-----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, Pbq5JUd4SrnzQ7/ErAXJ4uZBkRG0QSkZ8LfGsHWxG0uU67/QBEaRaaKEynoubobi eDAZDVk1l85ozrJm3+5vOA== 0000912057-97-032413.txt : 19971003 0000912057-97-032413.hdr.sgml : 19971003 ACCESSION NUMBER: 0000912057-97-032413 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 52 FILED AS OF DATE: 19971001 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASC HOLDINGS INC CENTRAL INDEX KEY: 0001043432 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 043373730 STATE OF INCORPORATION: ME FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-33483 FILM NUMBER: 97689584 BUSINESS ADDRESS: STREET 1: P O BOX 450 CITY: BETHEL STATE: ME ZIP: 04217 BUSINESS PHONE: 2078245196 MAIL ADDRESS: STREET 1: P O BOX 450 CITY: BETHEL STATE: ME ZIP: 04217 S-1/A 1 FORM S-1/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 1, 1997 REGISTRATION NO. 333-33483 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- AMENDMENT NO. 1 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------------- AMERICAN SKIING COMPANY (FORMERLY ASC HOLDINGS, INC.) (Exact name of registrant as specified in its charter) MAINE 7990 04-3373730 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
-------------------------- SUNDAY RIVER ACCESS ROAD BETHEL, MAINE 04217 (207) 824-8100 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ------------------------------ CHRISTOPHER E. HOWARD, ESQ. SENIOR VICE PRESIDENT AND CHIEF ADMINISTRATIVE OFFICER AMERICAN SKIING COMPANY SUNDAY RIVER ACCESS ROAD BETHEL, MAINE 04217 (207) 824-8100 (207) 824-5158 (FACSIMILE) (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------------ Copies to: THOMAS L. FAIRFIELD, ESQ. IAN B. BLUMENSTEIN, ESQ. LeBoeuf, Lamb, Greene & MacRae, L.L.P. Latham & Watkins Goodwin Square, 225 Asylum Street 885 Third Avenue Hartford, Connecticut 06103 New York, New York 10022 (860) 293-3500 (212) 906-1200 (860) 293-3555 (facsimile) (212) 751-4864 (facsimile)
-------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / -------------------------- CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT OF TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE Common Stock, $.01 par value per share $339,250,000 $102,803.00(2)
(1) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933. (2) The Company previously paid $75,758.00 in connection with its initial filing and has paid an additional $27,045.00 in connection with the increase in the proposed maximum aggregate offering price reflected in this filing. -------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED OCTOBER 1, 1997 PROSPECTUS , 1997 14,750,000 SHARES LOGO COMMON STOCK All of the 14,750,000 shares of common stock, $.01 par value per share (the "Common Stock"), offered hereby are being sold by American Skiing Company (the "Company"). A portion of the proceeds of the Offering (as defined), together with borrowings under the New Credit Facility (as defined), will be used to fund the acquisition by the Company of the Steamboat and Heavenly ski resorts (the "Acquisition") for a purchase price of approximately $290 million. See "Risk Factors--Substantial Leverage and Financial Risks." Following the Offering, the outstanding common stock of the Company will consist of 15,365,022 shares of Common Stock and 14,760,530 shares of Class A Common Stock, $.01 par value per share (the "Class A Common Stock"). The rights and preferences of holders of the Common Stock and Class A Common Stock will be identical, except that (i) holders of Class A Common Stock will elect a class of directors that constitutes two-thirds of the Board of Directors and holders of Common Stock will elect a class of directors that constitutes one-third of the Board of Directors and (ii) each share of Class A Common Stock will be convertible into one share of Common Stock under certain circumstances. See "Description of Capital Stock." All of the Class A Common Stock, representing approximately 42.4% of the combined voting power of all outstanding shares of Common Stock and Class A Common Stock, will be held by Leslie B. Otten, the principal shareholder of the Company (the "Principal Shareholder"). A portion of the 14,750,000 shares of Common Stock offered hereby are being offered by the Company at the price to the public set forth below (less underwriting discounts and commissions) directly to the Principal Shareholder (the "Concurrent Offering"). The Principal Shareholder intends to purchase a number of shares of Common Stock in the Concurrent Offering having an aggregate purchase price of between $15 million and $40 million. Assuming a price to the public equal to the midpoint of the range shown below ($18.50 per share), between 810,811 shares and 2,162,162 shares of Common Stock will be sold to the Principal Shareholder in the Concurrent Offering. Accordingly, upon consummation of the Concurrent Offering, the Principal Shareholder will own shares of Common Stock (including shares of Common Stock which the Principal Shareholder has the right to purchase pursuant to fully vested stock options, exercisable at the price to the public set forth below, granted under the Company's Stock Option Plan (as defined)) representing between 13.8% and 20.8% of the voting power of all outstanding shares of Common Stock and, when such shares of Common Stock are aggregated with the Principal Shareholder's shares of Class A Common Stock, representing between 51.1% and 55.1% of the combined voting power of all outstanding shares of Common Stock and Class A Common Stock. In addition, so long as the Principal Shareholder owns shares of Common Stock and Class A Common Stock representing a majority of the combined voting power of all outstanding shares of Common Stock and Class A Common Stock, he will be able to determine the outcome of all matters submitted to a vote of the shareholders of the Company, except for matters requiring (i) the vote of a higher percentage of voting power than the percentage held by the Principal Shareholder or (ii) the vote of the shareholders voting as a separate class under state law or the Company's Articles of Incorporation and Bylaws. See "Capitalization," "Management--Stock Option Plan," "Principal Shareholders" and "Description of Capital Stock." All of the 14,750,000 shares of Common Stock that are not sold to the Principal Shareholder in the Concurrent Offering will be offered by the Company to the public (the "Public Offering" and, together with the Concurrent Offering, the "Offering"). Consummation of the Public Offering is conditioned upon the concurrent consummation of the New Credit Facility, the Acquisition and the Concurrent Offering. Prior to the Offering, there has been no public market for the Common Stock. It is currently estimated that the initial public offering price will be between $17.00 and $20.00 per share. See "Underwriting" for a discussion of the factors to be considered in determining the initial public offering price. The Company intends to apply for listing of the Common Stock on the New York Stock Exchange under the symbol "SKI." SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. 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.
- --------------------------------------------------------------------------------------------------------------------- PRICE UNDERWRITING PROCEEDS TO THE DISCOUNTS AND TO THE PUBLIC COMMISSIONS(1) COMPANY(2) - --------------------------------------------------------------------------------------------------------------------- Per Share Public Offering........................................ $ $ $ Concurrent Offering.................................... $ -- $ Total (3)................................................ $ $ $ - ---------------------------------------------------------------------------------------------------------------------
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE SEVERAL UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). SEE "UNDERWRITING." (2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $ . (3) THE COMPANY HAS GRANTED TO THE UNDERWRITERS A 30-DAY OPTION TO PURCHASE UP TO 2,090,878 ADDITIONAL SHARES OF COMMON STOCK, SOLELY TO COVER OVER- ALLOTMENTS, IF ANY. IF SUCH OPTION IS EXERCISED IN FULL, THE TOTAL PRICE TO THE PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS TO THE COMPANY WILL BE $ , $ AND $ , RESPECTIVELY. SEE "UNDERWRITING." The shares of Common Stock are being offered by the several Underwriters, subject to prior sale, when, as and if delivered to and accepted by them against payment therefor, subject to various prior conditions, including their right to reject any order in whole or in part. It is expected that delivery of share certificates will be made in New York, New York, on or about , 1997. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION FURMAN SELZ MORGAN STANLEY DEAN WITTER SCHRODER & CO. INC. [Pictures of Ski Areas, Facilities and National Map of Resort Locations] CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." The Company intends to furnish its shareholders with annual reports containing audited consolidated financial statements and an opinion thereon expressed by its independent accountants, and with quarterly reports for the first three quarters of each fiscal year containing unaudited summary financial information. 2 PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION, CONSOLIDATED FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) AND PRO FORMA COMBINED FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES HEREIN TO THE "COMPANY" SHALL MEAN (A) AMERICAN SKIING COMPANY AND ITS SUBSIDIARIES, EXCLUDING THE ACQUIRED RESORTS (AS DEFINED), WHEN USED WITH RESPECT TO HISTORICAL INFORMATION CONTAINED HEREIN OR (B) AMERICAN SKIING COMPANY AND ITS SUBSIDIARIES, INCLUDING THE ACQUIRED RESORTS, WHEN USED WITH RESPECT TO INFORMATION ABOUT EVENTS THAT WILL OCCUR AFTER THE ACQUISITION OR WHEN GIVING PRO FORMA EFFECT THERETO. SEE "THE TRANSACTIONS." ALL REFERENCES HEREIN TO (A) THE COMPANY'S "FISCAL" YEAR SHALL MEAN THE 52- OR 53-WEEK PERIOD ENDED OR ENDING ON THE LAST SUNDAY IN JULY, (B) THE ACQUIRED RESORTS' FISCAL YEAR SHALL MEAN THE ACQUIRED RESORTS' FISCAL YEAR ENDED ON MAY 31, (C) "SKI SEASON" SHALL MEAN THE PERIOD FROM THE OPENING OF THE FIRST OF THE COMPANY'S MOUNTAINS FOR SKIING THROUGH THE CLOSING OF THE COMPANY'S LAST MOUNTAIN FOR SKIING, TYPICALLY MID-NOVEMBER TO LATE MAY, (D) "SKIER VISITS" SHALL MEAN ONE GUEST ACCESSING A SKI MOUNTAIN ON ANY ONE DAY AND (E) REAL ESTATE "RESIDENTIAL UNITS" SHALL MEAN RESIDENTIAL REAL ESTATE OWNERSHIP INTERESTS, INCLUDING INDIVIDUAL INTERVAL INTERESTS. ALL DISCUSSION HEREIN WITH RESPECT TO THE SIZE OF A RESORT SHALL BE IN TERMS OF THE RELATIVE NUMBER OF SKIER VISITS AT SUCH RESORT. EXCEPT AS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS WITH RESPECT TO THE RELATIVE VOTING POWER OF SHARES OF COMMON STOCK AND CLASS A COMMON, (A) ASSUMES THAT ALL STOCK OPTIONS TO PURCHASE SHARES OF COMMON STOCK THAT ARE EXERCISABLE AT OR BELOW THE INITIAL PUBLIC OFFERING PRICE ARE EXERCISED FOR SHARES OF COMMON STOCK, (B) GIVES EFFECT TO THE VOTING RIGHTS OF HOLDERS OF THE COMPANY'S 6% CONVERTIBLE PREFERRED STOCK (AS DEFINED), (C) ASSUMES THAT THE HOLDERS OF COMMON STOCK IN ASC EAST (AS DEFINED) EXCHANGE SUCH STOCK FOR AN AGGREGATE OF 615,022 SHARES OF COMMON STOCK, (D) ASSUMES THAT THE PRINCIPAL SHAREHOLDER PURCHASES A NUMBER OF SHARES OF COMMON STOCK IN THE CONCURRENT OFFERING, AT A PRICE TO THE PUBLIC EQUAL TO THE MIDPOINT OF THE RANGE SHOWN ON THE COVER PAGE OF THIS PROSPECTUS, HAVING AN AGGREGATE PURCHASE PRICE OF $15 MILLION, (E) ASSUMES THAT THE OVER-ALLOTMENT OPTION GRANTED TO THE UNDERWRITERS IS NOT EXERCISED, (F) ASSUMES THAT NO SHARES OF CLASS A COMMON STOCK ARE CONVERTED INTO SHARES OF COMMON STOCK AND (G) GIVES EFFECT TO A 14.76- FOR- 1 STOCK SPLIT (THE "STOCK SPLIT") WITH RESPECT TO CLASS A COMMON STOCK THAT WILL BE EFFECTED PRIOR TO THE CONSUMMATION OF THE OFFERING. PRIOR TO MAKING AN INVESTMENT IN THE COMMON STOCK, PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE INFORMATION DISCUSSED UNDER "RISK FACTORS." THE COMPANY Following the Acquisition, the Company will be the largest operator of alpine resorts in the United States. The Company will own and operate nine ski resorts, including two of the five largest resorts in the United States based on 1996-97 skier visits, with at least one resort in each major skiing market. These nine resorts generated approximately 4.9 million skier visits, representing approximately 9.4% of total skier visits in the United States during the 1996-97 ski season. The Company's existing resorts include Sunday River and Sugarloaf in Maine; Attitash/Bear Peak in New Hampshire; Killington, Mount Snow/Haystack and Sugarbush in Vermont; and The Canyons, adjacent to Park City, Utah (collectively, the "Existing Resorts"). On July 31, 1997, the Company entered into a definitive agreement (the "Acquisition Agreement") to acquire (i) the Steamboat ski resort and 168 acres of land held for development in Steamboat Springs, Colorado ("Steamboat") and (ii) the Heavenly ski resort near Lake Tahoe, California ("Heavenly" and, together with Steamboat, the "Acquired Resorts"). After giving pro forma effect to the Transactions (as defined) as if the Transactions occurred on July 28, 1996, the Company's resort revenues, Resort EBITDA (as defined) and net loss for fiscal 1997 would have been approximately $253.4 million, $56.2 and $3.6 million, respectively. The Existing and Acquired Resorts include several of the top resorts in the United States, including: (i) Steamboat, the number two overall ski resort in the United States (number three in North America) according to a September 1997 SNOW COUNTRY magazine survey and the fourth largest ski resort in the United States with over 1.1 million skier visits in the 1996-97 ski season; (ii) Killington, the fifth largest resort in the United States with over 1.0 million skier visits in the 1996-97 ski season; (iii) the three largest resorts in the Northeast (Killington, Sunday River and Mount Snow/Haystack) in the 1996-97 ski season; 3 (iv) Heavenly, the second largest resort in the Pacific West Region and the 11th largest resort in the United States with approximately 700,000 skier visits in the 1996-97 ski season; and (v) Sugarloaf, the number one resort in the Northeast according to the September 1997 SNOW COUNTRY magazine survey. In addition to operating alpine resorts, the Company develops mountainside real estate which complements the expansion of its on-mountain operations. The Company has created a unique interval ownership product, the Grand Summit Hotel, in which individuals purchase quartershare interval interests while the Company retains ownership of core hotel and commercial properties. The initial sale of quartershare units typically generates a high profit margin, and the Company derives a continuing revenue stream from operating the hotel retail, restaurant and conference facilities and renting quartershare interval interests when not in use by their owners. The Company also develops alpine villages at prime locations within certain of its resorts designed to fit that resort's individual characteristics. The Company's real estate development strategy was developed and implemented at the Sunday River resort, where over 1,350 units of residential real estate (including condominiums, townhouses and quartershares) have been developed and sold since 1983. A new Grand Summit Hotel was recently completed at Attitash/Bear Peak, one Grand Summit Hotel is currently under construction at each of Killington, Sunday River and Mount Snow/Haystack, and a hotel at Sugarbush is near completion of the permitting process. These hotels will have an aggregate of approximately 2,500 units, with preconstruction sales contracts currently totaling over $45 million (representing 845 units). In addition, the Company has over 7,000 acres of real estate available for future development at its resorts, providing the capacity to support over 30,000 residential units over the next 15 to 20 years. In addition, the Company operates golf courses at its resorts and conducts other off-season activities. Such off-season activities accounted for approximately 11% of the Company's resort revenues for fiscal 1997. See "Business--Operating Strategy--Expand Golf and Convention Business." The Company's primary strength is its ability to improve resort operations by integrating investments in on-mountain capital improvements with the development of mountainside real estate. Since 1994, the Company has increased skier visits by 10.0% in the aggregate for the three resorts that it has owned for multiple seasons. In addition, the Company has increased its market share of skier visits in the northeastern United States from approximately 21.8% in the 1995-96 ski season to approximately 24.4% in the 1996-97 ski season (after giving pro forma effect to the acquisition of the Killington, Mount Snow/ Haystack and Sugarloaf ski resorts as if such acquisitions had occurred on July 30, 1995). Management believes that the Acquired Resorts will provide the Company with several significant operating benefits, including: (i) enhanced cross-marketing of its resorts on a national basis; (ii) purchasing and other economies of scale; and (iii) implementation of the Company's operating strategy at a more diversified resort base. For an organizational chart of the Company and its material operating subsidiaries, see "Business-- The Company." OPERATING STRATEGY The Company believes that the following key operating strategies will allow it to increase revenues and profitability by capitalizing on its position as a leading mountain resort operator and real estate developer. High Impact Capital Improvements The Company attracts skiers to its resorts by creating a superior skiing experience through high impact capital investments in on-mountain facilities. The Company focuses its investments on increasing lift capacity, expanding skiable terrain and snowmaking coverage, and developing other exciting alpine attractions. For example, during the last two years the Company has (i) created diverse skiing experiences such as the Oz bowl and the Jordan Bowl at Sunday River, (ii) developed above tree-line snowfields at Sugarloaf, (iii) installed heated eight-passenger high speed gondolas at Killington and The Canyons and (iv) built one of the longest and fastest chairlifts in the world to interconnect Sugarbush's North and South mountains. Since 1994, when the Company began implementing its acquisition strategy, the Company has 4 increased lift capacity, skiable terrain and snowmaking coverage at its resorts. The 1997 summer capital improvement budget for on-mountain improvements totals over $57.7 million, approximately $18.2 million of which will be invested at The Canyons and approximately $7.0 million of which will be invested at the Acquired Resorts. Integration of Investments in Resort Infrastructure and Real Estate The Company develops mountainside real estate that complements its investments in ski operations to enhance the overall attractiveness of its resorts as vacation destinations. Management believes that this integrated approach results in growth in overall skier visits, including multi-day visits, while generating significant revenues from real estate sales and lodging. Investment typically begins with on-mountain capital improvements such as the creation of new lifts, trails, expanded snowmaking capability, additional restaurants and improved ski schools. As resort attendance increases, the Company develops mountainside real estate to provide accommodations for the increased number of resort guests. The Company carefully manages the type and timing of real estate development to achieve capital appreciation and high occupancy of accommodations. The Company's integrated investment strategy was developed and refined at its Sunday River resort, where it has sold over 1,350 units of residential real estate since 1983. During that same period, annual skier visits at Sunday River increased from approximately 50,000 to over 550,000, representing an approximate 18% compound annual growth rate. Mountainside Real Estate Development The Company's real estate development strategy is designed to capitalize on the 7,000 acres of developable land it will control at or near its resorts and its 15 years of experience in real estate development. Including the Acquired Resorts, the Company owns or has rights to land providing the capacity to develop over 30,000 residential units. The Company's resort real estate development strategy is comprised of three distinct components: (i) Grand Summit quartershare hotels, (ii) alpine village development and (iii) discrete resort-specific projects. Residential units in Grand Summit Hotels are sold in quartershare interval interests that allow each of four quartershare unit owners to use the unit for 13 weeks divided evenly over the year. The core commercial areas in the hotels are retained and operated by the Company and include a lobby area, a sports club, retail shops, restaurants and banquet and conference facilities. Unit owners may use the unit during their allotted weeks or make the unit available for rental by the Company under a management agreement that allows the Company to retain up to 45% of rental revenues. In addition to its Grand Summit Hotels, the Company has identified several areas for development of alpine villages unique to their resort locations that consist of carefully planned communities integrated with condominiums, luxury townhouses, single family luxury dwellings or lots and commercial properties. Each of the Company's resorts also has the potential for additional real estate development involving discrete projects tailored to the characteristics of the particular resort. Increase Revenues Per Skier The Company seeks to increase revenues per skier by managing ticket yields and expanding revenue sources at each resort. Management seeks to increase non-lift ticket revenue sources by increasing point-of-sale locations and sales volume through retail stores, food and beverage services, equipment rentals, skier development, lodging and property management. In addition, management believes that aggressive cross-selling of products and programs (such as the Company's frequent skier and multi-resort programs) to resort guests increases resort revenues and profitability. The Company believes it can increase ticket yields by managing ticket discounts, closely aligning ticket programs to specific customer market segments, offering multi-resort ticket products and introducing a variety of programs that offer packages which include tickets with lodging and other services available at its resorts. During the 1996-97 ski season, the Company increased its average yield per skier visit by approximately 2.9% as compared to the 1995-96 ski season. The Company intends to further increase revenues by implementing a property management 5 program at the Acquired Resorts. In addition to its on-mountain activities, the Company is expanding its retail operations by establishing retail stores in strategic high traffic and recognized retail districts such as Freeport, Maine; North Conway, New Hampshire; and South Lake Tahoe, Nevada, thereby strengthening the name and image of the Company and its resorts. Innovative Marketing Programs The Company's marketing program is designed to (i) establish a nationally recognized high quality name and image, while promoting the unique characteristics of its individual resorts, (ii) capitalize on cross-selling opportunities and (iii) enhance customer loyalty. The Company engages in joint marketing programs with nationally recognized commercial partners such as Mobil, Budweiser, Pepsi/Mountain Dew, Visa, FILA and Rossignol. Management believes these joint marketing programs create a high quality image and a strong market presence on a regional and national basis. In addition, the Company utilizes loyalty based incentive programs such as the Edge Card, a private label frequent skier program in which participants receive credits towards lift tickets and other products. The Company utilizes a variety of marketing media including direct mail, television and the Internet. Direct mail marketing efforts include the Company's "SNO" magazine, which targets the 18 to 30 year age group and currently has a circulation of over 300,000 copies per issue. Television marketing efforts include targeted commercials and programming such as the MTV Winter Lodge, which is hosted by MTV and targets teens and young adults. Internet marketing efforts include a Company sponsored website at www.peaks.com featuring photographs and detailed information about the Company's resorts and current skiing conditions. The Company's aggregate marketing budget for fiscal 1998 is approximately $28 million, including the value of contributions from strategic commercial marketing partners. Capitalize on a Multi-Resort Network The Company's network of resorts provides both geographic diversity and significant operating benefits. The Company believes its geographic diversity (i) reduces the risks associated with unfavorable weather conditions, (ii) insulates the Company from economic slowdowns in any particular region, (iii) increases the accessibility and visibility of the Company's network of resorts to the overall North American skier population and (iv) enables the Company to offer a wide range of mountain vacation alternatives. The Company believes that its ownership of multiple resorts also provides the opportunity to (i) create the industry's largest cross-marketing program, (ii) achieve efficiencies and economies of scale in purchasing goods and services, (iii) strengthen the distribution network of travel agents and tour operators by offering a range of mountain resort alternatives, consistent service quality, convenient travel booking and incentive packages, (iv) establish performance benchmarks for operations across all of the Company's resorts, (v) utilize specialized individuals and cross-resort teams at the corporate level as resources for the entire Company and (vi) develop and utilize information and technology systems for application across all of the Company's resorts. Growth through Acquisitions Since fiscal 1994, the Company has achieved substantial growth in its business through acquisitions. The Company intends to consider future acquisitions of large well-established destination resorts as well as smaller "feeder" resorts. The Company focuses on acquiring larger resorts where it believes it can improve profitability by implementing the Company's integrated real estate development and on-mountain capital improvement strategy. The Company also believes that by acquiring smaller regional resorts which have a strong local following it can capitalize on a broader customer base to cross-market its major destination resorts. The acquisition of less developed resorts may also offer opportunities for expansion. The Company, however, is effectively prohibited from acquiring additional resorts in New England as a result of antitrust concerns. Historically, the Company has financed resort acquisitions through private and public offerings of debt securities. The Company expects to finance future acquisitions through a combination of 6 internally generated funds, bank borrowings and public offerings or private placements of equity and/or debt securities. Following the Transactions, the Company will be highly leveraged. See "Risk Factors-- Substantial Leverage and Financial Risks," "--Growth Through Acquisitions; Integration of Acquired Resorts; Ability to Finance Acquisitions" and "Description of Indebtedness--The New Credit Facility." Expand Golf and Convention Business The Company is one of the largest owners and operators of resort golf courses in New England and seeks to capitalize on this status to increase off-season revenues. Sugarloaf, Killington, Mount Snow/ Haystack and Sugarbush all operate championship resort golf courses. The Sugarloaf course, designed by Robert Trent Jones Jr. is rated as one of the top 25 upscale courses in the country according to the May 1996 GOLF DIGEST magazine survey and one of the top 25 public courses in the country according to the May 1996 GOLF magazine survey. In addition, a championship course designed by Robert Trent Jones, Jr. is currently under construction at Sunday River. The Company also operates eight golf schools at locations along the east coast from Florida to Maine. The Company's golf program and other recreational activities draw off-season visitors to the Company's resorts and support the Company's growing off-season convention business, as well as its real estate development operations. 7 THE OFFERING Common Stock Offered: Public Offering(1)(2)......... 13,939,189 Concurrent Offering(2)........ 810,811 Total(1).................... 14,750,000 Common Stock and Class A Common Stock to be outstanding after the Offering: Common Stock(1)(3)(4)....... 15,365,022 shares Class A Common Stock(3)..... 14,760,530 shares Total(1)(4)............... 30,125,552 shares
- ------------------------ (1) Does not include up to 2,090,878 shares of Common Stock that may be sold by the Company to the Underwriters to cover over-allotments, if any. (2) Assuming that the Principal Shareholder purchases a number of shares of Common Stock in the Concurrent Offering, at a price to the public equal to the midpoint of the range shown on the cover page of this Prospectus ($18.50 per share), having an aggregate purchase price of $15 million. (3) Does not give effect to the conversion of any shares of Class A Common Stock into shares of Common Stock. Each share of Class A Common Stock is convertible at the option of the holder and upon the happening of certain events into one share of Common Stock. Assuming full conversion into Common Stock of all Class A Common Stock, after giving effect to the Offering, a total of 30,125,552 shares of Common Stock would be outstanding. (4) Does not include (i) 5,688,699 shares of Common Stock reserved for issuance pursuant to the Company's Stock Option Plan (the "Stock Option Plan"), 2,475,235 shares of which will be issuable pursuant to options which are exercisable immediately after the Offering, and (ii) 2,110,518 shares of Common Stock reserved for issuance upon conversion of the Company's 6% Convertible Preferred Stock (assuming a price to the public equal to the midpoint of the range shown on the cover page of this Prospectus ($18.50 per share)). All of the shares of Common Stock reserved for issuance under the Stock Option Plan are subject to lock-up restrictions for 180 days following the consummation of the Offering. See "The Transactions--Exchange Offers" and "Management--Stock Option Plan." 8 Voting Rights....................... The rights and preferences of holders of Common Stock and Class A Common Stock are identical, except that (i) holders of Class A Common Stock will elect a class of directors that constitutes two-thirds of the Board of Directors and holders of Common Stock will elect a class of directors that constitutes one-third of the Board of Directors and (ii) each share of Class A Common Stock will be convertible into one share of Common Stock (A) at the option of the holder at any time, (B) automatically upon transfer to any person that is not an affiliate of Leslie B. Otten and (C) automatically if, at any time, the number of shares of Class A Common Stock outstanding represent less than 20% of the combined voting power of all outstanding shares of Common Stock and Class A Common Stock. Upon completion of the Offering, the Principal Shareholder will hold 100% of the Class A Common Stock, representing approximately 42.4% of the combined voting power of all outstanding shares of Common Stock and Class A Common Stock. Accordingly, the Principal Shareholder initially will be able to elect six of the nine members of the Board of Directors of the Company. Mr. Otten also intends to purchase a number of shares of Common Stock in the Concurrent Offering having an aggregate purchase price of between $15 million and $40 million. Assuming a price to the public equal to the midpoint of the range set forth on the cover page of this Prospectus ($18.50 per share), between 810,811 shares and 2,162,162 shares of Common Stock will be sold to the Principal Shareholder in the Concurrent Offering. Accordingly, upon consummation of the Concurrent Offering, the Principal Shareholder will own shares of Common Stock (including shares of Common Stock which Mr. Otten has the right to purchase pursuant to fully vested stock options, exercisable at the price to the public set forth on the cover page of this Prospectus, granted under the Company's Stock Option Plan) representing between 13.8% and 20.8% of the voting power of all outstanding shares of Common Stock and, when such shares of Common Stock are aggregated with the Principal Shareholder's shares of Class A Common Stock, representing between 51.1% and 55.1% of the combined voting power of all outstanding shares of Common Stock and Class A Common Stock. In addition, so long as Mr. Otten owns shares of Common Stock and Class A Common Stock representing a majority of the combined voting power of all outstanding shares of Common Stock and Class A Common Stock, he will be able to determine the outcome of all matters submitted to a vote of the shareholders of the Company, except for matters requiring (i) the vote of a higher percentage of voting power than the percentage held by the Principal Shareholder or (ii) the vote of the shareholders voting as a separate class under state law or the Company's Articles of Incorporation and Bylaws. For a description of the matters which require a vote of the shareholders voting as a separate class, see "Description of Capital Stock--Common Stock." To the extent that all of the shares of Class A Common Stock are converted into Common Stock, the class vote for directors will be extinguished. See "Management," "Principal Shareholders" and "Description of Capital Stock." Use of Proceeds..................... The net proceeds from the Offering, together with borrowings of approximately $137 million under the New Credit Facility, will be used (i) to fund the Acquisition price of approximately $290 million, (ii) to repay all outstanding borrowings under the Existing Credit Facility (as defined) estimated to be approximately $60 million, (iii) to make an investment in ASC East of approximately $27.7 million to fund the redemption of all outstanding Discount Notes (as defined), (iv) to repay up to $12.0 million of indebtedness of the Company and its subsidiaries, (v) to pay certain fees and expenses relating to the Transactions and (vi) for general corporate purposes and capital expenditures. See "Use of Proceeds." Proposed New York Stock Exchange symbol............................ "SKI"
10 SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA THE COMPANY The summary historical financial data and the unaudited pro forma summary combined financial data (except Other Data set forth below) have been derived from the financial statements of the Company and the Acquired Resorts and should be read in conjunction with those statements and the notes thereto included elsewhere in this Prospectus. The unaudited pro forma summary combined financial data for the fiscal year ended July 27, 1997 give effect to the Transactions as if they had occurred on July 29, 1996 with respect to the Statement of Operations and Other Data, and on July 27, 1997 with respect to the Balance Sheet Data. See "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 the Transactions actually occurred on the dates specified.
PRO FORMA FISCAL YEAR ENDED(2) HISTORICAL FISCAL YEAR ENDED(1) ----------- ----------------------------------------------------------- JULY 27, JULY 25, JULY 31, JULY 30, JULY 28, JULY 27, 1997 1993 1994 1995 1996 1997 (UNAUDITED) ----------- ----------- ----------- --------- --------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER SKIER VISIT AMOUNTS) STATEMENT OF OPERATIONS DATA: Revenues: Resort............................................... $ 23,645 $ 26,544 $ 46,794 $ 63,489 $ 166,923 $ 253,397 Real estate.......................................... 6,103 6,682 7,953 9,933 8,468 8,468 ----------- ----------- ----------- --------- --------- ----------- Total net revenues................................. 29,748 33,226 54,747 73,422 175,391 261,865 Operating expenses: Resort............................................... 14,705 15,787 29,725 41,799 109,774 157,744 Real estate.......................................... 3,245 3,179 3,994 5,844 6,813 6,813 Marketing, general and administrative................ 4,718 5,940 9,394 11,289 26,126 39,464 Depreciation and amortization........................ 1,984 2,421 3,910 6,783 18,293 35,993 ----------- ----------- ----------- --------- --------- ----------- Total operating expense............................ 24,652 27,327 47,023 65,715 161,006 240,014 ----------- ----------- ----------- --------- --------- ----------- Income from operations................................. 5,096 5,899 7,724 7,707 14,385 21,851 Interest expense....................................... 849 1,026 2,205 4,699 23,730 27,327 Net income (loss) available to common shareholders..... $ 5,839 $ 4,873 $ 5,119 $ (2,237) $ (5,926) $ (3,620) ----------- ----------- ----------- --------- --------- ----------- ----------- ----------- ----------- --------- --------- ----------- Pro forma earnings per share........................... $ (.35) $ (.17) --------- ----------- --------- ----------- Pro forma weighted average number of shares outstanding.......................................... 16,871,048 30,132,568 --------- ----------- --------- ----------- OTHER DATA: Resort: Skier visits (000's)(3).............................. 525 528 1,060 1,290 3,025 4,821 Season pass holders (000's).......................... 3.2 3.7 11.2 13.2 30.9 38.3 Resort revenues per skier visit...................... $ 45.04 $ 50.27 $ 44.15 $ 49.22 $ 55.18 $ 52.56 Resort EBITDA(4)(5).................................. $ 4,222 $ 4,817 $ 7,675 $ 10,401 $ 31,023 $ 56,188 Real estate: Number of units sold................................. 173 155 163 177 123 123 Number of units pre-sold(6).......................... -- -- -- 109 605 605 Real estate EBIT(5)(7)............................... $ 2,858 $ 3,503 $ 3,959 $ 4,089 $ 1,655 $ 1,655 STATEMENT OF CASH FLOWS DATA: Cash flows from operations........................... $ 2,667 $ 5,483 $ 12,593 $ 7,465 $ 6,788 -- Cash flows from investing activities................. (4,432) (9,041) (13,843) (122,583) (14,070) -- Cash flows from financing activities................. 1,559 3,764 2,399 116,941 19,655 --
AT JULY 27, 1997 ---------------------- ACTUAL PRO FORMA --------- ----------- BALANCE SHEET DATA: Cash and cash equivalents................................................................. $ 15,558 $ 33,031 Total assets.............................................................................. 337,340 653,937 Long-term debt, including current portion................................................. 236,330 283,702 Mandatorily redeemable preferred stock.................................................... 16,821 36,848 Common shareholders' equity............................................................... 15,101 254,649
11 THE ACQUIRED RESORTS (11)
HISTORICAL FISCAL YEAR ENDED MAY 31, ----------------------------------------------------- 1993 1994 1995 1996 1997 --------- --------- --------- --------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SKIER VISIT AMOUNTS) STATEMENT OF OPERATIONS DATA: Total revenues........................................................... $ 83,410 $ 82,034 $ 88,567 $ 84,732 $ 89,066 Operating expenses: Retail, ski, rental and other.......................................... 44,778 46,560 48,714 47,373 51,138 Marketing, general and administrative(9)............................... 15,703 14,778 17,075 16,585 17,178 Writedown of assets(10)................................................ -- -- -- -- 2,000 Depreciation and amortization.......................................... 14,481 14,544 14,643 14,477 12,516 --------- --------- --------- --------- --------- Total operating expenses............................................. 74,962 75,882 80,432 78,435 82,832 --------- --------- --------- --------- --------- Operating income....................................................... 8,448 6,152 8,135 6,297 6,234 Net loss............................................................... (3,905) (5,254) (3,906) (4,538) (3,406) OPERATING DATA: Skier visits (000's)..................................................... 1,877 1,750 1,858 1,732 1,796 Season pass holders (000's).............................................. 5.7 6.6 6.9 7.0 7.5 Total revenues per skier visit........................................... $ 43.22 $ 45.23 $ 45.99 $ 47.46 $ 47.48 EBITDA(9)(10)............................................................ $ 25,929 $ 23,594 $ 26,078 $ 24,074 $ 24,150
- ------------------------ (1) The historical results of the Company reflect the results of operations of the Attitash/Bear Peak ski resort since its acquisition in July 1994, the results of operations of the Sugarbush ski resort since October 1994, the results of operations of the Mt. Cranmore ski resort from its acquisition in June 1995 through its divestiture in November 1996, the results of operations of S-K-I Ltd. since its acquisition in June 1996, and the results of operations of Pico Mountain since its acquisition in November 1996. (2) The results of operations of The Canyons have not been reflected in the pro forma statement of operations data or other data due to the immateriality of the results of operations of The Canyons relative to the Company as a whole. See "Pro Forma Financial Data." (3) For the purposes of estimating skier visits, the Company assumes that a season pass holder visits the Company's resorts a number of times equal to the average cost of a season pass divided by the average daily lift ticket price. (4) Resort EBITDA represents resort revenues less cost of resort operations and marketing, general and administrative expense. (5) Resort EBITDA and Real Estate EBIT are not measurements calculated in accordance with generally accepted accounting principles ("GAAP") and should not be considered as alternatives to operating or net income as an indicator of operating performance, cash flows as a measure of liquidity or any other GAAP determined measurement. Certain items excluded from Resort EBITDA and/or Real Estate EBIT, such as depreciation, amortization and non-cash charges for stock compensation awards and asset impairments are significant components in understanding and assessing the Company's financial performance. Other companies may define Resort EBITDA and Real Estate EBIT differently, and as a result, such measures may not be comparable to the Company's Resort EBITDA and Real Estate EBIT. The Company has included information concerning Resort EBITDA and Real Estate EBIT because management believes they are indicative measures of the Company's liquidity and financial position, and are generally used by investors to evaluate companies in the resort industry. (6) Pre-sold units represent quartershare and other residential units that are under construction for which the Company has a binding sales contract, subject to certain closing conditions, and has received a 5% down payment on the unit from the purchaser. Recognition of the revenue from such pre-sales is deferred until the period in which such sales are closed. (7) Real Estate EBIT represents revenues from real estate sales less cost of real estate sold, including selling costs, holding costs, the allocated capitalized cost of land, construction costs and other costs relating to property sold. (8) The Acquired Resorts have historically reimbursed Kamori International Corporation ("Kamori") for certain administrative services provided. Such reimbursements totalled approximately $3.0 million, $2.9 million, $3.3 million, $3.3 million and $3.4 million, respectively, for each of the years ended May 31, 1993 through May 31, 1997. Such amounts are included in marketing, general and administrative expense in the accompanying selected combined financial information, but have been excluded for purposes of calculating EBITDA. (9) In 1997, the Acquired Resorts recorded a $2.0 million impairment loss related to land, buildings and equipment of its golf resort to properly state these fixed assets at estimated fair values. Such loss is excluded in the calculation of EBITDA. (10) The statement of operations data includes the results of Sabal Point Golf Course in Orlando, Florida which the Company intends to sell following the closing of the Acquisition. 12 RECENT DEVELOPMENTS THE CANYONS ACQUISITION In May 1997, the Company commenced development of The Canyons resort. Through a series of transactions, the Company has acquired ski operations, development rights or other interests in over 7,100 acres centered around the former Wolf Mountain ski area ("Wolf"), which the Company intends to integrate into a world class destination resort. The Company acquired the existing buildings, ski lifts and other improvements, related infrastructure and personal property of Wolf for approximately $8.3 million which was financed primarily through the issuance of a note payable to the seller in the amount of $6.5 million. The Company also entered into a 200 year lease with an initial term of 50 years for the 2,100 acres that comprised Wolf, providing for annual payments equal to 4% of the resort's revenues. The lease provides the option to extend for three additional 50 year periods for an extension fee of $1.0 million for each extension period. The Company will make additional one-time rental payments upon achieving certain specified annual skier visit levels above Wolf's historical levels. The Company also purchased an option which gives it the right to purchase fee title to parcels of land within this 2,100 acre area on which it desires to develop real estate for resale for 11% of the capitalized cost of real estate improvements to be constructed thereon. In addition to Wolf, the Company acquired 605 acres of land suitable for real estate development and skiable terrain adjacent to Park City for $4.0 million. The Company has subleased an additional 807 acres in the center of the resort containing the mid-mountain plateau on which it plans to develop the High Mountain Meadows alpine village. The Company currently pays $40,000 per annum under this sublease and is negotiating a direct lease that will include provisions permitting the Company to acquire fee title to any land required for the development of residential projects located at the High Mountain Meadows. The Company has leased ski rights to a third parcel of land, consisting of 450 acres adjacent to Wolf, for annual rental payments of $150,000. In addition, on September 19, 1997, the Company entered into a joint development agreement with the owner of approximately 3,000 contiguous acres of land pursuant to which the Company has the right to develop the property as skiable terrain on an integrated basis with the owner's development of a low density, large lot subdivision. The consideration under the agreement is the mutual exchange of certain property interests required to fully develop both the resort and the subdivision. In order to finance certain acquisition costs and capital improvements with respect to The Canyons, on July 12, 1997, the Company issued $17.5 million of Series A Exchangeable Preferred Stock (the "Series A Exchangeable Preferred Stock") and on July 28, 1997, the Company issued $17.5 million principal amount of 14% Senior Exchangeable Notes (the "14% Exchangeable Notes" and, together with the Series A Exchangeable Preferred Stock, the "Canyons Securities"). See "The Transactions--Exchange Offers," "Description of Capital Stock" and "Description of Certain Indebtedness." The Canyons is adjacent to the Utah Winter Sports Park which will be the venue for the ski jumping, bobsled and luge events at the 2002 Winter Olympic Games. Management believes that The Canyons resort represents a unique development opportunity to build a world class destination resort in one of the fastest growing areas in the United States. See "Risk Factors--Required Development at The Canyons; Historical Losses of Predecessor," "--Real Estate Development," "--Leased Property and Forest Service Permits," and "Business--Existing Resorts--The Canyons." THE FORMATION In June 1997, Leslie B. Otten, who formerly held 96% of the common stock of ASC East, a subsidiary of the Company formerly doing business under the name American Skiing Company ("ASC East"), formed the Company. Mr. Otten contributed his 96% interest in the common stock of ASC East to the Company in exchange for 100% of the common stock of the Company (the "Formation"). Contemporaneously with the Formation, the Company formed its ASC Utah subsidiary for the purpose of acquiring The Canyons 13 resort. In July 1997, the Company formed its ASC West, Inc. subsidiary for the purpose of acquiring the Acquired Resorts. THE TRANSACTIONS THE ACQUISITION On August 1, 1997, the Company entered into the Acquisition Agreement to purchase the Steamboat and Heavenly ski resorts. As part of the Acquisition, the Company also agreed to purchase the Sabal Point Golf Course in Orlando, Florida and a residence in Denver, Colorado, both of which the Company intends to sell following the closing of the Acquisition (the "Divestiture"). The aggregate consideration to be paid by the Company for the Acquired Resorts is approximately $290 million. The Company will not assume any of the cash or funded debt of the Acquired Resorts. The purchase of the Acquired Resorts is subject to the satisfaction of certain covenants and conditions and there can be no assurance that the Acquisition will be consummated. Consummation of the Offering is conditioned upon the concurrent consummation of the Acquisition. See "Business--Acquired Resorts." Steamboat is one of the premier ski resorts in the United States, ranked second overall by the September 1997 SNOW COUNTRY magazine survey and fourth in skier visits for the 1996-97 ski season. Located in Steamboat Springs, Colorado and approximately three hours from Denver, Colorado, Steamboat is a world famous family resort recognized for its "champagne" powder and tree skiing. In the 1996-97 ski season, Steamboat skier visits increased from the 1995-96 ski season by 8.4% to 1.1 million. As part of the Acquisition, the Company also will acquire 168 acres of land held for development. Heavenly is located near Lake Tahoe in the states of Nevada and California. Heavenly is the second largest ski resort in the Pacific West Region and the 11th largest ski resort in the United States with approximately 700,000 skier visits in the 1996-97 ski season and approximately 4,800 acres of skiable terrain. THE REFINANCING The Company has accepted a proposal from a lender to provide the Company with a senior secured credit facility (the "New Credit Facility"), which will provide borrowings of up to $215 million. The proposal provides that borrowings under the New Credit Facility will be available: (i) to fund the Acquisition, (ii) to repay all outstanding borrowings under ASC East's credit agreement dated June 28, 1996, among Fleet National Bank, certain other banks and ASC East (the "Existing Credit Facility") estimated to be approximately $60 million, (iii) to pay certain fees and expenses relating to the Acquisition and (iv) for ongoing general corporate purposes and capital expenditures. Consummation of the Offering is conditioned upon the concurrent consummation of the New Credit Facility. See "Use of Proceeds" and "Description of Certain Indebtedness--The New Credit Facility." REDEMPTION OF DISCOUNT NOTES A portion of the net proceeds of the Offering will be used to make an approximate $27.7 million investment in ASC East to fund the redemption (the "Redemption") of all outstanding 13.75% Subordinated Discount Notes due 2007 of ASC East (the "Discount Notes"). The indenture relating to the Discount Notes (the "Discount Note Indenture") provides for a redemption price equal to 113.75% of the Accreted Value (as defined in the Discount Note Indenture) of the Discount Notes on the redemption date. The Company expects to record a pretax extraordinary loss of approximately $4.3 million related to the repayment of the Discount Notes. 14 EXCHANGE OFFERS The Company currently owns 96% of the outstanding common stock of ASC East. Concurrently with the Offering, the Company intends to offer (the "ASC East Exchange Offer") to exchange an aggregate of 615,022 shares of Common Stock for the 4% of the outstanding common stock of ASC East not owned by the Company. If all such holders elect to exchange their shares of ASC East common stock for Common Stock, the Company will issue 615,022 shares of Common Stock in the ASC East Exchange Offer, representing approximately 1.8% of all shares of Common Stock and Class A Common Stock outstanding immediately following the Offering. The Common Stock issued in the ASC East Exchange Offer will be registered with the Securities and Exchange Commission on a registration statement to be effective concurrently with the closing of the Offering. Participation in the ASC East Exchange Offer is conditioned upon the holders of ASC East common stock entering into lock-up agreements for a period of 180 days following the consummation of the Offering. Pursuant to the terms of a Securities Purchase Agreement, dated as of July 2, 1997 (the "Securities Purchase Agreement"), between the Company and the holder of the Canyons Securities, the holder of the Canyons Securities has indicated its intention to exchange (the "Preferred Exchange Offer" and, together with the ASC East Exchange Offer, the "Exchange Offers") for the Company's 6% Repriced Convertible Exchangeable Preferred Stock having an aggregate liquidation preference of approximately $36.0 million (the "6% Convertible Preferred Stock") for the Canyons Securities. Each share of 6% Convertible Preferred Stock will be convertible at any time, at the holder's option, into a number of shares of Common Stock ("Conversion Shares") initially equal to the liquidation preference per share of 6% Convertible Preferred Stock divided by the price per share of Common Stock offered to the public in the Public Offering discounted by 5%, subject to customary antidilution adjustments. The 6% Convertible Preferred Stock will be registered with the Securities and Exchange Commission on a registration statement as soon as market conditions permit but in any event within six months of the closing of the Offering. If the holder of the Canyons Securities does not exchange the 6% Convertible Preferred Stock for the Canyons Securities and the Preferred Exchange Offer is not consummated, consummation of the Offering will trigger a Change of Control (as defined under the Securities Purchase Agreement). In such event, the Securities Purchase Agreement requires that the Company offer to purchase the Canyons Securities for cash at a redemption price of 105.3% of the principal and liquidation amount outstanding on the date of redemption which would have been approximately $38.1 million as of September 30, 1997. See "Risk Factors--Immediate and Substantial Debt Obligations Upon Consummation of the Offering" and "Description of Certain Indebtedness--14% Exchangeable Notes" and "Description of Capital Stock--Series A Exchangeable Preferred Stock" and "--6% Convertible Preferred Stock." THE CONSENT SOLICITATION Concurrently with the Offering, the Company is soliciting the consent (the "Consent Solicitation") from holders of ASC East's 12% Senior Subordinated Notes due 2006 (the "12% Notes") to amend (the "Proposed Amendment") the definition of Permitted Holders (as defined under the indenture relating to the 12% Notes (the "12% Note Indenture")) to permit the consummation of the Offering without requiring the Company to make a Change of Control Offer (as defined below). The 12% Note Indenture requires the consent of the holders of at least a majority in aggregate principal amount of the 12% Notes to amend the 12% Note Indenture. If the Company obtains the requisite amount of consents pursuant to the Consent Solicitation, the Company will execute a supplemental indenture to give effect to the Proposed Amendment concurrently with the Offering. In connection with the Consent Solicitation, the Company expects to pay to the consenting holders of the 12% Notes a customary consent payment. To the extent the Company does not receive the necessary consents to amend the 12% Note Indenture, consummation of the Offering will trigger a Change of Control (as defined under the 12% Note 15 Indenture). The 12% Note Indenture provides that upon the occurrence of a Change of Control, ASC East is required to make an offer to repurchase the 12% Notes at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest to the date of repurchase (the "Change of Control Offer"). See "Description of Certain Indebtedness--The 12% Notes." In the event of a Change of Control, ASC East must mail a notice to all holders of 12% Notes setting forth the terms of the Change of Control Offer. The Company cannot determine at this time whether or not any or all holders of 12% Notes will accept such Offer. If all outstanding 12% Notes are tendered, the amount of funds necessary to consummate the Change of Control Offer would be $121.2 million plus the amount of all accrued and unpaid interest which was $3.6 million as of September 30, 1997. The Company is currently negotiating a standby credit facility for up to $125 million to fund the repurchase of the 12% Notes in the event that any or all of such 12% Notes are tendered to ASC East for repurchase. See "Risk Factors--Immediate and Substantial Debt Obligations Upon Consummation of the Offering" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Acquisition, the Divestiture, the initial borrowings under the New Credit Facility, the Redemption, the Exchange Offers, the Consent Solicitation, the Stock Split and the Offering are collectively referred to herein as the "Transactions." 16 RISK FACTORS IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS AND THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF NUMEROUS FACTORS, INCLUDING THOSE SET FORTH IN THE FOLLOWING RISK FACTORS AND ELSEWHERE IN THIS PROSPECTUS. SUBSTANTIAL LEVERAGE AND FINANCIAL RISKS GENERAL. Following the Transactions, the Company will be highly leveraged. At July 27, 1997, after giving pro forma effect to the Transactions, the Company's total indebtedness, including current maturities, and shareholders' equity would have been approximately $284 million and $255 million, respectively, and the Company would have had up to $83.2 million available for borrowings under the New Credit Facility. The additional debt of $64.9 million represents borrowings under the New Credit Facility. For the fiscal year ended July 27, 1997, after giving pro forma effect to the Transactions, the Company's earnings would have been insufficient to cover fixed charges by approximately $3.8 million. In addition, at July 27, 1997, after giving pro forma effect to the Transactions, total indebtedness would have represented 48% of total capital and the ratio of Resort EBITDA to interest expense would have been 2.1x. The Company has incurred additional indebtedness in the first quarter of fiscal 1998 to fund capital improvements, real estate development and operations. In addition, consummation of the Offering may trigger a change of control under certain of the Company's indebtedness which could total approximately $133 million. See "The Transactions--Exchange Offers," "--The Consent Solicitation," "--Immediate and Substantial Debt Obligations Upon Consummation of the Offering," "Use of Proceeds," "--Seasonality; Fluctuations in Operating Results; Dependence on Weather Conditions" and "Description of Indebtedness--The New Credit Facility." IMPACT ON FINANCIAL CONDITION. The high level of debt of the Company and its subsidiaries will have several important effects on the Company's future operations, including: (a) the Company will have significant cash requirements to service its debt (including approximately $10.6 million of scheduled principal repayments over the next two fiscal years), reducing funds available for operations, capital expenditures and acquisitions, thereby increasing the Company's vulnerability to adverse general economic and industry conditions; and (b) the financial covenants and other restrictions contained in the New Credit Facility, the 12% Note Indenture and other agreements relating to the Company's indebtedness will require the Company to meet certain financial tests and will restrict its and its subsidiaries' ability to borrow additional funds and to dispose of assets. The Company does not plan to establish any debt service reserves for the payment of principal or interest on any of its indebtedness. Substantially all of the Company's assets, other than the Grand Summit Hotel properties, are pledged to secure borrowings under the New Credit Facility. The Company has granted a mortgage to the construction lender on each Grand Summit Hotel property to secure the construction financing of such properties. See "Description of Certain Indebtedness." MAINTENANCE EXPENDITURE DEFERRAL. Although management believes that capital expenditures above maintenance levels can be deferred to address cash flow or other constraints, such activities may not be deferred for extended periods without adverse effects on skier visits, revenues and profitability. GROWTH LIMITATIONS. 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 and, therefore, to the extent it is unable to do so with internally generated cash, its inability to finance capital expenditures or real estate development through borrowed funds or additional equity investments could have a material adverse effect on the Company's future operations and revenues. 17 CAPITAL REQUIREMENTS The development of ski resorts is capital intensive. The Company spent approximately $12.0 million, $25.1 million and $45.7 million in fiscal 1995, 1996 and 1997, respectively, on resort capital expenditures and real estate development. In fiscal 1995, 1996 and 1997, the Acquired Resorts spent an aggregate of approximately $6.9 million, $5.9 million and $5.4 million, respectively, on resort capital expenditures. In fiscal 1998 and fiscal 1999, the Company plans to spend approximately $65 million and $60 million, respectively, to enhance its resort operations and approximately $100 million and $115 million, respectively, to develop its real estate holdings. There can be no assurance that the Company will have adequate funds, from internal or external sources, to make all planned or required capital expenditures. A lack of available funds for such capital expenditures could have a material adverse effect on the Company's ability to implement its operating strategy. The Company intends to finance resort capital improvements through borrowings under its New Credit Facility and internally generated funds and to finance real estate development through project-specific construction financing. See "--Substantial Leverage and Financial Risks," "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Liquidity and Capital Resources," "Business--Operating Strategy," "--Resort Operations" and "--Real Estate Development." RISKS ASSOCIATED WITH RAPID GROWTH Since 1994, the Company has experienced rapid and substantial growth. The Company's rapid and substantial growth has placed, and could continue to place, a significant strain on its employees and operations. The Company's growth has increased the operating complexity of the Company and the level of responsibility for new and existing management. For example, certain members of the Company's senior management team have limited experience managing publicly traded companies. The Company's ability to compete effectively and to manage its recent and future growth effectively will depend on its ability to implement and improve financial and management information systems on a timely basis and to effect changes in its business, such as implementing internal controls to handle the increased size of its operations and hiring, training, developing and managing an increasing number of experienced management-level and other employees. Unexpected difficulties during expansion, the failure to attract and retain qualified employees, or the Company's inability to respond effectively to recent growth or plan for future expansion, could have a material adverse effect on the Company. GROWTH THROUGH ACQUISITIONS; INTEGRATION OF ACQUIRED RESORTS; ABILITY TO FINANCE ACQUISITIONS The Company continually evaluates potential acquisition opportunities. The Company will need to finance future acquisitions through a combination of internally generated funds, additional bank borrowings from existing and new facilities and public offerings or private placements of equity (which may cause dilution to existing holders of capital stock of the Company) and/or debt securities, the combination of which will depend on several factors, including the size of the acquired resort and the Company's capital structure at the time of an acquisition. There can be no assurance, however, that attractive acquisition candidates will be identified, that the Company will be able to make acquisitions on terms favorable to it, that necessary financing will be available on suitable terms, if at all, or that such acquisitions will be permitted under applicable antitrust laws. The Company's ability to make such acquisitions is limited under applicable antitrust laws, and it is effectively prohibited from acquiring additional resorts in New England. See "--Substantial Leverage and Financial Risks." The Company faces risks in connection with the integration of acquired resorts, including The Canyons and the Acquired Resorts. Significant management resources and time will be required to integrate any acquired resorts and unanticipated problems or liabilities with respect to such new resorts may further divert management's attention from the Company as a whole, which could have a material adverse effect on the Company's operations and financial performance. There can be no assurance that the Company will be able to realize any additional skier visits, revenues or cost savings in connection with integrating acquired resorts. See "Business--Operating Strategy." 18 REQUIRED DEVELOPMENT AT THE CANYONS; HISTORICAL LOSSES OF PREDECESSOR The Canyons is a largely undeveloped asset that requires substantial development of on-mountain facilities, real estate and related infrastructure. The Company has adopted a five-year business plan for development of the resort; however, accomplishing its plan is contingent upon obtaining necessary permits and approvals, obtaining required financing for planned improvements and generating markets for the resort that will produce significant increases in skier visits. An estimated $60 million (approximately $18.2 million of which is expected to be spent by December 20, 1997) for on-mountain capital improvements and approximately $150 million for real estate development will be required to fulfill the Company's five-year business plan. There can be no assurance that capital will be available to fund these capital improvements or real estate development. The Canyons has historically experienced net operating losses. The Company's business plan assumes that it can significantly increase skier visits and generate positive Resort EBITDA and net income at The Canyons. There can be no assurance, however, that The Canyons will generate additional skier visits, positive Resort EBITDA or net income for the Company. See "Business--Alpine Village Development." REAL ESTATE DEVELOPMENT The Company intends to construct, operate and sell interval ownership and condominium units and other real estate at its ski resorts. Real estate development and the Company's ability to generate revenues therefrom may be adversely affected by numerous factors, many of which are beyond the control of the Company, including the ability of the Company to successfully market its resorts, the national and regional economic climate, local real estate conditions (such as an oversupply of space or a reduction in demand for real estate), costs to satisfy environmental compliance and remediation requirements associated with new development/renovation and ongoing operations, the attractiveness of the properties to prospective purchasers and tenants, competition from other available property or space, the ability of the Company to obtain adequate insurance, the ability of the Company to obtain all necessary zoning, land use, building, occupancy and other required governmental permits and authorizations and changes in real estate, zoning, land use, environmental or tax laws. In addition, real estate development will be dependent upon, among other things, receipt of adequate financing on suitable terms, obtaining and maintaining the requisite permits and licenses and, in certain circumstances, acquiring additional real estate. There can be no assurance as to whether, when or on what terms such financing, permits, licenses and real estate may be obtained. Upon the closing of the Offering, the Company will not have the financing available to complete all of its planned real estate development as set forth in "Business--Real Estate Development." 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 natural disasters, any of which could delay construction and result in a substantial increase in cost to the Company. Moreover, the Company's construction activities typically are performed by third-party contractors, the timing, quality and completion of which cannot be controlled by the Company. Nevertheless, claims may be asserted against the Company for construction defects and such claims may give rise to liability. There can also be no assurance that the Company will achieve any additional revenues from such projects. See "--Substantial Leverage and Financial Risks," "Business-- Real Estate Development" and "--Government Regulation." CONCENTRATION IN INTERVAL OWNERSHIP INDUSTRY Because a material portion of the Company's real estate development business is conducted within the interval ownership industry, any adverse changes affecting the interval ownership industry such as an oversupply of interval ownership units, a reduction in demand for interval ownership units, changes in travel and vacation patterns, changes in governmental regulations of the interval ownership industry and increases in construction costs or taxes could have a material adverse effect on the Company's operations. The Company enters into sales contracts for its quartershare interval ownership units prior to completion of construction. Although such contracts require a 5% deposit, there can be no assurance that any or all purchasers will consummate the purchase of units under contract and the failure by a large number of 19 purchasers to complete such purchases could have a material adverse effect on the Company's operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." REGULATION OF MARKETING AND SALES OF QUARTERSHARES; OTHER LAWS The Company's marketing and sales of Grand Summit Hotel quartershares and other operations are subject to extensive regulation by the federal government and the states in which the resorts are located and in which Grand Summit Hotel intervals are marketed and sold. On a federal level, the Federal Trade Commission Act prohibits unfair or deceptive acts or competition in interstate commerce. Other federal legislation to which the Company is or may be subject includes the Truth-in-Lending Act, the Equal Opportunity Credit Act, the Interstate Land Sales Full Disclosure Act, the Real Estate Standards Practices Act and the Fair Housing Act. In addition, many states have adopted specific laws and regulations regarding the sale of interval ownership programs. For example, certain state laws grant the purchaser the right to cancel a contract of purchase within a specified period following the earlier of the date the contract was signed or the date the purchaser has received the last of the documents required to be provided by the Company. No assurance can be given that the cost of qualifying under interval ownership regulations in all jurisdictions in which the Company desires to conduct sales will not be significant. The Company believes that it is in compliance with all material federal, state and local laws and regulations. The failure to comply with such laws or regulations could have a material adverse effect on the Company. GROWTH THROUGH RESORT EXPANSION A key element of the Company's strategy is to attract additional skiers through investment in on-mountain capital improvements. Such investments are capital intensive and, to the extent that the Company is unable to finance such capital expenditures from internally generated cash or otherwise, the Company's results of operations would be adversely affected. In addition, there can be no assurance that the Company's investment in on-mountain capital improvements will attract additional skiers and/or generate additional revenues. See "--Substantial Leverage and Financial Risks," "--Capital Requirements" and "Business--Operating Strategy." IMMEDIATE AND SUBSTANTIAL DEBT OBLIGATIONS UPON CONSUMMATION OF THE OFFERING If the Consent Solicitation is not successfully consummated, consummation of the Offering will trigger a Change of Control under the 12% Note Indenture which will require ASC East to make the Change of Control Offer. See "The Transactions--The Consent Solicitation." In the event any or all holders of 12% Notes tender their 12% Notes for repurchase by ASC East, ASC East would be required to obtain additional financing in an amount of up to $125 million to fund the repurchase of the 12% Notes. There can be no assurance that ASC East would be able to obtain the necessary financing on terms acceptable to it or at all and the failure to obtain such financing could have a material adverse effect on ASC East and the Company. Consummation of the Offering will also trigger the acceleration of approximately $12.0 million of other indebtedness of the Company, which indebtedness will be repaid with the proceeds of the Offering. See "Use of Proceeds" and "Description of Certain Indebtedness." In addition, to the extent the Preferred Exchange Offer is not consummated, the Company will be required to offer to purchase the Canyons Securities. See "The Exchange Offers." DEPENDENCE ON HIGHLY LEVERAGED AND RESTRICTED SUBSIDIARIES The Company is a holding company and its ability to pay principal and interest on its New Credit Facility and its other debt is dependent upon the receipt of dividends and other distributions, or the payment of principal and interest on intercompany borrowings from its subsidiaries. The Company does not have, and may not in the future have, any assets other than the common stock of ASC East and its other direct subsidiaries, including subsidiaries acquired in connection with the Acquisition. ASC East and its subsidiaries are parties to the 12% Note Indenture, which imposes substantial restrictions on ASC East's ability to pay dividends and other distributions to the Company until the earlier of the maturity of the 12% Notes in 2006 or the redemption thereof pursuant to the terms of the 12% Note Indenture. In addition, Grand Summit Resort Properties, Inc., a subsidiary of ASC East, is restricted in its ability to pay 20 dividends and other distributions to ASC East under the terms of the construction financing facility for its Grand Summit Hotel projects. The Company's other subsidiaries may become restricted in their ability to pay dividends and other distributions to the Company in the future. In addition, the breach of any of the conditions or provisions under the documents governing the indebtedness of the Company's subsidiaries could result in a default thereunder and, in the event of any such default, the holders of such indebtedness could elect to accelerate the maturity thereof. If the maturity of any such indebtedness were to be accelerated, such indebtedness would be required to be paid in full before such subsidiary would be permitted to distribute any assets or cash to the Company. There can be no assurance that the assets of ASC East or any of the Company's other subsidiaries would be sufficient to repay all of its outstanding debt or that the assets of the Company would be sufficient to repay all of its outstanding debt. In addition, state law further restricts the payment of dividends or other distributions to the Company by its subsidiaries. SEASONALITY; FLUCTUATIONS IN OPERATING RESULTS; DEPENDENCE ON WEATHER CONDITIONS Ski and resort operations are highly seasonal. Over the last five fiscal years, the Company realized an average of approximately 86% of its resort revenues and over 100% of Resort EBITDA and net income during the period from November through April and a significant portion of resort revenues (and approximately 23% of annual skier visits) was generated during the Christmas and Presidents' Day vacation weeks. In addition, the Company's resorts typically experience operating losses and negative cash flows for the period from May to October. During the six-month period from May to October 1996, for example, the Company had operating losses aggregating $15.1 million and negative cash flow from operations aggregating $0.6 million. The Acquired Resorts have historically experienced similar seasonality. There can be no assurance that the Company will be able to finance its capital requirements from external sources during this period. See "--Substantial Leverage and Financial Risks," "--Capital Requirements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The high degree of seasonality of revenues increases the impact of adverse events on operating results including, without limitation, adverse weather conditions, access route closures, equipment failures, and other developments of even moderate or limited duration occurring during its peak revenue periods. Adverse weather conditions may lead to increased power and other operating costs associated with snowmaking and could render snowmaking wholly or partially ineffective in maintaining quality skiing conditions. It has been the Company's experience that unfavorable weather conditions in more highly populated areas, regardless of actual skiing conditions, can result in decreased skier visits. Prolonged adverse weather conditions, or the occurrence of such conditions during key periods of the ski season, can adversely affect operating results. PURCHASE PRICE ALLOCATION FOR THE ACQUISITION Under the purchase accounting method, the total purchase price for the Acquisition will be allocated to the assets and liabilities of the Acquired Resorts on the basis of their relative fair values and pursuant to certain appraisals of such assets and liabilities which the Company expects to complete prior to the end of fiscal 1998. The Company's preliminary allocation of the Acquisition purchase price resulted in an excess of purchase price over the fair value of the net tangible assets acquired, which was allocated to various identifiable intangible assets and goodwill. The Company believes that its final allocation (and related amortization periods) will not differ materially from its preliminary allocation. No assurance can be given, however, that the actual allocation of the Acquisition purchase price and the resulting effect on operating income will not differ materially from the Company's preliminary allocation as discussed in the General Note to the Unaudited Pro Forma Combined Financial Data. COMPETITION The skiing industry is highly competitive and is capital intensive. The Company's competitors include other major ski resorts throughout the United States, Canada and Europe. The Company's competitors also include other worldwide recreation resorts, including warm weather resorts and various alternative 21 leisure activities. The competitive position of the Company's resorts is dependent upon numerous factors, such as proximity to population centers, availability and cost of transportation to and within a resort, natural snowfall, snowmaking quality and coverage, resort size, attractiveness of terrain, lift ticket prices, prevailing weather conditions, appeal of related services, quality and availability of lodging facilities, duration of the ski season and resort reputation. In addition, some of the Company's competitors have greater financial resources than the Company which could adversely affect the Company's competitive position and relative ability to withstand adverse developments. There can be no assurance that its competitors will not be successful in capturing a portion of the Company's present or potential customer base. See "Business--Competition." REGIONAL AND NATIONAL ECONOMIC CONDITIONS The skiing and real estate development industries are cyclical in nature and are particularly vulnerable to shifts in regional and national economic conditions. In particular, a significant portion of the Company's current skier visits are generated from customers that reside in the New England states which experienced a significant economic downturn beginning in 1988. Although data indicate that the New England economy has recovered significantly, there can be no assurance that improvement will continue or that stagnation or declines in skier visits or revenues will not occur. Skiing and vacation unit ownership are discretionary recreational activities entailing relatively high costs of participation, and any decline in the regional economies where the Company is operating, or deterioration in national economic conditions, could adversely impact skier visits, real estate sales and revenues. Accordingly, the Company's financial condition, particularly in light of its highly leveraged condition, could be adversely affected by a worsening in the regional or national economy. See "--Substantial Leverage and Financial Risks" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." ENVIRONMENTAL AND LAND USE MATTERS The Company is subject to a wide variety of federal, state and local laws and regulations relating to land use and development and to environmental compliance and permitting obligations (including those related to the use, storage, discharge, emission and disposal of hazardous materials and hazardous and nonhazardous wastes). Failure to comply with such laws could result in the need for capital expenditures and/or the imposition of severe penalties or restrictions on operations that could adversely affect present and future resort operations and real estate development. In addition, such laws and regulations could change in a manner that materially and adversely affects the Company's ability to conduct its business or to implement desired expansions and improvements to its facilities. See "Business--Government Regulation." LEASED PROPERTY AND FOREST SERVICE PERMITS Significant portions of the land underlying certain of the Company's ski resorts are leased or subleased by the Company or used pursuant to renewable permits or licenses. If any such lease, sublease, permit or license were to be terminated or not renewed upon expiration, or renewed on terms materially less favorable to the Company, the Company's ability to possess and use the land subject thereto and any improvements thereon would be materially adversely affected. A substantial portion of the land constituting skiable terrain at Attitash/Bear Peak, Sugarbush, Mount Snow/Haystack, Steamboat and Heavenly is located on federal land that is used under the terms of the permits with the United States Forest Service (the "Forest Service"). Generally, under the terms of such permits, the Forest Service has the right to review and comment on the location, design and construction of improvements in the permit area and on many operational matters. The permits can be terminated or modified by the Forest Service to serve the public interest. A termination or modification of any of the Company's permits could have a material adverse effect on the results of operations of the Company, however, the Company believes termination or modification of the Forest Service permits is not likely. See "Business--Leased Properties." 22 ADEQUACY OF WATER SUPPLY The Company's current operations and anticipated growth are heavily dependent upon its ability, under applicable federal, state and local laws, regulations, permits, and/or licenses or contractual arrangements, to have access to adequate supplies of water with which to make snow and otherwise to conduct its operations. There can be no assurance that applicable laws and regulations will not change in a manner that could have an adverse effect, or that important permits, licenses or agreements will be renewed, not cancelled, or, if renewed, renewed on terms no less favorable to the Company. The failure of the Company to have access to adequate water supplies to support its current operations and anticipated expansion would have a material adverse effect on the Company. See "Business--Government Regulation." POTENTIAL ANTI-TAKEOVER PROVISIONS The Company's Articles of Incorporation contain, among other things, provisions authorizing the issuance of "blank check" preferred stock and two classes of common stock. The Company is also subject to the provisions of Section 611-A of the Maine Business Corporation Act (the "MBCA"). See "Description of Capital Stock." These provisions could delay, deter or prevent a merger, consolidation, tender offer or other business combination or change of control involving the Company that some or a majority of the Company's shareholders might consider to be in their best interests or that might otherwise result in such shareholders receiving a premium over the market price for the Common Stock. CONTROL OF THE COMPANY BY PRINCIPAL SHAREHOLDER The Company's common stock is divided into two classes. Leslie B. Otten, the Company's principal shareholder, owns 100% of the Class A Common Stock, and, therefore, has the power to elect two-thirds of the Board of Directors of the Company, which allows for the maintenance of control of the Company by Mr. Otten with respect to all matters requiring approval of the Board of Directors. In addition, upon consummation of the Offering, Mr. Otten will own shares of Common Stock and Class A Common Stock, representing at least 50.0% of the combined voting power of all outstanding shares of Common Stock and Class A Common Stock and, accordingly, will be able to determine the outcome of all matters submitted to a vote of the shareholders of the Company, except for matters requiring (i) the vote of a higher percentage of voting stock than that held by Mr. Otten, or (ii) the vote of the shareholders voting as a separate class under state law or the Articles of Incorporation and Bylaws of the Company. See "Description of Capital Stock--Common Stock." 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. Other than with respect to Warren C. Cook and Christopher E. Howard, Mr. Otten and the other key members of management are not subject to employment agreements with the Company or any of its subsidiaries. The Company maintains key person life insurance on Mr. Otten in the amount of $14.0 million. See "Management." SHARES ELIGIBLE FOR FUTURE SALE Upon the consummation of the Transactions, the Company will have outstanding 17,948,365 shares of Common Stock (excluding all shares issuable upon the exercise of options and assuming no exercise of the Underwriters' over-allotment option and no conversion of the Class A Common Stock into Common Stock) and 14,760,530 shares of Class A Common Stock. All of the shares of Common Stock sold in the Offering will be freely tradeable under the Securities Act unless purchased by "affiliates" of the Company as that term is defined under the Securities Act. Upon the expiration of the lock-up agreements discussed below and exercise of all options granted under the Stock Option Plan, 4,585,753 shares of Common Stock and 14,760,530 shares of Class A Common Stock (the "Restricted Shares") will become eligible for sale, subject to compliance with Rule 144 of the Securities Act. Pursuant to the lock-up agreements, the Company, certain shareholders and the executive officers and directors of the Company have agreed with the Underwriters, until 180 days after the 23 consummation of the Offering, not to directly or indirectly offer, pledge, sell, contract to sell, sell any option or contract to purchase or grant any option, right or warrant to purchase or otherwise transfer or dispose of any Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, or enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of the Common Stock, or cause a registration statement covering any shares of Common Stock to be filed, without the prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), subject to certain exceptions, including pursuant to a foreclosure by a lender on a loan to the Principal Shareholder for which shares of Class A Common Stock and/or Common Stock will be pledged as collateral. No prediction can be made as to the effect, if any, that future sales of shares, or the availability of shares for future sale, will have on the market price of the Common Stock. Sales of substantial amounts of Common Stock in the public market, or the perception that such sales could occur, could adversely affect prevailing market prices for the Common Stock and could impair the Company's ability to raise additional capital through an offering of its equity securities. See "Shares Eligible for Future Sale." NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE Prior to the Offering, there has been no public market for the Common Stock. Although the Common Stock is expected to be approved for listing on the New York Stock Exchange (subject to notice of issuance), there can be no assurance that an active public market for the Common Stock will develop or continue after the Offering. Prices for the Common Stock will be determined in the marketplace and may be influenced by many factors, including variations in the financial results of the Company, changes in earnings estimates by industry research analysts, investors' perceptions of the Company and general economic, industry and market conditions. The initial public offering price per share of the Common Stock will be determined by negotiations among the Company and the representatives of the Underwriters and may not be indicative of the price at which the Common Stock will trade after completion of the Offering. See "Underwriting." The Company believes that there are relatively few comparable companies that have publicly-traded equity securities which may also impact the trading price of the Common Stock after the Offering. In addition, the stock market has from time to time experienced extreme price and volume volatility. The fluctuations may adversely affect the market price of the Common Stock. The market price of the Common Stock could be subject to significant fluctuations in response to the Company's operating results and other factors, and there can be no assurance that the market price of the Common Stock will not decline below the initial public offering price. DIVIDENDS The Company currently intends to retain earnings, if any, to support its operating strategy and does not anticipate paying cash dividends on its Common Stock or Class A Common Stock in the foreseeable future. In addition, the New Credit Facility will contain restrictions on the ability of the Company to pay cash dividends on its Common Stock or Class A Common Stock. See "Dividend Policy" and "Description of Certain Indebtedness--The New Credit Facility." DILUTION Purchasers of Common Stock offered hereby will experience immediate and substantial dilution in the net tangible book value of the Common Stock. See "Dilution." 24 USE OF PROCEEDS The net proceeds to be received by the Company from the sale of the Common Stock pursuant to the Offering are expected to be approximately $250.9 million, assuming an initial public offering price of $18.50 per share and after deducting underwriting discounts and commissions and estimated offering expenses. The net proceeds, together with borrowings of approximately $137 million under the New Credit Facility, will be used (i) to fund the Acquisition price of approximately $290 million, (ii) to repay all outstanding borrowings under the Existing Credit Facility, estimated to be approximately $60 million, (iii) to make an investment in ASC East of approximately $27.7 million, the proceeds of which will be used to fund the redemption of all outstanding Discount Notes, (iv) to repay up to $12 million of indebtedness of the Company and its subsidiaries, (v) to pay certain fees and expenses relating to the Transactions and (vi) for general corporate purposes and capital expenditures. The Existing Credit Facility bears interest at a rate of LIBOR plus 1.5% to 2.5% per annum and matures on December 31, 2001. The Discount Notes bear interest at a rate of 13.75% per annum and mature on January 15, 2007. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Description of Certain Indebtedness." DILUTION Purchasers of the Common Stock offered hereby will experience immediate and substantial dilution in the net tangible book value per share of Common Stock. At July 27, 1997, the deficit in the net tangible book value of the Company was approximately $(3.7) million, or $(.25) per share of Common Stock and Class A Common Stock. The deficit in net tangible book value per share is equal to the Company's total tangible assets less total liabilities, divided by the number of shares of Common Stock and Class A Common Stock outstanding at July 27, 1997 (after giving effect to the Stock Split). After giving effect to the sale of 14,750,000 shares at an assumed initial Public Offering price of $18.50 per share (the midpoint of the range for the estimated initial Public Offering price) and after deducting underwriting discounts and commissions, the pro forma net tangible book value of the Company at July 27, 1997 would have been approximately $247.2 million, or $8.38 per share. This represents an immediate increase in pro forma net tangible book value of $8.63 per share to existing shareholders and an immediate dilution of $10.12 per share to new investors purchasing shares of Common Stock in the Public Offering. Dilution to new investors is determined by subtracting pro forma net tangible book value per share of Common Stock and Class A Common Stock after giving effect to the assumed initial Public Offering price to be paid by new investors in the Public Offering for a share of Common Stock. The following table illustrates the per share dilution to investors in the Public Offering: Assumed Public Offering price............................... $ 18.50 Net tangible book value per share as of July 27, 1997....... $ (.25) Increase per share attributable to new investors in the Public Offering........................................... 8.63 Pro forma net tangible book value per share................. 8.38 Dilution per share to new investors in the Public Offering(1)(2)............................................ $ 10.12 --------- ---------
- ------------------------ (1) Does not give effect to the exercise of all fully vested options granted to certain employees at an exercise price less than the initial Public Offering price. Exercise of such options would result in further dilution to new investors in the Public Offering. If all such options eligible for exercise at July 27, 1997 were exercised, per share dilution to the new investors in the Public Offering would be $10.26 (2) Does not give effect to the shares of Common Stock that would be issued in the ASC East Exchange Offer. Exchange of such shares would result in further dilution to new investors in the Public Offering. 25 If all such ASC East shares were exchanged for 615,022 shares of Common Stock, per share dilution to the new investors in the Public Offering would be $10.42. The following table summarizes on a pro forma basis as of July 27, 1997 after giving effect to the Offering the number of shares of Common Stock and Class A Common Stock purchased from the Company, the total consideration paid to the Company and the average consideration paid per share by the existing shareholders and by the new investors in the Public Offering and the Concurrent Offering (at an assumed initial Public Offering price of $18.50 per share):
COMMON STOCK AND CLASS A COMMON STOCK SHARES PURCHASED TOTAL CONSIDERATION -------------------------- --------------------------- AVERAGE PRICE NUMBER PERCENT AMOUNT PERCENT PER SHARE ------------- ----------- -------------- ----------- ------------- Existing shareholders..................... 14,760,530 49.0% $ 2,796,000 1.0% $ 0.19 Investors in ASC East Exchange Offer...... 615,022 2.0 976,000 .4 1.59 Investors in the Public Offering.......... 13,939,189 46.3 257,875,000 93.2 18.50 Investor in the Concurrent Offering....... 810,811 2.7 15,000,000 5.4 18.50 ------------- --- -------------- ----- ------ Total................................... 30,125,552 100% $ 276,647,000 100.0% $ 9.18 ------------- --- -------------- ----- ------ ------------- --- -------------- ----- ------
DIVIDEND POLICY Since the Formation, the Company has not declared or paid any cash dividends on its capital stock. The Company currently intends to retain earnings, if any, to support its capital improvement and growth strategies and does not anticipate paying cash dividends on its Common Stock or Class A Common Stock in the foreseeable future. Payment of future dividends, if any, will be at the discretion of the Company's Board of Directors after taking into account various factors, including the Company's financial condition, operating results, current and anticipated cash needs and plans for capital improvements and expansion. The New Credit Facility will contain certain restrictions on the ability of the Company to pay any cash dividends on its Common Stock or Class A Common Stock. The 12% Note Indenture contains certain restrictive covenants that, among other things, limit the payment of dividends or the making of distributions on equity interests of ASC East. See "Risk Factors--Dependence on Highly Leveraged and Restricted Subsidiaries," "--Dividends" and "Description of Certain Indebtedness." 26 CAPITALIZATION The following table sets forth the capitalization of the Company at July 27, 1997 on an actual basis and on a pro forma basis after giving effect to the Transactions (assuming a Public Offering price of $18.50 per share), after deducting underwriting discounts and commissions and estimated offering expenses. See "Use of Proceeds." This table should be read in conjunction with the Consolidated Financial Statements and the Unaudited Pro Forma Combined Financial Data and the Notes thereto included elsewhere in this Prospectus.
JULY 27, 1997 ---------------------- ACTUAL(1) PRO FORMA --------- --------- (DOLLARS IN THOUSANDS) Cash................................................................................................ $ 15,558 $ 33,031 --------- --------- --------- --------- Short-term debt and current portion of long-term debt............................................... $ 39,748 $ 14,681 --------- --------- Long-term debt: Existing Credit Facility.......................................................................... $ 30,000 $ -- New Credit Facility............................................................................... -- 131,801 12% Notes (net of unamortized discount of $3,322)................................................. 116,678 116,678 Discount Notes.................................................................................... 22,121 -- Other long-term debt.............................................................................. 27,783 20,542 --------- --------- Total long-term debt, including current portion............................................... 236,330 283,702 --------- --------- 14% Series A Exchangeable Preferred Stock, $1,000 par value per share; 200,000 shares authorized; 17,500 shares issued and outstanding; net of unaccreted issuance costs and including accretion of discount and cumulative dividends in arrears (redemption value of $18,537)........................ 16,821 -- 6% Convertible Preferred Stock...................................................................... -- 36,848 Shareholders' equity: Common Stock, $.01 par value per share; [ ] shares authorized, issued and outstanding (actual); 100,000,000 shares authorized, 32,236,071 shares issued and outstanding (pro forma)..................................................................................... 10 10 Class A Common Stock, $.01 par value per share; no shares authorized (actual); 15,000,000 shares authorized, 14,760,530 shares outstanding (pro forma)........................................... -- -- Additional paid in capital........................................................................ 2,786 275,303 Retained earnings................................................................................. 12,305 (20,664) --------- --------- Total shareholders' equity.................................................................... 15,101 254,649 --------- --------- Total capitalization.......................................................................... $ 268,252 $575,199 --------- --------- --------- ---------
- ------------------------ (1) Does not include $17.5 million in principal amount of 14% Senior Exchangeable Notes issued on July 28, 1997 in connection with the financing of The Canyons acquisition, which securities will be converted into 6% Convertible Preferred Stock upon consummation of the Offering. 27 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 the Acquired Resorts, in each case included elsewhere in this Prospectus. The Pro Forma Financial Data 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 combined balance sheet data as of July 27, 1997 gives effect to the Transactions as if they had occurred on such date. The unaudited pro forma combined statement of operations data for the year ended July 27, 1997 gives effect to the Transactions as if they had occurred on July 29, 1996. The Unaudited Pro Forma Combined Balance Sheet Data for the Acquired Resorts is as of May 31, 1997; the Unaudited Pro Forma Combined Statement of Operations Data of the Acquired Resorts is for the year ended May 31, 1997. 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 Transactions actually occurred on the dates specified. In the opinion of the Company's management, all adjustments necessary to present fairly the Pro Forma Financial Data have been made based upon the terms and structure of each of the Transactions noted above. The following information should be read in conjunction with "Selected Historical Consolidated Financial Data of the Company," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements of the Company and the Acquired Resorts and the notes thereto included elsewhere in this Prospectus. Management expects to realize annual cost reductions following the Transactions that have not been identified at this time and that are not reflected in the Pro Forma Financial Data. These reductions are expected to result largely from decreases in discretionary costs and savings from purchasing efficiencies. There can be no assurance, however, that any such cost reductions will be realized. 28 AMERICAN SKIING COMPANY UNAUDITED PRO FORMA COMBINED BALANCE SHEET DATA AS OF JULY 27, 1997 (IN THOUSANDS)
PRO THE ACQUIRED FORMA TRANSACTION PRO FORMA COMPANY RESORTS COMBINED ADJUSTMENTS AS ADJUSTED -------- -------- ------- --------- ------------ ASSETS: Cash and cash equivalents......................... $ 15,558 $ 15,654 $31,212 $ 1,819 $ 33,031 Restricted cash................................... 2,812 -- 2,812 -- 2,812 Accounts receivable, net.......................... 3,801 575 4,376 -- 4,376 Inventory and supplies............................ 7,282 3,321 10,603 -- 10,603 Prepaid expenses and other current assets......... 3,339 743 4,082 (246) 3,836 Real estate developed for sale.................... 537 -- 537 -- 537 -------- -------- ------- --------- ------------ Total current assets.......................... 33,329 20,293 53,622 1,573 55,195 Property and equipment, net....................... 252,346 92,632 344,978 65,996 410,974 Land held for development and sale................ -- 27,382 27,382 7,700 35,082 Assets held for sale.............................. -- -- -- 4,500 4,500 Real estate developed for sale.................... 23,003 -- 23,003 -- 23,003 Other assets, net................................. 17,998 7,110 25,108 (1,285) 23,823 Goodwill and other intangibles, net............... 10,664 2,027 12,691 88,669 101,360 -------- -------- ------- --------- ------------ Total assets.................................. $337,340 $149,444 $486,784 $167,153 $ 653,937 -------- -------- ------- --------- ------------ -------- -------- ------- --------- ------------ LIABILITIES: Line of credit and current portion of long-term debt............................................ $ 39,748 $ 5,054 $44,802 $(30,121) $ 14,681 Accounts payable and other current liabilities.... 25,738 7,828 33,566 3,648 37,214 Accrued interest.................................. -- 1,204 1,204 (1,204) -- Demand note, shareholder.......................... 1,933 -- 1,933 -- 1,933 Deposits and deferred revenue..................... 4,379 -- 4,379 -- 4,379 -------- -------- ------- --------- ------------ Total current liabilities..................... 71,798 14,086 85,884 (27,677) 58,207 Deferred income taxes............................. 28,514 -- 28,514 -- 28,514 Indebtedness of Kamori............................ -- 130,359 130,359 (130,359) -- Other long-term debt.............................. 46,833 -- 46,833 (37,286) 9,547 New Credit Facility............................... -- -- -- 131,801 131,801 Subordinated notes and debentures................. 149,749 -- 149,749 (22,076) 127,673 Other long-term liabilities....................... 7,898 -- 7,898 (1,200) 6,698 Minority interest in subsidiary................... 626 -- 626 (626) -- -------- -------- ------- --------- ------------ Total long-term liabilities................... 233,620 130,359 363,979 (59,746) 304,233 14% Series A mandatorily redeemable Preferred Stock........................................... 16,821 -- 16,821 (16,821) -- 6% Repriced Converts.............................. -- -- -- 36,848 36,848 Common and Class A stock.......................... 10 -- 10 -- 10 Additional paid-in capital........................ 2,786 44,400 47,186 228,117 275,303 Retained earnings................................. 12,305 (39,401) (27,096) 6,432 (20,664) -------- -------- ------- --------- ------------ Total shareholders' equity.................... 15,101 4,999 20,100 234,549 254,649 -------- -------- ------- --------- ------------ Total liabilities, manditorily redeemable preferred stock and shareholders' equity.... $337,340 $149,444 $486,784 $167,153 $ 653,937 -------- -------- ------- --------- ------------ -------- -------- ------- --------- ------------
29 AMERICAN SKIING COMPANY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA SUMMARY OF PRO FORMA ADJUSTMENTS--BALANCE SHEET DATA (IN THOUSANDS)
JULY 27, BALANCE SHEET ACCOUNT NOTE ADJUSTMENT 1997 - --------------------------------------------- ----- --------------------------------------------- ------------ Cash and cash equivalents.................... a Gross proceeds from the Offering $ 272,875 b Proceeds from the New Credit Facility 131,801 b Retirement of the Existing Credit Facility (55,067) c Issuance of 14% Senior Exchangeable Notes 17,474 d Purchase price of Acquired Resorts (287,365) b Prepayment of Discount Notes (22,076) b Prepayment penalty pertaining to Discount Notes (3,036) e Underwriting discounts and other Offering expenses (22,000) b Repayment of indebtedness accelerated upon change of control (11,858) b Payment of commitment fee pertaining to the New Credit Facility (3,275) f Cash excluded from the Acquired Resorts (15,654) ------------ Net adjustment to cash and cash equivalents 1,819 ------------ Prepaid expenses and other current assets.... f Receivable from parent excluded from the Acquired Resorts (246) ------------ Property and equipment, net.................. g Allocation of purchase price pertaining to the Acquired Resorts 65,996 ------------ Land held for development and sale........... h Allocation of purchase price pertaining to the Acquired Resorts 7,700 ------------ Assets held for sale......................... i Reclassification of assets held for sale 4,500 ------------ Other assets, net............................ c Elimination of capitalized financing costs: Fees on Convertible Debt 26 b Retirement of Discount Notes (1,081) b Retirement of Existing Credit Facility (1,290) b Capitalized financing costs on New Credit Facility 3,275 f Other assets excluded from the acquisition of the Acquired Resorts (2,215) ------------ Net adjustment to other assets (1,285) Goodwill and other intangibles, net.......... j Allocation of purchase price pertaining to the Acquired Resorts 88,669 ------------ Net effect on total assets............... $ 167,153 ------------ ------------
30 AMERICAN SKIING COMPANY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA SUMMARY OF PRO FORMA ADJUSTMENTS--BALANCE SHEET DATA (IN THOUSANDS)
JULY 27, BALANCE SHEET ACCOUNT NOTE ADJUSTMENT 1997 - --------------------------------------------- ----- --------------------------------------------- ------------ Line of credit and current portion of long-term debt............................. f Current debt excluded from the acquisition of the Acquired Resorts $ (5,054) b Retirement of Exisiting Credit Facility (25,067) ------------ (30,121) ------------ Accounts payable and other current liabilities................................ m Accrual for tax liability relating to grant of Stock Options 3,648 ------------ Accrued interest............................. f Acquired Resorts liability not assumed (1,204) ------------ Indebtedness of Kamori....................... f Acquired Resorts long-term debt not assumed (130,359) ------------ Other long-term debt......................... b Retirement of Existing Credit Facility (30,000) n Proceeds from issuance of 14% Exchangeable Notes 17,500 b Retirement Sugarbush acquisition debt (7,286) n Conversion of 14% Exchangeable Notes (17,500) ------------ Net adjustments to other long-term debt (37,286) --- --------------------------------------------- ------------ New Credit Facility.......................... b Proceeds from the New Credit Facility 131,801 ------------ Subordinated notes and debentures............ b Prepayment of Discount Notes (22,076) ------------ Other long-term liabilities.................. d Contingency consideration pertaining to acquisition 3,000 b Retirement of Wolf acquisition debt.......... (4,200) ------------ Net adjustments to other long-term liabilities (1,200) Minority interest in subsidiary.............. k Remove minority interest from exchange of 4% of outstanding shares of ASC East (626) ------------ Net effect on total long-term liabilities.... (59,746) ------------ 14% Series A Preferred Stock................. n Exchange of Series A mandatory redeemable Preferred Stock to 6% Repriced Converts (16,821) ------------ 6% Repriced Converts......................... n Exchange of Securities for 6% Repriced Converts 36,848 Additional paid-in capital................... a Gross proceeds from the issuance of Common Stock 272,875 e Payment of costs pertaining to the issuance of Common Stock (22,000) f Elimination of Acquired Resorts shareholders' Common Stock (44,400) k Conversion of minority interest 11,378 m Effect of stock compensation award on additional paid-in capital 10,264 Net effect on additional paid-in capital..... 228,117 ------------ Retained earnings............................ f Remove accumulated deficit of Acquired Resorts 39,401 n Exchange of 14% Series A mandatorily redeemable Preferred Stock (2,526) b Retirement of Sugarbush acquisition debt (371) b Prepayment penalty on Discount Notes (3,036) b Write-off of prepaid loan fees (1,081) b Retirement of the Existing Credit Facility (1,290) k Conversion of minority shareholders (10,752) m Effect of stock compensation award on retained earnings (13,913) ------------ Net effect on retained earnings.............. $ 6,432 ------------ ------------
31 AMERICAN SKIING COMPANY UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA FOR THE YEAR ENDED JULY 27, 1997 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE YEAR ENDED FOR THE YEAR ENDED JULY 27, 1997 MAY 31, 1997 RESULTS OF ----------------- ------------------- OPERATIONS TRANSACTION PRO FORMA INCOME STATEMENT THE COMPANY ACQUIRED RESORTS TO BE SOLD ADJUSTMENTS AS ADJUSTED - ------------------------------- ----------------- ------------------- ------------- ----------- ------------------- Revenues: Resort....................... $ 166,923 $ 86,474 $ -- $ -- $ 253,397 Real estate sales............ 8,468 -- -- -- 8,468 Other........................ -- 2,592 (2,592) -- -- -------- ------- ------------- ----------- -------- Total revenues........... 175,391 89,066 (2,592) -- 261,865 Operating expenses: Cost of resort operations.... 109,774 51,079 (2,088) (1,021) 157,744 Cost of real estate sold..... 6,813 -- -- -- 6,813 Writedown of assets.......... -- 2,000 (2,000) -- -- Marketing, general and administrative............. 26,126 17,238 (500) (3,400) 39,464 Depreciation and amortization............... 18,293 12,516 (265) 5,449 35,993 -------- ------- ------------- ----------- -------- Total operating expenses............... 161,006 82,833 (4,853) 1,028 240,014 -------- ------- ------------- ----------- -------- Income from operations......... 14,385 6,233 2,261 (1,028) 21,851 Other income and expenses: Interest income.............. -- (682) -- 682 -- Interest expense............. 23,730 10,659 (332) (6,730) 27,327 -------- ------- ------------- ----------- -------- Income (loss) before taxes..... (9,345) (3,744) 2,593 5,020 (5,476) Provision (benefit) for income taxes........................ (3,613) (338) -- 1,651 (2,300) -------- ------- ------------- ----------- -------- Net income (loss) before minority interest in loss of subsidiary................... (5,732) (3,406) 2,593 3,369 (3,176) -------- ------- ------------- ----------- -------- Minority interest in loss of subsidiary................... (250) -- -- 250 -- -------- ------- ------------- ----------- -------- Net income (loss) after minority interest in loss of subsidiary................... (5,482) (3,406) 2,593 3,119 (3,176) -------- ------- ------------- ----------- -------- Accretion of discount and dividends accrued on mandatorily redeemable preferred stock.............. (444) -- -- -- (444) -------- ------- ------------- ----------- -------- Net income (loss) available to common shareholders.......... $ (5,926) $ (3,406) $ 2,593 $ 3,119 $ (3,620) -------- ------- ------------- ----------- -------- -------- ------- ------------- ----------- -------- Net loss per weighted average common shares outstanding.... (6.04) (.17) -------- -------- Weighted average common shares outstanding.................. [] 30,132,568 -------- --------
32 AMERICAN SKIING COMPANY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA SUMMARY OF PRO FORMA ADJUSTMENTS--STATEMENTS OF OPERATIONS DATA (IN THOUSANDS)
YEAR ENDED STATEMENT OF OPERATIONS ITEM NOTE ADJUSTMENT JULY 27, 1997 - ------------------------------------------------ --------- --------------------------------------------- -------------- Cost of resort operations....................... q Expected insurance savings (325) q Capitalization of equipment costs (350) q Purchase of operating leases (346) -------------- (1,021) Marketing, general and administrative................................ p Elimination of Kamori management fees (3,400) -------------- Depreciation and amortization................... j Amortization of goodwill and other intangibles of Acquired Resorts 3,900 b Amortization of the New Credit Facility commitment fee 409 r Remove depreciation and amortization of acquired assets (12,251) r Depreciation related to assets of Acquired Resorts 13,219 b Amortization of deferred financing costs relating to the Existing Credit Facility (322) b Amortization of deferred financing costs relating to Discount Notes (119) q Reclassification of capital expenditures by Acquired Resorts 350 q Purchase of operating leases 263 -------------- Total 5,449 Interest income................................. f Remove interest income from Acquired Resorts 682 Interest expense................................ q Interest on Discount Notes (2,890) f Interest on Kamori long-term debt (10,326) b Interest on incremental borrowings under the New Credit Facility 5,482 n Additional accretion on 6% Repriced Converts 921 q Interest expense from additional capital leases 83 -------------- (6,730) -------------- Provision (benefit) for income taxes............ l Tax effect of pro forma adjustments 1,651 -------------- Effect on net loss.............................. 3,369 -------------- Minority interest in loss of subsidiary......... k ASC East Exchange Offer 250 Net loss available to common shareholders.................................. $ 3,119 -------------- --------------
33 AMERICAN SKIING COMPANY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA SUMMARY OF PRO FORMA ADJUSTMENTS--STATEMENTS OF OPERATIONS DATA (CONTINUED) (IN THOUSANDS) GENERAL The acquisition of the Acquired Resorts by the Company will result in the assets of the Acquired Resorts being written up to reflect the purchase price. The purchase price of the Acquired Resorts will be calculated as the sum of (i) cash paid to the current Acquired Resorts shareholder, (ii) the fair value of any liabilities of the Acquired Resorts assumed, and (iii) the transaction costs incurred by the Company. The deposit of $11 million for the purchase of the Acquired Resorts is not included in the historical accounts since the event occurred after the Company's fiscal 1997 year end and is not reflected in the pro forma adjustments because it is included as part of the purchase price. The Acquisition will be treated as a purchase for financial reporting purposes. Preliminary analyses indicate that there will be a portion of the purchase price allocated to goodwill and other intangibles. The acquisition of the Acquired Resorts will be funded from the issuance of Common Stock and additional borrowings from the New Credit Facility. Pro forma adjustments have been made to depreciate these assets acquired over their estimated useful lives and to amortize goodwill and other intangibles over estimated useful lives ranging from 10 to 40 years. The actual depreciation and amortization charges recorded subsequent to the Acquisition may differ when the final purchase price is computed as of the closing date and an actual allocation of the purchase price to the underlying assets acquired is completed. Only after the final purchase price has been allocated and the estimated remaining useful lives are determined by management will the actual depreciation and amortization charges associated with the assets of the Acquired Resorts become available. These charges could ultimately be higher than what has been reflected in the Unaudited Pro Forma Combined Statement of Operations. The Company has not yet received the results of appraisals and other valuation studies which are in process, nor has it made a final determination of the useful lives of the assets acquired. Accordingly, the allocation of the excess of purchase cost over the fair value of the assets acquired to identifiable intangibles and goodwill may differ from that reflected herein. The actual allocation of purchase cost and the resulting effect on operating income may differ significantly from the pro forma amounts below. No deferred taxes have been provided on the step-up in the basis of the assets acquired because a 338(h)(10) election was made, and therefore the assets acquired are also written up to fair value for tax purposes. The Company expects to finalize purchase accounting for the acquisition by the end of fiscal 1998. (a) The gross proceeds to be received by the Company from the sale of Common Stock pursuant to the Offering are expected to be approximately $272,875 assuming an initial public offering price of $18.50 per share. (b) A portion of the initial proceeds of the New Credit Facility will be used to retire the Existing Credit Facility. In connection with the retirement of the Existing Credit Facility, certain prepaid loan fees related to such facility amounting to $1,290 will be written off and charged to expense when incurred. These nonrecurring charges are not included in the Unaudited Pro Forma Combined Statement of Operations. Upon closing of the New Credit Facility, the Company will pay $3,275 as a commitment fee to the lender. The commitment fee will be amortized to expense over the term of the credit facility. The Unaudited Pro Forma Combined Statement of Operations reflects $409 of commitment fee amortization related to the New Credit Facility for the year ended July 27, 1997. The amortization of the Existing Credit Facility's prepaid loan fees of $322 for the year ended July 27, 1997 has been removed. A portion of the proceeds of the Offering will be used to retire the outstanding principal balance of Discount Notes and a prepayment premium of $3,036 as of July 27, 1997 related to such prepayment. In connection with the retirement of the Discount Notes, certain prepaid loan fees associated with 34 AMERICAN SKIING COMPANY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA SUMMARY OF PRO FORMA ADJUSTMENTS--STATEMENTS OF OPERATIONS DATA (CONTINUED) (IN THOUSANDS) such debt in the amount of $1,081 will be written off and charged to expense when incurred. The prepayment penalty and the write-off of the prepaid loan fees represent nonrecurring charges and, therefore, are not included in the Unaudited Pro Forma Combined Statement of Operations. Such amounts have been charged against retained earnings in the Unaudited Pro Forma Combined Balance Sheet Data. The amortization of the Prepaid loan fees for the Discount Notes total $119 for the year ended July 27, 1997 and has been removed from the Pro Forma Financial Data Two notes associated with the acquisition of Sugarbush become due based on a change in control. The amount of these notes is approximately $7,700. The following table details the anticipated initial advances on the new credit facility: Retirement of Discount Notes...................................... $ 22,076 Prepayment penalty on Discount Notes.............................. 3,036 Retirement of Existing Credit Facility, current portion........... 25,067 Retirement of Existing Credit Facility, long term portion......... 30,000 Closing fees on New Credit Facility............................... 3,275 Payment of Sugarbush acquisition notes required by change of control......................................................... 7,657 Payment of Wolf Mountain (The Canyons) acquisition note required by Initial Public Offering...................................... 4,200 Amount required in addition to offering to purchase Acquired Resorts......................................................... 36,490 --------- $ 131,801 --------- ---------
(c) The Company issued $17,500 in 14% Senior Exchangeable Notes due 2002 in a private offering to an institutional investor on July 28, 1997. There were various fees totaling $26 making the net proceeds $17,474. (d) The purchase price of the Acquired Resorts is listed in the following table, the actual cash price excludes the "Liability established for contingencies." Stated Purchase Price............................................. $ 290,000 Net working capital adjustment.................................... (3,435) Estimated Transaction costs....................................... 800 Liability established for contingencies........................... 3,000 --------- $ 290,365 --------- ---------
(e) The Company estimates that total costs associated with the issuance of the Common Stock will be approximately $22,000. (f) Certain assets and liabilities including all cash and funded debt of the Acquired Resorts are being excluded in the Acquisition and are therefore eliminated in the pro forma balance sheet data. (g) Fixed assets were adjusted to their estimated fair market value pursuant to purchase accounting. These estimates are based on preliminary purchase price allocations which are subject to final allocations pursuant to appraisals. (h) Adjusts real estate held for development and sale to estimated fair value pursuant to purchase accounting. These are estimated based on preliminary purchase price allocations which are subject to final allocations pursuant to appraisals. (i) Management has determined that the golf course assets to be purchased from the Acquired Resorts will be sold. These assets are presented at their estimated net realizable value and are classified as assets held for sale in the accompanying Unaudited Pro Forma Combined Balance Sheet Data. The results of operations of the golf course operations have been eliminated in the Unaudited Pro Forma Combined Statement of Operations Data. Included in this adjustment is a personal residence which will also be sold. 35 AMERICAN SKIING COMPANY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA SUMMARY OF PRO FORMA ADJUSTMENTS--STATEMENTS OF OPERATIONS DATA (CONTINUED) (IN THOUSANDS) (j) Various intangible assets were recorded based on their fair value and goodwill was recorded as part of purchase accounting. These are estimates based on preliminary purchase price allocations which are subject to final allocations pursuant to appraisals. The following table lists the purchase price that was allocated to intangible assets:
ANNUAL USEFUL LIFE AMORTIZATION --------------- ------------- Tradenames................................................ 22,000 30 733 Software.................................................. 5,000 10 500 Customers................................................. 15,000 10 1,500 Goodwill.................................................. 46,669 40 1,167 --------- ----- Total................................................. 88,669 3,900 --------- ----- --------- -----
(k) The Company currently owns 96% of the outstanding common stock of ASC East. Concurrently with the Offering the Company intends to offer (the ASC East Exchange Offer) to exchange stock in ASC all minority interests owned in ASC East. The pro forma financial data assumes all minority owners exchange their shares. The amount of $626,000 represents the elimination of the minority interest holders. The fair market value of the minority interest at the IPO price of $18.50 a share is $10.3 million. This entire amount is recorded to common stock with the difference between the book value of the minority interest and the fair market value of the shares exchanged being a reduction to additional retained earnings. (l) All adjustments to the Unaudited Pro Forma Combined Statement of Operations Data have been tax-effected using the expected effective tax rate of 42%. (m) The Company has adopted a stock option plan for senior and other management of the Company. The senior management group will receive, prior to the date of the Acquisition and the Offering, deeply discounted options with a $2.00 exercise price. The estimated compensation expense related to the vested portion of the discounted options is $13,912,000, which has not been reflected as a pro forma adjustment to the Income Statement because the granting of discounted options is a one time occurrence, and all future options granted by the Company are expected to have an exercise price equal to the fair market value of the underlying shares as of the date the option is granted. The effect of the Stock Option Plan has been recorded as a pro forma adjustment to the Balance Sheet. (n) On July 3, 1997, ASC Utah, a sister corporation to ASC East, acquired The Canyons. Prior to such acquisition, Leslie B. Otten, who formerly held 96% of the outstanding common stock of ASC East, transferred all his shares of common stock of ASC East to the Company. The effects of such transactions are reflected in the Company's financial statements as of and for the year ended July 27, 1997. Concurrently with the Offering, the Company intends to conduct the ASC East Exchange Offer. If all such holders elect to exchange their shares of ASC East common stock for Common Stock, the Company will issue 615,022 shares of Common Stock in the ASC East Exchange Offer, representing approximately 1.8% of all shares of Common Stock outstanding immediately following the Offering, Consummation of the ASC East Exchange Offer is conditioned upon such holders entering into lock-up agreements for a period of 180 days following the consummation of the Offering. Pursuant to the terms of the Securities Purchase Agreement, the Company intends to conduct the Preferred Exchange Offer, and will exchange all of such securities for shares of the Company's 6% Convertible Preferred Stock or an aggregate of 1,991,794 shares of Common Stock at a 5% discount 36 AMERICAN SKIING COMPANY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA SUMMARY OF PRO FORMA ADJUSTMENTS--STATEMENTS OF OPERATIONS DATA (CONTINUED) (IN THOUSANDS) to the initial public offering price, representing 11.5% of the Common Stock outstanding after giving affect to the Offering. The effects of such discount are accounted for in the Unaudited Pro Forma Combined Financial Statements for the year ended July 27, 1997. If the holders of Series A manditorily redeemable Preferred Stock and 14% Senior Exchangeable Notes do not elect to exchange such securities for 6% Convertible Preferred Stock or Common Stock, consummation of the Offering will trigger a Change of Control (as defined) under the Securities Purchase Agreement relating to the Company's Series A manditorily redeemable Preferred Stock and 14% Senior Exchangeable Notes. In such event the Securities Purchase Agreement would require that the Company offer to purchase the Series A Preferred Stock and 14% Senior Exchangeable Notes for cash at a redemption price of 105.3% of the principal amount outstanding or the amount of the liquidation preference on the date of redemption. See "Description of Certain Indebtedness--14% Exchangeable Notes" and "Description of Capital Stock--Series A Exchangeable Preferred Stock" and "--6% Convertible Preferred Stock". Related to the purchase of The Canyons, ASC Utah entered into a long-term lease of the real estate constituting the resort. The results of operations of The Canyons have not been reflected in the pro forma statements of operations due to the immateriality of the activity. (o) Gives pro forma effect to the incremental interest expense related to the New Credit Facility. Included in the accompanying pro forma financial data is interest expense from the New Credit Facility of $5,482 for the year ended July 27, 1997. The incremental interest expense is based on a net increase in the Senior Credit Facility of $64.9 million. Historical interest expense related to the Discount Notes of $2,890 for the year ended July 27, 1997 has been eliminated in the pro forma statement of operations. (p) The pro forma adjustment reflects the elimination of reimbursements paid to the parent company of the Acquired Resorts for the guarantee of the Acquired Resorts' debt obligations by the parent. These costs would not have been incurred had the Acquired Resorts been subsidiaries of the Company for the year ended July 27, 1997 nor will such payments be required by the Acquired Resorts prospectively. In addition to the pro forma adjustments described above, management expects to realize further annual costs reductions following the Acquisition. These reductions are expected to result largely from decreases in discretionary costs yet to be incurred and, therefore, have not been reflected in the pro forma adjustments. (q) Management has specifically identified certain costs which will be eliminated in connection with the Acquisition. Insurance expense will be reduced by $325,000 based on preliminary quotes received from the Company's current insurance provider. The Aquired resorts have classified expenditures related to rental equipment purchases and uniform purchases as operating expenses, these expenditures will be capitalized and depreciated to be consistent with the Company's historical treatment. The Acquired Resorts have historically used several operating leases for grooming equipment, new equipment will be purchased and depreciated over the useful life of the equipment. (r) Total purchase price allocated to Acquired Resorts is $158.6 million. An estimated average useful life of these assets is estimated to be 12 years. Estimated annual depreciation is $13.2 million. The depreciation previously recorded on the Acquired Resorts has been eliminated. 37 MANAGEMENT'S DISCUSSION AND ANALYSIS OF PRO FORMA FINANCIAL INFORMATION GENERAL Since 1994, the Company's growth has been substantially as a result of acquisitions. The Company acquired Attitash/Bear Peak in 1994, Sugarbush in 1995, the S-K-I Ltd. resorts (Killington, Sugarloaf and Mount Snow/Haystack) in 1996 and The Canyons, formerly Wolf Mountain, in 1997. In August 1997, the Company agreed to acquire the Steamboat and Heavenly ski resorts. The operations of S-K-I Ltd. are only included in the Company's historical financial statements for one month of fiscal 1996, accordingly, the Company believes that a comparison of the pro forma results of operations for fiscal 1996 and fiscal 1997 is more meaningful to investors than a comparison of the actual results of operations for the same period. The following table sets forth the pro forma results of operations of the Company as if the acquisitions of S-K-I Ltd. and the Acquired Resorts and all related transactions had taken place at the beginning of fiscal 1996.
