to its Old Notes. This will instruct you to tender the Old Notes held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and the related Letter of Transmittal. Please tender the Old Notes held by you for my account as indicated below. Aggregate Principal Amount of Old Notes 13-3/4% Series A Subordinated Discount Notes Due 2007 __ Please do not tender any Old Notes held by you for my account. Dated:_______________________________, 1996 ________________________________________ _______ Signature(s) ________________________________________ _______ Please print name(s) here ________________________________________ _______ Address(es) ________________________________________ _______ Area Code and Telephone Number ________________________________________ _______ Tax Identification or Social Security No(s). None of the Old Notes held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all the Old Notes held by us for your account. NOTICE OF GUARANTEED DELIVERY FOR AMERICAN SKIING COMPANY 12% SENIOR SUBORDINATED NOTES DUE 2006 This form or one substantially equivalent hereto must be used to accept the Exchange Offer of American Skiing Company (the "Company") made pursuant to the Prospectus, dated November 12, 1996 (the "Prospectus"), if certificates for the outstanding 12% Series A Senior Subordinated Notes Due 2006 of the Company (the "Old Notes") are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Company prior to 5:00 p.m., New York City time, on the Expiration Date of the Exchange Offer. Such form may be delivered or transmitted by telegram, telex, facsimile transmission, mail or hand delivery to United States Trust Company of New York (the "Exchange Agent") as set forth below. In addition, in order to utilize the guaranteed delivery procedure to tender Old Notes pursuant to the Exchange Offer, a completed, signed and dated Letter of Transmittal (or facsimile thereof) must also be received by the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. Capitalized terms not defined herein are defined in the Prospectus. Delivery To: United States Trust Company of New York, Exchange Agent By Mail: United States Trust Company of New York P.O. Box 844 Peter Cooper Station New York, New York 10276 By Hand: United States Trust Company of New York 111 Broadway Lower Level Corporate Trust Window New York, New York 10005 By Overnight Courier: United States Trust Company of New York 770 Broadway, 13th Floor New York, New York 10003 Attn: Corporate Trust Services Window By Facsimile: (212) 420-6152 Confirm by Telephone: (800) 548-6565 Delivery of this instrument to an address other than as set forth above, or transmission of instructions via facsimile other than as set forth above, will not constitute a valid delivery. Ladies and Gentlemen: Upon the terms and conditions set forth in the Prospectus and the accompanying Letter of Transmittal, the undersigned hereby tenders to the Company the principal amount of Old Notes set forth below, pursuant to the guaranteed delivery procedure described in "The Exchange Offers -- Guaranteed Delivery" section of the Prospectus. Principal Amount of Old Notes Tendered:* $_______________________________________ _ Certificate Nos. (if available): If Old Notes will be delivered by book-entry transfer to The Depository Trust Company, provide account number. ________________________________________ _ Total Principal Amount Represented by Old Notes Certificate(s): $_______________________________________ _ Account Number _______________________________________ * Must be in denominations of principal amount of $1,000 and any integral multiple thereof. ________________________________________ ______________ All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. ________________________________________ ______________ PLEASE SIGN HERE X_______________________________________ ________ X_______________________________________ ________ Signature(s) of Owner(s) as Authorized Signatory _______________________________ Date Area Code and Telephone Number:____________________ Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on certificates for Old Notes or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below. Please print name(s) and address(es) Name(s): ________________________________________ Capacity: _______________________________________ Address(es): ______________________________________ GUARANTEE The undersigned, a member of a registered national securities exchange, or a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States, hereby guarantees that the certificates representing the principal amount of Old Notes tendered hereby in proper form for transfer, or timely confirmation of the book-entry transfer of such Old Notes into the Exchange Agent's account at The Depository Trust Company pursuant to the procedures set forth in "The Exchange Offers -- Guaranteed Delivery" section of the Prospectus, together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantee and any other documents required by the Letter of Transmittal, will be received by the Exchange Agent at the address set forth above, no