PRO FORMA PRO FORMA FISCAL 1996 FISCAL 1997 --------------------- --------------------- % OF % OF $ REVENUE $ REVENUE ---------- --------- ---------- --------- Revenues: Resort.................................................... $ 241,996 95.32 $ 253,397 96.77 Real Estate............................................... 11,877 4.68 8,468 3.23 ---------- --------- ---------- --------- Total revenues........................................ 253,873 100.00 261,865 100.00 Operating Expenses: Cost of resort operations................................. 151,595 59.71 157,744 60.24 Cost of real estate sold.................................. 6,273 2.47 6,813 2.60 Marketing, general and administrative..................... 37,302 14.69 39,464 15.07 Depreciation and amortization............................. 34,207 13.48 35,993 13.74 ---------- --------- ---------- --------- Total operating expenses.............................. 229,377 90.35 240,014 91.65 ---------- ---------- Commitment fee.............................................. 1,447 .57 -- -- Interest expense............................................ 26,002 10.24 27,327 10.44 Provision (benefit) for income taxes........................ (344) (.13) (2,300) (.88) ---------- --------- ---------- --------- Net loss.................................................... (2,609) (1.03) (3,176) (1.21) ---------- --------- ---------- --------- ---------- --------- ---------- ---------
PRO FORMA FISCAL YEAR ENDED JULY 27, 1997 VS. PRO FORMA FISCAL YEAR ENDED JULY 28, 1996 Pro forma total revenues in fiscal 1997 were $261.9 million, an increase of $8.0 million, or 3.2%, as compared to pro forma total revenues of $253.9 million in fiscal 1996. Pro forma resort revenues in fiscal 1997 were $253.4 million, an increase of $11.4 million, or 4.7%, as compared to pro forma resort revenues of $242.0 million in fiscal 1996. The increase in pro forma resort revenues was due primarily to a 2.1% increase in aggregate skier visits (to 4.8 million from 4.7 million) and a 1.5% increase in average resort revenues per skier visit. The pro forma resort revenues in fiscal 1997 of the Company's northeastern resorts were $166.9 million, an increase of $5.2 million, or 3.2%, as compared to pro forma resort revenues of $161.7 million in fiscal 1996. This increase was due primarily to a 1.6% increase in skier visits and a 1.8% increase in resort revenues per skier visit. The increase in resort revenues per skier visit was attributable to increased ticket prices and yield management and increases in non-ticket revenues per skier visit, offset, in part, by 38 increased promotional activity. The Company achieved these results notwithstanding a 10.6% decrease in industry-wide skier visits in the Northeast. The pro forma resort revenues in fiscal 1997 of the Acquired Resorts were $86.5 million, an increase of $6.2 million, or 7.7%, as compared to pro forma resort revenues of $80.3 million in fiscal 1996. This increase was due primarily to an 8.8% increase in skier visits at the Steamboat resort, offset, in part, by a 3.1% decrease in skier visits at the Heavenly resort. Skier visits at Heavenly were adversely impacted by the extended closure of U.S. Route 50, a major access road to the resort, during the 1996-97 ski season for 45 days in December and January. Changes in revenues per skier visit were immaterial during these periods at the Acquired Resorts. Pro forma real estate revenues in fiscal 1997 were $8.5 million, a decrease of $3.4 million, or 28.6%, as compared to pro forma real estate revenues of $11.9 million in fiscal 1996. This decrease was due primarily to the sale of all available quartershare units at the Company's Sunday River quartershare hotel in the fourth quarter of fiscal 1996, with no additional quartershare units being available for sale until the Company's quartershare hotel at Attitash/Bear Peak was completed in the third quarter of fiscal 1997. During the last four months of fiscal 1997, the Company closed $5.0 million in quartershare unit sales at Attitash/Bear Peak, and the Acquired Resorts had $1.9 million of real estate revenues from the sale of miscellaneous undeveloped parcels of land. Pro forma cost of resort operations in fiscal 1997 was $157.7 million, an increase of $6.1 million, or 4.0%, as compared to pro forma cost of resort operations of $151.6 million in fiscal 1996. The increase of .5% as a percentage of revenue was primarily from increased snowmaking activity necessitated by the adverse weather conditions in the Northeast during the 1996-97 ski season. Pro forma cost of real estate sold in fiscal 1997 was $6.8 million, an increase of $.5 million, or 7.9%, as compared to pro forma cost of real estate sold of $6.3 million in fiscal 1996. This increase was due primarily to approximately $1.0 million of development costs expensed in fiscal 1997 relating to projects that are currently under development, and consequently, did not generate revenues. Pro forma marketing, general and administrative expense in fiscal 1997 was $39.5 million, an increase of $2.2 million, or 5.9%, as compared to pro forma marketing, general and administrative expense of $37.3 million in fiscal 1996. As a percentage of resort revenues, marketing, general and administrative expense increased from 14.7% in fiscal 1996 to 15.1% in fiscal 1997. This increase was due primarily to increased marketing activities at the Company's resorts in the Northeast following the S-K-I Ltd. acquisition. Pro forma depreciation and amortization in fiscal 1997 was $36.0 million, an increase of $1.8 million, or 5.3%, as compared to pro forma depreciation and amortization of $34.2 million in fiscal 1996. This increase was due to the extensive capital programs during the summer of 1996 and the depreciation associated with these capital improvements. Pro forma interest expense in fiscal 1997 was $27.3 million, an increase of $1.2 million, or 4.6%, as compared to pro forma interest expense of $26.1 in fiscal 1996. This increase was due to additional borrowings from the acquisition of Pico and expenditures related to capital improvements. 39 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF THE COMPANY THE COMPANY The following selected historical financial data of the Company (except Other Data) (i) as of and for the fiscal years ended July 30, 1995, July 28, 1996 and July 27, 1997 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 fiscal years ended July 25, 1993 and July 31, 1994 have been derived from the financial statements of the Company audited by Berry, Dunn, McNeil & Parker, independent accountants.
HISTORICAL YEAR ENDED (1) --------------------------------------------------------- JULY 25, JULY 31, JULY 30, JULY 28, JULY 27, 1993 1994 1995 1996 1997 ----------- ----------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SKIER VISIT AMOUNTS) STATEMENT OF OPERATIONS DATA: Net revenues: Resort........................................................... $ 23,645 $ 26,544 $ 46,794 $ 63,489 $ 166,923 Real estate...................................................... 6,103 6,682 7,953 9,933 8,468 ----------- ----------- --------- --------- --------- Total net revenues............................................. 29,748 33,226 54,747 73,422 175,391 ----------- ----------- --------- --------- --------- Operating expenses: Resort........................................................... 14,705 15,787 29,725 41,799 109,774 Real estate...................................................... 3,245 3,179 3,994 5,844 6,813 Marketing, general and administrative............................ 4,718 5,940 9,394 11,289 26,126 Depreciation and amortization.................................... 1,984 2,421 3,910 6,783 18,293 ----------- ----------- --------- --------- --------- Total operating expenses....................................... 24,652 27,327 47,023 65,715 161,006 ----------- ----------- --------- --------- --------- Income from operations............................................. 5,096 5,899 7,724 7,707 14,385 Other expenses: Commitment fee..................................................... -- -- -- 1,447 -- Interest expense................................................... 849 1,026 2,205 4,699 23,730 ----------- ----------- --------- --------- --------- Income (loss) before provision (benefit) for income taxes, minority interest in loss of subsidiary and extraordinary gain from insurance claim.................................................. 4,247 4,873 5,519 1,561 (9,345) Provision (benefit) for income taxes............................... -- -- 400 3,906 (3,613) Minority interest in loss of subsidiary............................ -- -- -- 108 250 ----------- ----------- --------- --------- --------- Income (loss) before extraordinary gain from insurance claim....... 4,247 4,873 5,119 (2,237) (5,482) Extraordinary gain from insurance claim............................ 1,592 -- -- -- -- ----------- ----------- --------- --------- --------- Net income (loss).................................................. $ 5,839 $ 4,873 $ 5,119 $ (2,237) $ (5,482) ----------- ----------- --------- --------- --------- ----------- ----------- --------- --------- --------- OTHER DATA: Resort: Skier visits(000's)(2)........................................... 525 528 1,060 1,290 3,025 Season pass holders (000's)...................................... 3.2 3.7 11.2 13.2 30.9 Resort revenues per skier visit.................................. $ 45.04 $ 50.26 $ 44.14 $ 49.20 $ 55.18 Resort EBITDA(3)(4).............................................. $ 4,222 $ 4,817 $ 7,675 $ 10,401 $ 31,023 Real estate: Number of units sold............................................. 173 155 163 177 123 Number of units pre-sold(5)...................................... -- -- -- 109 605 Real estate EBIT(4)(6)........................................... $ 2,858 $ 3,503 $ 3,959 $ 4,089 $ 1,655 STATEMENT OF CASH FLOWS DATA: Cash flows from operations....................................... $ 2,667 $ 5,483 $ 12,593 $ 7,465 $ 7,344 Cash flows from investing activities............................. (4,432) (9,041) (13,843) (122,583) (14,626) Cash flows from financing activities............................. 1,559 3,764 2,399 116,941 19,655 BALANCE SHEET DATA: Total assets..................................................... $ 39,850 $ 51,784 $ 72,434 $ 298,732 $ 337,340 Long term debt, excluding current maturities..................... 14,453 19,103 27,169 187,827 196,582 Mandatory redeemable Preferred Stock............................. -- -- -- -- 16,821 Common shareholders' equity...................................... 23,167 26,212 30,502 21,903 15,101
40 - ------------------------ (1) The historical results of the Company reflect the results of operations of the Attitash/Bear Peak ski resort since its acquisition in July 1994, the results of operations of the Sugarbush ski resort since October 1994, the results of operations of the Mt. Cranmore ski resort from its acquisition in June 1995 through its divestiture in November 1996, the results of operations of S-K-I Ltd. since its acquisition in June 1996, and the results of operations of Pico Mountain since its acquisition in December 1996. (2) For the purposes of estimating skier visits, the Company assumes that a season pass holder visits the Company's resorts a number of times equal to the average cost of a season pass divided by the average daily lift ticket price. (3) Resort EBITDA represents resort revenues less cost of resort operations and marketing, general and administrative expense. (4) Resort EBITDA and Real Estate EBIT are not measurements calculated in accordance with GAAP and should not be considered as alternatives to operating or net income as an indicator of operating performance, cash flows as a measure of liquidity or any other GAAP determined measurement. Certain items excluded from Resort EBITDA and/or Real Estate EBIT, such as depreciation, amortization and non-cash charges for stock compensation awards and asset impairments are significant components in understanding and assessing the Company's financial performance. Other companies may define Resort EBITDA and Real Estate EBIT differently, and as a result, such measures may not be comparable to the Company's Resort EBITDA and Real Estate EBIT. The Company has included information concerning Resort EBITDA and Real Estate EBIT because management believes they are indicative measures of the Company's liquidity and financial position, and are generally used by investors to evaluate companies in the resort industry. (5) Pre-sold units represent quartershare and other residential units that are under construction for which the Company has a binding sales contract and has received a 5% down payment on the unit from the purchaser. Recognition of the revenue from such pre-sales is deferred until the period in which such sales are closed. (6) Real estate EBIT represents revenues from real estate sales less cost of real estate sold, including selling costs, holding costs, the allocated capitalized cost of land, construction costs and other costs relating to property sold. 41 SELECTED COMBINED FINANCIAL DATA OF THE ACQUIRED RESORTS
FISCAL YEAR ENDED MAY 31, ---------------------------------------------------------- 1993 1994 1995 1996 1997 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SKIER AMOUNTS) STATEMENT OF OPERATIONS DATA: Revenues: Ski operations.................................. $ 65,181 $ 62,700 $ 67,843 $ 64,967 $ 67,423 Retail, ski rental and other.................... 18,229 19,334 20,724 19,765 21,643 ---------- ---------- ---------- ---------- ---------- Total revenues.............................. 83,410 82,034 88,567 84,732 89,066 ---------- ---------- ---------- ---------- ---------- Operating expenses: Ski operations.................................. 32,590 33,543 34,682 34,033 36,712 Retail, ski rental and other.................... 12,188 13,017 14,032 13,341 14,427 Marketing, general, administrative and other(1)...................................... 15,703 14,778 17,075 16,585 17,178 Writedown of assets(2).......................... -- -- -- -- 2,000 Depreciation and amortization................... 14,481 14,544 14,643 14,477 12,516 ---------- ---------- ---------- ---------- ---------- Total operating expenses.................... 74,962 75,882 80,432 78,436 82,833 ---------- ---------- ---------- ---------- ---------- Operating income.................................. $ 8,448 $ 6,152 $ 8,135 $ 6,296 $ 6,233 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net loss.......................................... $ (3,905) $ (5,254) $ (3,906) $ (4,538) $ (3,406) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- OPERATING DATA: Skier visits (000's).............................. 1,877 1,750 1,858 1,732 1,796 Season pass holders (000's)....................... 5.7 6.6 6.9 7.0 7.5 Total revenues per skier visit.................... $ 43.22 $ 45.23 $ 45.99 $ 47.46 $ 47.48 EBITDA(1)(2)...................................... $ 25,929 $ 23,594 $ 26,078 $ 24,074 $ 24,150 Capital expenditures.............................. $ 11,998 $ 3,382 $ 6,925 $ 5,864 $ 5,344 BALANCE SHEET DATA: Total assets...................................... $ 188,513 $ 174,325 $ 166,610 $ 159,067 $ 149,444 Long-term debt.................................... 160,910 153,675 147,185 142,146 135,414 Total shareholders' equity........................ 18,603 13,349 9,443 8,405 4,999
- ------------------------ (1) The Acquired Resorts have historically reimbursed Kamori for certain administrative services provided. Such reimbursements totalled approximately $3.0 million, $2.9 million, $3.3 million, $3.3 million and $3.4 million, respectively, for each of the years ended May 31, 1993 through May 31, 1997. Such amounts are included in marketing, general and administrative expense in the accompanying selected combined financial information, but have been excluded for purposes of calculating EBITDA. (2) In 1997, the Acquired Resorts recorded a $2.0 million impairment loss related to land, buildings and equipment of its golf resort to properly state these fixed assets at estimated fair values. Such loss is excluded in the calculation of EBITDA. 42 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS AND THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS," "BUSINESS" AND ELSEWHERE IN THIS PROSPECTUS. 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 the Acquired Resorts and (iii) the liquidity and capital resources of the Company after giving effect to the consummation of the Transactions. The Company was formed in July 1997 pursuant to the Formation. The historical financial statements of the Company for all periods ending prior to the Formation are the financial statements of ASC East. For periods ending subsequent to the Formation, the financial statements of the Company will include the accounts of ASC East and the Company's other operations. 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 a strategy to differentiate its resorts from the competition by enhancing the quality and scope of on-mountain facilities and services, including (i) improving lifts, trail design, snowmaking, grooming and base facilities, (ii) increasing the on-mountain bed base and (iii) marketing 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 three years with growth through acquisitions, as reflected in the acquisitions of the Mount Attitash/Bear Peak and Sugarbush resorts in 1994, the S-K-I Ltd. resorts in 1996 and the Steamboat and Heavenly ski resorts to be consummated in October 1997, and subsequent or proposed capital expenditures at those resorts. See "Business--Existing Resorts" and "--Acquired Resorts." These efforts have resulted in significant growth both in revenues and profitability. Historically, both the Company and the Acquired Resorts 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 23% of annual skier visits are generated). During the first and fourth fiscal quarters, the Company and the Acquired Resorts 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. 43 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 JULY JULY 30, 28, 27, 1995 1996 1997 ------- ------ ------ Revenues Resort.................................................................. 85.5% 86.5% 95.2% Real estate............................................................. 14.5 13.5 4.8 ------- ------ ------ Total revenues........................................................ 100.0 100.0 100.0 ------- ------ ------ Expenses Cost of operations including wages, maintenance and supplies............ 54.3 56.9 62.6 Cost of real estate sold................................................ 7.3 8.0 3.9 Marketing, general and administrative................................... 17.2 15.4 14.9 Depreciation and amortization........................................... 7.1 9.2 10.4 ------- ------ ------ Total other expenses.................................................. 85.9 89.5 91.8 ------- ------ ------ Income from operations.................................................... 14.1 10.5 8.2 Commitment fee............................................................ -- 2.0 -- Interest expense.......................................................... 4.0 6.4 13.5 ------- ------ ------ Income (loss) before provision for income taxes and minority interest in loss of subsidiary...................................................... 10.1 2.1 (5.3) Provision (benefit) for income taxes...................................... 0.7 5.3 (2.1) ------- ------ ------ Income (loss) before minority interest in loss of subsidiary.............. 9.4 (3.2) (3.2) Minority interest in loss of subsidiary................................... -- 0.2 0.1 ------- ------ ------ Net income (loss)......................................................... 9.4% (3.0)% (3.1)% ------- ------ ------ ------- ------ ------
FISCAL YEAR ENDED JULY 27, 1997 COMPARED TO FISCAL YEAR ENDED JULY 28, 1996 Resort revenues in fiscal 1997 were $166.9 million, an increase of $103.4 million, or 162.8%, as compared to resort revenues of $63.5 million in fiscal 1996. This increase was due primarily to the addition of the S-K-I resorts in June 1996, which accounted for $106.6 million, which was offset by $3.2 million attributable to a decrease in revenues due to the divestiture of the Cranmore ski resort and an increase in resort revenues at the Company's other resorts. Revenues from real estate operations in fiscal 1997 were $8.5 million, a decrease of $1.4 million, or 14.1%, as compared to revenues from real estate operations of $9.9 million in fiscal 1996. This decrease was due primarily to all quartershare units at the Summit Hotel at Sunday River being fully sold by July 1996. The Company has completed construction of the Grand Summit Hotel at the Attitash/Bear Peak ski resort and began closing on quartershare unit sales thereof at the Grand Summit Hotel on April 6, 1997. As of July 27, 1997 the Grand Summit at Attitash/Bear Peak had $5.0 million in quartershare unit sales. Cost of resort operations in fiscal 1997 were $109.8 million, an increase of $68.0 million, or 162.7%, as compared to cost of resort operations of $41.8 million in fiscal 1996. This increase was due primarily to the addition of the S-K-I resorts. Cost of real estate operations in fiscal 1997 were $6.8 million, an increase of $1.0 million, or 17.2%, as compared to cost of real estate operations of $5.8 million in fiscal 1996. This increase was due to pre-construction activities on the hotel projects that began construction in the fourth quarter of the year ended July 27, 1997 and costs related to the sales of quartershares at the Grand Summit at Attitash/Bear Peak. 44 Marketing, general and administrative expenses in fiscal 1997 were $26.1 million, an increase of $14.8 million, or 131.0%, as compared to marketing, general and administrative expenses of $11.3 million in fiscal 1996. This increase was due to the addition of the S-K-I resorts, which account for an increase of $11.9 million. The remaining difference of $2.9 million is due to a decrease in expense of $0.5 million due to the divestiture of the Cranmore ski resort and an increase in expense of $3.4 million due to increased marketing activity at the pre-merger resorts. Depreciation and amortization expenses in fiscal 1997 were $18.3 million, an increase of $11.5 million, or 169.1%, as compared to depreciation and amortization expenses of $6.8 million in fiscal 1996. This increase was due primarily to the addition of the S-K-I resorts, which account for an increase of $10.2 million. The remainder of the increase results from capital improvements and the amortization of goodwill and prepaid loan fees that did not exist prior to the acquisition of the S-K-I resorts. FISCAL YEAR ENDED JULY 28, 1996 COMPARED TO FISCAL YEAR ENDED JULY 30, 1995. Resort revenues in fiscal 1996 were $63.5 million, an increase of $16.7 million, or 35.7%, as compared to resort revenues of $46.8 million in 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 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 the S-K-I resorts for the final month of fiscal 1996. Real estate revenues in fiscal 1996 were $9.9 million, an increase of $2.0 million, or 24.3%, as compared to real estate revenues of $7.9 million in 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 in fiscal 1996 were $41.8 million, an increase of $12.1 million, or 40.7%, as compared to cost of operations of $29.7 in 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) $2.9 million attributable to the inclusion of the S-K-I resorts for the final month of fiscal 1996. Cost of real estate sold in fiscal 1996 was $5.8 million, an increase of $1.9 million, or 48.7%, as compared to cost of real estate sold of $3.9 in fiscal 1995. This increase was due to the increased real estate sales volume. Marketing, general and administrative expense in fiscal 1996 were $11.3 million, an increase of $1.9 million, or 20.2%, as compared to marketing, general and administrative expenses of $9.4 in fiscal 1995. This increase was 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) $0.9 million attributable to the inclusion of the S-K-I resorts for the final month of fiscal 1996. Depreciation and amortization in fiscal 1996 were $6.8 million, an increase of $2.9 million, or 74.4%, as compared to depreciation and amortization of $3.9 million in fiscal 1995. This increase was 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) $0.9 million attributable to the inclusion of S-K-I resort for the final month of fiscal 1996. Interest expense in fiscal 1996 was $4.7 million, an increase of $2.5 million, or 113.6%, as compared to interest expenses of $2.2 in fiscal 1995. This increase was due to (i) increased borrowings to support the 45 Company's capital program, (ii) the acquisitions of Mt. Cranmore and Sugarbush and (iii) $0.2 million attributable to the inclusion of the S-K-I resorts for the final month of fiscal 1996. Income tax expense in fiscal 1996 was $3.9 million, an increase of $3.5 million, or 875.0%, as compared to income tax expenses of $0.4 million in fiscal 1995. The majority of the increase in the Company's provision for income taxes was attributable to the conversion of the former S corporations to C corporations, offset by an $0.8 million benefit due to inclusion of the S-K-I resorts for the final month of fiscal 1996. RESULTS OF OPERATIONS OF THE ACQUIRED RESORTS FISCAL YEAR ENDED MAY 31, 1997 COMPARED TO FISCAL YEAR ENDED MAY 31, 1996 Total revenues in fiscal 1997 were $89.1 million, an increase of $4.4 million, or 5.2%, as compared to total revenues of $84.7 million in fiscal 1996. This increase was attributable primarily to an 8.4% increase in skier visits at Steamboat, offset partially by a 3.1% decrease in skier visits at Heavenly. Access to the Heavenly ski area was impeded for a portion of the 1996-97 ski season due to the temporary closure of U.S. Highway 50, which leads into South Lake Tahoe. Average revenue per skier visit remained relatively constant in fiscal 1997 compared to fiscal 1996. Cost of ski operations in fiscal 1997 were $36.7 million, an increase of $2.7 million, or 7.9%, as compared to cost of ski operations of $34.0 million in fiscal 1996. This increase was attributable primarily to higher variable costs associated with the increase in skier visits at Steamboat, in addition to higher snowgrooming and vehicle maintenance expenses at Heavenly. As a percentage of ski revenues, cost of ski operations increased to 54% in fiscal 1997 from 52% in fiscal 1996. Retail and ski rental expenses in fiscal 1997 were $8.6 million, an increase of $0.1 million, or 1.2%, as compared to retail and ski rental expenses of $8.5 million in fiscal 1996. Retail and ski rental expenses represented 73.3% of related revenues in fiscal 1997 as compared to 76.0% in fiscal 1996. Marketing, general and administrative costs in fiscal 1997 were $17.2 million, an increase of $0.7 million, or 4.2%, as compared to general, administrative and marketing costs of $16.5 million in fiscal 1996. Included in this expense item were fees paid to Kamori of $3.4 million in fiscal 1997 and $3.3 million in fiscal 1996. Marketing, general and administrative expense was 19.3% of revenue in fiscal 1997 as compared to 19.6% in fiscal 1996. Interest expense in fiscal 1997 was $10.7 million, a decrease of $1.2 million, or 10.1%, as compared to interest expense of $11.9 million in fiscal 1996. This decrease was attributable primarily to lower long-term debt balances due to principal payments and decreases in the average balances of seasonal borrowings. Net loss in fiscal 1997 was $3.4 million, a decrease of $1.1 million, or 24.4%, as compared to net loss of $4.5 million in fiscal 1996. This decrease was attributable primarily to the decrease in interest expense of $1.2 million discussed above. FISCAL YEAR ENDED MAY 31, 1996 COMPARED TO FISCAL YEAR ENDED MAY 31, 1995 Total revenues in fiscal 1996 were $84.7 million, a decrease of $3.9 million, or 4.4%, as compared to total revenues of $88.6 million in fiscal 1995. The decrease was attributable to a 15.3% decrease in skier visits at Heavenly, which was caused by a year of drought in the Pacific West in fiscal 1996 following the record snowfall experienced at the resort in fiscal 1995. Cost of ski operations in fiscal 1996, were $34.0 million, a decrease of $0.7 million, or 2.0%, as compared to cost of ski operations of $34.7 million in fiscal 1995. This decrease resulted from cost saving measures implemented at Heavenly to account for the decrease in skier visits. As a percentage of ski revenues, cost of ski operations increased to 52.4% in fiscal 1996 from 51.1% in fiscal 1995. 46 Retail and ski rental expenses in fiscal 1996 were $8.6 million, a decrease of $0.2 million, or 2.3%, as compared to retail and ski rental expenses of $8.8 million in fiscal 1995. Retail and ski rental expenses represented 76.0% of related revenues in fiscal 1996 as compared to 74.0% in fiscal 1995. Marketing, general and administrative costs in fiscal 1996 were $16.5 million, as compared to marketing, general and administrative costs of $16.5 million in fiscal 1995. Included in these costs were $3.3 million and $3.3 million in fiscal 1996 and fiscal 1995, respectively, of management and other fees paid to Kamori. Interest expense in fiscal 1996 was $11.9 million, a decrease of $0.1 million, or 0.1%, as compared to interest expense of $12.0 million in fiscal 1995. This decrease was attributable primarily to lower long-term debt balances due to principal payments and was offset by an increase in average balances of seasonal borrowings due to the decrease in skier visits at Heavenly as discussed above. Net loss in fiscal 1996 was $4.5 million, an increase of $0.6 million, or 15.4%, as compared to net loss of $3.9 million in fiscal 1995. This increase was attributable primarily to the decrease in skier visits at Heavenly, as discussed above, offset by an income tax benefit recorded in fiscal 1996 compared to an income tax provision recorded in fiscal 1995. SELECTED QUARTERLY OPERATING RESULTS The following table presents certain unaudited quarterly financial information of the Company for the eight quarters ended July 27, 1997. In the opinion of the Company's management, this information has been prepared on the same basis as the Consolidated Financial Statements appearing elsewhere in this Prospectus and includes all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial results set forth herein. Results of operations for any previous quarters are not necessarily indicative of results for any future period.
QUARTER ENDED OCT. 28, JAN. 28, APR. 28, JULY 28, OCT. 27, JAN. 26, APR. 27, JUL. 27, 1995 1996 1996 1996 1996 1997 1997 1997 ----------- ----------- ----------- --------- --------- --------- --------- --------- (IN THOUSANDS) Revenues Resort......................... $ 4,490 $ 26,451 $ 26,342 $ 6,206 $ 11,541 $ 64,533 $ 86,288 $ 4,561 Real Estate.................... 387 4,307 4,788 451 1,569 1,740 1,886 3,273 ----------- ----------- ----------- --------- --------- --------- --------- --------- Total Revenues................... 4,877 30,758 31,130 6,657 13,110 66,273 88,174 7,834 ----------- ----------- ----------- --------- --------- --------- --------- --------- Expenses Cost of operations............. 5,576 18,221 8,864 9,138 20,351 40,573 40,737 8,113 Cost of real estate sold....... -- -- 4,806 1,038 -- -- 2,061 4,752 Marketing, general and administrative............... 2,537 2,927 4,919 906 5,405 7,096 8,595 5,030 Depreciation and amortization................. 327 2,500 2,788 1,168 1,527 7,344 8,558 864 ----------- ----------- ----------- --------- --------- --------- --------- --------- Total operating expenses......... 8,440 23,648 21,377 12,250 27,283 55,013 59,951 18,759 ----------- ----------- ----------- --------- --------- --------- --------- --------- Income (loss) from operations.... $ (3,563) $ 7,110 $ 9,753 $ (5,593) $ (14,173) $ 11,260 $ 28,223 $ (10,925) ----------- ----------- ----------- --------- --------- --------- --------- --------- ----------- ----------- ----------- --------- --------- --------- --------- ---------
LIQUIDITY AND CAPITAL RESOURCES Following the Transactions, the Company's primary liquidity needs will be to fund capital expenditures, service indebtedness and support seasonal working capital requirements. In connection with the Transactions, the Company expects to enter into the New Credit Facility to obtain financing in an aggregate principal amount of up to $215 million. See "Description of Certain Indebtedness--The New Credit Facility." The New Credit Facility is expected to be comprised of a combination of term loan facilities and revolving loan facilities, of which approximately $75 million will be made available to ASC East and its subsidiaries and $140 million will be made available to the Company excluding ASC East and 47 its subsidiaries. The Company has received a proposal from a lender with respect to the New Credit Facility but has not yet received a binding commitment. The Company's primary sources of liquidity will be cash flow from operations of its subsidiaries and borrowings under the New Credit Facility, under which approximately $83.2 million is expected to be available for future borrowing after consummation of the Transactions, subject to compliance by the Company with the provisions thereof. The 12% Note Indenture contains restrictive covenants that, among other things, impose limitations on ASC East and its subsidiaries' ability to pay dividends or make other distributions to the Company. ASC East is currently prohibited from paying dividends or other distributions to the Company under these provisions. See "Risk Factors--Dependence on Highly Leveraged and Restricted Subsidiaries," "Use of Proceeds" and "Description of Certain Indebtedness." The Company intends to use borrowings under the New 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, buildup of retail and other inventories prior to the start of the skiing season, and to fund on-mountain capital expenditures. As of July 27, 1997, the Company was in violation of certain financial covenants in the Existing Credit Facility. As of September 24, 1997, all of such violations were waived by the lenders party to the Existing Credit Agreement and the financial covenants with respect to which the Company was in default were amended. In fiscal 1997, cash provided from operating activities of $7.3 million was attributable primarily to net losses of $5.5 million, offset primarily by depreciation and amortization of $18.3 million, non-cash interest of $3.3 million, release of escrowed funds of $12.6 million and an increase in accounts payable and other current liabilities of $6.8 million. Such cash flows from operating activities were reduced by a net investment of approximately $22.0 million in real estate developed for resale, much of which is expected to be completed and available for sale in fiscal 1998. In fiscal 1996, cash provided by operating activities of $7.5 million was attributable to a net loss of $2.2 million plus depreciation and amortization of $6.8 million, the addback of a $5.6 million non-cash tax charge related to the conversion from S corporation status to C corporation status, reduced by a reduction in accounts payable and other accrued liabilities of approximately $3.6 million. In fiscal 1995, cash flow from operating activities of $12.6 million was generated by net income of $5.1 million plus depreciation and amortization of $3.9 million and a $2.5 million increase in accounts payable and other accrued liabilities. Over the last three years, the Company's cash flows from investing activities have consisted primarily of payments for acquisitions, capital expenditures and proceeds from the sale of businesses. In fiscal 1997, the Company's net investments were $14.6 million, consisting primarily of purchases of businesses of $7.0 million and capital expenditures of $23.7 million, net of $15.0 million of proceeds from the sale of businesses and property and equipment. In fiscal 1996, the Company invested an aggregate of $122.6 million including $97.1 million to acquire businesses and $25.1 million of capital expenditures. In fiscal 1995, the Company invested $13.8 million, including $1.8 million of acquisitions and $12.0 million of capital expenditures. The Company generated cash from financing activities of $19.7 million in fiscal 1997, consisting primarily of net receipts under borrowing agreements and $16.4 million of net proceeds from the issuance of Series A Exchangeable Preferred Stock. In fiscal 1996, cash provided by financing activities of $116.9 million included $121.1 million of net proceeds from issuance of long-term subordinated notes and debentures and $17.1 million of net revolving loan borrowings, less $8.5 million of deferred financing costs, $13.6 million of payments on long-term debt and a $3.2 million shareholder distribution. In fiscal 1995, cash provided by financing activities of $2.4 million included $4.0 million of increases under lines of credit and revolving credit loans, net of repayments of long-term debt of $0.8 million and a $0.9 million shareholder distribution. The Acquired Resorts' capital expenditures for the fiscal 1997 were $5.3 million. The Company's 1997 summer capital improvement budget for on-mountain improvements at the Existing Resorts and the 48 Acquired Resorts is approximately $57.7 million. See "Business--Operating Strategy." Management plans to fund the completion of these capital expenditures from proceeds of the Canyons Securities, borrowings under the New Credit Facility and cash provided by operations. Management also plans to undertake hotel and condominium development and construction activities in fiscal 1998 at The Canyons, Sunday River, Killington, Mount Snow/Haystack, Steamboat, Sugarbush and Sugarloaf (see "Business--Real Estate Development"), incurring total estimated costs of approximately $100 million. It is expected that these activities will be conducted through special purpose subsidiaries with limited guarantees of associated indebtedness being provided by the Company, to the extent permitted by the New Credit Facility and the 12% Note Indenture. The Company's ability to guarantee the obligations of unrestricted real estate development subsidiaries is limited under the New Credit Facility to an aggregate amount of $25 million of indebtedness. In keeping with the Company's historical real estate development practices, and as required under the 12% Note Indenture, such development projects generally must attain pre-construction sales (evidenced by executed purchase agreements and security deposits from purchasers) equal to approximately 35% of total projected construction costs, in order for the project to proceed. Liquidity may 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 Company's capital expenditure program is regarded by management as important, both as to timing and scope, additional or subsequent capital spending can be deferred, in some instances for substantial periods of time, in order to address cash flow or other constraints. However, management believes that, in light of current competitive conditions in the ski industry, such initiatives cannot be deferred indefinitely or even for extended periods without adverse effects on skier visits, revenues and profitability. 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 the Company's resorts. 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, unlike the capital expenditure program, is not regarded by management as likely to result in substantial decreases in skier visits, revenues or profitability. The Company's liquidity also will be affected by the indebtedness which will be outstanding following the Transactions, including the indebtedness evidenced by the 12% Note Indenture and the New Credit Facility. Such indebtedness requires cash for debt service and imposes various restrictions on additional indebtedness, capital expenditures, creation of liens, sales of assets, permitted investments and mergers or other business reorganizations. See "Description of Certain Indebtedness." Management believes that the Company's cash flow from operations, combined with borrowings available under the New Credit Facility and additional borrowings to the extent permitted under the New Credit Facility and the 12% Note Indenture, will be sufficient to enable the Company to meet all of its cash requirements for the foreseeable future. The Company expects that independent financing facilities must be established to carry out its real estate development strategy. See "Risk Factors--Substantial Leverage and Financial Risks," "--Real Estate Development" and "--Growth Through Resort Expansion." 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 is produced in two key weeks--the Christmas and Presidents' Day vacation weeks, during which over 23% of annual skier visits are realized. Cash flow from operations in the first and fourth quarters of the year typically will not be sufficient to cover fixed charges in such quarters. See "Risk Factors--Seasonality; Fluctuations in Operating Results; Dependence on Weather Conditions." 49 BUSINESS THE COMPANY Following the Acquisition, the Company will be the largest operator of alpine resorts in the United States. The Company will own and operate nine ski resorts, including two of the five largest resorts in the United States based on 1996-97 skier visits, with at least one resort in each major skiing market. These nine resorts generated approximately 4.9 million skier visits, representing approximately 9.3% of total skier visits in United States, during the 1996-97 ski season. The Company's existing resorts include Sunday River and Sugarloaf in Maine; Attitash/Bear Peak in New Hampshire; Killington, Mount Snow/Haystack and Sugarbush in Vermont; and The Canyons, adjacent to Park City, Utah. On July 31, 1997, the Company entered into the Acquisition Agreement to acquire (i) the Steamboat ski resort and 168 acres of land held for development in Steamboat Springs, Colorado and (ii) the Heavenly ski resort near Lake Tahoe, California. After giving pro forma effect to the Transactions as if the Transactions occurred on July 29, 1996, the Company's resort revenues, Resort EBITDA and net loss for fiscal 1997 would have been approximately $253.4 million, $56.2 million and $3.6 million, respectively. The Existing and Acquired Resorts include several of the top resorts in the United States, including: (i) Steamboat, the number two overall ski resort in the United States (number three in North America) according to the September 1997 SNOW COUNTRY magazine survey and the fourth largest ski resort in the United States with over 1.0 million skier visits in the 1996-97 ski season; (ii) Killington, the fifth largest resort in the United States with over 1.0 million skier visits in the 1996-97 ski season; (iii) the three largest resorts in the Northeast (Killington, Sunday River and Mount Snow/Haystack) in the 1996-97 ski season; (iv) Heavenly, the second largest resort in the Pacific West Region and the 11th largest resort in the United States with approximately 700,000 skier visits in the 1996-97 ski season; and (v) Sugarloaf, the number one resort in the Northeast according to the September 1997 SNOW COUNTRY magazine survey. In addition to operating alpine resorts, the Company develops mountainside real estate which complements the expansion of its on-mountain operations. The Company has created a unique interval ownership product, the Grand Summit Hotel, in which individuals purchase quartershare interval interests while the Company retains ownership of core hotel and commercial properties. The initial sale of quartershare units typically generates a high profit margin, and the Company derives a continuing revenue stream from operating the hotel retail, restaurant and conference facilities and renting quartershare interval interests when not in use by their owners. The Company also develops alpine villages at prime locations within certain of its resort designed to fit that resort's individual characteristics. The Company's real estate development strategy was developed and implemented at the Sunday River resort, where over 1,350 units of residential real estate (including condominiums, townhouses and quartershares) have been developed and sold since 1983. A new Grand Summit Hotel was recently completed at Attitash/Bear Peak, one Grand Summit Hotel is currently under construction at each of Killington, Sunday River and Mount Snow/Haystack, and a hotel at Sugarbush is near completion of the permitting process. These hotels will have an aggregate of approximately 2,500 units, with preconstruction sales contracts currently totaling over $45 million (representing 845 units). In addition the Company has over 7,000 acres of real estate available for future development at its resorts, providing the capacity to support over 30,000 residential units over the next 15 to 20 years. In addition, the Company operates golf courses at its resorts and conducts other off-season activities. Such off-season activities accounted for approximately 11% of the Company's resort revenues for fiscal 1997. The Company's primary strength is its ability to improve resort operations by integrating investments in on-mountain capital improvements with the development of mountainside real estate. Since 1994, the Company has increased skier visits by 10.0% in the aggregate for the three resorts that it has owned for multiple seasons. In addition, the Company has increased its market share of skier visits in the northeastern United States from approximately 21.8% in the 1995-96 ski season to approximately 24.4% in the 1996-97 ski season (after giving pro forma effect to its acquisition of the Killington, Mount Snow/ 50 Haystack and Sugarloaf ski resorts as if such acquisitions had occurred on July 30, 1995). Management believes that the Acquired Resorts will provide the Company with several significant operating benefits, including: (i) enhanced cross-marketing of its resorts on a national basis; (ii) purchasing and other economies of scale; and (iii) implementation of the Company's operating strategy at a more diversified resort base. Set forth below is an organizational chart of the Company and its material operating subsidiaries and the principal assets owned by each such entity: [CHART] ALPINE RESORT INDUSTRY There are approximately 750 ski areas in North America. In the United States, approximately 507 ski areas generated over 52 million skier visits during the 1996-97 ski season. Since 1985, the ski resort industry has undergone a period of consolidation and attrition resulting in a significant decline in the total number of ski areas in North America. The number of ski resorts in the United States has declined from approximately 735 in 1983 to approximately 507 in 1997, although the number of skier visits has remained relatively flat. Despite the recent consolidation trend overall, ownership of the smaller regional ski resorts remains highly fragmented. The Company believes that technological advances and rising infrastructure costs are the primary reasons for the ski resort industry consolidation, and that further consolidation is likely as smaller regional resorts are acquired by larger resort operators with more sophisticated management capabilities and increased availability of capital. In addition, the ski resort industry is characterized by significant barriers to entry because the number of attractive sites is limited, the costs of resort development are high, and environmental regulations impose significant restrictions on new development. 51 The following chart shows a comparison of the industry-wide skier visits compared to the Company's skier visits in the U.S. regional ski markets during the 1996-97 ski season:
PERCENTAGE SKIER 1996-97 OF VISITS TOTAL TOTAL AT COMPANY SKIER SKIER COMPANY MARKET GEOGRAPHIC REGION VISITS* VISITS RESORTS SHARE COMPANY RESORTS - --------------------------- ------ ------- ----- ------- ----------------------------------- (SKIER VISITS IN MILLIONS) Northeast.................. 12.4 23.7% 3.0 24.2% Killington, Sunday River, Mount Snow/Haystack, Sugarloaf, Sugarbush, Attitash/Bear Peak Southeast.................. 4.2 8.0 -- -- -- Midwest.................... 7.1 13.5 -- -- -- Rocky Mountain............. 18.9 36.1 1.2 6.3 The Canyons, Steamboat Pacific West............... 9.8 18.7 0.7 7.1 Heavenly ------ ------- ----- ------- U.S. Overall............. 52.4 100.0% 4.9 37.6% ------ ------- ----- ------- ------ ------- ----- -------
- ------------------------ * Source: Kottke National End of Season Survey 1996/97 Final Report. United States ski resorts range from small operations which cater primarily to day skiers from nearby population centers to larger resorts which attract both day skiers and destination resort guests. Management believes that day skiers focus primarily on the quality of the skier experience and travel time, while destination travelers are attracted to the number and type of amenities available and activities offered, as well as the perceived overall quality of the vacation experience. Destination guests generate significantly higher resort operating revenue per skier day than day skiers because of their additional spending on lodging, food and other retail items over a multiple-day period. Since 1985, the total number of skier visits has been relatively flat. However, according to the National Ski Area Association, the number of skier visits represented by snowboarders in the United States has increased from approximately 6.4 million in the 1994-95 ski season to approximately 9.3 million in the 1996-97 ski season, an increase of approximately 45.3%. Management believes that snowboarding will continue to be an important source of lift ticket, skier development, retail and rental revenue growth for the Company. The Company believes that it is well-positioned to capitalize on certain favorable recent trends and developments affecting the alpine resort industry in the United States, including (i) the 66.7 million members of the "baby boom" generation that are now approaching the 40 to 59 year age group where discretionary income, personal wealth and pursuit of leisure activities are maximized (this group is estimated to grow by 16.7% over the next 23 years), (ii) the "echo boom" generation (children of baby boomers) is emerging as a significant economic force as they begin to enter the prime entry age for skiing, snowboarding and other "on-snow" sports, (iii) advances in ski equipment technology such as development of parabolic skis which facilitate learning and make the sport easier to enjoy, (iv) the continued growth of snowboarding as a significant and enduring segment of the industry, which is increasing youth participation in alpine sports and (v) a greater focus on leisure and fitness. There can be no assurance, however, that such trends and developments will continue to have a favorable impact on the ski industry. OPERATING STRATEGY The Company believes that the following key operating strategies will allow it to increase revenues and profitability by capitalizing on its position as a leading mountain resort operator and real estate developer. 52 High Impact Capital Improvements The Company attracts skiers to its resorts by creating a superior skiing experience through high impact capital investments in on-mountain facilities. The Company focuses its investments on increasing lift capacity, expanding skiable terrain and snowmaking coverage, and developing other exciting alpine attractions. For example, during the last two years the Company has (i) created diverse skiing experiences such as the Oz bowl and the Jordan Bowl at Sunday River, (ii) developed above tree-line snowfields at Sugarloaf, (iii) installed heated eight-passenger high speed gondolas at Killington and The Canyons and (iv) built one of the longest and fastest chairlifts in the world to interconnect Sugarbush's North and South mountains. Since 1994, when the Company began implementing its acquisition strategy, the Company has increased lift capacity, skiable terrain and snowmaking coverage at its resorts. The 1997 summer capital improvement budget for on-mountain improvements totals over $57.7 million, approximately $18.2 million of which will be invested at The Canyons and approximately $7.0 million of which will be invested at the Acquired Resorts. Integration of Investments in Resort Infrastructure and Real Estate The Company develops mountainside real estate that complements its investments in ski operations to enhance the overall attractiveness of its resorts as vacation destinations. Management believes that this integrated approach results in growth in overall skier visits, including multi-day visits, while generating significant revenues from real estate sales and lodging. Investment typically begins with on-mountain capital improvements such as the creation of new lifts, trails, expanded snowmaking capability, additional restaurants and improved ski schools. As resort attendance increases, the Company develops mountainside real estate to provide accommodations for the increased number of resort guests. The Company carefully manages the type and timing of real estate development to achieve capital appreciation and high occupancy of accommodations. The Company's integrated investment strategy was developed and refined at its Sunday River resort, where it has sold over 1,350 units of residential real estate since 1983. During that same period, annual skier visits at Sunday River increased from approximately 50,000 to over 550,000, representing an approximate 18% compound annual growth rate. Mountainside Real Estate Development The Company's real estate development strategy is designed to capitalize on the 7,000 acres of developable land it will control at or near its resorts and its 15 years of experience in real estate development. Including the Acquired Resorts, the Company owns or has rights to land providing the capacity to develop over 30,000 residential units. The Company's resort real estate development strategy is comprised of three distinct components (i) Grand Summit quartershare hotels, (ii) alpine village development and (iii) discrete resort-specific projects. Residential units in Grand Summit Hotels are sold in quartershare interval interests that allow each of four quartershare unit owners to use the unit for 13 weeks divided evenly over the year. The core commercial areas in the hotels are retained and operated by the Company and include a lobby area, a sports club, retail shops, restaurants and banquet and conference facilities. Unit owners may use the unit during their allotted weeks or make the unit available for rental by the Company under a management agreement that allows the Company to retain up to 45% of rental revenues. In addition to its Grand Summit Hotels, the Company has identified several areas for development of alpine villages unique to their resort locations that consist of carefully planned communities integrated with condominiums, luxury townhouses, single family luxury dwellings or lots and commercial properties. Each of the Company's resorts also has the potential for additional real estate development involving discrete projects tailored to the characteristics of the particular resort. 53 Increase Revenues Per Skier The Company seeks to increase revenues per skier by managing ticket yields and expanding revenue sources at each resort. Management seeks to increase non-lift ticket revenue sources by increasing point-of-sale locations and sales volume through retail stores, food and beverage services, equipment rentals, skier development, lodging and property management. In addition, management believes that aggressive cross-selling of products and programs (such as the Company's frequent skier and multi-resort programs) to resort guests increases resort revenues and profitability. The Company believes it can increase ticket yields by managing ticket discounts, closely aligning ticket programs to specific market segments, offering multi-resort ticket products and introducing a variety of programs that offer packages which include tickets with lodging and other services available at its resorts. During the 1996-97 ski season, the Company increased its average yield per skier visit by approximately 2.9% as compared to the 1995-96 ski season. The Company intends to further increase revenues by implementing a property management program at the Acquired Resorts. In addition to its on-mountain activities, the Company is expanding its retail operations by establishing retail stores in strategic high traffic and recognized retail districts such as Freeport, Maine; North Conway, New Hampshire; and South Lake Tahoe, Nevada, thereby strengthening the name and image of the Company and its resorts. Innovative Marketing Programs The Company's marketing program is designed to (i) establish a nationally recognized high quality name and image, while promoting the unique characteristics of its individual resorts, (ii) capitalize on cross-selling opportunities and (iii) enhance customer loyalty. The Company engages in joint marketing programs with nationally recognized commercial partners such as Mobil, Budweiser, Pepsi/Mountain Dew, Visa, FILA and Rossignol. Management believes these joint marketing programs create a high quality image and a strong market presence on a regional and national basis. In addition, the Company utilizes loyalty based incentive programs such as the Edge Card, a private label frequent skier program in which participants receive credits towards lift tickets and other products. The Company utilizes a variety of marketing media including direct mail, television and the Internet. Direct mail marketing efforts include the Company's "SNO" magazine, which targets the 18 to 30 year age group and currently has a circulation of over 300,000 copies per issue. Television marketing efforts include targeted commercials and programming such as the MTV Winter Lodge, which is hosted by MTV and targets teens and young adults. Internet marketing efforts include a Company sponsored website at www.peaks.com featuring photographs and detailed information about the Company's resorts and current skiing conditions. The Company's aggregate marketing budget for fiscal 1998 is approximately $28 million, including the value of contributions from strategic commercial marketing partners. Capitalize on a Multi-Resort Network The Company's network of resorts provides both geographic diversity and significant operating benefits. The Company believes its geographic diversity (i) reduces the risks associated with unfavorable weather conditions, (ii) insulates the Company from economic slowdowns in any particular region, (iii) increases the accessibility and visibility of the Company's network of resorts to the overall North American skier population and (iv) enables the Company to offer a wide range of mountain vacation alternatives. The Company believes that its ownership of multiple resorts also provides the opportunity to (i) create the industry's largest cross-marketing program, (ii) achieve efficiencies and economies of scale in purchasing goods and services, (iii) strengthen the distribution network of travel agents and tour operators by offering a range of mountain resort alternatives, consistent service quality, convenient travel booking and incentive packages, (iv) establish performance benchmarks for operations across all of the Company's resorts, (v) utilize specialized individuals and cross-resort teams at the corporate level as resources for the 54 entire Company and (vi) develop and utilize information and technology systems for application across all of the Company's resorts. Growth through Acquisitions Since fiscal 1994, the Company has achieved substantial growth in its business through acquisitions. The Company intends to consider future acquisitions of large well-established destination resorts as well as smaller "feeder" resorts. The Company focuses on acquiring larger resorts where it believes it can improve profitability by implementing the Company's integrated real estate development and on-mountain capital improvement strategy. The Company also believes that by acquiring smaller regional resorts which have a strong local following it can capitalize on a broader customer base to cross-market its major destination resorts. The acquisition of less developed resorts may also offer opportunities for expansion. The Company, however, is effectively prohibited from acquiring additional resorts in New England as a result of antitrust concerns. Historically, the Company has financed resort acquisitions through private and public offerings of debt securities. The Company expects to finance future acquisitions through a combination of internally generated funds, bank borrowings and public offerings or private placements of equity and/or debt securities. Following the Transactions, the Company will be highly leveraged. See "Risk Factors-- Substantial Leverage and Financial Risks," "--Growth Through Acquisitions; Integration of Acquired Resorts; Ability to Finance Acquisitions" and "Description of Indebtedness--The New Credit Facility." Expand Golf and Convention Business The Company is one of the largest owners and operators of resort golf courses in New England and seeks to capitalize on this status to increase off-season revenues. Sugarloaf, Killington, Mount Snow and Sugarbush all operate championship resort golf courses. The Sugarloaf course, designed by Robert Trent Jones Jr., is rated as one of the top 25 upscale courses in the country according to the May 1996 GOLF DIGEST magazine survey and one of the top 25 public courses according to the May 1996 GOLF magazine survey. In addition, a championship course designed by Robert Trent Jones, Jr. is currently under construction at Sunday River. The Company also operates eight golf schools at locations along the east coast from Florida to Maine. The Company's golf program and other recreational activities draw off-season visitors to the Company's resorts and support the Company's growing off-season convention business, as well as its real estate development operations. 55 RESORTS The following table summarizes certain key statistics of the Company's resorts after giving effect to the Company's summer 1997 capital improvement program:
SNOWMAKING 1996-97 SKIABLE VERTICAL TOTAL COVERAGE SKIER TERRAIN DROP LIFTS (% OF SKI VISITS RESORT (YEAR ACQUIRED) (ACRES) (FEET) TRAILS (HIGH-SPEED) ACRES) LODGES (000S) - ---------------------------------------- ------- ------- ------ ---------- -------- ----- --------- Killington (1996)....................... 1,200 3,150 212 33(8) 56.0% 8 1,000 Sunday River (1980)..................... 654 2,340 126 17(4) 92.0 4 557 Mount Snow/Haystack (1996).............. 768 1,700 133 26(3) 70.0 5 560 Sugarloaf (1996)........................ 1,400 2,820 122 14(2) 87.4 1 336 Sugarbush (1995)........................ 432 2,650 112 18(4) 67.4 5 362 Attitash/Bear Peak (1994)............... 273 1,750 60 11(1) 89.7 2 210 The Canyons (1997)...................... 2,400 2,580 74 9(3) 8.3 1 100 Steamboat (1997)........................ 1,879 3,668 135 21(4) 13.6 4 1,103 Heavenly (1997)......................... 4,800 3,500 82 27(5) 5.7 7 693 ------- ------- ------ ---------- --- ----- --------- Total............................... 13,806 1,056 176(34) 37 4,921 ------- ------ ---------- ----- --------- ------ ---------- ----- ---------
Since acquiring each of the Existing Resorts, the Company has committed its resources to create a superior skiing experience by increasing lift capacity, skiable terrain and snowmaking coverage. The following chart shows the percentage increase in lift capacity, skiable terrain and snowmaking coverage since the date of acquisition of each resort after giving effect to the Company's summer 1997 capital improvement program:
% INCREASE IN KEY OPERATING CAPACITIES FROM DATE OF RESORT ACQUISITION --------------------------------- LIFT CAPACITY (SKIERS SKIABLE PER TERRAIN SNOWMAKING RESORT (YEAR ACQUIRED) HOUR) (ACRES) COVERAGE - ------------------------------------------------------------- ------ ----- ------ Killington (1996)............................................ 51% 36% 56% Sunday River (1980)(1)....................................... 28 23 26 Mount Snow/Haystack (1996)................................... 6 7 1 Sugarloaf (1996)............................................. 9 4 4 Sugarbush (1995)............................................. 56 9 56 Attitash/Bear Peak (1994).................................... 48 34 34 The Canyons (1997)........................................... 100 18 100 ------ ----- ------ Weighted Average......................................... 33% 38% 30% ------ ----- ------ ------ ----- ------
- ------------------------------ (1) Does not include capital improvements completed prior to 1994. EXISTING RESORTS KILLINGTON. Killington, located in central Vermont, is the largest ski resort in the northeast and the fifth largest in the United States, with over 1.0 million skier visits in 1996-97. Killington is a seven-mountain resort consisting of approximately 1,200 acres with 212 trails serviced by 33 lifts. The resort has a 4,241 foot summit and a 3,150 foot vertical drop. The resort's base facilities include eight full-service ski lodges, including one located at the top of Killington Peak. In December 1996, the Company acquired the Pico Mountain ski resort located adjacent to Killington and integrated the two resorts. Management believes the size and diversity of skiable terrain at Killington make it attractive to all levels of skiers and one of the most widely recognized of the Company's resorts with regional, national and international clientele. 56 The on-mountain accommodations at Killington consist of approximately 4,700 beds. The off-mountain bed base in the greater Sherburne, Vermont area is approximately 12,000 beds. Killington also owns and operates nine retail shops, seven rental and repair shops, a travel and reservation agency and a cable television station. At the base of Pico Mountain, the Company owns a well developed retail village and a health club. Killington is a year-round resort offering complete golf amenities including an 18-hole championship golf course, a golf school, a pro shop, a driving range and a tennis school. Notwithstanding that it is the largest ski resort in the Northeast, the Company has identified Killington as one of its most underdeveloped resorts. Since its acquisition in June 1996, the Company has invested $20.5 million in capital improvements to update Killington's snowmaking, trail and lift systems, and to develop base facilities and real estate potential at the base areas. Major improvements and enhancements to the resort completed since June 1996 include (i) installation of two high speed quad lifts, (ii) installation one high-speed gondola to service the Peak Restaurant at the Killington summit and to replace the old Killington Peak double chair, (iii) construction of a new children's center and related base area improvements and (iv) an increase in snowmaking capacity and coverage to approximately 56%. Management expects the gondola to increase summer revenues by attracting summer tourists for sightseeing and dining. The Company's three-year capital program for the 1998-01 ski seasons includes the interconnection of lift and trail systems between the Killington and Pico resorts. The interconnection of the two mountains will result in a 16% increase in lift capacity and an additional 110 acres (9%) of skiable terrain. Other improvements include connecting the resort to a nearby reservoir in 1998 through a 1.8 mile pipeline, which, when combined with other new water sources accessed via the pipeline, will expand snowmaking capacity by approximately 62%. SUNDAY RIVER. Sunday River, located in the western mountains of Maine, approximately a three-hour drive from Boston, is New England's third largest ski resort with over 550,000 skier visits in 1996-97. Extending over eight interconnected mountain peaks, its facilities consist of approximately 654 acres of skiable terrain and 126 trails serviced by 17 lifts. The resort has a 3,140 foot summit and a 2,340 foot vertical drop. The Company believes Sunday River has one of the most modern lift systems in the Northeast. Sunday River has four base lodges, one of which is located at the top of North Peak. The on-mountain accommodations of Sunday River consist of approximately 5,400 beds including 714 condominium units and 648 quartershare units at the Summit Hotel. The off-mountain bed base in greater Bethel, Maine totals approximately 2,000 beds. The resort owns and operates five ski shops, five 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 and approximately 714 condominium units. In addition, the Company is currently constructing a 588-unit Grand Summit Hotel at Sunday River's Jordan Bowl which is scheduled to open in December 1997. Since 1981, the Company has continually invested in capital improvements at Sunday River to expand and improve its on-mountain facilities and in real estate development. The most recently completed improvements include the creation of new skiing attractions at the Oz bowl and the Jordan Bowl which added approximately 158 acres (32%) of skiable terrain. In addition, Sunday River's 1997 capital program includes (i) installation of a new high speed quad lift to North Peak, (ii) complete renovation of its largest base lodge to improve skier amenities and increase retail and food and beverage space and (iii) an upgrade of other facilities located at the resort. In addition, the Company recently completed preliminary construction of a three mile scenic access road to the Jordan Bowl area and a Robert Trent Jones, Jr. championship golf course is currently under construction. Management believes that Sunday River has significant growth potential with over 325 acres of land at the base of the new Jordan Bowl area which are planned for development of extensive base facilities and a new Grand Summit Hotel. Additionally, there are over 4,000 acres of undeveloped land owned by the Company and 3,000 acres for which the Company holds purchase options that are suitable for development as skiable terrain. 57 MOUNT SNOW/HAYSTACK. Mount Snow, located in Brattleboro, Vermont, the second largest ski resort in the Northeast with 560,000 skier visits in 1996-97, is the southernmost of the Company's resorts. A large percentage of the skier base for Mount Snow derives from Massachusetts, Connecticut and New York. The resort consists of two mountains separated by approximately three miles, which have been combined under single management. Its facilities consist of 133 trails and approximately 768 acres of skiable terrain serviced by 26 lifts. The resort has a 3,580 foot summit and a 1,700 foot vertical drop. The resort has five full-service base lodges. Mount Snow's on-mountain bed base currently consists of 1,280 beds. The off-mountain bed base in the greater Dover, Vermont area has approximately 7,300 beds. The resort owns and operates eight retail shops, four 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, eight golf schools throughout the east coast, a mountain bike school, a 92-room hotel and a low-voltage local television station. Since its acquisition in June 1996, the Company has invested approximately $11.0 million in capital improvements to the resort, including the installation of two high speed quad chairlifts and increasing skiable terrain and snowmaking capacity and coverage. The capital improvements for summer 1997 include $2.6 million for additional lift capacity and over $500,000 for increased snowmaking capacity and base area expansion such as expanded retail and food and beverage outlets to complement the new Grand Summit Hotel. The Company's three-year capital program for the 1998-01 ski seasons includes three new high speed detachable quad lifts and conversion of an existing quad lift to a high speed detachable lift. The Company plans to expand Mount Snow's lodges to provide a new children's center, a new nightclub and more retail, food and beverage and guest service space. The Company also plans to expand snowmaking coverage and trails, adding approximately 100 acres of skiable terrain (representing an increase of approximately 13%). SUGARLOAF. Sugarloaf is located in Carrabassett Valley, Maine and was ranked as the number one overall ski resort in the East by the September 1997 SNOW COUNTRY magazine survey. Sugarloaf is a single mountain with approximately 1,400 acres of terrain and 122 trails covering approximately 530 acres serviced by 14 lifts. There are approximately 895 additional acres of off-trail skiable terrain. The mountain has a 4,237 foot summit and a 2,820 foot vertical drop. Sugarloaf offers one of the largest ski-in/ski-out base villages in the Northeast, containing numerous restaurants, retail shops and an abundance of lodging. Sugarloaf is widely recognized for its challenging terrain, including its snowfields, which represent the only lift-serviced above-treeline skiing in the Northeast. As a destination resort, Sugarloaf has a broad market, including areas as distant as New York, New Jersey, Pennsylvania and Canada. Sugarloaf operates a year-round conference center, a cross-country ski facility and an 18-hole championship golf course designed by Robert Trent Jones, Jr., which is rated by GOLF DIGEST and GOLF magazines as one of the top 25 public courses in the United States. Sugarloaf's slope side ski village consists of its base lodge, two hotels, banquet facilities for up to 800 people, retail stores, a rental and repair shop, a sports and fitness club, 900 condominium units, rental homes, restaurants and an extensive recreational path network. Improvements currently underway at Sugarloaf include a new high speed quad chair to service lower mountain terrain and an additional fixed grip quad chair accessing the snowfields. SUGARBUSH. Sugarbush, located in Vermont's Mad River Valley, features the three highest mountain peaks of any single resort in the East and was ranked as the ninth most popular ski area in North America by SKIING magazine in 1996. Extending over six mountain peaks, its facilities consist of 432 acres of skiable terrain and 112 trails serviced by 18 lifts. The resort has a 4,135 foot summit and a 2,650 foot vertical drop. The mountains are serviced by three base lodges and two summit lodges. 58 The on-mountain accommodations at Sugarbush consist of approximately 3,200 beds. The off-mountain bed base within the Mad River Valley totals approximately 6,600 beds. The resort operates three ski shops, three full-service restaurants and four cafeteria-style restaurants. 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. Since the acquisition of Sugarbush by the Company in October 1995, the Company has invested $19.5 million in capital improvements to expand and improve its on-mountain facilities. The most recently completed improvements include four high speed quad chairlifts, a 56% increase in snowmaking capacity, the creation of new glade skiing terrain, and numerous base area improvements. In addition, in 1997 expansions are scheduled to facilities at the base of Lincoln Peak which house children's programs, rental and repair services and retail outlets. As part of management's development plan, an 8,000 square foot addition to the Gate House Base Lodge and a new full service 12,000 square foot mid-mountain lodge for the top of the Gate House Express Chairlift are proposed for 1998. ATTITASH/BEAR PEAK. Attitash/Bear Peak, located in the Mount Washington Valley, New Hampshire, is one of New Hampshire's largest ski resorts. Covering two mountain peaks, its facilities consist of 273 acres of skiable terrain and 60 trails serviced by 11 lifts. The resort has a 2,350 foot summit and a 1,750 foot vertical drop. The resort benefits from its location in the heart of New Hampshire ski country and its proximity to the Town of North Conway and the Mt. Washington valley tourist area, and is widely recognized as a family-oriented resort. The mountains are serviced by two base lodges. The on-mountain accommodations of Attitash/Bear Peak consist of appromimately 1,700 beds. The off-mountain bed base in the Mt. Washington Valley area totals approximately 16,000 beds. The resort operates two ski shops, two full-service restaurants, three cafeteria-style restaurants and two bars. Since its acquisition in July 1994, the Company has invested approximately $10.0 million in capital improvements at Attitash/Bear Peak. The most recently completed improvements have been the development of the new Bear Peak area, construction of a modern base lodge facility, installation of a new high speed quad lift and trails. The summer 1997 capital program at Attitash/Bear Peak includes the addition of a triple-chair lift and increases in skiable terrain and snowmaking. The resort's three-year capital improvement program includes potential expansion into the Attitash bowl area and a proposed expansion into the National Forest area adjacent to the existing resort (both of which require the approval by the Forest Service), the installation of a high-speed six-passenger lift and a high-speed quad lift. In addition, in fiscal 1998 the Company expects to expand the children's center and to begin construction of a new 18-hole golf course. THE CANYONS. The Canyons, located in the Wasatch Mountains adjacent to Park City, Utah, is primarily an undeveloped ski resort with potential for future operational and real estate development. The resort generated approximately 100,000 skier visits in the 1996-97 ski season. Currently, the resort has approximately 1,700 acres of skiable terrain with an elevation of 9,380 feet and a 2,580 foot vertical drop. The area has one base lodge and one on-mountain restaurant. During the summer of 1997, the Company is investing approximately $18.2 million to develop and construct (i) an eight passenger high-speed gondola, (ii) five new quad lifts and to increase skiable terrain to approximately 2,400 acres at the resort, (iii) construction of a mid-mountain lodge which will begin operation prior to the opening of the resort on December 20, 1997. Its new Red Pine lodge will serve as the cornerstone of the Company's planned High Mountain Meadows real estate development located on a plateau at an elevation of 8,000 feet. Management believes the resort has significant growth potential due to its proximity to Salt Lake City, its undeveloped skiable terrain and its real estate development opportunities. The resort is located approximately 35 minutes from Salt Lake City and is accessed by a major state highway. Air transportation is provided through the Salt Lake City airport, which is a major regional hub with direct access from most 59 major domestic airports. The Salt Lake City area has been one of the fastest growing regions in the United States over the past several years, and the Park City area has an active real estate market undergoing rapid expansion. The Utah Winter Sports Park, which is located immediately adjacent to the resort, is scheduled to serve as the venue for the ski jumping, bobsled and luge events in the 2002 Winter Olympic Games. Management believes the 2002 Olympic Games will provide international exposure for the resort. The five-year capital plan currently calls for substantial development of the resort to be completed prior to the 2002 Olympic Games. Management believes that when The Canyons is fully developed, the resort could encompass over 7,200 acres of skiable terrain consisting of 14 mountain peaks with a maximum elevation of 10,000 feet, a vertical drop of approximately 3,400 feet, 22 high speed quad ski lifts and an eight passenger high speed gondola. In addition to the $18.2 million of capital improvements for the 1997-98 ski season, the Company estimates that it will need approximately $42.0 million for on-mountain capital improvements and approximately $150 million for real estate development in order to fulfill its five-year development plan for The Canyons. The Company plans to fund such capital improvements and real estate development from cash flow, bank borrowings or debt and/or equity offerings. See "Risk Factors--Substantial Leverage and Financial Risks" and "Description of Indebtedness--The New Credit Facility." ACQUIRED RESORTS STEAMBOAT. Steamboat is one of the premier ski resorts in the United States, ranked second overall by the September 1997 SNOW COUNTRY magazine survey and fourth nationally in skier visits for the 1996-97 ski season. Located in Steamboat Springs, Colorado and approximately three hours from Denver, Colorado, Steamboat is recognized for its "champagne" powder and tree skiing. In the 1996-97 ski season, Steamboat skier visits increased by 8.4%, to 1.1 million, from the 1995-96 ski season. U.S. Highway 40, a major east-west thoroughfare connecting the cities of Denver and Salt Lake City, is located approximately one mile west of the ski area. Steamboat is easily accessible through flights to the Denver, Colorado airport from many major U.S. cities. Steamboat has approximately 1,879 acres of skiable terrain which consists of 135 trails serviced by 21 lifts. Steamboat is making on-mountain improvements for the upcoming 1997-98 ski season, including the addition of a high-speed quad chairlift, approximately 260 acres of advanced/expert terrain in the Pioneer Ridge and snowmaking capacity. Lodge facilities are currently located in the base area and at three other points throughout the resort, Thunderhead, Four Points and Rendez Vous Saddle. Steamboat operates or leases 13 retail shops, four equipment rental shops, 15 miscellaneous retail shops and 19 food and beverage operations, having a total seating capacity of approximately 2,734. Steamboat's master plan calls for expansion to include Pioneer Ridge which will involve the installation of two detachable chair lifts servicing 27 open and graded trails for intermediate and expert skiers. Snowmaking covering 66 acres will be phased in over three years at Pioneer Ridge. The Morningside Park expansion will add one fixed grip chair lift servicing designated tree skiing and open bowl skiing area for intermediate skiers. Because the natural snowpack in Morningside Park is very high due to snow blowing over a ridge and depositing in the bowl, snowmaking is not needed in this area. The expansion into both areas will take place in three phases. Additionally, the resort has submitted an application to the Forest Service for conceptual approval to develop approximately 960 acres of contiguous forest lands. There can be no assurance, however, that the Company's application will be approved. See "Risk Factors "--Real Estate Development" and "--Growth through Resort Expansion"." HEAVENLY. Located on the south shore of Lake Tahoe in the states of Nevada and California, Heavenly consists of two peaks with a maximum elevation of approximately 10,000 feet, a 3,500 foot vertical drop with approximately 4,800 acres of skiable terrain and 82 trails serviced by 27 lifts. Heavenly is the second largest resort in the Pacific West Region with approximately 700,000 skier visits for the 1996-97 60 ski season. Snowmaking covers over 268 acres of skiable terrain, representing approximately 43% of the trails. Access to the resort is primarily through the Reno Cannon International Airport and by automobile via Route 50 from San Francisco and Sacramento, California. There are three base lodges and four on- mountain lodge restaurants. There are no residential units or tourist accommodation units adjacent to the ski resort; however, there is a well developed 11,000 bed base in the greater South Lake Tahoe area. Heavenly's master plan was approved in 1996 and is being implemented by the Company. The plan calls for the improvement and expansion of winter and summer uses and support facilities at the resort. A six-person high-speed chairlift known as the Tamarack Express is currently under construction. Associated with the new lift will be three new ski runs, adding approximately 13 acres of new terrain. Snowmaking capacity will also be added to an existing trail serviced by the Tamarack Express. A primary objective of the plan is to refocus the primary entrance to the ski resort from the three existing base lodges (California, Stagecoach and Boulder) to the commercial core of South Lake Tahoe utilizing a new high capacity gondola. The gondola has been designed for year round sightseeing, while the top station will provide direct ski access to both the Nevada and California sides via three new lifts. Additional snowmaking coverage is contemplated which will increase existing coverage from approximately 268 acres to approximately 500 acres. The master plan provides for the construction of base facilities and new restaurants at Sky Meadows, East Peak Lake and California base. The Company is also contemplating an additional 1,852 food service seats through a new ski lodge at the top of the gondola and modifications to Boulder lodge. Other proposed improvements include replacement of two existing maintenance facilities. The master plan also provides for eight new lifts, including the gondola, and the removal of the existing West Bowl lift. The master plan also provides for the widening of some existing trails and construction of new trails, adding approximately 117 acres of skiable terrain. RESORT OPERATIONS The Company's resort revenues are derived from a wide variety of sources including lift ticket sales, food and beverage, retail sales including rental and repair, skier development, lodging and property management, golf, other summer activities and miscellaneous revenue sources. Lift ticket sales represent the single largest source of resort revenues and represent approximately 46% of total resort operations revenue for fiscal 1997. The following chart reflects the Company's sources of resort revenues (excluding the Acquired Resorts and The Canyons) across certain revenue categories as well as the percentage of resort revenues constituted by each category for fiscal 1997.
RESORT REVENUES FOR PERCENTAGE OF RESORT REVENUES FOR REVENUE SEGMENT YEAR ENDED JULY 27, 1997 YEAR ENDED JULY 27, 1997 - ----------------------------------------------- ------------------------------- ----------------------------------- (IN MILLIONS) Lift tickets................................... $ 77.2 46% Food and beverage.............................. 20.8 13 Retail sales................................... 19.9 12 Skier development.............................. 8.5 5 Lodging and property........................... 21.6 13 Golf, other summer activities, and miscellaneous................................ 19.0 11 ------- --- Total $ 167.0 100% ------- --- ------- ---
61 LIFT TICKET SALES. The Company manages its lift ticket programs and products so as to increase the Company's ticket yields. Lift tickets are sold to customers in packages including accommodations in order to maximize occupancy. In order to maximize skier visits during non-peak periods and to attract specific market segments, the Company offers a wide variety of incentive-based lift ticket programs. The Company manages its ticket yields during peak periods so as to maximize aggregate lift ticket revenues. The Company's new Magnificent 7 lift ticket program offers a multi-day, multi-resort lift ticket package and generated over $5 million in sales during the 1996-97 ski season. FOOD AND BEVERAGE. Food and beverage sales provide significant revenues for the Company. The Company owns and operates the food and beverage facilities at its resorts, with the exception of the Sugarloaf resort, which is under a long-term concession contract that pre-existed the Company's ownership. The Company's food and beverage strategy is to provide a wide variety of restaurants, bars, cafes, cafeterias and other food and beverage outlets. The Company's control of its on-mountain and base area food and beverage facilities allows it to capture a larger proportion of guest spending as well as to ensure product and service quality. The Company currently owns and operates 79 different food and beverage outlets and has five outlets being expanded or constructed. RETAIL SALES. Retail revenue aids in stabilizing the Company's daily and weekly cash flows, as the Company's retail shops tend to have the strongest sales on poor weather days. Across all of its resorts, the Company owns 28 retail shops and 18 ski rental shops. The large number of retail locations operated by the Company allows it to improve margins through large quantity purchase agreements and sponsorship relationships. On-mountain shops sell ski accessories such as goggles, sunglasses, hats, gloves, skis, snowboards, boots and larger soft goods such as jackets and snowsuits. In addition, all locations offer the Company's own logo-wear which generally provides higher profit margins than other retail products. In the non-winter seasons, the shops sell mountain bikes, in-line skates, tennis equipment and warm weather apparel. In addition, the Company plans to expand its retail operations, including expanding and opening new off-site retail facilities in high traffic areas, such as stores on the Killington Access Road and in the North Conway, New Hampshire retail district, and a discount sporting goods chain with locations in Maine. SKIER DEVELOPMENT. The Company has been an industry leader in the development of learn to ski programs. Its Guaranteed Learn to Ski Program was one of the first skier development programs to guaranty that a customer would learn to ski in one day. The success of this program lead to the development of "Perfect Turn," which management believes was the first combined skier development and marketing program in the ski industry. Perfect Turn ski professionals receive specialized training in coaching, communication, skiing and both selling related products and cross selling other resort goods and services. Perfect Turn is currently licensed to five resorts in the United States and Canada. The Company operates a hard goods marketing program at each of its resorts designed to allow customers to test skis and snowboards with ski professionals, purchase their equipment from those professionals and receive ongoing product and technological support through Perfect Turn. LODGING AND PROPERTY MANAGEMENT. The Company's lodging and property management departments manage its own properties as well as properties owned by third parties. Currently, the Company's lodging departments manage approximately 1,750 lodging units at the Existing Resorts. The lodging departments perform a full complement of guest services including reservations, property management, housekeeping and brokerage operations. Each resort has a welcome center to which newly arriving guests are directed. The center allocates accommodations and provides guests with information on all of the resort's activities and services. The Company's property management operation seeks to maximize the synergies that exist between lodging and lift ticket promotions. The Company's real estate development program is designed to ensure the continued growth of its lodging operation. Typically, newly constructed condominiums and townhomes are sold to owners who place the units into the optional rental program managed by the Company. The resulting growth in occupancy may increase skier visits and provide an additional source of fee revenue for the Company. 62 MARKETING PROGRAMS General. The Company's marketing program is designed to (i) build a nationally recognized high quality name and image while perpetuating the unique image of its individual resorts, (ii) capitalize on opportunities to cross-sell resorts and (iii) enhance customer loyalty. As part of its marketing strategy, the Company engages in joint marketing programs with nationally recognized commercial partners, such as Mobil, Budweiser, Pepsi/Mountain Dew, Visa, FILA and Rossignol, whose target demographics complement those of the Company. Management believes these joint marketing programs provide it with advantages in creating a favorable image and market presence, both regionally and on a national basis. In addition, the Company utilizes loyalty based incentive programs such as its private label Edge Card, in which participants get credit towards resort purchases. PROGRAMS AND PROMOTIONS. The Company's strategy is to develop new and innovative programs and promotions to increase skier visits, ticket yields, spending per skier visit and Resort EBITDA. Management plans to focus the 1997-98 ski season programs primarily on ski weeks, fun centers and the Company's new Edge Card. The fun center program develops activities targeted at family participation in alpine sports. Fun center programs include sponsored evening activities and non-skiing and snowboarding activities that enhance the overall vacation experience, such as snow tubing, ice skating, luge, snowcat rides, arcades and outdoor evening activities. The Company's Edge Card is a private label frequent skier card through which participants gain credit toward resort purchases. This card is the central focus of the Company's loyalty based incentive programs, which it believes will help retain skiers in the Company's resort network and expand the volume and scope of information available for marketing purposes. MEDIA STRATEGIES. The Company utilizes both traditional marketing media such as advertisements in industry and lifestyle publications and an increasing number of traditional marketing media. Advertisements also appear in publications such as MEN'S JOURNAL, CONDE NAST TRAVELER, THE BOSTON GLOBE and OUTSIDE magazines. The Company utilizes other marketing media such as direct mail, television and the Company's Internet site at www.peaks.com. PROMOTIONAL PARTNERS. The Company enhances its marketing budget through forming promotional partnerships with major sponsors. Each of these sponsors is selected because of similarity in demographic profile between its customer base and that of the Company. Sponsors include Mobil, Budweiser, Pepsi/ Mountain Dew, Visa, FILA and Rossignol. Working with its promotional partners, the Company formulates television, radio and special event programs and activities that are designed to appeal to the target demographic segment. GROUP SALES. In addition to advertisements directed at the vacation guest, the Company's marketing activities are focused on attracting ski groups, corporate meetings and convention business. During the 1996-97 ski season, the Company's Existing Resorts and the Acquired Resorts hosted over 1,000 groups. The Company is able to attract new conference business due to its expertise in providing professional planning services, recreational activities and high quality dining and lodging facilities. REAL ESTATE DEVELOPMENT General. The Company has been developing alpine resort real estate for over fifteen years as part of its integrated resort and real estate investment strategy. Since 1983, the company has sold over 1,350 units of residential real estate at Sunday River (including condominiums, townhouses and quartershare interval ownership interests). The three components of the Company's real estate development strategy are (i) the Grand Summit quartershare hotel concept, (ii) development of alpine villages, and (iii) resort-specific discrete projects. The Company believes it will have a significant real estate development pipeline over the next 10 to 15 years. According to industry sources, the interval ownership industry has grown at a compound annual growth rate of approximately 18% from 1980 to 1994, with interval ownership sales increasing from $490 million to $4.8 billion. According to the American Resort Development Association ("ARDA"), the median age and annual household income of an interval ownership buyer at the time of purchase are 50 63 years and $71,000, respectively. Industry statistics indicate that the interval ownership concept has achieved low market penetration, with approximately 3% penetration among households with income above $35,000 per year and 3.7% penetration among households earning more than $50,000 per year. The Company believes it has a competitive advantage over traditional timeshare developers due to (i) its inventory of developable real estate, (ii) the relative affluence of its resort guests and (iii) the market created by guest visitation at its resorts. These factors lower land and marketing costs relative to traditional time share developers allowing the sale of longer duration intervals which differentiate the Grand Summit Hotel from traditional timeshares. The following table summarizes certain key statistics relating to each of the Company's resort real estate holdings as of September 19, 1997 added since the Company acquired each respective resort.
RESIDENTIAL UNITS ------------------------------------------------------- DEVELOPMENT COMMENCEMENT RESERVED DATES FOR (FISCAL UNDER FUTURE RESORT YEAR) SOLD DEVELOPMENT(1) PRE-SOLD DEVELOPMENT(2) - ------------------------------ ------------ ----- ---------- ------ ----------- Sunday River.................. 1982 1,362 892 256 4,894 Sugarbush..................... 1996 -- 420 170 2,150 Attitash/Bear Peak............ 1996 124 880 3 219 Killington.................... 1997 -- 508 213 11,282 Mount Snow/Haystack........... 1997 -- 540 203 2,308 The Canyons................... 1997 -- 880 -- 5,992 Sugarloaf..................... 1998 -- 160 -- 1,820 Steamboat..................... 1998 -- 468 -- 3,005 Heavenly...................... 1998 -- 320 -- 30 ----- ----- ------ ----------- Total 1,486 5,068 845 31,700 ----- ----- ------ ----------- ----- ----- ------ ----------- COMMERCIAL SPACE (SQUARE FT) -------------------------------------- RESERVED FOR UNDER FUTURE RESORT COMPLETED DEVELOPMENT(1) DEVELOPMENT(2) - ------------------------------ --------- ----------- ------------ Sunday River.................. 206,000 33,900 216,500 Sugarbush..................... 1,800 32,800 30,200 Attitash/Bear Peak............ 40,800 -- 60,000 Killington.................... 17,000 38,300 349,400 Mount Snow/Haystack........... 2,200 43,000 169,600 The Canyons................... -- 14,900 406,100 Sugarloaf..................... -- -- 120,000 Steamboat..................... -- 30,000 203,300 Heavenly...................... -- -- 122,500 --------- ----------- ------------ Total 267,800 192,900 1,677,600 --------- ----------- ------------ --------- ----------- ------------
- ------------------------ (1) Includes all units or commercial space currently under construction or in the permitting process. Completed, but unsold units, currently totalling 293, are all located at Attitash/Bear Peak. None of the other units identified in the table as under development have been completed. (2) Based on, among other things, the Company's capital and development plan for the next 10-15 years, the Company's estimates for projected demand of units, and the availability of developable acreage. There can be no assurance, however, that the Company will choose to undertake, or will have adequate financing to complete, such development. See "Risk Factors--Real Estate Development." GRAND SUMMIT HOTELS. The Grand Summit Hotel is a unique interval ownership product which is based on the Company's successful Summit Hotel at its Sunday River resort. Each hotel is a condominium consisting of both residential and commercial units and includes: a three-level atrium lobby, two or more restaurants, retail space, a grand ballroom, conference space, a health club with an outdoor heated pool and other recreational amenities. The commercial space is retained by the Company and used to operate the core hotel business, while the residential units are sold in quartershare interests. Each quartershare consists of a 13-week ownership interest in a unit spread evenly across the year. At the Company's Sunday River Hotel, owners utilize the unit for an average of approximately three weeks out of a possible 13 weeks. Weeks that are not used by an owner are typically dedicated to the Company's optional rental program for rental to a third party on terms allowing the Company to retain up to 45% of gross rental revenue. Consequently, the Company benefits from revenue generated by (i) the sale of units, (ii) the recurring revenues from lodging rental revenue and (iii) other hotel operations. Quartershare owners participate in Resort Condominium International ("RCI"), the world's largest vacation interval exchange program. In a 1995 study sponsored by the Alliance for Timeshare Excellence and ARDA, the "exchange opportunity" was cited by purchasers of vacation intervals as one of the most significant factors in determining whether to purchase a vacation interval. Participation in the RCI program allows the Company's quartershare owners to exchange their occupancy right for an occupancy right in one of approximately 3,000 participating resorts worldwide. Grand Summit Hotels are rated in 64 RCI's highest exchange category, the Gold Crown Club, which permits the owner to exchange their interest for an interval at RCI's finer properties. The Company intends to operate an internal exchange program within its expanding Grand Summit Hotel network. The Company expects that the opportunity to exchange intervals at any of its resorts nationwide will enhance its loyalty programs, cross-marketing of resorts and unit sales opportunities. ALPINE VILLAGE DEVELOPMENT The Company is currently in the planning and permitting stage of developing alpine villages at The Canyons, Killington and Sunday River's Jordan Bowl. Each village will be characterized by its proximity to resort facilities, ski in/ski out access, dramatic landscape and resort specific design and architecture. THE CANYONS. Two distinct areas at The Canyons are in the permitting process for resort village development. One area consists of approximately 350 acres in the base area, 150 acres of which are controlled by the Company. The second area is the Company's High Mountain Meadows development consisting of approximately 120 acres located on a mid-mountain plateau at an elevation of over 8,000 feet. The base area is under a long-term lease that provides an option to purchase fee title to parcels within that area. The Company is negotiating a similar arrangement with the owner of the mid-mountain plateau area. The base area development is currently in the master planning process with county authorities. The base village will be a mix of residential and commercial space arranged in six neighborhoods designed to create an integrated base area community, anchored by a Grand Summit Hotel. The master plan provides for the integrated development of 150 acres of Company-controlled property, as well as approximately 200 acres of surrounding property owned by unrelated third parties who have elected to participate in the village development. The High Mountain Meadows development presents an opportunity to develop a mid-mountain base area surrounded by six of the resort's 14 mountain peaks. The mid-mountain village will be accessed by a four-mile scenic drive and an eight-passenger, high-speed heated gondola currently under construction. The village will serve as the base for skiing the surrounding mountains, creating access to an additional 2,000 vertical feet of skiable terrain. The primary lodge, the Red Pine Lodge, is currently under construction at the mid-mountain development and is expected to be completed for the 1997-98 ski season. The Company proposes to commence construction of a Grand Summit Hotel in Summer 1998. The village will consist of approximately two million square feet of compact, high density residential and commercial development. The development will be principally a pedestrian village characterized by resort lodging, luxury condominiums and ranches and mountain recreation properties. The zoning for the base area and High Mountain Meadows development is being revised in connection with a complete amendment of the county's general plan. The proposed amendment would permit extensive development in each area. Adequate sewer and water capacity are available in close proximity to the resort; however, such capacity must be purchased from third party vendors and the Company must construct the necessary infrastructure for transport to both developments. See "Risk Factors -- Development of The Canyons." KILLINGTON BASE AREA. In May 1997, the Company entered into an agreement with the State of Vermont to exchange essential wildlife habitat owned by the Company for approximately 1,050 acres of undeveloped land centrally located in the base area. As part of the Company's proposed development plan for Killington, this parcel will be combined with an existing 400 acre planned unit development adjacent to Killington's golf facilities and the resort's primary base area. The Company has retained Snow Engineering, an internationally recognized resort and mountain planning firm, to assist in the master planning of the village. The 400 acre planned unit development is specifically zoned for commercial development. The village will integrate four "neighborhoods" into a planned community containing a variety of real estate uses. The 1,050 acres to be acquired from the State must be rezoned to accommodate the planned development. The City of Rutland, Vermont and certain environmental groups traditionally active in ski resort development have entered into a memorandum of understanding designating the area as a growth zone to be utilized for development. 65 The Company believes that adequate water is available from nearby wells for both projects. Sewer capacity will be provided through the Company's connection, currently under construction, to a municipal sewer system with 600,000 gallons per day excess capacity. JORDAN BOWL AT SUNDAY RIVER. Jordan Village will be located on approximately 1,100 acres of a 4,000 acre undeveloped parcel owned by the Company at the western end of the existing resort and the center of the Company's landholdings. The village will rest at the base of the Jordan Bowl, one of the resort's most popular skiing areas. Development of Jordan Village began with the construction of a scenic four-mile access road from the existing resort center to the Jordan Village area and commencement of construction of a ski-in/ski-out 220-unit Grand Summit Hotel, which is expected to be operational during the 1997-98 ski season. Construction of a Robert Trent Jones, Jr. championship golf course also began in Summer 1997. The master plan for the area also contemplates a high density village surrounded by neighborhoods consisting of luxury townhouses and detached single family dwellings. The Jordan Bowl area is zoned for village development. No density restrictions apply to the area. The Company believes adequate water is available for contemplated development and Sunday River's sewage treatment facility has sufficient capacity to allow completion of the planned development of the resort. OTHER RESORT DEVELOPMENT Each of the Company's resorts has the potential for additional real estate development involving discrete projects tailored to the characteristics of the particular resort. There can be no assurances, however, that the Company will successfully pursue any of the development opportunities described below. STEAMBOAT. The Company believes that the real estate development potential at Steamboat is among the most significant of its resorts. The Company has acquired 168 acres of real estate held for development at or near the base area. Included in these properties are several locations the Company has targeted for development, including (i) a 26 acre parcel centrally located in Steamboat's Village Commercial Center, which is zoned for commercial development, (ii) a 47 acre site with potential ski-in/ski-out access located at Tennis Meadows, which could support a Grand Summit Hotel and related development and (iii) a 20 acre site zoned for over 275 units together with commercial development. The Company is also a 50% partner in Country Club Highlands Partnership, a residential development located at the Sheraton Golf Club consisting of 142 lots being built in several phases, of which 49 lots and 38 townhouse units remain to be developed. SUGARLOAF. Development plans have begun for the expansion of an existing hotel, a new Grand Summit Hotel, a high density condominium development and commercial space as an expansion to the existing alpine village. There are several planned developments including single family homes around the 18-hole Robert Trent Jones, Jr. championship golf course. Sugarloaf has over 1,100 acres of land held for development. MOUNT SNOW/HAYSTACK. There are several undeveloped sites at Mount Snow/Haystack with potential for future projects including renovation of the current base lodge, a 21 acre parcel which could support up to 72 three-bedroom units with direct ski lift access, and a two acre parcel for a convention center. Mount Snow/Haystack also owns an 800 acre parcel slated for a proposed golf course expansion, which could create the opportunity for substantial golf course frontage real estate development. In addition, there are approximately 30 acres of developable land at the base of Haystack. KILLINGTON. In addition to the development of Killington's alpine village and Grand Summit Hotel, there are three distinct real estate parcels available for development. At the base of the Skyeship Gondola, there is a 165 acre site commercially zoned for a 150-room hotel and 40,000 square feet of commercial real estate, or for up to 200 townhouse duplexes. At the Falls Brook area, located at Bear Mountain, there are approximately 376 acres available for real estate development. A chair lift and ski trails serve a major portion of the site. In addition, an 11 acre parcel with several hundred feet of frontage on U.S. Route 4 is zoned for single and multi-family dwellings, hotels, motels and lodging, office, retail space and restaurants. 66 SYSTEMS AND TECHNOLOGY Information Systems. The Company's information systems are designed to improve the ski experience through the development of more efficient guest service products and programs. The Company is currently implementing a comprehensive $3.2 million system and technology plan including (i) a radio frequency lift ticket scanning system that provides more accurate tracking, control and information on all ticket products, (ii) a direct-to-lift access system that allows skiers to bypass the ticket window and proceed directly to the lift with an individualized radio frequency card that directly debits their credit or frequent-skier card, (iii) a resort-wide guest charging system utilizing individualized credit cards that can be used to charge goods and services at most of the Company's facilities, (iv) an integrated customer database that tracks information regarding guest preferences and product purchasing patterns, (v) an extensive data communications network linking most point-of-sale locations through a central database, (vi) a central reservations system for use in the resort's rental management business and (vii) a skier development reservation and instructor scheduling system that simplifies the booking process and allows for optimal utilization of instructors. SNOWMAKING SYSTEMS AND TECHNOLOGY. The Company believes it operates the largest consolidated snowmaking operation in existence. Including the 1997 expansion currently underway, it has over 7,000 acres of snowmaking coverage. The Company's proprietary snowmaking software program enables it to produce what management believes is the highest quality man-made snow in the industry. The Company's snowmaking capability can be implemented at its western resorts resulting in an extended season and reliable snow conditions and consistent quality surfaces during unfavorable weather conditions. All of the Company's snowmaking systems are operated via computer-based control using industrial automation software and a variety of state of the art hardware and instrumentations. The Company utilizes an efficient ground based, tower based and fully automated snowgun nozzle technology and has developed software for determining the optimal snowmaking nozzle setting at multiple locations on the mountain. This system monitors the weather conditions and system capacities and determines the proper operating water pressure for each nozzle, eliminating guesswork and ensuring the ideal snow quality. The Company refers to this ideal quality product as "Retail Snow," a high quality, durable skiing surface with top to bottom consistency. All of the snowmaking systems are networked to provide the ability to view information from multiple locations within its resort network. Another unique feature of the Company's system is the current display of trail status, lift status, weather conditions and other various on mountain information at locations throughout each resort. Much of this information will also be available on the world wide web at the Company's and its individual resorts' web sites for the 1997-98 season. LEASED 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 approximately 1,500 acres, which constitute a substantial portion of its 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 uses approximately 1,915 acres pursuant to a special use permit issued by United States Forest Service dated May 17, 1995. The permit has a 40-year term expiring April 30, 2035. The special use permit has a renewal option which provides that it may be renewed if the use of the property remains compatible with the special use permit, the site is being used for the purposes previously authorized, and the ski area has been continually operated and maintained in accordance with all the provisions of the permit. Mount Snow leases approximately 1,315 acres which constitute a substantial portion of its skiable terrain. Of this total, 893 acres are occupied by Mount 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, which is subject to renewal at the option of Mount Snow if certain renewal conditions 67 are satisfied. Mount 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, Mount Snow leases approximately 169 acres from Sargent Inc. pursuant to two separate leases expiring September 30, 2018 and March 31, 2025, respectively. Each lease can be renewed for an additional 30-year term. Mount 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 properties. Attitash/Bear Peak uses approximately 281 acres of its skiable terrain pursuant to a special use permit issued by the United States Forest Service dated July 19, 1994. The permit has a 40-year term expiring July 18, 2034, which is renewable subject to certain conditions. In addition, Attitash/Bear Peak leases a portion of 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. Killington leases approximately 2,500 acres from the State of Vermont. A substantial portion of that property constitutes skiable terrain. The initial lease was for an initial 10-year term which commenced in 1960. The lease contains nine 10-year renewal options. Killington exercised the renewal option in 1970, 1980 and 1990. Assuming continued exercise of Killington's option, the lease ultimately expires in the year 2060. The lease is subject to a buy-out option retained by the State of Vermont, as landlord. 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 extending back to the date of origin of the lease depreciated at 1% per annum, except that non-operable assets depreciate at 2% per annum. This buy-out option will next become exercisable in the year 2000. Although the Company has not had confirmation from Vermont state officials, it has no reason to believe that the State intends to exercise the option at that time. 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. 68 The Canyons leases approximately 2,100 acres, including most of the base area and a substantial portion of the skiable terrain, under a lease from Wolf Mountain Resorts, L.L.C. The initial term of this lease is 50 years expiring July 2047, with an option to extend for three additional terms of 50 years each (the "Wolf Lease"). The lease provides an option to purchase (subject to certain reconveyance rights) those portions of the leased property that are intended for residential or commercial development at a cost of 11% of the full capitalized cost of such development. The Wolf Lease includes a sublease of approximately 807 acres, which constitutes the area for the planned mid-mountain village and a substantial portion of skiable terrain, from the State of Utah School and Institutional Trust Land Administration, which terminates January 1, 2027. The sublease is being renegotiated as a direct lease extending its term to the year 2078 and provides an option to purchase those portions of the mid-mountain village area that are intended for real estate development at a cost of 25% of their fair market value on an undeveloped basis. The Wolf Lease also includes a sublease of certain skiable terrain owned by the Osguthoorpe family. The Company has established certain additional ski development rights under a direct agreement with the Osguthorpe family. The ski development rights for approximately 3,000 acres of skiable terrain targeted for development by the Company are contained in a development agreement with Iron Mountain Associates, LLC, which agreement effectively constitutes a lease of all skiable terrain for a term ending September 13, 2094. Heavenly uses approximately 1,543 acres of its skiable terrain located in California and Nevada pursuant to special use permit issued by the United States Forest Service dated December 18, 1990. The permit expires on August 5, 2029. Heavenly uses approximately 2,000 acres of additional skiable terrain in Nevada pursuant to a special use permit dated December 18, 1990. The permit expires on August 5, 2029. Steamboat uses approximately 2,644 acres, a substantial portion of which is skiable terrain, pursuant to a special use permit issued by the United States Forest Service. The permit expires on August 31, 2029. Under Steamboat's existing master plan, an additional 958 acres of contiguous National Forest lands is expected to be added to the permitted area. COMPETITION The ski industry is highly competitive. The Company competes with mountain resort areas in the United States, Canada and Europe. The Company also competes with other recreation resorts, including warm weather resorts, for the vacation guest. In order to cover the high fixed costs of operations associated with the ski industry, the Company must maintain each of its regional, national and international skier bases. The Company's prices are directly impacted by the variety of alternatives presented to skiers in these markets. The most significant competitors are resorts that are well capitalized, well managed and have significant capital improvement and resort real estate development programs. The Company's resorts also face strong competition on a regional basis. With approximately three million skier visits generated by its northeastern resorts, competition in that region is an important consideration. The Company's northeastern 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 Mount Snow indicate that approximately 23% and 35%, respectively, of their weekend skiers reside in New York, with high concentrations from Massachusetts, Connecticut, New Jersey and Vermont. The Colorado, Utah and California ski markets are also highly competitive. EMPLOYEES AND LABOR RELATIONS The Company employs approximately 6,300 employees at peak season and approximately 1,200 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. 69 GOVERNMENT REGULATION The Company's resorts are subject to a wide variety of federal, state and local laws and regulations relating to land use environmental/health and safety, water resources, air and water emissions, sewage disposal, and the use, storage, discharge, emission and disposal of hazardous materials and hazardous and nonhazardous wastes, and other environmental matters. While management believes that the Company's resorts are currently in material compliance with all land use and environmental laws, failure to comply with such laws could result in costs to satisfy environmental compliance and/or remediation requirements or the imposition of severe penalties or restrictions on operations by government agencies or courts that could adversely affect operations. Phase I environmental assessments have been completed on all nine resort properties. The reports identified areas of potential environmental concern including the need to upgrade existing underground storage tanks at several facilities and to potentially remediate petroleum releases. In addition, the Phase I environmental assessment for The Canyons indicated some soil contamination in areas where underground storage tanks have been removed. At this point, the extent or significance of the contamination at that site is unknown. The reports did not, however, 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. The Killington resort has been identified by the U.S. Environmental Protection Agency (the "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 the 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 the EPA for the other site, the PSC Resources Superfund Site in Palmer, Massachusetts. The Company believes that its liability for these Superfund sites, individually and in the aggregate, will not have a material adverse effect on the business or financial condition of the Company or 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 any of its properties. The purchase of the Acquired Resorts is subject to the satisfaction of certain covenants and conditions, including those related to environmental and land-use development issues. The Company is not aware of any environmental issues or conditions related to the Acquired Resorts which, individually or in the aggregate, would have a material adverse effect on the business or financial condition of the Company or results of operations or cash flow. 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 would have a material adverse effect on the Company, or that important permits, licenses or agreements will not be canceled, not renewed, or renewed on terms no less favorable to the Company. Major expansions of any one or more resorts could require the filing of an environmental impact statement under environmental laws and applicable regulations if it is determined that the expansion has a significant impact upon the environment and could require numerous other federal, state and/or local approvals. 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. 70 The Company's marketing and sales of interval ownership interests is subject to extensive federal and state government regulation. See "Risk Factors--Regulation of Marketing and Sales of Quartershares; Other Laws." 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 suits with respect to personal injury claims related principally to skiing activities at such 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. The Company operates a captive insurance company authorized under the laws of the State of Vermont, which provides liability and workers' compensation coverage for its resorts located in Vermont. 71 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The directors and executive officers of the Company, their ages and their respective positions with the Company are as follows:
NAME AGE POSITION - ----------------------------------------------------- --- ----------------------------------------------------- Leslie B. Otten...................................... 48 Director, President and Chief Executive Officer Thomas M. Richardson................................. 44 Director, Senior Vice President, Chief Financial Officer and Treasurer Christopher E. Howard................................ 39 Director, Senior Vice President, Chief Administrative Officer, General Counsel and Clerk Burton R. Mills...................................... 44 Senior Vice President--Mountain Operations G. Christopher Brink................................. 44 Senior Vice President--Marketing Warren C. Cook....................................... 52 Senior Vice President--Resort Operations W. Scott Oldakowski.................................. 33 Vice President--Real Estate Sales Michael Meyers....................................... 44 Vice President--Real Estate Development
Each officer serves at the discretion of the Board of Directors. Each director holds office until his successor is duly elected and qualified or until his resignation or removal. There are no family relationships among any of the directors or executive officers of the Company. On or prior to the consummation of the Offering, the Company intends to appoint two independent directors. LESLIE B. OTTEN, Director, President and Chief Executive Officer. In 1970, Mr. Otten joined Sherburne Corporation, then the parent company of Sunday River, Killington and Mount Snow. Mr. Otten became Assistant General Manager of Sunday River in 1972 and became General Manager of Sunday River in 1974. He has been a director and the President and Chief Executive Officer of the Company (or a subsidiary of the Company) since 1980. Mr. Otten is currently a director and was previously chairman of the Portland Museum of Art, the Maine Chamber and Alliance, Maine Handicap Skiing, Gould Academy (a private secondary school) and Project Opportunity (a higher education scholarship program). THOMAS M. RICHARDSON, Director, Senior Vice President, Chief Financial Officer and Treasurer. Mr. Richardson joined the Company in the spring of 1993 as Vice President of Finance and Base Operations and has served in his present position since July 1996. From 1992 until joining the Company, he worked at Loon Mountain Recreation Corporation (a ski resort operator) as Treasurer and Director of Food, Beverage and Tickets. From 1983 to 1992, Mr. Richardson worked at S-K-I Ltd. (an owner of ski resorts) as an Internal Auditor, Accounting Manager and Division Controller at Killington. Mr. Richardson serves on the Economic Committee of the National Ski Area Association. CHRISTOPHER E. HOWARD, Director, Senior Vice President, Chief Administrative Officer, General Counsel and Clerk. Mr. Howard joined the Company in 1996 after serving as the Company's outside counsel. Prior to joining the Company, Mr. Howard was a partner in the law firm of Pierce Atwood where he practiced in the firm's corporate department since 1982. BURTON R. MILLS, Senior Vice President--Mountain Operations. Mr. Mills has spent his entire 22-year career with the Company (or its predecessor), serving in his present capacity since July 1996. Prior thereto, he served as Vice President of Mountain Operations. 72 G. CHRISTOPHER BRINK, Senior Vice President--Marketing. Mr. Brink has been with the Company since 1993 and in his present capacity since July 1996. Prior to joining the Company, Mr. Brink served from 1991-1993 as a director of off-site sale centers for Marriott Vacation Ownership, Inc. WARREN C. COOK, Senior Vice President--Resort Operations. Mr. Cook joined the Company in 1996 as Managing Director of Sugarloaf Mountain Corp. (a subsidiary of the Company). Since January 1997 he has served in his present capacity with the Company. From 1986 to 1996 he was chief executive officer and general manager of Sugarloaf, USA (a ski resort operator). W. SCOTT OLDAKOWSKI, Vice President--Real Estate Sales. Mr. Oldakowski started working for the Company in 1991 as an independent consultant on the Summit Hotel project before being hired as Director of Real Estate in 1993. He became Vice President of Real Estate Sales for the Company in 1995. From 1986 to 1991, he served as Director of Sales and Marketing at multiple resorts for Dunes Marketing Group, a resort development firm. MICHAEL MEYERS, Vice President--Real Estate Development. Mr. Meyers joined the Company in April 1995 and has led the master planning, permitting and development of five hotels for Grand Summit Resort Properties, Inc., a subsidiary of the Company. From 1989 to 1993, Mr. Meyers was a Vice President at Stanmar Development, a real estate development firm. Immediately prior to joining the Company, he was chief operating officer from 1993 to 1995 for Massachusetts Industrial Finance Agency (a bond issuer for borrowers consisting of commercial, industrial and charitable organizations or entities). BOARD COMMITTEES Upon the appointment of the independent directors, the Board of Directors intends to establish a Compensation Committee, an Audit Committee and an Options Committee. The Compensation Committee, in conjunction with the entire Board of Directors, will make recommendations concerning salaries and incentive compensation for employees of and consultants to the Company. The Audit Committee, in conjunction with the entire Board of Directors, will review the results and scope of the audit and other services provided by the Company's independent public accountant and will be comprised solely of the Company's independent directors. The Options Committee will administer and interpret the Stock Option Plan. DIRECTOR COMPENSATION The Company will reimburse each member of the Board of Directors for expenses incurred in connection with attending Board and committee meetings. Directors will receive $5,000 for attendance at each meeting of the Board, unless attendance is via telephone. The Company will grant options to purchase 2,500 shares of Common Stock to non-employee directors upon their election and re-election to the Board of Directors. The stock options will have a term of 10 years and the option price will be no less than the fair market value as of the date of the grant. EXECUTIVE COMPENSATION The following table shows remuneration paid or accrued by the Company during the fiscal year ended July 27, 1997 to the Chief Executive Officer and to each of the other four most highly compensated executive officers of the Company (together, the "Named Executive Officers") for services in all capacities while they were employees of the Company, and the capacities in which the services were rendered. 73 SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION SECURITIES UNDERLYING ANNUAL COMPENSATION OPTIONS TO PURCHASE COMMON STOCK --------------------- OR CLASS A ALL OTHER NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS COMMON STOCK COMPENSATION - ---------------------------------------------- ----------- ---------- --------- ----------------------- --------------- Leslie B. Otten............................... 1997 $ 350,000 $ -- -- $ -- President and Chief Executive Officer Thomas M. Richardson.......................... 1997 170,000 -- -- -- Senior Vice President, Chief Financial Officer and Treasurer Warren C. Cook................................ 1997 133,770 -- -- -- Senior Vice President-Resort Operations Burton R. Mills............................... 1997 170,000 -- -- -- Senior Vice President--Mountain Operations G. Christopher Brink.......................... 1997 170,000 -- -- -- Senior Vice President--Marketing
STOCK OPTION PLAN Under the Company's Stock Option Plan, 5,688,699 shares of Common Stock are reserved for issuance upon the exercise of stock options. The Stock Option Plan is designed to attract, retain and motivate directors and key employees. The Options Committee of the Board of Directors of the Company (the "Options Committee") will administer and interpret the Stock Option Plan. Both incentive stock options and non-qualified stock options may be granted under the Stock Option Plan on such terms and at such prices as determined by the Options Committee pursuant to the requirements of applicable law. The per share exercise price of incentive stock options may not be less than the fair market value of the Common Stock on the date of grant. Each option is for a term of not less than five years or more than 10 years, as determined by the Options Committee. Options granted under the Stock Option Plan are not transferable other than by will or by the laws of descent and distribution. The Company has granted options to purchase an aggregate of 2,583,343 shares of the Common Stock with exercise prices ranging from $2.00 per share to the offering price of the Common Stock per share. The Stock Option Plan provides that all of an employee's options will become exercisable in full immediately upon termination of employment because of death or permanent disability, and provides that the Options Committee in its discretion may permit accelerated exercisability upon an employee's early retirement (at age 55 or over or after five years of employment). In the event of a "change in control" (as defined in the Stock Option Plan) all outstanding options will be exercisable in full for 30 days prior to such event and will terminate upon consummation of such event, unless assumed or replaced by other options in connection with such event. 74 OPTION GRANTS IN LAST FISCAL YEAR The following table sets forth grants of stock options to the Named Executive Officers as of the date hereof.
NUMBER OF SHARES % OF TOTAL VALUE OF UNEXERCISED OF COMMON OPTIONS GRANTED IN-THE- MONEY OPTIONS STOCK UNDERLYING TO AT JULY 27, 1997 OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -------------------------- NAME GRANTED FISCAL YEAR PRICE DATE 5% 10% - ---------------------------- ------------------ --------------- ----------- ----------- ------------ ------------ Leslie B. Otten............. 1,853,197 shares 71.7% $ 18.50 08/01/07 -- -- Thomas M. Richardson........ 100,334 shares 3.9% $ 2.00 08/01/07 2,895,568 4,686,498 Burton R. Mills............. 80,243 shares 3.1% $ 2.00 08/01/07 2,315,756 3,748,068 G. Christopher Brink........ 80,243 shares 3.1% $ 2.00 08/01/07 2,315,756 3,748,068 Warren C. Cook.............. 40,121 shares 1.6% $ 2.00 08/01/07 1,157,863 1,874,010
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In June 1996, Sunday River Skiway Corporation, a subsidiary of the Company ("SRSC"), issued an unsecured demand note to Mr. Otten obligating SRSC to pay to Mr. Otten a total of $5.2 million. Interest on the note is calculated at 5.4% per annum. The note was issued to Mr. Otten for an amount equal to the income taxes to be paid by him in 1996 and 1997 with respect to SRSC's income as a Subchapter S corporation which was converted to a C corporation. The remaining principal amount of such note as of September 1, 1997 was approximately $1.9 million. 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 fiscal years 1995, 1996 and 1997, Ms. Otten received total compensation of $53,584, $54,577 and $51,600, 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 1995, 1996 and 1997, payments under such leases totaled $34,000, $36,200 and $36,700, 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 comparable to those that would be offered by the Company to unaffiliated entities. In fiscal 1995, 1996 and 1997, payments by Ski Dorm, Inc. to Sunday River totaled $83,000, $90,000 and $87,000, respectively. In addition, Ski Dorm, Inc. issued a promissory note in 1995 in the principal amount of $265,000, of which $250,000 was outstanding at July 27, 1997. Such note is secured by a mortgage on land and a building. Interest on the note is charged at the prime rate plus 1- 1/2% and principal and any accrued interest are due in December 1999. Sunday River Land Holdings, Inc., a company wholly owned by Mr. Otten, leases the real estate upon which the Sunday River snow-making ponds are located. The lease has a term of 30 years and rent at the rate of $100,000 per year, subject to a Consumer Price Index inflation adjustment. 75 PRINCIPAL SHAREHOLDERS The following table sets forth certain information regarding beneficial ownership of the Company's Common Stock and Class A Common as of September 1, 1997, and as adjusted to reflect the sale of the shares offered hereby (i) by each person or entity known by the Company to own beneficially more than 5% of the Company's capital stock, (ii) by each director of the Company, (iii) by each of the Named Executive Officers and (iv) by all directors and executive officers of the Company as a group. Each person or entity listed below maintains a mailing address c/o American Skiing Company, P.O. Box 450, Sunday River Access Road, Bethel, Maine 04217, and has sole voting and investment power over the shares of Common Stock shown as beneficially owned, except to the extent authority is shared by spouses under applicable law.
COMMON STOCK CLASS A COMMON STOCK COMMON STOCK BENEFICIALLY OWNED BENEFICIALLY OWNED BENEFICIALLY OWNED BEFORE AND AFTER OFFERING BEFORE OFFERING AFTER OFFERING DIRECTORS, NAMED EXECUTIVE ----------------------- ------------------------- --------------------------- OFFICERS AND FIVE PERCENT OF PERCENT OF PERCENT OF PERCENT SHAREHOLDERS SHARES CLASS SHARES CLASS SHARES CLASS - ------------------------------- ---------- ----------- ---------- ------------- ------------ ------------- Leslie B. Otten(1)............. 1,853,197(1) 75.1% 2,664,008(2) 9.2% 14,760,530 100% Thomas M. Richardson(3)........ 100,334 14.0 100,334 * 0 -- Christopher E. Howard(3)....... 150,493 19.7 150,493 * 0 -- Burton R. Mills(3)............. 80,243 11.5 80,243 * 0 -- G. Christopher Brink(3)........ 80,243 11.5 80,243 * 0 -- Warren C. Cook(3).............. 40,121 6.1 40,121 * 0 -- Madeleine LLC(4) c/o Cerberus 450 Park Ave. New York, NY 10022........................ 2,110,518 12.1% Directors and Executive Officers as a Group (8 persons)(5)............... 2,324,697 79.1 3,385,712 19.1% 14,760,530 100% PERCENT OF CLASS A COMMON STOCK AND COMMON DIRECTORS, NAMED EXECUTIVE STOCK BENEFICIALLY OFFICERS AND FIVE OWNED AFTER PERCENT SHAREHOLDERS OFFERING - ------------------------------- ------------------- Leslie B. Otten(1)............. 54.5% Thomas M. Richardson(3)........ * Christopher E. Howard(3)....... * Burton R. Mills(3)............. * G. Christopher Brink(3)........ * Warren C. Cook(3).............. * Madeleine LLC(4) c/o Cerberus 450 Park Ave. New York, NY 10022........................ 6.5% Directors and Executive Officers as a Group (8 persons)(5)............... 55.1%
- ------------------------ * Less than one percent. (1) Includes 1,853,197 shares of Common Stock issuable under exercisable options granted under the Stock Option Plan. (2) Includes 810,811 shares of Common Stock to be issued in the Concurrent Offering. (3) All shares of Common Stock beneficially owned by such person are issuable under exercisable options granted under the Stock Option Plan. (4) Includes 2,110,518 shares of Common Stock which is issuable upon the conversion of such holder's shares of 6% Convertible Preferred. (5) Includes 2,324,697 shares of Common Stock issuable under exercisable options granted under the Stock Option Plan. 76 DESCRIPTION OF CERTAIN INDEBTEDNESS The following is a summary of the material terms of each instrument governing the Company's indebtedness. THE NEW CREDIT FACILITY In connection with the Offering and the Acquisition, the Company has accepted a proposal to provide the Company with a New Credit Facility of up to $215 million. Amounts borrowed under the New Credit Facility will be available (i) to finance the Acquisition, (ii) to repay approximately $60 million of indebtedness of ASC East under the Existing Credit Facility, (iii) to pay certain fees and expenses relating to the Acquisition and (iv) for ongoing general corporate purposes and capital expenditures. The New Credit Facility will be divided into two sub-facilities, $75 million will be available to be loaned to ASC East and its subsidiaries ("East Facility") and $140 million will be available to be loaned to the Company excluding ASC East and its subsidiaries ("West Facility"). The East Facility consists of a six-year revolving credit facility in the amount of $45 million and an eight-year term facility in the amount of $30 million. The West Facility consists of a six-year revolving facility in the amount of $65 million and an eight-year term facility in the amount of $75 million. The revolving facilities are subject to annual 30-day clean down requirements to an outstanding balance of not more than $10 million for the East Facility and not more than $25 million for the West Facility. The maximum availability under the revolving facilities will reduce over the term of the New Credit Facility by certain prescribed amounts. The term facilities amortize at a rate of approximately 1.0% of the principal amount for the first six years with the remaining portion of the principal due in two substantially equal installments in years seven and eight. At the Company's option, interest will be payable at an alternate base rate or LIBOR, each plus an applicable margin that is dependent upon the ratio of the Company's total debt to EBITDA. The New Credit Facility will require mandatory prepayments with the net proceeds of any asset sales and new debt and equity offerings of the Company. Beginning in July 1999, the New Credit Facility will require mandatory prepayments of 50% of excess cash flows during any period in which the ratio of the Company's total senior debt to EBITDA exceeds 3.50 to 1. In no event, however, will such mandatory prepayments reduce either revolving facility commitment below $35 million. The East Facility will be secured by substantially all the assets of ASC East and its subsidiaries, except Grand Summit Resort Properties, Inc., which is not a borrower under the New Credit Facility. The West Facility is secured by substantially all the assets of the Company and its subsidiaries, except ASC East and its subsidiaries. The New Credit Facility will contain various covenants that limit, among other things, subject to certain exceptions, indebtedness, liens, transactions with affiliates, restricted payments and investments, mergers, consolidations and dissolutions, sales of assets, dividends and distributions and certain other business activities. The New Credit Facility will contain financial covenants customary for this type of senior credit facility. Compliance with financial covenants will be determined on a consolidated basis notwithstanding the bifurcation of the New Credit Facility into the East Facility and the West Facility, with the exception of a leverage test. The financial covenants will include maintenance of customary financial ratios. An irrevocable commitment on the New Credit Facility is subject to the approval of the lender's credit committee. THE 12% NOTES ASC East has outstanding $120 million aggregate principal amount of 12% Notes which bear interest at a rate of 12% per annum, payable semi-annually in arrears on each January 15 and July 15. The 12% Notes mature on July 15, 2006. The 12% Notes represent senior subordinated unsecured obligations of 77 ASC East. ASC East's payment obligations under the 12% Notes are guaranteed on a subordinated basis by substantially all of ASC East's subsidiaries. The 12% Notes may not be redeemed at the option of ASC East prior to July 15, 2001, except that prior to July 15, 1999 ASC East may redeem up to 25% of the 12% Notes at a redemption price of 112% of the principal amount thereof, plus accrued and unpaid interest, if any, with the net proceeds of a public or private sale of common stock of ASC East. At any time on or after July 15, 2001, the 12% Notes may be redeemed at the option of ASC East, in whole or in part, at a premium declining ratably to par on July 15, 2005. The 12% Note Indenture provides that in the event of a Change of Control, ASC East is required to make an offer to purchase in cash all or any part of outstanding 12% Notes at a price of 101% of the aggregate principal amount thereof. Consummation of the Offering will constitute a Change in Control under the 12% Note Indenture. See "The Transactions--Consent Solicitation" and "Risk Factors-- Immediate and Substantial Debt Obligations Upon Consummation of the Offering." The 12% Note Indenture contains restrictive covenants that, among other things, impose limitations on the ability of ASC East and certain of its subsidiaries to (i) to incur additional indebtedness, (ii) merge, consolidate or sell or dispose of all or substantially all of its assets, (iii) issue certain preferred stock, pay dividends or make other distributions on account of ASC East's equity interests, repurchase equity interests or subordinated indebtedness, and make certain other Restricted Investments (as defined in the 12% Note Indenture), (iv) create certain liens, (v) enter into transactions with affiliates and (vi) sell assets. Such covenants prohibit ASC East and its subsidiaries from paying any dividends or other distributions to the Company except for limited payments permitted upon ASC East's meeting certain financial thresholds. ASC East is not currently eligible to pay any dividends or distributions to the parent company under these provisions. In addition, ASC East and its subsidiaries are prohibited from entering into any transaction with the Company or its other direct or indirect subsidiaries, except under certain conditions. 14% EXCHANGEABLE NOTES Pursuant to the Securities Purchase Agreement, the Company issued $17.5 million aggregate principal amount of its 14% Exchangeable Notes in a private offering to an institutional investor. The 14% Exchangeable Notes bear interest at a rate of 14% per annum and mature on July 28, 2002. Interest on the 14% Exchangeable Notes is payable in cash or additional 14% Exchangeable Notes, at the option of the Company. The Company intends to offer to exchange all of the 14% Exchangeable Notes for shares of 6% Convertible Preferred Stock with an aggregate liquidation preference of approximately $17.5 million. See "The Transactions--Exchange Offers." Upon consummation of the Offering, the 6% Convertible Preferred Stock will be convertible into an aggregate of 1,055,259 shares of Common Stock at the option of the holder thereof. If the holder of 14% Exchangeable Notes does not exchange such securities for 6% Convertible Preferred Stock issued in exchange for the 14% Exchangeable Notes, consummation of the Offering will trigger a Change of Control under the Securities Purchase Agreement. In such event, the Securities Purchase Agreement requires that the Company offer to purchase the 14% Exchangeable Notes for cash at a redemption price of 105.3% of the principal and liquidation amount outstanding on the date of redemption. See "The Transactions--Exchange Offers," and "Description of Capital Stock--6% Convertible Preferred Stock." THE CANYONS SELLER NOTE In connection with the acquisition of The Canyons on July 3, 1997, ASC Utah executed a promissory note payable to Wolf Mountain Resorts, L.C. (the "Seller") in an aggregate principal amount of $6.5 million (the "Canyons Seller Note"). Interest on the Canyons Seller Note accrues at the rate of 12% per annum and is payable monthly in arrears. The principal is payable in two installments, $4.2 million upon 78 the closing of the Offering and $2.3 million on January 31, 1998. The Company has guaranteed the payment of the Canyons Seller Note. TEXTRON FINANCING On August 1, 1997, Grand Summit Resort Properties, Inc. ("GSRP"), a subsidiary of the Company, entered into a construction loan facility (the "Construction Loan Facility") with Textron Financial Corporation, as agent and co-lender, and Green Tree Financial Servicing Corporation, as co-lender (together, the "Lenders") to develop Grand Summit Hotels. Pursuant to the terms of the Construction Loan Facility, the Lenders have agreed to make available to GSRP, under certain circumstances, up to $55 million to develop Grand Summit Hotels at Sunday River, Killington and Mount Snow/Haystack, and to refinance an existing $3.9 million facility used to finance construction of the Attitash Grand Summit Hotel. After an initial advance to refinance the Attitash Grand Summit Hotel facility and to finance certain pre-construction costs, the loan is to be funded in a series of advances through August 1999 as construction costs are incurred. Each advance is subject to certain conditions, including GSRP obtaining certain levels of preconstruction sales. Interest on the loan will accrue at the prime rate established by Chase Manhattan Bank as of the first day of each month, plus 1.5%, but will not accrue at less than 9.25% per annum. The loan will be secured by (i) a first mortgage on the hotel resort properties, (ii) any interests that the Company may have in purchased quartershare units, including sales contracts, and (iii) other security interests granted by GSRP, each on a cross-collateralized basis. The loan is non-recourse to the Company and its other subsidiaries. Interest on the loan is due and payable monthly in arrears, however, GSRP may take interest advances to pay such interest. Principal will be repaid on the following basis: (i) as quartershare sales close at the Attitash project, an amount equal to 85% of the sales proceeds payable in connection with the sale, (ii) as quartershare sales close at The Jordan Bowl, Killington and Mount Snow/ Haystack projects, an amount equal to 80% of the sales proceeds payable in connection with the sale, (iii) an amount equal to the rental payments received by GSRP from ASC East subsidiary for the lease of the Grand Summit Hotels (aggregating $193,000 per month) and (iv) other amounts upon the aggregate of original or outstanding advances exceeding certain construction costs and quartershare sales levels; provided, however, that the Construction Loan Facility will mature at the end of December 2000. The loan contains various covenants that limit GSRP, subject to certain exceptions, with respect to indebtedness, liens, sales of assets, consolidations or mergers, distributions, transactions with affiliates and certain other business activities. OTHER INDEBTEDNESS In addition to the indebtedness described above, certain of the Company's subsidiaries have other outstanding debt obligations pursuant to certain promissory notes, bonds, capital leases and other instruments. A brief description of certain material debt obligations is set forth below. The Company's Killington, Ltd. subsidiary is an obligor under certain subordinated debentures in multiple series due in various principal amounts from 1999 through 2016, with interest rates of 6% or 8%. The aggregate balance of the subordinated debentures, as of July 27, 1997, was approximately $11.0 million. The subordinated debentures contain certain covenants that limit, subject to certain exceptions, the ability of Killington, Ltd. to incur indebtedness and to make dividends and distributions. The Company's Sugarbush Resort Holdings, Inc. subsidiary is an obligor under a promissory note issued to Snowridge, Inc. with an outstanding balance as of July 27, 1997 of approximately $5.1 million and an interest rate of 6.25%. The outstanding principal and all accrued and unpaid interest outstanding is due on December 31, 1999. The note is collateralized by certain assets of Sugarbush. As a result of the Offering, the holders of the note may accelerate the maturity of the note. In such an event, the Company intends to repay the note with the proceeds of the Offering. See "Use of Proceeds." 79 The Company's Mountain Wastewater Treatment, Inc. subsidiary is an obligor under a promissory note issued to LHC Corporation due June 1, 2003, with an outstanding balance as of July 27, 1997 of approximately $2.2 million. Interest on the promissory note is payable at a rate equal to the lesser of (a) 9% per annum or (b) the prime lending rate announced by The First National Bank of Boston. Annual principal payments of $154,123 are due on each June 1 beginning on June 1, 1997. The note is collateralized by a pledge of certain capital stock and by a letter of credit. As a result of the Offering, the holders of the note may accelerate the maturity of the note. In such an event, the Company intends to repay the note with the proceeds of the Offering. See "Use of Proceeds." DESCRIPTION OF CAPITAL STOCK The following summarizes the material terms of the capital stock of the Company. GENERAL Upon the closing of the Offering, the authorized capital stock of the Company will consist of 100,000,000 shares of Common Stock, par value $.01 per share, 32,236,071 of which will be issued and outstanding, 15,000,000 shares of Class A Common Stock, par value $.01 per share, 14,760,530 of which will be issued and outstanding, 70,179 Series A Exchangeable Preferred Stock, having a liquidation preference of $1,000 per share (the "Series A Exchangeable Preferred Stock"), no shares of which will be outstanding, approximately 100,000 shares of 6% Convertible Preferred Stock, having a liquidation preference of $1,000 per share, approximately 38,100 shares of which will be outstanding, and shares of undesignated Preferred Stock, par value $.01 per share, none of which will be outstanding. COMMON STOCK The issued and outstanding shares of Common Stock and Class A Common Stock are, and the shares of Common Stock being offered will be, upon payment therefor, validly issued, fully paid and nonassessable. The rights of holders of Class A Common Stock and Common Stock are identical, except that, while any Class A Common Stock is outstanding, holders of Class A Common Stock elect a class of directors that constitutes two-thirds of the Board of Directors and holders of Common Stock elect a class of directors constituting one-third of the Board of Directors. The Class A Common Stock is convertible into Common Stock (i) at the option of the holder, (ii) automatically upon transfer to any person who is not an affiliate of Leslie B. Otten and (iii) automatically if the number of shares of Class A Common Stock outstanding at any time represent less than 20% of the combined voting power of Common Stock and Class A Common Stock outstanding at such time. The Common Stock is not convertible. Subject to the prior rights of the holders of any preferred stock, the holders of outstanding shares of Common Stock and Class A Common Stock are entitled to received dividends out of assets legally available therefor at such times and in such amounts as the Board of Directors may from time to time determine. See "Dividend Policy." The shares of Common Stock and Class A Common Stock will have no preemptive or subscription rights to purchase any securities of the Company. Upon liquidation, dissolution or winding up of the Company, the holders of Common Stock and Class A Common Stock are entitled to receive on a pro rata basis the assets of the Company which are legally available for distribution, after payment of all debts and other liabilities and subject to the prior rights of any holders of preferred stock then outstanding. Each outstanding share of Common Stock and Class A Common Stock is entitled to one vote on all matters submitted to a vote of shareholders. Under Maine law, the holders of any class of capital stock of a corporation, including holders of Common Stock and Class A Common Stock will be entitled to vote as a separate class on amendments to the Company's Articles of Incorporation that affect the relative rights of such holder's capital stock. Thus, the holders of Common Stock are entitled to vote as a class with respect to, among other things, (i) changes in designations, preferences, limitations and relative rights, (ii) changes in the aggregate number of authorized shares or par value, (iii) exchanges, reclassifications or cancellations of the Common 80 Stock into a different number or class, and (iv) the creation of new classes of shares having rights and preferences prior and superior to the rights (or increase the rights and preferences of any other class), in each instance, of the Common Stock. For example, the holders of Common Stock will be entitled to vote as a class on any merger in which the Company would be a party if the plan of merger contains provisions affecting the rights of the Common Stock, including a proposed exchange or reclassification of the Common Stock and on any sale of all or substantially all of the assets of the Company. In these circumstances the holders of the Class A Common Stock would not be able to determine the outcome of the shareholder vote. On all other matters, holders of Common Stock and Class A Common Stock will vote together as a single class. PREFERRED STOCK The Company's Board of Directors may, from time to time, without further action by the Company's shareholders direct the issuance of shares of preferred stock in series and may, at the time of issuance, determine the rights, preferences and limitations of each such series. Satisfaction of any dividend preferences of outstanding shares of preferred stock would reduce the amount of funds available for the payment of dividends on shares of Common Stock and Class A Common Stock. Holders of shares of preferred stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding-up of the Company before any payment is made to the holders of shares of Common Stock and Class A Common Stock. Under certain circumstances, the issuance of shares of preferred stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of the Company's securities or the removal of incumbent management. The Board of Directors of the Company, without shareholder approval, may issue shares of preferred stock with voting and conversion rights which could adversely affect the holders of shares of Common Stock and Class A Common Stock. SERIES A EXCHANGEABLE PREFERRED STOCK Pursuant to the Securities Purchase Agreement, the Company issued 17,500 shares of its Series A Exchangeable Preferred Stock in a private offering to an institutional investor. The liquidation preference is $1,000 per share and cumulative dividends on the Series A Exchangeable Preferred Stock are payable, at the option of the Company, in cash or in additional shares of Series A Exchangeable Preferred Stock at a rate of 14% per annum. The Company is required to redeem all shares of Series A Exchangeable Preferred Stock outstanding on July 15, 2002. The Company intends to offer to exchange all or any part of the Series A Exchangeable Preferred Stock for up to approximately 38,100 shares of 6% Convertible Preferred Stock. Upon consummation of the Offering, each share of 6% Convertible Preferred Stock initially will be convertible into approximately 2,100,000 shares of Common Stock. If the holder of Series A Exchangeable Preferred Stock does not elect to exchange such securities for 6% Convertible Preferred Stock or Common Stock, consummation of the Offering will trigger a Change of Control (as defined under the Securities Purchase Agreement). In such event, the Securities Purchase Agreement requires that the Company offer to purchase the Series A Exchangeable Preferred Stock for cash at a redemption price of 105.3% of the liquidation preference of such shares on the date of redemption. See "Recent Developments--Exchange Offers." 6% CONVERTIBLE PREFERRED STOCK At the time of Offering, the Company will have authorized 35,000 shares of 6% Convertible Preferred Stock. The initial liquidation preference of the 6% Convertible Preferred Stock is $1,000 per share and cumulative dividends are payable quarterly in cash at a rate of 6% per annum. The terms of the 6% Convertible Preferred Stock prohibit the Company from paying cash dividends on the Common Stock or Class A Common Stock unless the four preceding quarterly dividends on the 6% Convertible Preferred 81 Stock have been paid. In addition, the Company may not redeem any shares of Common Stock or Class A Common Stock so long as any 6% Convertible Preferred Stock remains outstanding. Each share of 6% Convertible Preferred Stock is convertible at any time, at the holder's option, into a number of shares of Common Stock initially equal to the liquidation preference per share of 6% Convertible Preferred Stock divided by the price per share of Common Stock offered to the public in the Offering discounted by 5%, subject to antidilution adjustments for certain events, including (i) stock splits, stock dividends or combinations of Common Stock into a smaller number of shares, (ii) issuances of, or rights to acquire, Common Stock to the holders of Common Stock at less than fair market value and (iii) distributions of cash or property to holders of Common Stock. The Company may, at its option, on any dividend payment date, exchange the shares of 6% Convertible Preferred Stock, in whole but not in part, for 6% Convertible Subordinated Debentures due five years from the date of issuance thereof in a principal amount equal to $1,000 for each share of 6% Convertible Preferred Stock, plus cash in an amount equal to all accrued but unpaid dividends. The 6% Convertible Subordinated Debentures will bear interest at a rate of 6% per annum payable in cash quarterly in arrears. The terms of the 6% Convertible Subordinated Debentures as to conversion and redemption are substantially similar to those contained in the 6% Convertible Preferred Stock. If such shares are not previously converted into Common Stock, the Company is required to redeem all outstanding shares of 6% Convertible Preferred Stock on the fifth anniversary of the date of issuance at a price equal to $1,000 per share plus any accrued and unpaid dividends thereon as of the date of redemption (the "Redemption Price"). In addition, the Company may, at its option, redeem the outstanding shares of 6% Convertible Preferred Stock at any time, at the Redemption Price, provided that the closing price of the Common Stock exceeds 140% of the price per share offered to the public in the Offering. The holders of 6% Convertible Preferred Stock have the right to vote on an as-converted basis with the holders of the Common Stock. In addition, upon the occurrence of certain defaults by the Company (including non-payment of dividends for four quarters (whether or not consecutive), failure to redeem the 6% Convertible Preferred Stock as may be required, and defaults under any other indebtedness of the Company in excess of $5.0 million), the Board of Directors will be increased by two members and the holders of 6% Convertible Preferred Stock will have the right to elect the two additional directors. Pursuant to a Registration Rights Agreement dated as of July 2, 1997 between the Company and the holder of the 14% Exchangeable Notes and the Series A Exchangeable Preferred Stock, the Company may be required, simultaneous with the Offering or at a future date, at the option of the holders, either (i) to register the shares of 6% Convertible Preferred Stock or the shares of Common Stock into which such securities are convertible or (ii) to include such shares in any subsequent registered offering of securities by the Company. ANTITAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF INCORPORATION, BYLAWS AND MAINE LAW ARTICLES OF INCORPORATION AND BYLAWS. The Company's Articles of Incorporation contain, among other things, provisions authorizing the issuance of "blank check" preferred stock, 6% Convertible Preferred Stock with rights to elect two directors upon the occurrence of certain events and two classes of common stock. These provisions could delay, deter or prevent a merger, consolidation, tender offer or other business combination or change of control involving the Company. See "Risk Factors--Potential Anti-Takeover Provisions." The Bylaws provide that any action required or permitted to be taken by the shareholders of the Company at an annual meeting or special meeting of shareholders may only be taken if it is properly brought before such meeting. Under the Bylaws, in order for any matter to be considered "properly brought" before a meeting, a shareholder must comply with certain requirements regarding advance notice 82 to the Company. The foregoing provisions could have the effect of delaying until the next shareholders' meeting, shareholder actions which are favored by the holders of a majority of the outstanding voting securities of the Company. See "Risk Factors--Potential Anti-Takeover Provisions." The Company is subject to certain provisions under the MBCA relating to the personal liability of directors. The MBCA provides that a director shall not be liable for monetary damages for a breach of fiduciary duty unless the director is found not to have acted honestly or in the reasonable belief that the action was in or not opposed to the best interests of the Company or its shareholders. Further, the Bylaws provide in all cases that the Company shall indemnify the Company's directors and officers to the fullest extent permitted by the MBCA. The Company believes that these provisions will assist the Company in attracting and retaining qualified individuals to serve as directors. MAINE ANTITAKEOVER STATUTE. The Company is subject to the provisions of Section 611-A of the MBCA (the "Antitakeover Law"). The Antitakeover Law prohibits a Maine corporation from engaging in a "business combination" with an "interested shareholder" for a period of five years after the date of the transaction in which the person became an interested shareholder, unless the business combination is approved in a prescribed manner. A "business combination" includes generally, mergers, asset sales, certain types of stock issuances, and other transactions resulting in a disproportionate financial benefit to the interested shareholder. Subject to certain exceptions, an "interested shareholder" is a person who owns, or within the preceding five years owned, 25% or more of the corporation's voting stock. See "Risk Factors--Potential Anti-Takeover Provisions." The MBCA provides generally that an amendment of a corporation's articles of incorporation must be adopted by the board of directors and approved by an affirmative vote of a majority of the shares entitled to vote on any matter. The MBCA provides generally that bylaws may be amended by a majority vote of the board of directors or the shareholders. The MBCA provides, however, that any Bylaws adopted or amended by the shareholders of the Company may not be amended or repealed by the board of directors for two years thereafter. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the Common Stock is . SHARES ELIGIBLE FOR FUTURE SALE Upon the consummation of the Offering, the Company will have outstanding 20,058,883 shares of Common Stock (excluding all shares issuable upon the exercise of options and assuming no exercise of the Underwriters' over-allotment option and no conversion of the Class A Common Stock into Class A Common Stock) and 14,760,530 shares of Class A Common Stock. All of the shares of Common Stock sold in the Offering will be freely tradeable under the Securities Act, unless purchased by "affiliates" of the Company as that term is defined under the Securities Act. Upon the expiration of lock-up agreements between the Company, certain shareholders of the Company, the executive officers and directors of the Company and the Underwriters, which will occur 180 days after the Consummation of the Offering (the "Closing Date") and exercise of all options granted under the Stock Option Plan, 4,585,753 shares of Common Stock and 14,760,530 shares of Class A Common Stock (collectively, the "Restricted Shares") will become eligible for sale, subject to compliance with Rule 144 of the Securities Act as described below. In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated) who has beneficially owned Restricted Shares for at least one year, will be entitled to sell in any three-month period a number of shares that does not exceed the greater of: (i) 1% of the number of shares of Common Stock then outstanding (approximately [201,000] shares immediately after the Offering) or (ii) the average weekly trading volume of the Company's Common Stock on the Nasdaq National Market during the four calendar weeks immediately preceding the date on which the notice of sale is filed with the Securities and Exchange Commission. Sales pursuant to Rule 144 are subject to certain requirements 83 relating to manner of sale, notice and availability of current public information about the Company. A person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of the Company at any time during the three months immediately preceding the sale and who has beneficially owned Restricted Shares for at least two years is entitled to sell such shares pursuant to Rule 144(k) without regard to the limitations and requirements described above. Certain shareholders of the Company and the executive officers and directors of the Company have agreed with the Underwriters that until 180 days after the Closing Date not to directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase or grant any option, right or warrant to purchase or otherwise transfer or dispose of any Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (including Class A Common Stock), or enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of the Common Stock, or cause a registration statement covering any shares of Common Stock to be filed, without the prior written consent of DLJ, subject to certain exceptions including pursuant to a foreclosure by a lender on a loan to the Principal Shareholder for shares of Class A Common Stock and/or Common Stock will be pledged as collateral. The Company has also agreed not to directly or indirectly, offer, sell, pledge, contract to sell, sell any option or contract to purchase or grant any option, right or warrant to purchase or otherwise transfer or dispose of any Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (including Class A Common Stock), or enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of the Common Stock or cause a registration statement covering any shares of Common Stock to be filed, for a period of 180 days after the Closing Date, without the prior written consent of DLJ, subject to certain limited exceptions including issuance of up to [3,213,444] shares of Common Stock under the Stock Option Plan. The lock-up agreements may be released at any time as to all or any portion of the shares subject to such agreements at the sole discretion of DLJ. See "Risk Factors-- Shares Eligible for Future Sale." The holder of the Company's 14% Exchangeable Notes and the Series A Exchangeable Preferred Stock has certain rights to require the Company to register shares of 6% Convertible Preferred Stock and Common Stock issuable upon the exchange or conversion of such securities. See "Description of Capital Stock--6% Convertible Preferred Stock." CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS FOR NON-UNITED STATES HOLDERS The following is a general discussion of certain United States federal income and estate tax consequences of the ownership and disposition of Common Stock by a person who is not a "U.S. person" (a "Non-U.S. Holder"). For this purpose, a "U.S. person" is any person who is, for United States federal income tax purposes, (i) a citizen or resident of the United States,(ii) a corporation or partnership created or organized in or under the laws of the United States or of any State,(iii) an estate the income of which is subject to U.S. federal income tax, regardless of its source, or (iv) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and (b) one or more United States fiduciaries have the authority to control all substantial decisions of the trust. This discussion does not address all aspects of United States federal income and estate taxes and does not deal with foreign, state and local consequences that may be relevant to such Non-U.S. Holders in light of their personal circumstances. Furthermore, this discussion is based on provisions of the United States Internal Revenue Code of 1986, as amended, existing and proposed regulations promulgated thereunder and administrative and judicial interpretations thereof, as of the date hereof, all of which are subject to change (possibly with retroactive effect). An individual may, subject to certain exceptions, be deemed to be a resident alien (as opposed to a non-resident alien) by virtue of being present in the United States on at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year 84 (counting for such purposes all of the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year). Resident aliens are subject to U.S. federal tax as if they were U.S. citizens and, thus, are not Non-U.S. Holders for purposes of this discussion. THIS DISCUSSION IS FOR GENERAL INFORMATION PURPOSES ONLY. EACH PROSPECTIVE PURCHASER OF COMMON STOCK IS ADVISED TO CONSULT A TAX ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF COMMON STOCK AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY FOREIGN, STATE, LOCAL OR OTHER TAXING JURISDICTION. DIVIDENDS Dividends paid to a Non-U.S. Holder of Common Stock generally will be subject to withholding of United States federal income tax either at a rate of 30% of the gross amount of the dividends or at such lower rate as may be specified by an applicable income tax treaty. However, dividends that are effectively connected with the conduct of a trade or business by the Non-U.S. Holder within the United States and, where a tax treaty applies, are attributable to a United States permanent establishment of the Non-U.S. Holder, are not subject to the withholding tax (provided the Non-U.S. Holder files appropriate documentation, including, under current law, Form 4224, with the payor of the dividend), but instead are subject to United States federal income tax on a net income basis at applicable graduated individual or corporate rates. Any such effectively connected dividends received by a Non-U.S. Holder that is a corporation may, under certain circumstances, be subject to an additional "branch profits tax" at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. In order to claim the benefit of an applicable tax treaty, a Non-U.S. Holder of Common Stock may have to file with the Company or its dividend paying agent an exemption or reduced treaty rate certificate or letter in accordance with the terms of the treaty. Under current law, dividends paid to an address outside the United States are presumed to be paid to a resident of such country (unless the payor has knowledge to the contrary) for purposes of the withholding discussed above and for purposes of determining the applicability of a tax treaty rate. However, under proposed Treasury regulations not currently in effect, in the case of dividends paid after December 31, 1997 (December 31, 1999 in the case of dividends paid to accounts in existence on or before the date that is 60 days after the proposed regulations are published as final regulations), a Non-U.S. Holder of Common stock who wishes to claim the benefit of an applicable treaty rate would be required to satisfy applicable certification and other requirements either directly or through an intermediary. In addition, backup withholdings, as discussed below, may apply in certain circumstances if applicable certification and other requirements are not met. A Non-U.S. Holder of Common Stock eligible for a reduced rate of United States withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the Internal Revenue Service (the "IRS"). GAIN ON DISPOSITION OF COMMON STOCK A Non-U.S. Holder generally will not be subject to United States federal income tax or withholding on gains recognized upon the sale or other disposition of Common Stock unless: (i) such gain is effectively connected with the conduct in the United States of a trade or business of the Non-U.S. Holder, or if a tax treaty applies, the gain is attributable to a United States permanent establishment (in either case, the branch profits tax also may apply if the Non-U.S. Holder is a corporation); (ii) in the case of a Non-U.S. Holder who is a non-resident alien individual and holds the Common Stock as a capital asset, such individual is present in the United States for 183 or more days in the taxable year of disposition and certain other conditions are met; or (iii) the Common Stock constitutes a United States real property interest by 85 reason of the Company's status as a "United States real property holding corporation" ("USRPHC") for federal income tax purposes at any time within the shorter of the five-year period preceding such disposition or such Non-U.S. Holder's holding period for such Common Stock. If a Non-U.S. Holder falls under clause (i) or (iii) above, the holder will be taxed on the net gain derived from the sale under the graduated United States federal income tax rates that are applicable to United States citizens, resident aliens and domestic corporations, as the case may be, and may be subject to withholding under certain circumstances (and, with respect to corporate Non-U.S. Holders, may also be subject to the branch profits tax described above.) If an individual Non-U.S. Holder falls under clause (ii) above, the holder generally will be subject to United States federal income tax at a rate of 30% on the gain derived from the sale and may be subject to withholding under certain circumstances. The Company will qualify as a USRPHC if the fair market value of its United States real property interests equals 50 percent or more of the aggregate fair market value of the Company's worldwide real property interests and any other assets of the Company used or held for use in a trade or business. If the Common Stock is regularly traded on an established securities market, however, it will be treated as a United States real property interest only in the case of a Non-U.S. Holder who owns 5 percent or more of the value of the outstanding Common Stock during the five-year period preceding the holder's disposition of such Common Stock or, if shorter, the Non-U.S. Holder's holding period for such Common Stock. Generally, if the Company constitutes a USRPHC, gain realized from the disposition of Common Stock by a Non-U.S. Holder will be subject to United States withholding tax equal to 10 percent of the amount realized on the sale. However, gain realized by a Non-U.S. Holder will not be subject to withholding so long as during the calendar year in which the disposition occurs the Common Stock of the Company is regularly traded on an established securities market. Upon consummation of the Offering, the Company believes that the Common Stock will be regularly traded on an established securities market. FEDERAL ESTATE TAX Common Stock held by an individual who is not a citizen or resident (as specifically defined for United States federal estate tax purposes) of the United States at the time of death will be included in such holder's gross estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. INFORMATION REPORTING AND BACKUP WITHHOLDING TAX The Company must report annually to the IRS and to each Non-U.S. Holder the amount of dividends paid to such holder and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the Non-U.S. Holder resides under the provisions of an applicable income tax treaty. United States backup withholding tax is imposed at the rate of 31% on certain payments to persons not otherwise exempt that fail to furnish certain identifying information to the payor. Under current law, backup withholdings generally will not apply to dividends paid to a Non-U.S. Holder at an address outside the United States (unless the payer has knowledge that the payee is a U.S. person), but generally will apply to dividends paid on Common Stock at addresses inside the United States to Non-U.S. Holders that fail to provide certain identifying information in the manner required. However, under proposed Treasury regulations not currently in effect, in the case of dividends paid after December 31, 1997 (December 31, 1999 in the case of dividends paid to accounts in existence on or before the date that is 60 days after the proposed regulations are published as final regulations), a Non-U.S. Holder generally would be subject to backup withholding at a 31% rate, unless certain certification procedures, (or, in the case of payments made outside the United States with respect to an offshore account, certain documentary evidence procedures) are complied with, directly or through an intermediary or a Non-U.S. Holder otherwise establishes an exemption from backup withholding. 86 Payment of the proceeds of a sale of Common Stock or through a United States office of a broker is subject to both backup withholding and information reporting unless the beneficial owner provides the payor with its name and address and certifies under penalties of perjury that it is a Non-U.S. Holder, or otherwise establishes an exemption. In general, backup withholding and information reporting will not apply to a payment of the proceeds of a sale of Common Stock by or through a non-United States office of a non-United States broker. If, however, such broker is, for United States federal income tax purposes a U.S. person, a controlled foreign corporation, or a non-United States person that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the United States, such payments will be subject to information reporting, but not backup withholding, unless (i) such broker has documentary evidence in its records that the beneficial owner is a Non-U.S. Holder and certain other conditions are met, or (ii) the beneficial owner otherwise establishes an exemption. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against such holder's U.S. federal income tax liability provided that required information is furnished in a timely manner to the IRS. 87 UNDERWRITING Subject to certain terms and conditions contained in an underwriting agreement (the "Underwriting Agreement"), the Underwriters named below, for whom DLJ, Furman Selz LLC ("Furman"), Morgan Stanley & Co. Incorporated and Schroder & Co. Inc. are acting as representatives (the "Representatives"), have severally agreed to purchase the number of shares of Common Stock from the Company set forth opposite their names below.
NUMBER UNDERWRITERS OF SHARES - ----------------------------------------------------------------------------------------------- ----------------- Donaldson, Lufkin & Jenrette Securities Corporation............................................ Furman Selz LLC................................................................................ Morgan Stanley & Co. Incorporated.............................................................. Schroder & Co. Inc............................................................................. ----------------- Total.................................................................................. 14,750,000 ----------------- -----------------
The Underwriting Agreement provides that the obligations of the several Underwriters to purchase shares of Common Stock are subject to the approval of certain legal matters by counsel and to certain other conditions. If any of the shares of Common Stock are purchased by the Underwriters pursuant to the Underwriting Agreement, all such shares of Common Stock (other than the shares of Common Stock covered by the over-allotment option described below) must be so purchased. The Company has been advised by the Representatives that the Underwriters propose to offer the shares of Common Stock to the public initially at the price to the public set forth on the cover page of this Prospectus and to certain dealers (who may include the Underwriters) at such price less a concession not to exceed $ per share. The Underwriters may allow, and such dealers may reallow, discounts not in excess of $ per share to any other Underwriter and certain other dealers. At the request of the Company, up to an aggregate of shares of Common Stock, representing approximately % of the shares offered hereby, have been reserved for sale at the public offering price to certain employees of the Company and other persons designated by the Company. The maximum investment of any such person may be limited by the Company in its sole discretion. The number of shares of Common Stock available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the Underwriters to the general public on the same basis as the other shares offered hereby. This program will be administered by DLJ. The Company has granted to the Underwriters an option to purchase up to 2,090,878 additional shares of Common Stock at the initial public offering price less underwriting discounts and commissions solely to cover over-allotments. Such option may be exercised in whole or in part from time to time during the 30-day period after the date of this Prospectus. To the extent that the Underwriters exercise such 88 option, each of the Underwriters will be committed, subject to certain conditions, to purchase a number of option shares proportionate to such Underwriter's initial commitment as indicated in the preceding table. The Company, certain shareholders of the Company and the executive officers and directors of the Company have agreed not to directly or indirectly offer, pledge, sell, contract to sell, sell any option or contract to purchase or grant any option, right or warrant to purchase or otherwise transfer or dispose of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, or enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of such Common Stock, or to cause a registration statement covering any shares of Common Stock to be filed, for 180 days after the closing of the Offering without the prior written consent of DLJ, subject to certain limited exceptions, and provided that the Company may issue shares of Common Stock upon vesting of rights under the Stock Option Plan. See "Shares Eligible for Future Sale." Prior to the Offering, there has been no established trading market for the Common Stock. The initial price to the public for the Common Stock offered hereby will be determined by negotiation among the Company and the Representatives. The factors to be considered in determining the initial price to the public include the history of and the prospects for the industry in which the Company competes, the ability of the Company's management, the past and present operations of the Company, the historical results of operations of the Company, the prospects for future earnings of the Company, the general condition of the securities markets at the time of the Offering and the recent market prices of securities of generally comparable companies. The Company intends to apply for listing of the Common Stock on the New York Stock Exchange. The Underwriters do not intend to make sales to accounts over which they exercise discretionary authority in excess of 5% of the number of shares of Common Stock offered hereby. In connection with the Offering, the Underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the Common Stock. Specifically, the Underwriters may overallot the Offering, creating a syndicate short position. Underwriters may bid for and purchase shares of Common Stock in the open market to cover syndicate short positions. In addition, the Underwriters may bid for and purchase shares of Common Stock in the open market to stabilize the price of the Common Stock. These activities may stabilize or maintain the market price of the Common Stock above independent market levels. The Underwriters are not required to engage in these activities, and may end these activities at any time. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Underwriters may be required to make in respect thereof. In addition to the shares of Common Stock to be sold by the Underwriters in the Public Offering, the Company is offering between 810,811 shares and 2,162,162 shares of Common Stock directly to the Principal Shareholder of the Company in the Concurrent Offering. DLJ has provided financial advisory services to the Company in connection with the Transactions and has acted as solicitation agent in connection with the Consent Solicitation, for which DLJ will receive customary fees. LEGAL MATTERS Certain legal matters with respect to the shares of Common Stock offered by the Company hereby will be passed upon for the Company by LeBoeuf, Lamb, Greene & MacRae, L.L.P, a limited liability partnership including professional corporations, Hartford, Connecticut and Pierce Atwood, Portland, Maine. Certain legal matters will be passed upon for the Underwriters by Latham & Watkins, New York, New York. 89 EXPERTS The consolidated balance sheet of the American Skiing Company as of July 28, 1996 and July 27, 1997 and the consolidated statements of operations, of changes in shareholders' equity, and of cash flows of the Company for the three years ended July 27, 1997 included in this Prospectus 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, of changes in shareholders' equity, and of cash flows of American Skiing Company for the year ended July 31, 1994 included in this Prospectus 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 S-K-I Ltd. as of July 31, 1994 and 1995, and the consolidated statements of income, of changes in shareholders' equity and of cash flows of S-K-I Ltd. for each of the three years in the period ended July 31, 1995 included in this Prospectus 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 balance sheets of the Kamori Combined Entities as of May 31, 1996 and 1997 and the combined statements of operations, stockholders' equity and cash flows of the Kamori Combined Entities for each of the three years in the period ended May 31, 1997 included in this Prospectus have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. ADDITIONAL INFORMATION The Company has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement (which term shall include all amendments, exhibits, schedules and supplements thereto) on Form S-1 under the Securities Act with respect to the shares of Common Stock offered hereby. This Prospectus, which constitutes a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement. The Registration Statement and the exhibits thereto may be inspected and copied at prescribed rates at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549 and at the regional offices of the Commission located at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The Commission maintains a World Wide Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of the Commission's Web site is http://www.sec.gov. 90 INDEX TO FINANCIAL STATEMENTS
PAGE --------- AMERICAN SKIING COMPANY Report of Independent Accountants--July 28, 1996 and July 27, 1997 and for the three years in the period ended July 27, 1997.................................................................................... F-2 Consolidated Balance Sheet--July 28, 1996 and July 27, 1997.............................................. F-3 Consolidated Statement of Operations--For the years ended July 30, 1995, July 28, 1996 and July 27, 1997................................................................................................... F-4 Consolidated Statement of Changes in Shareholders' Equity--For the years ended July 30, 1995, July 28, 1996 and July 27, 1997................................................................................. F-5 Consolidated Statement of Cash Flows--For the years ended July 30, 1995, July 28, 1996 and July 27, 1997................................................................................................... F-6 Notes to Consolidated Financial Statements............................................................... F-8 S-K-I LTD. Report of Independent Accountants........................................................................ F-28 Consolidated Balance Sheet--July 31, 1994 and 1995....................................................... F-29 Consolidated Statement of Income--For the years ended July 31, 1993, 1994, and 1995...................... F-30 Consolidated Statement of Changes in Stockholders' Equity--For the three years ended July 31, 1995....... F-31 Consolidated Statement of Cash Flows--For the years ended July 31, 1993, 1994, and 1995.................. F-32 Notes to Consolidated Financial Statements............................................................... F-33 Consolidated Balance Sheet--April 28, 1996 (unaudited)................................................... F-41 Consolidated Statement of Income--For the nine months ended April 30, 1995 and April 28, 1996 (unaudited)............................................................................................ F-42 Consolidated Statement of Cash Flows--For the nine months ended April 30, 1995 and April 28, 1996 (unaudited)............................................................................................ F-43 Notes to (Unaudited) Condensed Consolidated Financial Statements......................................... F-44 KAMORI COMBINED ENTITIES Report of Independent Public Accountants................................................................. F-47 Combined Balance Sheets as of May 31, 1996 and 1997...................................................... F-48 Combined Statements of Operations for the years ended May 31, 1995, 1996 and 1997........................ F-49 Combined Statements of Stockholders' Equity for the years ended May 31, 1995, 1996 and 1997.......................................................................................... F-50 Combined Statements of Cash Flows for the years ended May 31, 1995, 1996 and 1997........................ F-51 Notes to Combined Financial Statements................................................................... F-53
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of American Skiing Company The 14.76 for 1 stock split and the authorization of additional shares of Class A Common Stock and Common Stock described in Note 16 to the financial statements has not been consummated at October 1, 1997. When it has been consummated, we will be in a position to furnish the following report: "In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of changes in shareholders' 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 27, 1997, and the results of their operations and their cash flows for each of the three years in the period ended July 27, 1997 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." Boston, MA September 19, 1997 F-2 AMERICAN SKIING COMPANY CONSOLIDATED BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
JULY 28, JULY 27, 1996 1997 ------------ ------------ ASSETS Current assets Cash and cash equivalents........................................................... $ 3,185 $ 15,558 Restricted cash..................................................................... 902 2,812 Investments held in escrow.......................................................... 14,497 -- Accounts receivable................................................................. 2,458 3,801 Inventory........................................................................... 5,025 7,282 Prepaid expenses.................................................................... 3,371 1,579 Deferred financing costs............................................................ 1,056 1,338 Real estate developed for sale...................................................... 1,331 537 Assets held for sale................................................................ 14,921 -- Deferred tax assets................................................................. 588 422 ------------ ------------ Total current assets.............................................................. 47,334 33,329 Property and equipment, net........................................................... 227,470 252,346 Goodwill.............................................................................. 6,540 10,664 Deferred financing costs.............................................................. 7,911 8,093 Long-term investments................................................................. 4,343 3,507 Other assets.......................................................................... 3,378 6,398 Real estate developed for sale........................................................ -- 23,003 Assets held for sale.................................................................. 1,756 -- ------------ ------------ Total assets...................................................................... $ 298,732 $ 337,340 ------------ ------------ ------------ ------------ LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY Current liabilities Line of credit and current portion of long-term debt................................ $ 22,893 $ 39,748 Accounts payable and other current liabilities...................................... 17,403 25,738 Deposits and deferred revenue....................................................... 3,541 4,379 Demand note, shareholder............................................................ 5,200 1,933 ------------ ------------ Total current liabilities......................................................... 49,037 71,798 Long-term debt, excluding current portion............................................. 41,035 46,833 Subordinated notes and debentures..................................................... 146,792 149,749 Other long-term liabilities........................................................... 6,778 7,898 Minority interest in subsidiary....................................................... 2,492 626 Deferred income taxes................................................................. 30,695 28,514 ------------ ------------ Total liabilities................................................................. 276,829 305,418 Commitments, lease contingencies and contingent liabilities Mandatorily redeemable preferred stock; Series A, par value $1,000 per share, 200,000 shares authorized; 17,500 shares issued and outstanding; net of unaccreted issuance costs and including accretion of discount and cumulative dividends in arrears (redemption value of $18,537)....................................................... -- 16,821 SHAREHOLDERS' EQUITY Common stock, Class A, par value of $.01 per share; 15,000,000 shares authorized; 14,760,530 issued and outstanding................................................... -- 10 Common stock, par value of $.01 per share; 1,000,000 shares authorized; 978,300 shares issued and outstanding.............................................................. 10 -- Additional paid-in capital............................................................ 3,762 2,786 Retained earnings..................................................................... 18,131 12,305 ------------ ------------ Total shareholders' equity........................................................ 21,903 15,101 ------------ ------------ Total liabilities, mandatorily redeemable preferred stock and shareholders' equity............................................................................ $ 298,732 $ 337,340 ------------ ------------ ------------ ------------
The accompanying notes are an integral part of these financial statements. F-3 AMERICAN SKIING COMPANY CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
YEAR ENDED JULY 30, JULY 28, JULY 27, 1995 1996 1997 --------- ----------- ------------- Net revenues: Resort................................................................... $ 46,794 $ 63,489 $ 166,923 Real estate.............................................................. 7,953 9,933 8,468 --------- ----------- ------------- Total net revenues..................................................... 54,747 73,422 175,391 --------- ----------- ------------- Operating expenses: Resort................................................................... 29,725 41,799 109,774 Real estate.............................................................. 3,994 5,844 6,813 Marketing, general and administrative.................................... 9,394 11,289 26,126 Depreciation and amortization............................................ 3,910 6,783 18,293 --------- ----------- ------------- Total operating expenses............................................... 47,023 65,715 161,006 --------- ----------- ------------- Income from operations..................................................... 7,724 7,707 14,385 --------- ----------- ------------- Other expenses: Commitment fee........................................................... -- 1,447 -- Interest expense......................................................... 2,205 4,699 23,730 --------- ----------- ------------- Income (loss) before provision (benefit) for income taxes and minority interest in loss of subsidiary........................................... 5,519 1,561 (9,345) Provision (benefit) for income taxes....................................... 400 3,906 (3,613) Minority interest in loss of subsidiary.................................... -- 108 250 --------- ----------- ------------- Net income (loss).......................................................... 5,119 (2,237) (5,482) Accretion of discount and issuance costs and dividends accrued on mandatorily redeemable preferred stock................................... -- -- (444) --------- ----------- ------------- Net income (loss) available to common shareholders......................... $ 5,119 $ (2,237) $ (5,926) --------- ----------- ------------- --------- ----------- ------------- Pro forma net loss per weighted average common share outstanding........... $ (.35) ------------- ------------- Weighted average common shares outstanding................................. $ 16,871,048 ------------- -------------
The accompanying notes are an integral part of these financial statements. F-4 AMERICAN SKIING COMPANY CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
CLASS A COMMON STOCK COMMON STOCK ADDITIONAL ------------------------ ------------------------- PAID-IN RETAINED SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL ----------- ----------- ------------ ----------- ----------- --------- --------- Balance at July 31, 1994............. 116,737 $ 116 -- -- $ 1,635 $ 24,461 $ 26,212 Net income......................... -- -- -- -- -- 5,119 5,119 Distributions to shareholder....... -- -- -- -- -- (854) (854) Contributions...................... -- -- -- -- 25 -- 25 ----------- ----- ------------ ----- ----------- --------- --------- Balance at July 30, 1995............. 116,737 116 -- -- 1,660 28,726 30,502 Net loss........................... -- -- -- -- -- (2,237) (2,237) Distributions to shareholder....... -- -- -- -- -- (8,358) (8,358) Contributions...................... -- -- -- -- 1,020 -- 1,020 Conversion of affiliate company common stock to ASC common stock............................ 822,431 (106) -- -- 106 -- -- Issuance of shares of common stock............................ 39,132 -- -- -- 976 -- 976 ----------- ----- ------------ ----- ----------- --------- --------- Balance at July 28, 1996............. 978,300 10 -- -- 3,762 18,131 21,903 Exchange of the Shareholder's 96% interest in ASC East for 100% of the Common Stock of the Company.......................... (939,168) (10) -- -- -- -- (10) Restatement of beginning of the year retained earnings for the establishment of the 4% minority interest in ASC East and share of earnings since inception......... (39,132) -- -- -- (976) 100 (876) Issuance of Common Stock of the Company to the Shareholder....... 1,000,000 10 -- -- -- -- 10 Conversion of Common Stock to Class A Common Stock................... (1,000,000) (10) 1,000,000 10 -- -- -- Stock split in October 1997, accounted for retroactively to the date of the exchange......... -- -- 13,760,530 -- -- -- -- Accretion of discount and issuance costs and dividends accrued on mandatorily redeemable preferred stock............................ -- -- -- -- -- (444) (444) Net loss........................... -- -- -- -- -- (5,482) (5,482) ----------- ----- ------------ ----- ----------- --------- --------- Balance at July 27, 1997............. -- $ -- 14,760,530 $ 10 $ 2,786 $ 12,305 $ 15,101 ----------- ----- ------------ ----- ----------- --------- --------- ----------- ----- ------------ ----- ----------- --------- ---------
The accompanying notes are an integral part of these financial statements. F-5 AMERICAN SKIING COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED JULY 30, JULY 28, JULY 27, 1995 1996 1997 ---------- ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss).......................................................... $ 5,119 $ (2,237) $ (5,482) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Minority interest in net loss of subsidiary............................ -- (108) (250) Depreciation and amortization.......................................... 3,910 6,783 18,293 Amortization of discount on subordinated notes and debentures and other liabilities.......................................................... -- 435 3,300 Income tax expense on conversion of S corporations to C corporations... -- 5,552 -- Deferred income taxes, net............................................. (488) (1,940) (3,332) Decrease (increase) in assets: Restricted cash and investments held in escrow..................... -- -- 12,587 Accounts receivable................................................ (684) 481 (1,343) Inventory.......................................................... (876) (373) (2,257) Prepaid expenses................................................... (324) (648) 1,792 Real estate developed for sale..................................... 3,377 2,523 (21,976) Other assets....................................................... 54 (836) (872) Increase (decrease) in liabilities: Accounts payable and other current liabilities..................... 2,460 (3,601) 6,794 Other liabilities.................................................. -- 490 (1,304) Deposits and deferred revenue...................................... 45 944 838 ---------- ----------- ---------- Net cash provided by operating activities.............................. 12,593 7,465 6,788 ---------- ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Payments for purchases of businesses, net of cash acquired................. (1,819) (97,079) (6,959) Long-term investments...................................................... -- (450) 836 Capital expenditures....................................................... (12,024) (25,054) (23,267) Proceeds from sale of property and equipment............................... -- -- 2,626 Cash payments on note receivable........................................... 250 Proceeds from sale of businesses........................................... -- -- 14,408 Cash flows from investing activities, other................................ -- -- (1,964) ---------- ----------- ---------- Net cash used in investing activities.................................. $ (13,843) $ (122,583) $ (14,070) ---------- ----------- ---------- ---------- ----------- ----------
F-6 AMERICAN SKIING COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS) (CONTINUED)
YEAR ENDED JULY 30, JULY 28, JULY 27, 1995 1996 1997 ---------- ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from senior credit facility................................... $ -- $ 40,301 $ 14,766 Net proceeds from (payments of) line of credit............................. 2,820 (5,776) -- Net proceeds from (payments of) revolving credit loan...................... 1,150 (17,101) -- Proceeds from subordinated notes and debentures, net of investments held in escrow................................................................... -- 121,126 -- Deferred financing costs................................................... -- (8,485) (1,567) Proceeds from long-term debt............................................... 84 1,819 7,828 Payments of long-term debt................................................. (765) (13,625) (14,482) Payments on Demand note, Shareholder....................................... -- -- (3,267) Advances to Shareholder.................................................... (61) (156) -- Distributions to Shareholder............................................... (854) (3,158) -- Proceeds from issuance of mandatorily redeemable preferred stock, net of issuance costs................................... -- -- 16,377 Capital contribution....................................................... 25 1,020 -- Issuance of shares of common stock......................................... -- 976 -- ---------- ----------- ---------- Net cash provided by financing activities.............................. 2,399 116,941 19,655 ---------- ----------- ---------- Net increase in cash and cash equivalents.............................. 1,149 1,823 12,373 Cash and cash equivalents, beginning of year................................. 213 1,362 3,185 ---------- ----------- ---------- Cash and cash equivalents, end of year....................................... $ 1,362 $ 3,185 $ 15,558 ---------- ----------- ---------- ---------- ----------- ---------- Cash paid for interest....................................................... $ 1,056 $ 2,408 $ 20,998 Cash paid (refunded) for income taxes........................................ $ -- $ 15 $ (1,492) SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES: Property acquired under capitalized leases................................. $ 1,050 $ 435 $ 7,824 Liabilities assumed associated with purchased companies.................... $ 9,254 $ 58,497 $ 1,826 Deferred tax liability associated with purchased companies................. $ -- $ 28,372 $ -- Purchase price adjustments................................................. $ -- $ -- $ 1,541 Purchase price adjustments related to deferred taxes....................... $ -- $ -- $ 1,317 Note payable issued for distribution to Shareholder........................ $ -- $ 5,200 $ -- Note payable issued for purchase of a business............................. $ -- $ -- $ 6,500 Note receivable received for sale of businesses............................ $ -- $ -- $ 2,750 Recording of minority interest............................................. $ -- $ -- $ 626 Accretion of discount and issuance costs and dividends accrued on mandatorily redeemable preferred stock................................... $ -- $ -- $ 444
The accompanying notes are an integral part of these financial statements. F-7 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION American Skiing Company ("ASC") is organized as a holding company and operates through various subsidiaries. ASC and its subsidiaries (collectively, the "Company") operate primarily in a single business segment, which is the operation and development of ski resorts. ASC was originally formed on December 7, 1995. Through June 17, 1997, American Skiing Company was a holding company and operated through various subsidiaries. ASC Holdings, Inc. ('ASCH') was formed on June 17, 1997, when Les Otten (the 'Shareholder') exchanged his 96% ownership interest in ASC for 100% of the common stock of ASCH. In conjunction with the formation of ASCH, the Company changed the name of ASC to ASC East and recorded the 4% minority interest in ASC East. The minority interest in ASC East of $626,000 at July 27, 1997 is comprised of the fair market value of the stock when issued to the minority shareholders of $976,000, less the minority interest in the fiscal 1996 and 1997 losses of $100,000 and $250,000, respectively. On September 9, 1997, ASCH changed its name to American Skiing Company. For periods prior to June 17, 1997, the term 'Company' refers to ASC East and its subsidiaries, and after such date, to American Skiing Company (formerly ASCH) and its subsidiaries (including ASC East). In conjunction with the formation of ASCH, the Company formed ASC Utah, a wholly-owned subsidiary, for the purpose of acquiring the Canyons resort, including the Wolf Mountain ski areas in Utah. In August 1997, the Company formed ASC West for the purpose of the anticipated acquisition of the Steamboat Ski Resort in Colorado and the Heavenly Ski Resort in California. Prior to June 28, 1996, the Company was a combined group of separate entities which were wholly-owned by the Shareholder. The outstanding number of shares at July 30, 1995 of 116,737 represented the total outstanding shares of the companies within the combined group. On June 28, 1996, the Shareholder exchanged all the outstanding shares of the combined group for 939,168 shares of ASC common stock. Contemporaneously with the exchange, ASC purchased all the outstanding shares of common stock of S-K-I Limited, Inc. ('S-K-I') for $18.00 per share. Upon the acquisition of S-K-I, the companies from the combined group and the S-K-I companies were formed into a consolidated entity. In conjunction with the exchange and the acquisition of S-K-I, ASC issued 39,132 shares of common stock, representing a 4% minority interest in ASC, to an institutional investor in a private offering. The fair market value of the common stock was $976,000 at the date of issuance and was recorded as additional paid-in capital. The Company owns and operates resort facilities, real estate development companies, golf courses, ski and golf schools, retail shops and other related companies at the following resorts: VERMONT Killington Resort Pico Ski Resort Mount Snow/Haystack Resort Sugarbush Resort MAINE Sunday River Ski Resort Sugarloaf Resort NEW HAMPSHIRE Attitash/Bear Peak Ski Resort UTAH The Canyons Resort (Wolf Mountain ski areas) F-8 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of American Skiing Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. FISCAL YEAR The Company's fiscal year is a fifty-two week or fifty-three week period ending on the last Sunday of July. The periods for 1995, 1996 and 1997 consisted of fifty-two weeks. CASH AND CASH EQUIVALENTS The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. RESTRICTED CASH Restricted cash represents amounts held in escrow for the buyers of properties developed for sale. The cash will be available to the Company when the properties are sold. INVESTMENTS HELD IN ESCROW Investments held in escrow at July 28, 1996 consisted of U. S. Treasury Notes, the proceeds from the redemption of which were used for payment of interest on the Subordinated Notes. These Treasury Notes were carried at cost which approximated the quoted market values at July 28, 1996. At July 27, 1997, the Company is no longer required to hold cash in escrow for payment of interest on the Subordinated Notes. 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 amortized over the shorter of their useful lives or the respective lease lives. GOODWILL 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. Goodwill is recorded net of accumulated amortization in the accompanying consolidated balance sheet. F-9 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) DEFERRED FINANCING COSTS Costs incurred in connection with the issuance of debt are included in deferred financing costs, net of accumulated amortization. Amortization is calculated using the straight-line method over the respective original lives of the applicable issues and is included in depreciation and amortization in the accompanying consolidated statement of operations. Amortization calculated using the straight-line method is not materially different from amortization that would have resulted from using the interest method. LONG-TERM INVESTMENTS Long-term investments are comprised of 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 and July 27, 1997. LONG-LIVED ASSETS Effective July 29, 1996, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). In accordance with SFAS 121, whenever events or circumstances indicate that the carrying value of the long-lived assets, identifiable intangibles and real estate developed for sale may not be recoverable, impairment losses are recorded and the related assets are adjusted to their estimated fair market value, less selling costs. As of July 27, 1997, management believes that there has not been any impairment of the Company's long-lived assets, identifiable intangibles or real estate developed for sale. REVENUE RECOGNITION Resort revenues include sales of lift tickets, tuition from ski schools, sales from restaurants, bars and retail shops, and real estate rentals. These revenues are recognized as the services are performed. Real estate revenues are recognized when title has been transferred. Deposits from buyers of real estate are recorded as deposits and deferred revenue in the accompanying balance sheet until the revenue is recognized and the amount is applied to the selling price. Original acquisition costs, direct construction and development costs, interest incurred on costs related to land under development, and other related costs (engineering, surveying, landscaping, etc.) are recorded in the accompanying consolidated balance sheet as real estate developed for sale. INTEREST Interest is expensed as incurred except when it is capitalized in conjunction with major capital additions and development of real estate for sale. The amounts of interest capitalized are determined by applying current interest rates to the funds required to finance the construction. During 1995, 1996 and 1997, the Company incurred total interest cost of $2.4 million, $5.1 million and $24.3 million, respectively of which $224,000, $444,000 and $575,000, respectively, has been capitalized to property and equipment and real estate developed for sale. F-10 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EMPLOYEE BENEFITS In August 1997, the Company established the ASC 401(k) Retirement Plan pursuant to Section 401(k) of the Internal Revenue Code which allows all eligible employees to defer up to 15% of their income. The Company's match of participants' contributions is discretionary. As of July 27, 1997, the Company maintained two profit sharing and two savings plans pursuant to Section 401(k) of the Internal Revenue Code. There were no contributions to the profit sharing plans for 1995, 1996 and 1997. Contributions to the savings plans for 1995, 1996 and 1997 totaled $107,000, $87,000 and $301,000, respectively. These four plans were rolled into the ASC 401(k) Retirement Plan subsequent to year end. ADVERTISING COSTS Advertising costs are expensed the first time the advertising takes place. At July 28, 1996 and July 27, 1997 advertising costs of $282,000 and $384,000, respectively, were recorded as current assets in the accompanying consolidated balance sheet. Advertising expense for the years ended July 30, 1995, July 28, 1996 and July 27, 1997 was $4.5 million, $5.7 million and $5.2 million, respectively. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect amounts and disclosures reported in the accompanying consolidated 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 fiscal quarters, of which a significant portion is produced in two key weeks--the Christmas and Presidents' Day vacation weeks. EARNINGS PER SHARE For the year ended July 27, 1997, the computation of net loss per common share is based on the weighted average of shares outstanding during the year plus the fully diluted earnings per share impact of the conversion of the mandatorily redeemable preferred stock. 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 the fiscal year ended 1995. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). This pronouncement will be effective for the Company's year ended July 28, 1998 financial statements. SFAS 128 will supersede the pronouncement of the Accounting Principles Board Opinion No. 15. The statement eliminates the calculation of primary earnings per share and requires the disclosure of Basic Earnings Per Share and Diluted Earnings Per Share (formerly referred to as fully diluted earnings per share), if applicable. As the Company has recorded net losses for the years ended July 28, 1996 and July 27, 1997, any common stock equivalents would be antidilutive; therefore, primary earnings per share after accretion of the mandatorily F-11 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) redeemable preferred stock issuance costs and discount and the mandatorily redeemable preferred stock dividends as presented on the consolidated statements of operations is equivalent to Basic Earnings Per Share and Diluted Earnings Per Share under SFAS 128. FAIR VALUE OF FINANCIAL INSTRUMENTS The recorded amounts for cash and cash equivalents, accounts receivable and accounts payable and other current liabilities approximate fair value due to the short-term nature of these financial instruments. The fair values of amounts outstanding under the Company's Senior Credit Facility and certain other debt instruments approximates their book values in all material respects, as determined by discounting future cash flows at current market interest rates as of July 27, 1997. The fair value of the Company's Senior Subordinated Notes has been estimated using quoted market values. The fair value of the Company's Subordinated Discount Notes and the Subordinated debentures of Killington Ltd. have been estimated using discounted cash flow analyses based on current borrowing rates for debt with similar maturities and ratings. The estimated fair values of the Senior Subordinated Notes, the Subordinated Discount Notes and the Subordinated debentures of Killington Ltd. at July 27, 1997 are presented below (in thousands):
CARRYING FAIR AMOUNT VALUE ---------- ---------- 12% Senior Subordinated Notes due 2006................................ $ 116,678 $ 127,400 13.75% Subordinated Discount Notes due 2007........................... 22,121 22,121 Subordinated debentures of Killington Ltd............................. 10,950 9,286 ---------- ---------- $ 149,749 $ 158,807 ---------- ---------- ---------- ----------
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 shareholder. Concurrent with the acquisition of S-K-I, the subsidiaries' election to be treated as S corporations terminated. 3. BUSINESS ACQUISITIONS AND DIVESTMENTS On June 28, 1996, the Company acquired S-K-I (the "Acquisition") for a total purchase price, including direct costs, of $104.6 million including 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 F-12 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. BUSINESS ACQUISITIONS AND DIVESTMENTS (CONTINUED) 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 and July 27, 1997. The purchase price was allocated to the fair values of S-K-I's assets and liabilities at the date of acquisition as follows (in thousands):
FAIR VALUE OF NET ASSETS ACQUIRED ------------------ Cash...................................................................... $ 7,540 Accounts receivable, net.................................................. 1,625 Inventory................................................................. 3,271 Prepaid expenses.......................................................... 2,153 Property and equipment, net............................................... 163,745 Long-term investments..................................................... 3,893 Goodwill.................................................................. 6,554 Other assets.............................................................. 2,156 -------- Total assets.......................................................... 190,937 -------- -------- Accounts payable and accrued expenses..................................... (16,567) Other liabilities......................................................... (5,301) Minority interest......................................................... (2,600) Debt acquired............................................................. (34,029) Deferred income taxes..................................................... (27,820) -------- Total liabilities..................................................... (86,317) -------- Total................................................................. $ 104,620 -------- --------
During fiscal 1997, the Company recorded purchase price adjustments totaling $4.3 million pertaining to the Acquisition. Amortization of goodwill charged to depreciation and amortization amounted to $14,000 and $217,000 for 1996 and 1997, respectively. Accumulated amortization of goodwill amounted to $14,000 and $231,000 at July 28, 1996 and July 27, 1997, respectively. Pursuant to a consent decree with the U.S. Department of Justice in connection with the Merger, the Company sold the assets constituting the Mt. Cranmore and Waterville Valley resorts for $17.2 million on November 27, 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. In November 1996, the Company purchased the Pico Ski Resort for a total purchase price of $5.0 million. The purchase price includes a cash payment of $3.4 million and assumed liabilities of $1.6 million. In June 1997, the Company purchased the Canyons, including the Wolf Mountain ski area, for a total purchase price of $8.3 million. The purchase price includes a cash payment of $1.6 million, assumed liabilities of $200,000 and the issuance of a note payable in the amount of $6.5 million. F-13 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. BUSINESS ACQUISITIONS AND DIVESTMENTS (CONTINUED) On August 30, 1996, the Company purchased the remaining 49% minority interest in Sugarloaf, with a carrying amount of $2.5 million, for $2.0 million cash. In connection with the purchase, the Company recorded a liability in the amount of $492,000 to provide for contingent consideration that may be paid pursuant to the purchase agreement. The liability is included in other long-term liabilities in the accompanying consolidated balance sheet at July 27, 1997. Contemporaneously with the purchase of Sugarloaf, the Company paid certain debt in advance of its maturity and incurred a prepayment penalty of $600,000. The prepayment penalty is recorded in interest expense in the accompanying consolidated statement of operations for the year ended July 27, 1997. The following unaudited pro forma summary presents the consolidated results of operations as if the acquisition of S-K-I, the divestitures of Mt. Cranmore and Waterville Valley, the purchase of the minority interest of Sugarloaf, and the termination of S corporation status of the S corporations (which reflects the estimated results of operations as if Sunday River Skiway Corporation ("SRSC"), Sunday River Ltd. ("SRL"), Perfect Turn, Inc. ("PT") and Sunday River Transportation Co. ("SRTC"), wholly-owned subsidiaries of the Company, had been subject to corporate income taxes) had occurred on July 31, 1995 and July 29, 1996 (in thousands except per share amounts):
YEAR ENDED YEAR ENDED JULY 30, JULY 28, 1995 1996 ----------- ----------- Revenues............................................................. $ 149,031 $ 171,666 Net loss............................................................. $ (8,133) $ (3,785) Net loss per share................................................... -- $ (3.87)
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. REAL ESTATE OPERATIONS In addition to its resort operations, the Company engages in various real estate activities including rental services and the development of real estate for sale. During development, real estate taxes, insurance, interest, planning and permitting costs are capitalized. Profit is recognized from the sale of such property at the time of closing, when the Company has no ongoing involvement in the specific property sold. The carrying value of the property developed for sale 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 sale consist of the following (in thousands):
JULY 27, JULY 28, 1996 1997 ------------- ------------ Summit hotel completed units and hotels under development............................. $ 36 $ 22,685 Locke mountain........................................................................ 603 -- Other................................................................................. 692 861 ------ ------------ $ 1,331 $ 23,546 ------ ------------ ------ ------------
F-14 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. PROPERTY AND EQUIPMENT The following reflects the combination of both owned property and equipment as well as assets acquired pursuant to capital leases (in thousands):
JULY 28, JULY 27, 1996 1997 ---------- ---------- Buildings and grounds................................................. $ 62,301 $ 69,635 Machinery and equipment............................................... 53,422 61,218 Lifts and lift lines.................................................. 56,370 60,769 Trails................................................................ 11,064 11,667 Land improvements..................................................... 10,819 18,096 ---------- ---------- 193,976 221,385 Less--accumulated depreciation and amortization....................... 20,737 36,940 ---------- ---------- 173,239 184,445 Land.................................................................. 50,685 49,160 Construction-in-process............................................... 3,546 18,741 ---------- ---------- Net property and equipment............................................ $ 227,470 $ 252,346 ---------- ---------- ---------- ----------
Property and equipment includes approximately $3.5 million and $10.7 million of machinery and equipment held under capital leases at July 28, 1996 and July 27, 1997, respectively. Related accumulated amortization at July 28, 1996 and July 27, 1997 on property and equipment under capital leases was approximately $1.0 million and $2.3 million, respectively. Amortization expense for property and equipment under capital leases and included in depreciation expense was approximately $406,000, $493,000 and $1.6 million for 1995, 1996 and 1997, respectively. Depreciation expense was $3.8 million, $6.7 million and $16.6 million for 1995, 1996 and 1997, respectively. 6. NOTE RECEIVABLE In connection with the sale of Mt. Cranmore and Waterville Valley in November 1996, the Company received a promissory note in the amount of $2.8 million. Interest on the note is charged at a rate of 12% per annum and is payable semi-annually on December 31 and June 30. The note shall be paid in annual installments of $250,000, $100,000, $150,000, $200,000, $250,000, $300,000 and $350,000 beginning in January 1997 through January 2003, with the remaining balance to be paid in June 2004. The balance of the note at July 27, 1997 of $2.5 million is included in other assets in the accompanying consolidated balance sheet. 7. NOTE RECEIVABLE, AFFILIATE The note receivable in the amount of $265,000 at July 28, 1996 and $250,000 at July 27, 1997 is from Ski Dorms, Inc., a company which is principally owned by the Shareholder of the Company, and is secured by a mortgage on land and building. Interest is charged at Fleet National 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 28, 1996 and July 27, 1997 was $179,000 and $10,000, respectively. The balance of the note and the accrued interest receivable are included in other assets. F-15 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. DEMAND NOTE, SHAREHOLDER In June 1996, prior to the Acquisition, Sunday River, now a wholly-owned subsidiary of ASC East, delivered to the Shareholder a demand note in the principal amount of $5.2 million for the amount expected to become payable by the Shareholder in 1996 and 1997 for income taxes with respect to Sunday River's income as an S corporation through the date of the Acquisition. 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 (in thousands):
JULY 28, JULY 27, 1996 1997 --------- --------- Senior Credit Facility (see Note 11)..................................................... $ 40,301 $ 55,067 Subordinated debentures issued to the former shareholders of Mt. Attitash Lift Corporation by LBO Holding, Inc. ("LBO"), with an original face value of $2,151 (a discount has been reflected based on the Company's incremental borrowing rate at the date of issuance). 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 1, 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 limitation and discount as described in the agreement.............. 1,709 1,777 Promissory note issued to Snowridge, Inc. by Sugarbush Resort Holdings, Inc. ("Sugarbush") with a face value of $6,120 (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 was made on November 1, 1995 and the remaining principal and accrued interest outstanding are due on December 31, 1999. The note is collateralized by certain assets (as defined in the loan agreement) of Sugarbush................................................................................ 4,984 5,128 Promissory note in the amount of $2,311 issued to LHC Corporation (an affiliate of Snowridge, Inc.) by Mountain Waste Water Co. ("MWWC", a wholly-owned company of Sugarbush), which is secured by the stock of MWWC and Mountain Water Company (a wholly-owned company of Sugarbush) as well as letters of credit in the amount of $100. 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 are due each June 1, beginning in 1997, with the balance due on June 1, 2003..................................................... 2,311 2,158 Vermont Industrial Development Bonds, fluctuating interest rates, 1996- 3.56% to 4.83%; 1997- 4.03% to 4.50% due in varying installments through 1999, secured by certain machinery and equipment and real estate.................................................. 2,695 1,005 Town of Carrabassett Valley, Maine, $3,700 term loan due August 27, 2013 in serial maturities, interest at rates ranging from 5.0% to 8.5%, secured by first mortgages on property, plant and equipment............................................................ 3,515 --
F-16 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. LONG-TERM DEBT (CONTINUED)
JULY 28, JULY 27, 1996 1997 --------- --------- First National Bank of Boston, $1,600 revolving loan due August 31, 1996 interest at the bank's prime plus .5% (8.75%) at July 28, 1996........................................... 1,600 -- Note payable to Wolf Mountain Resorts, L.L.C. in an aggregate principal amount of $6.5 million to finance the acquisition of the Canyons resort and Wolf Mountain Ski area. The note bears interest at a rate of 12% per annum which is payable monthly. The principal is payable in installments of $4.2 million upon the effective date of the offering for sale of the Company's Common Stock to the public and $2.3 million in January 1998............. -- 6,500 Note payable by Grand Summit Resort Properties, Inc. (a wholly-owned subsidiary of the Company) to Key Bank in the amount of $8.5 million to finance the acquisition of land for a hotel at the Attitash/Bear Peak resort. The note matures on July 26, 1998.............. -- 4,250 OTHER Obligations under capital leases......................................................... 1,301 7,840 Other notes payable...................................................................... 5,512 2,856 --------- --------- 63,928 86,581 Less: current portion.................................................................... 22,893 39,748 --------- --------- Long-term debt, excluding current portion................................................ $ 41,035 $ 46,833 --------- --------- --------- ---------
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 27, 1997. The non-current portion of long-term debt matures as follows (in thousands):
1999............................................................................... $ 33,055 2000............................................................................... 7,576 2001............................................................................... 1,675 2002............................................................................... 3,527 2003 and thereafter................................................................ 2,975 Interest related to capitalized leases............................................. (1,263) Debt discount...................................................................... (712) --------- $ 46,833 --------- ---------
At July 27, 1997, the Company had letters of credit outstanding totaling $3.0 million. F-17 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. SUBORDINATED NOTES AND DEBENTURES On June 25, 1996, in connection with the Acquisition, ASC East issued $120.0 million of 12% Senior Subordinated Notes (the "Notes") and 39,132 units consisting of $39.1 million 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 ASC East, subordinated in right of payment to all existing and future debt of ASC East, including all borrowings of the Company under the Senior Credit Facility. The Notes and Subordinated Notes mature July 15, 2006 and January 15, 2007, respectively, and will be redeemable at the option of ASC East, in whole or in part, at any time after July 15, 2001. ASC East incurred deferred financing costs totaling $7.9 million in connection with the issuance of the Notes and Subordinated Notes which are recorded as assets, net of accumulated amortization, in the accompanying consolidated balance sheet. Amortization expense included in the accompanying consolidated statement of operations for the years ended July 28, 1996 and July 27, 1997 amounted to $58,000 and $781,000, respectively. Pursuant to a registration rights agreement, ASC East filed a registration statement with respect to an offer to exchange the Notes and Subordinated Notes for a new issue of notes of ASC East registered under the Securities Act of 1933, with identical terms. The registration statement became effective in November 1996. The Notes were issued with an original issue discount of $3.4 million and, as a result, the effective interest rate exceeds the stated interest rate. Interest on the Notes is payable semi-annually on January 15 and July 15 of each year, commencing on January 15, 1997. Interest expense on the Notes amounted to $1.1 million and $14.6 million in 1996 and 1997, respectively. Upon issuance of the Notes, a portion of the proceeds were required to be 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 in the Pledge Account was $14,497 and was invested in U.S. Treasury obligations. Following the July 15, 1997 interest payment, the amount remaining in the Pledge Account was not material and was released to ASC East. The balance in the pledge account at July 28, 1996 is reflected in Investments held in escrow in the accompanying consolidated balance sheet. The Subordinated Notes were issued with an original issue discount of $19.0 million. 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 and $2.9 million in 1996 and 1997, respectively. The shares of common stock issued with the Subordinated Notes represent 4% of the total common stock outstanding of ASC East and were valued at $976,000 as of June 28, 1996. F-18 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. SUBORDINATED NOTES AND DEBENTURES (CONTINUED) Subordinated debentures of Killington Ltd (a wholly-owned subsidiary of the Company) amounted to $10,950,000 at July 27, 1997 and are due as follows (in thousands):
YEAR INTEREST AMOUNT - ------------------------------------------------------ ------------- --------- 1999.................................................. 6% $ 455 2000.................................................. 6% 673 2001.................................................. 8% 525 2002.................................................. 8% 549 2003.................................................. 8% 1,074 2004.................................................. 8% 1,466 2010.................................................. 8% 1,292 2012.................................................. 6% 1,155 2013.................................................. 6% 1,065 2015.................................................. 6% 1,500 2016.................................................. 6% 1,196 --------- $ 10,950 --------- ---------
11. SENIOR CREDIT FACILITY On June 25, 1996, ASC East entered into the Senior Credit Facility (the "Facility") with Fleet National Bank ("Fleet"). The Facility provides for a $65.0 million revolving line of credit (which includes a $3.5 million sub-facility for letters of credit). The ASC East obligations under the Facility are guaranteed by substantially all of the assets of ASC East. Under the Facility, ASC East may enter into LIBOR contracts which provide for a fixed rate of interest on certain borrowings for a period of time not to exceed 90 days. At July 28, 1996 and July 27, 1997, ASC East had outstanding borrowings of $37.0 million and $53.0 million, respectively under LIBOR contracts which bear interest at a rate of 7.94% per annum at July 28, 1996 and at rates ranging from 8.17% to 8.19%, per annum at July 27, 1997. The balance of the borrowings outstanding at July 28, 1996 and July 27, 1997 of $3.3 million and $2.1 million, respectively, bear interest at Fleet's LIBOR rate plus 1.5% to 2.5% per annum on Fleet's Base rate plus up to 1.5% per annum (9.75% and 10.0% at July 28, 1996 and July 27, 1997, respectively). ASC East is required to 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 $50.0 million over the period ending July 1, 2000, and the Senior Credit Facility will mature on or about December 31, 2001. ASC East is required to pay down the amounts outstanding each year, commencing in 1996, for a 45-day period which must include March 31, to an amount declining from $25.0 million in 1997 to $10.0 million in 2000 and 2001. In establishing the Facility, ASC East incurred deferred financing costs totaling $1.5 million which are recorded as assets, net of accumulated amortization, in the accompanying consolidated balance sheet. Amortization expense included in the accompanying consolidated statement of operations for the years ended July 28, 1996 and July 27, 1997 amounted to $23,000 and $322,000, respectively. F-19 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. SENIOR CREDIT FACILITY (CONTINUED) As of July 27, 1997, the Company was in violation of certain financial covenants under the Facility. Subsequent to year end, the violations were waived by Fleet and the financial covenants with respect to which the Company was in default were amended. 12. INCOME TAXES Prior to June 28, 1996, certain companies comprising ASC Holdings, Inc., SRSC, SRL, PT and SRTC (the "S Corporations") 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 July 31, 1995 to June 28, 1996. For federal and state income tax purposes, taxable income, losses and tax credits are passed through to the Shareholder, who is individually responsible for reporting his share of such items. The Company distributed to the Shareholder amounts sufficient to pay his personal income taxes based on the S Corporations' earnings. In conjunction with the Acquisition, the S Corporations changed from S corporation status to C corporation status. As a result, the income or loss of the S Corporations subsequent to June 28, 1996 will be subject to corporate income tax. The income tax provision described below for the years ended July 28, 1996 and July 27, 1997 includes the income taxes related to the S Corporations since June 28, 1996. At the time of conversion of the S Corporations to C corporation status, a net deferred tax liability of $5.6 million 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 at the time of conversion. The provision (benefit) for income taxes charged to continuing operations was as follows (in thousands):
YEAR ENDED JULY 28, JULY 27, JULY 30, 1995 1996 1997 --------------- ------------ ------------ Current tax expense Federal.............................................................. $ 248 $ -- $ -- State................................................................ 55 -- -- ----- ------------ ------------ 303 -- -- ----- ------------ ------------ Deferred tax expense Federal.............................................................. 77 (1,330) (2,815) State................................................................ 20 (316) (798) ----- ------------ ------------ 97 (1,646) (3,613) ----- ------------ ------------ Change in tax status from S Corporation to C Corporation............... -- 5,552 -- ----- ------------ ------------ Total provision (benefit).............................................. $ 400 $ 3,906 $ (3,613) ----- ------------ ------------ ----- ------------ ------------
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. F-20 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. INCOME TAXES (CONTINUED) Deferred tax liabilities (assets) are comprised of the following at July 28, 1996 and July 27, 1997 (in thousands):
JULY 28, JULY 27, 1996 1997 ---------- ---------- Property and equipment basis differential................................................ $ 36,917 $ 40,040 Other.................................................................................... 753 907 ---------- ---------- Gross deferred tax liabilities........................................................... 37,670 40,947 ---------- ---------- Tax loss and credit carryforwards........................................................ (11,414) (16,766) Capitalized cost......................................................................... (1,473) (543) Other.................................................................................... (1,764) (1,589) Original issue discount on Subordinated Notes............................................ -- (1,212) ---------- ---------- Gross deferred tax assets................................................................ (14,651) (20,110) ---------- ---------- Valuation allowance...................................................................... 7,369 7,255 ---------- ---------- 30,388 28,092 ---------- ---------- Less: Net deferred tax liability related to assets held for sale......................... 281 -- ---------- ---------- $ 30,107 $ 28,092 ---------- ---------- ---------- ----------
The provision (benefit) 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 income (loss) before provision (benefit) for income taxes and minority interest in loss of subsidiary as a result of the following differences (in thousands):
YEAR ENDED JULY 30, JULY 28, JULY 27, 1995 1996 1997 --------- --------- --------- Income tax provision (benefit) at the statutory U.S. tax rates................... $ 1,932 $ 546 $ (3,271) Increase (decrease) in rates resulting from: Change in tax status from S Corporation to C Corporation..................... -- 5,552 -- Income from S Corporations not taxable for corporate income tax purposes..... (1,679) (2,371) -- State taxes, net............................................................. 115 -- (798) Change in valuation allowance................................................ -- -- 71 Nondeductible items.......................................................... 32 41 243 Other........................................................................ -- 138 142 --------- --------- --------- Income tax provision (benefit) at the effective tax rates........................ $ 400 $ 3,906 $ (3,613) --------- --------- --------- --------- --------- ---------
At July 27, 1997, the Company has federal net operating loss ("NOL") carryforwards of approximately $40.7 million which expire in varying amounts through the year 2011. Under Section 382 of the Internal Revenue Code, future use of NOL carryforwards generated prior to a change in ownership, as defined, may be significantly limited. Approximately $16.0 million and $3.3 million of Sugarloaf and LBO Holding, Inc.'s ("LBO"), a wholly-owned subsidiary of ASC East, federal NOL carryforwards, respectively, are subject to an annual limitation of $110,000 and $185,000, respectively, of the amount of their separate F-21 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. INCOME TAXES (CONTINUED) company taxable income that may be reduced by such carryforwards. Approximately $178,000 and $168,000 of Sugarloaf and LBO's investment tax credit carryforwards, respectively, are also subject to the annual limitation under Section 382 of the amount of their tax that may be offset by such carryforwards. The tax credit carryforwards expire in varying amounts through the year 2001. Subsequent changes in ownership could further affect the limitations in future years. In addition to the limitations under Section 382, approximately $23.0 million of the federal NOL carryforwards are from the separate return years of Sugarloaf ($16.0 million), LBO ($5.1 million) and Sugarbush ($1.9 million), and may only be used to offset each company's contribution to consolidated taxable income in future years. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management believes that the valuation allowance of $7.3 million is appropriate because, due to the change of ownership annual limitations, realization of the benefit 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. 13. MANDATORILY REDEEMABLE SECURITIES Pursuant to a Securities Purchase Agreement (the "Agreement") dated July 2, 1997 (as amended July 16, 1997), the Company issued 17,500 shares of its Series A Exchangeable Preferred Stock (the "Preferred Stock") in a private offering to an institutional investor. The Company incurred $1.1 million in expenses in connection with the issuance of the Preferred Stock. These amounts have been recorded as a reduction of the carrying value of the mandatorily redeemable preferred stock in the accompanying consolidated balance sheet at July 27, 1997. The liquidation preference is $1,000 per share and cumulative dividends on the Preferred Stock are payable, at the option of the Company, in cash or in additional shares of Preferred Stock at a rate of 14% per annum. The Company is required to redeem all shares of the Preferred Stock outstanding on July 15, 2002. The Company intends to offer to exchange all or any part of the Preferred Stock for shares of the Company's common stock (the "Common Stock") or up to 17,500 shares of the Company's 6% Convertible Preferred Stock. Upon completion of the anticipated initial offering of the Company's common stock to the public (the "Offering"), each share of the 6% Convertible Preferred Stock will be convertible into shares of Common Stock. If the holder of the Preferred Stock does not elect to exchange such securities for 6% Convertible Preferred Stock or Common Stock, consummation of the Offering will trigger a Change in Control as defined under the Agreement. In such event, the Agreement requires that the Company offer to purchase the Preferred Stock for cash at a redemption price of 105.3% of the liquidation preference of such shares at the date of redemption. The difference in the face amount of the preferred stock and the redemption price is being accreted over the period from issuance until the anticipated time of the Offering. In the event of a default as defined in the Agreement, there shall be a mandatory redemption of the Preferred Stock from funds legally available to the Company unless the holders of the Preferred Stock elect instead to have visitation rights with respect to meetings of the Company's board of directors and meetings of the Company's management committees. At July 27, 1997, the carrying amount of the Preferred Stock is $16.8 million which is comprised of the original liquidation preference of $17.5 million less unaccreted issuance costs of $922,000 plus accrued dividends and accretion of the discount of $109,000 and $134,000, respectively. Pursuant to the same agreement, the Company issued $17.5 million aggregate principal amount of its 14% Senior Exchangeable Notes Due 2002 (the "Notes") in a private offering to an institutional investor. F-22 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 13. MANDATORILY REDEEMABLE SECURITIES (CONTINUED) The Company incurred deferred financing costs totaling $1.1 million prior to year end in connection with the issuance of the Notes. These costs have been recorded as an asset in the accompanying consolidated balance sheet at July 27, 1997. The proceeds from the notes were received on July 30, 1997 and, therefore, the cash and notes have not been reflected in the balance sheet at July 27, 1997. The Notes bear interest at a rate of 14% per annum and mature on July 28, 2002. Interest on the Notes is payable in cash or additional Notes, at the option of the Company. The Company intends to offer to exchange all of the Notes for shares of Common Stock or up to 17,500 shares of 6% Convertible Preferred Stock with an aggregate liquidation preference of $17.5 million. Upon completion of the Offering each share of 6% Convertible Preferred Stock will be convertible into shares of Common Stock. If the holders of Notes do not elect to exchange such securities for 6% Convertible Preferred Stock or Common Stock, consummation of the Offering will trigger a Change of Control (as defined) under the Agreement. In such event, the Agreement requires that the Company offer to purchase the Notes for cash at a redemption price of 105.3% of the principal amount outstanding on the date of redemption. The holder of the Preferred Stock and the Notes (collectively, the "Securities") has indicated its intention to exchange the Securities for the Company's 6% Convertible Preferred Stock upon consummation of the Offering. 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 Sunday River Skiway Corporation to any bank, thrift institution or other institutional lender. 15. COMMITMENTS, LEASE CONTINGENCIES AND CONTINGENT LIABILITIES The Company leases certain land and facilities used in the operations of its resorts under several operating lease arrangements. These lease arrangements expire at various times from the year 2010 through the year 2060. Lease payments are generally based on a percentage of revenues. Total rent expense under these operating leases as recorded in resort operating expenses in the accompanying consolidated statement of operations for 1995, 1996 and 1997 were $619,000, $744,000 and $2.2 million, respectively. Significant portions of the land underlying certain of the Company's ski resorts are leased or subleased by the Company or used pursuant to renewable permits or licenses. If any such lease, sublease, permit or license were to be terminated or not renewed upon expiration, or renewed on terms materially less favorable to the Company, the Company's ability to possess and use the land subject thereto and any improvements thereon would be adversly affected, perhaps making it impossible for the Company to operate the affected resort. A substantial portion of the land constituting skiable terrain at the Attitash/ Bear Peak Ski Resort, Sugarbush Resort and Mount Snow/Haystack Resort is located on federal land that is used under the terms of the permits with the United States Forest Service (the "Forest Service"). Generally, under the terms of such permits, the Forest Service has the right to review and comment on the location, design and construction of improvements in the permit area and on many operational matters. The permits can be terminated or modified by the Forest Service to serve the public interest. A termination or modification of any of the Company's permits could have a material adverse effect on the results of operations of the Company. The Company does not anticipate any limitations, modifications, or non-renewals which would adversely affect the Company's operations. F-23 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 15. COMMITMENTS, LEASE CONTINGENCIES AND CONTINGENT LIABILITIES (CONTINUED) In connection with the purchase of the Canyons, the Company entered into an operating lease arrangement for the lease of certain land at the Wolf Mountain Ski area to be used in the operation of the resort and for future real estate development. The arrangment provides for an initial lease term of 50 years, with the option to extend for three additional 50 year periods for an extension fee of $1.0 million for each extension period. Lease payments are based on a percentage of resort net revenues. The arrangement also provides for additional one-time payments ranging from $250,000 to $2.0 million upon achievement of annual skier visit levels ranging from 100,000 to 1,000,000. Under the arrangement, the Company has the option to purchase parcels of land covered under the operating lease for real estate development. Payments to exercise the option total $14.6 million and are payable monthly, at the option of the Company, in varying amounts through July 2001. The Company is not required to make the option payments in order to develop and sell real estate on the land covered under the lease. No option payments were made and no lease expense was incurred under this arrangement as of and for the year ended July 27, 1997. In addition to the leases described above, the Company is committed under several operating and capital leases for various equipment. Rent expense under all operating leases was $1.0 million, $994,000 and $4.2 million for the years ended 1995, 1996 and 1997, respectively. Future minimum lease payments for lease obligations at July 27, 1997 are as follows (in thousands):
CAPITAL OPERATING LEASES LEASES --------- ----------- 1998.................................................................................... $ 2,564 $ 4,136 1999.................................................................................... 1,786 3,869 2000.................................................................................... 1,488 1,530 2001.................................................................................... 1,295 963 2002.................................................................................... 2,585 4,973 --------- ----------- Total payments...................................................................... 9,718 $ 15,471 --------- ----------- ----------- Less interest....................................................................... (1,878) --------- Present value of net minimum payments............................................... 7,840 Less current portion................................................................ 1,876 --------- Long-term obligations............................................................... $ 5,964 --------- ---------
Certain claims, suits and complaints associated with the ordinary course of business are pending or may arise against the Company, including all of its direct and indirect subsidiaries. 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. SUBSEQUENT EVENTS (UNAUDITED) ACQUISITIONS On July 31, 1997, the Company entered into an agreement to purchase the Steamboat and Heavenly resorts (the "Purchase"). As part of the Purchase, the Company agreed to acquire the Sabal Point Golf Course in Orlando, Florida and a residence in Denver, Colorado, both of which the Company intends to sell following the closing of the Purchase. The aggregate consideration to be paid by the Company for the F-24 AMERICAN SKIING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 16. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED) Purchase is approximately $290.0 million. The Purchase is subject to the satisfaction of certain covenants and conditions and there can be no assurance that the Purchase will be consummated. INITIAL PUBLIC OFFERING OF COMMON STOCK In August 1997, the Company filed a registration statement under the Securities Act of 1933 with the Securities and Exchange Commission on Form S-1 for the purpose of registering its common stock for the initial offering for sale to the public (the "Offering") at an estimated price of $18.50 per share for a proposed maximum aggregate offering price of $339.3 million. The number of shares to be sold and the price of those shares has not been determined. The anticipated effective date of the Offering is October 1997. Consummation of the Offering may trigger a Change of Control (as defined) under the indenture (the "12% Note Indenture") relating to the Notes. The 12% Note Indenture provides that upon the occurrence of a Change of Control, the Company will be required to make an offer to repurchase the Notes at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest to the date of repurchase (the "Change of Control Offer"). The Company is not able to determine at this time whether or not any or all holders of the Notes will accept the Change of Control Offer. If all outstanding Notes are tendered, the amount of funds necessary to consummate the Change of Control Offer would be $121.2 million plus the amount of all accrued and unpaid interest. The Company is currently negotiating a standby credit facility for up to $125.0 million to fund the repurchase of the Notes in the event that any or all of the Notes are tendered to the Company for repurchase. ADDITIONAL FINANCING In August 1997, the Company entered into a Loan and Security Agreement with a lender to provide financing for the real estate construction activities of Grand Summit Resort Properties, Inc., a wholly-owned subsidiary. The Loan and Security Agreement provides for advances up to $55.0 million which bear interest at a rate equal to the greater of 9.25% or the sum of the bank's prime rate plus 1.5%. All borrowings under the Loan and Security Agreement are collateralized by substantially all assets of the Grand Summit Resort Properties, Inc. CONVERTIBLE DEBT On July 30, 1997, the Company issued $17.5 million aggregate principal amount of its 14% Senior Exchangeable Notes due 2002 in a private offering to an institutional investor (see Note 14). STOCK OPTION PLAN On August 1, 1997, the Company adopted a stock option plan (the "Plan") for key executives. Under the Plan, the Company has granted 2,324,697 options for the purchase of Common Stock. STOCK SPLIT In October 1997, the Board of Directors, approved (i) an increase in authorized shares of Common Stock, (ii) a new issue of Class A Common Stock and (iii) a 14.76 for 1 stock split of shares of Common Stock for shares of Class A Common Stock. F-25 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 F-26 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...................................................................... 1$06,790,008 1$36,721,513 ------------ ------------ ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt and subordinated debentures (Note 3).............. $ 955,746 $3,858,184 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 (Note 8)................... 464,907 529,874 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........................................ 1$06,790,008 1$36,721,513 ------------ ------------ ------------ ------------
See accompanying notes to consolidated financial statements. F-27 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 administrative expenses...................... 16,871,496 15,298,138 19,494,655 Interest.......................................................... 2,228,385 2,214,309 3,818,893 Depreciation and amortization (Note 1)............................ 10,941,869 11,440,122 14,055,796 ------------- ------------- ------------- 89,347,274 91,090,775 112,232,141 ------------- ------------- ------------- Income before income taxes and minority interest.................... 7,361,117 7,816,444 1,727,571 Income taxes (Note 5)............................................... 2,952,310 3,169,956 997,123 ------------- ------------- ------------- Net income before minority interest................................. 4,408,807 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, 5,764,663 in 1994, 5,728,908 in 1993 (Note 6)............... $ 0.77 $ 0.81 $ 0.18 ------------- ------------- ------------- ------------- ------------- -------------
See accompanying notes to consolidated financial statements. F-28 S-K-I LTD. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
COMMON STOCK ---------------------- NUMBER OF PAID-IN RETAINED SHARES PAR VALUE CAPITAL EARNINGS TOTAL ---------- ---------- ------------ ------------- ------------- BALANCE AT JULY 31, 1992.................... 5,724,856 $ 572,486 $ 6,433,263 $ 42,183,973 $ 49,189,722 Common stock options exercised.......... 6,251 625 20,751 21,376 Net income.............................. 4,408,807 4,408,807 Dividends ($.10 per share).............. (573,015) (573,015) ---------- ---------- ------------ ------------- ------------- BALANCE AT JULY 31, 1993.................... 5,731,107 573,111 6,454,014 46,019,765 53,046,890 Common stock options exercised.......... 50,325 5,033 123,426 128,459 Net income.............................. 4,646,488 4,646,488 Dividends ($.11 per share).............. (635,545) (635,545) ---------- ---------- ------------ ------------- ------------- BALANCE AT JULY 31, 1994.................... 5,781,432 578,144 6,577,440 50,030,708 57,186,292 Common stock options exercised.......... 4,500 450 40,111 40,561 Net income.............................. 1,029,397 1,029,397 Dividends ($.12 per share).............. (693,997) (693,997) ---------- ---------- ------------ ------------- ------------- BALANCE AT JULY 31, 1995.................... 5,785,932 $ 578,594 $ 6,617,551 $ 50,366,108 $ 57,562,253 ---------- ---------- ------------ ------------- ------------- ---------- ---------- ------------ ------------- -------------
See accompanying notes to consolidated financial statements. F-29 S-K-I LTD. CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED JULY 31, ------------------------------------------- 1993 1994 1995 ------------- ------------- ------------- Cash flows from operating activities: Net income......................................................... $ 4,408,807 $ 4,646,488 $ 1,029,397 Non-cash items included in net income: Depreciation and amortization...................................... 10,941,869 11,440,122 14,055,796 Deferred income taxes.............................................. 613,451 154,084 1,001,464 Minority interest in net income of subsidiary...................... -- -- (298,949) ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES BEFORE CHANGES IN ASSETS AND LIABILITIES........................................................ 15,964,127 16,240,694 15,787,708 ------------- ------------- ------------- Changes in assets and liabilities: (Increase) decrease in accounts receivable......................... 398,318 (429,547) (1,027,240) Decrease (increase) in notes receivable............................ (9,458) 363,442 126,964 (Increase) in inventories.......................................... (154,437) (214,208) (33,885) Decrease (increase) in non-current note receivable................. (1,847,480) 303,976 3,615 Decrease (increase) in prepaid expenses............................ (537,397) (543,475) 573,785 (Decrease) increase in accounts payable............................ (1,191,930) 974,380 (776,700) Increase (decrease) in income taxes payable........................ (124,032) (63,132) 10,238 (Decrease) increase in accrued lease payments-Vermont.............. 120,378 49,837 (132,499) Increase (decrease) in accrued wages, profit sharing and incentive compensation..................................................... 517,897 (608,404) 64,967 Increase (decrease) in deposits and other unearned revenue......... (118,908) 186,707 264,499 (Decrease) increase in other accrued expenses...................... 585,544 761,857 (858,029) Increase (decrease) in other long-term liabilities................. (128,174) 441,669 944,985 ------------- ------------- ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES............................ 13,474,448 17,463,796 14,948,408 ------------- ------------- ------------- Cash flows from investing activities: Purchases of property and equipment................................ (12,306,683) (22,682,582) (19,479,985) Net book value of property and equipment sold...................... 79,036 178,177 2,377,685 Purchase of long-term investments.................................. -- (464,663) (1,163,814) Business acquired less cash on hand from business acquired......... -- -- (12,552,020) Other, net......................................................... 47,136 (138,772) (106,561) ------------- ------------- ------------- NET CASH USED IN INVESTING ACTIVITIES................................ (12,180,511) (23,107,840) (30,924,695) ------------- ------------- ------------- Cash flows from financing activities: Proceeds from issuance of long-term debt--and subordinated debentures....................................................... 12,123,500 592,804 -- Net proceeds from revolving credit agreement....................... -- 2,000,000 15,500,000 Reductions in long-term debt and subordinated debentures........... (10,807,391) (952,052) (2,279,178) Increase in current portion of long-term debt and subordinated debentures....................................................... 77,391 129,451 2,902,438 Proceeds from issuance of common stock............................. 21,376 128,459 40,563 Payment of dividends............................................... (573,015) (635,545) (693,997) Other.............................................................. 125,910 177,648 -- ------------- ------------- ------------- NET CASH PROVIDED BY FINANCING ACTIVITIES............................ 967,771 847,961 16,062,630 ------------- ------------- ------------- Net increase (decrease) in cash and short-term investments......... 2,261,708 (4,796,083) 86,343 Cash and short-term investments at beginning of year................. 5,238,677 7,500,385 2,704,302 ------------- ------------- ------------- CASH AND SHORT-TERM INVESTMENTS AT END OF YEAR....................... $ 7,500,385 $ 2,704,302 $ 2,790,645 ------------- ------------- ------------- ------------- ------------- ------------- Interest paid........................................................ $ 2,443,456 $ 2,124,392 $ 3,096,486 Taxes paid, net of refunds........................................... $ 2,438,100 $ 3,636,581 $ 1,060,150
See accompanying notes to consolidated financial statements. F-30 S-K-I LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The consolidated statements include the accounts of S-K-I Ltd. and its subsidiaries, the most significant of which include Killington Ltd., Mount Snow Ltd., Bear Mountain Ltd., Waterville Valley Ski Area Ltd., Sugarloaf Mountain Corporation and Ski Insurance Company, collectively referred to as S-K-I. All subsidiaries are wholly-owned, except for Sugarloaf Mountain Corporation which is 51% owned. Sugarloaf's results since acquisition are consolidated in the accompanying financial statements. All significant intercompany transactions have been eliminated in consolidation. In the consolidated statement of income, revenues from the sale of lift tickets, ski schools, repair shops, golf and tennis fees have been included under the heading of Resort services. Revenues from the sale from restaurants, bars, retail shops and personal property have been included under the heading Sale of goods. Revenues from ski, locker and real estate rentals, as well as sales of real property have been included under the heading of Rental and other income. Related costs, including property costs, are included in the respective Cost of operations categories. For financial reporting purposes, S-K-I provides for depreciation and amortization of property, equipment and capital leases by the straight-line method over estimated useful lives of the assets which generally range from 10 to 30 years for buildings, 3 to 20 years for machinery and equipment and 3 to 50 years for leasehold improvements, lifts, liftlines and trails. Accelerated cost recovery and accelerated depreciation methods are used for tax purposes. Management's intentions are to hold marketable securities, consisting of U.S. Government and Agency obligations and corporate obligations, until maturity, which does not exceed three years. These securities are carried at net amortized cost, which approximates quoted market values at July 31, 1995 and 1994. As part of its cash management policy, S-K-I invests cash in excess of immediate requirements in highly liquid short-term investments having original maturities of three months or less. Such investments are intended to minimize exposure to principal fluctuation. Profit on the sales of real estate are recognized in accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards ("SFAS") No. 66 "Accounting for the Sales of Real Estate". Revenues recognized amounted to $8,000, $-0-, and $1,857,954, in 1995, 1994, and 1993, respectively. Included in other assets at July 31, 1995 is a note receivable of $1,531,298, relating to a sale of real estate. The note bears interest at the prime rate plus 1.875%, payable in monthly installments through year 2007. The maturities are as follows: 1996............................................................ $ 10,141 1997............................................................ 11,300 1998............................................................ 12,592 1999............................................................ 14,033 2000............................................................ 15,636 2001 and thereafter............................................. 1,467,596 --------- $1,531,298 --------- ---------
Inventories are valued at the lower of cost (first-in, first-out method) or market. Allowances for doubtful accounts of $1,402 and $38,702 have been applied as a reduction of current accounts receivable at July 31, 1994 and 1995, respectively. F-31 S-K-I LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Provision is made for the estimated costs under the deductible portion of S-K-I's insurance policies, primarily general liability and workers' compensation. The balance of such reserves at July 31, 1994 and 1995 were $4,707,558 and $5,765,878, respectively. Of such amounts, $3,487,042 and $4,454,728 are included in other long-term liabilities at July 31, 1994 and 1995, respectively, with the remaining balance included in other accrued expenses. In fiscal 1993, S-K-I formed a wholly-owned Vermont captive insurance company, Ski Insurance Company, to manage a portion of its insurance costs. Advertising costs are expensed the first time the advertising takes place. The total amount charged to advertising expense for the year ended July 31, 1995, 1994 and 1993 was $9,249,984, $7,809,332 and $7,607,704, respectively. Bear Mountain Ltd.'s costs in excess of values assigned to the underlying net assets, net of amortization, totaled $233,774 and $99,255 at July 31, 1995 and 1994, respectively, and are being amortized over 20 years. The 1995 and 1994 amortization totaled $19,481 and $7,635, respectively. The accumulated amortization at July 31, 1995 and 1994 totaled $320,279 and $300,798, respectively. NOTE 2--BUSINESS DEVELOPMENT In August 1994, the company acquired 51% of the outstanding shares of Sugarloaf Mountain Corporation ("Sugarloaf"), a ski resort in Western Maine. Also, additional cash consideration is due, not to exceed $1,500,000, if certain profit objectives are achieved during the two years following acquisition. No such amounts were paid relating to fiscal 1995. The shareholders of Sugarloaf shall have the option to require S-K-I to purchase their shares during the month of November in the years 1997 through 2002 in return for a cash payment, the amount of which is computed by applying a formula to Sugarloaf Mountain Corporation's earnings per share over the previous three year period. S-K-I has the option to purchase the minority shares of Sugarloaf based upon the same exchange formula during the month of November in any year beginning in 1999, subject to a minimum value of $2,000,000 less 49% of any decline in the book value of Sugarloaf between the purchase date and the date of acquisition. The acquisition has been accounted for using the purchase method of accounting. The fair value of the assets acquired was approximately $13,597,000 and the fair value of liabilities was $9,425,000. There is no recourse to S-K-I for the Sugarloaf liabilities. The amounts in minority interest at July 31, 1995 represent the 49% ownership of Sugarloaf's outstanding capital stock held by the minority shareholders. In October 1994, the company acquired the ski-related assets only of the Waterville Valley Ski Area ("Waterville") for approximately $10,038,000. The acquisition was accounted for using the purchase method of accounting. The results of operations of Waterville are included in the company's consolidated financial statements since acquisition. The following unaudited pro forma summary presents the consolidated results of operations as if the acquisitions of Sugarloaf and Waterville occurred at the beginning of the years presented:
1994 1995 -------------- -------------- Revenues..................................................... $ 126,797,000 $ 114,554,000 Net income................................................... 4,279,000 782,000 Net income per common and common equivalent share............ $ .74 $ .14
F-32 S-K-I LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2--BUSINESS DEVELOPMENT (CONTINUED) The pro forma financial information does not purport to be indicative of the results of operations that would have occurred had the transaction taken place at the beginning of the periods presented or of future results of operations. NOTE 3--LONG-TERM DEBT AND SUBORDINATED DEBENTURES LONG-TERM DEBT AT JULY 31, 1995 AND 1994 SUMMARY:
1994 1995 ------------- ------------- Company, excluding Sugarloaf: Revolving Credit Agreement....................................................... $ 2,000,000 $ 17,500,000 Teachers Insurance and Annuity Association of America, 8.12% senior promissory notes due in varying installments through January 14, 2003..................... 12,000,000 12,000,000 Vermont Industrial Development Bonds, fluctuating interest rates, 1995--3.89% to 4.66%; 1994--3.13% to 3.73%; due in varying installments through 1999, secured by certain machinery and equipment and real estate............... 3,265,000 2,695,000 Deferred obligation in connection with acquisition of Bear Mountain Ltd., interest of 5%, due in 1995.................................................... 1,000,000 1,000,000 Obligation under capital lease................................................... 103,789 310,346 Other............................................................................ 7,314 180,356 ------------- ------------- 18,376,103 33,685,702 ------------- ------------- Sugarloaf (non-recourse to the Company): Town of Carrabassett Valley, Maine, note, $3,700,000, due in varying installments through 2013, interest rates ranging from 4.5% to 8.5%, secured by Sugarloaf's property, plant and equipment.................................................. -- 3,610,000 Sugarloaf Revolving Credit Agreement, $2,000,000, annual reduction of $200,000 beginning March 1995, due March 1998, interest at lender's base rate plus .5% (9.25% at July 31, 1995), secured by Sugarloaf's property, plant and equipment...................................................................... -- 1,800,000 Sugarloaf Line of Credit, $2,000,000 due May 1996, interest at lender's base rate plus 2% (10.75% at July 31, 1995), secured by Sugarloaf's property, plant and equipment...................................................................... -- 1,338,482 Sugarloaf Subordinated Notes, due July 1997, interest at 7.25%................... -- 584,934 Obligation under capital lease................................................... -- 549,989 Other............................................................................ -- 1,079,109 ------------- ------------- -- 8,962,514 ------------- ------------- Total.............................................................................. 18,376,103 42,648,216 Less: current portion.............................................................. 609,246 3,858,184 ------------- ------------- $ 17,766,857 $ 38,790,032 ------------- ------------- ------------- -------------
F-33 S-K-I LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3--LONG-TERM DEBT AND SUBORDINATED DEBENTURES (CONTINUED) The non-current portion of long-term debt matures as follows: 1997.................................................................. $ 1,968,908 1998.................................................................. 4,591,625 1999.................................................................. 3,484,751 2000.................................................................. 5,637,317 2001 and thereafter................................................... 23,107,431 -------------- $ 38,790,032 -------------- --------------
S-K-I maintains an unsecured revolving credit loan which allows S-K-I to borrow funds up to the amount of the commitment. At July 31, 1995, the revolving credit loan amount available was $30,600,000 with $17,500,000 outstanding. The loan commitment is scheduled to be reduced annually by $3,400,000 on March 31 of each consecutive year through March 31, 2000 with a final reduction of $13,600,000 on March 30, 2001. Under the terms of the revolving credit agreement, S-K-I may request that the interest rate, subject to certain limitations, be at the adjusted prime rate or at an applicable margin above the Eurodollar rate. The Eurodollar applicable margin was 1 1/4% at July 31, 1995. The applicable margin varies between 3/4% to 1 1/4% based on specific financial ratios on the previous July 31. The Agreement requires S-K-I to pay a commitment fee of 3/8 % of the average daily unused portion of the loan. Commitment fees assessed on unused portions of the revolving credit loan were approximately $38,000, $63,000, and $48,000 in 1995, 1994, and 1993, respectively. The following table summarizes the financial data relating to the revolving credit loan agreement for 1995 and 1994:
1994 1995 ------------- ------------- Weighted average annual interest rate.......................... 4.61% 6.93% Average amount outstanding during the year..................... $ 2,224,038 $ 16,274,038 Highest balance outstanding.................................... $ 13,500,000 $ 24,750,000 Amount available at year end................................... $ 14,000,000 $ 13,100,000
In addition to the unsecured revolving credit loan agreement, S-K-I maintained an unsecured short-term line of credit. Such line of credit allows for borrowings of up to $12,000,000 and expires January 15, 1996. Under the terms of the agreement S-K-I may request that the interest rate, subject to certain limitations, be at the adjusted prime rate or at an applicable margin above the Eurodollar rate. The Eurodollar applicable margin was 1 1/4% at July 31, 1995. The applicable margin varies between 3/4% to 1 1/4% based on specific financial ratios on the previous July 31. During 1995, S-K-I borrowed a maximum of $9,250,000 under this line of credit and did not borrow against the line of credit during 1994. At July 31, 1995 and 1994, there were no borrowings under the credit line. Additionally, at July 31, 1995, S-K-I had outstanding a $1,000,000 letter of credit relating to Ski Insurance, expiring December 3, 1995. The letter of credit fee on this line was $6,250 for the year ended July 31, 1995. F-34 S-K-I LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3--LONG-TERM DEBT AND SUBORDINATED DEBENTURES (CONTINUED) Subordinated debentures of $11,400,000 at July 31, 1995 are due as follows:
YEAR INTEREST AMOUNT - --------------------------------------------------------------------- ------------- ------------- 1997................................................................. 6% $ 450,000 1999................................................................. 6% 455,000 2000................................................................. 6% 672,500 2001................................................................. 8% 525,000 2002................................................................. 8% 549,000 2003................................................................. 8% 1,074,000 2004................................................................. 8% 1,466,500 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 ------------- $ 11,400,000 ------------- -------------
The company's long-term debt and subordinated debenture agreements require that the company satisfy various covenants including financial ratios, limitations on payment of dividends and repurchase of stock. Included in other accrued expenses is $687,414 and $703,656 of accrued interest at July 31, 1995 and 1994, respectively. CAPITAL LEASES The company leases certain machinery and equipment under long-term capital leases. Obligations under machinery and equipment capital leases are due as follows: 1996.............................................................. $ 407,000 1997.............................................................. 308,000 1998.............................................................. 246,000 1999.............................................................. 16,000 --------- 977,000 Less: amounts representing interest............................... 117,000 --------- $ 860,000 --------- ---------
At July 31, 1995, the gross amount of machinery and equipment under capital leases and related accumulated amortization was $1,409,000 and $486,000, respectively. NOTE 4--OPERATING LEASES AND PERMITS 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 installations affixed to the land become the property of the State. Mount Snow Ltd., Bear Mountain Ltd. and Waterville Valley operate certain portions of the skiing terrain under special use permits granted by the U.S. Forest Service. F-35 S-K-I LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4--OPERATING LEASES AND PERMITS (CONTINUED) 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 company was committed under operating leases for certain machinery and equipment which expire at various dates through 2018. Total rent expense under operating leases for 1995, 1994 and 1993 was $2,775,912, $2,526,991, and $2,485,435, respectively. Minimum lease payments under non-cancelable operating leases are as follows: 1996.................................................................. $ 3,433,832 1997.................................................................. 3,314,063 1998.................................................................. 3,004,033 1999.................................................................. 2,948,224 Beyond 2000........................................................... 1,889,827 -------------- Total minimum obligations............................................. $ 14,589,979 -------------- --------------
NOTE 5--INCOME TAXES In 1994 the company adopted, effective August 1, 1993, Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which requires the liability method for recording differences in financial and taxable income. Income taxes consist of the following:
1993 1994 1995 ------------ ------------ ---------- Current: Federal................................................................ $ 1,803,884 $ 2,347,943 $ (1,210) State.................................................................. 534,975 667,929 (3,131) ------------ ------------ ---------- 2,338,859 3,015,872 (4,341) Deferred................................................................. 613,451 154,084 1,001,464 ------------ ------------ ---------- Total provision for income taxes..................................... $ 2,952,310 $ 3,169,956 $ 997,123 ------------ ------------ ---------- ------------ ------------ ----------
Differences between S-K-I's effective income tax rate and the statutory federal income tax rate are as follows:
1993 1994 1995 --------- --------- --------- Statutory federal income tax rate....................................... 34.0% 34.0% 34.0% State income taxes net of federal tax benefit........................... 4.8 5.6 5.7 Sugarloaf loss with no benefit.......................................... -- -- 12.0 Life insurance premiums................................................. -- -- 4.0 Other................................................................... 1.3 0.9 2.0 --- --- --- Effective rate.......................................................... 40.1% 40.5% 57.7% --- --- --- --- --- ---
At July 31, 1995, Bear Mountain Ltd. had net operating loss carryforwards for federal income tax purposes of approximately $1,439,000, which expire in the years 2000 through 2002. At July 31, 1995, Bear Mountain Ltd. had net operating loss carryforwards for California income tax purposes of approximately $1,214,000 which expire in the years 1996 through 1999. As of July 31, 1995, Bear Mountain Ltd. had F-36 S-K-I LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5--INCOME TAXES (CONTINUED) investment tax credit carryforwards of approximately $225,000 which expire in the years 1997 through 2000. The federal tax loss and tax credit carryforwards relate to the operations of Bear Mountain Ltd. prior to the acquisition by S-K-I and can only be realized against future taxable income from the operations of Bear Mountain Ltd. The tax effect of these carryforwards and credits, when realized, will be recognized as an adjustment of the purchase cost. At July 31, 1995, Sugarloaf had net operating loss carryforwards for federal and Maine income tax purposes of approximately $17,426,000, which expire in the years 1999 through 2010. As of July 31, 1995, Sugarloaf had investment tax credit carryforwards of approximately $209,000, which expire in the years 1997 through 2000. Approximately $16,442,000 of the federal and Maine net operating loss carryforwards and all of the investment tax credit carryforwards relate to the operation of Sugarloaf prior to the S-K-I acquisition. Such carryforwards can only be realized against future taxable income from the operations of Sugarloaf and will be limited as a result of certain ownership changes pursuant to Section 382 of the Internal Revenue Code. At July 31, 1995, the company had additional federal net operating loss carryforwards of approximately $527,000 and additional state net operating loss carryforwards of $1,010,000 which expire in the year 2010. As of July 31, 1995, the company's gross deferred tax assets and liabilities were comprised of the following: Gross deferred tax assets: Accrued liabilities and reserves.................................... $ 1,495,000 Operating loss carryforwards........................................ 7,638,000 Alternative minimum and investment tax credits...................... 860,000 -------------- $ 9,993,000 -------------- -------------- Gross deferred tax liabilities: Depreciation........................................................ $ 10,516,000 Installment sales................................................... 659,000 -------------- $ 11,175,000 -------------- --------------
At July 31, 1995, a valuation allowance of $7,298,000 has been recorded which relates primarily to Sugarloaf's net operating loss and tax credit carryforwards for which a tax benefit is not likely to be received. The net change in the valuation allowance for deferred tax assets was an increase of $7,056,000, primarily attributable to Sugarloaf net operating loss carryforwards. Current and non-current deferred tax assets and liabilities within the same tax jurisdiction are offset for presentation in the consolidated balance sheet. NOTE 6--EARNINGS PER SHARE 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 (Note 7) have not been included in the per share computation because they would not have a material effect on earnings per share. F-37 S-K-I LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7--STOCK OPTIONS The company's 1988 Stock Option Plan for officers and key employees authorized the granting of a maximum of 168,750 shares of common stock options. On November 18, 1994, the stockholders approved an additional 100,000 shares to be optioned. The Plan permits the grant of incentive stock options (as defined in the Internal Revenue Code) and nonstatutory stock options. In the case of an incentive stock option, the per share option price cannot be less than the fair market value on the date on which the option is granted. There is no such requirement in the case of a nonstatutory stock option. The options become exercisable ratably over a 3-year period and expire in April 1997, October 1999, July 2000, April 2002, July 2002, March 2004, October 2004, and January 2005.