later than five New York Stock Exchange trading days after the date of execution hereof. ________________________________ Name of Firm ________________________________ Authorized Signature ________________________________________ ____ Address Title ____________________________ Zip Code Name:___________________________________ _______ (Please Type or Print) Area Code and Tel. No._________________________ Dated:__________________________________ ________ NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL. NOTICE OF GUARANTEED DELIVERY FOR AMERICAN SKIING COMPANY 13-3/4% SUBORDINATED DISCOUNT NOTES DUE 2007 This form or one substantially equivalent hereto must be used to accept the Exchange Offer of American Skiing Company (the "Company") made pursuant to the Prospectus, dated November 12, 1996 (the "Prospectus"), if certificates for the outstanding 13-3/4% Series A Subordinated Discount Notes Due 2007 of the Company (the "Old Notes") are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Company prior to 5:00 p.m., New York City time, on the Expiration Date of the Exchange Offer. Such form may be delivered or transmitted by telegram, telex, facsimile transmission, mail or hand delivery to United States Trust Company of New York (the "Exchange Agent") as set forth below. In addition, in order to utilize the guaranteed delivery procedure to tender Old Notes pursuant to the Exchange Offer, a completed, signed and dated Letter of Transmittal (or facsimile thereof) must also be received by the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. Capitalized terms not defined herein are defined in the Prospectus. Delivery To: United States Trust Company of New York, Exchange Agent By Mail: United States Trust Company of New York P.O. Box 844 Peter Cooper Station New York, New York 10276 By Hand: United States Trust Company of New York 111 Broadway Lower Level Corporate Trust Window New York, New York 10005 By Overnight Courier: United States Trust Company of New York 770 Broadway, 13th Floor New York, New York 10003 Attn: Corporate Trust Services Window By Facsimile: (212) 420-6152 Confirm by Telephone: (800) 548-6565 Delivery of this instrument to an address other than as set forth above, or transmission of instructions via facsimile other than as set forth above, will not constitute a valid delivery. Ladies and Gentlemen: Upon the terms and conditions set forth in the Prospectus and the accompanying Letter of Transmittal, the undersigned hereby tenders to the Company the principal amount of Old Notes set forth below, pursuant to the guaranteed delivery procedure described in "The Exchange Offers -- Guaranteed Delivery" section of the Prospectus. Principal Amount of Old Notes Tendered:* $_______________________________________ _ Certificate Nos. (if available): If Old Notes will be delivered by book-entry transfer to The Depository Trust Company, provide account number. ________________________________________ _ Total Principal Amount Represented by Old Notes Certificate(s): $__________________________________ Account Number _______________________________________ * Must be in denominations of principal amount of $1,000 and any integral multiple thereof. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. PLEASE SIGN HERE X____________________________ X_______________________________________ ________ Signature(s) of Owner(s) as Authorized Signatory ________________________________________ _______ Date Area Code and Telephone Number:____________________ Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on certificates for Old Notes or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below. Please print name(s) and address(es) Name(s): ____________________ Capacity: ____________________ Address(es): ____________________ GUARANTEE The undersigned, a member of a registered national securities exchange, or a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States, hereby guarantees that the certificates representing the principal amount of Old Notes tendered hereby in proper form for transfer, or timely confirmation of the book-entry transfer of such Old Notes into the Exchange Agent's account at The Depository Trust Company pursuant to the procedures set forth in "The Exchange Offers -- Guaranteed Delivery" section of the Prospectus, together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantee and any other documents required by the Letter of Transmittal, will be received by the Exchange Agent at the address set forth above, no later than five New York Stock Exchange trading days after the date of execution hereof. ________________________________________ ____ Name of Firm ________________________________________ ____ Authorized Signature ________________________________________ ____ Address Title ________________________________________ ____ Zip Code Name:___________________________________ _______ (Please Type or Print) Area Code and Tel. No._________________________ Dated:__________________________________ ________ NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL. -----END PRIVACY-ENHANCED MESSAGE-----