EXERCISE PRICE PER 1988 PLAN SHARES OPTION - ------------------------------------------------------------------------------ --------- ----------------------- Outstanding at July 31, 1992.................................................. 154,417 $8.625 to $10.45 Exercised................................................................... 1,042 $8.625 Canceled or expired......................................................... 10,625 $8.625 to $9.50 Outstanding at July 31, 1993.................................................. 142,750 $8.625 to $10.45 Granted..................................................................... 2,500 $12.00 Exercised................................................................... 4,950 $8.625 to $9.50 Canceled or expired......................................................... 10,000 $8.625 Outstanding at July 31, 1994.................................................. 130,300 $8.625 to $12.00 Granted..................................................................... 48,250 $11.8125 to $15.25 Exercised................................................................... 4,500 $8.625 to $9.50 Canceled or expired......................................................... 2,500 $9.50 Outstanding at July 31, 1995.................................................. 171,550 $8.625 to $15.25 Exercisable at July 31, 1995................................................ 138,550 $8.625 to $15.25
The company's 1982 Incentive Stock Option Plan authorized the granting to key employees of similar options to purchase a maximum of 187,500 shares of common stock. The options granted in 1992 become exercisable ratably over a 3-year period and expire in April 2002 and July 2002.
EXERCISE PRICE PER 1982 PLAN SHARES OPTION - ------------------------------------------------------------------------------- --------- ----------------------- Outstanding at July 31, 1992................................................... 80,625 $1.89 to $9.50 Exercised.................................................................... 5,209 $1.89 to $9.50 Canceled or expired.......................................................... 1,000 $8.625 to $9.50 Outstanding at July 31, 1993................................................... 74,416 $1.89 to $9.50 Exercised.................................................................... 45,375 $1.89 Canceled or expired.......................................................... 6,166 $9.50 Outstanding at July 31, 1994 and 1995.......................................... 22,875 $9.50 Exercisable at July 31, 1995................................................. 22,875 $9.50
NOTE 8--EMPLOYEE BENEFIT PLANS 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 income for 1995, 1994, and 1993. 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 up to $9,240 on a pretax basis. The company made a matching contribution of 15% on the first $1,500 deferred by each participating employee in 1995 and F-38 S-K-I LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8--EMPLOYEE BENEFIT PLANS (CONTINUED) 1994. In addition, S-K-I made a one time fully vested contribution to each eligible participant as of February 1, 1995. The cost of this contribution was $294,300. Effective July 31, 1995, the profit-sharing portion of the S-K-I Ltd. retirement plan was merged into the S-K-I Ltd. 401(k) savings plan. The name of the newly merged plan is changed to the S-K-I Ltd. 401(k) Retirement Plan. NOTE 9--BUSINESS OPERATIONS S-K-I operates predominantly in a single industry segment--the development and operation of ski areas. S-K-I provides ski recreation and related services to skiers, a single customer group. NOTE 10--SUBSEQUENT EVENTS On October 23, 1995 the Company sold a majority of the ski resort related and golf course assets of Bear Mountain to Fibreboard Corporation for approximately $20,370,000. F-39 S-K-I LTD. CONSOLIDATED BALANCE SHEET APRIL 28, 1996 (UNAUDITED) ASSETS Current assets: Cash and short-term investments (at cost, which approximates market value)......... $ 12,027,556 Accounts receivable................................................................ 2,068,022 Notes receivable................................................................... 242,128 Inventories........................................................................ 3,281,908 Prepaid expenses................................................................... 1,134,816 --------------- TOTAL CURRENT ASSETS............................................................. 18,754,430 --------------- Property and equipment, at cost: Buildings and grounds.............................................................. 36,335,433 Machinery and equipment............................................................ 60,313,773 Leasehold improvements............................................................. 39,794,570 Lifts/liftlines and trails on corporate property................................... 32,085,284 --------------- 168,529,060 Less--accumulated depreciation and amortization...................................... 83,933,510 --------------- 84,595,550 Construction in progress............................................................. 772,749 Land and development costs........................................................... 8,359,837 --------------- NET PROPERTY AND EQUIPMENT....................................................... 93,728,136 --------------- Long-term investments................................................................ 3,588,798 Other assets......................................................................... 2,382,298 --------------- TOTAL ASSETS..................................................................... $ 118,453,662 --------------- --------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt.................................................. $ 1,566,927 Accounts payable................................................................... 1,714,241 Income tax payable (Note 3)........................................................ 1,256,500 Accrued lease payments--Vermont.................................................... 1,108,254 Accrued wages...................................................................... 717,329 Deposits and other unearned revenue................................................ 1,044,614 Other accrued expenses (Note 7).................................................... 6,512,619 --------------- TOTAL CURRENT LIABILITIES........................................................ 13,920,484 --------------- Long-term debt....................................................................... 19,821,979 Subordinated debentures.............................................................. 11,400,000 Deferred income taxes (Note 3)....................................................... 7,238,102 Other long-term liabilities (Note 7)................................................. 5,107,358 Minority interest in consolidated subsidiary......................................... 2,402,716 --------------- TOTAL LIABILITIES................................................................ 59,890,639 --------------- Stockholders' equity: Common stock....................................................................... 579,087 Paid-in capital.................................................................... 6,661,895 Retained earnings.................................................................. 51,322,041 --------------- TOTAL STOCKHOLDERS' EQUITY....................................................... 58,563,023 --------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....................................... $ 118,453,662 --------------- ---------------
See accompanying Notes to (Unaudited) Condensed Consolidated Financial Statements. F-40 S-K-I LTD. CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED ------------------------------ APRIL 30, APRIL 28, 1995 1996 -------------- -------------- (UNAUDITED) (UNAUDITED) Revenues......................................................................... $ 106,681,987 $ 106,751,742 -------------- -------------- Expenses: Cost of operations including wages, maintenance and supplies................... 45,309,840 47,885,150 Other taxes.................................................................... 7,544,162 7,540,537 Utilities...................................................................... 7,623,646 7,465,058 Insurance...................................................................... 6,220,257 5,692,399 Selling, general and administrative expenses................................... 16,376,818 17,060,771 Interest....................................................................... 3,017,626 2,561,289 Depreciation and amortization (Note 3)......................................... 13,842,977 10,146,199 Loss on sale of Bear Mountain (Note 2)......................................... -- 4,736,646 -------------- -------------- Total expenses............................................................... 99,935,326 103,088,049 -------------- -------------- Income before provision for income taxes......................................... 6,746,661 3,663,693 Provision for income taxes (Note 3).............................................. 2,724,258 1,428,840 -------------- -------------- Net income before minority interest.............................................. 4,022,403 2,234,853 Minority interest in net income of consolidated subsidiary....................... (193,486) (526,528) -------------- -------------- Net income....................................................................... $ 3,828,917 $ 1,708,325 -------------- -------------- -------------- -------------- Net income per common share (Note 5)............................................. $ .66 $ .30 -------------- -------------- -------------- -------------- Retained earnings, beginning of period........................................... $ 50,030,708 $ 50,366,108 Add: net income.................................................................. 3,828,917 1,708,325 Less: Dividends paid on common stock (Note 9).................................... 693,997 752,392 -------------- -------------- Retained earnings, end of period................................................. $ 53,165,628 $ 51,322,041 -------------- -------------- -------------- --------------
See accompanying Notes to (Unaudited) Condensed Consolidated Financial Statements. F-41 S-K-I LTD. CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED ------------------------ APRIL 30, APRIL 28, 1995 1996 ----------- ----------- (UNAUDITED) (UNAUDITED) Cash flows from operating activities: Net income........................................................................... $ 3,828,917 $ 1,708,325 Non-cash items included in net income: Loss on disposition of net assets of Bear Mountain Ltd. (Note 2)..................... -- 4,736,646 Minority interest in net income of subsidiary........................................ 193,486 526,528 Depreciation and amortization........................................................ 13,539,407 10,146,199 Deferred income taxes................................................................ -- (1,241,854) ----------- ----------- CASH FLOW FROM OPERATING ACTIVITIES BEFORE CHANGES IN ASSETS AND LIABILITIES........... 17,561,810 15,875,844 ----------- ----------- Changes in assets and liabilities: Decrease (increase) in accounts receivable........................................... (724,565) 579,712 Decrease in notes receivable......................................................... 127,323 2,647 Decrease (increase) in inventories................................................... (540,996) 99,611 Decrease in prepaid expenses......................................................... 402,399 107,643 Increase (decrease) in accounts payable.............................................. (256,947) 96,620 Increase in income taxes payable..................................................... 2,517,977 984,248 Increase (decrease) in accrued lease payments-Vermont................................ (144,963) 68,888 Increase in accrued wages, profit sharing and incentive compensation................. 151,435 187,455 (Decrease) in deposits and other unearned revenue.................................... (383,618) (544,347) Increase in other accrued expenses................................................... 296,736 954,876 Increase in other long-term liabilities.............................................. 934,010 675,332 ----------- ----------- CASH FLOW PROVIDED BY OPERATING ACTIVITIES AFTER CHANGES IN ASSETS AND LIABILITIES..... 19,940,601 19,088,529 ----------- ----------- Cash flows from investing activities: Additions to property and equipment.................................................. (18,981,721) (6,019,657) Net book value of property and equipment sold........................................ 41,067 86,899 Purchase of long-term investments.................................................... (1,778,704) (1,960,321) Proceeds from disposition of net assets of Bear Mountain Ltd. (Note 2)............... -- 20,000,247 Businesses acquired less cash on hand from businesses acquired....................... (12,552,020) -- Other, net........................................................................... (230,632) 8,077 ----------- ----------- NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES................................... (33,502,010) 12,115,245 ----------- ----------- Cash flows from financing activities: Net (reductions) proceeds in revolving credit agreement.............................. 12,250,000 (17,500,000) Reductions in long-term debt......................................................... (1,949,327) (1,468,050) (Decrease) increase in current portion of long-term debt............................. 2,560,405 (2,291,258) Proceeds from issuance of common stock............................................... 16,172 44,837 Payment of dividends................................................................. (693,997) (752,392) ----------- ----------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES.................................... 12,183,253 (21,966,863) ----------- ----------- Net increase (decrease) in cash and short-term investments............................. (1,378,156) 9,236,911 Cash and short-term investments at beginning of year................................... 2,704,302 2,790,645 ----------- ----------- CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD....................................... $ 1,326,146 $12,027,556 ----------- ----------- ----------- ----------- Interest paid.......................................................................... $ 2,229,834 $ 1,998,601 Income taxes paid, net of refunds...................................................... $ 281,350 $ 1,686,523
See accompanying Notes to (Unaudited) Condensed Consolidated Financial Statements. F-42 S-K-I LTD. NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position as of April 28, 1996, the results of operations for the nine months ended April 28, 1996 and April 30, 1995 and cash flows for the nine months ended April 28, 1996 and April 30, 1995. All such adjustments are of a normal recurring nature with the exception of the sale of the majority of Bear Mountain assets. The unaudited condensed consolidated financial statements should be read in conjunction with the following notes and the consolidated financial statements in the 1995 Annual Report to the Securities and Exchange Commission on Form 10-K. 2. BEAR MOUNTAIN SALE On October 23, 1995 the Company sold a majority of the ski resort related and golf course assets of Bear Mountain to Fibreboard Corporation for approximately $20,370,000. The transaction had the following non-cash impact on the balance sheet:
Increase in current assets..................................... $ 234,000 Decrease in property and equipment, net........................ (23,833,000) Decrease in other assets, net.................................. (269,000) Increase in current liabilities................................ 400,000
3. INCOME TAXES The provision for taxes on income is based on a projected annual effective tax rate. The Company has reflected an effective tax rate through the third quarter of approximately 39%. Deferred income taxes include the cumulative reduction in current taxes payable resulting principally from the excess of depreciation reported for tax purposes over that reported for financial purposes. The reduction in the April 28, 1996 deferred income tax liability from July 31, 1995 is primarily attributable to the October 1995 sale of Bear Mountain and other book-tax differences, principally accelerated depreciation. 4. SEASONAL BUSINESS Results for interim periods are not indicative of results to be expected for the year, due to the seasonal nature of the business (skiing resorts). 5. NET INCOME PER COMMON SHARE Net income per common share figures are based on the average shares outstanding during year to date Fiscal 1996 of 5,788,592 (5,782,745 year to date Fiscal 1995). Shares issuable upon the exercise of stock options grants have not been included in the per share computation because they would not have a material effect on earnings per share. F-43 S-K-I LTD. NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 6. STOCK OPTIONS The 1988 Stock Option Plan authorized 168,750 shares of common stock to be optioned. On November 18, 1994 the stockholders approved an additional 100,000 shares. For the nine months ended April 28, 1996, 4,950 shares were exercised and 5,550 shares were forfeited. The 1982 Incentive Stock Option Plan authorized 187,500 shares of common stock to be optioned. No shares were granted, exercised or forfeited under this plan during Fiscal 1996. 7. GENERAL LIABILITY Provision is made for the estimated costs under the deductible portion of S-K-I's general liability insurance policies. The balance of such reserves at April 28, 1996 was $5,594,666. Of such amount, $4,795,428 is included in other long-term liabilities, with the remaining balance included in other accrued expenses. 8. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS The Company does not provide health care and life insurance benefits for retired employees who reach normal retirement age. The adoption of SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, has no effect on the Company's financial position or results of operations. 9. DIVIDEND PAID During November 1995, the Board of Directors declared a $.13 per share dividend on Common Stock payable to stockholders of record on December 8, 1995. The dividend was paid on January 17, 1996. 10. AGREEMENT AND PLAN OF MERGER S-K-I Ltd. announced that it has received, through its investment financial advisor Schroder Wertheim & Co., an offer by LBO Resort Enterprises of Newry, Maine, to purchase all of the approximately 6,000,000 shares of outstanding stock of S-K-I Ltd. for $18.00 per share. The S-K-I Ltd. Board of Directors has approved a definitive merger agreement with LBO Resort Enterprises. A meeting of S-K-I Ltd. shareholders will be held on June 10, 1996 to consider the offer as recommended by the S-K-I Ltd. Board of Directors. The total value of the offer for the equity approximates $107,000,000. The transaction is subject to, among other things, shareholder and regulatory approvals. 11. NEW ACCOUNTING PRONOUNCEMENTS In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". The standard identifies indicators to determine whether an impairment of long-lived assets has been incurred and provides guidance in determining the amount of the impairment. The Company will adopt SFAS No. 121 in Fiscal 1997. The Company expects that there will not be a F-44 S-K-I LTD. NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED) material impact to the Company's financial position or results of operations as a result of adopting this standard. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (FAS 123), "Accounting for Stock-Based Compensation." The Company does not intend to adopt the new compensation expense provisions of FAS 123 but will adopt the disclosure provisions in Fiscal 1997. 12. SUBSEQUENT EVENTS (UNAUDITED) On June 28, 1996, the Company consummated a transaction with American Skiing Company in which the Company sold all of its approximately 6,000,000 shares of outstanding common stock for $18.00 per share. American Skiing Company has entered into a consent decree with the U.S. Department of Justice in which American Skiing Company has agreed to divest the assets constituting the Waterville Valley ski resort. The divestiture is expected to be consummated no later than December 1, 1996. The unaudited carrying value of the Waterville Valley ski resort assets to be divested included in the accompanying S-K-I unaudited consolidated balance sheet as of April 28, 1996, is approximately $11.1 million and the unaudited net income for the nine months ended April 28, 1996 of the Waterville Valley ski resort included in the accompanying S-K-I unaudited consolidated statement of income for the nine months ended April 28, 1996, is approximately $863,000. F-45 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO KAMORI INTERNATIONAL CORPORATION: We have audited the accompanying combined balance sheets of the KAMORI COMBINED ENTITIES (the combined entities listed in Note 1) as of May 31, 1996 and 1997, and the related combined statements of operations, stockholders' equity and cash flows for each of the three years in the period ended May 31, 1997. These financial statements are the responsibility of Kamori's management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of the Kamori Combined Entities as of May 31, 1996 and 1997, and the combined results of their operations and their cash flows for each of the three years in the period ended May 31, 1997 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Denver, Colorado August 1, 1997 F-46 KAMORI COMBINED ENTITIES (NOTE 1) COMBINED BALANCE SHEETS AS OF MAY 31, 1996 AND 1997
1996 1997 -------------- -------------- ASSETS CURRENT ASSETS: Cash and cash equivalents...................................................... $ 14,391,404 $ 15,653,936 Accounts receivable, net of allowance for doubtful accounts of $67,384 and $15,551, respectively........................................................ 1,332,653 574,771 Inventory and supplies......................................................... 2,959,210 3,320,540 Receivable from Kamori International Corporation............................... 349,145 246,323 Prepaid expenses and other current assets...................................... 696,322 497,084 -------------- -------------- Total current assets......................................................... 19,728,734 20,292,654 -------------- -------------- PROPERTY AND EQUIPMENT, at cost: Ski lifts and trails........................................................... 61,886,703 62,933,368 Buildings and parking structures............................................... 56,199,673 56,106,317 Machinery and equipment........................................................ 46,113,639 48,664,085 Land used in operations........................................................ 17,513,217 16,256,564 Construction in progress....................................................... 3,837,897 4,582,273 -------------- -------------- 185,551,129 188,542,607 Less- Accumulated depreciation................................................... (83,810,102) (95,910,242) -------------- -------------- 101,741,027 92,632,365 -------------- -------------- LAND HELD FOR DEVELOPMENT AND SALE............................................... 28,327,824 27,381,613 -------------- -------------- INVESTMENT IN REAL ESTATE PARTNERSHIP (Note 1)................................... 5,536,758 4,894,087 -------------- -------------- OTHER ASSETS, net of accumulated amortization of $2,091,440 and $839,673, respectively................................................................... 3,733,134 4,243,275 -------------- -------------- $ 159,067,477 $ 149,443,994 -------------- -------------- -------------- -------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable............................................................... $ 2,072,766 $ 2,228,956 Accrued property taxes......................................................... 420,034 442,643 Accrued salaries and benefits.................................................. 2,069,674 2,588,032 Other accrued expenses......................................................... 2,367,498 2,568,010 Accrued interest payable....................................................... 1,154,989 1,168,930 Accrued interest payable to Kamori International Corporation................... 431,052 35,159 Current portion of long-term debt (Notes 3 and 4).............................. 4,050,400 5,053,539 -------------- -------------- Total current liabilities...................................................... 12,566,413 14,085,269 -------------- -------------- LONG-TERM DEBT (Notes 3 and 4): Collateralized notes payable to banks.......................................... 92,866,000 87,812,461 Notes payable to Kamori International Corporation.............................. 45,230,080 42,547,115 -------------- -------------- 138,096,080 130,359,576 -------------- -------------- Total liabilities............................................................ 150,662,493 144,444,845 -------------- -------------- COMMITMENTS AND CONTINGENCIES (Notes 1, 8 and 9) STOCKHOLDERS' EQUITY (Note 11): Common stock and additional paid-in capital.................................... 44,400,000 44,400,000 Accumulated deficit............................................................ (35,995,016) (39,400,851) -------------- -------------- 8,404,984 4,999,149 -------------- -------------- $ 159,067,477 $ 149,443,994 -------------- -------------- -------------- --------------
The accompanying notes to combined financial statements are an integral part of these balance sheets. F-47 KAMORI COMBINED ENTITIES (NOTE 1) COMBINED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED MAY 31, 1995, 1996 AND 1997
1995 1996 1997 ------------- ------------- ------------- REVENUES: Ski operations.................................................... $ 67,842,988 $ 64,966,616 $ 67,422,873 Retail and ski rental operations.................................. 11,848,262 11,279,791 11,905,843 Commercial leasing................................................ 1,779,339 1,943,583 1,889,300 Reservation services.............................................. 2,881,021 3,271,341 3,336,082 Golf operations................................................... 2,324,361 2,257,214 2,310,431 Land sales........................................................ 519,950 -- 1,199,097 ------------- ------------- ------------- Other............................................................. 1,371,156 1,013,458 1,002,642 ------------- ------------- ------------- 88,567,077 84,732,003 89,066,268 COSTS AND EXPENSES: Operating expenses-- Ski operations.................................................. 34,682,132 34,032,473 36,712,383 Retail and ski rental operations................................ 8,771,110 8,562,246 8,724,835 Commercial leasing.............................................. 312,430 350,935 310,351 Reservation services............................................ 2,552,523 2,497,808 2,548,538 Golf operations................................................. 1,874,812 1,930,483 1,880,543 Cost of land sales.............................................. 521,855 -- 962,506 Depreciation.................................................... 14,179,049 14,176,014 12,389,363 Amortization.................................................... 463,623 301,212 126,926 General, administrative and marketing............................. 16,468,101 16,511,590 17,238,072 (Gain) loss on disposition of property............................ 606,996 73,521 (60,181) Writedown of assets (Note 2)...................................... -- -- 2,000,000 ------------- ------------- ------------- 80,432,631 78,436,282 82,833,336 ------------- ------------- ------------- Operating income................................................ 8,134,446 6,295,721 6,232,932 ------------- ------------- ------------- OTHER (INCOME) EXPENSES: Interest expense.................................................. 12,047,155 11,970,893 10,658,465 Interest income................................................... (586,049) (738,639) (681,768) ------------- ------------- ------------- 11,461,106 11,232,254 9,976,697 ------------- ------------- ------------- Net loss before income taxes.................................... (3,326,660) (4,936,533) (3,743,765) INCOME TAX (BENEFIT) PROVISION (Note 6)............................. 579,496 (398,267) (337,930) ------------- ------------- ------------- Net loss........................................................ $ (3,906,156) $ (4,538,266) $ (3,405,835) ------------- ------------- ------------- ------------- ------------- -------------
The accompanying notes to combined financial statements are an integral part of these statements. F-48 KAMORI COMBINED ENTITIES (NOTE 1) COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED MAY 31, 1995, 1996 AND 1997
COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL (NOTE ACCUMULATED 11) DEFICIT TOTAL ---------------- -------------- ------------- BALANCES, at May 31, 1994....................................... $ 40,900,000 $ (27,550,594) $ 13,349,406 Net loss...................................................... -- (3,906,156) (3,906,156) ---------------- -------------- ------------- BALANCES, at May 31, 1995....................................... 40,900,000 (31,456,750) 9,443,250 Issuance of common stock in exchange for the assumption of debt by Kamori International Corporation.................... 3,500,000 -- 3,500,000 Net loss...................................................... -- (4,538,266) (4,538,266) ---------------- -------------- ------------- BALANCES, at May 31, 1996....................................... 44,400,000 (35,995,016) 8,404,984 Net loss...................................................... -- (3,405,835) (3,405,835) ---------------- -------------- ------------- BALANCES, at May 31, 1997....................................... $ 44,400,000 $ (39,400,851) $ 4,999,149 ---------------- -------------- ------------- ---------------- -------------- -------------
The accompanying notes to combined financial statements are an integral part of these statements. F-49 KAMORI COMBINED ENTITIES (NOTE 1) COMBINED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MAY 31, 1995, 1996 AND 1997
1995 1996 1997 -------------- -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss....................................................... $ (3,906,156) $ (4,538,266) $ (3,405,835) Adjustments to reconcile net loss to net cash provided by operating activities- Depreciation................................................. 14,179,049 14,176,014 12,389,363 Amortization................................................. 548,664 382,144 260,690 Cost of land sales........................................... 501,733 -- 946,211 Writedown of assets.......................................... -- -- 2,000,000 Equity in earnings from investee............................. (245,626) (178,141) (107,329) Loss (gain) on disposition of property....................... 111,933 73,521 (60,181) Changes in operating assets and liabilities- (Increase) decrease in accounts receivable................... (482,951) (114,331) 757,882 (Increase) decrease in inventory and supplies................ (69,766) 135,639 (361,330) Decrease (increase) in prepaid expenses and other current assets..................................................... 330,851 (206,636) 199,238 Decrease (increase) in receivable from Kamori International Corporation.................................. 862,718 (762,402) 102,822 Increase in other assets..................................... (459,290) (607,917) (770,836) Increase (decrease) in accounts payable...................... 665,689 (23,276) 156,190 Increase (decrease) in accrued expenses...................... 592,145 (586,827) 741,479 Increase (decrease) in accrued interest payable.............. 873,584 (408,197) (381,952) -------------- -------------- -------------- Net cash provided by operating activities.................... 13,502,577 7,341,325 12,466,412 -------------- -------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to ski lifts and trails.............................. (92,113) (335,359) (979,835) Additions to machinery and equipment........................... (5,535,146) (3,596,219) (3,103,335) Additions to buildings and parking structures.................. (440,458) (1,357,493) (516,821) Net change in construction in progress......................... (857,376) (574,903) (744,376) Proceeds from sale of property and equipment................... 3,107,677 226,273 123,852 Cash distribution from equity investee......................... -- -- 750,000 Other.......................................................... -- 81,881 -- -------------- -------------- -------------- Net cash used in investing activities.......................... (3,817,416) (5,555,820) (4,470,515) -------------- -------------- --------------
The accompanying notes to combined financial statements are an integral part of these statements. F-50 KAMORI COMBINED ENTITIES (NOTE 1) COMBINED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED MAY 31, 1995, 1996 AND 1997
1995 1996 1997 ------------- ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from seasonal lines of credit............................... 10,000,000 6,700,000 5,500,000 Payment of seasonal lines of credit.................................. (10,000,000) (6,700,000) (5,500,000) Payments of collateralized notes payable to banks.................... (5,060,098) (4,054,600) (4,050,400) Proceeds from collateralized notes payable to banks.................. -- 820,598 -- Proceeds from notes payable to Kamori International Corporation...... 12,689,782 15,095,218 15,827,347 Payments of note payable to Kamori International Corporation......... (14,120,000) (13,400,000) (18,510,312) Capitalized loan fees................................................ -- (321,128) -- ------------- ------------- ------------- Net cash used in financing activities............................ (6,490,316) (1,859,912) (6,733,365) Net increase (decrease) in cash and cash equivalents............. 3,194,845 (74,407) 1,262,532 CASH AND CASH EQUIVALENTS, beginning of year......................... 11,270,966 14,465,811 14,391,404 ------------- ------------- ------------- CASH AND CASH EQUIVALENTS, end of year............................... $ 14,465,811 $ 14,391,404 $ 15,653,936 ------------- ------------- ------------- ------------- ------------- ------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for interest, net of amounts capitalized.................................................... $ 10,906,553 $ 11,968,488 $ 10,649,477 ------------- ------------- ------------- ------------- ------------- ------------- Cash paid to Kamori International Corporation during the year for taxes.......................................................... $ -- $ -- $ -- ------------- ------------- ------------- ------------- ------------- -------------
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES: During fiscal 1995, Steamboat Ski & Resort Corporation refinanced a note payable to a bank and applied the loan balance of $800,402 to the new note payable. On March 31, 1996, Orlando Resort Corporation had a $3.5 million note payable in full to a bank. Kamori International Corporation refinanced the note at the parent level and accepted 100 shares of common stock in exchange for the assumption of the note payable. The accompanying notes to combined financial statements are an integral part of these statements. F-51 KAMORI COMBINED ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS AS OF MAY 31, 1996 AND 1997 (1) BUSINESS AND ORGANIZATION The Kamori Combined Entities ("Kamori") are comprised of the five wholly-owned subsidiaries of Kamori International Corporation ("KIC"). KIC is a controlled subsidiary of Kamori Kanko Co., Ltd. ("KKCL"), a Japanese corporation. The combined financial statements presented herein include the financial position, results of operations and cash flows of Steamboat Ski & Resort Corporation ("SSRC"), Steamboat Development Corporation ("SDC"), Heavenly Valley Ski & Resort Corporation ("HVSRC"), Heavenly Corporation ("HC"), and Orlando Resort Corporation ("ORC"), all Delaware corporations. Such financial statements have been combined due to the pending sale of Kamori, as discussed below. SSRC owns and operates a major ski and recreation complex in Steamboat Springs, Colorado (the "Steamboat Ski Resort"). SSRC also owns a majority interest in a consolidated subsidiary, Walton Pond Apartments, Inc. ("WPA"). WPA owns and operates an employee housing facility in Steamboat Springs primarily for the use of SSRC seasonal employees. SDC owns a 50% general partnership interest in Country Club Highlands Partnership ("CCHP"). CCHP is engaged in the development and sale of residential real estate adjacent to the Steamboat Ski Area. HVSRC and HC are the sole partners in Heavenly Valley, Limited Partnership ("HVLP"), which owns and operates the Heavenly Ski Resort, a major destination ski resort located in South Lake Tahoe, California and Stateline, Nevada. ORC owns and operates the Sabal Point Golf Course and Country Club ("Sabal Point"), a golf, tennis and swimming club located in Orlando, Florida. On August 1, 1997, KIC entered into a stock purchase agreement with ASC Holdings, Inc. ("ASC"), an unaffiliated third party, wherein ASC will acquire all of the issued and outstanding shares of Kamori upon the closing date of the agreement in exchange for approximately $288 million in cash. Certain assets reflected in the accompanying Kamori combined financial statements will be distributed to KIC prior to the closing and consist of all Kamori cash and cash equivalents and certain property with a net book value at May 31, 1997 of approximately $16.4 million. Proceeds from the sale will be used to retire all of the outstanding debt of Kamori. The ASC acquisition is subject to certain significant terms and conditions. In order to consummate the acquisition and fund the purchase price, ASC must successfully complete the initial public offering of its common stock. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF COMBINATION The combined financial statements include the accounts of Kamori. All significant intercompany accounts and transactions have been eliminated in combination. The minority shareholder's interest and share in the profits and losses of WPA have been reflected in accrued expenses in the accompanying combined balance sheets. REVENUE RECOGNITION Resort revenue primarily consists of revenue from ski operations, lodging, food and beverage operations and other recreational activities and is recognized as services are performed or as goods are sold. Real estate revenue is recognized when consideration has been received, title, possession and other attributes of ownership have been transferred to the buyer and Kamori is not obligated to perform significant additional activities after the sale. F-52 KAMORI COMBINED ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) AS OF MAY 31, 1996 AND 1997 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CASH AND CASH EQUIVALENTS Kamori considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. LAND HELD FOR DEVELOPMENT AND SALE Land held for development and sale is carried at the lower of cost or fair value. Costs related to the development activities of Kamori, including interest, are capitalized while such property is actively being prepared for its intended use, until the property is ready for sale. Kamori's land development and sales activities are impacted by a variety of factors, including local and regional economic conditions, and local zoning and approval guidelines. Management of Kamori monitors such conditions and the related effect on the value of its real estate holdings and will develop, market and dispose of such holdings at a rate which optimizes its value compared to its cost. PROPERTY AND EQUIPMENT Kamori owns substantially all of the base area land and facilities of the Steamboat and Heavenly Ski Resorts. A significant portion of the ski trails, lifts and related assets are on land leased from the United States Forest Service ("USFS") under special use permits which expire in 2029. Kamori also owns the land and facilities comprising the Sabal Point Country Club. Property and equipment is carried at cost and is depreciated using the straight-line method over the estimated useful lives of the related assets as follows:
ASSETS USEFUL LIVES - ---------------------------------------------------------------------------- ---------------- Buildings, improvements and parking structures.............................. 10 to 30 years Ski lifts and trails........................................................ 5 to 15 years Machinery and equipment..................................................... 3 to 15 years
HVLP has incurred approximately $3.2 million of project development costs relating to the proposed expansion of the Heavenly Ski Resort. These costs have been incurred since 1990 and are included in construction in progress in the accompanying combined balance sheets. During fiscal 1997, HVLP obtained the remaining required approvals relating to the proposed expansion. In management's opinion, these costs will be realized through the future development, operation and/or sale of the Heavenly Ski Resort. ADVERTISING COSTS Advertising costs are expensed as incurred. Advertising expense for the years ended May 31, 1995, 1996 and 1997 totaled approximately $2.1 million, $2.3 million and $2.2 million, respectively. INVENTORIES Inventories consist primarily of retail clothing, ski equipment and food and beverage inventories. Inventories are valued at the lower of cost or market value, generally on the average cost method. F-53 KAMORI COMBINED ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) AS OF MAY 31, 1996 AND 1997 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) DEFERRED LOAN COSTS Costs and fees incurred in connection with Kamori's financing activities have been capitalized and are being amortized over the terms of the related loans. Deferred loan costs are included in other assets in the accompanying combined balance sheets. GOODWILL The excess of the purchase price over the fair market value of the assets acquired in the Steamboat Ski Area acquisition is reflected as goodwill and is being amortized on a straight-line basis over 40 years. Goodwill is included in other assets in the accompanying combined balance sheets. ORGANIZATION COSTS Organization costs are included in other assets on the accompanying combined balance sheets and are being amortized on a straight-line basis over five years. INCOME TAXES A consolidated federal income tax return is filed by KIC. Kamori participates in an informal federal income tax sharing arrangement with KIC whereby taxes paid by KIC are allocated to each individual entity who, on a stand-alone basis, would have a tax liability. No payment for use of tax benefits is made to those members generating tax operating losses until such losses are utilized on a consolidated basis by KIC. Such payments are limited to the amount of taxes that the loss generating entities paid in prior years. Companies generating alternative minimum taxes are charged for those taxes on a stand-alone basis. To the extent alternative minimum tax amounts have been paid, they may benefit in future years if such benefit is realized by the consolidated group. Kamori accounts for income taxes on the liability method by recognizing deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets, liabilities and carryforwards. Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for the amount of any tax benefits which, more likely than not based on current circumstances, are not expected to be realized (see Note 6). EARNINGS PER SHARE Due to the proposed acquisition of Kamori by ASC, Kamori's historical capital structure is not indicative of its prospective structure upon the closing of the anticipated purchase transaction. Accordingly, historical net income or loss per common share is not considered meaningful and has not been presented herein. IMPAIRMENT OF LONG-LIVED ASSETS AND IDENTIFIABLE INTANGIBLES Kamori reviews its long-lived assets and certain identifiable intangibles whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Generally, the basis for making such assessments is based on future cash flow projections. F-54 KAMORI COMBINED ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) AS OF MAY 31, 1996 AND 1997 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ORC has historically generated net cash flow deficits from operations which have been funded by KIC. As a result, during fiscal 1997, ORC recorded an impairment loss of $2,000,000 related to its land, buildings and equipment to properly state these fixed assets at estimated fair values. Fair value was determined by assessing the present value of estimated expected future cash flows using a discount rate commensurate with the risks involved and based on the stock purchase agreement discussed above. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-55 KAMORI COMBINED ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) AS OF MAY 31, 1996 AND 1997 (3) LONG-TERM DEBT Long-term debt consists of the following as of May 31, 1996 and 1997:
1996 1997 -------------- -------------- SSRC- Collateralized note payable to a bank, due May 28, 1999; annual principal payments of $2,000,000 due March 31; secured by substantially all assets of SSRC- Fixed rate portion; interest payable quarterly at 8.05%...................... $ 15,000,000 $ 15,000,000 Variable rate portion; interest payable quarterly based on LIBOR at beginning of quarter (6.5625% and 6.9375% at May 31, 1996 and 1997, respectively).... 33,350,000 31,350,000 Revolving loan agreement payable to KIC; interest at 6.9%, payable monthly; principal due October 31, 2001............................................... 32,900,000 31,900,000 Line of credit payable to KIC; interest payable quarterly at prime rate plus 2% (10.25% and 10.5% at May 31, 1996 and 1997, respectively); principal due October 31, 2001............................................................. 8,457,149 6,487,174 WPA note payable to a bank, due October 1, 2002; interest at bank's prime rate and reset annually (8.25% and 8.5% at May 31, 1996 and 1997, respectively); secured by land, buildings, furniture and equipment of Walton Pond Apartment Complex...................................................................... 1,566,400 1,516,000 HVLP- Note payable to a bank, interest payable semiannually based on adjusted LIBOR (6.8125% and 7.325% on May 31, 1996 and May 31, 1997, respectively); due March 31, 2001; secured by substantially all assets of HVLP.................. 46,000,000 44,000,000 ORC- Line of credit payable to KIC; interest payable quarterly at prime rate plus 2%, (10.25% and 10.5% at May 31, 1996 and 1997, respectively); principal due October 31, 2001............................................................. 3,890,931 4,442,911 SDC- Line of credit payable to KIC; interest payable quarterly at prime rate plus 2%, (10.25% and 10.5% at May 31, 1996 and 1997, respectively); principal due October 31, 2001............................................................. 982,000 717,030 -------------- -------------- 142,146,480 135,413,115 Less- current portion.......................................................... (4,050,400) (5,053,539) -------------- -------------- Total long-term debt........................................................... $ 138,096,080 $ 130,359,576 -------------- -------------- -------------- --------------
SSRC DEBT At the beginning of each quarter, SSRC can elect to convert the variable rate portion of the collateralized note payable into fixed rate debt under certain circumstances. No such election was made by SSRC as of May 31, 1996 or 1997. F-56 KAMORI COMBINED ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) AS OF MAY 31, 1996 AND 1997 (3) LONG-TERM DEBT (CONTINUED) The collateralized note payable and the revolving credit facility (discussed below) are secured by a first deed of trust covering all Steamboat Ski Area assets, assignment of all rents, pledging by KIC of all of SSRC's and SDC's common stock and an assignment of the USFS Permit covering the Steamboat Ski Area. This note and the revolving credit facility are also secured by an intercreditor agreement which provides that all other indebtedness or obligations of SSRC are subordinate to this debt. Additionally, KKCL has guaranteed all obligations of SSRC under these arrangements. Under terms of the collateralized note agreement, SSRC is required to deposit Cash Flow, as defined, into an interest bearing account beginning one year prior to the date of the required principal payments. The deposit will then be applied to the principal payment. The WPA note payable is guaranteed by SSRC and requires, among other restrictions, that WPA maintain a Debt Service Coverage ratio, as defined, of 1.15 times and provide additional collateral if the projects appraised value falls below certain levels. On May 31, 1997, the note payable was refinanced under similar terms with a maturity date of October 1, 2002. SSRC also has a revolving credit facility with a bank which expires on May 31, 1999. Under this facility, the bank will provide a revolving line of credit of up to $5 million to finance SSRC's seasonal cash flow needs. Amounts outstanding under this facility bear interest at the prime interest rate and are due and payable on the facility's expiration date. No amounts were outstanding under this facility as of May 31, 1996 and 1997. The SSRC line of credit amount available to draw upon is set by KIC and fluctuates depending on SSRC's cash needs. Both the revolving loan and the line of credit are subordinate to the collateralized note payable and revolving credit facility with a bank discussed above. The revolving loan and the line of credit were renewed during the year to mature on October 31, 2001. Each agreement contains the same terms and provisions that existed in the original agreements. HVLP DEBT The variable rate debt can be converted, at the election of HVLP, into fixed-rate debt under certain circumstances. The note payable is secured by a first deed of trust covering all HVLP assets, security and financing statements and the USFS Permit covering the Heavenly Ski Resort. The note payable is guaranteed by KKCL. HVLP is subject to various restrictive covenants in connection with the loan which may be accelerated upon certain conditions. The loan terms require HVLP to make a minimum payment of $1 million for the year ended March 31, 1997 and is required to make another $1 million payment for the year ended March 31, 1999. However, payments must total $4 million by March 31, 1998 and $8 million by March 31, 2000, in the aggregate. HVLP repaid $2 million of the outstanding note during September 1996. LETTERS OF CREDIT Under an agreement with an insurance carrier, SSRC had a $210,000 letter of credit outstanding with a bank which guarantees payments of workers compensation claims and expires in January, 1998. No amount was drawn under this letter of credit as of May 31, 1997. F-57 KAMORI COMBINED ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) AS OF MAY 31, 1996 AND 1997 (3) LONG-TERM DEBT (CONTINUED) HVLP has an agreement with a bank to allow for $1.5 million in letters of credit to be issued under certain circumstances when needed. Semi-annual fees under the agreement include a letter of credit fee of .5% per annum on the average amount of all letters of credit outstanding and a commitment fee of .3125% per annum on the average amount of credit available. The letters of credit are subordinate to the collateralized note payable and operating loan described above. No letters of credit were outstanding as of May 31, 1997. DEBT MATURITIES Annual maturities for all long-term debt outstanding at May 31, 1997, are as follows:
YEAR ENDING MAY 31- - ------------------------------------------------------------------------------ 1998.......................................................................... $ 5,053,540 1999.......................................................................... 46,408,268 2000.......................................................................... 4,063,418 2001.......................................................................... 39,069,024 2002.......................................................................... 39,622,239 Thereafter.................................................................... 1,196,626 -------------- Total......................................................................... $ 135,413,115 -------------- --------------
(4) FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value. CASH AND CASH EQUIVALENTS The carrying amounts approximate fair value. DEBT An estimate of rates currently available to Kamori for debt with similar terms was used to determine the fair value of Kamori's debt. The carrying amounts and estimated fair values of Kamori's financial instruments are as follows:
MAY 31, 1996 MAY 31, 1997 ------------------------------ ------------------------------ CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE -------------- -------------- -------------- -------------- Cash and cash equivalents...................... $ 14,391,404 $ 14,391,404 $ 15,653,936 $ 15,653,936 Long-term debt................................. $ 142,146,480 $ 142,330,452 $ 135,413,115 $ 134,457,681
(5) RELATED PARTY TRANSACTIONS SSRC, ORC and HVLP reimburse KIC and KKCL for certain services provided. Such reimbursements for the years ended May 31, 1995, 1996 and 1997 totaled $3,340,928, $3,302,107 and F-58 KAMORI COMBINED ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) AS OF MAY 31, 1996 AND 1997 (5) RELATED PARTY TRANSACTIONS (CONTINUED) $3,399,642, respectively, and are included in general, administrative and marketing expense in the accompanying combined statements of operations. (6) INCOME TAXES The components of the income tax provision or benefit are as follows:
YEAR ENDED MAY 31, ------------------------------------ 1995 1996 1997 ---------- ----------- ----------- Current tax (benefit) provision............................................ $ 579,000 $ (398,000) $ (338,000) Deferred tax (benefit) provision........................................... -- -- -- ---------- ----------- ----------- Total tax (benefit) provision.............................................. $ 579,000 $ (398,000) $ (338,000) ---------- ----------- ----------- ---------- ----------- -----------
A reconciliation of the income tax provision or benefit and the amount computed by applying the U.S. federal statutory income tax rate to book income before income taxes is as follows:
YEAR ENDED MAY 31, ------------------------------------------- 1995 1996 1997 ------------- ------------- ------------- At U.S. federal income tax rate...................................... $ (1,131,000) $ (1,678,000) $ (1,273,000) State income tax, net of federal benefit............................. (156,000) (131,000) (101,000) Excess tax deductible amortization................................... (340,000) (340,000) (340,000) Nondeductible portion of meals and entertainment..................... 55,000 58,000 72,000 Valuation allowance adjustment....................................... 2,064,000 1,647,000 1,280,000 Other................................................................ 87,000 46,000 24,000 ------------- ------------- ------------- Income tax (benefit) provision....................................... $ 579,000 $ (398,000) $ (338,000) ------------- ------------- ------------- ------------- ------------- -------------
F-59 KAMORI COMBINED ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) AS OF MAY 31, 1996 AND 1997 (6) INCOME TAXES (CONTINUED) The components of gross deferred tax assets and liabilities are as follows:
DEFERRED TAX DEFERRED TAX ASSETS LIABILITIES MAY 31, MAY 31, ------------------------------ ---------------------- 1996 1997 1996 1997 -------------- -------------- ---------- ---------- Current: Insurance accruals..................................... $ 757,000 $ 661,000 $ -- $ -- Vacation accrual....................................... 133,000 136,000 -- -- Accrued expenses....................................... 88,000 160,000 -- -- AMT credit from parent................................. 370,000 -- -- -- -------------- -------------- ---------- ---------- Total current tax assets............................. 1,348,000 957,000 -- -- -------------- -------------- ---------- ---------- Noncurrent: Fixed assets basis differences......................... -- 999,000 556,000 -- Intangible assets...................................... 69,000 54,000 -- -- AMT credit from parent................................. 823,000 823,000 -- -- Net operating loss carryover........................... 14,373,000 14,504,000 -- -- -------------- -------------- ---------- ---------- Total noncurrent tax asset............................. $ 15,265,000 16,380,000 556,000 -- -------------- -------------- ---------- ---------- Total deferred taxes................................... $ 16,613,000 $ 17,337,000 $ 556,000 $ -- -------------- -------------- ---------- ---------- -------------- -------------- ---------- ---------- Net deferred tax asset................................... $ 16,057,000 $ 17,337,000 Less -- valuation allowance.............................. (16,057,000) (17,337,000) $ -- $ -- -------------- -------------- -------------- --------------
As of May 31, 1996 and 1997, Kamori had an income tax receivable of $312,079 and $218,094, respectively, from KIC related to income taxes. These amounts are included in receivable from KIC in the accompanying combined balance sheets. At May 31, 1997, Kamori had approximately $36,828,000 of net operating loss carryforwards for federal income tax purposes which expire in the years 2005 through 2012. Kamori also has alternative minimum tax credit carryforwards of approximately $823,000. The alternative minimum tax paid can, in general, be carried forward indefinitely to reduce future regular tax liabilities to the amount of tentative minimum tax due. (7) EMPLOYEE SAVINGS PLANS SSRC has a tax deferred savings plan covering substantially all year-round and certain seasonal employees. This plan provides for both employee and SSRC contributions. Employees may contribute, on an annual basis, up to 16% of their annual compensation. SSRC's contribution is determined by the board of directors on an annual basis. SSRC's contribution for the fiscal years ended May 31, 1995, 1996 and 1997 was $213,233, $233,053 and $247,042, respectively. HVLP has a tax deferred profit sharing plan covering certain year-round employees. The plan contains an added 401(k) feature whereby participants can elect to make tax deferred contributions to the plan. The plan also provides for discretionary HVLP contributions. HVLP's cash contribution is F-60 KAMORI COMBINED ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) AS OF MAY 31, 1996 AND 1997 (7) EMPLOYEE SAVINGS PLANS (CONTINUED) determined by management on an annual basis and totaled $256,965, $262,892 and $300,000 for the fiscal years ended May 31, 1995, 1996 and 1997, respectively. (8) COMMITMENTS AND CONTINGENCIES SSRC executed agreements with major airlines to provide direct flights into the Yampa Valley Regional Airport. These agreements require SSRC to guarantee specified minimum airline revenue and to fund start-up costs. SSRC did not meet the specified minimum levels under these agreements in fiscal 1995, 1996 or 1997 and was required to fund the specified differences. Such amounts have been expensed in the accompanying combined statements of operations. Kamori leases certain space and equipment under long-term operating leases. Aggregate future minimum annual rental commitments under noncancellable operating leases are as follows:
YEAR ENDING MAY 31- - ------------------------------------------------------------------------------------ 1998................................................................................ $ 1,538,447 1999................................................................................ 1,202,523 2000................................................................................ 629,580 2001................................................................................ 163,122 2002................................................................................ 80,163 ------------ $ 3,613,835 ------------ ------------
Total rental expense for all operating leases for the years ended May 31, 1995, 1996 and 1997, was $2,365,555, $2,132,545 and $2,233,113, respectively. As of May 31, 1997, Kamori had executed contracts for the acquisition of equipment, construction of buildings and the expenditure of certain amounts related to planning activities. These commitments total approximately $5,045,000, including $4,909,000 that will be incurred during fiscal 1998 and $136,000 in fiscal year 1999 and beyond. (9) LITIGATION Due to the nature of their operations, certain of the combined entities are defendants in several lawsuits which are actively being contested. In management's opinion, the effect of these disputes will not have a significant effect on Kamori's combined financial position or results of operations. F-61 KAMORI COMBINED ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) AS OF MAY 31, 1996 AND 1997 (10) RENTAL INCOME UNDER OPERATING LEASES SSRC leases retail space to unaffiliated entities under noncancellable leases expiring through 2004. Future minimum tenant rentals under the noncancellable leases are as follows:
YEAR ENDING MAY 31- - -------------------------------------------------------------------------------- 1998............................................................................ $ 1,353,098 1999............................................................................ 1,296,769 2000............................................................................ 1,105,754 2001............................................................................ 648,167 2002............................................................................ 442,396 Thereafter...................................................................... 677,521 ------------ $ 5,523,705 ------------ ------------
(11) STOCKHOLDERS' EQUITY As of May 31, 1995, 1996 and 1997, the stockholders' equity for each of the Kamori combined entities is as follows:
STEAMBOAT ORLANDO STEAMBOAT SKI & RESORT HEAVENLY RESORT DEVELOPMENT CORPORATION VALLEY (1) CORPORATION CORPORATION TOTAL ------------- ------------ ----------- ------------ ------------- BALANCE, at May 31, 1994................. $ (631,347) $ 9,973,703 $ 104,073 $ 3,902,977 $ 13,349,406 Net income (loss)...................... (2,721,345) (509,176) (808,019) 132,384 (3,906,156) ------------- ------------ ----------- ------------ ------------- BALANCE, at May 31, 1995................. (3,352,692) 9,464,527 (703,946) 4,035,361 9,443,250 Net income (loss)...................... (1,015,783) (2,640,120) (955,898) 73,535 (4,538,266) Issuance of common stock in exchange for the assumption of debt by the parent............................... -- -- 3,500,000 -- 3,500,000 ------------- ------------ ----------- ------------ ------------- BALANCE, at May 31, 1996................. (4,368,475) 6,824,407 1,840,156 4,108,896 8,404,984 Net income (loss)...................... 2,321,681 (3,121,328) (2,592,649) (13,539) (3,405,835) ------------- ------------ ----------- ------------ ------------- BALANCE, at May 31, 1997................. $ (2,046,794) $ 3,703,079 $ (752,493) $ 4,095,357 $ 4,999,149 ------------- ------------ ----------- ------------ ------------- ------------- ------------ ----------- ------------ -------------
F-62 KAMORI COMBINED ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) AS OF MAY 31, 1996 AND 1997 (11) STOCKHOLDERS' EQUITY (CONTINUED) As of May 31, 1997, the common stock components and additional paid-in capital by entity are as follows:
STEAMBOAT ORLANDO STEAMBOAT SKI & RESORT HEAVENLY RESORT DEVELOPMENT CORPORATION VALLEY (1) CORPORATION CORPORATION TOTAL ------------- ------------- ------------ ------------ ------------- Par value, per share................... $ .01 $ .01 $ 1.00 $ .01 ------------- ------------- ------------ ------------ ------------- ------------- ------------ ------------ Shares authorized...................... 22 200 10,000 100 ------------- ------------- ------------ ------------ ------------- ------------- ------------ ------------ Shares outstanding..................... 18 100 200 20 ------------- ------------- ------------ ------------ ------------- ------------- ------------ ------------ Common stock........................... $ -- $ 1 $ 200 $ -- $ 201 ------------- ------------- ------------ ------------ ------------- ------------- ------------- ------------ ------------ ------------- Additional paid-in capital............. $ 18,000,000 $ 16,999,999 $ 5,399,800 $ 4,000,000 $ 44,399,799 ------------- ------------- ------------ ------------ ------------- ------------- ------------- ------------ ------------ -------------
The equity components above were outstanding as of May 31, 1995, 1996 and 1997 for each entity with the exception of ORC, which issued 100 shares of stock to KIC in exchange for the assumption of a $3.5 million note payable on March 31, 1996. (1) Includes HVSRC and HC. F-63 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDER, ANY OF THE UNDERWRITERS OR BY ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY, TO ANY PERSON IN ANY JURISDICTION WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. ---------------- TABLE OF CONTENTS
PAGE --------- Prospectus Summary............................... 3 Recent Developments.............................. 13 The Transactions................................. 14 Risk Factors..................................... 17 Use of Proceeds.................................. 25 Dilution......................................... 25 Dividend Policy.................................. 26 Capitalization................................... 27 Pro Forma Financial Data......................... 28 Selected Historical Consolidated Financial Data of the Company................................. 40 Selected Combined Financial Data of the Acquired Resorts........................................ 42 Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 43 Business......................................... 50 Management....................................... 72 Certain Relationships and Related Transactions... 75 Principal Shareholders........................... 76 Description of Certain Indebtedness.............. 77 Description of Capital Stock..................... 80 Shares Eligible for Future Sale.................. 83 Certain United States Federal Tax Considerations For Non-United States Holders.................. 84 Underwriting..................................... 88 Legal Matters.................................... 89 Experts.......................................... 90 Additional Information........................... 90 Index to Financial Statements.................... F-1
-------------- UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. 14,750,000 SHARES LOGO COMMON STOCK -------------- PROSPECTUS ----------------- DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION FURMAN SELZ MORGAN STANLEY DEAN WITTER SCHRODER & CO. INC. , 1997 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the various expenses, all of which will be borne by the Registrant, in connection with the sale and distribution of the securities being registered, other than the underwriting discounts and commissions. All amounts shown are estimates except for the Securities and Exchange Commission registration fee and the NASD filing fee. SEC registration fee.................................................. $ 102,803.00 NASD filing fee....................................................... 34,425.00 New York Stock Exchange listing fee................................... Transfer agent fees................................................... Accounting fees and expenses.......................................... Legal fees and expenses............................................... Printing and mailing expenses......................................... Miscellaneous......................................................... -------------- Total......................................................... $ -------------- --------------
ITEM 14. 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. ss. 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 15. RECENT SALES OF UNREGISTERED SECURITIES Set forth in chronological order is information regarding all securities sold and employee stock options granted by the Registrant since July 1994. Further included is the consideration, if any, received by the Registrant for such securities, and information relating to the section of the Securities Act of 1933, as amended (the "Securities Act"), and the rules of the Securities and Exchange Commission under which II-1 exemption from registration was claimed. All awards of options did not involve any sale under the Securities Act. None of these securities were registered under the Securities Act. Except as described below, no sale of securities involved the use of an underwriter and no commissions were paid in connection with the sales of any securities. The information set forth in this Item 15 reflects the Company's 14.76-to-1 split in the Class A Common Stock to be effected prior to the closing of the Offerings. (1) On June 17, 1997, the Registrant issued 100 shares of common stock to Leslie B. Otten in exchange for 978,300 shares of common stock ASC East (formerly American Skiing Company), pursuant to the exemption contained in Section 4(2) of the Securities Act. (2) On July 12, 1997, the Registrant issued 17,500 shares of Series A Exchangeable Preferred Stock at a price of $1,000 per share to one institutional investor pursuant to the exemption under Section 4(2) of the Securities Act. (3) On July 28, 1997, the Registrant issued $17.0 million principal amount of its 14% Senior Exchangeable Notes due 2002 to one institutional investor pursuant to the exemption under Section 4(2) of the Securities Act. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits
EXHIBIT NO. DESCRIPTION - --------- --------------------------------------------------------------------------------------------------------- 1.1 Form of Underwriting Agreement.* 2.1 Stock Purchase Agreement dated as of August 1, 1997, among Kamori International Corporation, ASC West and the Registrant.* 2.2 Escrow Agreement dated as of August 1, 1997, among ASC West, Kamori International Corporation and the LTCB Trust Company.* 3.1 Articles of Incorporation of the Registrant, as amended.** 3.2 By-Laws of the Registrant.* 4.1 Specimen Certificate for shares of Common Stock, $.01 par value, of the Registrant.** 5.1 Opinion of Pierce Atwood with respect to the validity of the securities being offered.** 10.1 Credit Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries, Fleet National Bank, BankBoston, N.A., KeyBank National Association and Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.1 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.2 Security Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries and Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.2 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.3 Revolving Credit Notes dated June 28, 1996, issued by ASC East and certain Subsidiaries to Fleet National Bank, BankBoston, N.A. and KeyBank National Association in the aggregate principal amount of $65,000,000 (incorporated by reference to Exhibit 10.3 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.4 Swing Line Note dated June 28, 1996, issued by ASC East and certain Subsidiaries to Fleet National Bank in the aggregate principal amount of $5,000,000 (incorporated by reference to Exhibit 10.4 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
II-2
EXHIBIT NO. DESCRIPTION - --------- --------------------------------------------------------------------------------------------------------- 10.5 Fee and Leasehold Mortgage, Assignment of Leases and Rents, Financing Statement and Security Agreement dated as of June 28, 1996, by Sunday River Skiway Corporation to Fleet National Bank, as Agent (representative of substantially similar agreements of even date by each of Sunday River, Ltd., L.B.O. 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. to Fleet National Bank, as Agent) (incorporated by reference to Exhibit 10.5 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.6 Collateral Assignments of Leases and Rents dated as of June 28, 1996, by Sunday River Skiway Corporation to Fleet National Bank, as Agent (representative of substantially similar assignments of even date by each of Sunday River, Ltd., L.B.O. 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. to Fleet National Bank, as Agent) (incorporated by reference to Exhibit 10.6 to ASC East's Registration Statement of Form S-4, Registration No. 333-9763). 10.7 Development Agreement dated September 18, 1997, among ASC Utah, Iron Mountain Associates, LLC, WPA, Ltd., Iron Mountain Holding Group, LC and Iron Mountain Alliance, Inc.* 10.8 Assignment in Trust dated as of June 28, 1996, from L.B.O. Holding, Inc. to Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.8 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.9 Assignment of Agreements, Permits and Contracts dated as of June 28, 1996, by Sunday River Skiway Corporation to Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.9 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.10 Assignment of Trademarks and Service Marks (U.S.) dated as of June 28, 1996, by ASC East and certain Subsidiaries to Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.10 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.11 Hazardous Materials Indemnification Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries and Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.11 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.12 Unlimited Guaranty dated as of June 28, 1996, by LBO Hotel Co. in favor of Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.12 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.13 Unlimited Guaranty dated as of June 28, 1996, by Sugarloaf Mountain Corporation in favor of Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.13 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.14 Assignment dated May 30, 1997, between Wolf Mountain Resorts, L.C. and ASC Utah.* 10.15 Intercreditor Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries, Snowridge, Inc. and Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.15 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 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, Proctor Bank and BankBoston, N.A. (incorporated by reference to Exhibit 10.16 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
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EXHIBIT NO. DESCRIPTION - --------- --------------------------------------------------------------------------------------------------------- 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), Mount Snow Ltd., Proctor Bank and BankBoston, N.A.** 10.18 Lease Agreement dated April 2, 1997, between Grand Summit Resort Properties, Inc. and L.B.O. Holding, Inc.** 10.19 Indenture dated October 24, 1990, between 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) (incorporated by reference to Exhibit 10.19 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.20 Indenture dated September 25, 1986, between 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) (incorporated by reference to Exhibit 10.20 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.21 Restated Concession Agreement dated as of 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 (incorporated by reference to Exhibit 10.21 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.22 Indenture dated as of June 28, 1996, among ASC East, certain Subsidiaries and United States Trust Company of New York, relating to Series A and Series B 12% Senior Subordinated Notes Due 2006 (incorporated by reference to Exhibit 4.1 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.23 Indenture dated as of June 28, 1996, among ASC East, certain Subsidiaries and United States Trust Company of New York, relating to the Series A and Series B 13 3/4% Subordinated Discount Notes Due 2007 (incorporated by reference to Exhibit 4.2 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.24 Registration Rights Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries, Bear, Stearns & Co., Inc. and SPP Hambro & Co., LLC (incorporated by reference to Exhibit 4.3 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.25 Purchase Agreement dated as of June 25, 1996, among ASC East, certain Subsidiaries, Bear, Stearns & Co., Inc. and SPP Hambro & Co., LLC (incorporated by reference to Exhibit 4.4 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.26 Registration Rights Agreement dated June 28, 1996, among ASC East, certain Subsidiaries and Bear, Stearns & Co. Inc. (incorporated by reference to Exhibit 4.5 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.27 Pledge and Disbursement Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries and United States Trust Company of New York (incorporated by reference to Exhibit 4.6 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.28 Shareholders Agreement dated as of June 28, 1996, among Leslie B. Otten, ASC East and Bear Stearns & Co. Inc. (incorporated by reference to Exhibit 4.7 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
II-4
EXHIBIT NO. DESCRIPTION - --------- --------------------------------------------------------------------------------------------------------- 10.29 $2,311,838.00 Promissory Note from Mountain Wastewater Treatment, Inc. to LHC Corporation dated May 16, 1995 (incorporated by reference to Exhibit 10.32 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.30 $6,120,000.00 Promissory Note, Senior Commercial Mortgage Deed, Junior Commercial Mortgage Deed, and Senior Collateral Assignment of Income, Revenue and Rentals from Sugarbush Resort Holdings, Inc. to Snowridge, Inc. and Sugarbush Inn Corporation dated May 16, 1995 and attachments thereto (incorporated by reference to Exhibit 10.33 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.31 Form of Subordinated Debenture Due 2002 from L.B.O. Holding, Inc. to former shareholders of Mt. Attitash Lift Corporation (incorporated by reference to Exhibit 10.34 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.32 Purchase Agreement dated as of April 13, 1994, among Mt. Attitash Lift Corporation, certain of its shareholders and L.B.O. Holding, Inc. (incorporated by reference to Exhibit 10.35 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.33 Stock Purchase Agreement dated August 17, 1994, between Sugarloaf Mountain Corporation and S-K-I Ltd. (incorporated by reference to Exhibit 10.36 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.34 Acquisition 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. (incorporated by reference to Exhibit 10.38 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.35 Lease dated October 15, 1980, among H. Donald Penley, Joseph Penley, Albert Penley and Sunday River Skiway Corporation (incorporated by reference to Exhibit 10.40 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.36 Lease/Option dated July 19, 1984, between John Blake and L.B.O. Holding, Inc. (incorporated by reference to Exhibit 10.41 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.37 Lease Agreement dated as of July 1, 1993, between Snowridge, Inc. and Mountain Water Company (incorporated by reference to Exhibit 10.42 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.38 Lease Agreement dated as of March 1, 1988, between Snowridge, Inc. and Mountain Wastewater Treatment, Inc. (incorporated by reference to Exhibit 10.43 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.39 Lease dated November 10, 1960, between the State of Vermont and Sherburne Corporation (predecessor to Killington Ltd.) (incorporated by reference to Exhibit 10.44 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.40 Lease Agreement dated as of February 20, 1990, between Pico Pond Associates and Killington Ltd. (incorporated by reference to Exhibit 10.45 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.41 Lease Agreement dated as of June 21, 1994, between the Town of Wilmington and Mount Snow, Ltd. (incorporated by reference to Exhibit 10.46 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.42 Lease Agreement dated April 24, 1995, between Sargent, Inc. and Mount Snow, Ltd. (incorporated by reference to Exhibit 10.47 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
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EXHIBIT NO. DESCRIPTION - --------- --------------------------------------------------------------------------------------------------------- 10.43 United States Forest Service Special Use Permit No. 4040/01, issued November 29, 1989 to Mount Snow Ltd. (incorporated by reference to Exhibit 10.48 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.44 United States Forest Service Special Use Permit No. 4059/01 issued July 19, 1994 to L.B.O. Holding, Inc. and Amendment 1 thereto (incorporated by reference to Exhibit 10.49 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.45 United States Forest Service Special Use Permit No. 4041 issued May 17, 1995, to Sugarbush Resort Holdings, Inc. (incorporated by reference to Exhibit 10.51 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.46 Agreement between Sugarloaf Mountain Corporation and the Inhabitants of the Town of Carrabassett Valley, Maine, concerning the Sugarloaf Golf Course dated June 3, 1987 (incorporated by reference to Exhibit 10.52 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.47 Commercial Lease dated August 7, 1997, between L.B.O. Holding, Inc. and Grand Summit Hotel Condominium Unit Owners Association, Inc.** 10.48 Agreement dated July 26, 1995, among Bombardier Corporation, Killington, Ltd., Mount Snow, Ltd., Waterville Valley Ski Area, Ltd., Bear Mountain Ltd., and Sugarloaf Mountain Corporation (incorporated by reference to Exhibit 10.55 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.49 Agreement dated June 3, 1996, between ASC East and Eastern Resorts Company, LLC (incorporated by reference to Exhibit 10.56 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.50 Employment Agreement dated as of August 24, 1994, among Warren C. Cook, Sugarloaf Mountain Corporation and S-K-I Ltd. (incorporated by reference to Exhibit 10.57 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.51 Christopher E. Howard Employment Terms (Agreement) dated August 22, 1996, between Christopher E. Howard and ASC East.* 10.52 Partnership Agreement dated March 1993 among Sugarloaf Mountain Corporation, Jordan Lumber Company, Warren C. Cook, Linwood E. Doble, Inc., H&S Land, Inc. and Loaf Land Inc. relating to Sugarloaf Land Partners I (incorporated by reference to Exhibit 10.58 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.53 Partnership Agreement dated March 1993 among Sugarloaf Mountain Corporation, Jordan Lumber Company, Warren C. Cook, H&S Land, Inc., Loaf Land, Inc. and Clement Begin relating to Sugarloaf Land Partners II (incorporated by reference to Exhibit 10.59 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.54 First Amendment to Credit Agreement dated as of November 27, 1996, among ASC East, certain Subsidiaries, Fleet National Bank, BankBoston N.A., KeyBank National Association and Fleet National Bank, as Agent.* 10.55 Second Amendment to Credit Agreement dated as of May 30, 1997, among ASC East, certain Subsidiaries, Fleet National Bank, BankBoston N.A., KeyBank National Association of Maine and Fleet National Bank, as Agent.* 10.56 Third Amendment to Credit Agreement dated as of July 1997, among ASC East, certain Subsidiaries, Fleet National Bank, Bank Boston, N.A., KeyBank National Association and Fleet National Bank, as Agent.*
II-6
EXHIBIT NO. DESCRIPTION - --------- --------------------------------------------------------------------------------------------------------- 10.57 Limited Guaranty of Payment and Performance dated as of October 3, 1996 from ASC East to Key Bank of Maine (incorporated by reference to Exhibit 10.60 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.58 Purchase and Sale Agreement dated as of August 30, 1996, among Waterville Valley Ski Area, Ltd., Cranmore, Inc., ASC East and Booth Creek Ski Acquisition Corp. (incorporated by reference to Exhibit 10.61 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.59 Purchase and Sale Agreement dated as of October 16, 1996, among 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 (incorporated by reference to Exhibit 10.62 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.60 Fourth Amendment to Credit Agreement dated as of September 25, 1997, among ASC East, certain Subsidiaries, Fleet National Bank, BankBoston, N.A., KeyBank National Association and Fleet National Bank, as Agent.* 10.61 $2,500,000.00 Promissory Note from the Registrant to Madeleine LLC dated June 18, 1997.* 10.62 $6,500,000.00 Promissory Note from ASC Utah to Wolf Mountain Resorts, L.C. dated July 3, 1997.* 10.63 Guaranty dated as of July 3, 1997 by the Registrant to Wolf Mountain Resorts, L.C.* 10.64 Ground Lease Agreement dated July 3, 1997, between ASC Utah and Wolf Mountain Resorts, L.C.* 10.65 Ground Lease Guaranty dated July 3, 1997, from the Registrant to Wolf Mountain Resorts, L.C.* 10.66 Securities Purchase Agreement dated as of July 2, 1997, between the Registrant and Madeleine LLC.* 10.67 $17,500,000.00 14% Senior Exchangeable Note Due 2002 dated July 28, 1997, from the Registrant to Madeleine LLC.* 10.68 First Amendment to Securities Purchase Agreement dated as of July 25, 1997, between the Registrant and Madeleine LLC.* 10.69 Registration Rights Agreement dated as of July 2, 1997, between the Registrant and Madeleine LLC.* 10.70 Form of Repriced Converts Indenture between the Registrant and trustee.* 10.71 Loan and Security Agreement dated as of August 1, 1997, among Grand Summit Resort Properties, Inc., the lenders listed therein and Textron Financial Corporation, as Administrative Agent for the lenders.* 10.72 $2,750,000 Promissory Note dated November, 1996 by Booth Creek Ski Acquisition Corp., Waterville Valley Ski Resort, Inc. and Mount Cranmore Ski Resort, Inc. to ASC East.* 10.73 Management Agreement dated August 7, 1997, between Grand Summit Hotel Condominium Unit Owners Association, Inc. and L.B.O. Holding, Inc.** 10.74 Purchase and Sale Agreement dated July 3, 1997, between Wolf Mountain Resorts, L.C., and ASC Utah.* 10.75 Second Mortgage Deed, Security Agreement and Financing Statement from Waterville Valley Ski Resort, Inc. to ASC East, dated November 27, 1996.*
II-7
EXHIBIT NO. DESCRIPTION - --------- --------------------------------------------------------------------------------------------------------- 10.76 Promissory Note Dated August 15, 1997, in the principal amount of $30,000,000 issued by Grand Summit Resort Properties, Inc. to Textron Financial Corporation.* 10.77 Agreement in Trust dated as of November 27, 1996, by Waterville Valley Ski Resort, Inc. to ASC East.** 10.78 Second Mortgage Deed, Security Agreement and Financing Statement from Mt. Cranmore Ski Resort, Inc. to ASC East dated November 27, 1996.* 10.79 Promissory Note dated August 15, 1997, in the principal amount of $25,000,000 issued by Grand Summit Resort Properties, Inc. to Green Tree Financial Servicing Corporation.* 10.80 Subscription Agreement dated June 27, 1997, between Leslie B. Otten and ASC East.* 10.81 Joinder of Sugarloaf Mountain Corporation, Sugartech and Mountainside dated August 30, 1996, among Fleet National Bank, as Agent on behalf of the lenders, Sugarloaf Mountain Corporation, Sugartech, Mountainside and certain Subsidiaries.* 10.82 Mortgage, Assignment of Rents and Security Agreement (Attitash) dated as of August 1, 1997, by Grand Summit Resort Properties, Inc. in favor of Textron Financial Corporation, as Administrative Agent.* 10.83 Letter Agreement dated August 30, 1996, among Fleet National Bank, as Agent, Fleet National Bank, BankBoston, N.A., and KeyBank National Association of Maine and ASC East and certain Subsidiaries amending the Credit Agreement dated as of June 28, 1996.* 10.84 Security Agreement dated as of August 30, 1996, among Sugarloaf Mountain Corporation, Mountainside and Sugartech and Fleet National Bank, as Agent.* 10.85 Fee and Leasehold Mortgage, Assignment of Leases and Rents, Financing Statement and Security Agreement dated as of August 27, 1996, from Sugarloaf Mountain Corporation to Fleet National Bank, as Agent.* 10.86 Collateral Assignment of Leases and Rents dated August 27, 1996, by Sugarloaf Mountain Corporation to Fleet National Bank, as Agent.* 10.87 Hazardous Materials Indemnification Agreement dated as of August 30, 1996, among ASC East, certain Subsidiaries and Fleet National Bank, as Agent.* 10.88 Assignment of Agreements, Permits and Contracts dated as of August 30, 1996, by Sugarloaf Mountain Corporation to Fleet National Bank, as Agent.* 10.89 Stock Option Plan.* 10.90 Form of Stock Non-Qualified Option Agreement (Five-Year Vesting Schedule).* 10.91 Form of Non-Qualified Stock Option Agreement (Fully-Vested).* 10.92 Form of Incentive Stock Option Agreement.* 10.93 Assignment of Rents and Leases (Attitash Project) dated as of August 1, 1997, by Grand Summit Resort Properties, Inc. in favor of Textron Financial Corporation, as Administrative Agent.* 10.94 Subordination Agreement dated as of August 1, 1997, among Grand Summit Resort Properties, Inc., L.B.O. Holding, Inc. and Textron Financial Corporation, as Administrative Agent.* 10.95 Subordination Agreement dated as of August 1, 1997, among Grand Summit Resort Properties, Inc., ASC East and Textron Financial Corporation, as Administrative Agent.*
II-8
EXHIBIT NO. DESCRIPTION - --------- --------------------------------------------------------------------------------------------------------- 10.96 Assignment of Property-Related Contracts dated as of August 1, 1997, by Grand Summit Resort Properties, Inc. in favor of Textron Financial Corporation, as Administrative Agent.** 10.97 Collateral Assignment of Declarant's Rights dated as of August 1, 1997 between Grand Summit Resort Properties, Inc. and Textron Financial Corporation.* 10.98 Letter Agreement dated August 27, 1996, among S.K.I. Ltd. and certain shareholders of Sugarloaf Mountain Corporation (incorporated by reference to Exhibit 10.63 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.99 Ski Lease dated September 18, 1997, between ASC Utah and Iron Mountain, LLC.* 10.100 Agreement concerning American Skiing Company for Holder of Special Use Permit No. 4002.01 dated January 2, 1997, among the United States Department of Agriculture Forest Service, ASC East and Waterville Valley Ski Resort, Inc.** 11.1 Computation of pro forma earnings per share.* 21.1 Subsidiaries of the Registrant.* 23.1 Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P.** 23.2 Consent of Pierce Atwood.** 23.3 Consent of Price Waterhouse LLP.* 23.4 Consent of Arthur Andersen LLP.* 23.5 Consent of Berry, Dunn, McNeil & Parker.* 24.1 Power of Attorney.*** 27.1 Financial Data Schedule.***
- ------------------------ * Filed herewith. ** To be filed by amendment. *** Previously filed. All schedules have been omitted because they are not required or because the required information is given in the Consolidated Financial Statements or Notes thereto. ITEM 17. UNDERTAKINGS Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions contained in the Articles of Incorporation, as amended, and By-Laws, as amended, of the Registrant and the laws of the State of Maine or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the 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, the Registrant will, unless in the opinion of its counsel the matters have been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. The undersigned Registrant hereby undertakes that: II-9 (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus 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. II-10 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bethel, State of Maine, on this 1st day of October, 1997. AMERICAN SKIING COMPANY By: /s/ LESLIE B. OTTEN ----------------------------------------- Leslie B. Otten PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - ------------------------------------------------------ --------------------------------- ---------------------- /s/ LESLIE B. OTTEN Chairman of the Board of ------------------------------------------- Directors, President and Leslie B. Otten Chief Executive Officer October 1, 1997 (Principal Executive Officer) /s/ THOMAS M. RICHARDSON Chief Financial Officer, ------------------------------------------- Senior Vice President, Thomas M. Richardson Treasurer and Director October 1, 1997 (Principal Financial and Accounting Officer) /s/ CHRISTOPHER E. HOWARD Senior Vice President, Chief ------------------------------------------- Administrative Officer, Christopher E. Howard General Counsel, Clerk and October 1, 1997 Director
II-11 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - --------- --------------------------------------------------------------------------------------------------------- 1.1 Form of Underwriting Agreement.* 2.1 Stock Purchase Agreement dated as of August 1, 1997, among Kamori International Corporation, ASC West and the Registrant.* 2.2 Escrow Agreement dated as of August 1, 1997, among ASC West, Kamori International Corporation and the LTCB Trust Company.* 3.1 Articles of Incorporation of the Registrant, as amended.** 3.2 By-Laws of the Registrant.* 4.1 Specimen Certificate for shares of Common Stock, $.01 par value, of the Registrant.** 5.1 Opinion of Pierce Atwood with respect to the validity of the securities being offered.** 10.1 Credit Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries, Fleet National Bank, BankBoston, N.A., KeyBank National Association and Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.1 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.2 Security Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries and Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.2 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.3 Revolving Credit Notes dated June 28, 1996, issued by ASC East and certain Subsidiaries to Fleet National Bank, BankBoston, N.A. and KeyBank National Association in the aggregate principal amount of $65,000,000 (incorporated by reference to Exhibit 10.3 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.4 Swing Line Note dated June 28, 1996, issued by ASC East and certain Subsidiaries to Fleet National Bank in the aggregate principal amount of $5,000,000 (incorporated by reference to Exhibit 10.4 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.5 Fee and Leasehold Mortgage, Assignment of Leases and Rents, Financing Statement and Security Agreement dated as of June 28, 1996, by Sunday River Skiway Corporation to Fleet National Bank, as Agent (representative of substantially similar agreements of even date by each of Sunday River, Ltd., L.B.O. 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. to Fleet National Bank, as Agent) (incorporated by reference to Exhibit 10.5 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.6 Collateral Assignments of Leases and Rents dated as of June 28, 1996, by Sunday River Skiway Corporation to Fleet National Bank, as Agent (representative of substantially similar assignments of even date by each of Sunday River, Ltd., L.B.O. 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. to Fleet National Bank, as Agent) (incorporated by reference to Exhibit 10.6 to ASC East's Registration Statement of Form S-4, Registration No. 333-9763).
EXHIBIT NO. DESCRIPTION - --------- --------------------------------------------------------------------------------------------------------- 10.7 Development Agreement dated September 18, 1997, among ASC Utah, Iron Mountain Associates, LLC, WPA, Ltd., Iron Mountain Holding Group, LC and Iron Mountain Alliance, Inc.* 10.8 Assignment in Trust dated as of June 28, 1996, from L.B.O. Holding, Inc. to Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.8 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.9 Assignment of Agreements, Permits and Contracts dated as of June 28, 1996, by Sunday River Skiway Corporation to Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.9 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.10 Assignment of Trademarks and Service Marks (U.S.) dated as of June 28, 1996, by ASC East and certain Subsidiaries to Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.10 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.11 Hazardous Materials Indemnification Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries and Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.11 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.12 Unlimited Guaranty dated as of June 28, 1996, by LBO Hotel Co. in favor of Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.12 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.13 Unlimited Guaranty dated as of June 28, 1996, by Sugarloaf Mountain Corporation in favor of Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.13 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.14 Assignment dated May 30, 1997, between Wolf Mountain Resorts, L.C. and ASC Utah.* 10.15 Intercreditor Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries, Snowridge, Inc. and Fleet National Bank, as Agent (incorporated by reference to Exhibit 10.15 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 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, Proctor Bank and BankBoston, N.A. (incorporated by reference to Exhibit 10.16 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 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), Mount Snow Ltd., Proctor Bank and BankBoston, N.A.** 10.18 Lease Agreement dated April 2, 1997, between Grand Summit Resort Properties, Inc. and L.B.O. Holding, Inc.** 10.19 Indenture dated October 24, 1990, between 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) (incorporated by reference to Exhibit 10.19 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
EXHIBIT NO. DESCRIPTION - --------- --------------------------------------------------------------------------------------------------------- 10.20 Indenture dated September 25, 1986, between 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) (incorporated by reference to Exhibit 10.20 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.21 Restated Concession Agreement dated as of 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 (incorporated by reference to Exhibit 10.21 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.22 Indenture dated as of June 28, 1996, among ASC East, certain Subsidiaries and United States Trust Company of New York, relating to Series A and Series B 12% Senior Subordinated Notes Due 2006 (incorporated by reference to Exhibit 4.1 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.23 Indenture dated as of June 28, 1996, among ASC East, certain Subsidiaries and United States Trust Company of New York, relating to the Series A and Series B 13 3/4% Subordinated Discount Notes Due 2007 (incorporated by reference to Exhibit 4.2 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.24 Registration Rights Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries, Bear, Stearns & Co. Inc. and SPP Hambro & Co., LLC (incorporated by reference to Exhibit 4.3 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.25 Purchase Agreement dated June 25, 1996, among ASC East, certain Subsidiaries, Bear, Stearns & Co. Inc. and SPP Hambro & Co., LLC (incorporated by reference to Exhibit 4.4 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.26 Registration Rights Agreement dated June 28, 1996, among ASC East, certain Subsidiaries and Bear, Stearns & Co. Inc. (incorporated by reference to Exhibit 4.5 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.27 Pledge and Disbursement Agreement dated as of June 28, 1996, among ASC East, certain Subsidiaries and United States Trust Company of New York (incorporated by reference to Exhibit 4.6 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.28 Shareholders Agreement dated as of June 28, 1996, among Leslie B. Otten, ASC East and Bear, Stearns & Co. Inc. (incorporated by reference to Exhibit 4.7 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.29 $2,311,838.00 Promissory Note dated May 16, 1995, from Mountain Wastewater Treatment, Inc. to LHC Corporation (incorporated by reference to Exhibit 10.32 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.30 $6,120,000.00 Promissory Note, Senior Commercial Mortgage Deed, Junior Commercial Mortgage Deed, and Senior Collateral Assignment of Income, Revenue and Rentals from Sugarbush Resort Holdings, Inc. to Snowridge, Inc. and Sugarbush Inn Corporation dated May 16, 1995 and attachments thereto (incorporated by reference to Exhibit 10.33 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.31 Form of Subordinated Debenture Due 2002 from L.B.O. Holding, Inc. to former shareholders of Mt. Attitash Lift Corporation (incorporated by reference to Exhibit 10.34 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
EXHIBIT NO. DESCRIPTION - --------- --------------------------------------------------------------------------------------------------------- 10.32 Purchase Agreement dated as of April 13, 1994, among Mt. Attitash Lift Corporation, certain of its shareholders and L.B.O. Holding, Inc. (incorporated by reference to Exhibit 10.35 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.33 Stock Purchase Agreement dated August 17, 1994, between Sugarloaf Mountain Corporation and S-K-I Ltd. (incorporated by reference to Exhibit 10.36 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.34 Acquisition 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. (incorporated by reference to Exhibit 10.38 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.35 Lease dated October 15, 1980, among H. Donald Penley, Joseph Penley, Albert Penley and Sunday River Skiway Corporation (incorporated by reference to Exhibit 10.40 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.36 Lease/Option dated July 19, 1984, between John Blake and L.B.O. Holding, Inc. (incorporated by reference to Exhibit 10.41 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.37 Lease Agreement dated as of July 1, 1993, between Snowridge, Inc. and Mountain Water Company (incorporated by reference to Exhibit 10.42 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.38 Lease Agreement dated as of March 1, 1988, between Snowridge, Inc. and Mountain Wastewater Treatment, Inc. (incorporated by reference to Exhibit 10.43 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.39 Lease dated November 10, 1960, between the State of Vermont and Sherburne Corporation (predecessor to Killington Ltd.) (incorporated by reference to Exhibit 10.44 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.40 Lease Agreement dated as of February 20, 1990, between Pico Pond Associates and Killington Ltd. (incorporated by reference to Exhibit 10.45 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.41 Lease Agreement dated as of June 21, 1994, between the Town of Wilmington and Mount Snow, Ltd. (incorporated by reference to Exhibit 10.46 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.42 Lease Agreement dated April 24, 1995, between Sargent, Inc. and Mount Snow, Ltd. (incorporated by reference to Exhibit 10.47 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.43 United States Forest Service Special Use Permit No. 4040/01, issued November 29, 1989 to Mount Snow Ltd. (incorporated by reference to Exhibit 10.48 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.44 United States Forest Service Special Use Permit No. 4059/01 issued July 19, 1994 to L.B.O. Holding, Inc. and Amendment 1 thereto (incorporated by reference to Exhibit 10.49 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.45 United States Forest Service Special Use Permit No. 4041 issued May 17, 1995, to Sugarbush Resort Holdings, Inc. (incorporated by reference to Exhibit 10.51 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
EXHIBIT NO. DESCRIPTION - --------- --------------------------------------------------------------------------------------------------------- 10.46 Agreement between Sugarloaf Mountain Corporation and the Inhabitants of the Town of Carrabassett Valley, Maine, concerning the Sugarloaf Golf Course dated June 3, 1987 (incorporated by reference to Exhibit 10.52 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.47 Commercial Lease dated August 7, 1997, between L.B.O. Holding, Inc. and Grand Summit Hotel Condominium Unit Owners Association, Inc.** 10.48 Agreement dated July 26, 1995, among Bombardier Corporation, Killington, Ltd., Mount Snow, Ltd., Waterville Valley Ski Area, Ltd., Bear Mountain Ltd., and Sugarloaf Mountain Corporation (incorporated by reference to Exhibit 10.55 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.49 Agreement dated June 3, 1996, between ASC East and Eastern Resorts Company, LLC (incorporated by reference to Exhibit 10.56 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.50 Employment Agreement dated as of August 24, 1994, among Warren C. Cook, Sugarloaf Mountain Corporation and S-K-I Ltd. (incorporated by reference to Exhibit 10.57 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.51 Christopher E. Howard Employment Terms (Agreement) dated August 22, 1996, between Christopher E. Howard and ASC East.* 10.52 Partnership Agreement dated March 1993 among Sugarloaf Mountain Corporation, Jordan Lumber Company, Warren C. Cook, Linwood E. Doble, Inc., H&S Land, Inc. and Loaf Land Inc. relating to Sugarloaf Land Partners I (incorporated by reference to Exhibit 10.58 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.53 Partnership Agreement dated March 1993 among Sugarloaf Mountain Corporation, Jordan Lumber Company, Warren C. Cook, H&S Land, Inc., Loaf Land, Inc. and Clement Begin relating to Sugarloaf Land Partners II (incorporated by reference to Exhibit 10.59 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.54 First Amendment to Credit Agreement dated as of November 27, 1996, among ASC East, certain Subsidiaries, Fleet National Bank, BankBoston, N.A., KeyBank National Association and Fleet National Bank, as Agent.* 10.55 Second Amendment to Credit Agreement dated as of May 30, 1997, among ASC East, certain Subsidiaries, Fleet National Bank, BankBoston, N.A., KeyBank National Association and Fleet National Bank, as Agent.* 10.56 Third Amendment to Credit Agreement dated as of July 1997, among ASC East, certain Subsidiaries, Fleet National Bank, BankBoston, N.A., KeyBank National Association and Fleet National Bank, as Agent.* 10.57 Limited Guaranty of Payment and Performance dated as of October 3, 1996 from ASC East to KeyBank of Maine (incorporated by reference to Exhibit 10.60 to ASC East's Registration Statement of Form S-4, Registration No. 333-9763). 10.58 Purchase and Sale Agreement dated as of August 30, 1996, among Waterville Valley Ski Area, Ltd., Cranmore, Inc., ASC East and Booth Creek Ski Acquisition Corp. (incorporated by reference to Exhibit 10.61 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763).
EXHIBIT NO. DESCRIPTION - --------- --------------------------------------------------------------------------------------------------------- 10.59 Purchase and Sale Agreement dated as of October 16, 1996, among 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 (incorporated by reference to Exhibit 10.62 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.60 Fourth Amendment to Credit Agreement dated as of September 25, 1997, among ASC East, certain Subsidiaries, Fleet National Bank, BankBoston, N.A., KeyBank National Association and Fleet National Bank, as Agent.* 10.61 $2,500,000.00 Promissory Note from the Registrant to Madeleine LLC dated June 18, 1997.* 10.62 $6,500,000.00 Promissory Note from ASC Utah to Wolf Mountain Resorts, L.C. dated July 3, 1997.* 10.63 Guaranty dated as of July 3, 1997 by the Registrant to Wolf Mountain Resorts, L.C.* 10.64 Ground Lease Agreement dated July 3, 1997, between ASC Utah and Wolf Mountain Resorts, L.C.* 10.65 Ground Lease Guaranty dated July 3, 1997, from the Registrant to Wolf Mountain Resorts, L.C.* 10.66 Securities Purchase Agreement dated as of July 2, 1997, between the Registrant and Madeleine LLC.* 10.67 $17,500,000.00 14% Senior Exchangeable Note Due 2002 dated July 28, 1997, from the Registrant to Madeleine LLC.* 10.68 First Amendment to Securities Purchase Agreement dated as of July 25, 1997, between the Registrant and Madeleine LLC.* 10.69 Registration Rights Agreement dated as of July 2, 1997, between the Registrant and Madeleine LLC.* 10.70 Form of Repriced Converts Indenture between the Registrant and trustee.* 10.71 Loan and Security Agreement dated as of August 1, 1997, among Grand Summit Resort Properties, Inc., the lenders listed therein and Textron Financial Corporation as Administrative Agent for the lenders.* 10.72 $2,750,000 Promissory Note dated November, 1996, by Booth Creek Ski Acquisition Corp., Waterville Valley Ski Resort, Inc. and Mount Cranmore Ski Resort, Inc. to ASC East.* 10.73 Management Agreement dated as of August 7, 1997, between Grand Summit Hotel Condominium Unit Owners Association, Inc. and L.B.O. Holding, Inc.** 10.74 Purchase and Sale Agreement dated July 3, 1997, between Wolf Mountain Resorts, L.C., and ASC Utah.* 10.75 Second Mortgage Deed, Security Agreement and Financing Statement from Waterville Valley Ski Resort, Inc. to ASC East dated November 27, 1996.* 10.76 Promissory Note dated August 15, 1997, in the principal amount of $30,000,000 issued by Grand Summit Resort Properties, Inc. to Textron Financial Corporation.* 10.77 Agreement in Trust dated as of November 27, 1996, by Waterville Valley Ski Resort, Inc. to ASC East.**
EXHIBIT NO. DESCRIPTION - --------- --------------------------------------------------------------------------------------------------------- 10.78 Second Mortgage Deed, Security Agreement and Financing Statement from Mt. Cranmore Ski Resort, Inc. to ASC East dated November 27, 1996.* 10.79 Promissory Note dated August 15, 1997, in the principal amount of $25,000,000 issued by Grand Summit Resort Properties, Inc. to Green Tree Financial Servicing Corporation.* 10.80 Subscription Agreement dated June 27, 1997, between Leslie B. Otten and ASC East.* 10.81 Joinder of Sugarloaf Mountain Corporation, Sugartech and Mountainside dated August 30, 1996, among Fleet National Bank as Agent on behalf of the lenders, Sugarloaf Mountain Corporation, Sugartech, Mountainside and certain Subsidiaries.* 10.82 Mortgage, Assignment of Rents and Security Agreement (Attitash) dated as of August 1, 1997, by Grand Summit Resort Properties, Inc. in favor of Textron Financial Corporation, as Administrative Agent.* 10.83 Letter Agreement dated August 30, 1996, among Fleet National Bank, as Agent, Fleet National Bank, BankBoston, N.A., and KeyBank National Association and ASC East and certain Subsidiaries amending the Credit Agreement dated as of June 28, 1996.* 10.84 Security Agreement dated as of August 30, 1996, among Sugarloaf Mountain Corporation, Mountainside and Sugartech and Fleet National Bank, as Agent.* 10.85 Fee and Leasehold Mortgage, Assignment of Leases and Rents, Financing Statement and Security Agreement dated as of August 27, 1996, from Sugarloaf Mountain Corporation to Fleet National Bank, as Agent.* 10.86 Collateral Assignment of Leases and Rents dated August 27, 1996, by Sugarloaf Mountain Corporation to Fleet National Bank, as Agent.* 10.87 Hazardous Materials Indemnification Agreement dated as of August 30, 1996, among ASC East, certain Subsidiaries and Fleet National Bank, as Agent.* 10.88 Assignment of Agreements, Permits and Contracts dated as of August 30, 1996, by Sugarloaf Mountain Corporation to Fleet National Bank, as Agent.* 10.89 Stock Option Plan.* 10.90 Form of Non-Qualified Stock Option Agreement (Five-Year Vesting Schedule).* 10.91 Form of Non-Qualified Stock Option Agreement (Fully-Vested).* 10.92 Form of Incentive Stock Option Agreement.* 10.93 Assignment of Rents and Leases (Attitash Project) dated as of August 1, 1997, by Grand Summit Resort Properties, Inc. in favor of Textron Financial Corporation, as Administrative Agent.* 10.94 Subordination Agreement dated as of August 1, 1997, among Grand Summit Resort Properties, Inc., L.B.O. Holding, Inc. and Textron Financial Corporation, as Administrative Agent.* 10.95 Subordination Agreement dated as of August 1, 1997, among Grand Summit Resort Properties, Inc., ASC East and Textron Financial Corporation, as Administrative Agent.* 10.96 Assignment of Contracts dated as of August 1, 1997, by Grand Summit Resort Properties, Inc. in favor of Textron Financial Corporation, as Administrative Agent.**
EXHIBIT NO. DESCRIPTION - --------- --------------------------------------------------------------------------------------------------------- 10.97 Collateral Assignment of Declarant's Rights dated as of August 1, 1997 between Grand Summit Resort Properties, Inc. and Textron Financial Corporation, as Administrative Agent.* 10.98 Letter Agreement dated August 27, 1996, among S-K-I Ltd. and certain shareholders of Sugarloaf Mountain Corporation (incorporated by reference to Exhibit 10.63 to ASC East's Registration Statement on Form S-4, Registration No. 333-9763). 10.99 Ski Lease dated September 18, 1997, between ASC Utah and Iron Mountain Associates, LLC.* 10.100 Agreement Concerning American Skiing Company for Holder of Special Use Permit No. 4002-01 dated January 2, 1997, among the United States Department of Agriculture Forest Service, ASC East and Waterville Valley Ski Resort, Inc.** 11.1 Computation of pro forma earnings per share.* 21.1 Subsidiaries of the Registrant.* 23.1 Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P.** 23.2 Consent of Pierce Atwood.** 23.3 Consent of Price Waterhouse LLP.* 23.4 Consent of Arthur Andersen LLP.* 23.5 Consent of Berry, Dunn, McNeil & Parker.* 24.1 Power of Attorney.*** 27.1 Financial Data Schedule.***
- ------------------------ * Filed herewith. ** To be filed by amendment. *** Previously filed. EX-1.1 2 UNDERWRITING AGREEMENT EXHIBIT 1.1 __________ Shares ASC Holdings, Inc. Common Stock UNDERWRITING AGREEMENT __________, 1997 DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION FURMAN SELZ LLC MORGAN STANLEY & CO. INCORPORATED SCHRODER & CO. INC. As representatives of the several Underwriters named in Schedule I hereto c/o Donaldson, Lufkin & Jenrette Securities Corporation 277 Park Avenue New York, New York 10172 Ladies and Gentlemen: ASC Holdings, Inc., a Maine corporation (the "Company"), proposes to issue and sell to the several underwriters named in Schedule I hereto (the "Underwriters") an aggregate of _______________ shares (the "Firm Shares") of the common stock, $.01 par value per share, of the Company (the "Common Stock"). The Company and Leslie B. Otten (the "Selling Stockholder") also propose to issue and sell to the several Underwriters not more than an additional _______ shares (the "Additional Shares") of Common Stock, $.01 per value per share, of which _____________ shares are to be issued and sold by the Company and _____________ shares are to be sold by the Selling Stockholder, if requested by the Underwriters as provided in Section 2 hereof. The Firm Shares and the Additional Shares are hereinafter referred to collectively as the "Shares". The Company and the Selling Stockholder are hereinafter sometimes referred to collectively as the "Sellers." The offering of the Shares is being made in connection with (i) an acquisition (the "Acquisition") of, among other things, the Steamboat and Heavenly ski resorts pursuant to an agreement (the "Acquisition Agreement"), dated July 31, 1997, between the Company and Kamori International Corporation ("Kamori"), and (ii) the entering into of a senior secured credit facility (the "New Credit Facility") providing for borrowings of up to $210 million. SECTION 1. Registration Statement and Prospectus. The Company has prepared and filed with the Securities and Exchange Commission (the "Commission") in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Act"), a registration statement on Form S-1, including a prospectus, relating to the Shares. The registration statement, as amended at the time it became effective, including the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Act, is hereinafter referred to as the "Registration Statement"; and the prospectus in the form first used to confirm sales of Shares is hereinafter referred to as the "Prospectus". If the Company has filed or is required pursuant to the terms hereof to file a registration statement pursuant to Rule 462(b) under the Act registering additional shares of Common Stock (a "Rule 462(b) Registration Statement"), then, unless otherwise specified, any reference herein to the term "Registration Statement" shall be deemed to include such Rule 462(b) Registration Statement. SECTION 2. Agreements to Sell and Purchase and Lock-Up Agreements. On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to issue and sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Company, at a price per Share of $______ (the "Purchase Price"), the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I. On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, (i) the Company agrees to issue and sell, and the Underwriters shall have the right to purchase, severally and not jointly, up to _______ Additional Shares from the Company at the Purchase Price and (ii) the Selling Stockholder agrees to sell, and the Underwriters shall have the right to purchase, severally and not jointly, up to _______ Additional Shares from the Selling Stockholder at the Purchase Price. Additional Shares may be purchased solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. The Underwriters may exercise their right to purchase Additional Shares in whole or in part from time to time by giving written notice thereof to the Company and the Selling Stockholder within 30 days after the date of this Agreement. You shall give any such notice on behalf of the Underwriters and such notice shall specify the aggregate number of Additional Shares to be purchased pursuant to such exercise and the date for payment and delivery thereof, which date shall be a business day (i) no earlier than two business days after such notice has been given (and, in any event, no earlier than the Closing Date (as hereinafter defined)) and (ii) no later than ten business days after such notice has been given. If any Additional Shares are to be purchased, (i) the Company and the Selling Stockholder agree to sell to the Underwriters the number of Additional Shares (subject to such adjustment to eliminate fractional shares as you may determine) which bears the same proportion to the total number of Additional Shares with respect to which the Underwriters 2 shall have provided notice as the total number of Additional Shares that such Seller has made available for sale to the Underwriters bears to the total number of Additional Shares that both Sellers have made available for sale to the Underwriters and (ii) each Underwriter, severally and not jointly, agrees to purchase from the Company and the Selling Stockholder the number of Additional Shares (subject to such adjustments to eliminate fractional shares as you may determine) which bears the same proportion to the total number of Additional Shares to be purchased from the Company and the Selling Stockholder as the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I bears to the total number of Firm Shares. Each Seller hereby agrees not to (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (ii) enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any Common Stock (regardless of whether any of the transactions described in clause (i) or (ii) is to be settled by the delivery of Common Stock, or such other securities, in cash or otherwise), except to the Underwriters pursuant to this Agreement, for a period of 180 days after the date of the Prospectus without the prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding the foregoing, during such period (i) the Company may grant stock options pursuant to the Company's existing stock option plan and (ii) the Company may issue shares of Common Stock upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof. The Company also agrees not to file any registration statement with respect to any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock for a period of 180 days after the date of the Prospectus, without the prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation. In addition, the Selling Stockholder agrees that, for a period of 180 days after the date of the Prospectus, without the prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation, it will not make any demand for, or exercise any right with respect to, the registration of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock. The Company shall, prior to or concurrently with the execution of this Agreement, deliver an agreement executed by (i) each of the directors and officers of the Company other than the Selling Stockholder and (ii) each stockholder listed on Annex I hereto to the effect that such person will not, during the period commencing on the date such person signs such agreement and ending 180 days after the date of the Prospectus, without the prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation, (A) engage in any of the transactions described in the first sentence of this paragraph or (B) make any demand for, or exercise any right with respect to, the registration of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock. SECTION 3. Terms of Public Offering. The Sellers are advised by you that the Underwriters propose (i) to make a public offering of the Shares as soon after the 3 execution and delivery of this Agreement as in your judgment is advisable and (ii) initially to offer the Shares upon the terms set forth in the Prospectus. SECTION 4. Delivery and Payment. Delivery to the Underwriters of and payment for the Firm Shares shall be made at 9:00 A.M., New York City time, on October __, 1997 (the "Closing Date") at such place as you shall designate. The Closing Date and the location of delivery of and payment for the Firm Shares may be varied by agreement between you and the Company. Delivery to the Underwriters of and payment for any Additional Shares to be purchased by the Underwriters shall be made at such place as you shall designate at 9:00 A.M., New York City time, on the date specified in the applicable exercise notice given by you pursuant to Section 2 (an "Option Closing Date"). Any such Option Closing Date and the location of delivery of and payment for such Additional Shares may be varied by agreement between you, the Selling Stockholder and the Company. Certificates for the Shares shall be registered in such names and issued in such denominations as you shall request in writing not later than two full business days prior to the Closing Date or an Option Closing Date, as the case may be. Such certificates shall be made available to you for inspection not later than 9:30 A.M., New York City time, on the business day prior to the Closing Date or the applicable Option Closing Date, as the case may be. Certificates in definitive form evidencing the Shares shall be delivered to you on the Closing Date or the applicable Option Closing Date, as the case may be, with any transfer taxes thereon duly paid by the respective Sellers, for the respective accounts of the several Underwriters, against payment to the Sellers of the Purchase Price therefor by wire transfer of Federal or other funds immediately available in New York City. SECTION 5. Agreements of the Company. The Company agrees with you: (a) To advise you promptly and, if requested by you, to confirm such advice in writing, (i) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information, (ii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the suspension of qualification of the Shares for offering or sale in any jurisdiction, or the initiation of any proceeding for such purposes, (iii) when any amendment to the Registration Statement becomes effective, (iv) if the Company is required to file a Rule 462(b) Registration Statement after the effectiveness of this Agreement, when the Rule 462(b) Registration Statement has become effective and (v) of the happening of any event during the period referred to in Section 5(d) below which makes any statement of a material fact made in the Registration Statement or the Prospectus untrue or which requires any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, the Company will use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time. 4 (b) To furnish to you five signed copies of the Registration Statement as first filed with the Commission and of each amendment to it, including all exhibits, and to furnish to you and each Underwriter designated by you such number of conformed copies of the Registration Statement as so filed and of each amendment to it, without exhibits, as you may reasonably request. (c) To prepare the Prospectus, the form and substance of which shall be satisfactory to you, and to file the Prospectus in such form with the Commission within the applicable period specified in Rule 424(b) under the Act; during the period specified in Section 5(d) below, not to file any further amendment to the Registration Statement and not to make any amendment or supplement to the Prospectus of which you shall not previously have been advised or to which you shall reasonably object after being so advised; and, during such period, to prepare and file with the Commission, promptly upon your reasonable request, any amendment to the Registration Statement or amendment or supplement to the Prospectus which may be necessary or advisable in connection with the distribution of the Shares by you, and to use its best efforts to cause any such amendment to the Registration Statement to become promptly effective. (d) Prior to 10:00 A.M., New York City time, on the first business day after the date of this Agreement and from time to time thereafter for such period as in the opinion of counsel for the Underwriters a prospectus is required by law to be delivered in connection with sales by an Underwriter or a dealer, to furnish to each Underwriter and any dealer as many copies of the Prospectus (and of any amendment or supplement to the Prospectus) as such Underwriter or dealer may reasonably request. (e) If during the period specified in Section 5(d), any event shall occur or condition shall exist as a result of which, in the opinion of counsel for the Underwriters, it becomes necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare and file with the Commission an appropriate amendment or supplement to the Prospectus so that the statements in the Prospectus, as so amended or supplemented, will not in the light of the circumstances when it is so delivered, be misleading, or so that the Prospectus will comply with applicable law, and to furnish to each Underwriter and to any dealer as many copies thereof as such Underwriter or dealer may reasonably request. (f) Prior to any public offering of the Shares, to cooperate with you and counsel for the Underwriters in connection with the registration or qualification of the Shares for offer and sale by the several Underwriters and by dealers under the state securities or Blue Sky laws of such jurisdictions as you may request, to continue such registration or qualification in effect so long as required for distribution of the Shares and to file such consents to service of process or other documents as may be necessary in order to effect such registration or qualification; provided, however, that the Company shall not be required in connection therewith to qualify as a foreign corporation in any jurisdiction in 5 which it is not now so qualified or to take any action that would subject it to general consent to service of process or taxation other than as to matters and transactions relating to the Prospectus, the Registration Statement, any preliminary prospectus or the offering or sale of the Shares, in any jurisdiction in which it is not now so subject. (g) To mail and make generally available to its stockholders as soon as practicable an earnings statement covering the twelve-month period ending October 31, 1998 that shall satisfy the provisions of Section 11(a) of the Act, and to advise you in writing when such statement has been so made available. (h) During the period of three years after the date of this Agreement, to furnish to you as soon as available copies of all reports or other communications furnished to the record holders of Common Stock or furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed and such other publicly available information concerning the Company and its subsidiaries as you may reasonably request. (i) Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all expenses incident to the performance of the Sellers' obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Company's counsel, the Company's accountants and the Selling Stockholder's counsel (in addition to the Company's counsel) in connection with the registration and delivery of the Shares under the Act and all other fees and expenses in connection with the preparation, printing, filing and distribution of the Registration Statement (including financial statements and exhibits), any preliminary prospectus, the Prospectus and all amendments and supplements to any of the foregoing, including the mailing and delivering of copies thereof to the Underwriters and dealers in the quantities specified herein, (ii) all costs and expenses related to the transfer and delivery of the Shares to the Underwriters, including any transfer or other taxes payable thereon, (iii) all costs of printing or producing this Agreement and any other agreements or documents in connection with the offering, purchase, sale or delivery of the Shares, (iv) all expenses in connection with the registration or qualification of the Shares for offer and sale under the securities or Blue Sky laws of the several states and all costs of printing or producing any Preliminary and Supplemental Blue Sky Memoranda in connection therewith (including the filing fees and fees and disbursements of counsel for the Underwriters in connection with such registration or qualification and memoranda relating thereto), (v) the filing fees and disbursements of counsel for the Underwriters in connection with the review and clearance of the offering of the Shares by the National Association of Securities Dealers, Inc., (vi) all fees and expenses in connection with the preparation and filing of the registration statement on Form 8-A relating to the Common Stock and all costs and expenses incident to the listing of the Shares on the Nasdaq National Market, (vii) the cost of printing certificates representing the Shares, (viii) the costs and charges of any transfer agent, registrar and/or depositary, and (ix) all other costs and expenses incident to the performance of the obligations of the Company and the Selling Stockholder hereunder for which provision is not otherwise made in this Section. The provisions of this Section shall not supersede or 6 otherwise affect any agreement that the Company and the Selling Stockholder may otherwise have for allocation of such expenses between themselves. (j) To use its best efforts to list the Shares on the Nasdaq National Market and to maintain the listing of the Shares on the Nasdaq National Market for a period of three years after the date of this Agreement. (k) To use its best efforts to do and perform all things required or necessary to be done and performed under this Agreement by the Company prior to the Closing Date or any Option Closing Date, as the case may be, and to satisfy all conditions precedent to the delivery of the Shares. (l) If the Registration Statement at the time of the effectiveness of this Agreement does not cover all of the Shares, to file a Rule 462(b) Registration Statement with the Commission registering the Shares not so covered in compliance with Rule 462(b) by 10:00 P.M., New York City time, on the date of this Agreement and to pay to the Commission the filing fee for such Rule 462(b) Registration Statement at the time of the filing thereof or to give irrevocable instructions for the payment of such fee pursuant to Rule 111(b) under the Act. SECTION 6. Representations and Warranties of the Company. The Company represents and warrants to each Underwriter that: (a) The Registration Statement has become effective (other than any Rule 462(b) Registration Statement to be filed by the Company after the effectiveness of this Agreement); any Rule 462(b) Registration Statement filed after the effectiveness of this Agreement will become effective no later than 10:00 P.M., New York City time, on the date of this Agreement; and no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or threatened by the Commission. (b)(i) The Registration Statement (other than any Rule 462(b) Registration Statement to be filed by the Company after the effectiveness of this Agreement), when it became effective, did not contain and, as amended, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Registration Statement (other than any Rule 462(b) Registration Statement to be filed by the Company after the effectiveness of this Agreement) and the Prospectus comply and, as amended or supplemented, if applicable, will comply in all material respects with the Act, (iii) if the Company is required to file a Rule 462(b) Registration Statement after the effectiveness of this Agreement, such Rule 462(b) Registration Statement and any amendments thereto, when they become effective (A) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (B) will comply in all material respects with the Act and (iv) the Prospectus does not contain and, as amended or supplemented, if applicable, 7 will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Registration Statement or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein. (c) Each preliminary prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Act, complied when so filed in all material respects with the Act, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in any preliminary prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein. (d) Each of the Company and its subsidiaries has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority to carry on its business as described in the Prospectus and to own, lease and operate its properties, and each is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole. (e) There are no outstanding subscriptions, rights, warrants, options, calls, convertible securities, commitments of sale or liens granted or issued by the Company or any of its subsidiaries relating to or entitling any person to purchase or otherwise to acquire any shares of the capital stock of the Company or any of its subsidiaries, except as otherwise disclosed in the Registration Statement. (f) All the outstanding shares of capital stock of the Company (including the Shares to be sold by the Selling Stockholder) have been duly authorized and validly issued and are fully paid, non-assessable and not subject to any preemptive or similar rights; and the Shares to be issued and sold by the Company have been duly authorized and, when issued and delivered to the Underwriters against payment therefor as provided by this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights. (g) All of the outstanding shares of capital stock of each of the Company's subsidiaries have been duly authorized and validly issued and are fully paid and non-assessable, and, except as described in the Prospectus, are owned by the Company, 8 directly or indirectly through one or more subsidiaries, free and clear of any security interest, claim, lien, encumbrance or adverse interest of any nature. (h) The authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus. (i) Neither the Company nor any of its subsidiaries is in violation of its respective charter or by-laws or in default in the performance of any obligation, agreement, covenant or condition contained in any indenture, loan agreement, mortgage, lease or other agreement or instrument that is material to the Company and its subsidiaries, taken as a whole, to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective property is bound. (j) The execution, delivery and performance of this Agreement by the Company, the compliance by the Company with all the provisions hereof and the consummation of the transactions contemplated hereby and in the Prospectus will not (i) require any consent, approval, authorization or other order of, or qualification with, any court or governmental body or agency (except such as may be required under the securities or Blue Sky laws of the various states), (ii) conflict with or constitute a breach of any of the terms or provisions of, or a default under, the charter or by-laws of the Company or any of its subsidiaries or any indenture, loan agreement, mortgage, lease or other agreement or instrument that is material to the Company and its subsidiaries, taken as a whole, to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective property is bound, (iii) violate or conflict with any applicable law or any rule, regulation, judgment, order or decree of any court or any governmental body or agency having jurisdiction over the Company, any of its subsidiaries or their respective property or (iv) result in the suspension, termination or revocation of any Authorization (as defined below) of the Company or any of its subsidiaries or any other impairment of the rights of the holder of any such Authorization. (k) There are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is or could be a party or to which any of their respective property is or could be subject that are required to be described in the Registration Statement or the Prospectus and are not so described; nor are there any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not so described or filed as required. (l) Neither the Company nor any of its subsidiaries has violated any foreign, federal, state or local law or regulation relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws") or any provisions of the Employee Retirement Income Security Act of 1974, as amended, or the rules and regulations promulgated thereunder, except for such violations which, singly or in the aggregate, would not have a 9 material adverse effect on the business, prospects, financial condition or results of operation of the Company and its subsidiaries, taken as a whole. (m) Each of the Company and its subsidiaries has such permits, licenses, consents, exemptions, franchises, authorizations and other approvals (each, an "Authorization") of, and has made all filings with and notices to, all governmental or regulatory authorities and self-regulatory organizations and all courts and other tribunals, including, without limitation, under any applicable Environmental Laws, as are necessary to own, lease, license and operate its respective properties and to conduct its business, except where the failure to have any such Authorization or to make any such filing or notice would not, singly or in the aggregate, have a material adverse effect on the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole. Each such Authorization is valid and in full force and effect and each of the Company and its subsidiaries is in compliance with all the terms and conditions thereof and with the rules and regulations of the authorities and governing bodies having jurisdiction with respect thereto; and no event has occurred (including, without limitation, the receipt of any notice from any authority or governing body) which allows or, after notice or lapse of time or both, would allow, revocation, suspension or termination of any such Authorization or results or, after notice or lapse of time or both, would result in any other impairment of the rights of the holder of any such Authorization; and such Authorizations contain no restrictions that are burdensome to the Company or any of its subsidiaries; except where such failure to be valid and in full force and effect or to be in compliance, the occurrence of any such event or the presence of any such restriction would not, singly or in the aggregate, have a material adverse effect on the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole. (n) There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any Authorization, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, have a material adverse effect on the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole. (o) This Agreement has been duly authorized, executed and delivered by the Company. (p) Price Waterhouse LLP are the independent public accountants with respect to the Company and its subsidiaries as required by the Act. (q) The consolidated financial statements included in the Registration Statement and the Prospectus (and any amendment or supplement thereto), together with related schedules and notes, present fairly the consolidated financial position, results of operations and changes in financial position of the Company and its subsidiaries on the 10 basis stated therein at the respective dates or for the respective periods to which they apply; such statements and related schedules and notes have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as disclosed therein; the supporting schedules, if any, included in the Registration Statement present fairly in accordance with generally accepted accounting principles the information required to be stated therein; and the other financial and statistical information and data set forth in the Registration Statement and the Prospectus (and any amendment or supplement thereto) are, in all material respects, accurately presented and prepared (i) on a basis consistent with such financial statements and the books and records of the Company and (ii) in good faith on the basis of the assumptions described in the Registration Statement and such assumptions are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. (r) The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, will not be, an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. (s) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company or to require the Company to include such securities with the Shares registered pursuant to the Registration Statement. (t) Since the respective dates as of which information is given in the Prospectus, other than as set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement), (i) there has not occurred any material adverse change or any development involving a prospective material adverse change in the condition, financial or otherwise, or the earnings, business, management or operations of the Company and its subsidiaries, taken as a whole, (ii) there has not been any material adverse change or any development involving a prospective material adverse change in the capital stock or in the long-term debt of the Company or any of its subsidiaries and (iii) neither the Company nor any of its subsidiaries has incurred any material liability or obligation, direct or contingent. (u) All of the representations and warranties of the Company and Kamori in the Acquisition Agreement are true and correct as if made on and as of the date hereof. (v) All of the representations and warranties of the Company in the New Credit Facility are true and correct as if made on and as of the date hereof. (w) The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries, in each case 11 free and clear of all liens, encumbrances and defects except such as are described in the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries, in each case except as described in the Prospectus. (x) No relationship, direct or indirect, exists between or among the Company or any of its subsidiaries on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any of its subsidiaries on the other hand, which is required by the Act to be described in the Registration Statement or the Prospectus which is not so described. (y) The pro forma financial statements of the Company and its subsidiaries and the related notes thereto set forth in the Registration Statement and the Prospectus (and any supplement or amendment thereto) have been prepared on a basis consistent with the historical financial statements of the Company and its subsidiaries, give effect to the assumptions used in the preparation thereof on a reasonable basis and in good faith and present fairly the historical and proposed transactions contemplated by the Registration Statement and the Prospectus. Such pro forma financial statements have been prepared in accordance with the applicable requirements of Rule 11-02 of Regulation S-X promulgated by the Commission. The other pro forma financial and statistical information and data set forth in the Registration Statement and the Prospectus (and any supplement or amendment thereto) are, in all material respects, accurately presented and prepared on a basis consistent with the pro forma financial statements. (z) All material tax returns required to be filed by the Company and each of its subsidiaries in any jurisdiction have been filed, other than those filings being contested in good faith, and all material taxes, including withholding taxes, penalties and interest, assessments, fees and other charges due pursuant to such returns or pursuant to any assessment received by the Company or any of its subsidiaries have been paid, other than those being contested in good faith and for which adequate reserves have been provided. (aa) There is no (i) significant unfair labor practice complaint, grievance or arbitration proceeding pending or threatened against the Company or any of its subsidiaries before the National Labor Relations Board or any state or local labor relations board, (ii) strike, labor dispute, slowdown or stoppage pending or threatened against the Company or any of its subsidiaries or (iii) union representation question existing with respect to the employees of the Company and its subsidiaries, except for such actions specified above, which, singly or in the aggregate, would not have a material adverse effect on the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole. To the best of the Company's knowledge, no collective bargaining organizing activities are taking place with respect to the Company or any of its subsidiaries. 12 (ab) The Company and each of its subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (ac) The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; and neither the Company nor any of its subsidiaries (i) has received notice from any insurer or agent of such insurer that substantial capital improvements or other material expenditures will have to be made in order to continue such insurance or (ii) has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers at a cost that would not have a material adverse effect on the business, prospects, financial conditions or results of operations of the Company and its subsidiaries, taken as a whole. (ad) The Company has delivered to the Underwriters true and correct copies of all documents and agreements related to the Acquisition, including all amendments, alterations, modifications or waivers and all exhibits or schedules. (ae) The Company has delivered to the Underwriters true and correct copies of all documents and agreements related to the Securities Purchase Agreement, dated as of July 2, 1997, between the Company and Madeleine LLC, and all capital stock, preferred stock or debt instruments issued or to be, or proposed to be, issued in connection therewith, including all amendments, alterations, modifications or waivers and all exhibits or schedule. (af) Each certificate signed by any officer of the Company and delivered to the Underwriters or counsel for the Underwriters shall be deemed to be a representation and warranty by the Company to the Underwriters as to the matters covered thereby. For the purpose of the foregoing representations, after giving effect to the Acquisition, the term "subsidiaries" shall be deemed to include the entities acquired from Kamori pursuant to the Acquisition Agreement. SECTION 7. Representations and Warranties of the Selling Stockholder. The Selling Stockholder represents and warrants to each Underwriter that: (a) Such Selling Stockholder is the lawful owner of the Shares to be sold by such Selling Stockholder pursuant to this Agreement and has, and on each Option 13 Closing Date will have, good and clear title to such Shares, free of all restrictions on transfer, liens, encumbrances, security interests, equities and claims whatsoever. (b) The Shares to be sold by such Selling Stockholder have been duly authorized and are validly issued, fully paid and non-assessable. (c) Such Selling Stockholder has, and on each Option Closing Date will have, full legal right, power and authority, and all authorization and approval required by law, to enter into this Agreement, and to sell, assign, transfer and deliver the Shares to be sold by such Selling Stockholder in the manner provided herein and therein. (d) This Agreement has been duly authorized, executed and delivered by or on behalf of such Selling Stockholder. (e) Upon delivery of and payment for the Shares to be sold by such Selling Stockholder pursuant to this Agreement, good and clear title to such Shares will pass to the Underwriters, free of all restrictions on transfer, liens, encumbrances, security interests, equities and claims whatsoever. (f) The execution, delivery and performance of this Agreement, the compliance by such Selling Stockholder with all the provisions hereof and the consummation of the transactions contemplated hereby and thereby will not (i) require any consent, approval, authorization or other order of, or qualification with, any court or governmental body or agency (except such as may be required under the securities or Blue Sky laws of the various states), (ii) conflict with or constitute a breach of any of the terms or provisions of, or as a default under any indenture, loan agreement, mortgage, lease or other agreement or instrument to which such Selling Stockholder is a party or by which such Selling Stockholder or any property of such Selling Stockholder is bound or (iii) violate or conflict with any applicable law or any rule, regulation, judgment, order or decree of any court or any governmental body or agency having jurisdiction over such Selling Stockholder or any property of such Selling Stockholder. (g) The information in the Registration Statement under the caption "Principal and Selling Shareholders" which specifically relates to such Selling Stockholder does not, and will not on the Closing Date or any Option Closing Date, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (h) At any time during the period described in Section 5(d), if there is any change in the information referred to in Section 7(i), such Selling Stockholder will immediately notify you of such change. (i) Each certificate signed by or on behalf of such Selling Stockholder and delivered to the Underwriters or counsel for the Underwriters shall be deemed to be a 14 representation and warranty by such Selling Stockholder to the Underwriters as to the matters covered thereby. SECTION 8. Indemnification. (a) The Sellers, jointly and severally, agree to indemnify and hold harmless each Underwriter, its directors, its officers and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and against any and all losses, claims, damages, liabilities and judgments (including, without limitation, any legal or other expenses incurred in connection with investigating or defending any matter, including any action, that could give rise to any such losses, claims, damages, liabilities or judgments) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), the Prospectus (or any amendment or supplement thereto) or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Underwriter furnished in writing to the Company by such Underwriter through you expressly for use therein. Notwithstanding the foregoing, the aggregate liability of the Selling Stockholder pursuant to this Section 8(a) shall be limited to an amount equal to the total proceeds (before deducting expenses) received by such Selling Stockholder from the Underwriters for the sale of the Shares sold by such Selling Stockholder hereunder. (b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement, each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, each Selling Stockholder and each person, if any, who controls such Selling Stockholder within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Sellers to such Underwriter but only with reference to information relating to such Underwriter furnished in writing to the Company by such Underwriter through you expressly for use in the Registration Statement (or any amendment thereto), the Prospectus (or any amendment or supplement thereto) or any preliminary prospectus. (c) In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the "indemnified party"), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant to both Sections 8(a) and 8(b), the Underwriter shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of 15 such counsel, except as provided below, shall be at the expense of such Underwriter). Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for (i) the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all Underwriters, their officers and directors and all persons, if any, who control any Underwriter within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, (ii) the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for the Company, its directors, its officers who sign the Registration Statement and all persons, if any, who control the Company within the meaning of either such Section and (iii) the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for the Selling Stockholder, and all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Underwriters, their officers and directors and such control persons of any Underwriters, such firm shall be designated in writing by Donaldson, Lufkin & Jenrette Securities Corporation. In the case of any such separate firm for the Company and such directors, officers and control persons of the Company, such firm shall be designated in writing by the Company. In the case of any such separate firm for the Selling Stockholder, such firm shall be designated in writing by the Attorneys. The indemnifying party shall indemnify and hold harmless the indemnified party from and against any and all losses, claims, damages, liabilities and judgments by reason of any settlement of any action (i) effected with its written consent or (ii) effected without its written consent if the settlement is entered into more than twenty business days after the indemnifying party shall have received a request from the indemnified party for reimbursement for the fees and expenses of counsel (in any case where such fees and expenses are at the expense of the indemnifying party) and, prior to the date of such settlement, the indemnifying party shall have failed to comply with such reimbursement request. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability on claims that are or could have been the subject matter of such action and 16 (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the indemnified party. (d) To the extent the indemnification provided for in this Section 8 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Sellers on the one hand and the Underwriters on the other hand from the offering of the Shares or (ii) if the allocation provided by clause 8(d)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Sellers on the one hand and the Underwriters on the other hand in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative benefits received by the Sellers on the one hand and the Underwriters on the other hand shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Sellers, and the total underwriting discounts and commissions received by the Underwriters, bear to the total price to the public of the Shares, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Sellers on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Selling Stockholder on the one hand or the Underwriters on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Sellers and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such indemnified party in connection with investigating or defending any matter, including any action, that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 8, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The 17 Underwriters' obligations to contribute pursuant to this Section 8(d) are several in proportion to the respective number of Shares purchased by each of the Underwriters hereunder and not joint. (e) The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (f) The Selling Stockholder hereby designates the Company as its authorized agent, upon which process may be served in any action which may be instituted in any state or federal court in the State of New York by any Underwriter, any director or officer of any Underwriter or any person controlling any Underwriter asserting a claim for indemnification or contribution under or pursuant to this Section 8, and the Selling Stockholder will accept the jurisdiction of such court in such action, and waives, to the fullest extent permitted by applicable law, any defense based upon lack of personal jurisdiction or venue. A copy of any such process shall be sent or given to such Selling Stockholder, at the address for notices specified in Section 12 hereof. SECTION 9. Conditions of Underwriters' Obligations. The several obligations of the Underwriters to purchase the Firm Shares under this Agreement are subject to the satisfaction of each of the following conditions: (a) All the representations and warranties of the Company contained in this Agreement shall be true and correct on the Closing Date (after giving effect to the Acquisition) with the same force and effect as if made on and as of the Closing Date. (b) If the Company is required to file a Rule 462(b) Registration Statement after the effectiveness of this Agreement, such Rule 462(b) Registration Statement shall have become effective by 10:00 P.M., New York City time, on the date of this Agreement; and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been commenced or shall be pending before or contemplated by the Commission. (c) You shall have received on the Closing Date a certificate dated the Closing Date, signed by Thomas M. Richardson and Christopher E. Howard, in their capacities as Senior Vice Presidents of the Company, confirming the matters set forth in Sections 6(t), 9(a) and 9(b) and that the Company has complied with all of the agreements and satisfied all of the conditions herein contained and required to be complied with or satisfied by the Company on or prior to the Closing Date. (d) Since the respective dates as of which information is given in the Prospectus other than as set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement), (i) there shall not have occurred any change or any development involving a prospective change in the condition, financial or otherwise, or the earnings, business, management or operations of the Company 18 and its subsidiaries, taken as a whole, (ii) there shall not have been any change or any development involving a prospective change in the capital stock or in the long-term debt of the Company or any of its subsidiaries and (iii) neither the Company nor any of its subsidiaries shall have incurred any liability or obligation, direct or contingent, the effect of which, in any such case described above, in your judgment, is material and adverse and, in your judgment, makes it impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus. (e) All the representations and warranties of the Selling Stockholder contained in this Agreement shall be true and correct on the Closing Date with the same force and effect as if made on and as of the Closing Date and you shall have received on the Closing Date a certificate dated the Closing Date from the Selling Stockholder to such effect and to the effect that such Selling Stockholder has complied with all of the agreements and satisfied all of the conditions herein contained and required to be complied with or satisfied by such Selling Stockholder on or prior to the Closing Date. (f) You shall have received on the Closing Date an opinion (satisfactory to you and counsel for the Underwriters), dated the Closing Date, of Pierce Atwood, counsel for the Company and the Selling Stockholder, to the effect that: (i) each of the Company and its subsidiaries has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority to carry on its business as described in the Prospectus and to own, lease and operate its properties; (ii) each of the Company and its subsidiaries is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole; (iii) all the outstanding shares of capital stock of the Company (including the Shares to be sold by the Selling Stockholder) have been duly authorized and validly issued and are fully paid, non-assessable and not subject to any preemptive or similar rights; (iv) all of the outstanding shares of capital stock of each of the Company's subsidiaries have been duly authorized and validly issued and are fully paid and non-assessable, and are owned by the Company, directly or indirectly through one or more subsidiaries, free and clear of any security interest, claim, lien, encumbrance or adverse interest of any nature; 19 (v) the statement under the caption "Description of Capital Stock-Antitakeover Effects of Provisions of the Articles of Incorporation, Bylaws and Maine Law" in the Prospectus and Item 14 of Part II of the Registration Statement, insofar as such statements constitute a summary of the legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings; and (vi) (A) such counsel has no reason to believe that at the time the Registration Statement became effective or on the date of this Agreement, the Registration Statement and the Prospectus included therein (except for the financial statements and other financial data as to which such counsel need not express any belief) contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (B) such counsel has no reason to believe that the Prospectus, as amended or supplemented, if applicable (except for the financial statements and other financial data, as aforesaid) contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (g) You shall have received on the Closing Date an opinion (satisfactory to you and counsel for the Underwriters), dated the Closing Date, of LeBoeuf, Lamb, Greene & MacRae, LLP, counsel for the Company, to the effect that: (i) the Shares to be issued and sold by the Company hereunder have been duly authorized and, when issued and delivered to the Underwriters against payment therefor as provided by this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights; (ii) this Agreement has been duly authorized, executed and delivered by the Company; (iii) the authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus; (iv) the statements under the captions "Description of Certain Indebtedness," "Shares Eligible for Future Sale," "Business-Leased Properties," "Certain United States Federal Tax Considerations for NonUnited States Holders," "Management-Stock Option Plans," "Description of Capital Stock" and "Underwriting" in the Prospectus and Item 15 of Part II of the Registration Statement, insofar as such statements constitute a summary of the legal matters, documents or proceedings referred to therein, 20 fairly present the information called for with respect to such legal matters, documents and proceedings; (v) neither the Company nor any of its subsidiaries is in violation of its respective charter or by-laws and, to the best of such counsel's knowledge after due inquiry, neither the Company nor any of its subsidiaries is in default in the performance of any obligation, agreement, covenant or condition contained in any indenture, loan agreement, mortgage, lease or other agreement or instrument that is material to the Company and its subsidiaries, taken as a whole, to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective property is bound; (vi) the Registration Statement has become effective under the Act, no stop order suspending its effectiveness has been issued and no proceedings for that purpose are, to the best of such counsel's knowledge after due inquiry, pending before or contemplated by the Commission; (vii) the execution, delivery and performance of this Agreement by the Company, the compliance by the Company with all the provisions hereof and the consummation of the transactions contemplated hereby and in the Prospectus will not (A) require any consent, approval, authorization or other order of, or qualification with, any court or governmental body or agency (except such as may be required under the securities or Blue Sky laws of the various states), (B) conflict with or constitute a breach of any of the terms or provisions of, or a default under, the charter or by-laws of the Company or any of its subsidiaries or any indenture, loan agreement, mortgage, lease or other agreement or instrument that is material to the Company and its subsidiaries, taken as a whole, to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective property is bound, (C) violate or conflict with any applicable law or any rule, regulation, judgment, order or decree of any court or any governmental body or agency having jurisdiction over the Company, any of its subsidiaries or their respective property or (D) result in the suspension, termination or revocation of any Authorization of the Company or any of its subsidiaries or any other impairment of the rights of the holder of any such Authorization; (viii) after due inquiry, such counsel does not know of any legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is or could be a party or to which any of their respective property is or could be subject that are required to be described in the Registration Statement or the Prospectus and are not so described, or of any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as 21 exhibits to the Registration Statement that are not so described or filed as required; (ix) after due inquiry, such counsel does not know of any legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is or could be a party or to which any of their respective property is or could be subject that are required to be described in the Registration Statement or the Prospectus and are not so described, or of any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not so described or filed as required; (x) neither the Company nor any of its subsidiaries has violated any Environmental Law or any provisions of the Employee Retirement Income Security Act of 1974, as amended, or the rules and regulations promulgated thereunder, except for such violations which, singly or in the aggregate, would not have a material adverse effect on the business, prospects, financial condition or results of operation of the Company and its subsidiaries, taken as a whole; (xi) each of the Company and its subsidiaries has such Authorizations of, and has made all filings with and notices to, all governmental or regulatory authorities and self-regulatory organizations and all courts and other tribunals, including, without limitation, under any applicable Environmental Laws, as are necessary to own, lease, license and operate its respective properties and to conduct its business, except where the failure to have any such Authorization or to make any such filing or notice would not, singly or in the aggregate, have a material adverse effect on the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole; each such Authorization is valid and in full force and effect and each of the Company and its subsidiaries is in compliance with all the terms and conditions thereof and with the rules and regulations of the authorities and governing bodies having jurisdiction with respect thereto; and no event has occurred (including, without limitation, the receipt of any notice from any authority or governing body) which allows or, after notice or lapse of time or both, would allow, revocation, suspension or termination of any such Authorization or results or, after notice or lapse of time or both, would result in any other impairment of the rights of the holder of any such Authorization; and such Authorizations contain no restrictions that are burdensome to the Company or any of its subsidiaries; except where such failure to be valid and in full force and effect or to be in compliance, the occurrence of any such event or the presence of any such restriction would not, singly or in the aggregate, have a material 22 adverse effect on the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole; (xii) the Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, will not be, an "investment company" as such term is defined in the Investment Company Act of 1940, as amended; (xiii) to the best of such counsel's knowledge after due inquiry, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company or to require the Company to include such securities with the Shares registered pursuant to the Registration Statement, except as otherwise disclosed in the Registration Statement; (xiv) (A) the Registration Statement and the Prospectus and any supplement or amendment thereto (except for the financial statements and other financial data included therein as to which no opinion need be expressed) comply as to form with the Act, (B) such counsel has no reason to believe that at the time the Registration Statement became effective or on the date of this Agreement, the Registration Statement and the prospectus included therein (except for the financial statements and other financial data as to which such counsel need not express any belief) contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (C) such counsel has no reason to believe that the Prospectus, as amended or supplemented, if applicable (except for the financial statements and other financial data, as aforesaid) contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (xv) the Selling Stockholder is the lawful owner of the Shares to be sold by such Selling Stockholder pursuant to this Agreement and has good and clear title to such Shares, free of all restrictions on transfer, liens, encumbrances, security interests, equities and claims whatsoever; (xvi) the Selling Stockholder has full legal right, power and authority, and all authorization and approval required by law, to enter into this Agreement and to sell, assign, transfer and deliver the Shares to be sold by such Selling Stockholder in the manner provided herein and therein; (xvii) upon delivery of and payment for the Shares to be sold by the Selling Stockholder pursuant to this Agreement, good and clear title to such 23 Shares will pass to the Underwriters, free of all restrictions on transfer, liens, encumbrances, security interests, equities and claims whatsoever; (xviii) the execution, delivery and performance of this Agreement by such Selling Stockholder, the compliance by such Selling Stockholder with all the provisions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not (A) require any consent, approval, authorization or other order of, or qualification with, any court or governmental body or agency (except such as may be required under the securities or Blue Sky laws of the various states), (B) conflict with or constitute a breach of any of the terms or provisions of, or a default under, any indenture, loan agreement, mortgage, lease or other agreement or instrument to which such Selling Stockholder is a party or by which any property of such Selling Stockholder is bound or (C) violate or conflict with any applicable law or any rule, regulation, judgment, order or decree of any court or any governmental body or agency having jurisdiction over such Selling Stockholder or any property of such Selling Stockholder; (xix) the Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries, in each case except as described in the Prospectus; (xx) no relationship, direct or indirect, exists between or among the Company or any of its subsidiaries on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any of its subsidiaries on the other hand, which is required by the Act to be described in the Registration Statement or the Prospectus which is not so described; (xxi) all material tax returns required to be filed by the Company and each of its subsidiaries in any jurisdiction have been filed, other than those filings being contested in good faith, and all material taxes, including withholding taxes, penalties and interest, assessments, fees and other charges due pursuant to such returns or pursuant to any assessment received by the Company or any of its subsidiaries have been paid, other than those being 24 contested in good faith and for which adequate reserves have been provided; and (xxii) there is no (i) significant unfair labor practice complaint, grievance or arbitration proceeding pending or threatened against the Company or any of its subsidiaries before the National Labor Relations Board or any state or local labor relations board, (ii) strike, labor dispute, slowdown or stoppage pending or threatened against the Company or any of its subsidiaries or (iii) union representation question existing with respect to the employees of the Company and its subsidiaries, except for such actions specified above, which, singly or in the aggregate, would not have a material adverse effect on the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole. To the best of such counsel's knowledge, no collective bargaining organizing activities are taking place with respect to the Company or any of its subsidiaries. The opinions of Pierce Atwood and LeBoeuf, Lamb, Greene & MacRae, LLP described in Section 9(f) and (g) above shall be rendered to you at the request of the Company and the Selling Stockholder, as applicable, and shall so state therein. (h) You shall have received on the Closing Date an opinion, dated the Closing Date, of Latham & Watkins, counsel for the Underwriters, as to the matters referred to in Sections 9(g)(i), 9(g)(ii), 9(g)(iv) (but only with respect to the statements under the caption "Description of Capital Stock" and "Underwriting") and 9(g)(xiv). In giving such opinions with respect to the matters covered by Sections 9(f)(vi) and 9(g)(xiv), Leboeuf, Lamb, Greene & Macrae LLP, Pierce Atwood and Latham & Watkins may state that their opinion and belief are based upon their participation in the preparation of the Registration Statement and Prospectus and any amendments or supplements thereto and review and discussion of the contents thereof, but are without independent check or verification except as specified. (i) You shall have received, on each of the date hereof and the Closing Date, a letter dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to you, from Price Waterhouse LLP, independent public accountants, containing the information and statements of the type ordinarily included in accountants' "comfort letters" to Underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus. (j) The Company shall have delivered to you the agreements specified in Section 2 hereof which agreements shall be in full force and effect on the Closing Date. (k) The Shares shall have been duly listed on the Nasdaq National Market. 25 (l) You shall have received a certificate of the Company, dated as of the Closing Date, in form and substance satisfactory to you and counsel for the Underwriters, as to the solvency of the Company following consummation of the Acquisition. (m) The Acquisition and the New Credit Facility shall be consummated prior to, or simultaneously with, the Underwriters purchase of the Shares on substantially the terms described in the Prospectus and as otherwise disclosed to you, and you shall have received counterparts, conformed as executed, of the Acquisition Agreement and the New Credit Facility and such other documentation as you deem necessary to evidence consummation thereof. (n) All of the opinions to be delivered by the Company pursuant to the New Credit Facility and the Acquisition Agreement shall be addressed and delivered to you. (o) You shall have received from the Company, prior to the Closing Date, such further information, certificates and documents as you may reasonably request. (p) The Company and the Selling Stockholder shall not have failed on or prior to the Closing Date to perform or comply with any of the agreements herein contained and required to be performed or complied with by the Company or the Selling Stockholder, as the case may be, on or prior to the Closing Date. The several obligations of the Underwriters to purchase any Additional Shares hereunder are subject to the delivery to you on the applicable Option Closing Date of such documents as you may reasonably request from the Company and the Selling Stockholder with respect to the good standing of the Company, the due authorization and issuance of such Additional Shares and other matters related to the issuance of such Additional Shares. SECTION 10. Effectiveness of Agreement and Termination. This Agreement shall become effective upon the execution and delivery of this Agreement by the parties hereto. This Agreement may be terminated at any time on or prior to the Closing Date by you by written notice to the Sellers if any of the following has occurred: (i) any outbreak or escalation of hostilities or other national or international calamity or crisis or change in economic conditions or in the financial markets of the United States or elsewhere that, in your judgment, is material and adverse and, in your judgment, makes it impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus, (ii) the suspension or material limitation of trading in securities or other instruments on the New York Stock Exchange, the American Stock Exchange, the Chicago Board of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the Nasdaq National Market or limitation on prices for securities or other instruments on any such exchange or the Nasdaq National Market, (iii) suspension of trading of any securities of the Company on any exchange or in the over-the-counter market, (iv) the 26 enactment, publication, decree or other promulgation of any federal or state statute, regulation, rule or order of any court or other governmental authority which in your opinion materially and adversely affects, or will materially and adversely affect, the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by either federal or New York State authorities or (vi) the taking of any action by any federal, state or local government or agency in respect of its monetary or fiscal affairs which in your opinion has a material adverse effect on the financial markets in the United States. If on the Closing Date or on an Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase the Firm Shares or Additional Shares, as the case may be, which it or they have agreed to purchase hereunder on such date and the aggregate number of Firm Shares or Additional Shares, as the case may be, which such defaulting Underwriter or Underwriters, as the case may be, agreed but failed or refused to purchase is not more than one-tenth of the total number of Shares to be purchased on such date by all Underwriters, each non-defaulting Underwriter shall be obligated severally, in the proportion which the number of Firm Shares set forth opposite its name in Schedule I bears to the total number of Firm Shares which all the non-defaulting Underwriters, as the case may be, have agreed to purchase, or in such other proportion as you may specify, to purchase the Firm Shares or Additional Shares, as the case may be, which such defaulting Underwriter or Underwriters, as the case may be, agreed but failed or refused to purchase on such date; provided that in no event shall the number of Firm Shares or Additional Shares, as the case may be, which any Underwriter has agreed to purchase pursuant to Section 2 hereof be increased pursuant to this Section 10 by an amount in excess of one-ninth of such number of Firm Shares or Additional Shares, as the case may be, without the written consent of such Underwriter. If, on the Closing Date any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Firm Shares to be purchased by all Underwriters and arrangements satisfactory to you, the Company and the Selling Stockholder for purchase of such Firm Shares are not made within 48 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter, the Company or the Selling Stockholder. In any such case which does not result in termination of this Agreement, either you or the Sellers shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and the Prospectus or any other documents or arrangements may be effected. If, on an Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Additional Shares and the aggregate number of Additional Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Additional Shares to be purchased on such date, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase such Additional Shares or (ii) purchase not less than the number of Additional Shares that such non-defaulting Underwriters would have been obligated to purchase on such date in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of any such Underwriter under this Agreement. 27 SECTION 11. Agreements of the Selling Stockholder. The Selling Stockholder agrees with you and the Company: (a) To pay or to cause to be paid all transfer taxes payable in connection with the transfer of the Shares to be sold by such Selling Stockholder to the Underwriters. (b) To do and perform all things to be done and performed by such Selling Stockholder under this Agreement prior to the Closing Date and to satisfy all conditions precedent to the delivery of the Shares to be sold by such Selling Stockholder pursuant to this Agreement. SECTION 12. Miscellaneous. Notices given pursuant to any provision of this Agreement shall be addressed as follows: (i) if to the Company, to ASC Holdings, Inc., P.O. Box 450, Sunday River Access Road, Bethel, ME 04217 Attn: Christopher E. Howard, (ii) if to the Selling Stockholder, to such Selling Stockholder c/o ASC Holdings, Inc., P.O. Box 450, Sunday River Access Road, Bethel, ME 04217 and (iii) if to any Underwriter or to you, to you c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate Department, or in any case to such other address as the person to be notified may have requested in writing. The respective indemnities, contribution agreements, representations, warranties and other statements of the Company, the Selling Stockholder and the several Underwriters set forth in or made pursuant to this Agreement shall remain operative and in full force and effect, and will survive delivery of and payment for the Shares, regardless of (i) any investigation, or statement as to the results thereof, made by or on behalf of any Underwriter, the officers or directors of any Underwriter, any person controlling any Underwriter, the Company, the officers or directors of the Company, any person controlling the Company, or the Selling Stockholder, (ii) acceptance of the Shares and payment for them hereunder and (iii) termination of this Agreement. If for any reason the Shares are not delivered by or on behalf of any Seller as provided herein (other than as a result of any termination of this Agreement pursuant to Section 10), the Sellers agree, jointly and severally, to reimburse the several Underwriters for all out-of-pocket expenses (including the fees and disbursements of counsel) incurred by them. Notwithstanding any termination of this Agreement, the Company shall be liable for all expenses which it has agreed to pay pursuant to Section 5(i) hereof. The Sellers also agree, jointly and severally, to reimburse the several Underwriters, their directors and officers and any persons controlling any of the Underwriters for any and all fees and expenses (including, without limitation, the fees disbursements of counsel) incurred by them in connection with enforcing their rights hereunder (including, without limitation, pursuant to Section 8 hereof). Except as otherwise provided, this Agreement has been and is made solely for the benefit of and shall be binding upon the Company, the Selling Stockholder, the Underwriters, the Underwriters' directors and officers, any controlling persons referred to 28 herein, the Company's directors and the Company's officers who sign the Registration Statement and their respective successors and assigns, all as and to the extent provided in this Agreement, and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" shall not include a purchaser of any of the Shares from any of the several Underwriters merely because of such purchase. This Agreement shall be governed and construed in accordance with the laws of the State of New York. This Agreement may be signed in various counterparts which together shall constitute one and the same instrument. 29 Please confirm that the foregoing correctly sets forth the agreement among the Company, the Selling Stockholder and the several Underwriters. Very truly yours, ASC HOLDINGS, INC. By:______________________________ Title: LESLIE B. OTTEN _________________________________ DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION FURMAN SELZ LLC MORGAN STANLEY & CO. INCORPORATED SCHRODER & CO. INC. Acting severally on behalf of themselves and the several Underwriters named in Schedule I hereto By: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By:_______________________________ 30 SCHEDULE I Number of Firm Shares Underwriters to be Purchased ------------ --------------- Donaldson, Lufkin & Jenrette Securities Corporation Furman Selz LLC Morgan Stanley & Co. Incorporated Schroder & Co. Inc. Total ______________ Annex I [Insert names of stockholders of the Company who will be required to sign lock ups] 2 EX-2.1 3 STOCK PURCHASE AGREEMENT (KAMORI/ASC) Exhibit 2.1 STOCK PURCHASE AGREEMENT AMONG KAMORI INTERNATIONAL CORPORATION, as the Seller ASC WEST, as the Buyer AND ASC HOLDINGS, INC. August 1, 1997 TABLE OF CONTENTS Page ---- 1. Definitions.......................................................... 1 2. Purchase and Sale of Shares.......................................... 7 (a) Basic Transaction.............................................. 7 (b) Purchase Price................................................. 7 (c) Working Capital Adjustment..................................... 8 (d) Additional Payment............................................. 9 (e) Operating Losses............................................... 9 (f) The Closing.................................................... 11 (g) Deliveries at the Closing...................................... 11 (h) Excluded Assets................................................ 11 3. Additional Agreements by the Seller, the Buyer and ASC............... 11 (a) Planned Capital Expenditure Program............................ 11 (b) Sales and Transfer Taxes and Fees.............................. 13 4. Representations and Warranties Concerning the Transac tion........... 13 (a) Representations and Warranties of the Seller................... 13 (b) Representations and Warranties of the Buyer and ASC............ 15 5. Representations and Warranties Concerning the Companies.............. 16 (a) Organization, Qualification, and Corporate Power............... 16 (b) Capitalization................................................. 16 (c) Noncontravention............................................... 17 (d) Brokers' Fees.................................................. 17 (e) Title to Tangible Assets....................................... 18 (f) Financial Statements........................................... 18 (g) Events Subsequent to Most Recent Fiscal Month End.............. 18 (h) Legal Compliance............................................... 18 (i) Tax Matters.................................................... 19 (j) Real Property.................................................. 19 (k) Intellectual Property.......................................... 21 (l) Contracts...................................................... 21 (m) Powers of Attorney............................................. 22 (n) Litigation..................................................... 22 (o) Employee Benefits.............................................. 22 (p) USFS Permits................................................... 23 (q) Labor Matters.................................................. 23 (r) Books and Records.............................................. 24 (s) Insurance...................................................... 24 (t) Environment, Health, and Safety................................ 24 (u) Water Rights................................................... 25 (v) Condition and Sufficiency of Assets............................ 25 (w) Relationships with Affiliates.................................. 26 (x) Guarantees..................................................... 26 i Page ---- 6. Pre-closing Covenants................................................ 26 (a) General........................................................ 26 (b) Notices to and Consents by Government.......................... 26 (c) Operation of Business.......................................... 27 (d) Maintenance of Assets.......................................... 27 (e) Full Access, Disclosure, Press Release......................... 27 (f) Notice of Developments......................................... 28 (g) Payment of Indebtedness........................................ 28 (h) USFS Permit.................................................... 28 (i) Cooperation.................................................... 28 (j) Qualification of the Buyer to Secure Permits, Licenses and Other Approvals............................................ 28 (k) Escrow Agreement............................................... 29 (l) Financial Statements........................................... 29 (m) No Shop........................................................ 29 7. Post-Closing Covenants............................................... 29 (a) General........................................................ 29 (b) Litigation Support............................................. 29 (c) Perpetual Lift and Golf Passes................................. 30 (d) Employment..................................................... 31 (e) Bonus.......................................................... 31 8. Conditions to Obligation to Close.................................... 31 (a) Conditions to Obligation of the Buyer and ASC.................. 31 (b) Conditions to Obligation of the Seller......................... 32 9. Tax Matters.......................................................... 33 (a) Tax Sharing Agreements......................................... 33 (b) Returns for Periods Through the Closing Date................... 33 (c) Audits......................................................... 34 (d) Section 338(h)(10) Election.................................... 34 10. Remedies for Breaches of This Agreement.............................. 35 (a) Survival of Representations and Warranties..................... 35 (b) Indemnification Provisions for Benefit of the Buyer............ 35 (c) Indemnification Provisions for Benefit of the Seller........... 36 (d) Matters Involving Third Parties................................ 37 (e) Determination of Adverse Consequences.......................... 37 (f) Exclusive Remedy............................................... 37 (g) Liquidated Damages............................................. 37 11. Termination.......................................................... 38 (a) Termination of Agreement....................................... 38 (b) Effect of Termination.......................................... 39 12. Miscellaneous........................................................ 39 (a) Arbitration.................................................... 39 (b) No Third Party Beneficiaries................................... 40 ii Page ---- (c) Entire Agreement............................................... 40 (d) Succession and Assignment...................................... 40 (e) Counterparts................................................... 40 (f) Headings....................................................... 40 (g) Notices........................................................ 40 (h) Governing Law.................................................. 41 (i) Amendments and Waivers......................................... 42 (j) Severability................................................... 42 (k) Expenses....................................................... 42 (l) Construction................................................... 42 (m) Incorporation of Exhibits, Annexes, and Schedules.............. 42 (n) Joint and Several Obligations of the Buyer and ASC............. 42 Exhibit A -- Financial Statements Exhibit B -- USFS Permits Exhibit C -- Residence Purchase Agreement Exhibit D -- Computer Software Licensing Agreement Exhibit E -- Trademark Licensing Agreement Exhibit F -- Capital Improvements Exhibit G -- Escrow Agreement Annex I -- Exceptions to the Seller's Representations and Warranties Concerning the Transaction Annex II -- Exceptions to the Buyer's Representations and Warranties Concerning the Transaction Schedule 2(h)(ii) -- Excluded Assets Schedule 6(g) -- Indebtedness Schedule 7(c)(i) -- Ski Passes Schedule 7(e) -- Bonuses Schedule 9(k) -- Allocation Schedule Disclosure Schedule -- Exceptions to Representations and Warranties Concerning the Companies iii STOCK PURCHASE AGREEMENT Agreement entered into as of August, 1, 1997, by and among ASC West, a Maine corporation (the "Buyer"), Kamori International Corporation, a Delaware corporation (the "Seller"), and ASC Holdings, Inc., a Maine corporation ("ASC"). The Buyer, the Seller and ASC are referred to herein collectively as the "Parties" and individually as a "Party." The Seller owns all of the outstanding capital stock (the "Shares") of Steamboat Ski & Resort Corporation, a Delaware corporation ("SSRC"), Steamboat Development Corporation, a Delaware corporation ("SDC"), Orlando Resort Corporation, a Delaware corporation ("ORC"), Heavenly Valley Ski & Resort Corporation, a Delaware corporation ("HVSRC"), and Heavenly Corporation, a Delaware corporation ("HC"). HVSRC and HC collectively own all of the partnership interests in Heavenly Valley, Limited Partnership, a Nevada limited partnership ("HVLP" and, collectively with SSRC, SDC, ORC, HVSRC and HC, the "Companies"). This Agreement contemplates a transaction in which ASC will purchase through the Buyer, its direct wholly-owned subsidiary, from the Seller, and the Seller will sell to the Buyer, all of the outstanding capital stock of each of the Companies in return for cash. Now, therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows: 1. Definitions. "Accredited Investor" has the meaning set forth in Regulation D promulgated under the Securities Act. "Adjusted Amount" has the meaning set forth in ss. 2(b) below. "Adverse Consequences" means, whether or not involving a third party claim, all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, diminution in monetary value, dues, penalties, fines, costs, reasonable amounts paid in settlement, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys' fees and expenses. "Affiliate" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act. "Affiliated Group" means any affiliated group within the meaning of Code ss. 1504. "Applicable Federal Rate" means the short term applicable Federal Rate as published from time to time by the Internal Revenue Service in accordance with the Code. "ASC" has the meaning set forth in the preface above. "Banking Day" means any day other than a Saturday, Sunday or a day when banks are authorized or required by law to close in New York, New York. "Buyer" has the meaning set forth in the preface above. "Cash" means cash and cash equivalents (including marketable securities and short term investments) calculated in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements. "Closing" has the meaning set forth in ss. 2(f) below. "Closing Date" has the meaning set forth in ss. 2(f) below. "Code" means the Internal Revenue Code of 1986, as amended. "Companies" has the meaning set forth in the preface above. "Confidential Information" means any information concerning the businesses and affairs of the Companies and their subsidiaries that is not already generally available to the public. "Contract Deposit" has the meaning set forth in ss. 6(k) below. "Disclosure Schedule" has the meaning set forth in ss. 5 below. "Employee Benefit Plan" means any (a) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan. "Employee Pension Benefit Plan" has the meaning set forth in ERISA ss. 3(2). "Employee Welfare Benefit Plan" has the meaning set forth in ERISA ss. 3(1). 2 "Environmental Laws" means all foreign, federal, state and local laws, regulations, rules and ordinances relating to pollution or protection of human health or the environment, including, without limitation, laws relating to releases or threatened releases of Hazardous Substances into the indoor or outdoor environment (including, without limitation, ambient air, surface water, groundwater, land, surface and subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, release, transport or handling of Hazardous Substances. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Escrow Agent" means the LTCB Trust Company. "Expedited Arbitration" has the meaning set forth in ss. 12(b) below. "Financial Statements" has the meaning set forth in ss. 5(f) below. "GAAP" means United States generally accepted accounting principles as in effect from time to time. "Governmental Authorization" means any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement. "Governmental Body" means any: (a) nation, state, county, city, town, village, district, or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign, other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (d) multi-national organization or body; or (e) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature. "Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 3 "Hazardous Substances" means all substances defined as such in the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. ss. 300.5, or defined as such by, or regulated as such under, any Environmental Law, including, but not limited to, petroleum, asbestos, or polychlorinated biphenyls. "Income Tax" means any Tax or measured by net income. "Income Tax Return" means any return, declaration, report or information return or statement relating to Income Taxes, including any schedule or attachment thereto. "Indebtedness" means, with respect to any Person, without duplication 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 and any guarantee by such Person of any Indebtedness of any other Person. "Indemnified Party" has the meaning set forth in ss. 10(d) below. "Indemnifying Party" has the meaning set forth in ss. 10(d) below. "Knowledge" -- the Seller will be deemed to have "Knowledge" of a particular fact or other matter if any executive officer of any of the Companies is actually aware of such fact or other matter or should reasonably be expected to discover or otherwise become aware of such fact or matter in the Ordinary Course of Business. "Legal Requirement" means any federal, state, local, municipal, foreign, international, multinational, or other administrative order, constitution, law, ordinance, principle of common law, regulation, statute, or treaty. "Management" means persons employed by either SSRC, HVSRC, HC or HVLP as President or Vice President as of the date of this Agreement. 4 "Material Adverse Effect" means a material adverse effect upon the business, properties, results of operations or financial position of the Companies as a whole. "Most Recent Financial Statements" has the meaning set forth in ss. 5(f) below. "Most Recent Fiscal Month End" has the meaning set forth in ss. 5(f) below. "New USFS Permits" has the meaning set forth in ss. 6(h) below. "Net Working Capital" means the value of trade receivables determined on an aged basis in accordance with GAAP, minus (x) the amount of trade payables (excluding from this amount payables associated with the capital expenditures indicated on Exhibit F attached hereto), and (y) deposits and other amounts constituting prepayments for goods or services to be provided by any of the Companies following the Closing, including without limitation, amounts paid for the 1997-1998 ski passes or other pre-season or discount ticket sales, all as reflected on the September 30 Balance Sheets, as determined in accordance with GAAP and excluding items relating to transactions among the Companies and its Affiliates. "Operating Cash Flow Deficit" has the meaning set forth in ss. 2(e)(i) below. "Operating Cash Flow Deficit Reimbursement" has the meaning set forth in ss. 2(e)(i) below. "Ordinary Course of Business" means, with respect to the Companies, the ordinary course of business consistent with past custom and practice, taking into account the seasonality of their businesses. "Organizational Documents" means (a) the articles or certificate of incorporation and the bylaws of a corporation; (b) the limited partnership agreement and the certificate of limited partnership of a limited partnership; (c) any charter or similar document adopted or filed in connection with the creation, formation, or organization of a Person; and (d) any amendment to any of the foregoing. "Parties" has the meaning set forth in the preface above. "Permitted Liens" shall mean (A) mechanics' carriers', workmens', repairmens' and other like liens for work performed for, or services rendered or supplies furnished to, any of the Companies in the ordinary course of business (but excluding Security Interests), (B) liens for real estate taxes, assessments and other 5 governmental charges that are not yet due and payable or that may thereafter by paid without penalty, or that are being contested in good faith by appropriate proceedings, (C) imperfections of title that are not substantial in character, (D) easements, covenants, rights-of-way, claims and other encumbrances (but excluding any Security Interests), (E) zoning, building and other similar restrictions, and (F) any conditions that may be shown by a current, accurate survey or physical inspection of any of the real property of the Companies made prior to Closing, none of which items set forth in clauses (a) through (f) above, individually or in the aggregate, have, had or would reasonably be expected to have a Material Adverse Effect. "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof). "Preliminary September 30 Balance Sheets" has the meaning set forth in ss. 2(c)(ii) below. "Proceeding" has the meaning set forth in ss. 5(n) below. "Reportable Event" has the meaning set forth in ERISA ss. 4043. "Securities Act" means the Securities Act of 1933, as amended. "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended. "Security Interest" means any mortgage, pledge, lien, encumbrance, charge, or other security interest, other than (a) mechanic's, materialmen's, and similar liens securing trade payables or capital expenditures pursuant to ss. 3(c), (b) liens for taxes not yet due and payable or for taxes that the taxpayer is contesting in good faith through appropriate proceedings and for which adequate reserves are made in the Financial Statements, (c) purchase money liens securing trade payables or capital expenditures pursuant to ss.3 (c), and (d) other liens arising in the Ordinary Course of Business. "Seller" has the meaning set forth in the preface above. "September 30 Balance Sheets" has the meaning set forth in ss. 2(c)(iv) below. "September 30 Net Working Capital" has the meaning set forth in ss. 2(c)(i) below. 6 "Shares" means all of the outstanding shares of the Common Stock of each of SSRC, SDC, ORC, HVSRC and HC. "Tax and Taxes" any taxes imposed by the United States or any state, local or foreign Governmental Body. "Tax Returns" means any return, declaration, report or information return or statement relating to Taxes, including any schedule or attachment thereto. "Third Party Claim" has the meaning set forth in ss. 10(d) below. "Threatened" --a claim, proceeding, dispute, action, or other matter will be deemed to have been "Threatened" if any written statement has been made or any written notice has been given, that would lead a prudent Person to conclude that such a claim, proceeding, dispute, action or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future. "Unadjusted Purchase Price" has the meaning set forth in ss. 2(b) below. "USFS" means the United States Forest Service. 2. Purchase and Sale of Shares. (a) Basic Transaction. On the terms and subject to the conditions of this Agreement, the ASC and the Buyer jointly and severally agree to purchase from the Seller, and the Seller agrees to sell to the Buyer, all of the Shares for the consideration specified below in this ss. 2. (b) Purchase Price. The Buyer shall pay to the Seller $288.3 million (the "Unadjusted Purchase Price") plus or minus, as the case may be, an Adjustment Amount. The Adjustment Amount shall be the sum of (i) the Net Working Capital calculated pursuant to ss. 2(c) below; (ii) the Additional Payment calculated pursuant to ss. 2(d) below; and (iii) the Operating Cash Flow Deficit Reimbursement calculated pursuant to ss. 2(e) below. Upon execution of this Agreement, the Buyer shall deposit with the Escrow Agent the Contract Deposit. Such Contract Deposit shall be a check made payable to the order of the Escrow Agent and shall be partial payment of the Unadjusted Purchase Price. On the Closing Date, the Buyer shall pay, in cash payable by wire transfer or delivery of other immediately available funds: (i) the balance of the Unadjusted Purchase Price and (ii) the Additional Payment. 7 The positive Net Working Capital and the Operating Cash Flow Deficit Reimbursement shall be paid in cash payable by wire transfer or delivery of other immediately available funds as promptly as practicable and in accordance with ss. 2(c) and ss. 2(e) below. Upon consummation of the transactions contemplated hereby, the Seller shall retain the Contract Deposit. The Unadjusted Purchase Price shall be allocated to the capital stock of each of the Companies based on an appraisal by a firm or firms through a procedure mutually acceptable to the Parties to this Agreement promptly after execution of this Agreement but prior to the Closing. (c) Working Capital Adjustment. (i) The Buyer shall pay all positive Net Working Capital as calculated from the September 30 Balance Sheets (the "September 30 Net Working Capital") to the Seller. If the September Net Working Capital is negative then the Seller shall deliver to the Buyer the amount of such September 30 Net Working Capital. Payments must be made in immediately available funds and to such accounts as the receiving party will specify. (ii) Within sixty (60) days following the Closing Date, the Seller shall cause its Certified Public Accountant (currently Arthur Andersen LLP) to prepare and deliver to the Buyer audited balance sheets of the Companies as of September 30, 1997 (the "Preliminary September 30 Balance Sheets"). The Preliminary September 30 Balance Sheets shall be accompanied by an opinion of the Certified Public Accountant to the following effect; the Preliminary September 30 Balance Sheets will present fairly the consolidated financial position of the Companies as of September 30, 1997 and will be in conformity with GAAP. The Buyer shall, and shall cause the Companies to, fully cooperate in good faith with the Seller in the preparation of the Preliminary September 30 Balance Sheets, such cooperation to include, without limiting the generality of the foregoing, full access to the books and records of the Companies for such purpose. The Seller and the Buyer shall each pay 50% of the fees and expenses of the Certified Public Accountant. (iii) Upon receipt of the Preliminary September 30 Balance Sheets, the Buyer and its accountants shall have the right during the succeeding thirty (30)-day period to examine, at the Buyer's expense, the Preliminary September 30 Balance Sheets and all records used to prepare such Preliminary September 30 Balance Sheets. The Buyer shall notify the 8 Seller in writing, on or before the last day of the thirty (30)-day period, of any good faith objections to the Preliminary September 30 Balance Sheets, setting forth a detailed description of the Buyer's objections and the dollar amount of each objection. If the Buyer does not deliver such notice within such thirty (30)-day period, the Preliminary September 30 Balance Sheets shall be deemed to have been accepted by the Buyer. (iv) If the Buyer in good faith objects to the Preliminary September 30 Balance Sheets, the Seller and the Buyer shall attempt to resolve any such objections within ten (10) days of the Seller's receipt of the Buyer's objections. If the Parties agree upon the resolution of their dispute, such resolution shall be conclusive and binding upon the Parties. If the Parties are unable to resolve the matter within such ten (10) day period, then the Parties shall submit such dispute for final resolution in accordance with the procedures set forth in ss. 12(b). The Preliminary September 30 Balance Sheets after the acceptance thereof by the Buyer or the resolution of all disputes in connection therewith pursuant to ss. 12(b) hereof is referred to herein as the "September 30 Balance Sheets." (d) Additional Payment. The Buyer agrees to pay to the seller an additional amount (the "Additional Payment") equal to the Unadjusted Purchase Price multiplied by the short-term Applicable Federal Rate for October, 1997 as published by the Internal Revenue Service and a fraction, the numerator of which is the number of days from and including October 1, 1997 and to and excluding the Closing Date, and the denominator of which is 360. (e) Operating Losses. (i) The Buyer shall reimburse the Seller for the sum of operating cash flow deficits (the "Operating Cash Flow Deficit Reimbursement") of each of the Companies' operations realized by the Companies for the period from and including October 1, 1997 to the Closing as provided below. The Operating Cash Flow Deficit for a Company during this period shall be defined as the loss before income taxes, computed on the accrual basis of accounting in accordance with GAAP, minus (a) depreciation expense, (b) amortization expense related to deferred loan costs, (c) interest expense, (d) bad debt expense related to accounts and mortgages receivable, and (e) cash received by the Companies during the period from October 1, 1997 to the Closing Date related to the sale of ski passes for the 1997-98 ski season (or any subsequent ski season) of such Company; provided, however, without duplication, any amount paid in respect of trade payables on the September 30 Balance Sheets 9 paid between September 30, 1997 and the Closing shall be added to the Operating Cash Flow Deficit. For example, if the loss before income taxes computed on the accrual basis of accounting in accordance with GAAP were $100, and depreciation expenses were $25 then the Operating Cash Flow Deficit would be $75. Payments must be made in immediately available funds and to such account as the Seller will specify and shall be made together with interest at the Applicable Federal Rate for the month of October 1997 compounded daily beginning on the Closing Date and ending on the date of payment. (ii) Within sixty (60) days following the Closing, the Seller shall cause its Certified Public Accountant to determine the actual amount of the Operating Cash Flow Deficit Reimbursement and to give notice thereof to the Buyer which notice (the "Cash Flow Notice") shall include said Certified Public Accountant's documentation of such final determination. The Buyer shall, and shall cause the Companies to, fully cooperate in good faith with the Seller in such determination, such cooperation to include, without limiting the generality of the foregoing, full access to the books and records of the Companies for such purpose. The Seller and the Buyer shall each pay 50% of the fees and expenses of the Certified Public Accountant. (iii) Upon receipt of the Cash Flow Notice, the Buyer and its accountants shall have the right during the succeeding thirty (30)-day period to examine, at the Buyer's expense, the Cash Flow Notice and all records used to prepare such. The Buyer shall notify the Seller in writing, on or before the last day of the thirty (30)-day period, of any good faith objections to the Cash Flow Notice, setting forth a detailed description of the Buyer's objections and the dollar amount of each objection. If the Buyer does not deliver such notice within such thirty (30)-day period, the Cash Flow Notice shall be deemed to have been accepted by the Buyer. (iv) If the Buyer in good faith objects to the Cash Flow Notice, the Seller and the Buyer shall attempt to resolve any such objections within ten (10) days of the Seller's receipt of the Buyer's objections. If the Parties agree upon the resolution of their dispute, such resolution shall be conclusive and binding upon the Parties. If the Parties are unable to resolve the matter within such ten (10) day period, then the Parties shall submit such dispute for final resolution in accordance with the procedures set forth in ss. 12(b). 10 (f) The Closing. (i) The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, NY 10022 commencing at 9:00 a.m. local time on the second Banking Day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective Parties will take at the Closing itself) or such other Banking Day as the Buyer and the Seller may mutually determine (the "Closing Date"); provided, however, that the Closing Date shall be no earlier than October 15, 1997; provided, further, that the Buyer may accelerate the Closing Date with 15 days' written notice to the Seller. (ii) Time shall be of the essence with respect to the Closing Date and all other periods of time set forth herein. (g) Deliveries at the Closing. At the Closing, (i) the Seller will deliver to the Buyer the various certificates, instruments, and documents referred to in ss. 8(a) below, (ii) the Buyer will deliver to the Seller the various certificates, instruments, and documents referred to in ss. 8(b) below, (iii) the Seller will deliver to the Buyer stock certificates representing all of the Shares, endorsed in blank or accompanied by duly executed assignment documents, and (iv) the Buyer will deliver to the Seller the consideration specified in ss. 2(b) above. (h) Excluded Assets. Notwithstanding anything contained in this Agreement to the contrary, the Seller has not agreed to sell to the Buyer and is not obligated to transfer to the Buyer and the Buyer has not agreed to purchase and is not entitled to acquire from the Seller (i) Cash, and (ii) any of the assets set forth in Schedule 2(h)(ii) attached hereto, and all of which shall remain the sole and exclusive property of the Seller, and all of which shall be distributable pursuant to ss. 6(d) herein. 3. Additional Agreements by the Seller, the Buyer and ASC. (a) Planned Capital Expenditure Program. (i) The Seller shall cause the Companies, prior to the Closing Date, to proceed diligently with the capital improvements to the assets which are described on Exhibit F hereto (each a "Capital Improvement"). Said Exhibit F sets forth the estimated cost of performing each Capital Improvement. Unless the Seller otherwise agrees in writing, the aggregate estimated cost of performing all Capital Improve- 11 ments by the Companies shall not exceed the aggregate amount of performing all Capital Improvements set forth in Exhibit F attached hereto. (ii) The Seller agrees that all work to be done in connection with performing any or all such Capital Improvements shall, if and when commenced, be performed with due diligence in a good and workmanlike manner and in compliance with all laws in conformity with the standard observed by prudent owners of comparable facilities and all applicable legal and insurance requirements. (iii) On the Closing Date, the Seller shall pay to the Buyer an amount equal to 85% ("Pre-Closing Capital Expenditure Payment") of the excess of (i) the aggregate amount indicated on Exhibit F attached hereto over (ii) the Seller's estimate of the aggregate amount ("Pre-Closing Capital Expenditures") the Seller has paid in connection with the capital expenditures in Exhibit F as of the Closing Date. (iv) Within sixty (60) days following the Closing, the Buyer shall cause its Certified Public Accountant to determine the actual amount of the Pre-Closing Capital Expenditures ("Actual Pre-Closing Capital Expenditures") and to give notice thereof to the Seller which notice (the "Capital Expenditure Notice") shall include said Certified Public Accountant's documentation of such final determination. The Capital Expenditure Notice shall also set forth the excess of (i) the aggregate amount indicated on Exhibit F attached hereto over (ii) the sum of (A) the Pre-Closing Capital Expenditures Payment and (B) Actual Pre-Closing Capital Expenditures ("Capital Expenditure Adjustment"). The Seller shall pay the Buyer the Capital Expenditure Adjustment pursuant to the procedures set forth below. The Buyer shall pay the fees and expenses of the Certified Public Accountant. (v) Upon receipt of the Capital Expenditure Notice, the Seller and its accountants shall have the right during the succeeding thirty (30)-day period to examine, at the Seller's expense, the Capital Expenditure Notice and all records used to prepare such. The Seller shall notify the Buyer in writing, on or before the last day of the thirty (30)-day period, of any good faith objections to the Capital Expenditure Notice, setting forth a detailed description of the Seller's objections and the dollar amount of each objection. If the Seller does not deliver such notice within such thirty (30)-day period, the Capital Expenditure Notice shall be deemed to have been accepted by the Seller. 12 (vi) If the Seller in good faith objects to the Capital Expenditure Notice, the Buyer and the Seller shall attempt to resolve any such objections within ten (10) days of the Buyer's receipt of the Seller's objections. If the Parties agree upon the resolution of their dispute, such resolution shall be conclusive and binding upon the Parties. If the Parties are unable to resolve the matter within such ten (10)-day period, then the Parties shall submit such dispute for final resolution in accordance with the procedures set forth in ss. 12(b). (vii) No later than 10 days after May 31, 1998, the Buyer shall deliver to the Seller an invoice itemizing, in the same manner as set forth in Exhibit F, all expenditures incurred in connection with performing the Capital Improvements for the period from and including the Closing Date to and including May 31, 1998 ("Post-Closing Capital Expenditures"). The Buyer shall pay the Seller an amount equal to 49% of the excess of (i) the aggregate amount of capital expenditures set forth in Exhibit F over the (ii) the sum of (A) the Pre-Closing Capital Expenditures and (B) the Post-Closing Capital Expenditures. (b) Sales and Transfer Taxes and Fees. The Buyer shall pay all state and local taxes, other than franchise taxes or Income Taxes or taxes in the nature thereof, with respect to the transactions contemplated by this Agreement, including documentary fees and sales and transfer taxes. 4. Representations and Warranties Concerning the Transaction. (a) Representations and Warranties of the Seller. The Seller represents and warrants to the Buyer and ASC that the statements contained in this ss. 4(a) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this ss. 4(a)) with respect to itself, except as set forth in Annex I attached hereto. (i) Organization. The Seller is a corporation duly organized and validly existing under the laws of Delaware. The Seller is duly authorized to execute, deliver and perform this Agreement. Subject to obtaining the consents set forth in ss. 5(c) of the Disclosure Schedule, upon execution and delivery, and assuming the due authorization, execution and delivery by the Buyer, this Agreement will constitute the legal, valid and binding obligations of the Seller, enforceable against the Seller in accordance with its terms, except 13 as such enforceability may be limited by (i) bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditor's rights generally and (ii) the general principles of equity, regardless of whether asserted in a proceeding in equity or at law. The execution, delivery and performance of this Agreement by the Seller will not violate any law or regulation applicable to it, or its Certificate of Incorporation or by-laws, and will not constitute or result in a breach or default under any written agreement or other written instrument to which it is a party or by which it is bound or which affects any of its assets. (ii) No Conflict. Except as otherwise consented to, and subject to obtaining the consents listed in ss. 5(c) of the Disclosure Schedule, the execution and delivery of this Agreement by the Seller, the performance or compliance by the Seller of and with the terms and conditions hereof to be performed and complied with by the Seller, and the consummation by the Seller of the transactions contemplated hereby will not violate, conflict with or constitute a breach of (i) the terms, conditions or provisions of, or constitute a default under, any contract or agreement to which the Seller is a party or by which the Seller or its assets are bound or affected, that will be in effect at the Closing, or (ii) any law or regulation or any order, writ, injunction, or decree of any federal, state, local, or foreign court, department, agency, or instrumentally to which the Seller is subject or any or its assets is bound. (iii) Brokers' Fees. The Seller has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement, for which the Buyer could become liable or obligated except for such obligations to the Long-Term Credit Bank of Japan, Ltd., and any such fees or commissions payable to the Long-Term Credit Bank of Japan, Ltd. shall be the obligations of the Seller. (iv) Shares. The Seller holds of record and owns beneficially the number of Shares set forth next to its name in ss. 5(b) of the Disclosure Schedule, free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. The Seller is not a party to any option, warrant, purchase right, or other contract or commitment that could require the Seller to sell, transfer, or otherwise dispose of any capital stock of the Companies (other than this Agreement). The Seller is not a party to any voting trust, proxy, or other agreement or 14 understanding with respect to the voting of any capital stock of the Companies. (b) Representations and Warranties of the Buyer and ASC. The Buyer and ASC jointly and severally represent and warrant to the Seller that the statements contained in this ss. 4(b) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this ss. 4(b)), except as set forth in Annex II attached hereto. (i) Organization. The Buyer and ASC are corporations duly organized and validly existing under the laws of Maine. The Buyer is a direct wholly-owned subsidiary of ASC. ASC owns all the capital stock of American Skiing Company. The Buyer and ASC are duly authorized to execute, deliver and perform this Agreement. Upon execution and delivery, this Agreement will constitute the legal, valid and binding obligations of the Buyer and ASC, enforceable against the Buyer and ASC in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditor's rights generally and (ii) the general principles of equity, regardless of whether asserted in a proceeding in equity or at law. The execution, delivery and performance of this Agreement by the Buyer and ASC will not violate any law or regulation applicable to them, or their respective Certificate of Incorporation or by-laws, and will not constitute or result in a breach or default under any written agreement or other written instrument to which any of them is a party or by which any of them is bound or which affects any of their assets. (ii) No Conflict. The execution and delivery of this Agreement by the Buyer and ASC, the performance or compliance by the Buyer and ASC of and with the terms and conditions hereof to be performed and complied with the Buyer and ASC, and the consummation by the Buyer and ASC of the transactions contemplated hereby will not violate, conflict with or constitute a breach of the terms, conditions or provisions of, or constitute a default under any contract or agreement to which either the Buyer or ASC is a party or by which either the Buyer or ASC or any of their assets are bound or affected, or (ii) any law or regulation or any order, writ, injunction, or decree of any federal, state, local, or foreign court, department, agency, or instrumentally to which either the buyer or ASC is subject or any or any of their assets is bound. Mr. Les Otten owns a majority of the issued and outstanding capital stock of ASC. None of Mr. Otten, ASC or 15 the Buyer is party to any contract or agreement that limits, restricts or prohibits the ability of the Buyer or ASC to issue, or Mr. Otten to approve the issuance of, capital stock of the Buyer or ASC to finance the transactions contemplated hereby. (iii) Brokers' Fees. None of the Buyer, ASC, or American Skiing Company has any liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement. (iv) Investment. Neither the Buyer nor ASC is acquiring the Shares with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act. (v) Management. Neither the Buyer nor ASC has any current plan or intention to reshuffle, layoff or reassign one or more of the Management as of the Closing. The Buyer and ASC reserve the right to assess the Management's performance on a going forward basis after the Closing. 5. Representations and Warranties Concerning the Companies. The Seller represents and warrants to the Buyer and ASC that the statements contained in this ss. 5 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this ss. 5), except as set forth in the disclosure schedule delivered by the Seller to the Buyer on the date hereof and initialed by the Parties (the "Disclosure Schedule"). (a) Organization, Qualification, and Corporate Power. Each of the Companies is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. Each of the Companies is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where such qualification is required. Each of the Companies has full corporate power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it. ss. 5(a) of the Disclosure Schedule lists the name, jurisdictions in which it is authorized to do business and directors and officers of each of the Companies. The Seller has delivered to the Buyer copies of the Organizational Documents of each of the Companies, as currently in effect. (b) Capitalization. The entire authorized capital stock of SSRC consists of 22 shares, of which 18 shares are issued and outstanding. The entire authorized capital stock of SDC consists of 100 shares, of which 20 shares are issued and outstanding. The entire authorized capital stock of ORC consists of 10,000 shares, 16 of which 200 shares are issued and outstanding. The entire authorized capital stock of HVSRC consists of 100 shares, of which 69 shares are issued and outstanding. The entire authorized capital stock of HC consists of 100 shares, of which 31 shares are issued and outstanding. All of the issued and outstanding shares of each of SSRC, SDC, ORC, HVSRC and HC have been duly authorized, are validly issued, fully paid, and nonassessable, and are held of record by the Seller as set forth in ss. 5(b) of the Disclosure Schedule. There are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require the Companies to issue, sell, or otherwise cause to become outstanding any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to the Companies. (c) Noncontravention. To the Knowledge of the Seller, except as set forth in ss. 5(c) of the Disclosure Schedule, neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which any of the Companies is subject or any provision of the charter or bylaws of any of the Companies or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice or consent under any agreement, contract, lease, license, instrument, or other arrangement to which any of the Companies is a party or by which it is bound or to which any of its assets is subject (or result in the imposition of any Security Interest upon any of its assets). Except for the consents set forth in ss. 5(c) of the Disclosure Schedule, to the Knowledge of the Seller, none of the Companies needs to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Body in order for the Parties to consummate the transactions contemplated by this Agreement. Except as set forth in ss. 5(c) of the Disclosure Schedule, to the Knowledge of the Seller, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will, directly or indirectly (with or without notice or lapse of time), give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization that is held by any of the Companies or that otherwise relates to the business of, or any of the assets owned or used by, any of the Companies. (d) Brokers' Fees. None of the Companies has any liability or obligation to pay any fees or commissions to any 17 broker, finder, or agent with respect to the transactions contemplated by this Agreement. (e) Title to Tangible Assets. Except as set forth in ss. 5(e) of the Disclosure Schedule, to the Knowledge of the Seller, the Companies have good title to, or a valid leasehold interest in, the tangible assets they use in the conduct of their respective businesses or which are reflected in the Financial Statements, true and clear of all Security Interests. This section does not cover real estate, which is covered exclusively by ss. 5(j), intellectual property, which is covered exclusively by ss. 5(k) or contracts, which are covered by ss. 5(l). (f) Financial Statements. Attached hereto as Exhibit A are the following financial statements (collectively the "Financial Statements"): (i) audited consolidated balance sheets and statements of income, changes in stockholders' equity, and cash flow as of and for the fiscal years ended May 31, 1994, 1995, and 1996 for the Companies; and (ii) unaudited consolidated balance sheets and statements of income, changes in stockholders' equity, and cash flow (the "Most Recent Financial Statements") as of and for the twelve months ended May 31, 1997 (the "Most Recent Fiscal Month End") for the Companies. The Financial Statements (including the notes thereto) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby and present fairly the financial condition of the Companies as of such dates and the results of operations of the Companies for such periods; provided, however, that the Most Recent Financial Statements are subject to normal year-end adjustments and lack footnotes and other presentation items. (g) Events Subsequent to Most Recent Fiscal Month End. Except as provided in ss. 5(g) in the Disclosure Schedule, since the Most Recent Fiscal Month End, there has not been any change that has resulted, and to the Knowledge of the Seller, there has not been any event that is very likely to result, in a Material Adverse Effect compared with the comparable prior period. Without limiting the generality of the foregoing, since that date none of the Companies has engaged in any practice, taken any action, or entered into any transaction outside the Ordinary Course of Business. (h) Legal Compliance. To the Knowledge of the Seller, each of the Companies is in compliance with all Legal Requirements and Governmental Authorizations. To the Knowledge of the Seller, none of the Companies has received any written notice or written communication from any Governmental Body or any other Person which are currently not remedied in full or pending regarding (A) any actual, alleged, 18 possible, or potential violation of, or failure to comply with, any Legal Requirement, or (B) any actual, alleged, possible, or potential obligation on the part of any of the Companies to undertake, or to bear all or any portion of the cost of, any remedial action of any nature. This section does not cover environmental matters which are covered exclusively by ss. 5(t) below. (i) Tax Matters. (i) Each of the Companies has filed all Tax Returns that it was required to file, such Tax Returns are true, accurate and complete, and each of the Companies has paid all Taxes due. Each of the Companies has complied with all applicable laws, rules and regulations relating to the payment and withholding of Taxes. (ii) ss. 5(i)(ii) of the Disclosure Schedule lists all Income Tax Returns filed with respect to any of the Companies for taxable periods ended on or after May 31, 1994, indicates those Income Tax Returns that have been audited, and indicates those Income Tax Returns that currently are the subject of audit. The Seller shall deliver to the Buyer correct and complete copies of all federal Income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by any of the Companies since the tax year ended May 31, 1994. (iii) The Affiliated Group with Seller as parent and the Companies as subsidiary members has filed all Income Tax Returns that it was required to file for each taxable period during which any of the Companies was a member of the group, such Income Tax Returns are true, accurate and complete, and the Affiliated Group has paid all Income Taxes shown thereon as owing. (iv) The charges, accruals and reserves with respect to Taxes on the respective books of each of the Companies are adequate (determined in accordance with GAAP). There exists no proposed tax assessment against any of the Companies except as disclosed in the Financial Statements or in ss. 5(i)(iv) of the Disclosure Schedule. (j) Real Property. (i) Except as provided in ss. 5(j)(i) of the Disclosure Schedule, ss. 5(j)(i) of the Disclosure Schedule lists all real property that any of the Companies owns, which constitutes all owned real property used in the operations of the Companies' business or otherwise occupied in connection with the operations by the Companies, and/or reflected on the Financial Statements or acquired since the date thereof. Neither the 19 Seller nor its Affiliates own any real property located in the States of California, Colorado, Florida or Nevada other than those described in Schedule ss. 2(h)(ii) herein. The Seller has delivered or made available to the Buyer copies of the deeds and other instruments (as recorded) by which the Companies acquired such real property interests, and copies of all title insurance policies, opinions, abstracts, and surveys in the possession of the Seller or the Companies and relating to such real property interests. With respect to each such parcel of owned real property: (A) The identified owner has good and marketable title to the parcel of real property, free and clear of any Security Interest, easement, covenant, or other restriction, except for Permitted Liens; (B) Except as set forth in ss. 5(j)(i)(B) of the Disclosure Schedule there are no leases, licenses, concessions, or other agreements pursuant to which any of the Companies has granted to any other party or parties the right of use or occupancy of any portion of the parcel of real property described in ss. 5(j)(i) of the Disclosure Schedule; and (C) Except as may be provided in the instruments referred to in ss. 5(j)(i)(A) of the Disclosure Schedule, there are no outstanding options or rights of first refusal to purchase the parcel of real property described in ss. 5(j)(i) of the Disclosure Schedule, or any portion thereof or interest therein. (ii) ss. 5(j)(ii) of the Disclosure Schedule lists all real property leased or subleased to any of the Companies which constitutes all of the real property leased or subleased to any of the Companies for the regular use in the operation of their respective businesses, otherwise occupied by the Companies and/or reflected on the Financial Statements or acquired or disposed of in the Ordinary Course of Business since the date of the Financial Statements. The Seller has delivered to the Buyer correct and complete copies of the leases and subleases listed in ss. 5(j)(ii) of the Disclosure Schedule (as amended to date). To the Knowledge of the Seller, each lease and sublease listed in ss. 5(j)(ii) of the Disclosure Schedule is in full force and effect, each Company is in full compliance therewith and there exists no defaults, or events which with the passage of time or giving of notice, could constitute a default. (iii) Except as provided in ss. 5(j)(i) or (ii) of the Disclosure Schedule, ss. 5(j)(i) and (ii) of the Disclosure 20 Schedule lists all real property that the Company owns, regularly uses or occupies in connection with the operation of the Companies' respective businesses. (k) Intellectual Property. Except as disclosed in ss. 5(k) of the Disclosure Schedule, to the Knowledge of the Companies, the Companies own or possess adequate licenses or other valid rights to use or operate within the scope of all Untied States and foreign patents, trademarks, trade names, copyrights, service marks, all applications therefor and registrations thereof, confidential or proprietary technical and business information, know-how and trade secrets, and computer software (collectively, "Intellectual Property") which are material to the operations of the Companies, as currently conducted. ss. 5(k) of the Disclosure Schedule sets forth a full and complete list of the service marks, trademarks, and copyrights owned by any of the Companies. Except as disclosed in ss. 5(k) of the Disclosure Schedule, such Intellectual Property that is owned by the Companies is not subject to any Security Interest. To the Knowledge of the Companies, there are no infringements or other violations or conflicts with the rights of others with respect to the use of or other conduct by the Companies within the scope of, ownership of, validity or enforceability of any Intellectual Property owned by the Companies. (l) Contracts. ss. 5(l) of the Disclosure Schedule lists, other than agreements for Indebtedness which the Seller or any of the Companies is obligated to pay prior to or at Closing, (i) all written contracts currently in effect and other written agreements currently in effect to which any of the Companies is a party the performance of which will involve consideration in excess of $100,000 or is otherwise material to the operation of the business, and each licensing agreement or other contract with respect to patents, trademarks, copyrights, or other intellectual property, including agreements with current or former employees, consultants, or contractors regarding the appropriation or the non-disclosure of any of the Intellectual Property; (ii) each collective bargaining agreement and other contract to or with any labor union or other employee representative of a group of employees; (iii) each joint venture and partnership agreement involving a sharing of profits, losses, costs, or liabilities by any of the Companies with any other Person; and (iv) each contract containing covenants that in any way purport to restrict the business activity of any of the Companies or any Affiliate of any of the Companies or limit the freedom of any of the Companies or any Affiliate of any of the Companies to engage in any line of business or to compete with any Person. The Seller has delivered to the Buyer a correct and complete copy of each contract or other agreement listed in 5(l) of the Disclosure Schedule (as amended to date). 21 To the Seller's Knowledge, all the contracts listed in ss. 5(l) of the Disclosure Schedule are in full force and effect and neither the Seller nor any of the Companies has received any written notice of breach, violation or other default of any nature, or any event which with the passage of time or giving of notice or both, would constitute an event of default, breach or other violation with respect to any such contracts. (m) Powers of Attorney. As of the completion of the Closing, there will be no outstanding powers of attorney executed on behalf of any of the Companies. (n) Litigation. ss. 5(n) of the Disclosure Schedule sets forth each instance in which any of the Companies (i) is subject to any outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a party to any action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction (the "Proceeding"), except where such Proceeding would relate to matters with respect to which the Companies are fully insured and the defense is being provided by the insurer or (iii) has any Knowledge that any such Proceeding has been Threatened by written correspondence to any of the Companies since January 1, 1995. (o) Employee Benefits. (i) ss. 5(o) of the Disclosure Schedule lists each Employee Benefit Plan that any of the Companies maintains or to which any of the Companies contributes. No Employee Company Benefit Plans are subject to Title IV of ERISA. (A) To the Knowledge of the Seller, each such Employee Benefit Plan (and each related trust, insurance contract, or fund) complies in form and in operation in all respects with the applicable requirements of ERISA and the Code. (B) All contributions (including all employer contributions and employee salary reduction contributions) which are due have been paid to each such Employee Benefit Plan which is an Employee Pension Benefit Plan. (C) Each such Employee Benefit Plan which is an Employee Pension Benefit Plan has received a determination letter from the Internal Revenue Service to the effect that it meets the requirements of Code ss. 401(a). (D) The Seller has delivered to the Buyer correct and complete copies of the plan documents and summary 22 plan descriptions, the most recent determination letter received from the Internal Revenue Service, the most recent Form 5500 Annual Report, and all related trust agreements, insurance contracts, and other funding agreements which implement each such Employee Benefit Plan. (ii) No action, suit, proceeding, hearing, or investigation with respect to the administration or the investment of the assets of any Employee Benefit Plan that any of the Companies maintains or ever has maintained or to which any of them contributes, ever has contributed, or ever has been required to contribute (other than routine claims for benefits) is pending or to the Knowledge of the Companies has been Threatened since January 1, 1995. (p) USFS Permits. Annexed hereto as Exhibit B are true, complete and correct copies of the existing USFS permits (including all amendments thereto). The existing USFS Permits are in full force and effect and, to the best of its knowledge, there are no defaults or amounts owing to USFS thereunder. (q) Labor Matters. Since January 1, 1994, none of the Companies has been or is a party to any collective bargaining or other labor contract. Since January 1, 1994, to the Knowledge of the Seller, there has not been, there is not presently pending or existing, and there is not Threatened, (a) any strike, slowdown, picketing, work stoppage, or union grievances, (b) any proceeding against or affecting any of the Companies relating to the alleged violation of any Legal Requirement pertaining to labor relations or employment matters, including any charge or complaint filed by an employee or union with the National Labor Relations Board, the Equal Employment Opportunity Commission, or any comparable Governmental Body or organizational activity, against or affecting any of the Companies or their premises, or (c) any application for certification of a collective bargaining agent. There is no lockout of any employees by any of the Companies, and no such action is contemplated by any of the Companies. Each of the Companies has complied with all Legal Requirements relating to employment, equal employment opportunity, discrimination, immigration, wages, hours, benefits, collective bargaining, the payment of social security and similar taxes, occupational safety and health, and plant closing. To the Seller's Knowledge, ss.5(q) of the Disclosure Schedule contains a complete and accurate list of the following information for each employee or director of the Companies, including each employee on leave of absence or layoff status; employer; name; job title; current compensation paid or payable; 23 and any enforceable employment contracts of any of the Companies, if any. (r) Books and Records. The books of account, minute books, stock record books, and other records of the Companies, all of which have been made available to the Buyer, are complete and correct and have been maintained in accordance with sound business practices, including the maintenance of an adequate system of internal controls. The minute books of the Companies contain accurate and complete records of all meetings held of, and corporate action taken by, the stockholders, the boards of directors, and committees of the boards of directors of the Companies, and no meeting of any such stockholders, board of directors, or committee has been held for which minutes have not been prepared and are not contained in such minute books. At the Closing, all of those books and records will be in the possession of the Companies. (s) Insurance. ss. 5(s) of the Disclosure Schedule sets forth a complete and correct list and summary description of all insurance policies maintained by or on behalf of any of the Companies as of the date hereof. Such policies are in full force and effect, and all premiums due thereon have been paid. The Companies have complied in all material respects with the terms and provisions of such policies. The insurance coverage provided by such policies is believed by each of the Companies to be suitable for the respective business and operations of each of the Companies. (t) Environment, Health, and Safety. To the Knowledge of Seller: (i) Each of the Companies is in compliance with, and there has been no violation by the Companies of, since the respective date the Seller acquired each of the Companies, all applicable Environmental Laws. Such compliance includes, but is not limited to, the possession by each of the Companies of all permits and other governmental authorizations required under applicable Environmental Laws; (ii) There is no pending or Threatened claim, lawsuit, or administrative proceeding against any of the Companies under any Environmental Law. Neither Seller nor any of the Companies has received written notice or written communication from any federal, state, or local governmental agency, having jurisdiction since the respective date the Seller acquired each of the Companies, alleging that any of the Companies are in violation of any applicable Environmental Law or otherwise 24 may be in liable under any applicable Environmental Law, which violation or liability is unresolved; and (iii) There have been no releases, spills or discharges of Hazardous Substances on or underneath any of the real property currently owned or leased by any of the Companies (the "Real Property") since the respective date the Seller acquired each of the Companies; (iv) The Seller and the Companies have made available to the Buyer for the Buyer's review, true and complete records of (A) all reports assessing the Companies' compliance with Environmental Laws or the environmental condition of the properties that have been prepared within the last five years from the date hereof, to the extent that such reports are within the possession of Seller or the Companies; (B) all test results relating to whether any of the Properties have been impacted by Hazardous Substances, to the extent such test results are within the possession of Seller or the Companies on the date of this Agreement; and (C) any written notices of violation, administrative or judicial complaints, or administrative or judicial orders (collectively, "Environmental Documents"), relating to (1) violations or alleged violations of Environmental Law or (2) releases, spills or discharges of Hazardous Substances, to the extent, in both cases, that such Environmental Documents relate to the Properties, are within the possession of Seller or the Companies, and involve pending matters or were issued within the last three years. (v) The representations and warranties in this Section 5(u) are the sole and exclusive representations and warranties in this Agreement related to environmental matters. (u) Water Rights. ss. 5(u) of the Disclosure Schedule contains a list of all of the water rights (whether decreed or undecreed, tributary, non-tributary, surface, underground or water authority or company stock) owned by, used in connection with the businesses of the Companies or appurtenant to real property owned by the Companies (the "Water Rights"). ss. 5(u) of the Disclosure Schedule also identifies all sources of water (other than natural snowfall) used by the Companies for snowmaking purposes during the 1996-1997 ski season setting forth the estimated annual amounts used from each source. For each of the fiscal years ended May 31, 1994, 1995, 1996 and 1997, each of the Companies had all necessary right, title, and interest in and to sufficient water rights to operate their respective businesses. (v) Condition and Sufficiency of Assets. To the Knowledge of the Seller, the buildings, plants, structures, and equipment, including all lifts, snow-making and associated 25 equipment of the Companies are adequate for the uses to which they were being put as of the end of the 1996-1997 ski season. (w) Relationships with Affiliates. To the Knowledge of the Seller, neither the Seller nor the Companies or any Affiliates of the Seller or of any of the Companies has, or since May 31, 1996 has had, any interest in any property (whether real, personal, or mixed and whether tangible or intangible), used in or pertaining to the Companies' businesses in the United States (except for property that is owned or leased by any of the Companies or their subsidiaries). To the Knowledge of the Seller, except as set forth in ss. 5(w) of the Disclosure Schedule, neither the Seller or any Affiliates of the Seller or of any of the Companies is a party to any contract with or has any claim or right against, any of the Companies. (x) Guarantees. Except as set forth in ss. 5(y) of the Disclosure Schedule, (i) there is no Indebtedness of Persons other than the Companies secured by a lien or other Security Interest on or in any assets of the Companies (whether or not such indebtedness is assumed by the Companies), (ii) the Companies do not have any preferred stock outstanding and (iii) the Companies have not guaranteed any Indebtedness or other obligations of any Persons other than the Companies. 6. Pre-closing Covenants. The Parties agree as follows with respect to the period between the execution of this Agreement and the Closing. (a) General. Each of the Parties will use its reasonable best efforts to take all action and to do all things necessary, proper, or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in ss. 8 below). (b) Notices to and Consents by Government. Each of the Parties will (and the Seller will cause each of the Companies to) give any notices to, make any filings with, and use its reasonable best efforts to obtain any authorizations, consents, and approvals of governments and governmental agencies in connection with the matters referred to in ss. 4(a)(ii), ss. 4(b)(ii) and ss. 5(c) above. Without limiting the generality of the foregoing, each of the Parties will file (and the Seller will cause each of the Companies to file) any Notification and Report Forms and related material that it may be required to file with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice under the Hart-Scott-Rodino Act, will use his or its reasonable best efforts to obtain (and the Seller will cause each of the Companies to use its reasonable best efforts to obtain) a 26 waiver from the applicable waiting period, and will make (and the Seller will cause each of the Companies to make) any further filings pursuant thereto that may be necessary, proper, or advisable in connection therewith. (c) Operation of Business. Except as otherwise specifically permitted under this agreement, including ss. 6(d) below, the Seller will not cause or permit any of the Companies to engage in any practice, take any action, or enter into any transaction outside the Ordinary Course of Business. The Seller will cause the Companies to use their reasonable efforts to preserve intact their respective business organization and their respective relationship with suppliers, distributors, employees, customers and others having business relationships with the Companies, except as may otherwise be agreed in writing by the Buyer. (d) Maintenance of Assets. The Seller shall cause the Companies to maintain their respective assets consistent with their respective current practices until the Closing; provided however, on or prior to the Closing Date, the Seller may retain certain assets pursuant to ss. 2(h) herein and cause the Companies to distribute such assets set forth in Schedule 2(h)(ii) attached hereto. (e) Full Access, Disclosure, Press Release. The Seller will permit the Buyer, and the Seller will cause each of the Companies to permit the Buyer, representatives of the Buyer, the Buyer's financing sources and their representatives to have full access at all reasonable times, and in a manner so as not to interfere with the normal business operations of the Companies, to all premises, properties, personnel, books, records (including tax records), contracts, and documents of or pertaining to each of the Companies, whether in the Companies' possession or in the possession of its independent public accountants, subject to the rights of any tenants therein. The Buyer will treat and hold as such any Confidential Information it receives from the Seller and any of the Companies in the course of the reviews contemplated by this ss. 6(e), will not use any of the Confidential Information except in connection with this Agreement, and, if this Agreement is terminated for any reason whatsoever, will return to the Seller and the Companies all tangible embodiments (and all copies) of the Confidential Information which are in its possession. The Parties shall make a mutually agreeable joint press release upon execution and delivery of this Agreement. No Party shall issue any other press release or make any public announcement relating to the subject matter of this Agreement prior to the Closing without the prior written approval of the Buyer and the Seller, which will not be unreasonably withheld or delayed; provided, however, that any Party may make any public disclosure (in the case of information of a primarily financial nature concerning the Seller or the Compa- 27 nies, limited to historical financial information) that in the opinion of counsel to such Party is required by applicable law or any listing or trading agreement concerning its publicly-traded securities or which may be necessary or desirable in connection with the Buyer's obtaining financing, including without limitation in complying with the provisions of federal and state securities laws and regulations and in conducting related underwriting and solicitation activities, in which case the disclosing Party will use its reasonable best efforts to advise the other Parties prior to making the disclosure. (f) Notice of Developments. Each Party will give prompt written notice to the others of any material adverse development causing a breach of any of its own representations and warranties in this Agreement. No disclosure by any Party pursuant to this ss. 6(f), however, shall be deemed to amend or supplement Annex I, Annex II, or the Disclosure Schedule or to prevent or cure any misrepresentation or breach of warranty. (g) Payment of Indebtedness. On or prior to the Closing Date, the Seller shall pay or assume full and complete liability for all Indebtedness for borrowed money (including capital leases, if any) of the Companies existing at the Closing Date, which Indebtedness for borrowed money, to the extent in existence on the date hereof, is set forth on Schedule 6(g), and the Seller shall deliver at Closing evidence satisfactory to the Buyer that the Companies have been released of any and all liability or obligation therefor. (h) USFS Permit. Each of ASC and the Buyer shall use its best efforts to obtain (x) either (i) consents related to the transfer of ownership interests in the Steamboat and Heavenly ski areas (the "USFS Consents") or (ii) new USFS permits (the "New USFS Permits") and (y) any consents or agreements which may be required in connection therewith, and the Seller shall cooperate with the Buyer and furnish the Buyer such information as is in its possession and is necessary to obtain such USFS Consents and New USFS Permits. Each of ASC and the Buyer shall regularly inform the Seller of any developments with respect to the process of obtaining such consents and agreements or New USFS Permits and shall promptly respond to all inquiries of the Seller with respect thereto. (i) Cooperation. The Buyer, ASC and the Seller each covenant to use diligent efforts to cause all conditions to Closing to be met on or prior to the Closing Date. (j) Qualification of the Buyer to Secure Permits, Licenses and Other Approvals. Each of ASC and the Buyer or its permitted assignee, shall take such action as may reasonably be required to qualify itself under all applicable laws and regula- 28 tions in order to consummate the transactions contemplated hereunder including without limitation, obtaining the USFS Consents and the New USFS Permits. Each of ASC and the Buyer shall timely and diligently proceed with such action so as to be able to perform its obligations in accordance with the provisions of this Agreement. (k) Escrow Agreement. Upon execution of this Agreement, the Parties shall enter into an escrow agreement in form and substance as set forth in Exhibit G attached hereto, pursuant to which the Buyer agrees to deposit with the Escrow Agent $11 million (the "Contract Deposit"). (l) Financial Statements. The Seller shall provide to the Buyer, immediately upon receipt thereof, a full and complete copy of the Companies' audited consolidated balance sheets and statements of income, changes in stockholders' equity and cash flows as of, and for the twelve months ended on, May 31, 1997, including all notes, together with the report of the Seller's independent public accountants thereon. (m) No Shop. The Seller shall not solicit, initiate, or encourage any proposals from, or negotiate with, any Person other than the Buyer or ASC with respect to the sale of any or all portion of its stock, any stock of any of the Companies, or any assets of any of the Companies, except in the Ordinary Course of Business, subject to the provisions of ss.ss. 6(c) and 6(d) hereof until this Agreement is terminated. The Seller shall inform any prospective purchasers that have contacted the Seller of the existence of this provision and shall terminate any discussions with such prospective purchasers as promptly as reasonably possible following any contact. Upon the Buyer's request, the Seller will cooperate with the Buyer in informing any potential purchasers of this provision. 7. Post-Closing Covenants. The Parties agree as follows with respect to the period following the Closing. (a) General. In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request, all at the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification therefor under ss. 10 below). (b) Litigation Support. In the event and for so long as any Party actively is contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, 29 or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving any of the Companies, each of the other Parties shall cooperate with him or it and his or its counsel in the defense or contest, make available their personnel, and provide such testimony and access to their books and records as shall be necessary in connection with the defense or contest, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefor under ss. 10 below). (c) Perpetual Lift and Golf Passes. (i) The Buyer shall honor the currently outstanding perpetual ski-lift passes and golf passes for the Companies previously issued by the Seller or its Affiliates or their respective predecessors, which passes are listed on Schedule 7(c)(i) hereof, if and to the extent permitted under federal law and by the USFS. (ii) At the Closing, the Buyer shall issue ten new perpetual ski-lift passes for each of the Steamboat and Heavenly resorts to and in the name of the Seller, and shall have the ongoing obligation to issue ten new perpetual ski- lift passes for each of the ski resorts other than the Steamboat and Heavenly resorts which the Buyer will directly or indirectly own on or after the Closing Date. All such passes shall be assignable to any Affiliate of Kamori Kanko Co., Ltd., a Japanese corporation, the majority owner of the Seller and each of the passes described in this ss. 7 may be used by any person designated by the recipient of such pass. (iii) For so long as ASC directly or indirectly through its Affiliates holds the concession from the USFS to operate the ski areas to which such ski passes relate, ASC shall on an annual basis prior to November 15th of each year hereafter issue or cause such Affiliates to issue such new ski passes for the coming ski season to each of the persons entitled to receive such new ski passes pursuant to the terms of this Section. ASC further agrees that they shall require as a condition precedent to the transfer of its interests in the Companies holding such concession that the person or entity obtaining the succeeding concession to operate such ski area (i) assume in all respects ASC's continuing obligation to provide such new ski passes, and (ii) agrees to require any succeeding transferee of the ski area concession to assume such obligations as a condition precedent to such succeeding transfer. 30 (d) Employment. The Buyer and ASC shall not effectuate, or cause any of the Companies to effectuate, a "plant closing" or "mass layoff" with respect to either SSRC or HVLP within 60 days after the Closing within the meaning of the Worker Adjustment and Restraining Notification Act. (e) Bonus. The Buyer and ASC agree to make bonus payments in December of 1997 to certain employees of HVLP as indicated in Schedule 7(e) attached hereto. The bonus payments shall be, in the aggregate, $250,000. 8. Conditions to Obligation to Close. (a) Conditions to Obligation of the Buyer and ASC. The obligations of each of the Buyer and ASC to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in ss.4(a) and ss.5 above shall be true and correct in all material respects on the date hereof and at and as of the Closing Date, subject only to such exceptions as are not, individually or in the aggregate, materially adverse to the business, properties, results of operations or financial position of the Companies as a whole; provided that solely for such purpose such representations and warranties shall be construed without any Knowledge qualification contained therein, if any; (ii) the Seller shall have performed and complied with all of their covenants hereunder in all material respects through the Closing; (iii) there shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement; (iv) the Seller shall have delivered to the Buyer a certificate to the effect that each of the conditions specified above in ss. 8(a)(i)-(iii) is satisfied in all respects; (v) all applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated and the Parties and the Companies shall have received all other authorizations, consents, and approvals of Governmental Bodies and other third parties referred to in ss. 4(a)(ii), ss. 5(c) and including, without limitation, ss. 5(c) of the Disclosure Schedule, subject only to such conditions that would not cause a Material Adverse Effect; except where failure to receive such authorizations, consents, and approvals of Governmental Bodies and other third parties would not have a Material Adverse Effect; 31 (vi) The Buyer shall have obtained the New USFS Permits in the name of the Buyer, or an assignment of the existing USFS Permits which shall be accompanied by an appropriate instrument of assignment or transfer to the Buyer, and all required consents to such assignment or transfer, if any; (vii) the Buyer shall have received from counsel to the Seller an opinion addressed to the Buyer in form and substance reasonably satisfactory to the Buyer's counsel, and dated as of the Closing Date; and (viii) all actions to be taken by the Seller in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Buyer. The Buyer or ASC may waive any condition specified in this ss. 8(a) if it executes a writing so stating at or prior to the Closing. The availability of financing is not a condition to the obligation of the Buyer and ASC to consummate the transactions to be performed by them in connection with the Closing. (b) Conditions to Obligation of the Seller. The obligation of the Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in ss. 4(b) above shall be true and correct in all material respects at and as of the Closing Date; (ii) the Buyer and ASC shall have performed and complied with all of their covenants hereunder in all material respects through the Closing; (iii) there shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement; (iv) the Buyer and ASC shall have delivered to the Seller a certificate to the effect that each of the conditions specified above in ss. 8(b)(i)-(iii) is satisfied in all respects; (v) all applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated and the Parties and the Companies shall have received all other authorizations, consents, and approvals of governments and governmental agencies referred to in ss. 4(a)(ii), ss. 4(b)(ii), and ss. 5(c) above including, without limitation, ss. 5(c) of the Disclosure Schedule; 32 (vi) the Buyer and the Seller shall have entered into a licensing agreement with respect to certain software owned by SSRC and a licensing agreement with respect to certain trademarks, logos, service marks, symbols or trade names as set forth in Exhibits D and E attached hereto and the same shall be in full force and effect; (vii) the Buyer shall have entered into a purchase agreement for Mr. Kimihito Kamori's residence at Polo Place, 2423 East Exposition Avenue, Denver, Colorado 80209 in form and substance as set forth in Exhibit C attached hereto and the same shall be in full force and effect; (viii) the Seller shall have received from counsel to the Buyer an opinion addressed to the Seller in form and substance reasonably satisfactory to the Seller's counsel, and dated as of the Closing Date; and (ix) all actions to be taken by the Buyer and ASC in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Seller. The Seller may waive any condition specified in this ss. 8(b) if it executes a writing so stating at or prior to the Closing. 9. Tax Matters (a) Tax Sharing Agreements. Any tax sharing agreement between the Seller and any of the Companies is terminated as of the Closing Date and will have no further effect for any taxable year (whether the current year, a future year, or a past year). (b) Returns for Periods Through the Closing Date. Seller's Responsibility. The Seller shall be responsible for paying, and shall indemnify and hold the Buyer and the Companies harmless, from and after the Closing Date, from and against any liabilities in respect of (i) any Taxes of the Seller and the Companies for any taxable periods ending on or before the Closing Date ("Pre-Closing Tax Periods") and (ii) any liability arising from the breach of the Seller's representations and warranties contained in ss. 5(i) hereof; provided, however, that the Seller shall not be responsible for any taxes described in ss. 3(b) hereof. The Seller shall duly prepare, or cause to be prepared, and file, or cause to be filed, on a timely basis all Tax Returns including any consolidated, combined or similar Tax Return with respect to the Companies for all Pre-Closing Tax Periods. Buyer Responsibility. The Buyer and the Companies shall be responsible for paying, and shall indemnify and hold the Seller harmless from, against, and in respect of any Taxes of the Buyer 33 and of the Companies for (i) any Post-Closing Tax Periods and (ii) any taxes described in ss. 3(b) hereof. The Buyer shall duly prepare, or cause to be prepared, and file, or cause to be filed, on a timely basis all Tax Returns with respect to the Companies for any taxable periods ending after the Closing Date ("Post-Closing Tax Periods"). Neither the Buyer nor the Companies shall file any amended Tax Returns for any periods for or in respect of the Companies with respect to which the Buyer is not obligated to prepare or cause to be prepared pursuant to this ss. 9 without the prior written consent of the Seller. With respect to the Closing Date, the Buyer and ASC shall not cause the Companies to engage in any transaction that is not in each Company's Ordinary Course of Business except as otherwise provided in this Agreement. (c) Audits. With respect to any audits relating to taxes with respect to taxable periods ending on or before the Closing Date, the Seller shall control all proceedings and may make all decisions taken in connection with such audit. With respect to any tax claim relating to taxable periods ending after the Closing Date, the Buyer shall control all proceedings and may make all decisions taken in connection with such audit. The Buyer and the Seller shall cooperate in contesting any tax claim, which cooperation shall include the retention and (upon request) the provision to the requesting party of records and information which are reasonably relevant to such tax claim, and making employees available on a mutually convenient basis to provide additional information or explanation of any material provided hereunder or to testify at proceedings relating to such tax claim. (d) Section 338(h)(10) ElectThe Seller will join with the Buyer in making an election under Section 338(h)(10) of the Code (and any corresponding elections under state, local, or foreign tax law) (collectively a "Section 338(h)(10) Election") with respect to the purchase and sale of the Shares hereunder. The Seller will pay any tax attributable to the making of the Section 338(h)(10) Election as soon as practicable following the Closing Date, but in no event later than thirty days prior to the date such ss. 338 forms are required to be filed, the Buyer and the Seller shall prepare and agree upon the computation of the Modified Aggregate Deemed Sale Price (as defined under applicable Treasury Regulations) of the assets of the Companies in accordance with the terms hereof and the allocation of such Modified Aggregate Deemed Sale Price among such assets. This allocation of the Modified Aggregate Deemed Sale Price shall be based upon the fair market value of the assets of the Companies as determined by an appraisal conducted by a firm or firms through procedures as the Buyer and the Seller mutually agree upon. The Buyer shall bear the cost of all fees and expenses of the appraisal. All values contained in the allocation shall be consistently reported for tax purposes in accordance with the procedures reflected herein. The Buyer and the Seller shall report the purchase and sale under this Agreement consistent with such ss. 338(h)(10) Election. The Buyer and the Seller shall not take a position or any action contrary thereto unless re- 34 quired to do so by applicable tax laws pursuant to a determination as defined in ss. 1313(a) of the Code. The Seller shall execute and deliver to Buyer such documents or forms as are reasonably requested and are required by any tax laws in order to properly complete the ss. 338 forms at least twenty days prior to the date such ss. 338 forms are required to be filed. 10. Remedies for Breaches of This Agreement. (a) Survival of Representations and Warranties. All of the representations and warranties of the Seller contained in ss. 5 above (other than ss. 5(t)) shall survive the Closing hereunder (unless the damaged Party knew of any misrepresentation or breach of warranty at the time of Closing) and continue in full force and effect until May 31, 1998; provided, however, the representations and warranties contained in ss. 5(t) shall survive the Closing hereunder (unless the damaged Party knew of any misrepresentation or breach of warranty at the time of Closing) and continue in full force and effect until September 30, 1998. All of the representations and warranties of the Parties contained in ss. 4 above shall survive the Closing (unless the damaged Party knew of any misrepresentation or breach of warranty at the time of Closing) and continue in full force and effect for five (5) years thereafter (subject to any applicable statutes of limitations). (b) Indemnification Provisions for Benefit of the Buyer. In the event the Seller breaches any of its representations, warranties, and covenants contained herein and, if there is an applicable survival period pursuant to ss. 10(a) above, provided that the Buyer makes a written claim for indemnification against the Seller pursuant to ss. 12(h) below within such survival period, then the Seller agrees to indemnify the Buyer from and against any Adverse Consequences the Buyer shall suffer through and after the date of the claim for indemnification caused by the breach; provided, however, that the Seller shall not have any obligation to indemnify the Buyer from and against any Adverse Consequences caused by the breach of any representation or warranty of the Seller contained in ss. 5 above (other than ss. 5(e), (t), and (u)): (A) until the Buyer has suffered Adverse Consequences by reason of all such breaches in excess of a $100,000 aggregate deductible (after which point the Seller will be obligated only to indemnify the Buyer from and against further such Adverse Consequences) or thereafter (B) to the extent the Adverse Consequences the Buyer has suffered by reason of all such breaches exceeds a one (1) million dollars aggregate ceiling (after which point the Seller will have no obligation to indemnify the Buyer from and against further such Adverse Consequences); provided further that the Seller shall not have any obligation to indemnify the Buyer from and against any Adverse Consequences by the breach of any representation or warranty of the Seller: 35 (1) contained in ss. 5(e): (A) until the Buyer has suffered Adverse Consequences by reason of such breaches in excess of $100,000 aggregate deductible (after which point the Seller will be obligated only to indemnify the Buyer from and against further such Adverse Consequences) or thereafter (B) to the extent the Adverse Consequences the Buyer has suffered by reason of such breaches exceed a one (1) million dollars aggregate ceiling (after which point the Seller will have no obligation to indemnify the Buyer from and against further such Adverse Consequences); (2) contained in ss. 5(t): (A) until the Buyer has suffered Adverse Consequences by reason of such breaches in excess of $500,000 aggregate deductible (after which point the Seller will be obligated only to indemnify the Buyer from and against further such Adverse Consequences) or thereafter (B) to the extent the Adverse Consequences the Buyer has suffered by reason of such breaches exceed a five (5) million dollars aggregate ceiling (after which point the Seller will have no obligation to indemnify the Buyer from and against further such Adverse Consequences); (3) contained in ss. 5(u): (A) until the Buyer has suffered Adverse Consequences by reason of such breaches in excess of $250,000 aggregate deductible (after which point the Seller will be obligated only to indemnify the Buyer from and against further such Adverse Consequences) or thereafter (B) to the extent the Adverse Consequences the Buyer has suffered by such breaches exceed a two (2) million dollars aggregate ceiling (after which point the Seller will have no obligation to indemnify the Buyer from and against further such Adverse Consequences; provided further that, the Seller shall not have any obligation to indemnify the Buyer from and against any Adverse Consequences caused by the breach of any representation or warranty of the Seller contained in ss. 5 (e), (t) and (u): to the extent the Adverse Consequences the buyer has suffered by reason of all such breaches of ss. 5 (e), (t) and (u) exceed a five (5) million dollars aggregate ceiling (after which point the Seller will have no obligation to indemnify the Buyer from and against further such Adverse Consequences). (c) Indemnification Provisions for Benefit of the Seller. In the event the Buyer or ASC breaches any of their respective representations, warranties, and covenants contained herein, and, if there is an applicable survival period pursuant to ss. 10(a) above, provided that the Seller makes a written claim for indemnification against the Buyer pursuant to ss. 12(h) below within such survival period, then the Buyer and ASC agree to indemnify jointly and severally the Seller from and against the entirety of any Adverse Consequences the Seller shall suffer through and after the date of the claim for indemnification caused by the breach. 36 (d) Matters Involving Third Parties. (i) If any third party shall notify any Party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against any other Party (the "Indemnifying Party") under this ss. 10, then the Indemnified Party shall promptly (and in any event within [five business days] after receiving notice of the Third Party Claim) notify each Indemnifying Party thereof in writing. (ii) Any Indemnifying Party will have the right to assume and thereafter conduct the defense of the Third Party Claim with counsel of his or its choice reasonably satisfactory to the Indemnified Party; provided, however, that the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be withheld unreasonably) unless the judgment or proposed settlement involves only the payment of money damages and does not impose an injunction or other equitable relief upon the Indemnified Party. (iii) Unless and until an Indemnifying Party assumes the defense of the Third Party Claim as provided in ss. 10(d)(ii) above, however, the Indemnified Party may defend against the Third Party Claim in any manner he or it reasonably may deem appropriate. (iv) In no event will the Indemnified Party consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of each of the Indemnifying Parties (not to be withheld unreasonably). (e) Determination of Adverse Consequences. The Parties shall make appropriate adjustments for tax benefits and insurance coverage in determining Adverse Consequences for purposes of this ss. 10. All indemnification payments under this ss. 10 shall be deemed adjustments to the Unadjusted Purchase Price. (f) Exclusive Remedy. The Parties agree that the remedies provided in this Agreement shall constitute the sole and exclusive remedy available to the Parties. (g) Liquidated Damages. In the event the Buyer or ASC breaches any of its representations, warranties, and covenants contained herein in any material respect (including the Buyer's failure to purchase from the Seller the Shares pursuant to this Agreement or if the closing condition with respect to the Hart- Scott-Rodino Act set forth in ss. 8(a)(v) shall not have been satisfied prior to October 31, 1997, each of which shall be deemed such a material breach), the Seller shall retain the Contract 37 Deposit as liquidated damages; provided, however, that the Seller shall not retain the Contract Deposit if the transactions contemplated hereby are not consummated because the Seller has breached any one or more of its representations, warranties or covenants contained in this Agreement, which breach, individually or in the aggregate, is materially adverse to the business, properties, results of operations or financial position of the Companies taken as a whole, and the Buyer has notified the Seller of the breach, and the breach has continued without cure and has remained materially adverse in the manner described immediately above for a period of 30 days after the notice of breach. If the Buyer and ASC breach their obligations hereunder in any material respect, the Seller's damages would be impossible to ascertain and the Contract Deposit constitutes a fair and reasonable amount of compensation. Notwithstanding the foregoing, the Seller shall retain the Contract Deposit as liquidated damages if ASC directly or through its subsidiary will not have issued stock publicly in a recognized United States securities market and raised at least $200 million or otherwise provided for full funding of the purchase price for the Shares in a manner satisfactory to the Seller on or prior to October 31, 1997; provided,however, that the Seller shall not retain the Contract Deposit if (i) the transactions contemplated hereby are not consummated because the Seller has breached any one or more representations, warranties or covenants contained in this Agreement, which breach, individually or in the aggregate, is materially adverse to the business, properties, results of operations or financial position of the Companies taken as a whole (a "Breach"), and the Buyer has notified the Seller of the Breach on or prior to October 31, 1997, and (ii) the Breach has continued without cure and has remain materially adverse in the manner described immediately above for a period of 30 days after the notice of breach. Upon the cure of such a Breach, the Seller shall be entitled to and to retain the Contract Deposit. Any such Breach by the Seller after October 31, 1997 shall not impair the right of the Seller to retain the Contract Deposit. Notwithstanding the foregoing sentences in this ss. 10(g), the Seller will apply the Contract Deposit to the Unadjusted Purchase Price if the Closing takes place on or prior to December 1, 1997. 11. Termination. (a) Termination of Agreement. Certain of the Parties may terminate this Agreement as provided below: (i) the Buyer, ASC and the Seller may terminate this Agreement by mutual written consent at any time prior to the Closing; (ii) the Buyer may terminate this Agreement by giving written notice to the Seller at any time prior to the Closing (A) in the event the Seller has breached any one or more representations, warranties, or covenants contained in this Agreement, which breaches, individually or in the aggregate, 38 are materially adverse to the business, properties, results of operations or financial position of the Companies taken as a whole, the Buyer has notified the Seller of the breach, and the breach has remained materially adverse to the business, properties, results of operations and financial condition of the Companies taken as a whole for a period of 30 days after the notice of breach or (B) if the Closing shall not have occurred on or before December 1, 1997, by reason of the failure of any condition precedent under ss. 8(a) hereof (unless the failure results primarily from the Buyer itself or ASC breaching any representation, warranty, or covenant contained in this Agreement); and (iii) the Seller may terminate this Agreement by giving written notice to the Buyer or ASC at any time prior to the Closing (A) in the event the Buyer or ASC, as the case may be, has breached any one or more representations or warranties contained in this Agreement, which breaches, individually or in the aggregate, result in a failure or refusal of USFS to issue the USFS Consents or New USFS Permits or are otherwise materially adverse to the business, properties, results of operations or financial position of the Companies taken as a whole or if the Buyer or ASC has breached any covenants contained in this Agreement, the Seller has notified the Buyer or ASC, as the case may be, of the breach, and the breach has continued without cure for a period of 30 days after the notice of breach or (B) if the Closing shall not have occurred on or before December 1, 1997. (b) Effect of Termination. If any Party terminates this Agreement pursuant to ss. 11(a) above, all rights and obligations of the Parties hereunder shall terminate without any liability of any Party to any other Party (except for any liability of any Party then in breach); provided, however, that the confidentiality provisions contained in ss. 6(d) and liquidated damages provisions contained in ss. 10(g) above shall survive termination. 12. Miscellaneous. (a) Arbitration. Any dispute required to be resolved pursuant to Section 2(c) or Section 2(e) of this Agreement shall be finally settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") then in effect as modified herein (the "Rules"). The arbitration shall be held in New York, New York, For the purposes of any arbitration hereunder, ASC and the Buyer shall be deemed to be one Party. There shall be three arbitrators, of whom each party shall select one. The claimant shall name its arbitrators in its demand. The respondent shall name its arbitrator in its answering statement, or, at the latest, within ten (10) days of its notification by the AAA of the claimant's demand. The party-appointed arbitrators shall select the third arbitrator within fifteen days of the appointment of the second arbitrator. The hearing shall commence 39 no later than thirty days and the award shall be rendered no later than sixty days following the appointment of the last of the three arbitrators. The arbitration shall be governed by the U.S. Arbitration Act, 9 U.S.C. ss. ss. 1-16. Judgment upon the arbitrators' award may be entered in any court of competent jurisdiction. (b) No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. (c) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they have related in any way to the subject matter hereof. (d) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written approval of the Buyer and the Seller; provided, however, that the Buyer may (i) assign any or all of its rights and interests hereunder to one or more of its Affiliates and (ii) designate one or more of its Affiliates to perform its obligations hereunder (in any or all of which cases the Buyer nonetheless shall remain responsible for the performance of all of its obligations hereunder). (e) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (f) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (g) Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to the Seller: Kimihito Kamori Kamori International Corporation 2305 Mt. Werner Circle, Steamboat Springs, CO 80487 Tel: (970) 879-6111 Fax: (970) 879-7463 40 Copy to: Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, NY 10022 Attn: Kenju Watanabe, Esq. Tel: (212) 735-3476 Fax: (212) 735-2000 If to the Buyer and ASC: ASC Holdings, Inc. P.O. Box 450 Attn: Chris Howard, Esq. Bethel, ME 04217 Tel: (207) 824-5151 Fax: (207) 824-5158 Copy to: Pierce Atwood 1 Monument Square Bethel, ME 04101 Attn: David Champoux, Esq. Tel: (207) 791-1364 Fax: (207) 791-1350 Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. (h) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. (i) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer, ASC and the Seller. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in 41 any way any rights arising by virtue of any prior or subsequent such occurrence. (j) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (k) Expenses. Except as otherwise specifically provided in this Agreement, whether or not the transactions contemplated hereby are consummated, (i) all costs and expenses incurred by the Buyer in connection with this Agreement and the transactions contemplated hereby shall be paid by the Buyer or ASC, as the case may be, and (ii) all costs and expenses incurred by the Seller and the Companies in connection with this Agreement and the transactions contemplated hereby shall be paid by the Seller or the Companies, as the case may be. It is agreed that the Buyer shall pay the cost of all surveyors and title companies in connection with the transactions contemplated hereby. (l) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. (m) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits, Annexes, and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. (n) Joint and Several Obligations of the Buyer and ASC. ASC and the Buyer shall be jointly and severally liable with respect to any of the representations, warranties, covenants and other agreements of either or both of them contained herein. 42 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date first above written. ASC WEST By: /s/ Leslie B. Otten Title:_________________________________ ASC HOLDINGS, INC. By: /s/ Leslie B. Otten Title:_________________________________ KAMORI INTERNATIONAL CORPORATION By: /s/ Kimihito Kamori Title:_________________________________ 43 EX-2.2 4 ESCROW AGREEMENT (ASC/KAMORI, LTCB) Exhibit 2.2 ESCROW AGREEMENT ESCROW AGREEMENT dated as of August 1, 1997 among Kamori International Corporation (the "Seller"), ASC West ("Purchaser"), and LTCB Trust Company ("Escrowee"). Background The Seller and Purchaser are parties to that certain Purchase and Sale Agreement dated as of the date hereof (the "Purchase Agreement") pursuant to which the Seller has agreed to sell and Purchaser has agreed to purchase the Property in accordance with the terms set forth in the Purchase Agreement. Capitalized terms used in this Agreement and not defined shall have the meanings specified in the Purchase Agreement. Pursuant to the Purchase Agreement, Purchaser shall deliver to Escrowee the Initial Deposit and the Additional Deposit to be held by Escrowee in accordance with the terms hereof. Agreement 1. In accordance with the terms of the Purchase Agreement, within one business day following the date hereof, Purchaser is hereby delivering to Escrowee by federal wire transfer the sum of $11,000,000 (the "Deposit"), to be held by Escrowee in escrow pursuant to the terms of this Agreement. The executed Purchase Agreement shall be held in escrow by counsel for each party and released only upon (a) receipt of confirmation by the Escrowee of receipt of the Deposit and (b) receipt of confirmation by Donaldson, Lufkin & Jenrette Securities Corporation that the Purchase Agreement is acceptable to it. 2. The Deposit shall be invested by Escrowee in shares in any money market mutual fund of Federated Investors rated at least AAA by Standard & Poor or Aaa by Moody's Investors Service Inc. or Eurodollar time deposits with the Long-Term Credit Bank of Japan, Ltd. by Escrowee. Escrowee shall have no liability for the loss of principal or interest on the deposited funds by any depository or the failure of a depository to return the principal of, or pay interest on, the deposited funds when requested, or for any other default, action or inaction on the part of such depository. The Seller and Purchaser understand that it may take some time to deposit the funds and some time to withdraw the funds and that the funds will earn no interest during such times. Funds received by the Escrowee, at or prior to 11:00 am. New York City Time, will be invested on the day of receipt. Funds received after 11:00 a.m. will be invested on the following business day. The term "Deposit" as used herein shall, unless otherwise provided, be deemed to include any and all interest earned on the Deposit pursuant to this Agreement. 3. The Deposit shall be released by Escrowee only as follows: (a) In accordance with the joint written request and instruction of the Seller and Purchaser; (b) To Purchaser upon the written request of Purchaser stating that the Agreement has terminated and that Purchaser is entitled to the delivery of the Deposit, which delivery shall be made not sooner than ten (10) days after written notice of Purchaser's request has been delivered to the Seller and the Seller has failed to timely deliver to Escrowee the Notice of Dispute provided for hereinafter; (c) To the Seller upon the written request of the Seller stating that the Agreement has terminated and that the Seller is entitled to the delivery of the Deposit, which delivery shall be made no sooner than ten (10) days after written notice of the Seller's request has been delivered to Purchaser and Purchaser has failed to timely deliver to Escrowee the Notice of Dispute provided for hereinafter; or (d) To the Seller upon the written request of the Seller stating that the Buyer has failed to fund fully the purchase price for the Shares in a manner satisfactory to the Seller on or prior to October 31, 1997 in accordance to ss. 10(g) of the Purchase Agreement and that the Seller is entitled to the Delivery of the Deposit. In the event of the delivery by either Purchaser or the Seller of a unilateral request for disbursement as provided in subparagraphs (b) or (c) above, Escrowee shall promptly deliver written notice of such request to the other party to the Agreement. The party receiving notice of such request shall have a period of ten (10) days after its receipt of such notice within which to deliver to Escrowee and the other party to the Agreement a notice (the "Notice of Dispute") disputing the other party's entitlement to delivery of the Deposit and failure to deliver such Notice of Dispute shall be conclusively presumed to indicate such party's acquiescence in the request for disbursement of which it has had notice. Upon receipt of a Notice of Dispute, Escrowee shall give 2 prompt notice thereof to the party initially requesting delivery of the Deposit and shall take no further action thereafter except upon the joint written instruction of the Seller and Purchaser, or the order of a court of competent jurisdiction. 4. (a) The duties and responsibilities of Escrowee shall be limited to those expressly set forth herein, being purely ministerial in nature, and Escrowee shall incur no liability whatsoever hereunder except for willful misconduct or gross negligence. (b) Escrowee shall not be personally liable for any act taken or omitted hereunder if taken or omitted by it in good faith and in the exercise of its own best judgment and without willful misconduct or gross negligence. Escrowee shall also be fully protected in relying upon any written notice, demand, certificate, or document which it in good faith believes to be genuine and signed by the proper parties. (c) Escrowee shall be under no responsibility in respect of the amounts deposited with it other than faithfully to follow the instructions contained herein. It may obtain advice of counsel and shall be fully protected in any action taken in good faith, in accordance with such advice. It shall not be required to defend any legal proceedings that may be instituted against it in respect of the subject matter of these instructions unless requested so to do by the Seller and shall be indemnified by the Seller to its satisfaction against the cost and expense of such defense. It shall have no responsibility for the genuineness or validity of any document or other item deposited with it. (d) Escrowee shall have no liability to Purchaser and the Seller for any loss to the Deposit resulting from the failure of a bank in which the Deposit is deposited. 5. Both parties promise and agree to indemnify and save Escrowee harmless from any claims, liabilities, judgments, attorneys' fees, and other expenses of every kind and nature (other than those arising from Escrowee's willful misconduct or gross negligence and other than the normal de minimis costs of retaining the Deposit in accordance with paragraph 2 above) that may be incurred by Escrowee by reason of its acceptance of, and its performance under, this instrument; provided, however, that Purchaser shall not be obligated to indemnify Escrowee for attorneys fees for which Seller is obligated for under Section 4(c) hereof. 6. All of the terms and conditions in connection with Escrowee's duties and responsibilities are contained in this instrument and Escrowee is not expected to be required to be familiar with the provisions of any other instrument or agreement and shall not be charged with any responsibility or liability in 3 connection with the observance or non observance by any one of the provisions of any such instrument or agreement. 7. In the event of a dispute between any parties hereto, Escrowee shall be entitled, but shall not be required so to do, to deposit the Deposit in the Supreme Court of the State of New York located in New York County and thereupon be relieved of all responsibilities hereunder. 8. All notices, consents, approvals and other communications under this Escrow Agreement shall be in writing and shall be given in accordance with Section 12(h) of the Purchase Agreement. 9. The tax identification numbers of Seller and Purchaser are as follows: The Seller: 84-114-4087 Purchaser: 10. The Escrowee shall receive an up front flat fee of $10,000 payable by the Purchaser for their services hereunder. 11. This Agreement shall be construed and enforced in accordance with the laws of the State of New York and shall be binding upon and inure to the benefit of Purchaser and the Seller and their respective successors and permitted assigns, and Escrowee. 12. This Escrow Agreement shall terminate and be of no further force and effect from and after the date that final distribution has been made hereunder. 4 Escrowee, the Seller and Purchaser have executed this Agreement as of the day and year first above written. LTCB TRUST COMPANY. By: ------------------------------------- Name: Title: KAMORI INTERNATIONAL CORPORATION By: /s/ Kimihito Kamori ------------------------------------- Name: Title: ASC WEST By: /s/ Leslie B. Otten ------------------------------------- Name: Title: 5 EX-3.2 5 BY-LAWS OF THE REGISTRANT Exhibit 3.2 BYLAWS OF ASC HOLDINGS, INC. Adopted: May 29, 1997 ARTICLE I Name Section 1. Name. The name of this corporation is stated in the Articles of Incorporation. ARTICLE II References, Locations and Seal Section 1. References. References in these Bylaws to the Articles of Incorporation shall mean this corporation's Articles of Incorporation as amended from time to time as on file with the Secretary of State of Maine. References in these Bylaws to the Maine Business Corporation Act and to particular sections of said Act are to said Act and said sections as amended from time to time. The headings of Articles and Sections in these Bylaws are for convenience only, and shall not be taken into account in construing these Bylaws. Section 2. Office and Location. The registered office of this corporation in Maine and the municipality or other place in Maine where it is located are set forth in the Articles of Incorporation. The principal office and place of business of this corporation, within or without Maine, shall be at such place as the Board of Directors shall from time to time fix. Section 3. Seal. The seal of this corporation shall be circular in form with the name of the corporation, the word "Maine" and the year of its incorporation so engraved on its face that it may be embossed on paper by pressure, provided that the Board of Directors may adopt a wafer seal in any form in respect of any particular document, in which case such wafer seal affixed to such document shall be the corporate seal of this corporation thereon for all purposes provided by law. The Clerk shall have custody of the corporate seal and he or the Secretary may affix the same to documents requiring it and attest the same. The Clerk may permit the President or Secretary to keep a duplicate of the corporate seal. ARTICLE III Meetings of Shareholders Section 1. Place. All meetings of shareholders shall be held at the registered office of the corporation or at such other place within Maine (or outside Maine if permitted by the Articles of Incorporation) as shall be fixed (i) by the Board of Directors, (ii) by the person or persons calling the meeting, or (iii) in waivers of notice of the meeting signed by all persons entitled to notice thereof. Section 2. Date of Annual Meeting. The annual meeting of shareholders shall be held on the third Tuesday of April in each year, if not a legal holiday, and if a legal holiday, then on the next business day following, at 10:00 A.M., Local Time, or at such other hour as may be fixed by the President or Board of Directors, for the election of a Board of Directors, and for the transaction of such other business as may properly come before the meeting. The annual meeting of shareholders may likewise be held at any date and time fixed by the President or Board of Directors during a period of 30 days after the date hereinabove specified. If there shall be a failure for whatever reason to hold the annual meeting for a period of 30 days after the date hereinbefore specified, a substitute annual meeting of shareholders may be called by any person or persons entitled to call a special meeting of shareholders. Section 3. Call of Special Meetings. Special meetings of shareholders for any purpose or purposes may be called to be held at the date and time fixed in the call by the President, the Chairman of the Board of Directors (if any), a majority of the Board of Directors, or the holders of not less than 50% of the shares entitled to vote at the meeting. Section 4. Notice. Unless waived in the manner prescribed by law, written notice stating the place, day and time of the meeting and, in case of a special meeting or when otherwise required by the Maine Business Corporation Act, the purpose or purposes for which the meeting is called, shall be delivered within the time period prescribed in ss. 604(1) of the Maine Business Corporation Act, either personally or by mail, by or at the direction of the President, Secretary, Clerk, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting, and to shareholders of record not entitled to vote when required by the Maine Business Corporation Act. ARTICLE IV Quorum and Voting of Shares Section 1. Quorum. The holders of a majority of the shares entitled to vote thereat shall constitute a quorum at a meeting of shareholders. Section 2. Votes. Except as otherwise provided by the Maine Business Corporation Act, any corporate action shall be authorized by a majority of the votes cast at the meeting by the holders of shares entitled to vote on the subject matter. In elections of Directors, those candidates who receive the greatest number of votes cast at the meeting by the holders of shares entitled to vote to elect Directors, even though not receiving a majority of the votes cast, shall be deemed elected. ARTICLE V Directors Section 1. Number and Term. The number of Directors shall be fixed by resolution of the shareholders or the Board of Directors within the limits specified in the Articles of Incorporation. The Directors shall be elected at the annual meeting of the shareholders, and each Director so elected shall hold office for one year and until the next succeeding annual meeting and until his successor shall have been elected and qualified, or until his earlier resignation, removal from office, death or incapacity. Section 2. Vacancies, Resignation and Removal. Any vacancy in the Board of Directors, including newly created directorships created by an increase in the number of Directors, may be filled by a majority of the remaining Directors or by the sole remaining Director. Any Director may resign his office by delivering a written resignation to the President or Clerk. Section 3. Powers. In the management and control of the business, property and affairs of the corporation, the Board of Directors is hereby vested with the power to authorize any and all corporate action, except when shareholder action is specifically required by the Maine Business Corporation Act, the Articles of Incorporation or these Bylaws, or except when otherwise required by a written agreement pursuant to ss. 618 of the Maine Business Corporation Act. ARTICLE VI Meetings of the Board of Directors Section 1. Annual Meeting. The first meeting of each newly elected Board of Directors, which shall be the Annual Meeting of the Board of Directors, shall be held at such time and place as shall be fixed by the shareholders at their meeting electing them, or if no such time and place are so fixed, said first meeting shall be held at the place of and immediately following such meeting of shareholders. In either event, no notice of such meeting shall be necessary. Such meeting of the Board of Directors may also convene at such place and time as shall be fixed by the consent in writing of all the Directors. Section 2. Regular Meetings. Regular meetings of the Board of Directors may be held at such time and place as shall from time to time be fixed by the Board of Directors. Unless action is to be taken with respect to the Articles of Incorporation or Bylaws, no notice of such regular meetings shall be necessary. Section 3. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors (if any), President, Clerk, Secretary or any other person or persons authorized byss.709(6) of the Maine Business Corporation Act. The person or persons calling the special meeting shall fix the time and place thereof. Section 4. Notice; Generally. Notice of each special meeting of the Board of Directors shall be given to each Director who has not signed a waiver of notice before or after the meeting. Notices of meetings of the Board of Directors shall be given by the Clerk or Secretary or the person or persons calling the meeting. Neither the business to be transacted at nor the purpose of the meeting need be specified in the notice unless the Maine Business Corporation Act shall otherwise require. The giving of notice of a special meeting of the Board of Directors by or at the direction of the person or persons authorized to call the same shall constitute the call thereof. Section 5. Notice; When and How Given. Notice of meetings of the Board of Directors may be given by any of the following methods within the time period specified for that method: (a) by depositing a copy of the notice in the United States mail, first class postage prepaid, addressed to the Director at his usual or last known business or residence address, at least 3 business days before the meeting; (b) by delivering a copy of the notice to a recognized overnight delivery or express service addressed to the Director at his usual or last known business or residence address, including street or the like in the address, at least 2 business days before the meeting; (c) by delivering a copy of the notice in hand to the Director at least 24 hours before the meeting; (d) by reading or causing to be read the notice over the telephone to the Director at least 24 hours before the meeting; (e) by sending a telegram containing the contents of the notice addressed to the Director at his usual or last known business or residence address at least 2 business days before the meeting; (f) by transmitting the contents of the notice by telecopy, fax or any other electronic means for the simultaneous or substantially simultaneous transmission of data to a telephone or other number held out by the Director as a number maintained by him for the receipt of the means of transmission selected at least 24 hours before the meeting; or (g) by sending a copy of the notice by any usual means of communication addressed to the Director at his usual or last known business or residence address, including street or the like in the address, at least 3 business days before the meeting. Notice to any Director actually received by him at least 24 hours before the meeting shall be deemed sufficient, notwithstanding the method or means of communication selected or the time when sent. For the purposes of this Section, a "business day" is any day other than a Saturday, Sunday or legal holiday in Maine. ARTICLE VII Executive and Other Committees Section 1. Establishment; Authority. The Board of Directors, by a resolution adopted by a majority of the Directors then in office, may designate from among its members an executive committee and other committees, each consisting of 2 or more Directors, and may delegate to such committee or committees any part or all of the authority of the Board of Directors, except as otherwise provided by ss. 713 of the Maine Business Corporation Act relating to certain amendments, mergers, certain sales, dissolutions,certain distributions and the like. Section 2. Procedures. Vacancies in the membership of a committee shall be filled by resolution adopted by a majority of the Directors then in office. Committees shall keep minutes of their proceedings and report the same to the Board of Directors. Members of a committee may be removed from office, with or without cause, by resolution adopted by a majority of the Directors then in office. Any person or persons authorized to call a meeting of the Board of Directors, as well as the chairman of a committee or the committee itself, may call a meeting of a committee. Except as hereinbefore otherwise provided, so far as applicable, the provisions of these Bylaws relating to the calling, noticing and conduct of meetings of the Board of Directors shall govern the calling, noticing and conduct of meetings of committees. ARTICLE VIII Officers Section 1. Number. The officers of the corporation shall be elected by the Board of Directors and shall be a President, a Secretary and a Treasurer. The Board of Directors may also elect one or more Vice Presidents (one of whom may be designated by the Board of Directors as the Executive Vice President), and one or more Assistant Secretaries and Assistant Treasurers. The corporation shall also have a Clerk who shall not be an officer by reason of such position. Section 2. When Chosen; Qualifications; Term. The Board of Directors at its initial meeting after the incorporation of the corporation and at each Annual Meeting thereafter shall elect said officers, who shall hold office until the next Annual Meeting of the Board of Directors and thereafter until their successors are chosen and have qualified, or until their earlier death, resignation or removal from office; provided that the Clerk shall not be elected annually and shall hold office until his death or a change of Clerk is made pursuant to ss. 304 of the Maine Business Corporation Act. No officer must also be a Director. Section 3. Authority and Duties. Each officer shall have such authority and perform such duties as are set forth in the Maine Business Corporation Act or in these Bylaws, and as shall be determined from time to time by the Board of Directors. Each officer shall also have such authority and perform such duties as are usually incumbent upon his office except as the same may be limited from time to time by the Board of Directors. Section 4. Compensation of Officers. The compensation of all officers of the corporation shall be fixed by the Board of Directors. Section 5. President. The President shall be the chief executive officer of the corporation, shall preside at all meetings of the shareholders and of the Board of Directors at which he is present, and shall see that all orders and resolutions of the Board of Directors are carried into effect. Section 6. Vice President. The Vice President, if any, or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors, shall, in case of the absence or disability of the President, have the authority and perform the duties of the President. If the Board of Directors shall elect an Executive Vice President, it shall be presumed that he is the Vice President determined by the Board of Directors first to act in case of the absence or disability of the President. Section 7. Secretary. The Secretary or the Clerk shall attend all meetings of the Board of Directors and record all the proceedings of the Board of Directors in a book kept for that purpose. The Secretary shall perform like duties for the executive committee. In case of the absence or disability of the Secretary, or if the corporation shall have no Secretary, all of the powers of the Secretary may be exercised by the Clerk. The Clerk, Secretary or an Assistant Secretary may certify all votes, resolutions and actions of the shareholders and the Board of Directors and its committees. Section 8. Assistant Secretaries. The Assistant Secretary, or if there be more than one, the Assistant Secretaries, in the order determined by the Board of Directors, shall, in case of the absence or disability of the Secretary, have the authority and perform the duties of the Secretary. Section 9. Treasurer. The Treasurer shall have the custody of the corporate funds and securities, and shall deposit all such funds in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall keep or cause to be kept all books and records of account and shall prepare or cause to be prepared all financial statements required by ss. 625 of the Maine Business Corporation Act, the Board of Directors or good accounting practices. The Treasurer shall render to the Board of Directors, whenever required, accounts of all corporate financial transactions and of the financial condition of the corporation. Section 10. Assistant Treasurers. Except as hereinbefore provided, the Assistant Treasurer, or, if there shall be more than one, the Assistant Treasurers, in the order determined by the Board of Directors, shall, in case of the absence or disability of the Treasurer, have the authority and perform the duties of the Treasurer. ARTICLE IX Voting Shares of Other Corporations Section 1. Voting Shares of Other Corporations. The Chairman of the Board of Directors, if any, the President, any Vice President, the Secretary, the Treasurer and the Clerk of this corporation, in that order, shall have authority to vote shares of other corporations standing in the name of this corporation, and the President, Secretary or Clerk is authorized to execute and deliver in the name and on behalf of this corporation proxies appointing any one or more of the foregoing officers as the proxy agents of this corporation. ARTICLE X Lost Stock Certificates Section 1. Lost Stock Certificates. The Board of Directors may authorize, generally or in a specific case, the appropriate officers to execute and deliver a replacement certificate for shares of this corporation in substitution for any certificate for shares theretofore issued alleged to have been lost, destroyed or stolen. Unless waived by the Board of Directors, the officers executing the replacement certificate shall require the registered holder thereof to sign and swear to an affidavit of loss and indemnity agreement in such form as shall be prescribed by the Clerk. In addition, the Board of Directors may prescribe such other terms and conditions precedent to the issuance of replacement certificates, including without limitation the requirement of further indemnities and surety bonds or insurance policies, as it deems appropriate to protect the corporation and its officers and agents from any claim that may be made against it or them with respect to any such certificate alleged to have been lost, destroyed or stolen. The powers and duties of the Board of Directors prescribed in this ARTICLE X may be delegated in whole or in part to any registrar or transfer agent for this corporation. ARTICLE XI Transfers and Registration of Shares Section 1. Stock Transfer Books. Upon surrender to the corporation or the transfer agent of the corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto, and the old certificate cancelled and the transaction recorded in the original stock transfer books of the corporation, provided that the provisions of Article XV of these Bylaws respecting restrictions on transfers of shares have been complied with. The original issue of shares of this corporation shall likewise be recorded in the original stock transfer books of the corporation. Section 2. Registered Shareholders. The corporation shall be entitled to recognize the person or persons shown on its original stock transfer books as the owner of shares as the exclusive and only owner thereof for all purposes, including without limitation the right to (i) receive dividends and other distributions; (ii) vote (except as otherwise provided in ss. 613 of the Maine Business Corporation Act); and (iii) examine lists, books, minutes or other materials relating to the corporation. The corporation shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person not noted in its original stock transfer books, whether or not it shall have express or other notice thereof. ARTICLE XII Indemnification Section 1. Definitions. For all purposes of this Article, (i) the term "Officer" (when capitalized, but not otherwise) shall mean any person who is or was a Director, the President, the Treasurer, the Secretary or the Clerk of this corporation; (ii) the term "Employee" (when capitalized, but not otherwise) shall mean any other person (whether or not a common law employee) who is or was an officer, employee or agent of this corporation, or is or was serving at the request of this corporation as a director, officer, trustee, partner, fiduciary, employee or agent of another corporation, partnership, joint venture, trust, pension or other employee benefit plan, or other enterprise; and (iii) the term "Claimant" (when capitalized, but not otherwise) shall mean any Officer or Employee seeking indemnification under this Article. Section 2. Indemnification. This corporation shall in all cases indemnify any Officer, and shall have power exercisable by its Board of Directors as provided in Section 5 hereof to indemnify any Employee, who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that the Claimant is or was an Officer or Employee, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement to the extent actually and reasonably incurred by the Claimant in connection with such action, suit or proceeding; provided that no indemnification may be provided for any Claimant with respect to any matter as to which the Claimant shall have been finally adjudicated: A. Not to have acted honestly or in the reasonable belief that the Claimant's action was in or not opposed to the best interests of this corporation or its shareholders or, in the case of a Claimant serving as a fiduciary of an employee benefit plan or trust, in or not opposed to the best interests of that plan or trust, or its participants or beneficiaries; or B. With respect to any criminal action or proceeding, to have had reasonable cause to believe that the Claimant's conduct was unlawful. The termination of any action, suit or proceeding by judgment, order or conviction adverse to the Claimant, or by settlement or plea of nolo contendere or its equivalent, shall not of itself create a presumption that the Claimant did not act honestly or in the reasonable belief that the Claimant's action was in or not opposed to the best interests of this corporation or its shareholders or, in the case of a person serving as a fiduciary of an employee benefit plan or trust, in or not opposed to the best interests of that plan or trust or its participants or beneficiaries and, with respect to any criminal action or proceeding, had reasonable cause to believe that the Claimant's conduct was unlawful. Section 3. Derivative Actions. Notwithstanding any provision of Section 2 hereof, this corporation shall not indemnify any person with respect to any claim, issue or matter asserted by or in the right of this corporation as to which the Claimant is finally adjudicated to be liable to this corporation unless the court in which the action, suit or proceeding was brought shall determine that, in view of all the circumstances of the case, the Claimant is fairly and reasonably entitled to indemnity for such amounts as the court shall deem reasonable. Section 4. When Defense Successful. Any provisions of Sections 2, 3 or 5 hereof to the contrary notwithstanding, to the extent that a Claimant has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 2 or 3, or in defense of any claim, issue or matter therein, the Claimant shall be indemnified against expenses, including attorneys' fees, actually and reasonably incurred in connection therewith. Section 5. Determination in Specific Cases. Any indemnification of an Employee under Section 2 hereof, unless ordered by a court or required by Section 4 hereof, shall be made by this corporation only as authorized in the specific case upon a determination that indemnification of the Claimant is proper in the circumstances and in the best interests of this corporation. Where such a case specific determination is required, that determination shall be made by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to the action, suit or proceeding, or if such a quorum is not obtainable, or even if obtainable if so directed by a majority vote of a quorum of disinterested Directors, by independent legal counsel in a written opinion, or by the shareholders. Such a determination once made may not be revoked and, upon the making of that determination, the Employee may enforce the indemnification against this corporation by a separate action notwithstanding any attempted or actual subsequent action by the Board of Directors. Section 6. Advances of Expenses. Expenses incurred by or in behalf of an Employee in defending a civil, criminal, administrative or investigative action, suit or proceeding may be authorized and paid by this corporation in advance of the final disposition of that action, suit or proceeding upon a determination made in accordance with the procedure established in Section 5 hereof that, based solely on the facts then known to those making the determination and without further investigation, the Claimant satisfies the standard of conduct prescribed by Section 2 hereof. Expenses incurred by or in behalf of an Officer in defending a civil, criminal, administrative or investigative action, suit or proceeding shall in all cases be paid, as reasonably requested from time to time by the Officer, by this corporation in advance of the final disposition of the action, suit or proceeding upon receipt by this corporation, at the time of the initial advance, of: A. A written undertaking by or on behalf of the Officer to repay all amounts advanced if the Officer is finally adjudicated: (1) Not to have acted honestly or in the reasonable belief that his action was in or not opposed to the best interests of this corporation or its shareholders, or, in the case of a Claimant serving as a fiduciary of an employee benefit plan or trust, in or not opposed to the best interests of that plan or trust, or its participants or beneficiaries; (2) With respect to any criminal action or proceeding, to have had reasonable cause to believe that his conduct was unlawful; or (3) With respect to any claim, issue or matter asserted in any action, suit or proceeding brought by or in the right of this corporation, to be liable to this corporation, unless the court in which the action, suit or proceeding was brought permits indemnification in accordance with Section 3 hereof; and B. A written affirmation by the Officer that he has met the standard of conduct necessary for indemnification by this corporation as authorized in this Article. The undertaking required by paragraph A shall be an unlimited general obligation of the Officer seeking the advance, but need not be secured and may be accepted without reference to financial ability to make the repayment. Section 7. Indemnification Not Exclusive. The indemnification and entitlement to advances of expenses provided by this Article shall not be deemed exclusive of any other rights to which a Claimant may be entitled under any agreement, vote of shareholders or disinterested directors or otherwise, both as to action in the Claimant's official capacity and as to action in another capacity while holding an office with this corporation, and shall continue as to a person who has ceased to be a director, officer, employee, agent, trustee, partner or fiduciary and shall inure to the benefit of the heirs, personal representatives, executors and administrators of such a person. Section 8. Enforceable By Separate Action. A right to indemnification required by this Article or established pursuant to the provisions of this Article may be enforced by a separate action against this corporation, if an order for indemnification has not been entered by a court in any action, suit or proceeding in respect to which indemnification is sought. Section 9. Miscellaneous. For purposes of this Article, (i) references to this "corporation" shall include, in addition to the surviving corporation or new corporation, any participating corporation in a consolidation or merger; (ii) this corporation shall be deemed to have requested a person to serve an employee benefit plan whenever the performance by him of his duties to this corporation also imposes duties on, or otherwise involves services by, him to the plan or participants or beneficiaries of the plan; and (iii) excise taxes assessed on a person seeking indemnification with respect to an employee benefit plan pursuant to applicable law shall be deemed "fines". Section 10. Amendment. Any amendment, modification or repeal of this Article shall not deny, diminish or otherwise limit the rights of any Claimant to indemnification or advances hereunder with respect to any action, suit or proceeding arising out of any conduct, act or omission occurring or allegedly occurring at any time prior to the date of such amendment, modification or repeal. ARTICLE XIII Fiscal Year Section 1. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors. ARTICLE XIV Execution of Documents Section 1. Execution of Documents. Unless the Board of Directors, Executive Committee or shareholders shall otherwise generally or in any specific instance provide: A. Any bill, note or negotiable instrument may be signed or endorsed in the name and on behalf of this corporation in the ordinary course of business by the President or Treasurer, acting singly; B. The President or Treasurer, acting singly, shall in the ordinary course of business have authority to sign or endorse in the name and on behalf of this corporation all checks and other orders for the payment of money drawn on any bank or trust company; C. The President or Treasurer, acting singly, shall have authority to make, in the name and on behalf of this corporation, all contracts in the ordinary course of business; and D. Any other instrument, document, deed, bill of sale or other writing of whatever nature to be executed in the ordinary course of business may be executed in the name and on behalf of this corporation by the President or Treasurer, acting singly, and either officer may seal, acknowledge and deliver the same. Section 2. Assistants. Vice Presidents and Assistant Treasurers shall not have the authority provided in Section 1 unless granted by the Board of Directors generally or in any specific instance. ARTICLE XV Restrictions on Transfers of Shares Section 1. Restrictions on Sales of Shares. If any shareholder of this corporation, his personal representative, executor, administrator or any person, firm or corporation claiming by, through or under him, including without limitation any assignee for the benefit of creditors or trustee in bankruptcy or receiver, however appointed, of a shareholder (said shareholder or any other such person being hereinafter called the "transferring party") desires to sell for a sum or sums of money all or any part of the shares of this corporation owned by said shareholder or his legal representatives, and has received a bona fide offer therefor, the transferring party shall first give written notice of proposed sale to the Treasurer of this corporation, which notice shall state the number of shares desired to be sold, the amount of the bona fide offer, and the name of the person to whom he desires to sell the same, and for a period of forty-five (45) days following receipt of such notice by the Treasurer, this corporation or any person or persons specified by the Board of Directors (this corporation or any such person or persons being hereinafter called the "optionee") shall have an option to purchase such shares for the amount of the bona fide offer so stated. The option may be exercised by the optionee by depositing a written notice of election to exercise signed by the optionee in the United States mails, first class postage prepaid, addressed to the transferring party at his usual residence or business address, or by delivery of said signed notice of election to exercise to the transferring party, in either case within said forty-five (45) day period. If the optionee does not exercise said option within said forty-five (45) day period, the transferring party may sell and assign the number of shares stated in the notice of proposed sale to the person named therein at the price therein stated, provided said sale is made within seventy-five (75) days following the Treasurer's receipt of the notice of proposed sale. The Board of Directors may by resolution waive the option herein granted and authorize the sale of shares specified in their resolution to a person named therein, whether or not the Treasurer has received a notice of proposed sale. Section 2. Restrictions on Gifts and Other Transfers. If the transferring party desires to make a transfer or other disposition (including without limitation gifts, transfers for a consideration other than money, sales not pursuant to bona fide offers, exchanges or dispositions by way of distribution pursuant to the terms of any will or trust) of all or any part of the shares of this corporation owned by said shareholder or his legal representatives, and such proposed transfer or other disposition is not controlled by Section 1 hereof for any reason, the transferring party shall first give written notice of proposed transfer to the Treasurer of this corporation, which notice shall state the number of shares desired to be transferred or otherwise disposed of and the name of the person to whom the same are to be transferred or disposed of, and the manner of and reason for the transfer or disposition, and the consideration (if any) to be received, and the optionee shall have the option to purchase such shares at the fair value thereof. In the event the transferring party and the optionee are unable to agree on the amount of the fair value of such shares within forty-five (45) days after receipt of the notice of proposed transfer by the Treasurer, the fair value shall be determined by three appraisers, one to be chosen and compensated by the transferring party (such choice to be made and announced in writing to the Treasurer within sixty (60) days after his receipt of the notice of proposed transfer), one to be chosen by the President or Board of Directors of this corporation (within 30 days after announcement of the choice of the first appraiser) and compensated by the optionee, and the third to be chosen by the two appraisers so chosen (within 15 days after the choice of the second appraiser) and compensated equally by the transferring party and the optionee. If the transferring party fails to choose an appraiser within the time set forth in the preceding sentence, the fair value of the shares shall be determined by two appraisers, the first to be chosen by the President or Board of Directors of this corporation and the second to be disinterested and chosen by the first; the compensation of both such appraisers shall be borne equally by the transferring party and the optionee. In either such event, the decision of said appraisers or a majority thereof as to fair value shall be final, binding and conclusive upon all parties. In either such event, the appraisers in determining fair value of the shares shall take into account appropriate control premiums or minority discounts, and shall take into account the nonmarketability of the shares, and shall take into account the going concern value of this corporation's business, but shall not take into account the value of any proceeds of any life insurance policies on the life of the transferring party (or the shareholder represented by the transferring party) in excess of cash surrender value. The optionee's option pursuant to this Section 2 shall not expire until the expiration of a period of sixty (60) days after the determination of fair value by agreement or by the appraisers or a majority of them, or until thirty (30) days after any judgment with respect to appraisal hereunder or fair value in an action commenced during or before said 60-day period has become final, whichever is later. The option may be exercised by the optionee by depositing a written notice of election to exercise signed by the optionee in the United States mails, first class postage prepaid, addressed to the transferring party at his usual residence or business address, or by delivery of said signed notice of election to exercise to the transferring party, in either case within the later of said periods. If the optionee does not exercise said option within the later of said two periods, the transferring party may transfer or dispose of the number of shares stated in the notice of proposed transfer to the person named therein in the manner and for the consideration (if any) stated therein, provided that the transfer or other disposition is made within thirty (30) days following the expiration of the later of said two periods. The Board of Directors may by resolution waive the option herein granted and authorize the transfer or other disposition of shares specified in their resolution to a person named therein, whether or not the Treasurer has received a notice of proposed transfer. Section 3. Provisions Binding. Notwithstanding any other provisions of these Bylaws, no shares of this corporation shall be sold, transferred or otherwise disposed of, nor transferred upon the original stock transfer books of this corporation, nor shall any purported purchaser, transferee or assignee thereof have any right to demand and require transfer of any shares of this corporation attempted to be sold or transferred to him, nor have or exercise any of the rights of a shareholder of this corporation, until after notice given in accordance with Sections 1 or 2 of this Article and until after expiration of the option of the optionee or express waiver thereof by the Board of Directors as therein provided. All certificates for shares issued by this corporation shall have the following legend conspicuously printed, typewritten or stamped thereon: "Transfers of the shares represented by this certificate are subject to and may be made only upon compliance with the provisions of Article XV of the Bylaws of this corporation relating to restrictions on sales or transfers of shares." Section 4. Pledges. Nothing in Sections 1 or 2 of this Article shall in any way limit or restrict the right of the owner of shares of this corporation to pledge the same as security; provided, however, that any pledgee of shares of this corporation shall be subject to and shall comply with the provisions of said Sections 1 or 2 prior to making any sale, transfer or other disposition of the pledged shares to any person (including without limitation vesting beneficial or record ownership in the pledgee) other than the pledgor or his legal representatives. Article XVI Amendments to Bylaws Section 1. Amendments. The Board of Directors shall have the power to alter, amend or repeal these Bylaws, and to adopt new Bylaws, provided that the notice, unless notice shall be duly waived, of any regular or special meeting at which such action is to be taken shall either set out the text of the proposed new Bylaw or amendment or Bylaw to be repealed, or shall summarize the changes to be effected by such adoption, amendment or repeal, and provided further that the shareholders may amend or repeal a Bylaw provision adopted by the Board of Directors and in such case the Board of Directors may not, for two years thereafter, amend or readopt the Bylaw provision thus amended or repealed by the shareholders. EX-10.7 6 DEVELOPMENT AGREEMENT EXHIBIT 10.7 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- DEVELOPMENT AGREEMENT BETWEEN ASC UTAH AND IRON MOUNTAIN ASSOCIATES, LLC - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TABLE OF CONTENTS RECITALS.......................................................................1 AGREEMENT......................................................................2 ARTICLE I: COOPERATIVE PLANNING EFFORTS......................................2 1.01 IMA Project ..............................................................2 1.02 ASC Project ..............................................................2 1.03 Cooperative Efforts ......................................................3 1.04 Government Approvals ...................................................3-4 1.05 Separate Approval and Permitting .........................................4 1.06 Costs and Expenses .......................................................4 ARTICLE II: DENSITY CREDIT EXCHANGE ..........................................4 2.01 Basic Exchange .........................................................4-5 2.02 Definitions ..............................................................5 2.03 Additional Buildings in IMA Project ......................................5 2.04 Conditional Rights in Leased Lands.......................................6 2.05 IMA Development Rights ..................................................6 2.06 Failure to Deliver 100 Units.............................................6 ARTICLE III: CONSENT TO INCLUSION OF PROPERTY.................................7 3.01 Consent to Inclusion Defined ............................................7 3.02 ASC Consent to Inclusion.................................................7 3.03 Limitations to ASC Consent to Inclusion..................................7 3.04 Consent to Inclusion of Others...........................................7 3.05 Planning and Design Control of IMA Project.............................7-8 ARTICLE IV.....................................................................8 4.01 Participation Ratio....................................................8-9 a. ASC Participation Ratio................................................8 b. Net Proceeds Defined...................................................8 c. Verification of Net Percent..........................................8-9 d. Affiliates of IMA......................................................9 4.02 ASC Payments.............................................................9 4.03 Deferment of Payments....................................................9 4.04 Lot Releases for Development Purposes.................................9-10 ii ARTICLE V: RIGHT OF WAY EASEMENTS............................................10 5.01 Right of Way Easements To and Across ASC and IMA Fee Properties..........10 5.02 Right of Way Easements To and Across the ASC Lease Property..............10 5.03 Right of Way Easements To and Across Osguthorpe Lands....................10 5.04 Nature of Right of Way Easements......................................10-11 ARTICLE VI: SKI LEASE........................................................11 6.01 Lease Established.......................................................11 ARTICLE VII: CLARIFICATION AND CONSTRUCTION OF ROW EASEMENTS AND SKI IMPROVEMENTS..................................................................11 7.01 Initial and Final Locations...........................................11-12 7.02 Construction of ROW Easements and Ski Improvements.......................12 7.03 Cost of Construction..................................................12-13 ARTICLE VIII: DEVELOPMENT COSTS AND MARKETING................................13 8.01 Development Costs.......................................................13 8.02 Allocation of Development Costs.........................................13 8.03 Marketing...............................................................14 ARTICLE IX: IRON MOUNTAIN....................................................14 9.01 Limitations on Skiing...................................................14 ARTICLE X: WATER RIGHTS.....................................................14 10.01 Cooperative Efforts....................................................14 10.02 IMA Water Agreement.................................................14-15 10.03 ASC Water Commitment...................................................15 10.04 Water for the 100 Units................................................15 ARTICLE XI: REPRESENTATIONS, WARRANTIES and COVENANTS........................15 11.01 IMA Representations, Warranties and Covenants..........................15 11.02 ASC Representations, Warranties and Covenants.......................15-16 11.03 Mutual Representations, Warranties and Covenants...................16-17 ARTICLE XII: ARBITRATION....................................................17 ARTICLE XIII: DEFAULT.......................................................17 iii 13.01 Default.................................................................18 13.02 13.02 Notice of Default.............................................18-19 13.03 Time to Cure............................................................19 13.04 Default Under Lease Agreement...........................................19 13.05 Rights and Remedies.....................................................19 ARTICLE XIV: MISCELLANEOUS...................................................19 14.01 Force Majeure...........................................................19 14.02 Certificates.........................................................19-20 14.03 Governing Law...........................................................20 14.04 Partial Invalidity......................................................20 14.05 Gender..................................................................20 14.06 Interpretations.........................................................20 14.07 Counterparts............................................................20 14.08 Parties.................................................................20 14.09 Entire Agreement........................................................20 14.10 Amendments..............................................................20 14.11 Successors and Assigns..................................................20 14.12 No Warranties...........................................................21 14.13 Construction of Agreement...............................................21 14.14 Headings................................................................21 14.15 Time is of the Essence..................................................21 14.16 Further Assurances......................................................21 14.17 No Waiver...............................................................21 14.18 Survival of Covenants...................................................21 14.19 Attorneys Fees.......................................................21-22 14.20 Notices.................................................................22 iv SCHEDULES A IMA Property - IMA Fee Property - IMA Lease Property B. ASC Property - ASC Fee Property - ASC Lease Property C. Preliminary Development Plan D. Lease E. IMA Disclosures F. ASC Disclosures v This Development Agreement (the "Agreement") is entered into this ___ day of ________, 1997 between ASC Utah, a Maine corporation, ("ASC"), Iron Mountain Associates, LLC , a Utah limited liability company ("IMA"), WPA, LTD. , a Utah limited partnership ("WPA"), Iron Mountain Holding Group, LC , a Utah limited liability company ("IMHG") and Iron Mountain Alliance, Inc., a Utah corporation ("IMAI"), WPA, IMHG and IMAI being collectively referred to as the "Members of IMA," and all collectively referred to as the "Parties." RECITALS 1. ASC, with a principal place of business in Newry, Maine, is qualified to do business in the State of Utah. All of the issued and outstanding common stock of ASC is owned beneficially and of record by ASC Holdings, Inc., a Maine corporation. All of the outstanding voting stock of ASC Holdings, Inc. is owned beneficially and of record by Leslie B. Otten. American Skiing Company, a Maine corporation, is a subsidiary of ASC Holdings, Inc. 2. IMA, with a principal place of business in Summit County, Utah ("Summit County"), conducts business pursuant to an Operating Agreement dated September 14, 1995, and is qualified to do business in the State of Utah. 3. The Members of IMA own the real property interests in Summit County described in Schedule A attached hereto and incorporated herein by reference (the "IMA Property"). The IMA Property consists of real estate owned in fee by IMHG and certain leasehold interests owned by IMAI. The portion of the IMA Property owned in fee is separately identified in Schedule A and is referred to herein as the "IMA Fee Property." The portion of the IMA Property consisting of a leasehold interest with State of Utah School and Institutional Trust Lands Administration ("Trust Lands"), Lessor is separately identified in Schedule A and is referred to herein as the "IMA Lease Property." 4. ASC owns the real property interests described in Schedule B attached hereto and incorporated herein by reference (the "ASC Property"). The ASC Property consists of both real estate owned in fee and certain leasehold interests. The portion of the ASC Property owned in fee is separately identified in Schedule B and is referred to herein as the "ASC Fee Property." The portion of the ASC Property consisting of a sub-leasehold interest in lands owned by Trust Lands is separately identified in Schedule B and is referred to herein as the "ASC Lease Property." 5. IMA and ASC each contemplate the development of their respective properties as generally shown on the Preliminary Development Plan shown in Schedule C attached hereto and incorporated herein by reference ("Preliminary Development Plan"). 6. ASC and IMA previously executed a letter of intent dated May 14, 1997, as well as that certain Ski Lift and Trail Lease Agreement and ASC Utah Commitment Regarding Tombstone Ski Easement dated July 24, 1997, and now desire to enter into this Agreement to definitively set forth in legally binding form certain agreements regarding the development of their respective properties, as generally contemplated by the letter of intent. AGREEMENT Now, therefore, in furtherance of the foregoing and in consideration of the recitals, mutual promises, covenants, conditions, and agreements hereinafter set forth, the Parties to this Agreement, intending to be legally bound, agree as follows: ARTICLE I COOPERATIVE PLANNING EFFORTS 1.01 IMA PROJECT. IMA is in the process of planning the development of a low density, large lot residential subdivision on the IMA Property (the "IMA Project"). IMA intends that the IMA Project will be located upon the IMHG Fee Property and the IMAI Lease Property, and the following additional properties: (a) that portion of the ASC Fee Property consisting of the 650 acres in White Pine Canyon recently acquired by ASC from the George and John Condas Family, identified in Schedule A and referred to herein as "The ASC/Condas Property." (b) that portion of the ASC Lease Property consisting of approximately 240 acres in Section 2 which generally lies south and east of the ridgeline between Red Pine and White Pine Canyons identified in Schedule A and referred to herein as "The ASC/Section 2 Property," the development of which as part of the IMA Project shall be pursuant to a separate development lease to be established between IMA and Trust Lands; and (c) the two parcels in White Pine Canyon consisting of 200 acres in Sections 10 and 13 currently owned by the Bureau of Land Management (the "BLM") which are the subject of an exchange between the BLM and Trust Lands, which are intended to be included in the IMA Lease Property by future agreement with Trust Lands and which are identified in Schedule A and referred to herein as "The BLM Lands." 1.02 ASC PROJECT. ASC is in the process of planning a commercial alpine ski resort (the "ASC Project"). ASC has recently acquired, and is in the process of developing and expanding, the so-called Wolf Mountain Ski Resort, a portion of which is located on the ASC Property. ASC intends that the development and expansion should include not only the ASC Property and the ASC Lease Property, but also the following additional properties: (a) portions of the IMA Property consisting of an as yet undetermined number of acres in Sections 1, 6, 7, 11, 12 and 13 which are identified in Schedule B and referenced to herein as "The IMA Ski Lease Property." 2 (b) portions of the property owned by the Osguthorpe Family which consist of approximately 550 acres in Sections 1 and 3 and which are identified in Schedule B and referred to herein as "The Osguthorpe Property." 1.03 COOPERATIVE EFFORTS. IMA and ASC recognize and agree that development of the IMA Project and the ASC Project must occur in an environment of mutual cooperation in which the needs and requirements of the respective developments must be integrated and accommodated. To assist in accomplishing that goal, IMA and ASC hereby agree to engage in a collaborative decision-making process to implement the Preliminary Development Plan using the following "General Principles" as a basis for the collaborative decision-making: (a) The Parties recognize that the Preliminary Development Plan is intended to serve as the initial depiction of the easement locations, the IMA Ski Lease Property and the boundaries of the IMA and ASC Projects, and the Parties agree that the planning, permitting and development process will require mutual cooperation in making the necessary adjustments and alterations to the Preliminary Development Plan to accommodate the needs of the IMA Project and the ASC Project. (b) The Parties recognize and agree that it is their mutual objective to maximize the value of the IMA Project and the ASC Project and that the projects shall be designed to complement one another without adversely impacting the value of either project. (c) The Parties agree that their projects will be designed so as to preserve and enhance the scenic, aesthetic and environmental qualities of the area, to the maximum extent reasonably possible consistent with the essential nature of both projects and their commercial viability. (d) The Parties will, to the maximum extent reasonably possible, integrate their design and planning so as to produce a combined residential and resort experience that functions in a complementary fashion, and will provide to each other, the opportunity to review and comment upon their respective development programs prior to the submittal of applications, or amendments to existing applications, to governmental authorities. (e) The Parties will, consistent with the independent nature of the projects, approach the planning and permitting process on a coordinated basis in an effort to minimize the demands on regulatory authorities and portray to regulatory authorities as cohesive a development plan for the area as reasonably possible. (f) The Parties each will exercise their best efforts to foster a cooperative working environment in the planning, permitting and development process with all landowners adjoining the ASC Project and the IMA Project, and to coordinate, to the greatest extent possible, the development of real estate development projects on adjoining property with the IMA Project and the ASC Project. 3 1.04 GOVERNMENTAL APPROVALS. The Parties covenant and agree to cooperate fully with each other in any and all applications, proceedings and appeals made or prosecuted by the other in connection with obtaining any necessary permits, licenses, approvals or consents under the zoning, land use, environmental and/or building regulations, ordinances, codes, laws and directives of all of the federal, state, county and other authorities having jurisdiction over the development, including without limitation, the Snyderville Basin Planning Commission and the Summit County Board of County Commissioners, provided such applications, proceedings or appeals are consistent with the Preliminary Development Plan, as amended or revised pursuant to Section 7.01. Each party shall execute any and all documents, instruments, consents and authorizations requested by the other which shall reasonably be necessary or desirable with respect thereto. Either party reasonably may prosecute such applications, proceedings and appeals through counsel of its choice, but shall do so at its own cost and expense. 1.05 SEPARATE APPROVAL AND PERMITTING. Notwithstanding the provisions of Sections 1.01 and 1.02 above, IMA and ASC reserve the right to make legally separate applications for all necessary permits and approvals for their respective developments. Any such applications may proceed independently from each other as to the timeline for approval; however, the parties will exercise their best efforts to coordinate their independent applications. As regards the timing of applications, the parties will coordinate timing to the extent necessary to maintain IMA's status as a Base Density project, as provided in Section 2.01(b) below. 1.06 COSTS AND EXPENSES. Except as specifically provided herein, or as provided in a separate written agreement executed by ASC and IMA subsequent to the date hereof, each party shall bear its own costs and expenses associated with the planning and permitting of its projects and any reviews provided for hereunder. ARTICLE II DENSITY CREDIT EXCHANGE 2.01 BASIC EXCHANGE. As part of their cooperative effort, ASC and IMA agree to the following exchange: (a) ASC shall grant to IMA fee simple title to land within the ASC Project on which ASC has received approval from Summit County for one-hundred (100) permanent whole ownership residential units and for which, pursuant to said approval, ASC has recorded a final plat (the "100 Units"). IMA shall have the right to construct, own, market and sell the 100 Units, subject to the conditions specified below. The 100 Units shall be located within the mountain village in Section 2 of the ASC Lease Property if that area is developed as such by ASC. The 100 Units and the land upon which the 100 Units are located shall be conveyed to IMA free and clear of any encumbrances, liens, and/or obligations of any kind whatsoever. ASC agrees to exercise commercially reasonable efforts to obtain approvals for the 100 Units within sixty (60) months of the date hereof. In the event such approvals are not obtained within that period, IMA's obligation to repay the $1m Line of Credit under Section 8(f) of the Lease Agreement shall be forgiven. 4 (b) IMA shall grant to ASC the sole and exclusive right and authority (to the exclusion of all parties including IMA) to apply for, negotiate, obtain and use for purposes of increasing density allowed on the ASC Property, any and all Density Credits (as defined below) resulting from or associated with the development of the IMA Property which Summit County authorities may be willing to grant over and above the Base Density as defined below. IMA shall develop the IMA Project consistent with the guidelines described below at Base Density (as defined herein) in a manner that maximizes Density Credits (as defined herein) associated with the IMA Project. ASC shall have the right to transfer, use and apply to the ASC Project all Density Credits it may attain by negotiation with Summit County relating to IMA Project , including without limitation any Density Credits from the IMHG Fee Property, the ASC/Condas Property, the ASC/Section 2 Property, the IMAI Lease Property and any portions of the BLM Lands which may come under the ownership of Trust Lands and which subsequently are leased to IMAI and become part of the IMA Project. ASC agrees that it shall not seek any definition or quantification of Density Credits relative to Phase 1 of the IMA Project to the extent that seeking any such information would adversely impact the timing of approvals for Phase 1 of the IMA Project. 2.02 DEFINITIONS. The Parties recognize and acknowledge that the terms "Base Density" and "Density Credits" have not been fully defined in the Summit County zoning process. Thus, the provisions of this Article II are intended as conceptual descriptions of provisions anticipated to be incorporated into final zoning for the area by Summit County. The commitment described in Section 2.01 above shall remain conceptual in nature and shall be interpreted broadly so as to effect the intent of the Parties. Implementation of the final zoning by Summit County may alter the definitions in this Section and shall affect this Section only, and shall not act to alter the remainder of this Agreement or the intent of the Parties. The intent of the Parties is that IMA shall plan and develop the IMA Project as a large lot residential subdivision at Base Density. For the purposes of this Agreement, "Base Density" is defined as (a) the minimum development density permitted by Summit County in the proposed Snyderville Basin General Plan for the property included within the IMA Project, provided the lot yield resulting from the minimum development density is not less that 1 unit per 20 acres on property with slopes under 30% and 1 unit per 40 acres on property with slopes of 30% or greater; and (b) any additional units which may be required by Summit County planning authorities as a condition of approval of the IMA Project to satisfy requirements for neighborhood centers, affordable and/or employee housing, and the like. Consistent with the foregoing minimum development density, the development of the IMA Project in this manner would maximize the Density Credits associated with the IMA Project. For the purposes of this Agreement, "Density Credits" means any and all credits, benefits, transfers or other allowances, by whatever name or nature, created by or associated with limiting development to Base Density, whether formally or informally, in the IMA Project; including, without limitation, Density Credits for the preservation of excess open space, environmental and wildlife enhancements, public trails or public access, transfers of density, and the like. The nature and extent of Density Credits, and the means of transferring or crediting Density Credits to the ASC Project is currently uncertain. In accordance with the terms of Section 2.01, ASC shall have the lead in working with Summit County authorities to establish 5 these concepts; provided however, ASC shall have no authority to bind IMA to any commitment to Summit County. 2.03 ADDITIONAL BUILDINGS ON IMA PROPERTY . Any units, buildings or other structures which IMA may wish to add to the IMA Project which are not included in the "Base Density" as defined herein shall be considered "discretionary" and shall be deducted, at IMA's option, either from the IMA "Base Density" or from the 100 Units ; provided, however, that IMA shall work in concert with ASC to assure that any "discretionary" additions to the IMA Project will not adversely impact the nature of the project so as to materially impair ASC's ability to maximize Density Credits through negotiation with Summit County authorities. 2.04 CONDITIONAL RIGHTS IN LEASED LANDS. The Parties acknowledge that their ability to meet their obligations under certain provisions of this Agreement is conditioned on the resolution of issues with Trust Lands on the IMA Lease Property and the ASC Lease Property. ASC's ownership and use of Density Credits derived from the IMA Lease Property and the BLM Lands is subject to the resolution of the issues between Trust Lands and IMA, and the grant by ASC to IMA of the 100 Units located in the ASC Lease Property is subject to the resolution of the issues between Trust Lands and ASC. ASC acknowledges and agrees that it is "at risk" as to the ownership and use of Density Credits which may be derived from the IMA Lease Property and the BLM Lands if Trust Lands and IMA cannot resolve the issues between them. As it relates to the ASC Lease Property, the Parties agree that the grant by ASC to IMA of the 100 Units is of central importance to this Agreement. ASC agrees, therefore, that if ASC and Trust Lands cannot resolve the issues between them on the ASC Lease Property, ASC shall not be relieved of its obligation to grant the 100 Units to IMA. In that event, and subject to IMA's approval, ASC then shall grant to IMA the 100 Units on another portion of the ASC Property or, on a portion of the land within the IMA Ski Lease Property approved by IMA for such use. 2.05 PLANNING AND DESIGN CONTROL. ASC shall determine the planning, design, configuration, and location of the 100 Units within the ASC Project. The 100 Units in the ASC Project developed and owned by IMA shall be built in conformance with the ASC Project development program and design criteria, except that if the 100 Units are located within the IMA Ski Lease Property then they shall not be subject to this restriction and IMA shall have final design approval. The 100 Units shall have access to amenities established by ASC for the other residences and commercial rental units in that portion of the ASC Project. The 100 Units shall be permanent full-time residential units representative of the entire mix of multi-family and/or single family units in the mountain village in Section 2 of the ASC Lease Property, excluding conference facilities, hotels, time-shares and other commercial rental units. More specifically, the 100 Units shall be a mix of units of various sizes and types and which, when all aspects of a residential unit such as floor area, amenities, location and similar attributes material to each unit's value are taken into account, represent a cross section of the mix in the mountain village. If the 100 Units are located within the IMA Ski Lease Property then the 100 Units shall not be constrained or limited in size by the foregoing provision unless a limitation is imposed by Summit County as a general planning condition and provided there is no adverse impact upon Density Credits available to ASC. 6 2.06 FAILURE TO DELIVER 100 UNITS. In the event ASC has not received planning approval from Summit County for the 100 units and delivered same to IMA as provided herein within sixty (60) months of the date hereof, IMA's obligation to repay the One-million Dollar ($1,000,000) Line of Credit established under Section 8(f) of the Lease Agreement (as defined below) shall be forgiven. In the event ASC has not received planning approval for the 100 Units and delivered same to IMA within seventy-two (72) months of the date hereof, then at IMA's option and in lieu of the delivery of 100 Units, ASC shall execute and deliver to IMA a promissory note in the principal amount of $10,000,000 with interest at the rate of ten percent (10%) per annum, payable in ten (10) equal annual installments of principal plus accrued interest. ARTICLE III CONSENT TO INCLUSION OF PROPERTY 3.01 CONSENT TO INCLUSION DEFINED. For the purposes of this Agreement, "consent to inclusion of property" shall be defined as the consent of a property owner (a) to include the land which it owns in the common development plan of the IMA Project as described herein , and (b) to share proportionately all costs and revenues of the development on the terms and conditions as set forth in this Agreement ("Consent to Inclusion"). 3.02 ASC CONSENT TO INCLUSION: ASC hereby Consents to Inclusion of the ASC/Condas Property. Further, ASC hereby Consents to Inclusion of the ASC/Section 2 Property and the BLM Lands, subject to (a) the revision of the IMA/Trust Lands lease to include these properties, and (b) the release of the ASC/Section 2 Property from the ASC/Trust Lands sub-lease. ASC hereby consents to the release of the ASC/Section 2 Property from the ASC/Trust Lands sub-lease and any future lease between ASC and Trust Lands. The ASC Consent to Inclusion shall be subject to the terms and conditions related to the respective properties as set forth below in this Agreement. ASC agrees that it shall not negotiate with Trust Lands, directly or indirectly, for any development rights on the ASC/Section 2 Property and the BLM Lands, except that ASC shall have the right, as provided in Section 6.03 below, to separately negotiate and establish a ski lease with Trust Lands for the ASC/Section 2 Property and the BLM Lands. IMA hereby consents to such ski lease. 3.03 LIMITATIONS TO ASC CONSENT TO INCLUSION. The Consent to Inclusion of the ASC/Condas Property shall not prevent or prohibit the use and development of that property by ASC as part of its ski resort development, provided such use and development, including the design of any structures: (a) shall not be inconsistent with the use, development and overall design of the IMA Project; and (b) shall not require public access to the ski resort development on the road, except for maintenance; and 7 (c) shall have been approved by IMA based upon the General Principles which approval shall not be unreasonably withheld. 3.04 CONSENT TO INCLUSION BY OTHERS. In addition to IMA and ASC, other property owners who may Consent to Inclusion may include, but may not be limited to, Trust Lands, United Park City Mines, Park City Mountain Resort, Silver King Mining Company, and Mines Venture Company, all of which have property interests in White Pine Canyon and the master plan area of the IMA Project. Consistent with Section 1.01(f), IMA and ASC agree that they shall not oppose a Consent to Inclusion of these property owners. 3.05 PLANNING AND DESIGN CONTROL OF IMA PROJECT. IMA shall determine the planning, design, configuration, and location of all lots, units and structures within the IMA Project. Any structures built within the IMA Project shall be built in conformance with the program, design criteria, covenants, conditions and restrictions established by IMA for the IMA Project. All lots and units within the IMA Project shall have access to all amenities established by IMA for the IMA Project generally and/or for the specific phase in which the lot or unit is located. ARTICLE IV PAYMENTS TO PROPERTY OWNERS 4.01 THE PARTICIPATION RATIO. As consideration for its Consent to Inclusion of property in the IMA Project, ASC and any additional property owner shall participate in the IMA Project by sharing in the net proceeds of the sale of all IMA Project lots according to a participation ratio. In order to maximize value, density within the IMA Project will be clustered; lots will be sited in the very best locations without regard to property ownership boundaries. In order to avoid potential disputes between property owners as to which property owner should receive which lots, each participating property owner shall receive a proportionate payment from the net proceeds (as defined below) of each and every lot sold in the IMA Project. The proportionate payment to each property owner shall be calculated by multiplying the net proceeds of each and every lot sale by a fraction, the numerator of which is the Base Density attributable to the land contributed by that property owner and the denominator of which is the total Base Density attributable to all the land contributed to the IMA Project. The fraction shall constitute the participation ratio (the "Participation Ratio"). (a) THE ASC PARTICIPATION RATIO. The Base Density of the ASC/Condas Property is currently estimated at 20 lots. The Base Density of the entire IMA Project is currently estimated at 155 lots. These quantities are estimates only and will be adjusted once the Base Density of each property within the IMA Project has been calculated. Based on current estimates, the ASC Participation Ratio would be 20/155 or 12.90% (the "ASC Participation Ratio"). The final ASC Participation Ratio will be based upon the Base Density determinations as set forth in Section 2.02. (b) NET PROCEEDS DEFINED. For the purposes of this Agreement, "Net Proceeds" shall be defined as the value of all consideration, whether paid in cash or by note, derived 8 from the sale of each lot in the IMA Project or any amenities, memberships, privileges or services associated therewith, less a proportionate share, equal for each lot, of (i) the cost of goods sold which shall include all development costs; (ii) the cost and expenses of sale (including marketing costs); and (iii) the cost of financing the development costs of the IMA Project, all determined in accordance with Generally Accepted Accounting Principles (the "Net Proceeds"), provided that any development costs of the IMA Project paid by ASC shall be excluded from all costs in applying ASC's participation ratio to Net Proceeds. For the purposes of this Agreement, "development costs" are defined in Section 8.01 below. (c) VERIFICATION OF NET PROCEEDS. The calculation of Net Proceeds shall be subject to verification by any one or more of the participating property owners by audit of IMA's books of account. The full cost of the audit shall be paid by the property owner(s) requesting the audit. IMA, when requested, shall make its books, records and personnel (including its outside accountants, agents or consultants) available to any participating owner(s) for the purpose of conducting the audit. (d) AFFILIATES OF IMA. The cost of any transactions with, or payments to, affiliates of IMA, IMHG or IMAI shall be adjusted to the market rate for such transactions which prevails in the area. Affiliates of IMA, IMHG or IMAI shall include any persons or organizations (including corporations, partnerships, limited partnerships, limited liability companies and limited liability partnerships) that control, are controlled by or are under common control of IMA, IMHG or IMAI or any combination thereof. Control means either holding a majority of the capital, equity, cash flow, profits, residuals or voting interests in the entity or otherwise exercising or having the ability or right to directly or indirectly, individually or collectively exercise effective management and control of the entity. 4.02 ASC PAYMENTS. ASC shall be entitled to receive from IMA payments equal to the sum of the Net Proceeds received by IMA from the sale of all lots in the IMA Project multiplied by the ASC Participation Ratio. IMA shall remit payments to ASC within 30 days of receipt of any cash by IMA, together with a statement certified by IMA's chief financial officer setting forth the calculation of Net Proceeds in sufficient detail to provide an independent public accounting firm with an adequate basis to verify the calculation upon audit. 4.03 DEFERMENT OF PAYMENTS. Notwithstanding any provision herein to the contrary, IMA shall have the right, in its sole and absolute discretion, to establish a development reserve funded by the deferral of payments to participating property owners from any phase in order to provide a reserve in an amount reasonably sufficient to adequately provide for the financing of projected infrastructure costs of the ensuing phase. IMA shall not defer the payments of one or more property owner(s) to establish such a reserve fund unless it defers the payments of all property owners, including IMA and any affiliates, in which case the amount of the deferment for each property owner shall be calculated on a proportional basis as determined by the Participation Ratio. 9 4.04 LOT RELEASES FOR DEVELOPMENT PURPOSES. Any property owner who participates in the IMA Project shall have the right at any time to obtain the release of any lot for development purposes (the "Lot Release"). So as not to disadvantage any other property owner(s), a lot release may be obtained only by agreeing to pay the price at which the lot is then being marketed (the "Release Consideration"). The Release Consideration shall be paid as follows: (a) At the time of the lot release (the "Release Date"), the participant requesting the Lot Release, shall, as part of the Release Consideration, pay to IMA in cash, the pro-rata share of the Development Costs for that lot (as defined in Article VIII below). (b) The balance of the Release Consideration shall become a first lien on the released lot (the "Release Lien") and shall be paid as follows: (i) interest shall accrue at 10% on the principal amount of the Release Lien and shall be paid annually; (ii) all principal and interest accrued on the Release Lien shall be due and payable twenty-four (24) months from the Release Date; and (iii) the Release Lien shall not be subordinated to any development loan unless secured by a takeout commitment. A Lot Release shall not affect or reduce the Participation Ratio or the share of Net Proceeds of the property owner obtaining the Lot Release. ARTICLE V RIGHT OF WAY EASEMENTS 5.01 RIGHT OF WAY EASEMENTS TO AND ACROSS ASC AND IMA FEE PROPERTIES: The Parties hereby grant transferable ROW Easements to and across the IMA Fee Property and the ASC Fee Property in the general locations depicted on the Preliminary Development Plan ("the ROW Easements)". On the Preliminary Development Plan, the ROW Easements granted to IMA by ASC are identified as the "IMA ROW #1" and the ROW Easements granted to ASC by IMA are identified as the "ASC ROW #1." The ROW Easements shall be granted by ROW Easement Deeds (the "ROW Deeds") in form and substance acceptable to the Parties. The ROW Deeds shall be executed, delivered and recorded as soon as definitive locations for the ROW Easements have been agreed upon by the parties. 5.02 RIGHT OF WAY EASEMENTS TO AND ACROSS THE ASC LEASE PROPERTY: The Parties shall grant ROW Easements to and across the ASC Lease Property in the general locations depicted on the Preliminary Development Plan. On the Preliminary Development Plan, the ROW Easement which shall be granted to IMA is identified and referred to herein as "IMA 10 ROW #2" and the right of way easement which shall be granted to ASC is identified and referred to herein as "ASC ROW #2." The ROW Deeds shall be in the same form approved by the Parties as the ROW Deeds referred to in Section 5.01 above. The ROW Deeds for IMA ROW #2 and ASC ROW #2 shall be executed, delivered and recorded after the execution of agreements with Trust Lands for the development of the ASC Lease Property, provided none of the Parties is then in default of the provisions of this Agreement. 5.03 ROW EASEMENTS TO AND ACROSS OSGUTHORPE PROPERTY: The Parties shall grant the ROW Easements across the Osguthorpe Property in the general locations depicted on the Preliminary Development Plan. On the Preliminary Development Plan, the ROW Easement which shall be granted to IMA is identified and referred to herein as "IMA ROW #3" and the ROW Easement which shall be granted to ASC is identified on Schedule D and referred to herein as "ASC ROW #3." The ROW Deeds shall be in the same form approved by the Parties as the ROW Deeds referred to in Section 5.01 above. The ROW Deeds for IMA ROW #3 and ASC ROW #3 shall be executed, delivered and recorded after the execution of an agreement with the Osguthorpe Family provided none of the Parties is then in default of the provisions of this Agreement. 5.04 NATURE OF RIGHT OF WAY EASEMENTS. The Parties agree that the ROW Easements described in this Article IV shall be sufficient in width to meet the requirements of the Summit County Development Code for the purposes intended and shall be granted for the purpose of providing access by vehicle and on foot over and across the respective properties, and to provide a possible underground location for utility lines including sewer, water, gas, electric, telephone, communications, and the like. The ROW Deeds, in conformance with adjustments or refinements subsequently made by the Parties pursuant to Article VI, shall provide INTER ALIA that the ROW Easements, or portions thereof, are intended for use by the Parties, their successors and assigns, including without limitation the purchasers or lessees of property developed within the IMA and ASC Projects and their invitees; provided, however, that use of ASC ROW #1 and IMA ROW #1 by the general public or ASC's day skier traffic shall be prohibited and shall be limited in use to ASC, IMA and its members, and purchasers of lots in the IMA Project. ARTICLE VI CONSENT TO SKI LEASE 6.01 LEASE ESTABLISHED. The Parties shall execute and deliver concurrently herewith (a) a separate lease agreement (the "Lease" or "Lease Agreement"), and (b) a short form "Notice of Lease" in recordable form, all in substantial conformance with the terms set forth in Exhibit D attached hereto and incorporated herein by this reference. ARTICLE VII CLARIFICATION AND CONSTRUCTION OF ROW EASEMENTS AND SKI IMPROVEMENTS 7.01 INITIAL AND FINAL LOCATIONS. The ROW Easements granted in Article V and the boundaries of the Leased Premises as granted in Article VI and the Lease Agreement shall be 11 identified through a two step process. (a) INITIAL LOCATION. ROW Easements depicted in the Preliminary Development Plan shall constitute the initial locations of such rights of way, and the land area depicted as sites for Ski Improvements on the Preliminary Development Plan shall constitute the initial Leased Premises. The Preliminary Development Plan contains only an initial depiction of the ROW Easements and a general ski lift and skiing pod plan for the Leased Premises. ASC and IMA shall work cooperatively to refine the plan to include a general layout of easement locations and lifts, trails, defined skier boundary and related improvements, which elements may be adjusted through further analysis, design, and agreement between IMA and ASC using as a guide the "General Principles" set forth in Section 1.01 above. (b) FINAL LOCATION. The final location of the ROW Easements and the boundaries of the Leased Premises are subject to (a) final design of the developments contemplated to occur within the IMA Project and ASC Project, (b) agreement of the Parties as to location and boundaries, and (c) receipt of all necessary approvals by planning authorities for the design and location of the ROW Easements and boundaries. Therefore, consistent with the provisions of Section 1.01 hereof, the Parties agree to work together in good faith to establish final locations and boundaries as rapidly as reasonably possible and to accommodate the needs of both Parties and their respective developments. Upon approval of final plat design by planning authorities, but prior to recordation of the final plats, the Parties shall execute, deliver and record with the appropriate recording offices final definitive descriptions of the ROW Easement locations and boundaries of the Leased Premises in form acceptable to the Parties based upon the designs reflected in the final plat. The Leased Premises shall include not only the actual location of Ski Improvements, but also a reasonable buffer area in and around the Ski Improvements to allow for nominal relocation, improvement and use of the Ski Improvements in a fashion consistent with first class ski resort operations. ASC and IMA will negotiate in good faith the location and extent of any buffer area reasonably necessary for such Ski Improvements. 7.02 CONSTRUCTION OF ROW EASEMENTS AND SKI IMPROVEMENTS. (a) Each Party shall have the right, subject to the provisions of Section 8.01, to construct improvements within the ROW Easements and the Ski Improvements as are permitted hereunder subject to the following: (i) The General Plan, zoning and Development Code of Summit County shall permit the construction and operation of the ROW Easements and Ski Improvements contemplated. (ii) Adequate utilities (including sewer, water and necessary energy utilities) shall be available to serve the uses contemplated. 12 (iii) There shall be no easement, covenant or restriction affecting the property to be improved or any restriction under any state, county, or local laws or ordinances, which would prohibit the ROW Easements and Ski Improvements and the uses contemplated thereby. (iv) There shall be no easement, covenant or restriction affecting the property to be improved which, in the opinion of the Parties, would adversely affect the construction or operation thereon of the ROW Easements and Ski Improvements. (v) The Party undertaking the construction shall be in receipt of all necessary permits, licenses and approvals from the appropriate governmental authorities for the construction and operation of the contemplated ROW Easements and Ski Improvements in a manner and location, and under such conditions, as are acceptable to the Parties as provided herein. 7.03 COST OF CONSTRUCTION. The costs of constructing and maintaining the Ski Improvements and the roads within the ROW Easements and Ski Improvements shall be as follows: (a) ASC alone shall be responsible for construction of the Ski Improvements, at its own expense, and maintaining the ROW Easements and Ski Improvements located on, or at any time erected on, the IMA Ski Lease Property, and IMA shall not be required to furnish any services or facilities or to make any repairs or alterations to any Ski Improvements in or to the IMA Ski Lease Property, or any other improvements thereon, during the term of the Lease. (b) Each Party shall be responsible for construction and maintenance of the roads within the ROW Easements within their respective projects and shall bear the expense in the same manner as Development Costs as provided in Section 8.02 below. ARTICLE VIII DEVELOPMENT COSTS AND MARKETING 8.01 DEVELOPMENT COSTS. For the purposes of this Agreement, development costs shall be defined as all costs related to the planning, engineering, subdivision and improvement of the IMA and ASC Projects, including all infrastructure costs and the cost of any community, common area, or association based amenities, within the IMA Project or the ASC Project (the "Development Costs"). Development Costs shall not include the cost of acquisition of property or the cost of constructing residential or commercial structures within either project. 8.02 ALLOCATION OF DEVELOPMENT COSTS: Development Costs for each project shall be allocated between the Parties as follows: (a) ASC shall bear all Development Costs relating to the ASC Project, including the Section 2 alpine resort village and the bringing infrastructure to the 13 boundary of the Section 2 parcel conveyed to IMA for the 100 Units, and any development within the IMA Ski Lease Property. However, should IMA request that a portion of the 100 Units be developed as a separate development of single family, detached dwellings adjacent to the area shown on the Preliminary Development Plan identified as and referred to herein as the "Tombstone Lift Base," then in that event IMA shall pay and ASC shall not be required to pay the Development Costs related to such separate development of that portion of the 100 Units and the Participation Ratio provided for in Section 4.01 shall not apply to that separate development. (b) IMA and ASC shall share the Development Costs relating to the IMA Project according to the Participation Ratio calculated for each party, as provided for in Sections 4.01 and 4.02 above. Each lot within the IMA Project shall bear an equal share of all the Development Costs, including infrastructure costs, of the IMA Project. ASC's share of the Development Costs shall be the total Development Costs of the IMA Project multiplied by the ASC Participation Ratio. ASC's liability for Development Costs shall be limited to the net proceeds payable to or realized by ASC under Article IV hereof. (c) IMA shall not bear any cost of constructing any structures, which may include INTER ALIA bridges, tunnels, culverts, and the like, where ski trails cross roadways at any point within the IMA Project. (d) ASC's liability for infrastructure costs shall be limited to the Net Proceeds payable to or realized by ASC under Section 4.03 hereof. ASC shall have no obligation to pay infrastructure costs from its own funds in advance of sales of lots in the IMA Project, except as provided in Section 7.03. 8.03 MARKETING. ASC and IMA shall retain marketing control over their respective projects. Any interests of IMA or ASC in units within the other party's project shall not be independently marketed without the consent of the party in control of marketing for that project. The costs of inclusion in a marketing program will be allocated to each party based upon a specific identification of those costs. Those costs shall be reasonable based upon the generally applicable market for such activities. ARTICLE IX IRON MOUNTAIN 9.01 LIMITATION ON SKIING. The Parties agree that neither of them shall, without the prior written approval of the other, offer, discuss in detail or commit to any limitations regarding the potential development of ski terrain on the northwest face of Iron Mountain identified as and referred to on the Preliminary Development Plan as the "Northwest Face." Approval of the Parties shall be required only as its relates to the following issues: (a) The nature and extent of the limitations; (b) The time the consideration of any such limitations should be introduced into the public permitting or planning processes; and 14 (c) The consideration to be paid or provided for such limitations. ASC's right to develop ski terrain on Iron Mountain will be limited to the area on the Preliminary Development Plan identified as and referred to herein as the "Western Pod." ASC commits to submit an application for Ski Improvements in the Western Pod on or before December 31, 1999, and to construct the Ski Improvements in the Western Pod as reflected on the Preliminary Development Plan on or before December 31, 2000, subject to receipt of all necessary permits and approvals. ARTICLE X WATER RIGHTS 10.01 COOPERATIVE EFFORTS. ASC and IMA will work on a cooperative basis to identify and secure adequate water sources for their respective projects. This cooperative effort shall include: (a) Full disclosure of all existing and potential water sources on a continuing basis; (b) Prompt disclosure of all communications relating to possible water sources and consultation prior to any substantive communications or negotiations with third parties regarding the same. 10.02 IMA WATER AGREEMENT. IMA currently is negotiating a (a) Land Development and Water Service Agreement and (b) Agreement for Grant of Open Space Easement and Purchase and Sale Agreement and Escrow Instructions with Park City Municipal Corporation for water service to the IMA Project (the "IMA Water Agreement"). IMA shall exercise its best and most diligent efforts to consummate the IMA Water Agreement and shall keep ASC fully informed regarding that transaction. 10.03 ASC WATER COMMITMENT. In the event that IMA, despite its best and most diligent efforts, fails to consummate the IMA Water Agreement, then ASC shall provide to IMA, at ASC expense, the following: (a) a connection to an identifiable source of wet water acceptable to IMA with approved points of diversion, and (b) water rights sufficient to serve the IMA Project. 10.04 WATER FOR THE 100 UNITS. ASC shall provide the water rights necessary for the 100 Units and access to a water system developed and paid for by ASC for that portion of the ASC Project in which the 100 Units are located. As provided for in subsection 8.02(a), IMA shall not be responsible for the cost of the acquisition of water rights for the 100 Units or for the cost of a pipeline for delivering water to the boundary of the parcel conveyed as a site for the 100 Units. ARTICLE XI REPRESENTATIONS, WARRANTIES AND COVENANTS 15 11.01 IMA REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as described in Schedule E, attached hereto and incorporated herein by this reference, IMA warrants, represents and covenants to ASC, upon which warranty, representation and covenants ASC has relied in the execution of the Agreement, and shall warrant, represent and covenant in the ROW Easements and the Lease, and any other documents which implement the provisions of this Agreement, the following: (a) IMA is a limited liability company duly organized and existing under the laws of the State of Utah and has full power and authority to carry on its business as now conducted; (b) The execution, delivery and performance of this Agreement has been duly authorized by all necessary actions under the IMA Operating Agreement and this Agreement constitutes a valid, binding obligation of IMA enforceable in accordance with its terms, except as limited by equitable principles and any applicable bankruptcy or creditors' rights, laws, rulings and regulations; (c) IMHG has good, marketable fee simple title to the Leased Premises and the IMA Fee Property , free and clear of all encumbrances, liens, defects in title, leases, tenancies, easements, restrictions and agreements, none of which to IMA's knowledge would materially impair the operation of the Leased Premises as a ski resort or will prevent or prohibit the development of the premises as a ski resort, provided, however, IMA is not a knowledgeable ski resort operator and therefore may not be fully cognizant of what may prevent or prohibit the development and operation of a ski resort. 11.02 ASC REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as described in Schedule F attached hereto and incorporated herein by this reference, ASC warrants, represents, and covenants, upon which warranty, representation and covenants IMA and its members have relied in the execution of this Agreement, and shall warrant, represent and covenant in the ROW Easements, the conveyance of the 100 Units, the Lease and any other documents which implement the provisions of this Agreement, the following: (a) ASC is a corporation duly organized and existing under the laws of the State of Maine and has full power and authority to carry on its business as now conducted; (b) The execution, delivery and performance of this Agreement has been duly authorized by all necessary actions by ASC and its affiliates and this Agreement constitutes a valid, binding obligation of ASC enforceable in accordance with its terms, except as limited by equitable principles and any applicable bankruptcy or creditors' rights, laws, rulings and regulations; (c) ASC has good, marketable fee simple title to the ASC Fee Property and the ASC/Condas Property, free and clear of all encumbrances, liens, defects in title, leases, tenancies, easements, restrictions, and agreements, none of which would materially impair the ability of ASC to grant the ROW Easements or prevent or prohibit the 16 development of the IMA Project, or prevent or prohibit the development of the 100 Units on the ASC Fee Property should it be necessary to do so. 11.03 MUTUAL REPRESENTATIONS, WARRANTIES AND COVENANTS: Except as described in Schedules E and F, each party mutually warrants, represents and covenants to the other, upon which warranty, representation and covenants each of them has relied in the execution of this Agreement, and shall warrant, represent and covenant in any document which implements this Agreement, the following: (a) This Agreement and the consummation of the transactions contemplated hereby and thereby do not and will not (1) 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 it is a party, or by which it or any of its properties or assets may be bound or affected or (2) violate any order, writ, injunction, decree or statute, or any rule, regulation, permit, license or conditions thereto, or (3) result in the creation or imposition of any lien, charge or encumbrance of any nature upon any of the properties; (b) This Agreement is a valid and binding obligation enforceable in accordance with its terms, subject to equitable principles and applicable bankruptcy and other creditors' rights laws, regulations and rulings. (c) There are no permits, licenses, approvals, clearances or other governmental consents which are required either for the execution and delivery of this Agreement or the initial ROW Easements or the Lease. (d) 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 its knowledge, threatened, against it with respect to any portion of its property or that would affect its ability to enter into and perform this Agreement. (e) It is not in violation of any applicable federal, state and local laws, rules, regulations, ordinances, codes or orders ("Laws") governing its property, and has not received written notification of any asserted material failure, past or present, to maintain its property 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. (f) It has no knowledge of any outstanding or threatened (i) actions, claims, proceedings, determinations or judgments by any party, including, but not limited to, any governmental authority or agency, against or involving ASC, 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 17 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; or(ii) 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 the its property which have not been complied with or resolved to the satisfaction of such governmental authority. (g) It has read the disclosures contained in Schedules E and F, have had adequate opportunity to ask questions regarding the disclosures, and hereby approve same. ARTICLE XII ARBITRATION Any dispute arising in connection with or in any way involving this Agreement shall be resolved by submission of the dispute to binding arbitration under the following provisions. Unless otherwise agreed by the parties in writing, the arbitration shall take place in Salt Lake City, Utah, and shall be conducted according to the rules for commercial arbitration of the American Arbitration Association. If the parties cannot agree on an arbitrator, each party shall select one arbitrator and the two arbitrators so chosen shall choose a third arbitrator. Unless otherwise specified herein, the parties shall jointly bear all costs of arbitration. All arbitration shall be binding. ARTICLE XIII DEFAULT 13.01 DEFAULT. A default in the terms of this Agreement shall be deemed to have occurred by the party identified below in the event of any one or more of the following events shall have occurred and shall not have been remedied as hereinafter provided. (a) A default by ASC shall have occurred upon: (i) ASC's failure to pay any Rent in accordance with the Lease Agreement when the same shall be due and payable and the continuance of such failure for a period of thirty (30) days after receipt by ASC of notice in writing from IMA specifying in detail the nature of such failure; or (ii) ASC's failure to perform any of, or conduct operations on a basis consistent with, the other covenants, conditions and agreements herein contained, or contained in the Lease Agreement, on ASC's part to be kept or performed and the continuance of such failure without the securing of same for a period of sixty (60) days after receipt by ASC of notice in writing from IMA specifying in detail the nature of such failure, and provided ASC shall not cure said failure as provided herein below; 18 (iii) ASC's abandonment of the operation of the ski resort; (iv) ASC's failure to include the ASC/Condas Property as part of the IMA Project under the terms and conditions set forth in Section 3.02; (v) ASC's execution of an agreement with Trust Lands on the ASC Lease Property which fails to provide for a separate lease of the ASC/Section 2 Property to IMA for inclusion in the IMA Project as provided in Section 3.02, which fails to provide for the grant the 100 Units free and clear of any encumbrances, covenants, conditions or restrictions as provided for in Section 2.01, and/or which fails to provide for the grant of IMA ROW #2 without cost to IMA as provided for in Section 5.02 ; or (vi) ASC's execution of an agreement with the Osguthorpe Family regarding access across the Osguthorpe Lands to the Section 2 Property which fails to provide for the grant of IMA ROW #3 without cost to IMA as provided in Section 5.03. (b) A default by IMA shall have occurred upon any failure of IMA to perform, observe or satisfy any of its obligations hereunder within a period of 60 days following written notice of such failure from ASC. 13.02 NOTICE OF DEFAULT. In the event of a default by any Party, the non-defaulting Party may, at its option, give to the defaulting Party a notice of election to terminate the Agreement upon a date specified in such notice, which date shall be not less than thirty (30) business days (Saturdays, Sundays and legal holidays excluded) after the date of receipt of such notice if the default has not been cured, and upon the date specified in said notice, the Agreement and any and all other right, title and interest hereunder shall cease without further notice or lapse of time. Simultaneously with the sending of the notice to the defaulting Party, hereinabove provided for, the non-defaulting Party shall send a copy of such notice to any leasehold Mortgagee(s) and to any persons or parties having an interest in the Agreement provided the defaulting Party, prior to the date of the notice, has provided the non-defaulting Party with a written list of all such leasehold Mortgagees, persons or parties having such an interest. The curing of any default(s) within the above time limits by any of the aforesaid persons or parties or combinations thereof, shall constitute a curing of any default(s) hereunder with like effect as if the defaulting Party had cured the same hereunder. 13.03 TIME TO CURE. Only in the event that ASC gives notice of a default by IMA pursuant to subsection 13.01(b) above or in the event that IMA gives notice of a default by ASC pursuant to subsection 13.02 above, and the default is of such a nature that it cannot be cured within the sixty (60) day period as provided for in said subsections, then such default shall not be deemed to continue so long as the defaulting Party, after receiving such notice, proceeds to cure the default as soon as reasonably possible and continues to take all steps necessary to complete the same within a period of time which, under all prevailing circumstances, shall be reasonable. No default shall be deemed to continue if and so long as the defaulting Party shall be so 19 proceeding to cure the same in good faith or be prevented from curing the same by any of the causes constituting Force Majeure as defined in Section 14.01 below. 13.04 DEFAULT UNDER LEASE AGREEMENT. Any default under the Lease Agreement shall constitute a default hereunder for which the Parties shall have all of the rights and remedies specified in Section 13.05 below.. 13.05 RIGHTS AND REMEDIES. In the event of a default by either party, the non-defaulting party shall have all rights and remedies provided at law and in equity for breach of this Agreement, including, without limitation, the right to specific performance. ARTICLE XIV MISCELLANEOUS 14.01 FORCE MAJEURE. In the event that IMA or ASC shall be delayed, hindered in or prevented from the performance of any act (except for the payment of Rent) required hereunder by reason of strikes, lock-outs, labor troubles, inability to procure materials, failure of power, restrictive governmental laws or regulations, riots, insurrection, the act, failure to act or default of the other party, war, economic depression, civil strife or other reason beyond their control, then performance of such act shall be excused for the period of the delay and the proof for the performance of any such act shall be extended for a period equivalent to the period of such delay. 14.02 CERTIFICATES. Either party shall, without charge, at any time and from time to time hereafter, within thirty (30) days after written request of the other, certify by written instrument duly executed and acknowledged to any mortgagee or purchaser, or proposed mortgagee or proposed purchaser, or any other person, firm or corporation specified in such request: (a) as to whether the Lease has been supplemented or amended, and if so, the substance and manner of such supplement or amendment; (b) as to the validity and force and effect of the Lease, in accordance with its tenor as then constituted; (c) as to the existence of any default thereunder; (d) as to the existence of any offsets, counterclaims or defense thereto on the part of such other party; (e) as to the commencement and expiration dates of the term of the Lease; and (f) as to any other matters as may reasonably be so requested. Any such certificate may be relied upon by the party requesting it and any other person, firm or corporation to whom the same may be exhibited or delivered, and the contents of such certificate shall be binding on the party executing same. 14.03 GOVERNING LAW: This Agreement and the performance thereof shall be governed, interpreted, construed and regulated by the laws of the State of Utah. 14.04 PARTIAL INVALIDITY. If any term, covenant, condition or provision of this Agreement or the application thereof to any person or circumstance shall, at any time or to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, covenant, condition and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 20 14.05 GENDER. Wherever herein the singular number is used, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders, and vice versa, as the context shall require. 14.06 INTERPRETATIONS. The section headings used herein are for reference and convenience only, and shall not enter into the interpretation hereof. 14.07 COUNTERPARTS. The Lease may be executed in several counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. 14.08 PARTIES. The terms "IMA" and "ASC" whenever used herein shall mean only the owner for the time being of IMA's or ASC's interest herein, and upon any sale or assignment of the interest of either IMA or ASC herein, their respective successors in interest and/or assigns shall, during the term of their ownership of their respective estates herein, be deemed to be IMA or ASC, as the case may be. 14.09 ENTIRE AGREEMENT. No oral statements or prior written matter shall have any force or effect. The Parties agree that they are not relying on any representations or agreements other than those contained in this Agreement. 14.10 AMENDMENTS. This Agreement shall not be modified or canceled except in writing and subscribed to by the Parties. 14.11 SUCCESSORS AND ASSIGNS. Except as herein otherwise expressly provided, the covenants, conditions and agreements contained in this Agreement shall bind and inure to the benefit of IMA and ASC and their respective heirs, successors, administrators representatives and assigns. 14.12 NO WARRANTIES. Except as otherwise specifically provided herein, neither party has made representations, warranties or agreements by or on behalf of either party as to any matters. No agreements, warranties or representations not expressly contained herein shall bind either party. 14.13 CONSTRUCTION OF AGREEMENT. The agreements contained herein shall not be construed in favor of or against either party, but shall be construed as if both parties prepared this Agreement. 14.14 HEADINGS. The paragraph headings herein are used only for the purpose of convenience and shall not be deemed to limit the subject of the paragraphs of this Agreement or to be considered in their construction. 14.15 TIME IS OF THE ESSENCE. Time is of the essence of each and every provision of this Agreement. 14.16 FURTHER ASSURANCES. Each of the parties shall execute and deliver any and all additional papers, documents and other assurances, and shall do any and all acts and things 21 reasonably necessary in connection with the performance of their obligations hereunder and to carry out the intent of the parties. 14.17 NO WAIVER. No waiver by any party of a breach of any of the terms, covenants or conditions of this Agreement by the other party shall be construed or held to be a waiver of any succeeding or preceding breach of the same or any other term, covenant or condition contained herein. No waiver of any default by a party hereunder shall be implied from any omission by such party to take any action on account of such default if such default persists or is repeated, and no express waiver shall affect a default other than as specified is such waiver. The consent or approval by a party to or any act by the other party requiring such party's consent or approval shall not be deemed to waive or render unnecessary such party's consent or approval to or of any subsequent similar acts by the other party. 14.18 SURVIVAL OF COVENANTS. All covenants, representations, warranties, obligations and agreements contained in this Agreement shall survive the execution and delivery of this Agreement and the delivery and recordation of all documents or instruments in connection therewith. 14.19 ATTORNEYS FEES. In any action, arbitration proceeding or other litigation ("Litigation") between the parties to declare the rights granted in this Agreement or to enforce the provisions of this Agreement, the party prevailing in the Litigation, whether at trial or on appeal, shall be entitled to its costs and expenses of suit, including, without limitation, a reasonable sum as and for attorneys' fees incurred in such Litigation. The term "prevailing party" as used in this paragraph shall not be limited to a prevailing plaintiff, but shall also include, without limitation, any party who is made a defendant in Litigation in which damages or other relief or both may be sought against such party and a final judgment or dismissal or decree is entered in such Litigation in favor of such party defendant. Attorneys' fees incurred in enforcing any judgment rendered in connection with the interpretation or enforcement of this Agreement ("Judgment") are recoverable by the party in whose favor such Judgment is rendered, as a separate item of damages. The provisions of this paragraph are severable from the other provisions of this Agreement and shall survive any such Judgment, and the provisions of this paragraph shall not be deemed merged into any such Judgment. 14.20 NOTICES. Any and all notices and other communications required or permitted by this Agreement or by law to be given to either party shall be in writing and shall be deemed duly served and delivered (a) when personally delivered to the other party or an officer of such party, (b) forty-eight (48) hours following deposit into the United States mail, first-class postage prepaid, registered or certified, return receipt requested, addressed to the other party at the address indicated below, or (c) when received when sent by facsimile at the address and number set forth below (provided, however, that notices given by facsimile shall not be effective unless either (i) a duplicate notice of such facsimile notice is promptly given by depositing the same in the United States mail as provided above, (ii) the receiving party delivered a written confirmation of receipt for such notice either by facsimile or any other method permitted under this section. 22 Additionally, any notice given by facsimile shall be deemed received on the next business day if such notice is received after 5:00 p.m. (recipient's time) or on a non-business day. ASC: Chris Howard, CAO IMA: WPA, LTD., Its Manager American Skiing Company c/o Keith R. Kelley P.O. Box 450 P.O. Box 681690 Bethel, ME 0445 Park City, UT 84068 Fax: (207) 824-5158 Fax: (435) 658-0049 REMAINDER OF PAGE INTENTIONALLY LEFT BLANK 23 IN WITNESS WHEREOF, the parties have executed and delivered this Development Agreement as of the day and year first set forth above. ASC UTAH By: /s/ Christopher E. Howard ----------------------------------------- Christopher E. Howard Chief Administrative Officer IRON MOUNTAIN ASSOCIATES, LLC. By: WPA, LTD. Its Manager By: White Pine Associates, Inc. Its General Partner By: /s/ Keith R. Kelley ------------------------------------- Keith R. Kelley Vice-President/Secretary WPA, LTD. By: White Pine Associates, Inc. Its General Partner By: /s/ Keith R. Kelley ------------------------------------- Keith R. Kelley Vice-President and Secretary IRON MOUNTAIN HOLDING GROUP, LC. By: /s/ Alexandra C. Ockey ---------------------------------------- Alexandra C. Ockey Chairman, Managing Committee IRON MOUNTAIN ALLIANCE, INC. 24 By: /s/ Alexandra C. Ockey ------------------------------------ Alexandra C. Ockey President 25 EX-10.14 7 ASSIGNMENT BETWEEN WOLF MOUNTAIN AND ASC EXHIBIT 10.14 ASSIGNMENT THIS ASSIGNMENT is made this 30th day of May, 1997, by and between WOLF MOUNTAIN RESORTS, L.C., a Utah limited liability company with a principal place of business in Park City, Utah ("Wolf Mountain"), and ASC Utah, a Maine corporation with a principal place of business in Newry, Maine. WITNESSETH WHEREAS, on or about January 28, 1997, Wolf Mountain and Harry P. Condas, John P. Condas, George P. Condas, Tessie P. Condas, Margarita C. Ellis, and Jack W. Ellis (collectively "Condas") entered into an Irrevocable Option and Real Estate Purchase Agreement Upon Exercise of Option (the "Agreement"), a copy of which is attached as Exhibit A and is incorporated herein by reference, pursuant to which Wolf Mountain purchased the irrevocable option to purchase certain real property as described in the Agreement; and WHEREAS, on or about May 27, 1997, Wolf Mountain and Condas entered into a Modification of Irrevocable Option and Real Estate Purchase Agreement Upon Exercise of Option Dated January 28, 1997 (the "Modification"), a copy of which is attached hereto as Exhibit B and the terms of which are incorporated herein by reference, pursuant to which the parties extended the date upon which the option referred to in the Agreement may be exercised and modified certain other terms of the Agreement; and WHEREAS, Wolf Mountain desires to assign its rights under the Agreement and the Modification to ASC. NOW, THEREFORE, in consideration of the mutual covenants and conditions set forth herein, Wolf Mountain and ASC Utah hereby agree as follows: 1. Wolf Mountain hereby assigns and transfers to ASC all of Wolf Mountain's right, title, and interest in and to the option to purchase from Condas the real property described in the Agreement ("Option"). Upon the closing of the transaction contemplated by the Purchase and Sale Agreement between ASC Utah and Wolf dated May 30,1997, ASC shall pay to Wolf the amount of $100,000 to reimburse it for the initial deposit made by Wolf under the Condas Option. 2. In the event that Wolf Mountain and ASC Utah do not consummate the transaction contemplated in the Letter of Intent between those parties executed April 9, 1997, or some other transaction pursuant to which American Skiing Company acquires an interest in or control over the Wolf Mountain Ski Resort on or before July 31, 1997, then Wolf Mountain shall repurchase the Option and ASC's interest in the escrow agreement contemplated by the Modification within 15 business days following demand by ASC for a purchase price equal to $900,000. 3. Wolf Mountain's obligation to repurchase the option set forth in Section 3 above is hereby personally guaranteed in full by Michael A. Baker. IN WITNESS WHEREOF, the parties have caused this Assignment to be executed as of the date first set forth above. WOLF MOUNTAIN RESORTS, L.C. By: /s/ Kenneth Griswald ------------------------- Its: Managing Member ASC UTAH By: /s/ Christopher E. Howard -------------------------- Christopher E. Howard Its: Chief Administrative Officer STATE OF UTAH COUNTY OF SUMMIT, SS On the 30th day of May, 1997, personally appeared before me Kenneth Griswald and made oath that he is the Managing Member of Wolf Mountain Resorts, L.C., a Utah limited liability company, and that the foregoing instrument was signed by him on behalf of said limited liability company by authority of its Operating Agreement. /s/ Susan L. Tolliver ---------------------------- NOTARY PUBLIC Residing at: Park City, Utah --------------- My Commission expires: June 7, 2000 [SEAL] Notary Public SUSAN L. TOLLIVER 1745 Sidewinder Drive P.O. Box 1814 Park City, Utah 84068 My Commission Expires June 7, 2000 State of Utah STATE OF UTAH COUNTY OF SUMMIT, SS On the 30th day of May, 1997, personally appeared before me Christopher E. Howard and made oath that he is the Chief Administrative Officer of ASC Utah, a Maine corporation, and that the foregoing instrument was signed by him on behalf of said limited liability company by authority of its bylaws. /s/ Susan L. Tolliver ------------------------- NOTARY PUBLIC Residing at: Park City, Utah --------------- My Commission expires: June 7, 2000 [SEAL] Notary Public SUSAN L. TOLLIVER 1745 Sidewinder Drive P.O. Box 1814 Park City, Utah 84068 My Commission Expires June 7, 2000 State of Utah EX-10.51 8 EMPLOYMENT TERMS EXHIBIT 10.51 Christopher E. Howard Employment Terms August 22, 1996 Position and Employer: Chief Administrative Officer and General Counsel of American Skiing Company. Base Annual Salary: $150,000, with minimum annual increase equal to inflationary adjustment based on relevant annual increase in Consumer Price Index. Annual Bonus: Minimum annual bonus equal to greater of (a) $50,000, with minimum annual increase equal to inflationary adjustment based on relevant annual increase in Consumer Price Index or (b) .1875% of combined ski & lodging and real estate EBITDA. Minimum bonus will be paid as salary during the course of each year. The excess over the minimum will be paid within 10 days following delivery of ASC's audited financials each year. Any bonus earned in one year will not affect base salary or bonus amounts to be provided in any subsequent year. Participation with key management group in bonus pool, to the extent the pool share exceeds guaranteed bonus. Key management group will initially consist of the following officers of the company: Chief Administrative Officer Chief Financial Officer Vice President-Operations Vice President-Marketing Pool participants may be added with advance notice and a commensurate increase in pool funding. The pool will consist of a pool of funds equal to a minimum of .5% of combined ski & lodging and real estate EBITDA to be determined based on annual audited statements. Actual bonus amounts will be determined based upon performance of the company compared to budget. Prior to the commencement of each fiscal year the key management group and the president shall mutually agree on a reasonably achievable budget for the ensuing fiscal year. Bonus shall be awarded based upon the actual EBITDA for the fiscal year compared to budgeted EBITDA using the following scale: - Over 115% of budget = 150% of bonus pool earned - 106% of 115% of budget = 110% of bonus pool earned - 95% to 105% of budget = 100% of bonus pool earned - Under 95% of budget = discretionary bonus pool as determined by president The pool shall be divided among the members as agreed among the members. In the absence of unanimous agreement the shares shall be equal. Shadow Stock/ISO Plan: Participation in equity participation plans substantially as described in the attached materials on a basis providing a minimum participation level of .75% of the growth in equity of the Company measured in the manner described in the plans attached. The incentive comp plan shall be fully implemented within 30 days. Educational Benefit: The company shall pay for, or otherwise provide fully for, the cost of 4 years of secondary education for C. Howard's two sons (Andrew and Tanner) at Gould Academy in Bethel, Maine, at no cost to C. Howard. Moving Expenses: Fully reimbursed upon submission of verified invoices. Expenses include all out-of-pocket costs associated with any move to the Bethel area, including all closing costs and brokers commissions associated with purchase and sale of principal residence. No move to Bethel area is required as a condition of employment. Severance Benefit: In the event of involuntary termination: 1 x annual compensation (including both salary and bonus). In the event of termination in connection with a "Sale of the Company" as described in the attached incentive comp plan: 2 x annual compensation (including both salary and bonus). 2 Benefits: Full participation in all benefits programs. Commitment to restructure retirement program to allow maximum voluntary contribution by key management group through top hat program and provide group life insurance program for management group. Job Location and Schedule: Employee will be present at Sunday River offices a minimum of 3 days per week. Employee shall be entitled to work from a Portland, Maine office maintained at ASC expense 2 days per week. Employee will regularly be expected to have Saturday afternoons and Sundays off. This is a base case with which both sides must have flexibility to accommodate needs and schedules. Vacation and Holidays: 4 weeks mandatory vacation per year. In addition to other regular holidays employee shall be entitled to holidays at Thanksgiving and Christmas. SEEN AND AGREED /s/ Leslie B. Otten ---------------------------- President of American Skiing Company /s/ Christopher E. Howard ---------------------------- 3 EX-10.54 9 1ST AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.54 ================================================================================ FIRST AMENDMENT TO CREDIT AGREEMENT Dated as of November 27, 1996 Among AMERICAN SKIING COMPANY SUNDAY RIVER SKIWAY CORPORATION SUNDAY RIVER LTD. PERFECT TURN, INC. SUNDAY RIVER TRANSPORTATION INC. LBO HOLDING, INC. CRANMORE, INC. SUGARBUSH RESORT HOLDINGS INC. SUGARBUSH LEASING COMPANY SUGARBUSH RESTAURANTS, INC. MOUNTAIN WASTEWATER TREATMENT, INC. S-K-I LTD. KILLINGTON, LTD. MOUNT SNOW LTD. WATERVILLE VALLEY SKI AREA LTD. PICO SKI AREA MANAGEMENT COMPANY RESORTS SOFTWARE SERVICES, INC. KILLINGTON RESTAURANTS, INC. RESORT TECHNOLOGIES, INC. DOVER RESTAURANTS, INC. DEERFIELD OPERATING COMPANY SUGARLOAF MOUNTAIN CORPORATION MOUNTAINSIDE SUGARTECH the Borrowers and FLEET NATIONAL BANK THE FIRST NATIONAL BANK OF BOSTON KEYBANK OF MAINE the Banks and FLEET NATIONAL BANK, AS AGENT the Agent ================================================================================ FIRST AMENDMENT TO CREDIT AGREEMENT This FIRST AMENDMENT TO CREDIT AGREEMENT is entered into as of November 27, 1996 by and among AMERICAN SKIING COMPANY, SUNDAY RIVER SKIWAY CORPORATION, SUNDAY RIVER LTD., PERFECT TURN, INC., SUNDAY RIVER TRANSPORTATION INC., LBO HOLDING, INC., CRANMORE, INC., SUGARBUSH RESORT HOLDINGS INC., SUGARBUSH LEASING COMPANY, SUGARBUSH RESTAURANTS, INC., MOUNTAIN WASTEWATER TREATMENT, INC., S-K-I LTD., KILLINGTON, LTD., MOUNT SNOW LTD., WATERVILLE VALLEY SKI AREA LTD., PICO SKI AREA MANAGEMENT COMPANY, RESORTS SOFTWARE SERVICES, INC., KILLINGTON RESTAURANTS, INC., RESORT TECHNOLOGIES, INC., DOVER RESTAURANTS, INC., DEERFIELD OPERATING COMPANY, SUGARLOAF MOUNTAIN CORPORATION, MOUNTAINSIDE and SUGARTECH (each a "Borrower" and collectively the "Borrowers"), FLEET NATIONAL BANK, THE FIRST NATIONAL BANK OF BOSTON and KEYBANK OF MAINE as the Banks parties to the Credit Agreement referred to below (the "Lenders"), and FLEET NATIONAL BANK, as Agent (the "Agent") under the Credit Agreement referred to below. Recitals The Borrower, the Lenders and the Agent are parties to a Credit Agreement dated as of June 28, 1996, as supplemented by a Joinder dated as of August 30, 1996 (the "Credit Agreement"). All capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Credit Agreement. Pursuant to the Divestiture Consent Decree, American Ski has entered into an agreement to sell all of the assets comprising the Mt. Cranmore and Waterville Valley Ski Resorts and desires to release the assets of Cranmore and Waterville from the Collateral held by the Agent. American Ski also desires, through Pico, to acquire the real and personal property used in the operation of the Pico Mountain Ski Resort, including certain capital stock of Upland Water Company, Inc. and certain capital stock and wastewater disposal units issued by Alpine Pipeline Company. The Borrower also desire to amend the Credit Agreement in certain other respects. The Lenders and the Agent are willing to amend the Credit Agreement on the terms and conditions set forth herein. NOW, THEREFORE, subject to the satisfaction of the conditions to effectiveness specified in Section 7, the Borrower, the Lenders and the Agent hereby agree as follows: Section 1. Definitions. Section 1.1 of the Credit Agreement is hereby amended as follows: (a) The definition of "Maximum Revolving Credit Agreement" is hereby deleted in its entirety and a new definition substituted therefor as follows: "Maximum Revolving Credit Amount" shall mean as of any date of determination, the lesser of (a)(i)(A) $65,000,000 from November 27, 1996 through January 15, 1997, (B) $57,500,000 from January 16, 1997 through June 30, 1999, (C) $50,000,000 from July 1, 1999 through June 30, 2000, and (D) $42,500,000 from July 1, 2000 through maturity, less (ii) in each case the Asset Sale Reserve, or (b) the amount to which the Maximum Revolving Credit Amount may have been reduced pursuant to Section 2.10 or Section 2.15 hereof; provided that if the obligation of the Lenders to make further Loans is terminated upon the occurrence of an Event of Default, the Maximum Revolving Credit Amount as of any date of determination thereafter shall be deemed to be $0. (b) The definition of "Security Agreements" is hereby amended by adding the following new paragraphs (h), (i), (j) and (k) at the end thereof: (h) The Security Agreement; the Fee and Leasehold Mortgage, Assignment of Rents and Security Agreement; the Collateral Assignment of Leases and Rents; the Trademark and Tradename Security Agreements; and the Assignment of Licenses, Contracts and Permits; each dated as of August 30, 1996 pursuant to which Sugarloaf, Mountainside and Sugartech granted to the Agent a first perfected lien on and security interest in all of its assets. (i) The Fee and Leasehold Mortgage, Assignment of Leases and Rents, Financing Statement and Security Agreement, each dated October 15, 1996 pursuant to which Sugarloaf granted to the Agent a first perfected lien on and security interest in the assets described therein. (j) The Fee and Leasehold Mortgage, Assignment of Rents and Security Agreement; the Collateral Assignment of Leases and Rents; and the Assignment of Licenses, Contracts and Permits, each of even date with the First Amendment pursuant to which Pico has granted 2 the Agent a first perfected lien on and security interest in the assets described therein. (k) All other security agreements, pledge agreements, mortgages, assignments and other instruments by which one or more Borrowers grants or pledges to the Agent a lien on, security interest in, or pledge or mortgage or assignment of any of its assets. (c) New definitions of "Alpine Pipeline," "Asset Sale Permanent Reduction Date", "Asset Sale Reserve", "Booth Creek Acquisition Agreement," "Booth Creek Note," "First Amendment," "Mountainside," "Pico Acquisition Agreement," "Pico Assets," "Pico Mortgage," "Sugartech," and "Upland Water" shall be added in alphabetical order, as follows: "Alpine Pipeline" shall mean Alpine Pipeline Company, a Vermont corporation. "Asset Sale Permanent Reduction Date" shall mean the date on or before November 21, 1997 on which the Borrowers permanently reduce the Maximum Revolving Credit Amount pursuant to Section 2.10(b). "Asset Sale Reserve" shall mean (a) $6,500,000 from November 27, 1996 through December 31, 1996, and (b) $7,500,000 from January 1, 1997 through the Asset Sale Permanent Reduction Date. "Booth Creek Acquisition Agreement" means the Purchase and Sale Agreement dated as of August 30, 1996 by and among American Ski, Waterville, Cranmore and Booth Creek Ski Acquisition Corp. "Booth Creek Note" shall mean the promissory note of Booth Creek Acquisition Corp. to the order of American Ski in the original principal amount of $2,750,000 issued pursuant to the Booth Creek Acquisition Agreement. "First Amendment" shall mean the First Amendment to Credit Agreement among the Borrowers, the Lenders and the Agent dated as of November 27, 1996. 3 "Mountainside" shall mean Mountainside, a Maine corporation. "Pico Assets" shall mean the real, personal and intangible property to be purchased by Pico pursuant to the Pico Acquisition Agreement. "Pico Mortgage" shall mean the Fee and Leasehold Mortgage, Assignment of Leases and Rents, Financing Statement and Security Agreement of even date with the First Amendment executed by Pico in favor of the Agent and encumbering the Pico Assets. "Pico Acquisition Agreement" shall mean the Purchase and Sale Agreement dated as of October 16, 1996 by and between Sherburne Pass Mountain Properties, LLC, Pico Mountain Sports Center, LLC, Pico Mountain Operating Company, LLC, Harold L. and Edith Herbert and Pico. "Sugartech" shall mean Sugartech, a Maine corporation. "Upland Water" shall mean Upland Water Company, Inc., a Vermont corporation. Section 2. Release of Assets of Cranmore and Waterville; Release of Otten Guaranty; Mandatory Permanent Reduction. (a) The Agent and the Lenders hereby release all Collateral consisting of the assets of Cranmore and Waterville to be conveyed pursuant to the Booth Creek Acquisition Agreement. On request of American Ski, the Agent will execute any confirmatory releases, discharges and terminations as may be necessary to confirm such releases of record. The Agent and the Lenders hereby further release Leslie B. Otten from all obligations under the Otten Guaranty and acknowledge and agree that the Otten Guaranty is hereby terminated. (b) Article 2 of the Credit Agreement is hereby amended by deleting Section 2.10 thereof in its entirety and substituting therefor the following: Section 2.10 Reduction of Commitment by the Borrowers. (a) The Borrowers at their option may, at any time and from time to time, (i) irrevocably reduce in part (in integral multiples of $1,000,000) the 4 unused portion of the Available Revolving Credit Amount or (ii) terminate the entire unused portion of the Available Revolving Credit Amount, in each case on not less than five (5) Business Days' prior written notice to the Agent and upon payment of any amounts due under Section 4.2. No such reduction may be reinstated by the Borrowers. (b) On or before November 21, 1997, the Borrower shall permanently reduce the amounts set forth in clauses (a)(i)(A), (a)(i)(B), (a)(i)(C) and (a)(i)(D) of the definition of Maximum Revolving Credit Amount by the amount of the Asset Sale Reserve; provided, however, that American Ski will not be required to make such permanent reductions if (i) American Ski is not required to permanently reduce such amounts pursuant to the provisions of the Senior Subordinated Notes Indenture and the Junior Subordinated Notes Indenture and (ii) the Banks consent thereto in writing. Section 3. Amendment of Covenants. (a) Article 6 of the Credit Agreement is hereby amended by adding a new Section 6.14 at the end thereof as follows: 6.14 Notices under Booth Creek Acquisition Agreement and Pico Acquisition Agreements. American Ski will provide the Agent copies of all written notices given or received by American Ski, Waterville or Cranmore under the Booth Creek Acquisition Agreement or by Pico under the Pico Acquisition Agreement at the time given or promptly following receipt thereof. (b) Section 8.5 of the Credit Agreement is hereby amended by deleting the last sentence thereof in its entirety and substituting therefor the following: The sale of the assets of Cranmore and Waterville pursuant to the terms thereof satisfies in full the requirements of the Divestiture Consent Decree. (c) Section 9.1 of the Credit Agreement is hereby amended by adding at the end thereof a new clause (i), as follows: (i) Indebtedness of Pico under the Pico Acquisition Agreement in an aggregate amount not to exceed $3,350,000 plus $500,000 in consulting fees payable to the principals of the sellers of the Pico Assets. 5 (d) Section 9.3 of the Credit Agreement is hereby amended by adding at the end thereof new clauses (g) and (h), as follows: (g) An Investment consisting of the Booth Creek Note so long as such note has been pledged as Collateral and delivered to the Agent. (h) Investments consisting of Pico's ownership of (i) 2001 shares of the capital stock of Upland Water, constituting approximately 95% of the issued and outstanding capital stock thereof and (ii) 61 shares of the capital stock of Alpine Pipeline and all related wastewater disposal units, in each case so long as such Investments have been pledged as Collateral and delivered to the Agent. Section 4. Consent to Ski Resort Acquisition. The Agent and the Lenders hereby consent to Pico undertaking a Ski Resort Acquisition pursuant to the Pico Acquisition Agreement and hereby waive the restrictions of Section 9.6 of the Credit Agreement to permit such Ski Resort Acquisition. Section 5. Amendment of Schedule 5.4(a). Schedule 5.4(a) to the Credit Agreement is hereby deleted in its entirety and the new Schedule 5.4(a) attached hereto is substituted therefor. Section 6. Representations and Warranties. Article 5 of the Credit Agreement is hereby amended by adding at the end thereof a new Section 5.32, as follows: Section 5.32. Sale of Mt. Cranmore and Waterville Valley; Acquisition of Pico. Attached as Exhibits A and B to the First Amendment, respectively, are true, complete and correct copies of the Booth Creek Acquisition Agreement and the Pico Acquisition Agreement, neither of which has been modified, amended or supplemented in any respect. On or about the date of the execution and delivery of the First Amendment, the sale of the assets comprising the Mt. Cranmore and Waterville Valley ski areas was consummated pursuant to the Booth Creek Acquisition Agreement. It is anticipated that the purchase of the assets comprising the Pico Mountain ski area will be consummated pursuant to the Pico Acquisition Agreement prior to December 15, 1996. As the holder of the shares of capital stock of Alpine Pipeline acquired under the Pico Acquisition Agreement, Pico has rights to access the Alpine Pipeline wastewater pipe for sewage disposal, consisting of 61 6 "Equivalent Units" ("EUs") giving it the right to discharge 27,450 gallons per day of disposal capacity. Not more than 20 of these EUs, or not more than 9,000 gallons per day, is utilized by existing development at Pico. Pico will be entitled to use the remaining EUs to service development at Killington Mountain, subject to the receipt of state and local permits and approvals for the placement of pipe and pumping stations necessary to connect such development to Alpine Pipeline's pipe. In addition, Alpine Pipeline has approximately 368,000 gallons per day of excess disposal capacity currently committed from the City of Rutland (the "City") wastewater treatment plant. The City has substantial excess capacity and American Ski has met with the City concerning the possibility of allocating additional capacity to the Town of Sherburne and Alpine Pipeline Company for sale to Pico. Section 7. Effectiveness; Conditions to Effectiveness. This First Amendment to Credit Agreement shall become effective as of November 27, 1996 upon execution hereof by the Borrowers, the Lenders and the Agent and satisfaction of the following conditions: (a) Resolutions. Copies of the resolutions of the Board of Directors of the Borrowers authorizing the execution, delivery and performance of this Third Amendment, the Booth Creek Acquisition Agreement, the Pico Acquisition Agreement and the other Lender Agreements executed in connection herewith to which any Borrower is a party, certified by the Secretary or an Assistant Secretary (or Clerk or Assistant Clerk) of each Borrower (which certificate shall state that such resolutions are in full force and effect). (b) Officers' Certificate. A certificate of the Secretary or an Assistant Secretary (or Clerk or Assistant Clerk) of each Borrower certifying (i) the name and signatures of the officers of such Borrower authorized to sign this Third Amendment, the Booth Creek Acquisition Agreement, the Pico Acquisition Agreement and the other Lender Agreements executed in connection herewith to which any Borrower is a party and (ii) as to no change in the charter documents or By-laws of the Borrowers previously certified to the Agent. (c) Booth Creek Sale Proceeds. Evidence of the receipt by American Ski of $17,500,000 in consideration of the sale of assets of Cranmore and Waterville Valley in the form described in the Booth Creek Acquisition Agreement. (d) Booth Creek Note. Delivery to the Agent of the Booth Creek Note, together with a separate endorsement thereof to the Agent and an acknowledgment thereof by Booth Creek Acquisition Corp. 7 Section 8. Closing of Acquisition of Pico Assets. Contemporaneously with the closing of the acquisition of the Pico Assets, the Borrower shall satisfy the following conditions: (a) Upland Water Shares. Delivery to the Agent of 2001 shares of the issued and outstanding capital stock of Upland Water, together with stock powers executed in blank. (b) Alpine Pipeline Shares. Delivery to the Agent of 61 the issued and outstanding capital stock of Alpine Pipeline, together with stock powers executed in blank. (c) Recording of Mortgages, Financing Statements, Etc. All actions necessary or appropriate to perfect the Agent's liens and security interests in the Pico Assets shall have been fully performed including without limitation: (i) the due and proper recording and filing of the Pico Mortgage and a Collateral Assignment of Leases and Rents executed by Pico in favor of the Agent; (ii) Uniform Commercial Code financing statements necessary to perfect the security interests of the Agent in the Pico Assets; and (iii) the receipt by the Agent of a commitment from Lawyer's Title Insurance Corporation to issue an ALTA standard form title insurance policy insuring the first priority of the Pico Mortgage, subject only to Permitted Liens, covering all of the Pico Assets, such policy to be in form and substance satisfactory to the Agent, including without limitation, such endorsements and affirmative insurance as the Agent shall require with the standard tenant's and mechanic's liens exceptions deleted and with such portions of the survey coverage deleted as the Agent may require, and the receipt by the Agent shall also have received proof of full payment of all fees and premiums for said policies and copies of all documents listed as exceptions on Schedule B to each such policy. (iv) Pico shall have executed and delivered to the Agent a Collateral Assignment of Licenses, Contracts and Permits assigning all rights in contracts, licenses and permits used in connection with the Pico Assets in form and substance satisfactory to the Agent. (d) Insurance. The Agent shall have received (i) certificates of insurance as to the liability hazard and other insurance maintained by Pico on the Pico Assets in 8 conformity with the insurance requirements contained in the Security Agreements (including flood insurance if necessary) from the insurer or an independent insurance broker dated as of the date hereof, identifying insurers, types of insurance, insurance limits, and policy terms all in accordance with the provisions of the Security Agreements; (ii) certified copies of all policies evidencing such insurance (or certificates therefor signed by the insurer or an agent authorized to bind the insurer); and (iii) such further information and certificates from the Borrowers, their insurers and insurance brokers as the Agent may request. (e) Surveys. Pico shall have provided the Agent with site plans or other maps acceptable to the Agent showing the real property subject to the Pico Mortgage, the dimensions and the area thereof, together with a licensed surveyor's or civil engineer's certificate in a form acceptable to the Agent, certifying that all existing improvements necessary for the operation of the Pico Assets as presently operated in all material respects (the "Pico Material Improvements"), including without limitation all utilities, sewer and water systems, snowmaking equipment (including necessary water delivery systems), lodges, ski-lifts, parking areas, driveways and any other material improvements are located within the boundaries of the real property owned by Pico. Pico shall provide the Agent with a list of Pico Material Improvements acceptable to Agent together with a certificate of the Borrowers in form acceptable to the Agent certifying that the Pico Material Improvements constitute all of the improvements necessary to fully operate the Pico Assets as currently operated and as contemplated to be operated during the 1996-97 ski season. The certificate shall also indicate those portions of the Pico Assets, if any, falling within a federally designated flood hazard area; if any portion falls within such area, flood hazard insurance will be required by federal regulations. (f) Compliance with Zoning and Other Laws. Prior to the effectiveness of this First Amendment, the Borrowers shall submit opinions of counsel or other evidence in form and substance satisfactory to the Agent's counsel that the Pico Assets, all existing and proposed improvements thereon and the use or proposed use thereof, are in compliance in all material respects with all zoning laws, building codes, environmental laws and other laws and regulations applicable to the Pico Assets and the use and proposed use thereof, and that all licenses, permits and certificates of occupancy or building permits have been issued to permit the lawful use or improvement of the Pico Assets as contemplated by the Borrowers. (g) Environmental Assessments. The Agent shall have received site assessment reports concerning the Pico Assets, dated as of a recent date, from environmental engineers acceptable to the Agent, such reports to be in form and substance satisfactory to the Agent. (h) Permit Assurances. The Agent shall have received evidence satisfactory to the Agent that all activities being conducted on the Pico Assets which require 9 federal, state or local licenses or permits have been duly licensed except where the absence of any such license would not have a Material Adverse Effect and that such licenses or permits are in full force and effect and have been assigned to the Agent pursuant to the Security Agreements. (i) Leases/Service Contracts. The Agent shall have received copies of all material service contracts and leases affecting any portion of the Pico Assets. (j) Flood Insurance. The Agent shall have received evidence of flood hazard insurance for the Mortgaged Properties as required pursuant to the Credit Agreement and federal regulations. (k) Opinion of Counsel. The Borrowers shall have delivered to the Agent (i) an opinion of general counsel to the Borrowers and (ii) an opinion of Reiberg, Kenlan, Schwiebert, Hall & Facey, P.C., all in form and substance satisfactory to the Agent. Section 9. Confirmation of Representations and Warranties; No Default. The Borrowers hereby confirm to the Agent and the Lenders the representations and warranties of the Borrowers set forth in Article 5 of the Credit Agreement (as amended hereby) as of the date hereof, as if set forth herein in full. The Borrowers hereby certify that no Default exists under the Credit Agreement. Section 10. Environmental Action Plan. The Environmental Action Plan included with the Credit Agreement as Exhibit 8.16 is amended by addition of the Pico Environmental Action Plan attached hereto. Section 11. Miscellaneous. The Borrowers agree, jointly and severally, to pay on demand all the Agent's reasonable expenses in preparing, executing and delivering this First Amendment to Credit Agreement, and all related instruments and documents, including, without limitation, the reasonable fees and out-of-pocket expenses of the Agent's special counsel, Goodwin, Procter & Hoar LLP. This First Amendment to Credit Agreement shall be a Lender Agreement and shall be governed by and construed and enforced under the laws of The Commonwealth of Massachusetts. 10 IN WITNESS WHEREOF, the Borrowers, the Lenders and the Agent have caused this First Amendment to Credit Agreement to be executed by their duly authorized officers as of the date first set forth above. AMERICAN SKIING COMPANY By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer SUNDAY RIVER SKIWAY CORPORATION By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer SUNDAY RIVER LTD. By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer PERFECT TURN, INC. By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer SUNDAY RIVER TRANSPORTATION INC. LBO HOLDING, INC. By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer CRANMORE, INC. By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer SUGARBUSH RESORT HOLDINGS INC. By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer 11 SUGARBUSH LEASING COMPANY By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer SUGARBUSH RESTAURANTS, INC. By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer MOUNTAIN WASTEWATER TREATMENT, INC. By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer S-K-I LTD. By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer KILLINGTON, LTD. By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer MOUNT SNOW LTD. By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer WATERVILLE VALLEY SKI AREA LTD. By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer PICO SKI AREA MANAGEMENT COMPANY By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer 12 RESORTS SOFTWARE SERVICES, INC. By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer KILLINGTON RESTAURANTS, INC. By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer RESORT TECHNOLOGIES, INC. By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer DOVER RESTAURANTS, INC. By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer DEERFIELD OPERATING COMPANY By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer SUGARLOAF MOUNTAIN CORPORATION By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer MOUNTAINSIDE By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer SUGARTECH By: /s/ [Illegible] ------------------------------------ Senior Vice President/Chief Administrative Officer 13 FLEET NATIONAL BANK By: /s/ David B. Henderson ------------------------------------ Name: David B. Henderson Title: Vice President THE FIRST NATIONAL BANK OF BOSTON By: /s/ [Illegible] ------------------------------------ Name: Title: Vice President KEYBANK OF MAINE By: /s/ Jane Roundy ------------------------------------ Name: Jane Roundy Title: Senior Vice President FLEET NATIONAL BANK, AS AGENT By: /s/ David B. Henderson ------------------------------------ Name: David B. Henderson Title: Vice President 14 EX-10.55 10 2ND AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.55 ================================================================================ SECOND AMENDMENT TO CREDIT AGREEMENT Dated as of May 30, 1997 Among AMERICAN SKIING COMPANY SUNDAY RIVER SKIWAY CORPORATION SUNDAY RIVER LTD. PERFECT TURN, INC. SUNDAY RIVER TRANSPORTATION INC. LBO HOLDING, INC. CRANMORE, INC. SUGARBUSH RESORT HOLDINGS INC. SUGARBUSH LEASING COMPANY SUGARBUSH RESTAURANTS, INC. MOUNTAIN WASTEWATER TREATMENT, INC. S-K-I LTD. KILLINGTON, LTD. MOUNT SNOW LTD. WATERVILLE VALLEY SKI AREA LTD. PICO SKI AREA MANAGEMENT COMPANY RESORTS SOFTWARE SERVICES, INC. KILLINGTON RESTAURANTS, INC. RESORT TECHNOLOGIES, INC. DOVER RESTAURANTS, INC. DEERFIELD OPERATING COMPANY SUGARLOAF MOUNTAIN CORPORATION MOUNTAINSIDE SUGARTECH the Borrowers and FLEET NATIONAL BANK BANKBOSTON, N.A. KEYBANK NATIONAL ASSOCIATION the Banks and FLEET NATIONAL BANK, AS AGENT the Agent ================================================================================ SECOND AMENDMENT TO CREDIT AGREEMENT This SECOND AMENDMENT TO CREDIT AGREEMENT is entered into as of May 30, 1997 by and among AMERICAN SKIING COMPANY, SUNDAY RIVER SKIWAY CORPORATION, SUNDAY RIVER LTD., PERFECT TURN, INC., SUNDAY RIVER TRANSPORTATION INC., LBO HOLDING, INC., CRANMORE, INC., SUGARBUSH RESORT HOLDINGS INC., SUGARBUSH LEASING COMPANY, SUGARBUSH RESTAURANTS, INC., MOUNTAIN WASTEWATER TREATMENT, INC., S-K-I LTD., KILLINGTON, LTD., MOUNT SNOW LTD., WATERVILLE VALLEY SKI AREA LTD., PICO SKI AREA MANAGEMENT COMPANY, RESORTS SOFTWARE SERVICES, INC., KILLINGTON RESTAURANTS, INC., RESORT TECHNOLOGIES, INC., DOVER RESTAURANTS, INC., DEERFIELD OPERATING COMPANY, SUGARLOAF MOUNTAIN CORPORATION, MOUNTAINSIDE and SUGARTECH (each a "Borrower" and collectively the "Borrowers"), FLEET NATIONAL BANK, BANKBOSTON, N.A. (f/k/a The First National Bank of Boston) and KEYBANK NATIONAL ASSOCIATION (f/k/a KeyBank of Maine) as the Banks parties to the Credit Agreement referred to below (the "Lenders"), and FLEET NATIONAL BANK, as Agent (the "Agent") under the Credit Agreement referred to below. Recitals The Borrowers, the Lenders and the Agent are parties to a Credit Agreement dated as of June 28, 1996 (as previously amended, the "Credit Agreement"). All capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Credit Agreement. The Borrowers desire to (a) increase the Maximum Revolving Credit Amount under the Credit Agreement and (b) amend the Credit Agreement in certain other respects. The Lenders and the Agent are willing to amend the Credit Agreement on the terms and conditions set forth herein. NOW, THEREFORE, subject to the satisfaction of the conditions to effectiveness specified in Section 6, the Borrowers, the Lenders and the Agent hereby agree as follows: Section 1. Definitions. Section 1.1 of the Credit Agreement is hereby amended as follows: (a) The definitions of "Consolidated Adjusted Cash Flow", "Hotel Subsidiary" and "Maximum Revolving Credit Agreement" are hereby deleted in their entirety and new definitions substituted therefor, as follows: "Consolidated Adjusted Cash Flow" shall mean (a) Consolidated EBITDA (before any adjustments to reflect acquisitions, sales and exchanges of property during such period) for each fiscal year of the Borrowers and their Restricted Subsidiaries less (b) the sum of (i) $6,000,000, representing the Borrowers' and their Restricted Subsidiaries estimated Capital 1 Expenditures required to maintain their existing ski resorts, and (ii) cash taxes paid. "Hotel Subsidiary" shall mean Grand Summit Resort Properties, Inc. "Maximum Revolving Credit Amount" shall mean as of any date of determination, the lesser of (a)(i) $65,000,000 from May __, 1997 through April 30, 1998, (ii) $57,500,000 from May 1, 1998 through April 30, 1999, (iii) $50,000,000 from May 1, 1999 through June 30, 2000, and (iv) $42,500,000 from July 1, 2000 through the Revolving Credit Termination Date, or (b) the amount to which the Maximum Revolving Credit Amount may have been reduced pursuant to Section 2.10; provided that if the obligation of the Lenders to make further Loans is terminated upon the occurrence of an Event of Default, the Maximum Revolving Credit Amount as of any date of determination thereafter shall be deemed to be $0. (b) The definitions of "Asset Sale Permanent Reduction Date" and "Asset Sale Reserve" are hereby deleted in their entirety. (c) New definitions of "Capital Expenditure Test Period," "Second Amendment" and "Wolf Mountain Development" shall be added in alphabetical order, as follows: "Capital Expenditure Test Period" shall mean each period commencing April 1 of any year and ending March 31 of the following year. "Second Amendment" shall mean the Second Amendment to Credit Agreement among the Borrowers, the Lenders and the Agent dated as of May 30, 1997. "Wolf Mountain Development" shall mean the acquisition and development of Wolf Mountain ski resort in Park City, Utah by any Borrower. Section 2. Amendment of Article 2. (a) Section 2.1 of the Credit Agreement is hereby amended by deleting paragraphs (b) and (c) thereof in their entirety and substituting therefor the following: (b) Subject to the foregoing limitations and the provisions of Section 4.2, the Borrowers shall have the right to make prepayments reducing the outstanding 2 balance of Revolving Credit Advances and to request further Revolving Credit Advances, all in accordance with Section 2.2, without other restrictions hereunder; provided that the Lenders shall have the absolute right to refuse to make any Revolving Credit Advances for so long as there exists any Default or any other condition which would constitute a Default upon the making of such a Revolving Credit Advance; and provided further that during each fiscal year of the Borrowers, commencing with the fiscal year ending July, 1997, there shall be a period of 45 consecutive days, including March 31 of each year, during which the outstanding principal amount of all Revolving Credit Advances shall not exceed the amounts set forth below: ----------------------------------------- Maximum Outstanding Clean-Down Period Revolving Credit Including March 31 Advances ----------------------------------------- 1997 $25,000,000 ----------------------------------------- 1998 $30,000,000 ----------------------------------------- 1999 $25,000,000 ----------------------------------------- 2000 $20,000,000 ----------------------------------------- 2001 $15,000,000 ----------------------------------------- Promptly following the commencement of each clean-down period, American Ski will notify the Agent that the clean-down period has begun. (b) Article 2 of the Credit Agreement is hereby further amended by deleting Section 2.10 thereof in its entirety and substituting therefor the following: Section 2.10 Reduction of Commitment by the Borrowers. The Borrowers at their option may, at any time and from time to time, (a) irrevocably reduce in part (in integral multiples of $1,000,000) the unused portion of the Available Revolving Credit Amount or (b) terminate the entire unused portion of the Available Revolving Credit Amount, in each case on not less than five (5) Business Days' prior written notice to the Agent and upon payment of any amounts due under Section 4.2. No such reduction may be reinstated by the Borrowers. (c) Section 2.13 of the Credit Agreement is hereby amended to permit the Borrowers to use the up to $1,320,000 of proceeds of Revolving Credit Advances to fund certain costs relating to the Wolf Mountain Development, consisting of (i) $1,000,000 as an installment of the purchase price of the so-called "Condas parcel", (ii) $200,000 earnest 3 money, (iii) $75,000 for acquisition of the Gorgoza Water Option, and (iv) $45,000 for filing fees under the Hart-Scott-Rodino Anti-Trust Improvement Act of 1976, as amended. Section 3. Amendment of Covenants. (a) Section 4.2(c) of the Credit Agreement is hereby amended by deleting the last sentence thereof in its entirety and substituting therefor the following: "For purposes of this Section 4.2(c), the Maximum Revolving Credit Amount shall be deemed to be $65,000,000." (b) Section 6.1 of the Credit Agreement is hereby amended by adding the following new paragraph (c) thereto: (c) Not more than seven (7) days after the end of each month, the Borrowers shall furnish to the Agent and each Lender its internally prepared, unaudited profit plan report in the form currently prepared by the Borrowers. (c) Article 6 of the Credit Agreement is hereby amended by deleting Section 6.2 thereof in its entirety and substituting therefor the following: Section 6.2. Annual Financial Statements. As soon as available, but in any event within ninety (90) days after the end of each fiscal year of the Borrowers, the Borrowers shall furnish to the Agent and each Lender: (a) audited consolidated and consolidating balance sheets of (i) the Borrowers and their Restricted Subsidiaries and (ii) the Borrowers and their Subsidiaries, as of the end of such fiscal year, and consolidated and consolidating statements of income, shareholders' equity and cash flow of (i) the Borrowers and their Restricted Subsidiaries and (ii) the Borrowers and their Subsidiaries, for such fiscal year, in each case (other than the consolidating statements) reported on by Price Waterhouse LLP, or other independent certified public accountants of recognized national standing acceptable to the Agent, which report shall express, without reliance upon others, a positive opinion regarding the fairness of the presentation of such financial statements in accordance with generally accepted accounting principles consistently applied, said report to be without qualification, except in cases of unresolved litigation and accounting changes with which such accountants concur, together with the statement of such accountants that they have caused the provisions of this Agreement and the other Lender Agreements to be reviewed and that nothing has come to their attention to lead them to believe that any Default exists hereunder or specifying 4 any Default and the nature thereof; (b) a Compliance Certificate; and (c) unconsolidated audited financial statements of the Hotel Subsidiary and the Insurance Subsidiary similar to the financial statements described in clause (a) above. At the time of delivery of the annual audited financial statements, the Borrowers shall furnish to the Agent and each Lender copies of the written recommendations concerning the management, finances, financial controls, or operations of any Borrower or any Restricted Subsidiary received from the Borrowers' independent public accountants. (d) Section 6.5 of the Credit Agreement is hereby amended by adding the words "paid skier visits and unpaid" before the words "skier visits" in clause (i) thereof. (e) Article 7 of the Credit Agreement is hereby amended by deleting Sections 7.3 and 7.4 thereof in their entirety and substituting therefor the following: Section 7.3. Ratio of Consolidated Adjusted Cash Flow to Consolidated Debt Service. The Borrowers and their Restricted Subsidiaries shall maintain as of the end of each fiscal quarter commencing with the fourth fiscal quarter of the Borrowers' fiscal year 1997 for the four-quarter period ending on such date a ratio of (a) Consolidated Adjusted Cash Flow to (b) Consolidated Debt Service of not less than the following levels as of the end of any fiscal quarter during the year indicated: Fiscal Year Ending July Ratio ----------- ----- 1997 1.20-to-1.00 1998 1.40-to-1.00 1999 1.50-to-1.00 2000 1.40-to-1.00 2001 1.75-to-1.00 Section 7.4. Minimum Consolidated Tangible Net Worth. The Borrowers and their Restricted Subsidiaries shall maintain minimum Consolidated Tangible Net Worth as of the last day of each fiscal year of the Borrowers of not less than the sum of (a) $10,000,000 plus (b) 50% of cumulative Consolidated Net Income (without deduction for any losses) for each fiscal year, commencing with the fiscal year ending July 1997 plus (c) all amounts received by the Borrowers after June 28, 1996 from the issuance of equity interests. 5 (f) Section 8.11 of the Credit Agreement is hereby amended by adding the following sentence at the end thereof: "The Borrowers and their Restricted Subsidiaries will conduct their business and operations separately from that of the Unrestricted Subsidiaries, and will cause the Unrestricted Subsidiaries to conduct their business and operations separately from that of the Borrowers and their Restricted Subsidiaries, including without limitation (i) not commingling funds or other assets, (ii) maintaining separate corporate and financial records and observing all corporate formalities, (iii) paying their respective liabilities from their respective assets, except pursuant to any guarantees extended by the Borrowers and their Restricted Subsidiaries of obligations of Unrestricted Subsidiaries with the approval of the Lenders, (iv) maintaining capitalization adequate to meet their respective business needs, and (v) conducting dealings with third parties in their respective names and as separate and independent entities." (g) Article 9 of the Credit Agreement is hereby amended by deleting Section 9.12 thereof in its entirety and substituting therefor the following: Section 9.12. Limitations on Real Estate Operations. Engage in any real estate development, or similar activities, including acquisition of land intended for resale or development of residential subdivisions, condominium units, golf courses, tennis courts, hotels or related infrastructure and utilities, except through the Development Subsidiary, the Hotel Subsidiary and any Unrestricted Subsidiary and except for the completion of the Locke Mountain development at Sunday River; provided, however, that from the date hereof through July 31, 1997, the Borrowers may conduct pre-development activities, excluding construction costs, related to the development of hotels so long as all costs incurred for such activities (the "Pre-Construction Expenditures") do not exceed $4,000,000 and all such expenditures will be repaid to the Borrowers. (h) Article 9 of the Credit Agreement is hereby further amended by deleting Section 9.14 thereof in its entirety and substituting therefor the following: Section 9.14. Capital Expenditures. Make any Capital Expenditure except that (a) for the fifteen-month period from May 1, 1996 through February 28, 1997, the Borrowers and their Restricted Subsidiaries may make Capital Expenditures of not more than $21,000,000, of which not less than $9,500,000 shall be funded from the proceeds of Capital Asset Financing, (b) for the Capital Expenditure Test Period commencing April 1, 1997, the Borrowers and their Restricted Subsidiaries may make Capital Expenditures of not more than the sum of (i) (A) $27,500,000 less (B) the aggregate amount of Pre-Construction Expenditures 6 (as defined in Section 9.12) which have not been repaid to the Borrowers on or before July 31, 1997, less (C) all amounts expended by the Borrowers, directly or indirectly, in connection with the acquisition and development of Wolf Mountain in Park City, Utah, which have not been repaid to the Borrowers on or before July 31, 1997, plus (ii) up to $5,000,000 for Capital Expenditures for the Killington/Pico interconnect project, or such other projects as may be approved by the Lenders in writing and (c) during each Capital Expenditure Test Period thereafter, the Borrowers and their Subsidiaries may make Capital Expenditures not to exceed the sum of (i) $6,000,000, which amount is intended to be used for maintenance Capital Expenditures, plus (ii) the Discretionary Capital Expenditure Allowance, to be used for discretionary Capital Expenditures in accordance with the Capital Expenditure budget delivered under Section 6.4 hereof. Attached as Exhibit A to the Second Amendment is a description of the Borrowers' proposed capital expenditures for the Capital Expenditure Test Period commencing April 1, 1997 and those expenditures which will not be made if the deductions referred to in clauses (b)(i)(B) and (C) above are required to be made. Section 4. Treatment of Asset Sales under Subordinated Notes Indentures. The Borrowers hereby represent and warrant that (a) the aggregate amount of Net Proceeds received from Asset Sales (each as defined in the Subordinated Notes Indentures) from June 25, 1996 through the date hereof, including without limitation the DOJ Divestiture, does not exceed $16,500,000; (b) since the receipt of such Net Proceeds from each such Asset Sale, the Borrowers have applied such Net Proceeds to the making of capital expenditures or the acquisition of long-term assets in the same line of business as any Borrower was engaged immediately prior to such Asset Sale, in an aggregate amount not less than $17,900,000; and (c) in the absence of any further such Asset Sale, the Borrowers will have no obligation under the Subordinated Notes Indenture to permanently reduce Senior Debt (as defined in the Subordinated Notes Indentures) of the Borrowers. Section 5. Security Interest in Utah Assets. Promptly following the acquisition by any Borrower of any assets, real or personal, tangible or intangible, relating to or in connection with the Wolf Mountain Development, including without limitation the so-called "Condas parcel," such Borrower will grant to the Agent, upon the Agent's request, a first priority mortgage on or security interest in all such assets so acquired, and in connection therewith such Borrower shall execute and deliver to the Agent such agreements, instruments, certificates, opinions, title insurance policies, and other documents reasonably requested by the Agent. 7 Section 6. Effectiveness; Conditions to Effectiveness. This Second Amendment to Credit Agreement shall become effective as of May 30, 1997 upon execution hereof by the Borrowers, the Lenders and the Agent and satisfaction of the following conditions: (a) Resolutions. Copies of the resolutions of the Board of Directors of the Borrowers authorizing the execution, delivery and performance of this Third Amendment and the other Lender Agreements executed in connection herewith to which any Borrower is a party, certified by the Secretary or an Assistant Secretary (or Clerk or Assistant Clerk) of each Borrower (which certificate shall state that such resolutions are in full force and effect). (b) Officers' Certificate. A certificate of the Secretary or an Assistant Secretary (or Clerk or Assistant Clerk) of each Borrower certifying (i) the name and signatures of the officers of such Borrower authorized to sign this Second Amendment and the other Lender Agreements executed in connection herewith to which any Borrower is a party and (ii) as to no change in the charter documents or By-laws of the Borrowers previously certified to the Agent. (c) Opinion of Counsel. The Agent shall have received an opinion of Pierce Atwood, general counsel to the Borrowers, with respect to such matters as the Agent may request. (d) Amendment Fee. The Agent shall have received for the benefit of the Lenders pro rata, an amendment fee of $50,000, which shall be deemed earned in full by the Lenders upon their execution and delivery hereof. Section 7. Representations and Warranties; No Default. The Borrowers hereby confirm to the Agent and the Lenders the representations and warranties of the Borrowers set forth in Article 5 of the Credit Agreement (as amended hereby) as of the date hereof, as if set forth herein in full. The Borrowers hereby further represent and warrant that the activities of the Borrowers with respect to the Wolf Mountain Development, taken prior hereto and all such activities expected to be undertaken after the date hereof and financed, directly or indirectly, with proceeds of Revolving Credit Advances, including without limitation the acquisition of the Condas parcel, the payment of earnest money and the acquisition of the Gorgoza Water option, do not constitute a default under the Senior Subordinated Notes Indenture and, to the extent they constitute the incurrence of Indebtedness (as defined under the Senior Subordinated Notes Indenture), such Indebtedness is permitted purchase money Indebtedness. The Borrowers hereby certify that no Default exists under the Credit Agreement. Section 8. Miscellaneous. The Borrowers agree, jointly and severally, to pay on demand all the Agent's reasonable expenses in preparing, executing and delivering this Second Amendment to Credit Agreement, and all related instruments and documents, including, without limitation, the reasonable fees and out-of-pocket expenses of the Agent's special counsel, Goodwin, Procter & Hoar LLP. This Second Amendment to Credit Agreement shall 8 be a Lender Agreement and shall be governed by and construed and enforced under the laws of The Commonwealth of Massachusetts. 9 IN WITNESS WHEREOF, the Borrowers, the Lenders and the Agent have caused this Second Amendment to Credit Agreement to be executed by their duly authorized officers as of the date first set forth above. AMERICAN SKIING COMPANY By: /s/ [Illegible] --------------------------------- SUNDAY RIVER SKIWAY CORPORATION By: /s/ [Illegible] --------------------------------- SUNDAY RIVER LTD. By: /s/ [Illegible] --------------------------------- PERFECT TURN, INC. By: /s/ [Illegible] --------------------------------- SUNDAY RIVER TRANSPORTATION INC. LBO HOLDING, INC. By: /s/ [Illegible] --------------------------------- CRANMORE, INC. By: /s/ [Illegible] --------------------------------- SUGARBUSH RESORT HOLDINGS INC. By: /s/ [Illegible] --------------------------------- 10 SUGARBUSH LEASING COMPANY By: /s/ [Illegible] --------------------------------- SUGARBUSH RESTAURANTS, INC. By: /s/ [Illegible] --------------------------------- MOUNTAIN WASTEWATER TREATMENT, INC. By: /s/ [Illegible] --------------------------------- S-K-I LTD. By: /s/ [Illegible] --------------------------------- KILLINGTON, LTD. By: /s/ [Illegible] --------------------------------- MOUNT SNOW LTD. By: /s/ [Illegible] --------------------------------- WATERVILLE VALLEY SKI AREA LTD. By: /s/ [Illegible] --------------------------------- PICO SKI AREA MANAGEMENT COMPANY By: /s/ [Illegible] --------------------------------- 11 RESORTS SOFTWARE SERVICES, INC. By: /s/ [Illegible] --------------------------------- KILLINGTON RESTAURANTS, INC. By: /s/ [Illegible] --------------------------------- RESORT TECHNOLOGIES, INC. By: /s/ [Illegible] --------------------------------- DOVER RESTAURANTS, INC. By: /s/ [Illegible] --------------------------------- DEERFIELD OPERATING COMPANY By: /s/ [Illegible] --------------------------------- SUGARLOAF MOUNTAIN CORPORATION By: /s/ [Illegible] --------------------------------- MOUNTAINSIDE By: /s/ [Illegible] --------------------------------- SUGARTECH By: /s/ [Illegible] --------------------------------- 12 FLEET NATIONAL BANK By: /s/ David A. Splaine ------------------------------------ Name: David A. Splaine Title: Senior Vice President BANKBOSTON, N.A. By: ------------------------------------ Name: Matthew A. Ross Title: Vice President KEYBANK NATIONAL ASSOCIATION By: ------------------------------------ Name: Stephen P. Lubelczyk Title: Senior Vice President FLEET NATIONAL BANK, AS AGENT By: /s/ David A. Splaine ------------------------------------ Name: David A. Splaine Title: Senior Vice President 13 FLEET NATIONAL BANK By: ------------------------------------ Name: David B. Henderson Title: Vice President BANKBOSTON, N.A. By: /s/ Matthew A. Ross ------------------------------------ Name: Matthew A. Ross Title: Vice President KEYBANK NATIONAL ASSOCIATION By: ------------------------------------ Name: Jane Roundy Title: Senior Vice President FLEET NATIONAL BANK, AS AGENT By: ------------------------------------ Name: David B. Henderson Title: Vice President 13 FLEET NATIONAL BANK By: ------------------------------------ Name: David A. Splaine Title: Senior Vice President BANKBOSTON, N.A. By: ------------------------------------ Name: Matthew A. Ross Title: Vice President KEYBANK NATIONAL ASSOCIATION By: /s/ Stephen P. Lubelczyk ------------------------------------ Name: Stephen P. Lubelczyk Title: Senior Vice President FLEET NATIONAL BANK, AS AGENT By: ------------------------------------ Name: David A. Splaine Title: Senior Vice President 13 EX-10.56 11 3RD AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.56 ================================================================================ THIRD AMENDMENT TO CREDIT AGREEMENT Dated as of July __, 1997 Among AMERICAN SKIING COMPANY SUNDAY RIVER SKIWAY CORPORATION SUNDAY RIVER LTD. PERFECT TURN, INC. SUNDAY RIVER TRANSPORTATION INC. LBO HOLDING, INC. CRANMORE, INC. SUGARBUSH RESORT HOLDINGS INC. SUGARBUSH LEASING COMPANY SUGARBUSH RESTAURANTS, INC. MOUNTAIN WASTEWATER TREATMENT, INC. S-K-I LTD. KILLINGTON, LTD. MOUNT SNOW LTD. WATERVILLE VALLEY SKI AREA LTD. PICO SKI AREA MANAGEMENT COMPANY RESORTS SOFTWARE SERVICES, INC. KILLINGTON RESTAURANTS, INC. RESORT TECHNOLOGIES, INC. DOVER RESTAURANTS, INC. DEERFIELD OPERATING COMPANY SUGARLOAF MOUNTAIN CORPORATION MOUNTAINSIDE SUGARTECH the Borrowers and FLEET NATIONAL BANK BANKBOSTON, N.A. KEYBANK NATIONAL ASSOCIATION the Banks and FLEET NATIONAL BANK, AS AGENT the Agent ================================================================================ THIRD AMENDMENT TO CREDIT AGREEMENT This THIRD AMENDMENT TO CREDIT AGREEMENT is entered into as of July __, 1997 by and among AMERICAN SKIING COMPANY, SUNDAY RIVER SKIWAY CORPORATION, SUNDAY RIVER LTD., PERFECT TURN, INC., SUNDAY RIVER TRANSPORTATION INC., LBO HOLDING, INC., CRANMORE, INC., SUGARBUSH RESORT HOLDINGS INC., SUGARBUSH LEASING COMPANY, SUGARBUSH RESTAURANTS, INC., MOUNTAIN WASTEWATER TREATMENT, INC., S-K-I LTD., KILLINGTON, LTD., MOUNT SNOW LTD., WATERVILLE VALLEY SKI AREA LTD., PICO SKI AREA MANAGEMENT COMPANY, RESORTS SOFTWARE SERVICES, INC., KILLINGTON RESTAURANTS, INC., RESORT TECHNOLOGIES, INC., DOVER RESTAURANTS, INC., DEERFIELD OPERATING COMPANY, SUGARLOAF MOUNTAIN CORPORATION, MOUNTAINSIDE and SUGARTECH (each a "Borrower" and collectively the "Borrowers"), FLEET NATIONAL BANK, BANKBOSTON, N.A. (f/k/a The First National Bank of Boston) and KEYBANK NATIONAL ASSOCIATION (f/k/a KeyBank of Maine) as the Banks parties to the Credit Agreement referred to below (the "Lenders"), and FLEET NATIONAL BANK, as Agent (the "Agent") under the Credit Agreement referred to below. Recitals The Borrowers, the Lenders and the Agent are parties to a Credit Agreement dated as of June 28, 1996 (as previously amended, the "Credit Agreement"). All capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Credit Agreement. Leslie B. Otten desires to transfer the stock of American Ski owned by him to a newly formed holding company, ASC Holdings, Inc., a Maine corporation. Such transfer is not permitted under the Credit Agreement, and the Borrowers desire to amend the Credit Agreement to permit such transfer. The Lenders and the Agent are willing to amend the Credit Agreement on the terms and conditions set forth herein. NOW, THEREFORE, the Borrowers, the Lenders and the Agent hereby agree as follows: Section 1. Definitions. Section 1.1 of the Credit Agreement is hereby amended by adding new definitions of "Holdings" and "Holdings Securities Purchase Agreement", as follows: "Holdings" shall mean ASC Holdings, Inc., a Maine corporation. "Holdings Securities Purchase Agreement" shall mean the Securities Purchase Agreement dated as of July 2, 1997 relating to Holdings' Series A Exchangeable Preferred Stock and 14% Senior Exchangeable Notes Due 2000. Section 2. Amendment of Article 5. (a) Article 5 of the Credit Agreement is hereby amended by deleting Section 5.11 thereof in its entirety and substituting therefor the following: Section 5.11 Stock. There are presently issued by Holdings, the Borrowers and their Subsidiaries and outstanding the shares of capital stock indicated on Schedule 5.4(a). Holdings, the Borrowers and their Subsidiaries have received the consideration for which such stock was authorized to be issued and have otherwise complied with all legal requirements relating to the authorization and issuance of shares of stock and all such shares are validly issued, fully paid and non-assessable. Holdings, the Borrowers and their subsidiaries have no other capital stock of any class outstanding. (b) Article 5 of the Credit Agreement is hereby further amended by deleting Schedule 5.4 thereof in its entirety and substituting therefor the Schedule 5.4 attached hereto. Section 3. Amendment of Article 10. (a) Article 10 of the Credit Agreement is hereby amended by deleting clauses (i) and (j) thereof and substituting therefor the following: (i) At any time that none of the stock of Holdings or of any Borrower is publicly traded, (i) Holdings shall cease to own of record and beneficially at least 96% of the issued and outstanding stock of American Ski, on a fully diluted basis, or (ii) Leslie B. Otten, his spouse and children, and trusts established for his or their benefit (collectively the "Otten Shareholders") shall cease to own of record and beneficially at least 65% of the issued and outstanding capital stock of Holdings, on a fully diluted basis. (j) At any time at any of the stock of Holdings or any Borrower is traded publicly, any person or group of persons within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, other than the Otten Shareholders, shall own of record or beneficially more than 35% of the issued and outstanding capital stock of Holdings. (b) Article 10 of the Credit Agreement is hereby further amended by adding a new subclause (s) as follows: (s) After July 2, 1997, Holdings shall incur any Indebtedness for borrowed money or shall issue any preferred stock, in either case on terms and conditions which impose any limitations or restrictions applicable to any Borrower, directly or indirectly, which are more onerous than the terms and conditions to which such Borrower is subject under the Lender Agreements. 2 Section 4. Representations and Warranties; No Default. The Borrowers hereby confirm to the Agent and the Lenders the representations and warranties of the Borrowers set forth in Article 5 of the Credit Agreement (as amended hereby) as of the date hereof, as if set forth herein in full. The Borrowers hereby further represent and warrant that the execution and delivery by Holdings of the Holdings Securities Purchase Agreement does not constitute a Default under the Subordinated Notes Indentures. The Borrowers hereby certify that, after giving effect to this Third Amendment to Credit Agreement and the Holdings Securities Purchase Agreement, no Default exists under the Credit Agreement. Section 5. Miscellaneous. The Borrowers agree, jointly and severally, to pay on demand all the Agent's reasonable expenses in preparing, executing and delivering this Third Amendment to Credit Agreement, and all related instruments and documents, including, without limitation, the reasonable fees and out-of-pocket expenses of the Agent's special counsel, Goodwin, Procter & Hoar LLP. This Third Amendment to Credit Agreement shall be a Lender Agreement and shall be governed by and construed and enforced under the laws of The Commonwealth of Massachusetts. 3 IN WITNESS WHEREOF, the Borrowers, the Lenders and the Agent have caused this Third Amendment to Credit Agreement to be executed by their duly authorized officers as of the date first set forth above. AMERICAN SKIING COMPANY By: /s/ [Illegible] --------------------------------- Its Senior Vice President ("SVP") SUNDAY RIVER SKIWAY CORPORATION By: /s/ [Illegible] --------------------------------- Its SVP SUNDAY RIVER LTD. By: /s/ [Illegible] --------------------------------- Its SVP PERFECT TURN, INC. By: /s/ [Illegible] --------------------------------- Its SVP SUNDAY RIVER TRANSPORTATION INC. LBO HOLDING, INC. By: /s/ [Illegible] --------------------------------- Its SVP CRANMORE, INC. By: /s/ [Illegible] --------------------------------- Its SVP SUGARBUSH RESORT HOLDINGS INC. By: /s/ [Illegible] --------------------------------- Its SVP 4 SUGARBUSH LEASING COMPANY By: /s/ [Illegible] --------------------------------- Its SVP SUGARBUSH RESTAURANTS, INC. By: /s/ [Illegible] --------------------------------- Its SVP MOUNTAIN WASTEWATER TREATMENT, INC. By: /s/ [Illegible] --------------------------------- Its SVP S-K-I LTD. By: /s/ [Illegible] --------------------------------- Its SVP KILLINGTON, LTD. By: /s/ [Illegible] --------------------------------- Its SVP MOUNT SNOW LTD. By: /s/ [Illegible] --------------------------------- Its SVP WATERVILLE VALLEY SKI AREA LTD. By: /s/ [Illegible] --------------------------------- Its SVP PICO SKI AREA MANAGEMENT COMPANY By: /s/ [Illegible] --------------------------------- Its SVP 5 RESORTS SOFTWARE SERVICES, INC. By: /s/ [Illegible] --------------------------------- Its SVP KILLINGTON RESTAURANTS, INC. By: /s/ [Illegible] --------------------------------- Its SVP RESORT TECHNOLOGIES, INC. By: /s/ [Illegible] --------------------------------- Its SVP DOVER RESTAURANTS, INC. By: /s/ [Illegible] --------------------------------- Its SVP DEERFIELD OPERATING COMPANY By: /s/ [Illegible] --------------------------------- Its SVP SUGARLOAF MOUNTAIN CORPORATION By: /s/ [Illegible] --------------------------------- Its SVP MOUNTAINSIDE By: /s/ [Illegible] --------------------------------- Its SVP SUGARTECH By: /s/ [Illegible] --------------------------------- Its SVP 6 FLEET NATIONAL BANK By: /s/ Richard A. Meringolo ----------------------------------- Name: Richard A. Meringolo Title: Senior Vice President BANKBOSTON, N.A. By: ----------------------------------- Name: Matthew A. Ross Title: Vice President KEYBANK NATIONAL ASSOCIATION By: ----------------------------------- Name: Stephen P. Lubelczyk Title: Senior Vice President FLEET NATIONAL BANK, AS AGENT By: /s/ Richard A. Meringolo ----------------------------------- Name: Richard A. Meringolo Title: Senior Vice President 7 FLEET NATIONAL BANK By: ----------------------------------- Name: Richard A. Meringolo Title: Senior Vice President BANKBOSTON, N.A. By: /s/ [Illegible] ----------------------------------- Name: [Illegible] Title: Director KEYBANK NATIONAL ASSOCIATION By: ----------------------------------- Name: Stephen P. Lubelczyk Title: Senior Vice President FLEET NATIONAL BANK, AS AGENT By: ----------------------------------- Name: Richard A. Meringolo Title: Senior Vice President 7 FLEET NATIONAL BANK By: ----------------------------------- Name: Richard A. Meringolo Title: Senior Vice President BANKBOSTON, N.A. By: ----------------------------------- Name: Matthew A. Ross Title: Vice President KEYBANK NATIONAL ASSOCIATION By: /s/ Stephen P. Lubelczyk ----------------------------------- Name: Stephen P. Lubelczyk Title: Senior Vice President FLEET NATIONAL BANK, AS AGENT By: ----------------------------------- Name: Richard A. Meringolo Title: Senior Vice President 7 EX-10.60 12 4TH AMENDMENT TO CREDIT AGREEMENT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FOURTH AMENDMENT TO CREDIT AGREEMENT Dated as of September 24, 1997 Among ASC EAST SUNDAY RIVER SKIWAY CORPORATION SUNDAY RIVER LTD. PERFECT TURN, INC. SUNDAY RIVER TRANSPORTATION INC. LBO HOLDING, INC. CRANMORE, INC. SUGARBUSH RESORT HOLDINGS INC. SUGARBUSH LEASING COMPANY SUGARBUSH RESTAURANTS, INC. MOUNTAIN WASTEWATER TREATMENT, INC. S-K-I LTD. KILLINGTON, LTD. MOUNT SNOW LTD. WATERVILLE VALLEY SKI AREA LTD. PICO SKI AREA MANAGEMENT COMPANY RESORTS SOFTWARE SERVICES, INC. KILLINGTON RESTAURANTS, INC. RESORT TECHNOLOGIES, INC. DOVER RESTAURANTS, INC. DEERFIELD OPERATING COMPANY SUGARLOAF MOUNTAIN CORPORATION MOUNTAINSIDE SUGARTECH the Borrowers and FLEET NATIONAL BANK BANKBOSTON, N.A. KEYBANK NATIONAL ASSOCIATION the Banks and FLEET NATIONAL BANK, AS AGENT the Agent - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FOURTH AMENDMENT TO CREDIT AGREEMENT This FOURTH AMENDMENT TO CREDIT AGREEMENT is entered into as of September 24, 1997 by and among ASC EAST (f/k/a American Skiing Company), SUNDAY RIVER SKIWAY CORPORATION, SUNDAY RIVER LTD., PERFECT TURN, INC., SUNDAY RIVER TRANSPORTATION INC., LBO HOLDING, INC., CRANMORE, INC., SUGARBUSH RESORT HOLDINGS INC., SUGARBUSH LEASING COMPANY, SUGARBUSH RESTAURANTS, INC., MOUNTAIN WASTEWATER TREATMENT, INC., S-K-I LTD., KILLINGTON, LTD., MOUNT SNOW LTD., WATERVILLE VALLEY SKI AREA LTD., PICO SKI AREA MANAGEMENT COMPANY, RESORTS SOFTWARE SERVICES, INC., KILLINGTON RESTAURANTS, INC., RESORT TECHNOLOGIES, INC., DOVER RESTAURANTS, INC., DEERFIELD OPERATING COMPANY, SUGARLOAF MOUNTAIN CORPORATION, MOUNTAINSIDE and SUGARTECH (each a "Borrower" and collectively the "Borrowers"), FLEET NATIONAL BANK, BANKBOSTON, N.A. (f/k/a The First National Bank of Boston) and KEYBANK NATIONAL ASSOCIATION (f/k/a KeyBank of Maine) as the Banks parties to the Credit Agreement referred to below (the "Lenders"), and FLEET NATIONAL BANK, as Agent (the "Agent") under the Credit Agreement referred to below. RECITALS The Borrowers, the Lenders and the Agent are parties to a Credit Agreement dated as of June 28, 1996 (as previously amended, the "Credit Agreement"). All capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Credit Agreement. Events of Default have occurred and are continuing under the Credit Agreement, and the Borrowers desire to amend the Credit Agreement in certain respects and to have outstanding Events of Default waived. The Lenders and the Agent are willing to amend the Credit Agreement and waive such Events of Default on the terms and conditions set forth herein. NOW, THEREFORE, the Borrowers, the Lenders and the Agent hereby agree as follows: Section 1. AMENDMENT OF ARTICLE 6. Article 6 of the Credit Agreement is hereby amended by adding a new Section 6.14 as follows: Section 6.14 WEEKLY REPORTS. As soon as practicable, and in any event by Wednesday of each week, the Borrowers shall furnish, from the date hereof through October 30, 1997, to the Agent and each Lender weekly cash flow reports showing receipts and disbursements in such detail as the Lenders may reasonably request. Section 2. AMENDMENT OF ARTICLE 9. (a) Section 9.12 of the Credit Agreement is hereby amended by deleting Section 9.12 thereof in its entirety and substituting therefor the following: Section 9.12. LIMITATIONS ON REAL ESTATE OPERATIONS. Engage in any real estate development, or similar activities, including acquisition of land intended for resale or development of residential subdivisions, condominium units, golf courses, tennis courts, hotels or related infrastructure and utilities, except through the Development Subsidiary, the Hotel Subsidiary and any Unrestricted Subsidiary and except for the completion of the Locke Mountain development at Sunday River; provided, however, the Borrowers may engage in such development activities relating to the development of hotels at the Sunday River, Killington, Sugarbush and Mount Snow resorts so long as all costs incurred for such activities (the "Development Expenditures") do not exceed (a) $12,000,000 at any time from May 30, 1997 through August 31, 1997, and (b) $8,000,000 at any time from August 31, 1997 through October 10, 1997; and provided, further, that the Development Expenditures relating to the hotels at Sunday River, Killington and Mount Snow will be repaid (with the exception of unreimburseable capital costs for marketing) to the Borrowers on or before October 10, 1997. It is understood that the Development Expenditures for Sugarbush and that operational marketing expenses for all hotels will not be repaid on or before October 10, 1997 and that those amounts will not exceed $4,000,000 at any time. (b) Article 9 of the Credit Agreement is hereby further amended by deleting Section 9.14 thereof in its entirety and substituting therefor the following: Section 9.14. CAPITAL EXPENDITURES. Make any Capital Expenditure except that (a) for the fifteen-month period from May 1, 1996 through February 28, 1997, the Borrowers and their Restricted Subsidiaries may make Capital Expenditures of not more than $21,000,000, of which not less than $9,500,000 shall be funded from the proceeds of Capital Asset Financing, (b) for the Capital Expenditure Test Period commencing April 1, 1997, the Borrowers and their Restricted Subsidiaries may make Capital Expenditures of not more than the sum of (i) (A) $27,500,000 LESS (B) the aggregate amount of Development Expenditures (as defined in Section 9.12) which have not been repaid to the Borrowers on or before October 10, 1997, LESS (C) all amounts expended by the Borrowers, directly or indirectly, in connection with the acquisition and development of Wolf Mountain in Park City, Utah, which have not been repaid to the Borrowers on or before October 10, 1997, PLUS (ii) up to $5,000,000 for Capital Expenditures for the Killington/Pico interconnect project, or such other projects as may be approved by the Lenders in writing and (c) during each Capital Expenditure Test Period thereafter, the Borrowers and their Subsidiaries may make Capital Expenditures not to exceed the sum of (i) $6,000,000, which amount is intended to be used for maintenance Capital Expenditures, PLUS (ii) the Discretionary Capital Expenditure Allowance, to be used for discretionary Capital Expenditures in accordance with the Capital Expenditure budget 2 delivered under Section 6.4 hereof. Attached as Exhibit A to the Second Amendment is a description of the Borrowers' proposed capital expenditures for the Capital Expenditure Test Period commencing April 1, 1997 and those expenditures which will not be made if the deductions referred to in clauses (b)(i)(B) and (C) above are required to be made. Section 3. AMENDMENT OF ARTICLE 10. Section 10.1 of the Credit Agreement is hereby amended by adding a new subclause (t) and (u) as follows: (t) Holdings shall have failed to receive not less than $250,000,000 in gross proceeds from the sale of its common stock in an initial public offering on or before November 30, 1997. (u) The Borrowers shall fail to deliver to the Agent by October 10, 1997 satisfactory written evidence of a lending commitment to the Borrowers in an amount sufficient to repay the obligations under or in connection with this Credit Agreement by a date certain (the "Commitment Letter") and further, the Borrowers shall fail to close the transaction proposed in the Commitment Letter by December 15, 1997. Section 4. AMENDMENT OF ARTICLE 11. Section 11.1 of the Credit Agreement is hereby amended by adding a new subclause (vii) as follows: (vii) no waiver of an Event of Default under the Credit Agreement as a result of the occurrence of either of the events set forth in Section 10.1(t) and Section 10.1(u) shall be made. Section 5. WAIVER OF DEFAULTS. (a) The Lenders and the Agent hereby waive the Events of Default existing under the Credit Agreement as of July 31, 1997 as a result of the Borrowers' failure to maintain (i) the ratio of Consolidated Total Debt to Consolidated EBITDA required under Section 7.1 of the Credit Agreement for the four fiscal period ending July 31, 1997, (ii) the ratio of Consolidated Adjusted Cash Flow to Consolidated Debt Service required under Section 7.3 of the Credit Agreement as of the end of the fiscal quarter ending July 31, 1997, and (iii) Consolidated Tangible Net Worth required under Section 7.4 of the Credit Agreement as of the last day of fiscal year 1997. The Borrowers hereby represent and warrant that (i) Consolidated EBITDA as determined under Section 7.1 of the Credit Agreement for the four-quarter period ending July 31, 1997 was not less than $32,094,552, (ii) Consolidated Debt Service as determined under Section 7.3 of the Credit Agreement as of the end of the fiscal quarter ending July 31, 1997 was not less than $35,663,994, and (iii) Consolidated Tangible Net Worth as of the last date of fiscal year 1997 was not less than $2,906,095. (b) The Lenders and the Agent hereby waive the Events of Default existing under the Credit Agreement as of July 31, 1997 as a result of the Borrowers' failure to comply with: 3 (i) the notice requirement set forth in Section 6.6 relating to notice of defaults described in paragraph (a) hereof and clause (ii) below, and (ii) the covenants set forth in Section 9.12 and 9.14. Section 6. EFFECTIVENESS; CONDITIONS TO EFFECTIVENESS. This Fourth Amendment to Credit Agreement shall become effective upon execution hereof by the Lenders, the Agent and the Borrowers and satisfaction of the following conditions: (a) TEXTRON. The Borrowers shall have delivered to the Agent a letter from Textron Financial Corp. ("Textron") confirming that the financial arrangement between the Borrowers and Textron will close on or before September 30, 1997. (b) DLJ. The Borrowers shall have delivered to the Agent a letter from Donaldson, Lufkin & Jenrette ("DLJ") confirming that the proposed initial public offering of the common stock of Holdings is proceeding and DLJ is not aware of any circumstance or reason that would prevent the initial public offering from closing on or about November 30, 1997. (c) PRICE WATERHOUSE. The Borrowers shall have delivered to the Agent a letter from Price Waterhouse confirming that this Fourth Amendment is sufficient to allow Price Waterhouse to render an unqualified opinion with respect to the Borrowers' financial statements for their fiscal year ending July 31, 1997. (d) AMENDMENT FEE. An amendment fee in an amount equal to $60,000 will be payable to the Agent, for the account of each Lender, on the date of execution of this Fourth Amendment. (e) COUNSEL FEES. All fees and expenses of the Agent's special counsel, Goodwin, Procter & Hoar LLP, will be paid on the date of execution of this Fourth Amendment which fees and expenses consist of (i) outstanding invoices in the amount of $26,167.38, and (ii) fees and expenses incurred through the date hereof in the amount of $6,698.58. Section 7. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The Borrowers hereby confirm to the Agent and the Lenders the representations and warranties of the Borrowers set forth in Article 5 of the Credit Agreement (as amended hereby) as of the date hereof, as if set forth herein in full. The Borrowers hereby certify that, after giving effect to this Fourth Amendment to Credit Agreement, no Default exists under the Credit Agreement. Section 8. MISCELLANEOUS. The Borrowers agree, jointly and severally, to pay on demand all the Agent's reasonable expenses in preparing, executing and delivering this Fourth Amendment to Credit Agreement, and all related instruments and documents, including, without limitation, the reasonable fees and out-of-pocket expenses of the Agent's special counsel, Goodwin, Procter & Hoar LLP. This Fourth Amendment to Credit Agreement shall be a Lender Agreement and shall be governed by and construed and enforced under the laws of The Commonwealth of Massachusetts. 4 IN WITNESS WHEREOF, the Borrowers, the Lenders and the Agent have caused this Fourth Amendment to Credit Agreement to be executed by their duly authorized officers as of the date first set forth above. ASC EAST By: /s/ Thomas Richardson ------------------------------------- SUNDAY RIVER SKIWAY CORPORATION By: /s/ Thomas Richardson ------------------------------------- SUNDAY RIVER LTD. By: /s/ Thomas Richardson ------------------------------------- PERFECT TURN, INC. By: /s/ Thomas Richardson ------------------------------------- SUNDAY RIVER TRANSPORTATION INC. LBO HOLDING, INC. By: /s/ Thomas Richardson ------------------------------------- CRANMORE, INC. By: /s/ Thomas Richardson ------------------------------------- SUGARBUSH RESORT HOLDINGS INC. By: /s/ Thomas Richardson ------------------------------------- SUGARBUSH LEASING COMPANY By: /s/ Thomas Richardson ------------------------------------- 5 SUGARBUSH RESTAURANTS, INC. By: /s/ Thomas Richardson ------------------------------------- MOUNTAIN WASTEWATER TREATMENT, INC. By: /s/ Thomas Richardson ------------------------------------- S-K-I LTD. By: /s/ Thomas Richardson ------------------------------------- KILLINGTON, LTD. By: /s/ Thomas Richardson ------------------------------------- MOUNT SNOW LTD. By: /s/ Thomas Richardson ------------------------------------- WATERVILLE VALLEY SKI AREA LTD. By: /s/ Thomas Richardson ------------------------------------- PICO SKI AREA MANAGEMENT COMPANY By: /s/ Thomas Richardson ------------------------------------- 6 RESORTS SOFTWARE SERVICES, INC. By: /s/ Thomas Richardson ------------------------------------- KILLINGTON RESTAURANTS, INC. By: /s/ Thomas Richardson ------------------------------------- RESORT TECHNOLOGIES, INC. By: /s/ Thomas Richardson ------------------------------------- DOVER RESTAURANTS, INC. By: /s/ Thomas Richardson ------------------------------------- DEERFIELD OPERATING COMPANY By: /s/ Thomas Richardson ------------------------------------- SUGARLOAF MOUNTAIN CORPORATION By: /s/ Thomas Richardson ------------------------------------- MOUNTAINSIDE By: /s/ Thomas Richardson ------------------------------------- SUGARTECH By: /s/ Thomas Richardson ------------------------------------- 7 FLEET NATIONAL BANK By: /s/ Patrick F. McAvliffe ------------------------------------- Name: Patrick F. McAvliffe Title: Executive Vice President BANKBOSTON, N.A. By: /s/ Carlton F. Williams ------------------------------------- Name: Carlton F. Williams Title: Director KEYBANK NATIONAL ASSOCIATION By: /s/ Stephen P. Lubelczyk ------------------------------------- Name: Stephen P. Lubelczyk Title: Senior Vice President FLEET NATIONAL BANK, AS AGENT By: /s/ Patrick F. McAvliffe ------------------------------------- Name: Patrick F. McAvliffe Title: Executive Vice President 8 EX-10.61 13 PROMISSORY NOTE #1 EXHIBIT 10.61 PROMISSORY NOTE $2,500,000.00 New York, New York June 18, 1997 FOR VALUE RECEIVED, the undersigned, ASC Holdings, Inc., a Maine corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of Madeleine LLC (the "Lender"), (i) the principal sum of TWO MILLION FIVE HUNDRED THOUSAND Dollars ($2,500,000.00) or, if less, the aggregate unpaid principal amount of the Loan (as hereinafter defined) made by the Lender to the Borrower, such principal amount to be paid on July 31, 1997 (the "Maturity Date"), and (ii) interest on any and all principal amounts remaining unpaid hereunder from time to time outstanding, from the date hereof until the Maturity Date, payable on the Maturity Date together with any principal amount unpaid hereunder at an interest rate per annum equal to 14% per annum, compounded monthly (the "Applicable Interest Rate"). I. (a) Any amount of principal of and (to the extent permitted by law) interest on the Loan that is not paid when due shall bear interest from the day when due until such amount is paid in full, payable on demand, at an interest rate of 19% per annum, compounded daily (the "Default Rate"). All interest shall be computed on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) elapsed. Notwithstanding any other provision of this Note, interest paid or becoming due hereunder shall in no event exceed the maximum rate permitted by applicable law. (b) This Note evidences a loan (the "Loan") that the Lender has made to the Borrower. Such Loan is conclusively presumed to have been made to, and for the benefit of, the Borrower in accordance with its request. (c) The Lender shall maintain an account on its books in the name of the Borrower (the "Loan Account") on which the Borrower will be charged with all amounts owing hereunder, including all accrued interest, all fees, all expenses (including legal expenses) incurred by the Lender in connection with this Note, and any other obligations of the Borrower to the Lender. The Borrower authorizes the Lender to charge the Loan Account with such interest, fees, expenses and other obligations and acknowledges that such charges shall be properly added to the principal amount of the Loan to the Borrower. (d) If any amount payable hereunder shall be due on a Saturday, Sunday or other day on which national banks are required or authorized to close (any other day being a "Business Day"), such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest payable hereon. (e) Both principal and interest are payable in lawful money of the United States and in immediately available funds at the offices of the Lender located at 450 Park Avenue, 28th Floor, New York, NY 10022, Attention: Robert Davenport or as directed by the Lender pursuant to written notice to the Borrower. Payments received by the Lender or its designee after 2:00 p.m. Eastern Standard Time on a Business Day will be deemed to be received on the next Business Day. (f) The Borrower may, at its option, prepay the Loan evidenced by this Note, in whole, at any time or in part from time to time, without penalty or premium, such prepayment to be accompanied by the payment of accrued interest to the date of such prepayment. II. The Borrower represents and warrants as follows: (a) the Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Maine; (b) the execution, delivery and performance by the Borrower of this Note and each other instrument, agreement and other document delivered by the Borrower to the Lender in connection with this Note (the Note, together with all such other agreements, instruments and other documents, are hereinafter referred to individually as a "Document" and collectively as the "Documents") are within the Borrower's powers, have been duly authorized by all necessary action, and do not contravene the Borrower's charter or by-laws; (c) no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of any Document; (d) each Document constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms; (e) the Borrower has no directly owned first tier Subsidiaries other than as set forth on Exhibit A annexed hereto, which exhibit accurately sets forth the issued and outstanding shares of capital stock of each such Subsidiary; (f) as of the date hereof, the Borrower has conducted no business, other than the holding of the shares of the Subsidiaries listed on Exhibit A, and has incurred no liabilities, other than the obligations represented by this Note; (g) the Borrower is the shareholder of record and beneficial owner of the shares of common stock (the "Shares") of American Skiing Company ("ASC"), a Maine corporation, identified on Exhibit A annexed hereto; (h) the Shares represent ninety-six percent (96%) of the issued and outstanding capital stock of ASC as of the date hereof; and (i) the Shares are owned by the Borrower free and clear of all liens, claims and encumbrances, and free of any adverse claim, any lien in favor of the issuer, and any restrictions on transfer imposed by the issuer except as imposed under a Shareholders Agreement between Leslie B. Otten, ASC and Bear Stearns Co., Inc. dated June 28, 1996. III. The proceeds of the Loan shall be used by the Borrower to acquire certain real estate associated with the Borrower's intended development of a recreational skiing property currently referred to as the Wolf Mountain Resort located in Summit County, Utah (the "Wolf Purchase"). IV. If any of the following shall occur (each a "Default"): (a) the Borrower shall fail to pay any principal of or interest on this Note when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); or (b) any representation or warranty made by the Borrower in this Note, in any other Document or in any document or certificate executed in connection with this Note shall have been incorrect in any material respect when made; or (c) the Borrower shall fail to pay any debt for borrowed money or other similar obligation or liability of the Borrower (excluding such amounts as evidenced by this Note), or any interest or premium -2- thereon, when due; or (d) one or more judgments or orders for the payment of money exceeding any applicable insurance coverage shall be rendered against the Borrower, or (e) the Borrower shall be generally not paying its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any such person seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for such person or for any substantial part of its property; or the Borrower shall take any action to authorize or effect any of the actions set forth above in this clause (e); or (f) any provision of this Note or any other Document shall at any time for any reason be declared to be null and void by a court of competent jurisdiction, or the validity or enforceability thereof shall be contested by the Borrower or any other person, or a proceeding shall be commenced by the Borrower or any other person seeking to establish the invalidity or unenforceability thereof, or the Borrower shall deny that it has any liability or obligation hereunder or thereunder; or (g) a material adverse change in the condition or operations, financial or otherwise, of the Borrower, as determined by the Lender in its sole discretion, shall occur and written notice thereof shall have been given to the Borrower by the Lender; then the Lender may (i) declare the outstanding principal amount of this Note and all other amounts due hereunder or under any other Document to be immediately due and payable, whereupon the outstanding principal amount of this Note and all such other amounts shall become and shall be forthwith due and payable, without diligence, presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, and (ii) exercise any and all of its other rights under applicable law, hereunder and under the other Documents. V. So long as any principal or interest on the Loan remains unpaid, the Borrower will not, without the prior written consent of the Lender: (i) Create, incur, assume, or suffer to exist, any mortgage, deed of trust, pledge, lien, security interest, hypothecation or other preferential arrangement, charge or encumbrance (including, without limitation, any conditional sale, or other title retention agreement, or finance lease) of any nature, upon or with respect to any of its properties (including, but not limited to, the Shares and the contract rights in connection with the Wolf Purchase), now owned or hereafter acquired, or sign or file under the Uniform Commercial Code of any jurisdiction a financing statement which names the Borrower as a debtor, or sign, any security agreement authorizing any secured party thereunder to file such financing statement. (ii) Create, incur, assume or suffer to exist, any Debt. "Debt" means (1) indebtedness or liability for borrowed money; (2) obligations evidenced by bonds, debentures, notes, or other similar instruments; (3) obligations for the deferred purchase price of property or services (including trade obligations); (4) obligations as lessee under any capital or operating leases; (5) obligations under letters of credit; (6) obligations under acceptance facilities; (7) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to -3- invest in any Person or entity, or otherwise to assure a creditor against loss; and (8) obligations secured by any mortgage, lien, pledge, or security interest or other charge or encumbrance on property, whether or not the obligations have been assumed. (iii) (a) Merge or consolidate with, or permit any of its Subsidiaries to merge or consolidate with, any Person, (b) sell, assign or otherwise transfer or dispose of, or permit any of its Subsidiaries to sell, assign or otherwise transfer or dispose of, all or any substantial part of its assets or properties, whether now owned or hereafter acquired to any Person, except in the ordinary course of business or (c) wind up, liquidate, reorganize or dissolve itself. (iv) Declare or pay any cash dividends, return any capital to its shareholders as such, or make any other distribution or payment on account of or in redemption, retirement or purchase of any capital stock now or hereafter outstanding. (v) Convey, lease, transfer or otherwise dispose of all or any part of its business, properties or other assets. (vi) Make any loan or advance to any Person, or purchase or otherwise acquire, any capital stock, assets, obligations, or other securities of, make any capital contribution to, or otherwise invest in or acquire any interest in any Person, or participate as a partner or joint venturer with any other Person other than the purchase of stock or assets in connection with the purchase of Wolf Mountain. (vii) Assume, guaranty, endorse, or otherwise be or become directly or contingently responsible or liable, (including, but not limited to, an agreement to purchase any obligation, stock, assets, goods, or services or to supply or advance any funds, assets, goods, or services, or an agreement to maintain or cause such Person to maintain a minimum working capital or net worth, or otherwise to assure the creditors of any Person against loss) for the obligations of any Person. (viii) Enter into any transaction, including, without limitation, the purchase, sale, or exchange of property or the rendering of any service, with any Affiliate, "Affiliate" means any Person which directly or indirectly controls, or is controlled by, or is under common control with the Borrower. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. As used in this Note, the terms Subsidiary and Person are defined, respectively, as follows: "Subsidiary" means, as to any Person, any corporation, partnership or other entity of which more than 50% of the outstanding shares of capital stock or other ownership interest having (in the absence of contingencies) ordinary voting power to elect directors, managers or Persons performing similar functions of such corporation, partnership or other entity is, at the time of determination, owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, by such Person. -4- "Person" means an individual, sole proprietorship, corporation, partnership, association, joint-stock company, trust, unincorporated organization, joint venture, limited liability company or other business entity. VI. All payments made by the Borrower under this Note will be made without setoff, counterclaim or other defense. VII. (a) All notices or other communications provided for hereunder shall be in writing (including telecommunications) and shall be mailed, telecopied, telexed, telegraphed or delivered to the Borrower at the address set forth below next to the signature of its authorized officer, or at such other address as may hereafter be specified by the Borrower to the Lender (at its address set forth herein) in writing. All notices and communications shall be effective (i) if mailed, when received or three days after mailing, whichever is earlier, (ii) if telecopied, when transmitted, and (iii) if delivered, upon delivery. (b) No failure on the part of the Lender to exercise, and no delay in exercising, any right, power, privilege or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof by the Lender preclude any other or further exercise thereof or the exercise of any other right, power, privilege or remedy of the Lender. No amendment or waiver of any provision of this Note, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Lender and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. (c) Any provision hereof which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. (d) The Borrower hereby agrees to pay on the Maturity Date all costs and expenses (including, without limitation, all fees, expenses and other client charges of counsel to the Lender) incurred by the Lender in connection with (i) the preparation, execution, delivery, administration and amendment of this Note and the Documents, and (ii) the enforcement of the Lender's rights, and the collection of all amounts due, hereunder. -5- (e) This Note shall be governed by, and construed in accordance with, the laws of the State of New York. ASC HOLDINGS, INC. By: /s/ Christopher E. Howard -------------------------- Name: Christopher E. Howard Title: Chief Administrative Officer Maine ---------------------- State of Incorporation Address: P.O. Box 450 Bethel, Maine 04217 Attention: Christopher E. Howard Telephone: 207-824-5196 Telex: ------------------------------- Telecopier: 207-824-5158 -6- SCHEDULE TO PROMISSORY NOTE - ------ ---------------- --------------------- ----------------------- ---------- Amount of Principal Unpaid Principal Amount Notation Date Amount of Loan Paid of Note Made By - ------ ---------------- --------------------- ----------------------- ---------- - ------ ---------------- --------------------- ----------------------- ---------- - ------ ---------------- --------------------- ----------------------- ---------- - ------ ---------------- --------------------- ----------------------- ---------- - ------ ---------------- --------------------- ----------------------- ---------- - ------ ---------------- --------------------- ----------------------- ---------- - ------ ---------------- --------------------- ----------------------- ---------- - ------ ---------------- --------------------- ----------------------- ---------- - ------ ---------------- --------------------- ----------------------- ---------- - ------ ---------------- --------------------- ----------------------- ---------- - ------ ---------------- --------------------- ----------------------- ---------- - ------ ---------------- --------------------- ----------------------- ---------- - ------ ---------------- --------------------- ----------------------- ---------- - ------ ---------------- --------------------- ----------------------- ---------- - ------ ---------------- --------------------- ----------------------- ---------- - ------ ---------------- --------------------- ----------------------- ---------- -7- EXHIBIT A Number of Shares Name of Subsidiary Issued and Outstanding ------------------ ---------------------- American Skiing Company 939,168 ASC Utah 100 -8- EX-10.62 14 PROMISSORY NOTE #2 Exhibit 10.62 PROMISSORY NOTE $ 6,500,000.00 Summit County, Utah July 3, 1997 FOR VALUE RECEIVED, ASC UTAH, INC., a Maine corporation ("Maker") with a mailing address of Sunday River Road, P.O. Box 450, Bethel, Maine 04217, hereby promises to pay to the order of WOLF MOUNTAIN, L.C., a Utah limited liability company ("Lender"), and its successors and assigns, at 4000 Parkwest Drive, Park City, Utah, 84098 the principal sum of Six Million Five Hundred Thousand and No/100 Dollars ($6,500,000.00), together with interest on the unpaid principal balance of this Note from time to time outstanding at a rate of twelve (12%) per annum, which interest shall be paid as of the first day of each and every month during the term hereof. The principal balance of this Note shall be paid in two installments as follows: (a) On January 31, 1998, Maker shall make a principal payment of $2,300,000 to Lender; and (b) On the earlier of (1) the effective date of any public offering by Maker, Guarantor (defined below) or American Skiing Company, a Maine corporation, or (2) April 15, 2005 (the "Maturity Date"), Maker shall pay the entire remaining unpaid balance of this Note and any unpaid accrued interest thereon. This Note is guaranteed by ASC Holdings, Inc., a Maine corporation ("Guarantor"), as set forth in that certain Guaranty of even date herewith, executed by Guarantor in favor of Lender. Any principal of, and to the extent permitted by applicable law any interest on, this Note which is not paid when due shall bear interest, from the date due and payable until paid, at a rate equal to the lesser of (a) fifteen percent (15%) per annum or (b) the maximum rate allowed by applicable law. Whenever any payment shall be due under this Note on a day which is not a Business Day, the date on which such payment is due shall be extended to the next succeeding Business Day, and such extension of time shall be included in the computation of the amount of interest then payable. "Business Day" means a day other than a Saturday, Sunday or other day on which national banks in Salt Lake City, Utah are closed. Maker may at any time pay the full amount or any part of this Note without payment of any premium or fee. All prepayment shall be accompanied by payment of all accrued but unpaid interest on the amount prepaid. All payments made as scheduled on this Note shall be applied, to the extent thereof, first to accrued but unpaid interest and the balance to unpaid principal. All prepayments on this Note shall be applied, to the extent thereof, first to accrued but unpaid interest and the balance to the remaining principal installments in inverse order of their maturity. If any principal, interest, or other amount of money due under this Note is not paid in full within ten (10) days after written notice from the holder hereof to Maker that a payment is past due for the first two (2) such occurrences in any calendar year and thereafter within ten (10) days of the date when due, regardless of how such amount may have become due, then such occurrence shall be a default under this Note ("Default"). Upon occurrence of a Default, the holder hereof shall have the right to declare the unpaid principal balance and accrued but unpaid interest on this Note at once due and payable (and upon such declaration, the same shall be at once due and payable) and to exercise any of its other rights, powers, and remedies under this Note or at law or in equity. Neither the failure by the holder hereof to exercise, nor delay by the holder hereof in exercising, the right to accelerate the maturity of this Note or any other right, power or remedy upon any default shall be construed as a waiver of such default or as a waiver of the right to exercise any such right, power or remedy at any time. No single or partial exercise by the holder hereof of any right, power or remedy shall exhaust the same or shall preclude any other or further exercise thereof, and every such right, power or remedy may be exercised at any time and from time to time. All rights and remedies provided for in this Note are cumulative of each other and of any and all other rights and remedies existing at law or in equity, and the holder hereof shall, in addition to the rights and remedies provided herein, be entitled to avail itself of all such other rights and remedies as may now or hereafter exist at law or in equity for the collection of the indebtedness owing hereunder. The resort to any right or remedy provided for hereunder or provided for by law or in equity shall not prevent the concurrent or subsequent employment of any other appropriate rights or remedies. Without limiting the generality of the foregoing provisions, the acceptance by the holder hereof from time to time of any payment under this Note which is past due or which is less than the payment in full of all amounts due and payable at the time of such payment, shall not (i) constitute a waiver of or impair or extinguish the rights of the holder hereof to accelerate the maturity of this Note or to exercise any other right, power or remedy at the time or at any subsequent time, or nullify any prior exercise of any such right, power or remedy, or (ii) constitute a waiver of the requirement of punctual payment and performance, or a novation in any respect. If any holder of this Note retains an attorney in connection with any default or at maturity or to collect, enforce or defend this Note in any lawsuit or in any probate, reorganization, bankruptcy or other proceeding, or if Maker sues any holder in connection with this Note and does not prevail, then Maker agrees to pay to each such holder, in addition to principal and interest, all reasonable costs and expenses incurred by such holder in trying to collect this Note or in any such suit or proceeding, including reasonable attorneys' fees It is the intent of Lender and Maker to conform to and contract in strict compliance with applicable usury law from time to time in effect. All agreements between Lender or any other holder hereof and Maker (or any other party liable with respect to any indebtedness under the Note) are hereby limited by the provisions of this paragraph which shall override and control all 2 agreements, whether now existing or hereafter arising and whether written or oral. In no way, nor in any event or contingency (including but not limited to prepayment, default, demand for payment, or acceleration of the maturity of any obligation), shall the interest taken, reserved, contracted for, charged or received under this Note or otherwise, exceed the maximum nonusurious amount permissible under applicable law. If, from any possible construction of any document, interest would otherwise be payable in excess of the maximum nonusurious amount, any such construction shall be subject to the provisions of this paragraph and such document shall be automatically reformed and the interest payable shall be automatically reduced to the maximum nonusurious amount permitted under applicable law, without the necessity of execution of any amendment or new document. If the holder hereof shall ever receive anything of value which is characterized as interest under applicable law and which would apart from this provision be in excess of the maximum lawful amount, an amount equal to the amount which would have been excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the indebtedness evidenced hereby in the inverse order of its maturity and not to the payment of interest, or refunded to Maker or the other payor thereof if and to the extent such amount which would have been excessive exceeds such unpaid principal. As used in this paragraph, the term "applicable law" shall mean the laws of the State of Utah or the federal laws of the United States, whichever laws allow the greater interest, as such laws now exist or may be changed or amended or come into effect in the future. Maker and all sureties, endorsers, guarantors and any other party now or hereafter liable for the payment of this Note in whole or in part, hereby severally (i) waive demand, presentment for payment, notice of dishonor and of nonpayment, protest, notice of protest, notice of intent to accelerate, notice of acceleration and all other notices (except for those notices expressly provided for herein); (ii) agree to the release of any party primarily or secondarily liable hereon; (iii) agree that the holder hereof shall not be required first to institute suit or exhaust its remedies hereon against Maker or others liable or to become liable hereon or to enforce its rights against them or any security herefor; (iv) consent to any extension or postponement of time of payment of this Note for any period or periods of time and to any partial payments, before or after maturity, and to any other indulgences with respect hereto, without notice thereof to any of them; and (v) submit (and waive all rights to object) to personal jurisdiction in the State of Utah, and venue in Summit County, Utah, for the enforcement of any and all obligations under the Note. This Note may not be changed, amended or modified except in a writing expressly intended for such purpose and executed by the party against whom enforcement of the change, amendment or modification is sought. The loan evidenced by this Note is made solely for business and commercial purposes and is not for personal, family, household or agricultural purposes. Maker acknowledges and agrees that the holder of this Note may, from time to time, sell or offer to sell interests in the loan evidenced by this Note to one or more participants. 3 This Note, and its validity, enforcement and interpretation, shall be governed by Utah law (without regard to any conflict of laws principles) and applicable United States Federal law. Time shall be of the essence in this Note with respect to all of Maker's obligations hereunder. IN WITNESS WHEREOF, Maker has duly executed this Note as of the date first above written. MAKER: ASC UTAH, INC., a Maine corporation By: /s/ Julianne Cloutier Name: Julianne Cloutier Title: Vice President 4 EX-10.63 15 GUARANTY EXHIBIT 10.63 GUARANTY THIS GUARANTY, dated as of July 3, 1997 ("Guaranty"), is made by ASC HOLDINGS, INC., a Maine corporation (together with its successors and assigns, the "Guarantor"), in favor of WOLF MOUNTAIN RESORTS, L.C., a Utah limited liability company ("Lender"), and its successors and assigns, in connection with the Promissory Note dated as of the date hereof, given by ASC UTAH, INC., a Maine corporation ("Maker"), to Lender (the "Note"). W I T N E S S E T H: WHEREAS, Maker is a wholly-owned subsidiary of Guarantor; and WHEREAS, Lender has agreed to sell to Maker and Maker has agreed to purchase from Lender those certain buildings, improvements and personal property constituting a portion of, or used in connection with, the Wolf Mountain Ski Resort and described more fully in that Purchase and Sale Agreement by and between Maker and Lender and dated as of the date of hereof ("Purchase and Sale Agreement"); and WHEREAS, the execution and delivery of the Note by the Maker and the Guaranty by the Guarantor are conditions to the obligation of Lender to close the transactions contemplated by the Purchase and Sale Agreement; NOW, THEREFORE, in consideration of the premises and other valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the Guarantor hereby agrees as follows: ARTICLE I GUARANTY SECTION 1.1 The Guaranty. Guarantor hereby unconditionally and irrevocably guarantees to Lender (a) the timely, complete and full performance by Maker of all of the obligations of Maker under the terms of the Note, and (b) the due, complete and punctual payment of all sums now or hereafter required to be paid to Lender by Maker under the Note (to the extent not theretofore paid by Guarantor or Maker) as and when the same shall become due and payable according to the terms thereof. The obligations of the Guarantor under this Guaranty are independent of the obligations of Lender and Maker under the Note, the Purchase and Sale Agreement and the Ground Lease Agreement of even date herewith by and between Maker and Lender, and Lender may proceed directly to enforce all of its rights under this Guaranty without proceeding against or joining Maker or any other person; provided, that the Guarantor shall have the same defenses to performance hereunder that Maker has under any obligations guaranteed hereby, except that Guarantor shall have no defense to performance based on the bankruptcy, insolvency, moratorium, reorganization or other similar proceeding affecting generally the enforcement of creditors' rights of Lender. SECTION 1.2 Guaranty Unconditional. This Guaranty is a guaranty of payment, not collection. The obligations of the Guarantor under this Article I (the "Obligations") shall be unconditional, absolute, and irrevocable and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (a) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of Lender or Maker under the Note or any other document; (b) any modification or amendment of or supplement to the Note or any other document; (c) any change in the corporate existence, structure or ownership of the Guarantor, Lender or Maker or any insolvency, bankruptcy, moratorium, reorganization or other similar proceeding affecting generally the enforcement of creditors' rights of Lender or Maker; (d) any failure, omission or delay to enforce, assert, or exercise any right, power, privilege or remedy conferred on Lender by the terms of the Note or any other document or the waiver of any default thereunder; or (e) any other occurrence, circumstance, happening or event whatsoever, whether foreseen or unforeseen, and any other circumstance which might otherwise constitute a legal or equitable defense, release or discharge of the liabilities of the Guarantor or which might otherwise limit recourse against the Guarantor. SECTION 1.3 Continuing Guaranty. This Guaranty shall be a continuing guaranty and shall cover and secure any ultimate balance owing to Lender in respect of the Obligations, including all costs, charges and any expenses which they or any one or more of them may incur in enforcing or obtaining performance or the payment of the sums of money due to them hereunder, but no such party shall be obliged to seek any recourse against Maker or other persons or the collateral it may hold, if any, for the Obligations before being entitled to payment from the Guarantor. Lender may compromise or otherwise change the terms of any of the Obligations hereby guaranteed to it, in each case without consent of the Guarantor and without exonerating in whole or in part the Guarantor. The Guarantor acknowledges that this Guaranty has been delivered free of any conditions other than those set forth herein. ARTICLE II MISCELLANEOUS SECTION 2.1 Notices. All notices, requests, demands and other communications required or permitted to be given under this Guaranty shall be deemed to have been duly given if in writing and delivered personally, or five (5) business days after being mailed first class, postage prepaid, registered or certified mail, or the next business day after being delivered to a nationally recognized overnight courier service that keeps receipts of delivery or upon delivery of a telecopy (provided it is later confirmed by one of the preceding methods), as follows: 2 If to Lender: WOLF MOUNTAIN RESORTS, L.C. 4000 Parkwest Drive Part City, Utah 84098 With a copy to: Bracewell & Patterson, L.L.P. South Tower, Pennzoil Place 711 Louisiana St., Suite 2800 Houston, Texas 77002-2781 Attn: Clark G. Thompson, Jr. If to Guarantor: ASC HOLDINGS, INC. c/o American Skiing Company Sunday River Road P. O. Box 450 Bethel, Maine 04217 Any party may change the address to which such communications are to be directed to it by giving written notice to the other in the manner specified in this Section 3.1. SECTION 2.2 Amendments and Waivers. Any provision of this Guaranty may be amended or waived if, and only if, such amendment or waiver is in writing and is signed by Lender and the Guarantor. SECTION 2.3 Applicable Law. This Guaranty shall be construed in accordance with and governed by the laws of the State of Utah without regard to any choice of law provisions existing thereunder. SECTION 2.4 Successors and Assigns. All of the provisions of this Guaranty shall be binding upon the Guarantor and its permitted successors and assigns. None of the interests, rights or obligations of the Guarantor hereunder shall be assignable (whether by operation of law or otherwise) without the consent of Lender, which shall not be unreasonably withheld. SECTION 2.5 Remedies. (a) Upon any failure by the Guarantor to comply with its Obligations, Lender shall be authorized to demand specific performance of such provisions upon five (5) days' prior written notice to the Guarantor. The Guarantor hereby waives, to the extent permitted by applicable law, any defense based on the adequacy of a remedy at law which might be asserted as a bar to the remedy of specific performance of the Obligations in any action brought therefor by Lender. 3 (b) The Guarantor hereby waives presentment, demands for performance, notices of nonperformance, and any other notice of any kind in connection with the Guaranty, other than the notice provided by Section 2.5 above. SECTION 2.6 Expenses. If the Guarantor shall default in any of its obligations hereunder, the Guarantor shall also pay the reasonable out-of-pocket costs of Lender (including reasonable fees and expenses of legal counsel) incurred in connection with the enforcement of this Guaranty against it. SECTION 2.7 Waiver of Subrogation. Notwithstanding any payment or payments made by the Guarantor hereunder, the Guarantor shall not be entitled to, and shall not be subrogated to, any of the rights of Lender against Maker for the payment of the Obligations. If, notwithstanding the preceding sentence, any amount shall be paid to the Guarantor on account of such subrogation rights at any time when any of the Obligations shall not have been paid in full, such amount shall be held by the Guarantor in trust for Lender, as the case may be, segregated from other funds of the Guarantor and, if payment of the Obligations by Guarantor is otherwise due, be turned over to Lender in the exact form received by the Guarantor (duly endorsed by the Guarantor to Lender if required), to be applied against the Obligations. SECTION 2.8 Reliance, Etc. All liabilities to which this Guaranty applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon. No failure or delay on the part of Lender in exercising any right, power or privilege hereunder and no course of dealing between the Guarantor or Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege. The rights, powers and remedies herein expressly provided are cumulative and not exclusive of any rights, powers or remedies which Lender would otherwise have. No notice to or demand on the Guarantor in any case shall entitle the Guarantor to any other further notice or demand in similar or other circumstances or constitute a waiver of the rights of Lender to any other or further action in any circumstances without notice or demand. SECTION 2.9 Delivery of Documents. The Guarantor acknowledges that executed (or conformed) copies of the Note and the Purchase and Sale Agreement have been delivered to it. SECTION 2.10 Judgments. If claim is ever made upon Lender for repayment or recovery of any amount or amounts received from or on behalf of Maker or the Guarantor in payment or on account of any of the Obligations and Lender repays all or part of said amount by reason of (a) any judgment, decree or order of any court or administrative body having jurisdiction over Lender or any of Lender's property or (b) any settlement or compromise of any such claim effected by Lender with any such claimant (including Guarantor and Maker), then and in such event the Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon it, notwithstanding any revocation hereof and the Guarantor shall be and remain liable to Lender hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by Lender. 4 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed by its authorized officer as of the date first above written. ASC HOLDING, INC. By: /s/ Julianne Cloutier ----------------------------- Name: Julianne Cloutier --------------------------- Title: Vice President -------------------------- 5 EX-10.64 16 GROUND LEASE AGREEMENT EXHIBIT 10.64 ================================================================================ GROUND LEASE AGREEMENT by and between WOLF MOUNTAIN RESORTS, L.C. ("Landlord") and ASC UTAH ("Tenant") dated as of July 3, 1997 ================================================================================ TABLE OF CONTENTS Page RECITALS.......................................................................1 AGREEMENT......................................................................1 ARTICLE I......................................................................1 1.01 Premises.........................................................1 1.02 Lease Attributes.................................................1 ARTICLE II.....................................................................2 2.01 Initial Term.....................................................2 2.02 Extended Term....................................................2 2.03 Grace Period.....................................................2 ARTICLE III....................................................................2 3.01 Rent.............................................................2 3.02 Rent to be Net to Landlord.......................................5 ARTICLE IV.....................................................................5 4.01 Taxes and Utility Expenses.......................................5 ARTICLE V......................................................................7 ARTICLE VI.....................................................................7 6.01 Improvements.....................................................7 6.02 Improvement Conditions...........................................7 6.03 Maintenance......................................................8 6.04 Demolition.......................................................8 6.05 Improvement Ownership............................................8 6.06 Disposition at Lease Termination.................................8 ARTICLE VII....................................................................8 7.01 Requirements of Public Authority.................................8 ARTICLE VIII...................................................................9 ARTICLE IX....................................................................10 ARTICLE X.....................................................................10 10.01 Subletting.....................................................10 10.02 Assignment.....................................................10 ARTICLE XI....................................................................10 ARTICLE XII...................................................................11 12.01 Liability Insurance............................................11 12.02 Property Insurance.............................................11 12.03 Blanket Policy.................................................11 12.04 Waiver of Subrogation..........................................12 i TABLE OF CONTENTS (Cont'd) Page 12.05 Adjustment.....................................................12 ARTICLE XIII..................................................................12 13.01 Casualty.......................................................12 13.02 Demolition.....................................................12 13.03 No Abatement...................................................12 ARTICLE XIV...................................................................13 14.01 Condemnation...................................................13 14.02 Prosecuting Takings Claims.....................................13 ARTICLE XV....................................................................14 ARTICLE XVI...................................................................14 16.01 Mortgage.......................................................14 16.02 Further Agreement..............................................16 ARTICLE XVII..................................................................17 17.01 Quiet Enjoyment................................................17 17.02 Representations, Warranties and Covenants......................17 17.03 Remedies.......................................................20 17.04 General Provisions.............................................20 ARTICLE XVIII.................................................................20 18.01 Defaults.......................................................20 18.02 Cure...........................................................21 18.03 Remedies.......................................................22 ARTICLE XIX...................................................................22 ARTICLE XX....................................................................23 ARTICLE XXI...................................................................23 ARTICLE XXII..................................................................23 ARTICLE XXIII.................................................................24 ARTICLE XXIV..................................................................24 ARTICLE XXV...................................................................25 25.01 Grant of Option................................................25 25.02 Option Payments................................................25 25.03 Mandatory Exercise of Option...................................27 25.04 Option Price...................................................27 25.05 Option Price Payment...........................................27 25.06 Owned Property.................................................27 25.07 Development Commitment.........................................28 ii TABLE OF CONTENTS (Cont'd) Page 25.08 Closing........................................................28 25.09 Restrictions Against Encumbrance...............................28 ARTICLE XXVI..................................................................28 26.01 Governing Law..................................................28 26.02 Partial Invalidity.............................................28 26.03 Short Form Lease...............................................28 26.04 Interpretations................................................29 26.05 entire Agreement...............................................29 26.06 Parties........................................................29 26.07 Restriction on use of Landlord's Adjacent Land.................29 GUARANTY COMMITMENT...........................................................31 SCHEDULE A....................................................................32 iii This Ground Lease Agreement is made and entered into by and between Wolf Mountain Resorts, L.C., a limited liability company organized under the law of the State of Utah with a principal place of business in Summit County, Utah ("Landlord"), and ASC Utah, a corporation organized and existing under the laws of the State of Maine with its principal place of business at Bethel, Maine ("Tenant"). RECITALS 1. Landlord owns and leases certain land and other interests in real property located in Summit and Salt Lake Counties, Utah more particularly described in Article I of this Lease known generally as the Wolf Mountain Ski Resort. 2. Contemporaneously herewith, Landlord is selling all of Seller's assets constituting the Wolf Mountain Ski Resort, except the property leased or subleased hereunder, to Tenant pursuant to a Purchase and Sale Agreement dated of even date herewith ("Purchase and Sale Agreement"). 3. Landlord desires to maintain its fee or leasehold interests in the leased premises described in Article I and lease the same to Tenant on a ground lease basis. 4. Landlord and Tenant desire to provide a mechanism whereby Landlord could sell to Tenant and Tenant could purchase from Landlord its fee interest in certain parcels within the leased premises for development by Tenant as more particularly described in Article XXV hereof. AGREEMENT NOW, THEREFORE, it is mutually agreed by and between the parties hereto as follows: ARTICLE I PREMISES 1.01 Premises. Landlord hereby leases and lets to Tenant, and Tenant hereby takes and hires from Landlord, upon and subject to the terms, conditions, covenants and provisions hereof, all of the tracts, pieces and parcels of land, situated in Summit County, Utah, more particularly described in Schedule A annexed hereto and made a part hereof, together with any and all appurtenances, rights, privileges and easements benefiting, belonging or pertaining thereto (all of the foregoing hereinafter sometimes referred to as the "demised premises", "leased premises" or the "premises"). 1.02 Lease Attributes. The leased premises consists of two different types of property interests, land owned in fee by Landlord ("Fee Land") and land leased by Landlord ("Leased Land"). The Fee Land and Leased Land are separately identified in Schedule A as such. This lease shall constitute a direct lease of all Fee Land and a sublease of all Leased Land, subject to the terms and conditions of the prime leases. 1 ARTICLE II TERM 2.01 Initial Term. The initial term of this Lease shall commence on the date hereof (hereinafter referred to as the "Commencement Date") and shall continue for a period of Fifty (50) years. 2.02 Extended Term. Tenant may by right extend the term of this Lease on the same terms and conditions as provided herein for up to three (3) additional periods of fifty (50) years each by sending Landlord written notice of the exercise of each extension right not less than 12 months prior to expiration of the then current term, together with a payment of an extension fee of One Million Dollars ($1,000,000) for each 50-year extension right exercised. Upon such receipt of the written notice and payment of the fee, the Lease term shall be automatically extended. 2.03 Grace Period. In the event Tenant fails to exercise an extension option pursuant to Section 2.02, Tenant shall not be deemed to have lost its right to exercise such option until thirty (30) days following written notice thereof from Landlord, during which period Tenant shall retain its right to exercise such extension option in accordance with Section 2.02 above. If no such notice shall have been given by Landlord prior to the expiration of the initial term or any extended term of this Lease (other than an expiration by virtue of the exercise by Landlord of its remedies pursuant to Article XVIII below), this Lease shall not terminate, but rather shall become a tenancy at will on the same terms and conditions set forth herein, subject to termination by Landlord after expiration of such thirty (30) days written notice to Tenant. ARTICLE III RENT 3.01 Rent. Tenant covenants and agrees to pay Landlord, for the demised premises, rent at the following rates and times: (a) Tenant shall pay to Landlord the sum of four percent (4%) of Gross S&L Revenues, as hereinafter defined. Said sums shall be payable on or before September 15 of each year during the term of this Lease and shall be determined with reference to the Gross S&L Revenues actually received by Tenant for its preceding 12-month fiscal year ended July 31. Rent shall be prorated for any partial year included in the term. (b) The payment by Tenant to Landlord shall be accompanied by a statement of Tenant's Chief Financial Officer setting forth the Gross S&L Revenues actually received by Tenant for the period involved and the method of computing the amount, if any, simultaneously being paid by Tenant to Landlord in such detail as Landlord and Tenant shall from time to time reasonably agree. The term "Gross S&L Revenues" shall mean any and all revenues determined in accordance with generally accepted accounting principles attributable to the use or ownership of the leased premises and any additional property owned by the Tenant, or its successors or assigns or any affiliates of any such parties, now or at any time in the future used and operated on an integrated basis as a part 2 of what is now known as the Wolf Mountain Ski Resort or any successor thereto (including without limitation, any of the land included in Section 25.06 below and any of the property designated on the Parcel Maps as [UPC Mines, Lehmer, BLM, Sun Peak, L. Clifford, UWSP and Hi Ute Ranch]), or from any buildings, lodges, restaurants, sports facilities, condominium units, lifts or other structures located thereon, including without limitation, any sales, charges, dues, rentals, concessions, fees, or other revenues relating thereto, excluding only: (i) sales or excise taxes; and (ii) proceeds of sales of real property interests, with the term "sales" to include any lease of real estate for a term exceeding ten (10) years, that are conveyed to Tenant pursuant to Article XXV below. Gross S&L Revenues includes such revenues generated through operations of any business enterprises or person affiliated with Tenant. Affiliated parties shall mean any persons or business organizations that control, are controlled by, or are under common control with the Tenant, whether directly or indirectly through one or more intermediaries. Control shall mean the ability to control the management or operations of the person or organization whether through voting or capital interests or through any management contracts or other arrangements that provide for effective control. Gross S&L Revenues shall include any revenues or the value of any other consideration that are diverted from what is now known as the Wolf Mountain Ski Resort operations to some other location or source within the Tenant's or any affiliated party's organization through establishing a contract, agreement or other business arrangement at what is now known as the Wolf Mountain Ski Resort that is less favorable than would be established on an independent arm's length basis. (c) Tenant shall pay the following additional rent based upon the volume of paid skier visits achieved at the demised premises. Beginning with the 1997-98 ski season, a one-time rent payment shall be made within 45 days following the close of any fiscal year of Tenant in which the ski resort of which the demised premises are included achieves, for the first time, the paid skier visit volumes set forth below. Each such payment shall be accompanied by a statement of Tenant's Chief Financial Officer setting forth the skier visits during such period in accordance with the terms of this subsection in such detail as Landlord and Tenant shall from time to time reasonably agree. Paid skier visits shall be determined by Tenant using the same methodology employed by American Skiing Company and its affiliated parties at all of their ski resorts, which shall be consistent in all material respects with the methodologies employed generally within the industry. 3 Skier Visits One-Time Rent Payment ------------ --------------------- 100,000 $ 250,000 200,000 $ 500,000 300,000 $ 750,000 400,000 $1,000,000 500,000 $2,000,000 600,000 $3,000,000 700,000 $2,000,000 800,000 $2,000,000 900,000 $2,000,000 1,000,000 $2,000,000 The following example is provided for illustrative purposes: If 1997 - 1998 skier visits equal 300,000, Tenant shall pay $250,000 and $500,000 and $750,000 (for a total of $1,500,000) to Landlord prior to September 15, 1998. If 1998 - 1999 skier visits equal 400,000 skier visits, Tenant shall pay $1,000,000 to Landlord on or before September 15, 1999. d) It is expressly understood and agreed that nothing in this Lease contained shall be deemed or construed to grant or otherwise provide Landlord with any authority over, or other rights to control or direct, the operation of the resort at the demised premises. e) All rent hereunder shall be paid either at the address of Landlord set forth below with regard to notices, or at such other places of which Landlord shall have given Tenant written notice at least thirty (30) days in advance, or in the case of Section 25.02, as therein provided. f) As hereinafter used the term "rent" shall be deemed for reference purposes to include all rent covered by this Article III, the Additional Rent described in Article IV, if any, payable by Tenant to Landlord hereunder and all Option Payments described in Section 25.02 below. g) Tenant shall prepare and retain true and accurate books of account and records, relating to the demised premises conforming to generally accepted accounting principals consistently applied to the extent applicable, including but not limited to, Gross S&L Revenues and a record of skier visits sufficient to comply with the foregoing requirements of this Article III. h) Landlord shall have the right, at any time, upon reasonable advance notice (and not more often than once per quarter) to audit or inspect all of Tenant's books and records relating to Gross S&L Revenues, skier visits and any of the other obligations of Tenant under this Lease, which shall be maintained and made available at Tenant's offices in Summit County, Utah. Tenant shall make all such books and records available for such examination. Landlord's right to conduct an audit or inspection includes the 4 right to do whatever is reasonably necessary to complete the audit or inspection. If the audit or inspection reveals an underpayment of rent, Tenant shall pay the amount of same, together with interest on such amount at 18% from the date due until paid. If Landlord conducts an audit or inspection and the audit or inspection reveals an understatement of Gross S&L Revenues or skier visits for a particular calendar year by more than five percent (5%), Tenant shall pay all reasonable costs of the audit or inspection. If the audit or inspection reveals an overpayment of percentage rent, Landlord shall refund same, plus interest at the rate specified above. Any audits and inspections may be made by Landlord's employees or by any certified public accountant selected by Landlord. 3.02 Rent to be Net to Landlord. It is the intention of the parties that the rent payable by Tenant to Landlord pursuant to this Article III shall be net to Landlord so that this Lease shall yield to Landlord the net annual rent specified in Article III herein during the term of this Lease, and that all costs, expenses and obligations of every kind and nature whatsoever relating to the demised premises shall be paid by Tenant, except as otherwise expressly provided herein. Without limiting the generality of the foregoing, Landlord and Tenant hereby agree that Tenant shall be responsible for paying and shall pay all of the payments due under the leases covering the portion of the land described as the Leased Land in Schedule A attached hereto, including any modifications or amendments thereto with Tenant's prior consent. Except as specifically provided herein, in no event shall Tenant be entitled to any abatement, reduction, set off, counterclaim, defense or reduction with respect to the payment of any rent hereunder. ARTICLE IV ADDITIONAL RENT 4.01 Taxes and Utility Expenses. (a) (1) Tenant shall, during the term of this Lease, as additional rent, pay and discharge punctually, as and when the same shall become due and payable, all taxes, special and general assessments, water rents, rates and charges, sewer rents and other governmental impositions and charges of every kind and nature whatsoever, extraordinary as well as ordinary, (hereinafter referred to as "Taxes"), and each and every installment thereof which shall or may during the term of this Lease be charged, levied, laid, assessed imposed, become due and payable, or a lien upon, or for, or with respect to, the demised premises or any part thereof, or any buildings, appurtenances or equipment owned by Tenant thereon or therein or any part thereof, together with all interest and penalties thereon, under or by virtue of all present or future laws, ordinances, requirements, orders, directives, rules or regulations of the federal, sate, county and municipal governments and of all other governmental authorities whatsoever (all of which shall also be included in the term "Taxes" as heretofore defined); and all sewer rents and charges for water, steam, gas, heat, hot water, electricity, light and power, and other services or services furnished to the demised premises or the occupants thereof during the term of this Lease (hereinafter referred to as "Utility Expenses"). 5 (2) To the extent that the same may be permitted by law, Tenant or its designees shall have the right to apply for the conversion of any assessment for local improvements assessed during the term of this Lease in order to cause the same to be payable in annual installment, and upon such conversion, Tenant shall pay and discharge punctually said installments as they shall become due and payable during the term of this Lease. Landlord agrees to permit the application for the foregoing conversion to be filed in Landlord's name, if necessary, and shall execute any and all documents requested by Tenant to accomplish the foregoing result. (3) Tenant shall be deemed to have complied with the covenants of this paragraph (a) if payment of such Taxes shall have been made either within any period allowed by law or by the governmental authority imposing the same during which payment is permitted without penalty or interest or before the same shall become a lien upon the demised premises, and Tenant shall produce and exhibit to Landlord satisfactory evidence of such payment, if Landlord shall demand the same in writing. (b) All such Taxes, including assessments which have been converted into installments as set forth in the preceding paragraph (a), which shall become payable during each of the calendar or fiscal tax years, as the case may be, in which the term of this Lease commences or terminates, shall be apportioned pro rata between Landlord and Tenant in accordance with the respective portions of such year during which such term shall be in effect. (c) (1) Tenant or its designee shall have the right to contest or review all such Taxes by legal proceedings, or in such other manner as it may deem suitable (which, if instituted, Tenant or its designees shall conduct promptly at its own cost and expense, and, if necessary, in the name of Landlord with the cooperation of Landlord and Landlord shall execute all documents reasonable necessary to accomplish the foregoing). Notwithstanding the foregoing, Tenant shall promptly pay all such taxes if at any time the demised premises or any part thereof shall then be immediately subject to forfeiture, or if Landlord shall be subject to any criminal liability arising out of the nonpayment thereof. (2) The legal proceedings referred to in the preceding subparagraph (1) shall include appropriate certiorari proceedings, and appeals from orders therein and appeals from any judgments, decrees, or orders. In the event of any reduction, cancellation or discharge, Tenant shall pay the amount finally levied or assessed against the demised premises or adjudicated to be due and payable on any such contested Taxes. (d) Landlord covenants and agrees that if there shall be any refunds or rebates on account of the Taxes paid by Tenant under the provisions of this Lease, such refund or rebate shall belong to Tenant. Any refunds received by Landlord shall be deemed trust funds and as such are to be received by Landlord in trust and paid to Tenant forthwith. Landlord will, upon the written request of Tenant, sign any receipts which may be necessary to secure the payment of any such refund or rebate, and will pay over to Tenant such refund or rebate as received by Landlord. Landlord further covenants and agrees on 6 request of Tenant at any time, and from time to time, but without cost to Landlord, to make application individually (if legally required) or to join in Tenant's application (if legally required) for separate tax assessments for such portions of the demised premises as Tenant shall at any time, and from time to time, designate. Landlord hereby agrees upon reasonable request of Tenant to execute such instruments and to give Tenant such assistance in connection with such applications as shall be required by Tenant. (e) Nothing herein or in this Lease otherwise contained shall require or be construed to require Tenant to pay any sales, rent, inheritance, estate, succession, transfer, gift, franchise, income or profit taxes, by whatever name the same may be called, that are or may be imposed upon Landlord, its successor or assigns. ARTICLE V USE The demised premises may be used for any lawful purpose consistent with existing covenants, conditions and restrictions of record applicable to the premises. The premises shall not be used for commercial timbering operations except in connection with development and construction of ski terrain and other improvements at the premises. ARTICLE VI MAINTENANCE, REPAIRS AND IMPROVEMENTS 6.01 Improvements. Subject to the provisions of Section 6.02 below, Tenant shall have the right, at its own cost and expense, to construct on the demised premises such buildings, improvements and other facilities as Tenant may desire and determine appropriate in connection with its operations at the premises. 6.02 Improvement Conditions. The rights of Tenant set forth in Section 6.01 are subject to the following conditions: (a) The premises being zoned by Summit County so as to permit the construction and operation of the improvements contemplated by Tenant. (b) Adequate utilities (including sewer, water and necessary energy utilities) being located on the premises or in property immediately adjoining the premises and being available for use on the premises. (c) There being no covenant or restriction affecting the property or any restriction under any state, county, or local laws or ordinances, which would prohibit the improvements and the use of the premises contemplated thereby. (d) There being no easement, covenant or restriction on the portion of the premises to be improved which, in the opinion of Tenant, would adversely affect the construction or operation thereon of the improvements. 7 (e) The receipt of all necessary permits, licenses and approvals of the appropriate governmental authorities for the construction and operation of the contemplated improvements in a manner and location, and under such conditions, as are acceptable to Tenant in its sole judgment. 6.03 Maintenance. Tenant alone shall be responsible for maintaining and shall maintain, the buildings and improvements currently located on, or at any time erected on, the demised premises in good condition comparable to conditions maintained at other American Skiing Company ("ASC") resorts. Landlord shall not be required to furnish any services or facilities or to make any improvements, repairs or alterations in or to the demised premises during the term of this Lease. 6.04 Demolition. Tenant may, at its option and at its own cost and expense, at any time and from time to time, make such alterations, changes, replacements, improvements and additions in and to the buildings and improvements currently located on the demised premises, subject to the conditions specified in Section 6.02, as it may deem desirable, including the removal or demolition of any building(s) and improvement(s) and/or structure(s) that now or hereafter may be situated or erected on the demised premises. 6.05 Improvement Ownership. Until the expiration or sooner termination of this Lease (subject, however, to the rights of the holder of any leasehold Mortgagee(s) to obtain a new lease as set forth in Section 16 hereof), title to any building or buildings or improvements situate or erected on the demised premises and the building equipment and other items installed thereon and any alterations, changes or additions thereto shall remain solely in Tenant; and Tenant alone shall be entitled to deduct all depreciation on Tenant's income tax returns for any such building or buildings, building equipment and/or other items, improvements, additions, changes or alterations. 6.06 Disposition at Lease Termination. On the last day or sooner termination of the term of this Lease, Tenant shall quit and surrender to Landlord the demised premise, and any buildings and permanent improvements then located thereon, provided, however, that notwithstanding anything in this Lease to the contrary, Tenant shall have the right, but not the obligation, at the end of the term, to remove any buildings or other improvements made, constructed or installed by Tenant upon the premises, provided that such removal shall be accomplished within sixty (60) days following the end of the term. ARTICLE VII GOVERNMENTAL REQUIREMENTS 7.01 Requirements of Public Authority. (a) During the term of this Lease, Tenant shall, at its own cost and expense, promptly observe and comply with all present and future laws, ordinances, requirements, orders, directives, rules and regulations of the federal, state, county, municipal governments and of all other governmental authorities affecting the demised premises or appurtenances thereto or any part thereof whether the same are in force at the 8 commencement of the term of this Lease or may in the future be passed, enacted or directed. (b) Tenant shall have the right to contest by appropriate legal proceedings diligently conducted in good faith, in the name of the Tenant, or Landlord (if legally required), or both (if legally required), without cost or expense to Landlord, the validity or application of any law, ordinance, rule, regulation or requirement of the nature referred to in paragraph (a) of this Section and, if by the terms of any such law, ordinance, order, rule, regulation or requirement, compliance therewith may legally be delayed pending the prosecution of any such proceeding, Tenant may delay such compliance therewith until the final determination of such proceeding. (c) Landlord agrees to execute and deliver any appropriate papers or other instruments which may be necessary or proper to permit Tenant so to contest the validity or application of any such law, ordinance, order, rule, regulation or requirement and to fully cooperate with Tenant in such contest. ARTICLE VIII COVENANT AGAINST LIENS If, because of any act or omission of Tenant, any mechanic's lien shall be filed against Landlord or any portion of the demised premises, Tenant shall, at its own cost and expense, cause the same to be discharged of record or bonded within one hundred twenty (120) days (or such earlier date as may be necessary to prevent the claimant hereunder from exercising its rights thereunder) after written notice from Landlord to Tenant, of the filing thereof; and Tenant shall indemnify and save harmless Landlord against and from all costs, liabilities, suits, penalties, claims and demands resulting therefrom. Nothing contained herein shall constitute any consent or request by Landlord, express or implied, to or for the performance of any labor or services or the furnishing of any materials or other property in respect of the premises, nor as giving Tenant any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against Landlord in respect thereof. NOTICE IS HEREBY GIVEN THAT LANDLORD WILL NOT, UNDER ANY CIRCUMSTANCES, BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED TO TENANT OR TO ANYONE HAVING AN INTEREST IN THE PREMISES OR ANY PART THEREOF THROUGH OR UNDER TENANT, AND NO MECHANIC'S OR OTHER LIEN FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE REVERSIONARY OR OTHER INTEREST OF LANDLORD IN AND TO THE PREMISES, OR IN AND TO ANY ALTERATIONS, ADDITIONS OR IMPROVEMENTS TO BE MADE OR ERECTED THEREON. 9 ARTICLE IX ACCESS TO PREMISES Landlord shall have the right to enter upon the demised premises at all reasonable times to examine the same provided such entry shall not interfere with the business then being conducted on the demised premises. ARTICLE X ASSIGNMENT AND SUBLETTING 10.01 Subletting. Tenant shall be entitled to sublease any portion of the premises to an affiliated party or to anyone else for a period of ten (10) years or less without the consent or approval of Landlord. Any sublease in excess of ten (10) years to a party not affiliated with Tenant shall require the prior written consent of Landlord, not to be unreasonably withheld or delayed. Tenant and Holdings shall remain fully liable to perform their respective obligations under this Lease and the related Guaranty with respect to any subleased portion of the premises. 10.02 Assignment. Tenant shall not assign all or any portion of the Lease without obtaining the prior written consent of Landlord to any such assignment, which consent Landlord may not unreasonably withhold or delay. Notwithstanding the foregoing, Tenant shall not be prohibited from assigning all or any portion of its interest hereunder to any entity affiliated with Tenant. Except as provided below, Tenant and Holdings shall remain fully liable to perform their respective obligations under this Lease and the related Guaranty, notwithstanding any assignment permitted hereunder. A sale of all or substantially all Tenant's assets, or a transfer of record or beneficial ownership of more than 50% of the voting stock of Tenant to a party unaffiliated with Tenant, whether by merger, consolidation, or other reorganization, shall constitute an "assignment" for purposes of this Section 10.02. In such event, Landlord may not unreasonably withhold or delay its consent provided that the proposed successor or assign of Tenant shall be a person or business organization with financial condition and operating capability and expense reasonably adequate to operate the premises in a manner consistent with other comparably sized ski resorts throughout the United States. ARTICLE XI INDEMNITY Tenant shall indemnify and save harmless Landlord from and against any and all liability, damage, penalties or judgments arising from injury to person or property sustained by anyone in and about the demised premises resulting from any act or acts or omission or omissions of Tenant, or Tenant's officers, agents, servants, employees or contractors. Tenant shall, at its own cost and expense, defend any and all suits or actions which may be brought against Landlord or in which Landlord may be impleaded with others upon any such above-mentioned matter, claim or claims, except as may result from the Landlord's gross negligence or the gross negligence of its officers, agents, servants, employees or contractors. Excepting such acts, Landlord shall not be responsible or liable for any damage or injury to any property, fixtures, buildings or other 10 improvements, or to any person or persons, at any time on the demised premises, including any damage or injury to Tenant or to any of Tenant's officers, agents, servants, employees, contractors, customers or sublessees. ARTICLE XII INSURANCE 12.01 Liability Insurance. Tenant shall provide at its expense, and keep in force during the term of this Lease, general liability insurance in a good and solvent insurance company or companies licensed to do business in the State of Utah, selected by Tenant, and reasonably satisfactory to Landlord, or through a self insurance program approved by all necessary governmental authorities, in the amount of at least Ten Million Dollars ($10,000,000) with respect to injury to or death of any one person and Five Million Dollars ($5,000,000) with respect to injury to or death of more than one person in any one accident or other occurrence, and One Million Dollars ($1,000,000) with respect to damages to property. Such policy, policies or programs shall include Landlord as an additional insured. Tenant agrees to deliver certificates of such insurance to Landlord at the beginning of the term of this Lease and thereafter not less than ten (10) days prior to the expiration of any such policy. Such insurance shall be noncancellable without ten (10) days' written notice to Landlord. 12.02 Property Insurance. During the term of this Lease, Tenant shall keep all buildings and improvements presently at the premises or hereafter erected by Tenant on the demised premises at any time insured for the benefit of Landlord and Tenant and the holder of any leasehold mortgage permitted pursuant to Section 16 hereof, as their respective interests may appear, against loss or damage by fire, and those casualties covered by the customary extended coverage endorsements, in a minimum amount necessary to avoid the effect of coinsurance provisions of the applicable policies. All proceeds payable at any time and from time to time by any insurance company under such policies shall be payable to such leasehold mortgagee, if any, or, if none, to Tenant. Any proceeds paid to Tenant shall be retained by Tenant and Landlord shall not be entitled to, and shall have no interest in, such proceeds or any part thereof, EXCEPT THAT Gross S&L Revenues shall include any proceeds of business interruption insurance received by Tenant with respect thereto. Landlord shall, at Tenant's cost and expense, cooperate fully with Tenant in order to obtain consents and other instruments and take all other actions necessary or desirable in order to effectuate the same and to cause such proceeds to be paid as hereinbefore provided and Landlord shall not carry any insurance concurrent in coverage and contributing in the event of loss with any insurance required to be furnished by Tenant hereunder if the effect of such separate insurance would be to reduce the protection or the payment to be made under Tenant's insurance. 12.03 Blanket Policy. Any insurance required to be provided by Tenant pursuant to this Lease may be provided by blanket insurance covering the demised premises and other locations of Tenant provided such blanket insurance complies with all of the other requirements of this Lease with respect to the insurance involved. 11 12.04 Waiver of Subrogation. All insurance policies carried by either party covering the demised premises, including but not limited to contents, fire and casualty insurance, shall expressly waive any right on the part of the insurer against the other party. The parties hereto agree that their policies will include such waiver clause or endorsement so long as the same shall be obtainable without extra cost, or if extra cost shall be charged therefor, so long as the other party pays such extra cost. If extra cost shall be chargeable therefor, each party shall advise the other thereof and of the amount of the extra cost, and the other party, as its election, may pay the same, but shall not be obligated to do so. 12.05 Adjustment. Every ten (10) years during the term, Landlord and Tenant shall review the nature and levels of insurance coverage to update the insurance requirements of this lease to the type, coverages and levels of insurance customarily being maintained by comparable ski resorts located in the United States. ARTICLE XIII DESTRUCTION 13.01 Casualty. (a) In the event that, at any time during the term of this Lease, any one or more of the buildings on the demised premises shall be destroyed or damaged in whole or in part by fire or other cause within the extended coverage of the Lease, then, Tenant, at its own cost and expense, shall, subject to the provisions of paragraph (b) of this Section cause the same to be repaired, replaced or rebuilt within a period of time which, under all prevailing circumstances, shall be reasonable, but Tenant shall not be required hereby to expend any sums in excess of the insurance proceeds recovered by Tenant by reason of such destruction or damage. (b) In the event that at any time during the term of this Lease any one or more of the buildings on the demised premises shall have been damaged or destroyed by fire or any other cause whatsoever, and such damage or destruction shall amount to fifteen percent (15%) or more of the sound insurable value of said building or buildings, or if such damage or destruction shall occur during the last ten (10) years of the term or any extended term hereof, Tenant shall have the right, but not the obligation, to elect not to repair, replace or rebuild such building or improvements. 13.02 Demolition. If Tenant shall elect not to restore any damaged property pursuant to the provisions of Section 13.01 (b) hereof, it shall, prior to, or immediately commence and diligently prosecute to completion, the demolition and removal of any damaged buildings or structures which are upon the demised premises, and shall remove all rubble. 13.03 No Abatement. Tenant shall not be entitled to any suspension or abatement of rent by reason of any destruction or damage to the demised premises. 12 ARTICLE XIV EMINENT DOMAIN 14.01 Condemnation. If the whole or any part of the demised premises shall be taken for any public or quasi-public use under any statute or by right of eminent domain or by private purchase in lieu thereof, then this Lease shall continue and the taking shall be administered in the manner specified in Section 14.02 below. 14.02 Prosecuting Takings Claims. In the event of a taking (or purchase) the parties hereto agree to cooperate in applying for and in prosecuting any claim for such taking and further agree, that the aggregate net award pertaining to the demised premises, after deducting all expenses and costs, including attorney's fees, incurred in connection therewith, payable to both Landlord and Tenant (herein called the "Fund") shall be paid and distributed as follows: (a) Landlord shall be paid an amount out of the Fund equal to the value of Landlord's continuing fee interest in the land after taking into account the remaining term of this Lease, including the extended terms, plus net present value of the rent and additional rent to be paid to Landlord hereunder over the remaining term, including the extended terms, of this Lease, all determined as of the date of taking (or purchase), together with interest thereon from the date of taking (or purchase) to the date of payment at the rate paid on said award, and if such value shall be officially determined and stated in the condemnation proceedings, then the amount thereof shall control for the purposes hereof, otherwise the same, unless agreed upon by the parties to this Lease, shall be determined by arbitration. (b) Any part of the Fund then remaining after the payment to Landlord specified in subparagraph (a) hereinabove shall be paid to the holder of any leasehold Mortgage permitted under the provisions of Section 16 hereof, to be applied in accordance with the terms of such Mortgage, and if no such Mortgage, or there remains any excess after payment of all amounts due under the mortgage, then to Tenant. (c) (1) In the event of a partial taking (or purchase) Tenant shall, at its own cost and expense, make all repairs to the buildings and improvements on the demised premises affected by such taking (or purchase) to the extent necessary to restore the same to a complete architectural unit (to the extent permitted, however, taking into consideration the amount of land remaining after any such takings or purchase), provided, however, that Tenant shall not be obligated to expend an amount in excess of the proceeds of the net award available to Tenant for such purposes, as hereinafter provided. (2) All compensation available or paid to Landlord and Tenant upon such a partial taking (or purchase), shall be paid to Tenant for the purpose of paying towards the cost of such restoration, or, in the event that the parties hereto agree that only a portion of the aggregate award is sufficient to so restore, then only such portion as agreed upon shall be paid to Tenant for such purpose and the balance shall be distributed pursuant to subparagraph (3) below. 13 (3) All compensation available or paid to Landlord and Tenant upon such a partial taking (or purchase) in excess of the amount thereof needed by Tenant to repair and restore the buildings and improvements shall be distributed in the same manner as is provided in subparagraphs (a) and (b) this Section 14.02, except that all compensation for any temporary taking of five (5) years or less shall be distributed to Tenant without participation by Landlord. ARTICLE XV UTILITY EASEMENTS AND HIGHWAY ALIGNMENT Tenant shall have the right to enter into agreements with utility companies and/or public authorities which provide necessary utilities, creating easements, subleases or other necessary property interests in favor of such companies and/or authorities as are required in order to service the occupants of the buildings and the improvements on the demised premises, and Landlord covenants and agrees to provide any reasonably required consent thereto and to execute any and all documents, agreements and instruments, and to take all other actions, in order to effectuate such consent all at Tenant's cost and expense. Landlord further covenants and agrees, upon request of Tenant to convey without compensation therefor, insubstantial portions of the demised premises for highway, roadway or utility purposes to any applicable governmental body. ARTICLE XVI LEASEHOLD MORTGAGES 16.01 Mortgage. Tenant and every successor and assign of Tenant is hereby given the right by Landlord in addition to any other rights herein granted, without Landlord's prior written consent, but only with prior written notice to Landlord, to mortgage Tenant's interests in this Lease, or any part or parts thereof, under one or more leasehold Mortgage(s), and to assign this Lease, or any part or parts thereof, and any subleases, or parts thereof, as collateral security for such Mortgage(s), upon the condition that all rights acquired under such Mortgage(s) shall be subject to each and every one of the covenants, conditions and restrictions set forth in this Lease, and to all rights and interests of Landlord herein, none of which covenants, conditions or restrictions is or shall be waived by Landlord by reason of the right given so to mortgage such interest in this Lease, except as expressly provided herein. Notwithstanding the foregoing, Tenant is prohibited from mortgaging the leasehold solely for the purposes of effecting a transfer of its leasehold interest to a third party in any transaction that does not involve a contemporaneous exchange of equivalent value determined on independent, arm's length basis. If Tenant and/or Tenant's successors and assigns shall mortgage this leasehold or any part or parts thereof, and if the holder(s) of such Mortgage(s) shall send to Landlord written notice of such Mortgage(s) specifying the name and address of the Mortgagee(s) and the pertinent recording data with respect to such Mortgage(s), Landlord agrees that so long as any such leasehold Mortgage(s) shall remain unsatisfied of record or until written notice of satisfaction is given by the holder(s) to Landlord, the following provisions shall apply. 14 (a) There shall be no cancellation, surrender or material modification of this Lease by joint action of Landlord and Tenant without at least ten (10) days advance written notice to the leasehold Mortgagee given in accordance with Section XXIII below. (b) Landlord shall, upon serving Tenant with any notice of default, simultaneously serve a copy of such notice upon the holder(s) of such leasehold Mortgagee(s), and no such notice of default to Tenant shall be effective unless and until a copy of such notice is served upon each such holder. The leasehold Mortgagee(s) shall thereupon have the same period, after service of such notice upon it, to remedy or cause to be remedied the defaults complained of, and Landlord shall accept such performance by or at the instigation of such leasehold Mortgagee(s) as if the same had been done by Tenant. (c) If the Landlord shall elect to terminate this Lease by reason of any default of Tenant, the leasehold Mortgagee(s) shall have the right by delivering written notice thereof to Landlord prior to the effective date of such termination, to postpone and extend the specified date for the termination of this Lease as fixed by Landlord in its notice of termination, for a period reasonably sufficient to allow the leasehold Mortgagee to conduct a foreclosure of its mortgage, but in no event more than six (6) months from the date of Landlord's termination notice, provided that such leasehold Mortgagee(s) shall cure or cause to be cured any then existing monetary defaults and meanwhile pay all rent, additional rent and other monetary payments due hereunder, and comply with and perform all of the other terms, conditions and provisions of this Lease on Tenant's part to be complied with or performed, other than past non-monetary defaults which cannot reasonably be cured by such Mortgagee, and provided further, that the leasehold Mortgagee(s) shall forthwith take steps to acquire or sell Tenant's interest in this Lease by foreclosure of the Mortgage(s) or otherwise and shall prosecute the same to completion with all due diligence. If, during said six (6) month period, the leasehold Mortgagee(s) shall have promptly commenced and shall have actively engaged in steps to acquire or sell Tenant's interest herein, but shall not have acquired or sold such interest at the end of such period, the time of said Mortgagee to comply with the provisions of this Section 16.01 shall be extended for such period as shall be reasonably necessary to complete such steps with reasonable diligence and continuity. (d) Landlord agrees that in the event of foreclosure by such mortgagee on this Lease by reason of any default by Tenant that Landlord will enter into a new lease of the demised premises directly with the leasehold Mortgagee(s) or its nominee(s), for the remainder of the term, effective as of the date of such termination, at the rent and additional rent and upon the terms, provisions, covenants and agreements as herein contained and subject only to all matters of record and all rights, if any, of the parties then in possession of any part of the demised premises, provided: (i) Said Mortgagee(s) or its nominee(s) shall make written request upon Landlord for such new lease within fifteen (15) days after the date of such foreclosure and such written request is accompanied 15 by payment to Landlord of all sums then due to Landlord under this Lease. (ii) Said Mortgagee(s) or its nominee(s) shall pay to Landlord at the time of the execution and delivery of said new lease, any and all sums which would at the time of the execution and delivery thereof, be due pursuant to this Lease but for such termination, and in addition thereto, any expenses, including reasonable attorney's fees, to which Landlord shall have been subjected by reason of such default. (iii) Said Mortgagee(s) or its nominee(s) shall perform and observe all covenants herein contained on Tenant's part to be performed and shall further remedy any other conditions which Tenant under the terminated lease was obligated to perform under the terms of this Lease. (iv) Landlord shall not warrant possession of the demised premises to the Tenant under the new lease. (v) Such new lease shall be expressly made subject to the rights, if any, of Tenant under the terminated lease. (vi) The Tenant under such new lease shall have the same right, title and interest in and to the buildings and improvements on the demised premises as Tenant had under the terminated lease. (vii) Nothing herein contained shall require the leasehold Mortgagee(s) or its nominee(s) to cure any default of Tenant referred to in Article XIX hereof. (viii) The proceeds from any insurance policies or arising from a condemnation are to be held by any leasehold Mortgagee(s) and distributed pursuant to the provisions of this Lease, but the leasehold Mortgagee(s) may reserve its right to apply to the mortgage debt all, or any part, of Tenant's share of such proceeds pursuant to such mortgage(s). 16.02 Further Agreement. Landlord shall upon request, execute, acknowledge an deliver to each leasehold Mortgagee(s), an agreement prepared at the sole cost and expense of Tenant in form satisfactory to Landlord and such leasehold Mortgagee(s) between Landlord, Tenant and the leasehold Mortgagee(s), agreeing to (a) all of the provisions of Section 16.01 and (b) such other provisions as are reasonably customary in mortgaging long-term leaseholds in connection with large commercial development projects. 16 ARTICLE XVII LANDLORD'S WARRANTIES 17.01 Quiet Enjoyment. Tenant, upon paying the rent and additional rent and all other sums and charges to be paid by it as herein provided, and observing and keeping all covenants, warranties, agreements and conditions of this Lease on its part to be kept, shall quietly have and enjoy the demised premises during the term of this Lease, without hindrance or molestations, subject to encumbrances listed in Schedule B. 17.02 Representations, Warranties and Covenants. Landlord warrants, represents and covenants to Tenant, upon which warranty representation and covenants Tenant has relied in the execution of this Lease and in the payment of the initial installments of rent hereunder. (a) That it has and will maintain good and marketable fee simple title to the demised premises constituting Fee Land, free and clear of all encumbrances, liens, defects in title, leases, tenancies, easements, restrictions and agreements, except for this Lease and the restrictions set forth in Schedule B, none of which materially impair the current operation of the demised premises as a ski resort. (b) Landlord represents, warrants and covenants as follows with respect to the sublease of Leased Land: (i) Each underlying lease of Leased Land is in full force and effect as of the date hereof. A true, accurate and correct copy of each lease is attached hereto as a part of Schedule A, and such leases have not been amended or revised except as shown in Schedule A. Except as set forth in Schedule 17.02(b), there are no material defaults, breaches or violations of such leases by lessee or, to Landlord's Knowledge, by the lessor existing as of the date hereof, and there have occurred no events which with the passage of time, giving of notice, or both, would constitute a default, breach or violation of any such leases by Landlord or, to Landlord's Knowledge, by any such lessor. (ii) Landlord shall timely perform all its obligations under such leases in accordance with the terms thereof, and shall undertake all such actions as may be necessary or appropriate to maintain such leases in full force and effect, in accordance with their terms. (iii) Landlord hereby grants to Tenant the right, power and authority to enter into independent negotiations with each owner of Leased Land to change, revise, amend, restate or otherwise alter the underlying leases. Tenant shall not enter into any change, revision, amendment, alteration or restatement without the Landlord's prior written consent, which shall not be unreasonably withheld or delayed. 17 Landlord shall obtain from each owner of Leased Land and deliver to Tenant a Landlord's Consent and Estoppel in the form attached hereto as Schedule C. (d) The execution and delivery of this Lease by Landlord and the performance by Landlord of the obligations to be performed hereunder have been duly authorized by all necessary and appropriate action by Landlord under its Operating Agreement. Except as listed in Schedule 17.02(d), 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 Landlord is 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 demised premises. This Lease is a valid and binding obligation of Landlord enforceable in accordance with its terms, subject to equitable principles and applicable bankruptcy and other creditors' rights laws, regulations and rulings. (e) Except as set forth in Schedule 17.02(e) Landlord does not have any Landlord's Knowledge of any violation of any applicable federal, state and local laws, rules, regulations, ordinances, codes or orders ("Laws") governing the demised premises and the operation of the Wolf Mountain Ski Resort business, including without limitation environmental and health and safety laws rules and regulations, and will not knowingly violate any such laws during the term hereof, and (b) has not received written notification of any asserted material past or present failure to operate the demised premises and the Wolf Mountain Ski Resort business in accordance with any such law, ordinance or regulation, or of any event that has occurred which with notice or the passage of time would constitute any such failure. (f) (i) No permits, licenses, approvals, clearances or other governmental consents are required for the execution and delivery of this Lease, except for the transfer or reissuance of the governmental licenses, permits, authorizations, approvals and certificates identified in Section 17.02(f). (ii) The Landlord has not disposed of or permitted to lapse any license, permit or other authorization from any federal, state or local authorities related to the demised premises that is currently required for the operation of the Wolf Mountain Ski Resort business. (iii) Except as reported in Schedule 17.02(f), the Licenses and Permits listed on Schedule 17.02(f) are all of the governmental licenses, permits, authorizations, approvals and certificates which are, to 18 Landlord's Knowledge, required for the current use of the demised premises. (g) The existing uses of the demised premises by Landlord are permitted uses within the zoning districts in which they are located and otherwise permitted under applicable federal, state and local laws, rules and regulations and under the permits identified in Section 17.02(g). (h) Except as provided in Schedule 17.02(h) there is, to Landlord's Knowledge, 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, threatened, against Landlord with respect to the Wolf Mountain Ski Resort business or any portion of the demised premises. (i) Except as provided in Schedule 17.02(i), Landlord (i) has timely filed all tax returns, tax information returns and other tax reports required to be filed with any applicable governmental authorities through the date hereof which relate to the demised premises and, the Wolf Mountain Ski Resort business, and has 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 Landlord may be contesting in good faith in appropriate proceedings, and (ii) shall continue to timely file all such returns and reports and pay all such taxes relating to Landlord, but not those relating to the demised premises, the Wolf Mountain Ski Resort or that Tenant is otherwise obligated to file or pay hereunder. Landlord is not delinquent in the payment of any tax assessment or governmental charge which relates to any of the demised premises, no written notices asserting deficiencies for any taxes which relate to any of the demised premises have been received by Landlord, and no requests for waivers of the time to assess or pay any such tax are pending. There are no tax liens upon any fee portion of the demised premises and, to Landlord's Knowledge, no tax liens upon any leased portion of the demised premises and no such liens will arise as a result of the transaction contemplated hereby except as listed in Schedule 17.02(i) or that will be paid and discharged at Closing. For the purposes of this Lease, the term "tax" shall include all federal, state, local and foreign income, property, sales, excise and other taxes of any nature whatsoever. (j) Except as disclosed in Schedule 17.02(j), there are to Landlord's Knowledge, no outstanding or threatened actions, claims, proceedings, determinations or judgments by any party, including, but not limited to, any governmental authority or agency, against or involving the Landlord, 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 19 removal of an existing environmentally contaminated condition or substance. Except as listed in Schedule 17.02(j), there are, to Landlord's Knowledge, no outstanding or 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 demised premises or the Wolf Mountain Ski Resort business, which have not been complied with or resolved to the satisfaction of such governmental authority. 17.03 Remedies. In the event Landlord fails to undertake the actions, or refrain from taking action, required pursuant to subparagraph 17.02 (b) above, then Tenant shall have the right, but not the obligation, to perform all such acts and pay all sums of money necessary, on behalf of Landlord, to maintain the lease in full force and effect, and Landlord hereby appoints Tenant as its true and lawful attorney in fact for purposes of undertaking all such action on behalf of and in the name of Landlord as Tenant deems necessary or appropriate to maintain any or all underlying leases in full force and effect. The power of attorney herein granted is coupled with an interest and is therefore irrevocable during the term of this Lease. Tenant may offset against any and all amounts due hereunder any cost and expense incurred by Tenant in exercising its rights under this subsection 17.03. Prior to offsetting against rent due hereunder Tenant shall provide Landlord with notice of its intent to offset and Landlord shall have a period of 30 days to advise Tenant that it objects to or disputes the offset, in which case any such dispute shall be submitted to arbitration in accordance with the provisions hereof. Tenant shall use reasonable efforts to mitigate any damages resulting from Landlord's breach or default. 17.04 General Provisions. The term "Landlord's Knowledge" shall have the same meaning as the term "Seller's Knowledge" under Section 6.17(c) of the Purchase and Sale Agreement. Seller expressly disclaims any express or implied warranties not specifically set forth in this Lease, the Purchase and Sale Agreement, or any other agreement entered into by and between Landlord and Tenant. ARTICLE XVIII DEFAULT 18.01 Defaults. In the event of any one or more of the following events ("Events of Default") shall have occurred and shall not have been remedied as hereinafter provided: (1) the occurrence of any event set forth in Article XIX hereof, without the curing of same as therein provided; (2) Tenant's failure to pay any installment of basic rent, additional rent or any other monetary payments when the same shall be due and payable and the continuance of such failure for a period of ten (10) days after receipt by Tenant of notice in writing from Landlord specifying in detail the nature of such failure, provided, however that Tenant shall pay interest at the rate of 18% per annum during any period in which any payment is delinquent; (3) Tenant's failure to pay any option payments pursuant to Section 25.02 hereof when the same shall be due and payable and the continuance of such failure for a period of 10 days after receipt by Tenant of notice in writing from Landlord of such failure; provided, however, that Tenant shall be entitled to only two such notices during any 360 day period, after which no such notice shall be required, and provided further that Tenant shall pay interest on any delinquent payment at the rate of 18% 20 per annum during the period of any such delinquency; (4) a material default by Tenant, and the expiration of any grace, notice or cure period required thereby, under any of the other agreements then existing between Landlord and Tenant, including without limitation, the promissory notes referred to in Section 25.05 below and the Promissory Note referred to in Section 4.01(c) of the Purchase and Sale Agreement; and (5) Tenant's failure to perform any of the other covenants, conditions and agreements herein contained on Tenant's part to be kept or performed and the continuance of such failure for a period of sixty (60) days after receipt by Tenant of notice in writing from Landlord specifying in detail the nature of such failure, and provided Tenant shall not cure said failure as provided in Section 18.02 hereof; then, Landlord may, at its option, give to Tenant a notice of election to end the term of this Lease upon a date specified in such notice, which date shall be not less than thirty (30) business days (Saturdays, Sundays and legal holidays excluded) after the date of receipt by Tenant of such notice from Landlord, and upon the date specified in said notice, the term and estate hereby vested in Tenant shall cease and any and all other right, title and interest of Tenant hereunder shall likewise cease without further notice or lapse of time, as fully and with like effect as if the entire term of this Lease had elapsed, but Tenant shall continue to be liable to Landlord as hereinafter provided. Simultaneously with the sending of the notice to Tenant, hereinabove provided for, Landlord shall send a copy of such notice to any leasehold Mortgagee(s) as to which Landlord has received written notice. The curing of any default(s) in the manner provided hereinabove by any of the aforesaid parties or combinations thereof, shall constitute a curing of any default(s) hereunder with like effect as if Tenant had cured the same hereunder. 18.02 Cure. (a) In the event that Landlord gives notice of a default of such a nature that it cannot reasonably be cured within such sixty (60) day period, then such cure period shall be deemed to continue so long as Tenant, after receiving such notice, proceeds to cure the default as soon as reasonably possible and continues to take all steps necessary to complete the same within a period of time which, under all prevailing circumstances, shall be reasonable; provided that, in no event shall any cure period extend for a period longer than 180 days after the Landlord's notice of default under Section 18.01. No cure period shall be deemed to end if and so long as Tenant shall be prevented from curing the same by any of the causes constituting Force Majeure. (b) Notwithstanding anything to the contrary contained in this Article XVIII, in the event that any default(s) of Tenant shall be cured in any manner hereinabove provided, Tenant's right hereunder shall continue unaffected by such default(s). 21 18.03 Remedies. (a) Upon any Event of Default pursuant to Section 18.01, or at any time thereafter, Landlord may, in addition to and without prejudice to any other rights and remedies Landlord shall have at law or in equity, including termination, reenter the demised premises, and recover possession thereof and dispossess any or all occupants of the demised premises in the manner prescribed by the applicable laws relating to summary proceedings, or similar laws; but Tenant in such case shall remain liable to Landlord as hereinafter provided. (b) In case of any such default, reentry, expiration and/or dispossess by Landlord: (1) the rent shall become due thereupon and be paid up to the time of such reentry, expiration and/or dispossess; (2) Landlord may relet the demised premises or any part or parts thereof, either in the name of Landlord or otherwise, for a term or terms which may, at Landlord's option, be less than or exceed the period which would otherwise have constituted the balance of the term of this Lease and (3) Landlord may pursue any and all other remedies allowed to Landlord under applicable law, including without limitation, the collection of all future rent and other monetary payments provided for hereunder. Landlord, at Landlord's option and Tenant's expense, may make such alteration, repairs, and/or replacements in the demised premises as are reasonably necessary for the purpose of reletting and premises; and the making of such alterations, repairs, replacements and/or decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Landlord agrees to use reasonable efforts to mitigate all damages and to relet the demised premises in the event of any default specified herein. ARTICLE XIX BANKRUPTCY AND INSOLVENCY If, after the commencement of the term of this Lease: (a) the Tenant then having the title to the leasehold estate created hereunder shall while having such title be adjudicated a bankrupt or adjudged to be insolvent; (b) a receiver or trustee shall be appointed for the aforesaid Tenant's property and affairs; (c) the aforesaid Tenant shall make an assignment for the benefit of creditors or shall file a petition in bankruptcy or insolvency or for reorganization or shall make application for the appointment of a receiver; or (d) any execution or attachment shall be issued against the aforesaid Tenant or any of the aforesaid Tenant's property, whereby the demised premises or any building or buildings or any improvements thereon shall be taken or occupied or attempted to be taken or occupied by someone other than the aforesaid Tenant, except as may herein be permitted, and such adjudication, appointment, assignment, petition, execution or attachment shall not be set aside, vacated, discharged or bonded within ninety (90) days after the issuance of the same, then an Event of a Default hereunder shall be deemed to have occurred. Notwithstanding anything to the contrary hereinabove contained, upon the occurrence of a default pursuant to this Article, if the rent and other monetary payments due and payable hereunder shall continue to be paid and the other covenants, conditions and agreements of this 22 Lease on Tenant's part to be kept and performed shall continue to be kept and performed, no event of default shall have been deemed to have occurred. ARTICLE XX WAIVERS Failure of Landlord or Tenant to complain of any act or omission on the part of the other party no matter how long the same may continue, shall not be deemed to be a waiver by said party of any of its rights hereunder. No waiver by Landlord or Tenant at any time, express or implied, of any breach of any provision of this Lease shall be deemed a waiver of a breach of any other provision of this Lease or a consent to any subsequent breach of the same or any other provision. No acceptance by Landlord of any partial payment shall constitute an accord or satisfaction but shall only be deemed a part payment on account. ARTICLE XXI GOVERNMENT APPROVALS Landlord covenants and agrees to cooperate fully with Tenant in any and all applications and proceedings and appeals made or prosecuted by Tenant in connection with obtaining any necessary permits, licenses, approvals or consents under the zoning, land use, environmental and/or building regulations, ordinances, codes, laws and directives of all of the federal, state county and other authorities having jurisdiction over the development and use of the demised premises, including without limitation, the Summit County Planning Board. Landlord shall execute any and all documents, instruments, consents and authorizations requested by Tenant which shall be reasonably necessary or desirable with respect thereto. Tenant may prosecute such applications, proceedings and appeals in its own name and through counsel of its choice, but shall do so at its own cost and expense and shall reimburse Landlord for Landlord's reasonable expenses incurred in such cooperative efforts. ARTICLE XXII FORCE MAJEURE In the event that Landlord or Tenant shall be delayed, hindered in or prevented from the performance of any act (except for monetary payments) required hereunder by reason of strikes, lock-outs, organized labor disputes, unavailability of materials, extended failure of power, governmental laws or regulations prohibiting performance of any obligation hereunder, riots, insurrection, war or civil strife, or other reason beyond such party's reasonable control, then performance of such act shall be excused for the period of the delay and the proof for the performance of any such act shall be extended for a period equivalent to the period of such delay. 23 ARTICLE XXIII NOTICES Every notice, approval, consent or other communication authorized or required by this Lease shall not be effective unless the same shall be in writing and sent postage prepaid by United States registered or certified mail, return receipt requested, directed to the other party at its address set forth hereinbelow, or such other address as either party may designate by notice given form time to time in accordance with this Article. Unless otherwise directed by Landlord, rent payable by Tenant hereunder shall be paid to Landlord at the same place where a notice to Landlord is herein required to be directed. All such notices and other communications initially shall be addressed as follows: Tenant: Christopher E. Howard, Esq. Chief Administrative Officer and General Counsel American Skiing Company P.O. Box 450 Access Road Bethel, Maine 04217 Landlord: Kenneth Griswold Michael Baker c/o Bracewell & Patterson LLP 2900 South Tower, Penzoil Place Houston, TX 77002-2781 Attn: Clark Thompson All such notices shall be deemed to have been given and received as of the date of deposit of such notice in a depository of the U.S. Postal Service. ARTICLE XXIV CERTIFICATES Either party shall, without charge, at any time and from time to time hereafter, within thirty (30) days after written request of the other, certify by written instrument duly executed and acknowledged to any mortgagee or purchaser, or proposed mortgagee or proposed purchaser, or any other person, firm or corporation specified in such request: (a) as to whether this Lease has been supplemented or amended, and if so, the substance and manner of such supplement or amendment; (b) as to the validity and force and effect of this Lease, in accordance with its tenor as then constituted; (c) as to the existence of any known default thereunder; (d) as to the existence of any offsets, counterclaims or defense thereto on the part of such other party; (e) as to the commencement and expiration dates of the term of this lease; and (f) as to any other matters as may reasonably be so requested. Any such certificate may be relied upon by the party 24 requesting it and any other person, firm or corporation to whom the same may be exhibited or delivered, and the contents of such certificate shall be binding on the party executing same. ARTICLE XXV DEVELOPMENT RIGHTS 25.01 Grant of Option. Landlord hereby gives and grants to Tenant, its successors and assigns, an exclusive option to purchase any portion of the demised premises now or hereafter owned in fee by Landlord upon which Tenant desires to construct any buildings or improvements of any nature, at any time during the term of this Lease , or any extended term. 25.02 Option Payments. As consideration for the option granted pursuant to Section 25.01 above, Tenant shall pay to Landlord the following amounts on first day of each of the months specified below: Amount Due Payment Date ---------- ------------ 3,532,340 June, 1997 47,007 July, 1997 157,340 August, 1997 32,340 September, 1997 47,007 October, 1997 157,340 November, 1997 1,232,340 December, 1997 180,340 January, 1998 157,340 February, 1998 32,340 March, 1998 47,007 April, 1998 15,167 May, 1998 15,167 June, 1998 29,834 July, 1998 140,167 August, 1998 15,167 September, 1998 29,834 October, 1998 140,167 November, 1998 15,167 December, 1998 2,748,000 January, 1999 125,000 February, 1999 0 March, 1999 14,667 April, 1999 875,000 May, 1999 0 June, 1999 14,667 July, 1999 125,000 August, 1999 0 September, 1999 14,667 October, 1999 25 Amount Due Payment Date ---------- ------------ 125,000 November, 1999 0 December, 1999 148,000 January, 2000 125,000 February, 2000 0 March, 2000 14,667 April, 2000 125,000 May, 2000 0 June, 2000 14,667 July, 2000 125,000 August, 2000 0 September, 2000 14,667 October, 2000 125,000 November, 2000 0 December, 2000 548,000 January, 2001 125,000 February, 2001 0 March, 2001 0 April, 2001 125,000 May, 2001 0 June, 2001 0 July, 2001 Tenant shall have the right to accelerate payment of any or all of such amounts, in which case Tenant shall pay to Landlord the net present value of any payments made on an accelerated basis. Net present value of such payments shall be determined in a manner and at a discount rate reasonably acceptable to both Tenant and Landlord. (b) All option payments made by Tenant shall be placed in a segregated bank account established at a banking institution acceptable to both parties ("Option Escrow Account") in the name of both Landlord and Tenant. Amounts shall be disbursed from the account under signature of authorized representatives of both Landlord and Tenant solely and exclusively for purposes of satisfying the following obligations of Landlord (the "Underlying Obligations"): Obligation Date Principal Amount ---------- ---- ---------------- Nine Star Development Note February 2, 1995 2,600,000 Snyderville Land Co. Purchase June 16, 1997 3,500,000 and Sale Agreements Roberts Retirement Trust Note February 2, 1995 750,000 Kimball Note January 18, 1995 533,333 26 Obligation Date Principal Amount ---------- ---- ---------------- Vitesse Ski Properties Note March 8, 1994 2,194,000 (or substitute Note to be identified by Landlord upon refinancing Vitesse) Wasatch Capital Corp. Note Even date herewith 5,000,000 Songbird Note December 12, 1996 1,200,000 In the event, and to the extent Tenant accelerates its option payments hereunder, Landlord shall exercise reasonable efforts to accelerate a corresponding amount of the Underlying Obligations so as to minimize the amounts on deposit from time to time in the Option Escrow Account. 25.03 Mandatory Exercise of Option. Tenant shall not be permitted to exercise its option until such time, from time to time, as Tenant has received all necessary permits, licenses and approvals for any real estate development project to be located upon the portion of the demised premises to be released by Landlord involving the construction of any buildings constituting residential or commercial real estate being developed with the intent to resell any material portion of such building(s), as evidenced by the description of such real estate development project(s) in the application(s) for necessary permits and approvals. Said option shall be exercised by Tenant, its successors or assigns, by giving written notice of the election to exercise said option to purchase to Landlord, addressed to the place then provided for the sending of notices under this Lease, which notice shall specify a date, time and place of closing which shall take no more than one hundred twenty (120) days after the posting of said notice. 25.04 Option Price. The purchase price for the portion of the demised premises purchased by Tenant shall be an amount equal to eleven percent (11%) of the full capitalized cost of construction of buildings or improvements on the option parcel (less any capitalized interest on financing for the improvements and less up to 5% of such capitalized costs attributable to any internal overhead costs capitalized by Tenant) as reflected upon Tenant's books of account maintained in accordance with generally accepted accounting principles, consistently applied. 25.05 Option Price Payment. The purchase price shall be paid at closing by a promissory note in the full amount of the purchase price, bearing interest at a rate equal to the prime rate in effect as of the date of the closing as reported in The Wall Street Journal under the heading "Money Rates - Prime Rate," and maturing upon the issuance of a certificate of occupancy for the development project. The note shall be secured by a mortgage or deed of trust with priority subordinate only to Tenant's financing for the construction cost of the improvements, which mortgage or deed of trust and form of subordination shall be in form reasonably acceptable to Landlord. 25.06 Owned Property. As additional consideration for the options granted pursuant to Section 25.01 above, Tenant hereby agrees to deliver to Landlord additional option payments at the time development is commenced on the property more particularly described in Schedule 27 25.06 hereto in the same amount and in the same manner as if such property were covered by this Lease and the options described in Section 25.01, and Tenant was otherwise purchasing such property in accordance with terms of Section 25.04 and 25.05. 25.07 Development Commitment. Tenant agrees to produce and submit to Summit County for approval, and exercise its best efforts to maintain in place, a master plan for the demised premises (which may be a continuation of the master plan submitted by Landlord in April, 1997, or a derivation thereof) that contemplates a minimum of three million (3,000,000) square feet of residential and commercial real estate development on that portion of the demised premises denominated the base area as reflected on the Landlord's current master plan and two million (2,000,000) square feet of residential and commercial development on that portion of the demised premises denominated the mid-mountain village as reflected on the Landlord's current master plan. The master plan may not alter the designation of Willow Draw as a subdivision for single family detached dwellings without Landlord's prior written consent. 25.08 Closing. At closing, Tenant shall deliver the required promissory note against delivery by Landlord of a warranty deed in form acceptable to Tenant conveying good and marketable title to the development parcel free an clear of all liens, encumbrances, restrictions, defects in title, leases, tenancies easements and agreements, except as set forth in Schedule A, and except any which may arise by reason of this Lease. 25.09 Restrictions Against Encumbrance. Landlord, its successors and assigns covenants and agrees that during the term hereof it shall not, voluntarily or by operation of law, place or allow placement of any liens, encumbrances or restrictions of any nature on the Landlord's interest in the demised premises, including without limitation, mortgage liens, trust deeds, mechanics liens, judgment liens or any other liens or encumbrances similar or dissimilar to the foregoing. ARTICLE XXVI MISCELLANEOUS 26.01 Governing Law. This Lease and the performance thereof shall be governed, interpreted, construed and regulated by the laws of the State of Utah. 26.02 Partial Invalidity. If any term, covenant, condition or provision of this Lease or the application thereof to any person or circumstance shall, at any time or to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, covenant, condition and provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. 26.03 Short Form Lease. The parties will at any time, at the request of either one, promptly execute duplicate originals of an instrument, in recordable form reasonably satisfactory to both parties, which will constitute a short form of lease, setting forth a description of the demised premises, the term of this Lease and any other portions thereof, excepting the rental provisions, as either party may request. 28 26.04 Interpretations. Wherever herein the singular number is used, the same shall include the plural, and the masculine gander shall include the feminine and neuter genders, and vice versa, as the context shall require. The section headings used herein are for reference and covenance only, and shall not enter into the interpretation hereof. This Lease may be executed in several counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. The terms "Landlord" and "Tenant" whenever used herein shall mean only the owner for the time being of Landlord's or Tenant's interest herein, and upon any sale or assignment of the interest of either Landlord or Tenant herein, their respective successors in interest and/or assigns shall, during the term of their ownership of their respective estates herein, be deemed to be Landlord or Tenant, as the case may be. 26.05 Entire Agreement. No oral statements or prior written matter shall have any force or effect. Tenant agrees that it is not relying on any representations or agreements other than those contained in this Lease. This Agreement shall not be modified or canceled except by writing subscribed by all parties. 26.06 Parties. Except as herein otherwise expressly provided, the covenants, conditions and agreements contained in this lease shall bind and inure to the benefit of Landlord and Tenant and their respective heirs, successors, administrators and assigns. 26.07 Restriction on use of Landlord's Adjacent Land. Attached as Schedule 26.07 is a list of all real estate owned beneficially or of record by Landlord, by Michael Baker or Kenneth Griswold or by any entities in which Baker or Griswold own any interest, located within a five mile radius of the leased premises. Landlord hereby agrees that during the term of this Lease, with the exception of the A-2 and Cox and Muller parcels described in such Schedule 26.07, none of the Landlord, Baker or Griswold, or entities in which they have a controlling interest shall use the restricted property designated in such Schedule 26.07 for a motel, hotel, inn, restaurant or other type of place of lodging or guest entertainment (other than single family residences). The restriction imposed hereby for the benefit of Tenant is intended to run with the land and be enforceable against Landlord's successors in title to such land. 29 IN WITNESS WHEREOF, the parties hereto have executed this Lease under seal as of the day and year first above written. WOLF MOUNTAIN RESORTS, L.C. By: /s/ Kenneth Griswold ------------------------------- Kenneth Griswold Its Managing Member ASC UTAH By: /s/ Julianne Cloutter ------------------------------- Its Vice President 30 GUARANTY COMMITMENT ASC Holdings, Inc., a Maine corporation with a principal place of business at Newry, Maine ("ASC"), does hereby agree to execute the guaranty described in Exhibit ____ attached hereto. 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. ASC HOLDINGS, INC. By: /s/ Julianne Cloutter ------------------------------- Its: Vice President 31 EX-10.65 17 GROUND LEASE GUARANTY EXHIBIT 10.65 GROUND LEASE GUARANTY FOR VALUE RECEIVED, and in consideration for, and as an inducement to, Wolf Mountain Resorts, L.C., a Utah limited liability company ("Landlord"), to enter into that certain Ground Lease Agreement dated July 3, 1997 (the "Lease"), by and between Landlord and ASC Utah, Inc., a Maine corporation ("Tenant"), the undersigned hereby unconditionally guarantees to Landlord, its successors and assigns, the payment of the rent, additional rental and all other payments to be made by Tenant under the Lease and the full performance and observance by Tenant of all the other terms, covenants, conditions and agreements as and when therein provided to be performed and observed by Tenant, for which the undersigned shall be jointly and severally liable with Tenant, without requiring any notice of nonpayment, nonperformance or nonobservance other than any notices required to be provided to Tenant under the terms of the Lease, all of which the undersigned hereby expressly waives, and the undersigned expressly agrees that Landlord may proceed against the undersigned separately or jointly before or after or simultaneously with proceeding against Tenant for default and that this Guaranty shall not be terminated, affected or impaired in any way or manner whatsoever by reason of the assertion by Landlord against Tenant of any of the rights or remedies reserved to Landlord pursuant to the provisions of said Lease, or by reason of summary or other proceedings against Tenant or by reason of any extension of time or indulgence granted by Landlord to Tenant. The undersigned further covenants and agrees (1) that the undersigned will be bound by all the provisions, terms, conditions, restrictions and limitations contained in the Lease, the same as though the undersigned was named therein as Tenant; and (2) that this Guaranty shall be absolute and unconditional and shall remain and continue in full force and effect as to any renewal, extension, amendment, addition, assignment, sublease, transfer, or other modification of the Lease, whether or not the undersigned shall have knowledge or have been notified of or agreed or consented to any such renewal, extension, amendment, addition, assignment, sublease, transfer, or other modification of the Lease. If Landlord at any time is compelled to take any action or proceeding in court or otherwise to enforce or compel compliance with the terms of this Guaranty, the undersigned shall, in addition to any other rights or remedies to which Landlord may be entitled hereunder or a matter of law or in equity, be obligated to pay all costs, including attorneys' fees, incurred or expended by Landlord in connection therewith. Further, the undersigned hereby covenants and agrees to assume the Lease and to perform all of the terms and conditions thereunder for the balance of the original term of the Lease should the Lease be disaffirmed by any Trustee in bankruptcy for Tenant, or at the option of Landlord, the undersigned shall, in the event of Tenant's bankruptcy make and enter into a new lease for the balance of the original term, which the new lease shall be in form and substance identical to the Lease. All obligations and liabilities of the undersigned pursuant to this Guaranty shall be binding upon the heirs, legal representatives, successors and assigns of the undersigned. This Guaranty shall be governed by and construed in accordance with the laws of the State of Utah. DATED: July 3, 1997. ASC HOLDINGS, INC. By: /s/ Julianne Cloutier --------------------------- Name: Julianne Cloutier ------------------------- Title: Vice President ------------------------ EX-10.66 18 SECURITIES PURCHASE AGREEMENT EXHIBIT 10.66 ================================================================================ ASC Holdings, Inc. ----------------------- SECURITIES PURCHASE AGREEMENT ------------------------ Dated as of July 2, 1997 Re: Series A Exchangeable Preferred Stock 14% Senior Exchangeable Notes Due 2002 ================================================================================ ASC Holdings, Inc. c/o American Skiing Company P.O. Box 450 Bethel, Maine 04217 SECURITIES PURCHASE AGREEMENT Series A Exchangeable Preferred Stock 14% Senior Exchangeable Notes Due 2002 Dated as of July 2, 1997 To the Purchaser which is a signatory to this Agreement Gentlemen: The undersigned, ASC Holdings, Inc., a Maine corporation (the "Company"), hereby agrees with you as follows: SECTION 1. DEFINITIONS For all purposes of this Agreement the following terms shall have the meanings set forth herein or elsewhere in the provisions hereof: "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 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 Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Acquiring Person" has the meaning set forth in Section 6.15(e). "Acquisition Documents" mean the documents to be executed and delivered by ASCU and its Affiliates in connection with the acquisition of the assets of Wolf Mountain Corporation. "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 -1- 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, however, that beneficial ownership of 25% or more of the voting securities of a Person shall be deemed to be control. "Agreement" means the Securities Purchase Agreement, as amended from time to time. "Applicable Common Stock" means the common stock of the IPO Entity or the Acquiring Person, as the case may be. "Applicable Company" means the IPO Entity or the Acquiring Person, as the case may be. "Articles of Incorporation" shall mean the articles or certificate of incorporation, statute, constitution, joint venture or partnership agreement or articles or other organizational document of any Person other than an individual, each as from time to time amended or modified. "ASC" means American Skiing Company, a Maine corporation. "ASCU" means ASC Utah, a Maine corporation. "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 (including real property inventory held for resale in the ordinary course of business), sales of obsolete or unused equipment and sales by Real Estate Subsidiaries of hotel, condominium, interval ownership, timeshares or other units, in each case, in the ordinary course of business or (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, and (iii) Restricted Payments that are permitted by the provisions of Section 6.9 hereof will not be deemed to be Asset Sales. "Bank Credit Agreement" means (i) the Credit Agreement dated as of June 28, 1996 among various Subsidiaries of the Company, Fleet National Bank, as Agent, and the lenders party thereto, (ii) any other credit, loan, reimbursement or other similar agreements among the Company, any Restricted Subsidiary (other than Real Estate Subsidiaries) and any bank, insurance company, finance company or other institutional 2 lender, and (iii) each instrument securing any Indebtedness under any agreements described in (i) or (ii) above, in each case, as of the date hereof. "Benefit Plan" shall mean a defined benefit plan as defined in Section 3(35) of ERISA and subject to Title IV of ERISA (other than a Multiemployer Plan) in respect of which any of the Company, its Subsidiaries or any ERISA Affiliate is or within the immediately preceding six (6) years was an "employer" as defined in Section 3(5) of ERISA. "Board of Directors" means the Board of Directors of the Company or any authorized committee of the Board of Directors. "Board Resolution" means a resolution of the Board of Directors of the Company set forth in an Officers' Certificate delivered to the Purchaser. "Business Day" shall mean any day other than a Saturday, Sunday or other day on which banks are authorized to be closed in the State of New York. "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. "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 3 any net loss realized in connection with an Asset Sale, (ii) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, (iii) consolidated interest expense of such Person and its 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 creditor 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 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 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 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 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 Subsidiary or its stockholders. "Certificate of Designation" shall have the meaning set forth in Section 2.2 hereof. "Certificated Notes" means Notes that are in the form of the Notes attached hereto as Exhibit A. "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 Subsidiaries, taken as a whole, to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act), (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 4 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. "Closing" shall have the meaning given to such term in Section 2.6 hereof. "Closing Date" shall have the meaning given to such term in Section 2.6 hereof. "Code" shall mean the Internal Revenue Code of 1986, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed also to refer to any successor sections. "Common Stock" shall mean the common stock of any Person, together with any other Capital Stock of such Person, which stock participates in the profits of such Person without limitation provided, that in connection with an IPO, Common Stock means the class of stock to be issued to the public, as such Common Stock may be constituted from time to time. "Company" shall mean ASC Holdings, Inc. "Consolidated" or "consolidated" shall mean, with reference to any term used herein, that term as applied to the accounts of the Company and its Subsidiaries, consolidated in accordance with GAAP. "Consolidated Net Income" means, with respect to the Company for any period, the aggregate of the Net Income of the Company and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided, however, that (i) the Net Income (but not loss) of Real Estate Subsidiaries, Unrestricted Subsidiaries and Subsidiaries that are accounted for by the equity method of accounting shall each be included only to the extent of the amount of dividends or distributions paid in cash to the Company or a Wholly Owned Restricted Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary of ASC that is not a guarantor of ASC 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 the Company 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. "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 this Agreement or (ii) was nominated for election to the board of 5 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. "Control" means the direct or indirect power to direct or cause the direction of the management and policies of a Person, whether through ownership of Capital Stock, other securities, by contract or otherwise. "Conversion Discount Percentage" means, with respect to Common Stock of an IPO Entity or the Company, the discount percentage from the IPO Price or Market Valuation, as applicable to such Common Stock, equal to the following percentages: Period % Discount ------ ---------- 7/15/97 -7/14/98 5% 7/15/98 to 10/14/98 6.25% 10/15/98 to 1/14/99 7.50% 1/15/99 to 4/14/99 8.75% 4/15/99 to 7/14/99 10.00% 7/15/99 to 10/14/99 11.25% 10/15/99 to 1/14/00 12.50% 1/15/00 to 4/14/00 13.75% 4/15/00 to 7/14/00 15.00% 7/15/00 to 10/14/00 16.25% 10/15/00 to 1/14/01 17.50% 1/15/01 to 4/14/01 18.75% 4/15/01 to 7/14/01 20.00% 4/15/01 to 10/14/01 21.25% 10/15/01 to 1/14/02 22.50% 1/15/02 to 4/14/02 23.75% 4/15/02 to 7/15/02 25.00% "Conversion Event" shall mean an Initial Public Offering of the Common Stock of an IPO Entity or a Change of Control. "Conversion Shares" shall mean Common Stock of any IPO Entity or any Designated Acquiring Person. "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. "Designated Acquiring Person" means an Acquiring Person in which, following the acquisition (by merger, consolidation, sale of stock, sale of assets or otherwise) of the businesses and operations of the Company, the stockholders of the Company beneficially own (as defined in Regulation 13d-5 under the Securities Exchange Act of 1934, as amended) 30% or more of the Common Stock of such Acquiring Person or Control the management of such Acquiring Person. 6 "Distribution" shall mean, with respect to any Person, (a) the declaration or payment of any dividend on or in respect of any shares of any class of capital stock of such Person, other than dividends payable solely in shares of the capital stock of the payor; (b) the purchase, redemption or other retirement of any shares of any class of capital stock of such Person, directly or indirectly or otherwise; or (c) any other distribution on or in respect of any shares of any class of capital stock of such Person. "EBITDA" means, for any period, with respect to any Person, the sum of Net Income plus in each case, without repetition, to the extent deducted in determining Net Income, the sum of (i) Interest Expense, plus (ii) amounts relating to non-cash charges for depreciation and amortization, plus (iii) expenses relating to income taxes, plus (iv) all other non-cash charges of any nature whatsoever, all as determined for such Person and its Subsidiaries for such period on a consolidated basis and in accordance with GAAP. "Environmental Laws" means all federal, provincial or local laws, statutes, regulations, ordinances, rules, guidelines, orders, directives and other requirements of any government or political subdivision, agency or instrumentality or of any court, tribunal or other similar body, relating to the protection of the environment, occupational health and safety or the manufacture, processing, distribution, use, treatment, storage, disposal, discharge, transport or handling of any pollutants, contaminants, chemicals or industrial, toxic or hazardous wastes or substances; and "Environmental Law" means any of the foregoing. "Environmental Matter" means any claim, investigation, litigation or administrative proceeding, whether pending or threatened, or judgment or Order, asserted, arising or entered under or pursuant to any Environmental Law, or relating to any Hazardous Materials, in each case against or pertaining to the Company or any of its Subsidiaries, the respective operations of such Persons, or any Properties owned, leased or used by such Persons, which if adversely determined would have a Material Adverse Effect. "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 (and, in the case of the Company, excluding the Preferred Stock). "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. "ERISA Affiliate" shall mean any (i) corporation which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) as the Company or its Subsidiaries, (ii) partnership or other trade or business (whether or not incorporated) under common control (within the meaning of Section 7 414(c) of the Code) with the Company or its Subsidiaries, or (iii) member of the same affiliated service group (within the meaning of Section 414(m) of the Code) as the Company or its Subsidiaries, or any corporation described in clause (i) above or any partnership or trade or business described in clause (ii) above. "Event of Default" shall have the meaning given to such term in Section 7.1 hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Existing Indebtedness" means Indebtedness of the Company (inclusive of any Indebtedness incurred under this Agreement), its Subsidiaries and Wolf Mountain Corporation, which is in existence on the date of this Agreement or incurred to finance the initial acquisition of the assets of Wolf Mountain Corporation and is set forth on Schedule 4.15(a). "Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) the Consolidated Interest Expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of 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 PIK Dividends and 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 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 a pro forma effect to such incurrence, assumption, Guarantee or 8 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, (a) acquisitions that have been made by the Company or any of its Restricted Subsidiaries, including through consolidations and including any related financing transactions, during the four-quarter reference periods 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 (b) 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 included only to the extent included in Consolidated Net Income, and (c) 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 to 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 energy as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States for the payment of which guarantee or obligations the full faith and credit of the United States is pledged. "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. "Hazardous Materials" shall mean any substance or material that is prohibited, controlled or regulated under any Environmental Laws; or any contaminants, pollutants, dangerous substances, including liquid waste, special waste, toxic substances, hazardous or toxic chemicals and hazardous materials or substances, as defined in or pursuant to any Environmental Laws. Without limiting the generality of the foregoing, the term "Hazardous Material" includes, but is not limited to, any material, waste or substance that is or contains petroleum or any fractions thereof, urea formaldehyde foam 9 insulation, asbestos, or polychlorinated biphenyls, or that is flammable, explosive or radioactive. "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. "Holder" means a Person in whose name a Security is registered. "Holding Company Affiliate" means any Person created to own or hold Holdings Common Stock or which exercises Control over the Company. "Holdings Common Stock" means the Common Stock of the Company. "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) 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 (iv) to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person. "Independent Director" means a member of the Board of Directors of the Company who is neither an officer nor an employee of the Company or any of its Subsidiaries or Affiliates. "Initial Closing" means the Closing of the purchase of the Preferred Stock occurring on July 2, 1997. "Initial Public Offering" or "IPO" shall mean the first to occur of (i) an underwritten public offering of any class of Common Stock of an IPO Entity, the gross proceeds of which shall be at least $30 Million, pursuant to a registration statement (other than on Form S-8 or S-4 or successor forms) filed with, and declared effective by, the SEC or (ii) the issuance to equity holders of a Person pursuant to a merger, exchange, acquisition or otherwise of Common Stock having a public float of at least $30 million. 10 "Interest Expense" shall mean, with respect to any Person for any period, the interest expense of such Person during such period determined on a consolidated basis with its Restricted Subsidiaries in accordance with GAAP, and shall in any event include, without limitation, (i) the amortization of debt discounts, (ii) the amortization of all fees payable in connection with the incurrence of Indebtedness (as defined in the Bank Credit Agreement) to the extent included in interest expense, (iii) the portion of any Capitalized Lease Obligation allocable to interest expense, (iv) all fixed or calculable dividend payments on preferred stock, including dividend payments-in-kind, and (v) payments of interest expense in kind. "Interest Payment Date" shall have the meaning given to such term in Section 2.3(d) hereof. "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 Subsidiaries for consideration consisting solely of Holdings Common Stock shall not be deemed to be an Investment. "IPO Common Stock" means Common Stock of an IPO Entity issued pursuant to an Initial Public Offering of shares in such IPO Entity. "IPO Entity" means the Company or any Holding Company Affiliate, in the event that either of such entities is the subject of an Initial Public Offering, any Designated Acquiring Person that consummates an IPO within the 12 month period contemplated by Section 2.3(b)(ii) hereof, or any Designated Acquiring Person that is a Public Company. "IPO Price" means (a) in an underwritten public offering, the initial price at which IPO Common Stock is offered to the public and (b) in any other public offering, the market price of the IPO Common Stock as of the date of the applicable registration statement. "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). 11 "Liquidation Preference" means the $1000 per share liquidation preference of the Preferred Stock, plus all accrued and unpaid dividends, including PIK Dividends. "Management Committee" shall mean any committee bestowed with management authority with respect to the Company or any of its Subsidiaries. "Market Valuation" means the market value of the Common Stock of a Designated Acquiring Person that is a Public Company, determined as follows: The Market Valuation shall be the average of the daily closing prices of such Common Stock for the 30 consecutive Trading Days preceding the effective date of a Change of Control. The closing price for each day shall be the last reported sales price, or, in case no such reported sale takes place on such date, the average of the reported closing bid and asked prices in either case on the NASDAQ National Market System or, if such Common Stock is not listed or admitted to trading on the NASDAQ National Market System, on the principal national securities exchange on which such Common Stock is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the closing sales price of such Common Stock as quoted by NASDAQ, or, in case no reported sales takes place, the average of the closing bid and asked prices as quoted by NASDAQ or, in any comparable system, the closing sales price or, in case no reported sale takes place, the average of the closing bid and asked price, as furnished by any two members of the National Association of Securities Dealers, Inc. selected from time to time by the Purchaser for that purpose. "Material Adverse Effect" means any occurrence, action or event the result of which causes or has, or is reasonably likely to cause or have, a material adverse effect on the business, condition (financial or otherwise), operations, performance, properties or prospects of the Company any of its direct or indirect Subsidiaries, or on the ability of such Persons to carry out their respective Obligations under this Agreement or the Acquisition Documents. "Material Contract" means any supply agreement, requirements contract, customer agreement, services agreement, lease, license agreement, franchise agreement, royalty agreement, distribution agreement, marketing agreement, advertising agreement, joint venture agreement, partnership agreement, stockholders agreement, asset purchase agreement, stock purchase agreement, merger agreement, escrow agreement, tax sharing agreement, agency agreement, investment banking agreement, fidelity or surety contract, power of attorney, non-competition agreement or other agreement limiting the freedom of the Company or any of its Subsidiaries to do business or compete in any line of business or with any Person or in any area, or any credit agreement, loan agreement, note purchase agreement, security agreement, mortgage, trust deed, trust indenture, promissory note, bond, debenture, Guarantee, letter of credit, reimbursement agreement or other agreement or instrument relating to the borrowing of money or the extension of credit (excluding this Agreement, the Notes and the other Note Documents), or any bonus, deferred compensation, thrift, incentive compensation, stock purchase, stock option, employment, consulting, severance or termination pay, hospitalization or other medical, life or other 12 insurance, or retirement plan, program, agreement or arrangement, or other Plan maintained or contributed to by any Person with respect to employees of the Company or its Subsidiaries, or any other contract, agreement, purchase order or other commitment, in each case to which the Company or any of its Subsidiaries is a party and which involves aggregate payments or obligations in excess of $1,000,000 or is otherwise material to the business of the Company and its Subsidiaries taken as a whole or the breach of which would result in a Material Adverse Effect. "Maturity Date" means July 15, 2002. "Multiemployer Plan" shall mean a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA and subject to Title IV of ERISA which is, or within the immediately preceding six (6) years was, contributed to by the Company, its Subsidiaries or any ERISA Affiliate. "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, 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 (not including the sale of interval ownerships, time shares or purchaser notes issued in connection with the sale of time shares or interval ownership units) by such Person or any of its Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "Net Proceeds" means the aggregate net cash proceeds received by the Company or any of its 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 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 requiring any financial obligation of the Company 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 13 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 Subsidiaries, other than Real Estate Subsidiaries, (a) provides credit support requiring any financial obligation of the Company 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 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 Subsidiaries, other than Real Estate Subsidiaries, except, in each case, to the extent permitted by the provisions of Section 6.10 hereof. "Notes" shall have the meaning given to such term in Section 2.2. "Obligations" with respect to any instrument or agreement means 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. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, any Assistant Secretary or any Vice President of such Person. "Officers' Certificate" means, with respect to the Company, a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 5.4 hereof. 14 "Order" means any order, writ, injunction, decree, judgment, award, determination or written direction or demand of any court, arbitrator or governmental body. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor thereto. "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 Indebtedness" shall have the meaning given to such term in Section 6.10. "Permitted Investments" means: (i) any Investment in the Company; (ii) any Investment in Cash Equivalents; and (iii) any Investment by the Company or any of its Subsidiaries in a Person if, as a result of such Investment, (a) such Person becomes a Wholly Owned Restricted Subsidiary of the Company 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. "Permitted Liens" means: (i) Liens securing Permitted Indebtedness; (ii) Liens in favor of the Company or any of its Subsidiaries; (iii) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any of its 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 Subsidiary; (iv) Liens on property existing at the time of acquisition thereof by the Company or any of its Subsidiaries, provided that such Liens were in existence prior to the contemplation of such acquisition; (v) 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; (vi) Liens to secure Indebtedness permitted by Section 6.10 hereof covering only the assets acquired with such Indebtedness; (vii) Liens securing Existing Indebtedness; (viii) 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, however, that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; and (ix) Liens on assets of Real Estate Subsidiaries securing Non-Recourse Real Estate Debt. Notwithstanding the foregoing, Permitted Liens shall not include liens on the Capital Stock of the Company, ASC, ASCU and Wolf Mountain Corporation as described in Section 6.18 hereof. 15 "Permitted Refinancing Debt" means any Indebtedness of the Company or any of its 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 Subsidiary, or any Permitted Indebtedness; provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Debt 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 Debt 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; and (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Principal Amount or the Liquidation Preference, as the case may be, of the Securities, such Permitted Refinancing Debt has a final maturity date no earlier than the final maturity date of, and is subordinated in right of payment to the Principal Amount or Liquidation Preference, as the case may be, of the Securities 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. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or agency or political subdivision thereof (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business). "PIK Dividends" means dividends on any Preferred Shares and PIK Shares paid in additional Preferred Shares. "PIK Interest" means interest on any Notes and any additional outstanding PIK Notes paid in additional Notes. "PIK Notes" means promissory notes, delivered by the Company in respect of interest payable on the Notes and any additional outstanding PIK Notes. "PIK Shares" means Preferred Shares, delivered by the Company in respect of dividends payable on the Preferred Shares. "Plan" shall mean an employee benefit plan defined in Section 3(3) of ERISA in respect of which the Borrowers, the Guarantors or any ERISA Affiliate is, or within the immediately preceding six (6) years was, an "employer" as defined in Section 3(5) of ERISA. "Preferred Shares" shall have the meaning given to such term in Section 2.2 hereof. 16 "Preferred Stock" shall have the meaning given to such term in Section 2.2 hereof. "preferred stock" of any Person means any Capital Stock of such Person which has a preference in liquidation or preference with respect to the payment of dividends and having a fixed dividend rate or floating dividend rate based on an established index. "Principal Amount" means the face value of the Notes, plus all accrued and unpaid interest, including PIK Interest. "Property" means with respect to any Person, any interest in any kind of property or asset, whether real, personal or mixed, movable or immovable, tangible or intangible, corporeal or incorporeal, of such Person. "Public Company" means a Person the Common Stock of which is traded on the New York Stock Exchange, the American Stock Exchange, the NASDAQ National Market System or in the over-the-counter markets. "Purchaser" shall mean Madeleine LLC, or any subsequent transferee or Holder of the Notes. "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 of the Company as a Real Estate Subsidiary. "Redemption Price" equals the Liquidation Preference or Principal Amount on the date of redemption multiplied by the applicable Redemption Premium on the date of redemption. "Redemption Premium" means one (1) divided by: (a) one (1) minus (b) the Redemption Premium Discount Percentage. "Redemption Premium Discount Percentage" means the following percentages in effect during the applicable period: Period Percentage ------ ---------- 7/15/97 to 7/14/98 5% 7/15/98 to 10/14/98 6.25% 10/15/98 to 1/14/99 7.50% 1/15/99 to 4/14/99 8.75% 4/15/99 to 7/14/99 10.00% 17 7/15/99 to 10/14/99 11.25% 10/15/99 to 1/14/00 12.50% 1/15/00 to 4/14/00 13.75% 4/15/00 to 7/14/00 15.00% 7/15/00 to 10/14/00 16.25% 10/15/00 to 1/14/01 17.50% 1/15/01 to 4/14/01 18.75% 4/15/01 to 7/14/01 20.00% 7/15/01 to 10/14/01 21.25% 10/15/01 to 1/14/02 22.50% 1/15/02 to 4/14/02 23.75% 4/15/02 to 7/15/02 25.00% "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date hereof, by and among the Company and the Purchaser as such agreement may be amended, modified or supplemented from time to time. "Reportable Event" shall mean any of the events described in Sections 4043(b) of ERISA (other than events for which the notice requirements have been waived). "Repriced Converts" shall mean the 6% Convertible Subordinated Debentures or 6% Convertible Preferred Stock of the Company, a Designated Acquiring Person or IPO Entity, as determined by the Company or the Designated Acquiring Person, as the case may be, in its sole discretion, issued pursuant to the Repriced Converts Indenture or Repriced Converts Certificate of Designation, with dividends or interest payable quarterly at a rate per annum equal to 6%, Convertible into Conversion Shares and with a maturity or mandatory redemption date on the fifth anniversary of their date of issuance. "Repriced Converts Certificate of Designation" shall mean the Certificate of Designations, Rights and Preferences for the Repriced Converts issued in the form of preferred stock of the Company, an Acquiring Person or an IPO Entity substantially in the form of Exhibit C attached hereto. "Repriced Converts Indenture" shall mean the Indenture for the Repriced Converts issued in the form of subordinated debentures of the Company, an Acquiring Person or an IPO Entity substantially in the form of Exhibit D attached hereto. "Restricted Investment" means any Investment other than a Permitted Investment. "Restricted Subsidiary" means any Subsidiary that is not an Unrestricted Subsidiary. "SEC" means the Securities and Exchange Commission. 18 "Securities" means, together, the Preferred Shares and the Notes. "Securities Act" means the Securities Act of 1933, as amended. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date hereof. "Skiing and Lodging EBITDA" means, for any period, with respect to any Person, the sum of Consolidated Net Income plus in each case, without repetition, to the extent deducted in determining Adjusted Net Income, the sum of (i) Interest Expense, plus (ii) amounts relating to non-cash charges for depreciation and amortization, plus (iii) expenses relating to income taxes, plus (iv) all other non-cash charges, all as determined for such Person and its Subsidiaries for such period on a consolidated basis in accordance with GAAP. "Statute" means any statute, ordinance, code, treaty, directive, law, rule or regulation of any governmental body. "Subordinated Obligations" shall mean any Obligations in respect of any Equity Interests of the Company and all Indebtedness of the Company other than Permitted Indebtedness. "Subsequent Closing" means the Closing of the purchase of the Notes, which shall occur on or before July 28, 1997. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which 50% or more 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). "Termination Event" shall mean (i) a Reportable Event with respect to any Benefit Plan, (ii) the withdrawal of the Company, any Subsidiary or any ERISA Affiliate from a Benefit Plan during a plan year in which the Company, any Subsidiary or any ERISA Affiliate was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (iii) the imposition of an obligation on the Company, any Subsidiary or any ERISA Affiliate under Section 4041 of ERISA to provide affected parties written notice of intent to terminate a Benefit Plan in a distress termination described in Section 4041(c) of ERISA, (iv) the institution by the PBGC of proceedings to terminate a Benefit Plan, or 19 (v) the partial or complete withdrawal of the Company, any Subsidiary or any ERISA Affiliate from a Multiemployer Plan. "Transfer Restricted Securities" means securities that bear or are required to bear the legend set forth in Section 4.6 hereof. "Unrestricted Subsidiary" means any Subsidiary (i) that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary (for purposes of this Agreement) pursuant to a board resolution, but only to the extent that such Subsidiary (a) has no Indebtedness other than Non-Recourse Debt and Obligations with respect to Guarantees that are subordinated to the Company's Obligations under the Securities, (b) 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, (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (1) to subscribe for additional Equity Interests or (2) 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 any state in which it is licensed as an insurer), and (d) has not guaranteed or otherwise directly or indirectly provided financial credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries. Any such designation by the Board of Directors of the Company shall be evidenced to the Purchaser by delivering to the Purchaser 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. 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 this Agreement 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 Section 6.10 hereof, the Company shall be in default of such covenant). The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary, provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted by Section 6.10 hereof and (ii) no Default or Event of Default would be in existence following such designation. "Utah Subsidiary" means ASCU and any Subsidiary acquired or created in connection with the Wolf Mountain Acquisition. "Utah Subsidiary Guarantee" shall have the meaning given to such term in Section 6.10 hereof. 20 "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 of 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. "Wolf Mountain Acquisition" shall have the meaning given to such term in Section 2.8 hereof. "Wolf Mountain Corporation" means Wolf Mountain Resorts L.C., a [Utah] [Corporation/Limited Company]. 1.2 Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined shall be construed in accordance with GAAP; (3) words in the singular include the plural, and the plural include the singular; (4) provisions apply to successive events and transactions; and (5) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time. SECTION 2. PURCHASE AND SALE OF THE SECURITIES 2.1 Purchase and Sale of the Securities. Subject to all of the terms and conditions hereof and in reliance on the representations and warranties set forth or referred to herein, the Company agrees to issue and sell to the Purchaser, and the Purchaser agrees to purchase Preferred Shares and Notes in the respective amounts set forth on Schedule 2.1 attached hereto, in the aggregate initial Principal Amount and Liquidation Preference of $35,000,000. 2.2 Authorization of Notes and Repriced Converts. The Company has duly authorized the issue, sale and delivery of: 21 (a) 17,500 shares of Series A Exchangeable Preferred Stock (the "Preferred Stock"). The terms, limitations and relative rights and preferences of the Preferred Stock are set forth in the Certificate of Designation, Number, Voting Powers, Preferences and Rights of Series A Exchangeable Preferred Stock of the Company (the "Certificate of Designation"), substantially in the form of Exhibit A attached hereto. The initial Liquidation Preference of the Preferred Shares is $1,000 per share, and dividends on the Preferred Shares shall be payable, at the option of the Company, in cash or in PIK Shares quarterly in arrears at the rate of 14% per annum, compounded monthly. The Preferred Shares shall be exchangeable in accordance with the provisions set forth in Sections 6.15 and 8.1 hereof. (b) 14% Senior Exchangeable Notes Due 2002 (the "Notes") in an aggregate principal amount of up to U.S. $17,500,000. Each Note will bear interest on the unpaid principal thereof from its date of issuance (calculated on the basis of a 360-day year and actual days elapsed) at the rate of 14% per annum payable quarterly in arrears and compounded monthly, and will mature and be due in full five (5) years after the date of issuance. Interest on the Notes will be payable in cash or in PIK Notes, at the option of the Company. The Notes will be issued in denominations of $1,000 each and in multiple integrals thereof, and will be evidenced by an instrument issued by the Company in the form of Exhibit B attached hereto. The Notes shall be exchangeable in accordance with the provisions set forth in Section 6.15 and 8.1 hereof. 2.3 Payment of Principal and Interest. (a) Mandatory Redemption. On the Maturity Date, the Company will redeem all of the Securities for an amount equal to the Redemption Price fixed as of the Maturity Date. Upon the occurrence of a Change of Control, the Company shall offer to redeem the Securities, in whole or in part, for an amount equal to the Redemption Price fixed as of the effective date of the Change of Control. If Mandatory Redemption is triggered by a Change of Control or an Event of Default, then the procedures of redemption shall be in accordance with the procedures described in Section 6.15 hereof. (b) Optional Redemption. (i) At any time subsequent to the issuance of the Securities, the Company may at its option, redeem the Securities, in whole or in part, on a pro rata basis as between the Notes and the Preferred Shares, for an amount per Security equal to the Redemption Price fixed as of the date of such redemption. If less than all of the Securities are to be redeemed, than the amount of Notes and Preferred Shares to be redeemed will be in proportion to the relative Principal Amounts and Liquidation Preferences of the Securities then outstanding. (ii) If the Company, any of its Affiliates, or a Designated Acquiring Person shall propose, within 12 months following an optional redemption of all or part of the Securities pursuant to Section 2.3(b) hereof or a redemption of all or part of the Securities triggered by a Change of Control pursuant to the second sentence of Section 2.3(a) hereof, to effect an IPO, the Company shall (or 22 shall cause the IPO Entity or Designated Acquiring Person to) provide an Offering Notice of the type contemplated by Section 8.1(a), and the Purchaser shall have the right, within 20 days of receipt of an Offering Notice, to deliver a Response Notice also in accordance with Section 8.1(a), in each case as if such Securities had not been optionally redeemed; provided that in lieu of exchanging Securities the Purchaser shall pay cash for the Repriced Converts or IPO Common Stock being purchased (as the case may be), and provided further the purchase price for the Conversion Shares and the initial conversion price for the Conversion Shares issuable upon conversion of the Repriced Converts shall be determined by reference to the Conversion Discount Percentage in effect on the date of the original optional or mandatory redemption, the Principal Amount or Liquidation Preference of the Repriced Converts shall be equal to the Principal Amount or Liquidation Preference of the Securities redeemed as of such original optional or mandatory redemption date, and the number of Conversion Shares or Repriced Converts issued shall be equal to such Principal Amount or Liquidation Preference divided by the IPO Price multiplied by the difference between one (1) minus the then applicable Conversion Discount Percentage. (c) No Other Prepayments. Except as expressly permitted by Section 2.3, Section 6.11, and Section 6.15 hereof, the Preferred Shares may not be redeemed, and the principal of the Notes may not be repaid or prepaid. (d) Interest and Dividend Payments. Interest and dividends shall be calculated on the basis of the actual number of days elapsed and a 360-day year, shall be compounded monthly and shall be payable in cash, PIK Shares or PIK Notes (as the case may be), at the option of the Company, quarterly in arrears on each January 15, April 15, July 15, and October 15 (commencing October 15, 1997) and at the maturity of the Securities (each such date, an "Interest Payment Date"). (ii) In the event of a Default, if the Company fails to make Mandatory Redemption on the date required, the Securities shall bear interest and dividends at a rate equal to 19% per annum, compounded daily, and shall be payable on demand. (iii) It is not intended by the Holders of the Securities, and nothing contained in this Agreement or any Security shall be deemed, to establish or require the payment of a rate of interest in excess of the maximum rate permitted by applicable federal, state or other law (the "Maximum Rate") and, to prevent such an occurrence, any agreement which may now or hereafter be in effect between the Company and the Holders of the Securities regarding the payment of fees or interest to such holders is hereby limited by the provisions of this Section 2.3(d). If, in any month, the effective interest rate applicable to the Securities, absent the Maximum Rate limitation contained herein, would have exceeded the Maximum Rate, then the effective interest rate for that month shall be the Maximum Rate, and, if in any subsequent month, the effective interest rate would otherwise be less than the Maximum Rate, then the effective interest rate for such month shall be increased to the Maximum Rate until such 23 time as the amount of interest paid hereunder equals the amount of interest which would have been paid if the same had not been limited by the Maximum Rate. In the event that, upon payment in full of the Securities, the total amount of interest paid or accrued under the terms of this Agreement is less than the total amount of interest which would have been paid or accrued had the interest not been limited hereby to the Maximum Rate, then the Company shall, to the extent permitted by such applicable federal, state or other law, pay to the Holder of the Securities an amount equal to the excess, if any, of (i) the lesser of (A) the amount of interest which would have been charged if the Maximum Rate had, at all times, been in effect with respect to the Securities and (B) the amount of interest which would have accrued had the effective interest rate applicable with respect to the Securities at all times not been limited hereunder by the Maximum Rate over (ii) the amount of interest actually paid or accrued under this Agreement. In the event that the holders of the Securities receive, collect or apply as interest any sum in excess of the Maximum Rate, such excess amount shall be applied to the reduction of principal outstanding under the Notes or the redemption of the Preferred Shares, as the case may be, and if no such principal or Preferred Shares are then outstanding, such excess or part thereof remaining shall be paid to the Company. 2.4 Conversion Rights. The Securities shall be convertible and exchangeable in the manner, and on the terms and conditions set forth in Section 6.15 and Section 8.1 hereof. 2.5 Seniority. The Preferred Shares shall be senior, with respect to dividends and liquidation, to all Equity Interests of the Company. The Notes shall be general unsecured obligations of the Company and shall be senior in right of payment to all Subordinated Obligations. 2.6 Closings. (a) The closings of the purchase and sale of the Securities will take place at the offices of Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York 10022 at such time and on the date on which all definitive legal documentation satisfactory to the parties is executed by the Company and the Purchaser, and on which all conditions to the Closings contemplated in Section 5 hereof shall have been satisfied or waived, or at such other time and date as the parties shall agree (the date of each such Closing, the "Closing Date"). The Initial Closing hereunder shall take place with respect to the Preferred Shares. The Subsequent Closing (together with the Initial Closing, the "Closings") hereunder shall take place with respect to the Notes. At each of the Closings, the Company will deliver certificates representing the applicable Securities purchased hereunder against payment by the Purchaser of $17,500,000. Such payments shall be made by wire transfer on each Closing Date in immediately available funds to such accounts as are designated by the Company in accordance with Section 5.10 hereof. The Securities will be issued to the Purchaser on the Closing Date and registered in the name of the Purchaser or the Purchaser's nominee, as applicable. (b) Without the prior written consent of the Purchaser, the Company will not issue (i) any additional Notes in excess of the $17,500,000 principal amount of 24 the Notes issued hereunder (other than PIK Notes), or (ii) any additional Preferred Shares in excess of the $17,500,000 liquidation preference of the Preferred Shares issued hereunder (other than PIK Shares). The parties hereto agree that the Purchaser and its Affiliates shall have a right of first refusal to purchase any Securities, the issuance for which the Purchaser has given its consent pursuant to this Section 2.6(b). In the event the Company determines to issue additional Securities to finance additional acquisitions of ski properties, the Company shall mail a notice to the Purchaser stating: (i) the amount of Securities it intends to offer, which shall, in every case, be a minimum of $5 million, (ii) the combination of Preferred Shares and Notes contemplated for such issuance, (iii) the date of the planned issuance of the Securities, and (iv) that the purpose for which the funds are being raised is to purchase additional ski properties. Not later than fifteen (15) Business Days after the Purchaser receives such notice, the Purchaser will advise the Company of (i) its intention to either purchase (a) all of the Securities being issued, (b) a specified amount of the Securities being issued, or (c) none of the Securities being issued, and (ii) whether it grants or withholds consent with respect to the additional issuance of Securities to parties other than the Purchaser. 2.7 Use of Proceeds. The proceeds from the Initial Closing shall be used as follows: (a) to pay in full all amounts outstanding under the $2.5 million Promissory Note, dated June 18, 1997, made by the Company in favor of the Purchaser, including all interest accrued and unpaid thereunder; (b) to pay the Closing Fee; (c) to pay the fees and expenses of the Purchaser incurred in connection with this Agreement, including attorneys fees and expenses; (d) up to $5 million to be retained by the Company for general working capital purposes; or retained by the Company for the purpose of being contributed as capital to ASC to fund the general working capital requirements of ASC and capital expenditures by its Subsidiaries, provided, however, that the Company shall not contribute any of the $5 million as capital to ASC except on terms no less favorable to ASC than those that would have been obtained in a comparable transaction with an unrelated Person and otherwise in accordance with Section 4.12 of the ASC Indenture (as defined in Section 6.9 hereof); and (e) an amount up to the balance to be contributed as capital to ASCU, a Wholly Owned Restricted Subsidiary of the Company, which will, in turn, be directed to use such proceeds to pay or otherwise retire the obligations of ASCU with respect to the purchase of the assets of Wolf Mountain Resorts LC (the "Wolf Mountain Acquisition"), as set forth on Schedule 2.7A hereof. The proceeds from the Subsequent Closing shall be used as follows: (a) to pay the fees and expenses of the Purchaser incurred subsequent to the Initial Closing in connection with this Agreement; (b) up to $17.5 million to be contributed as capital to ASCU which will, in turn, be directed to use such proceeds to pay any balance remaining on the obligations of ASCU with respect to the Wolf Mountain Acquisition as set forth on Schedule 2.7B hereof and for the continued development and investment of Wolf Mountain. 2.8 Replacement Certificates. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of, and the loss, theft, destruction or mutilation of, certificates representing any Security or Repriced Convert and 25 (a) in the case of loss, theft or destruction, of an indemnity reasonably satisfactory to it (provided, if the holder of the Security or Repriced Convert is an original holder thereof, its own agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender and cancellation thereof to the Company, the Company at its expense will execute and deliver in lieu thereof, a new certificate representing such Security or Repriced Convert of like tenor and principal amount, dated and bearing interest from the date to which interest has been paid on such lost, stolen, destroyed or mutilated Security or Repriced Convert, or dated the date of such lost, stolen, destroyed or mutilated Security or Repriced Convert if no interest has been paid thereon. 2.9 Delivery Expenses. If the Purchaser surrenders any Security to the Company for conversion pursuant to this Agreement (other than the initial exchange of Notes to Preferred Shares, which shall be at the Purchaser's sole expense), the Company will pay the cost of delivery from the Purchaser's office, insured to the Purchaser's satisfaction, the surrendered Securities and the certificates representing Repriced Converts or Conversion Shares. 2.10 Issue Taxes. The Company will pay all taxes in connection with the issuance and sale of the Securities and the issue of the Repriced Converts and Conversion Shares and in connection with any modification of the Notes and will save the Purchaser harmless without limitation as to time against any and all liabilities with respect to all such taxes (other than any income taxes assessed on your income). The obligations of the Company under this Section 2.10 shall survive the payment or repayment of the Securities or the Repriced Converts and the termination of this Agreement. 2.11 Closing Fee. The Purchaser shall receive a fee upon Closing (the "Closing Fee") equal to two percent (2%) of the gross proceeds to the Company (prior to deducting the Closing Fee) from the sale of the Securities. 2.12 Transfer Restrictions. The Purchaser shall not sell, transfer or assign any Security other than to: (i) an Affiliate of the Purchaser, or (ii) a Qualified Institutional Buyer or Accredited Investor (as such terms are defined in the Securities Act). The Purchaser shall not sell, transfer or assign any Security in an initial aggregate Liquidation Preference or initial Principal Amount, as applicable, of less than $2.5 million, or any Repriced Converts in denominations of less than $1,000. The foregoing restrictions on transfer shall not apply to any participations in the Securities granted to third parties. SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. 26 The Purchaser hereby represents and warrants to and for the benefit of the Company as follows: 3.1 Organization and Qualification. The Purchaser is a limited liability company duly authorized and validly existing under the laws of the state of New York and has the requisite power to carry on its business as it is now being conducted and currently proposed to be conducted. The Purchaser is duly qualified to do business, and is in good standing, in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities make such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on its business, properties, assets, condition (financial or otherwise), liabilities or operations. 3.2 Authority Relative to this Agreement. The Purchaser has the requisite power to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the Registration Rights Agreement between the Company and the Purchaser to be entered into on the Closing Date (the "Registration Rights Agreement"), substantially in the form of Exhibit E attached hereto, and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary actions on the part of the Purchaser. This Agreement and the Registration Rights Agreement, upon its execution, each constitute a valid and binding obligation of the Purchaser, enforceable in accordance with its terms except as enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding therefor may be brought. No other proceedings on the part of the Purchaser are necessary to authorize this Agreement or the Registration Rights Agreement and the transactions contemplated hereby and thereby. 3.3 Financing Arrangements. The Purchaser has funds available to it sufficient to effect the transactions contemplated by this Agreement. 3.4 Investment Intent. The Purchaser is acquiring the Securities for investment for its own (or an Affiliate's) account, not as a nominee or agent and not with a view to the distribution of any part thereof in violation of law. The Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the Securities, other than to its Affiliates. SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants that: 4.1 Corporate Organization And Authority Of The Company And Subsidiaries. The Company (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Maine; (b) has all requisite power and authority and all necessary licenses and permits to own and operate its Properties and to 27 carry on its business as now conducted and as presently proposed to be conducted, except as would not have a material adverse effect on the Company; and (c) is duly licensed or qualified and is authorized to do business and is in good standing as a foreign corporation in each jurisdiction where the character of its Properties or the nature of its activities makes such licensing or qualification necessary, except as would not have a Material Adverse Effect on the Company. 4.2 Authorized Capital Stock. As of the date hereof, the authorized and outstanding Capital Stock of the Company is as set out on Schedule 4.2 hereto, and all of the issued shares of Capital Stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable. All of the outstanding shares of Capital Stock of the Subsidiaries have been duly and validly authorized and issued and are fully paid and non-assessable. The shares of Capital Stock of each Subsidiary listed on Schedule 4.2(i) hereto are owned directly by the Company free and clear of any Liens. The Shares of Capital Stock of each Subsidiary listed on Schedule 4.2(ii) hereto are owned indirectly by the Company free and clear of any Liens. The Company does not own, directly or indirectly, any equity or debt securities of any other company, corporation, partnership, joint venture or other entity which are material to the business or operations of the Company. All of the outstanding Capital Stock of the Company is owned by Leslie B. Otten, free and clear of any Liens. 4.3 Sale Is Legal And Authorized. (a) The offer, issuance, sale and delivery of the Securities and the Repriced Converts and the Conversion Shares and compliance by the Company with all of the provisions of this Agreement, the Certificate of Designation, the Notes and the Repriced Converts: (i) are within the corporate powers of the Company; (ii) are legal and will not violate, conflict with, result in any breach of any of the provisions of, constitute a default under (upon notice or lapse of time or both), or result in the creation of any Lien upon any Property of the Company or any of its Subsidiaries under the provisions of, any charter instrument, by-law, or any order of any court, governmental authority or arbitration board or tribunal, or any provision of any indenture, mortgage, contract, instrument or other agreement to which the Company or any of its Subsidiaries is a party or by which it may be bound, except with respect to such consents, approvals, releases or amendments thereof as are necessary and/or appropriate to permit such sale and compliance that have been obtained by the Company on the Closing Date; and (iii) have been duly authorized by all necessary corporate action on the part of the Company (no action by the stockholders of the Company or of any other Person being required by law, by the Articles of Incorporation or By-laws of the Company or otherwise except as has already been taken by the Company); (b) This Agreement has been duly and validly executed and delivered by the Company (and the officers or agents executing this Agreement on behalf of the Company are duly authorized to do so). This Agreement constitutes the legal, valid and binding obligation, contract and agreement of the Company, enforceable in accordance with its terms, except as enforcement of such terms may be limited by any applicable bankruptcy, insolvency, reorganization or other similar laws relating to or affecting the 28 enforcement of creditors' rights generally and by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law; (c) The Preferred Shares conform to the terms of the Preferred Shares contained in the Company's Articles of Incorporation. The Certificate of Designation sets forth the rights preferences and priorities of the Preferred Stock. The Conversion Shares conform to the terms of the Holdings Common Stock contained in the Company's Articles of Incorporation. (d) As of the date hereof, the Preferred Shares, and the issuance thereof, have been duly authorized by the Board of Directors of the Company. On or prior to the Closing Date, the holders of the Holdings Common Stock approved all amendments to the Company's Articles of Incorporation necessary to authorize the creation of the new series of Preferred Stock. The Notes have been duly and validly executed, issued and delivered by the Company (and the officers executing the Notes have been duly authorized to do so), and constitute the legal, valid and binding obligations, contracts and agreements of the Company, enforceable in accordance with their respective terms, except as enforcement may be limited by any applicable bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditor's rights, generally and by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law. 4.4 No Defaults. No event has occurred and no condition exists which, with the giving of Notice or passage of time or both, would constitute a Default or an Event of Default pursuant to any agreement to which the Company or its Subsidiaries are a party, or as a result of the issue of the Preferred Shares or the Notes. Neither the Company nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any indenture, mortgage, contract, instrument or other agreement to which it is a party, where such default could, singularly or in the aggregate, have a material adverse effect on the condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole or on the ability of the Company to perform its obligations contained in this Agreement, the Certificate of Designation, the Notes or the Repriced Converts. 4.5 Governmental Consent. Neither the nature of the Company or of any Subsidiary, or of any of their respective businesses or Properties, nor any relationship between the Company or any Subsidiary and any other Person, nor any circumstance in connection with the execution and delivery of this Agreement or the offer, issue, sale or delivery of the Securities and Repriced Converts or the Conversion Shares is such as to require a consent, approval or authorization of, or filing, registration (other than registration of the Repriced Converts under the Securities Act), or qualification with, any governmental authority on the part of the Company as a condition to the execution and delivery of this Agreement or the offer, issue, sale or delivery of the Securities or the issuance of Conversion Shares pursuant to conversion of the Securities. 29 4.6 Conversion Shares, Legends. (a) The Conversion Shares, as and when issued by the Company from time to time pursuant to conversion of the Securities or Repriced Converts, will be validly issued and outstanding, fully paid and non-assessable and will not be subject to any pre-emptive or similar right, and the holder of each Security or Repriced Convert will receive good and valid title to the Conversion Shares upon conversion of such Security or Repriced Convert, free and clear of any Lien, except such as may have been created by the Purchaser and such restrictions on transfer as may be imposed under United States federal or state securities or blue sky laws. No consent or approval by the stockholders of the Company or any other Person is required to be obtained by the Company for the consummation of the issuance of the Conversion Shares by the Company pursuant to conversion of the Securities. (b) Each of the Company's certificates representing the Securities, Repriced Converts or Conversion Shares (prior to registration, and any certificates issued in exchange therefor or substitution thereof) shall bear legends in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES. 4.7 Legal Proceedings. There are no actions, suits, investigations or proceedings pending to which the Company or any Subsidiary is a party before or by any court or governmental agency or body, which would result, individually or in the aggregate, in any material adverse change in the financial condition or results of operations of the Company and its Subsidiaries, taken as a whole, or which would have a Material Adverse Effect upon the Properties or assets of the Company and its Subsidiaries, taken as a whole, and to the knowledge of the Company, no such actions, suits, investigations or proceedings are threatened by any Person. 4.8 Full Disclosure. Neither this Agreement, nor any written statement furnished by the Company or its agents to you in connection with the negotiation of the sale of the Securities, to the best knowledge of the Company, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein or herein, in light of the circumstances under which they were made, not misleading. There is no fact known to the Company or any of its Subsidiaries (or which, after due inquiry, should have been known) which the Company has not disclosed to you in writing which materially affects adversely, nor, so far as the Company can foresee, could materially affect adversely, the Properties, business, 30 prospects, profits or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole or the ability of the Company, its Subsidiaries or any of its Affiliates to perform its respective obligations contained in this Agreement, the Certificate of Designation, the Notes or the Repriced Converts. 4.9 Use Of Proceeds. The Company will use, and will cause ASCU to use, the proceeds from the sale of the Securities solely for the purposes described in Section 2.7 hereof. 4.10 Certain Laws. (a) Neither the Company nor any of its Subsidiaries is, directly or indirectly, controlled by, or acting on behalf of any Person which is, an "investment company" or an "affiliated person" of, "promoter" or "principal" of an "investment company," within the meaning of the Investment Company Act of 1940, as amended. (b) Neither the Company nor any of its Subsidiaries is a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended or a "public utility" within the meaning of the Federal Power Act, as amended. 4.11 Capital Stock. There are no securities outstanding, other than the Preferred Shares and the Notes, that are convertible into or exchangeable for any shares of Capital Stock of the Company or any Subsidiary, nor are there outstanding any rights to subscribe for or purchase, or any options or warrants for the purchase of, or any agreements (contingent or otherwise) providing for the issuance of, or any calls, commitments or claims of any character relating to, any shares of Capital Stock of the Company or any Subsidiary, or any securities convertible into or exchangeable for any such shares. 4.12 Business Operations and Other Information: Financial Condition. (a) Except as set forth in Schedule 4.12, ASC has filed all reports required to be filed with the SEC, pursuant to the Exchange Act, since November 22, 1996 (collectively, the "SEC Reports"). ASC has heretofore delivered or made available to the Purchaser, in the form filed with SEC, all such SEC Reports. The SEC Reports were prepared in accordance with the requirements of the Securities Act and the Exchange Act, as the case may be; none of such SEC Reports, as of their respective dates, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Financial Statements (as defined below) included in the SEC Reports present fairly the financial position of ASC and its Subsidiaries as of the respective dates thereof, and the results of their operations, changes in stockholders equity and their cash flows for the respective periods set forth therein, all in conformity with GAAP consistently applied during the periods involved. As used in this Agreement, the term "Financial Statements" when used with respect to any Person means the consolidated balance sheets of the Person and its consolidated Subsidiaries as of the respective dates thereof, and the related consolidated statements of income, 31 changes in stockholders equity and cash flows of that Person and its Subsidiaries for the respective periods set forth therein. (b) Projections of the consolidated net income and cash flow of the Company and its Subsidiaries (assuming completion of the sale of the Securities and the consummation of the Wolf Mountain Acquisition) for each of the fiscal years of the Company in the period from the Closing Date through June 30, 2002 have been delivered to the Purchaser. Such projections have been prepared by management of the Company and Wolf Mountain Corporation on the basis of assumptions, set forth in Schedule 4.12(b) hereto, which such management believes, as of the Closing Date, are fair and reasonable in light of (i) the historical financial performance of the Company, (ii) to the best knowledge of management, after reasonable inquiry, the projected financial performance of Wolf Mountain Corporation and (iii) current and reasonably foreseeable business conditions. Actual results may vary materially and significantly from the projections of financial performance. (c) A true and complete copy of a consolidated pro forma balance sheet for the Company prepared by management of the Company on the basis of the historical unaudited balance sheet of each of the Company as of April 30, 1997, as though the sale of the Securities had been completed immediately prior to such date, has been delivered to the Purchaser. Such pro forma balance sheet fairly presents in all material respects the consolidated financial position of the Company as of the close of business on such date on a pro forma basis as if the sale of the Securities had been completed immediately prior to such date, and contains all material pro forma adjustments necessary in order to fairly reflect such assumption. (d) A true and complete copy of a consolidated pro forma balance sheet for the Company prepared by management of the Company on the basis of the historical unaudited balance sheet of the company as of April 30, 1997, as though the sale of the Securities and the Wolf Mountain Acquisition had been completed immediately prior to such date, has been delivered to the Purchaser. (e) As of the date of each of the balance sheets included in the Financial Statements, the Company had no Indebtedness or liability, absolute or contingent, liquidated or unliquidated, except Indebtedness and liabilities reflected or reserved against on such respective balance sheets or described in the notes thereto. Since April 30, 1997, no Material Adverse Effect has occurred. (f) The Company was incorporated on May 28, 1997; ASCU was incorporated on January 4, 1995; and since their respective dates of incorporation to the Closing Date neither the Company nor ASCU has engaged in any business or activity other than activities relating to the ownership of the stock of ASCU (for the Company only) and the Wolf Mountain Acquisition. The capitalization of each of the Company and ASCU as of the date hereof, before giving effect to the sale of the Securities, are as set forth on Schedule 4.12 (g) hereto. As of the date hereof, the date of the Initial Closing 32 and the date of the Subsequent Closing, Leslie B. Otten owns and will continue to own 100% of the Holdings Common Stock and the Company owns and will continue to own (a) 100% of the Common Stock of ASCU and (b) 96% of the Common Stock of ASC. Neither the Company nor ASCU has incurred or will incur Indebtedness in connection with the Wolf Mountain Acquisition other than Indebtedness incurred with respect to the issuance of the Securities or Permitted Indebtedness. 4.13 Subsidiaries. Other than as set forth on Schedule 4.2(i) hereto, the Company does not own any shares of Capital Stock of, and does not have any direct or indirect equity interest in, any other Person. 4.14 No Conflicts with Agreements, Statutes, Orders, Etc. Neither the execution and delivery by the Company of this Agreement or any other documents executed and delivered in connection with this Agreement, nor the offering, issuance or sale of the Securities, the Repriced Converts or the Conversion Shares, nor the fulfillment of or compliance with the terms and provisions hereof or thereof, will conflict with, or result in a breach or violation of the terms, conditions or provisions of, or constitute a default under, or result in the creation of, any Lien on any Properties or assets of the Company or any of its Subsidiaries pursuant to, the charter or by-laws of the Company or any of its Subsidiaries, or any contract, agreement (other than as listed and briefly described on Schedule 4.14 hereto), mortgage, indenture, lease or instrument to which either of them is a party or by which any of them is bound or to which any of their respective assets are subject, or any Order or Statute to which any of them or any of their respective assets are subject. 4.15 Intentionally Omitted. 4.16 Assets and Properties (a) The Company has good and marketable title to all of its Properties (other than Properties leased from others, licensed or consigned), subject to Liens, restrictions and encumbrances of record. (b) The Properties owned by, leased to or used by the Company and its Subsidiaries, taken as a whole, are sufficient for operation of their businesses as currently contemplated, are in good operating condition and repair, ordinary wear and tear excepted, are free and clear of any known defects except such defects as do not materially interfere with the continued use thereof in the conduct of normal operations of the Company, and are able to serve the function for which they are currently being used in all material respects. The Properties owned by, leased to or used by the Company and its Subsidiaries constitute all of the material assets used in the conduct of their business and neither this Agreement nor the Notes, nor any transaction contemplated under any such agreement or document, will materially adversely affect any right, title or interest of the Company or its Subsidiaries in and to any of such assets. (c) As of the Closing Date, the Company and each of its Subsidiaries enjoys peaceful and undisturbed possession under all leases, whether of realty or personalty, to which it is a party, and all such leases are valid and subsisting and in full 33 force and effect except, in each case, for matters that would not in the aggregate have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in breach or violation of the terms of any such lease, and the Company does not know of any breach or violation of any of such leases by any third party, except, in each case, for matters that would not in the aggregate have a Material Adverse Effect. 4.17 Taxes. The Company and all of its Subsidiaries have filed, or on behalf of each of them there have been filed, all tax returns, informational returns and excise and sales tax returns which are required to have been filed prior to the date of this Agreement by or on behalf of them under the laws of the United States of America or any state or local jurisdiction therein, or any other jurisdiction located outside of the United States of America, and there have been paid all taxes shown to be due and payable on such returns and all other material taxes and assessments payable by any of them, unless such tax liability is being diligently contested in good faith and the Company or any of its Subsidiaries as the case may be, and has adequately reserved against such tax liability on its books and financial statements in accordance with GAAP. No material tax liens have been filed and no material claims are being asserted with respect to any such taxes as of the date hereof. No material tax assessment against the Company or any of its Subsidiaries has been proposed as of the date hereof and all of their respective tax liabilities are adequately provided for on their respective books and financial statements in accordance with GAAP. 4.18 Intentionally Omitted. 4.19 Offering of Securities. None of the Company or their respective representatives has, directly or indirectly, offered any of the Securities or the Repriced Converts or any security similar to any of them for sale to, or solicited any offers to buy any of the Securities or the Repriced Converts or any security similar to any of them from, or otherwise approached or negotiated with respect thereto with, more than 10 Persons including the Purchaser, and none of the Company or their respective representatives has taken or will take any action which would subject the issuance or sale of any of the Securities or Repriced Converts to the provisions of Section 5 of the Securities Act or violate the provisions of any securities or Blue Sky laws of any applicable jurisdiction. 4.20 Broker's or Finder's Commissions. Except for the fee of Berenson Minella, no broker's or finder's fee or commission will be payable by the Company with respect to the issuance and sale of the Securities. The Company agrees to indemnify the Purchaser and hold it harmless against any loss, cost, claim or liability (including, without limitation, reasonable attorneys' fees and disbursements for the investigation and defense of claims) asserted against Purchaser arising out of or relating to any such actual or alleged fee or commission including any such fee or commission owed to Berenson Minella. 34 4.21 Environmental Matters. Except as set forth in Schedule [4.21], there is no pending, or to the knowledge of the Company, threatened Environmental Matter relating to the Properties of the Company or its Subsidiaries, and after due inquiry, the Company is aware of no facts that could result in any such Environmental Matter. The Company has not agreed to assume by contract or otherwise any liability of any other Person for cleanup, compliance, or required Capital Expenditures in connection with any Environmental Matter arising prior to the date hereof. 4.22 ERISA. Schedule 4.22 sets forth a true, complete list of all Benefit Plans and Multiemployer Plans of the Company and its Subsidiaries. Neither the Company, its Subsidiaries nor any ERISA Affiliate nor any fiduciary of any Plan which is not a Multiemployer Plan (i) has engaged in a nonexempt prohibited transaction described in Sections 406 of ERISA or 4975 of the Code or (ii) has taken any action which would constitute or result in a Termination Event which in each case would have a Material Adverse Effect on or before the Termination Date. Neither the Company, its Subsidiaries nor any ERISA Affiliate has made a complete or partial withdrawal under Section 4203 or 4205 of ERISA from a Multiemployer Plan in either case which would have a Material Adverse Effect on or before the Termination Date. Except as required by Section 4980B of the Code, no welfare benefit plan (as defined in Section 3(1) of ERISA) provides benefits or coverage beyond an employee's termination of employment other than severance or plans that would not have a Material Adverse Effect on or before the Termination Date. The contributions required under Section 412 of the Code for each Benefit Plan have been made when due and no event has occurred which could result in the imposition of a Lien under Section 412(n) of the Code. Neither the Company, its Subsidiaries nor any ERISA Affiliate has any outstanding waivers or variances from the minimum funding requirements under Section 412 of the Code with respect to any Benefit Plan. The Parent has heretofore furnished to the Agent copies of the most recent Annual Report (Form 5500) with respect to each Benefit Plan. 4.23 Material Contracts. The exhibits to the SEC Reports and Schedule 4.23 contain a list of all Material Contracts to which the Company or any of its Subsidiaries is a party as of the Closing Date. True and complete copies as of the Closing Date of each of the Material Contracts to which the Company is a party, with all amendments, modifications and supplements thereto to the date hereof, have previously been furnished by the Company to the purchaser or its representatives. Each of the Material Contracts is valid, subsisting and in full force and effect except to the extent that, after the Closing Date, the failure to be valid, subsisting and in full force and effect would not have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in breach or violation of any of the terms, conditions or provisions of any of the Material Contracts, and, to the best knowledge of the Company, no other party to any of the Material Contracts is in breach or violation of any of the terms, conditions or provisions thereof, except for such breaches and violations as in the aggregate would not result in a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has transferred or subordinated any of its rights or interests in any of the Material Contracts, and such rights and interests are subject to no Liens except Permitted Liens. 35 4.24 Insurance. The Company has purchased policies (or has self-insured in accordance with state regulatory requirements) of workers compensation, general liability, fire, property, casualty, business interruption, flood, earthquake and other insurance carried by the Company and its Subsidiaries as of the Closing Date. Such policies are in full force and effect, and the Company has not received notice of cancellation with respect to any such policy. All premiums payable with respect to such policies have been or will then have been paid in respect of the coverage periods specified therein. 4.25 Related Documents The Company has delivered to the Purchaser true and correct copies of the Acquisition Documents as in effect on the Closing Date, including all amendments, modifications and supplements thereto, and of each document, certificate or statement required to be executed or delivered by any party thereunder (there being no amendments or modifications to such documents, and no waiver of any rights thereunder by the Company, nor of any condition to the obligations of such Persons under any thereof, except as heretofore disclosed to the Purchaser in writing). 4.26 Solvency The Company, ASC, ASCU and Wolf Mountain Corporation will be solvent both before and after giving effect to the Wolf Mountain Acquisition to be effected on the Closing Date and the application of the net proceeds of the issuance and sale of the Securities to be issued on the Closing Date. 4.27 Consents and Approvals All consents, permits and approvals, including approval required under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, necessary to the consummation of the Wolf Mountain Acquisition, have been received by the Company; and all transactions necessary to complete the Wolf Mountain Acquisition will be completed prior to or on the Closing Date. SECTION 5. CLOSING CONDITIONS. The Purchaser's obligation to purchase and pay for the Securities on each Closing Date pursuant to Section 2 of this Agreement shall be subject to the following conditions precedent: 5.1 [Intentionally Omitted] 5.2 Representations And Warranties True. The representations and warranties of the Company contained in Section 4 shall be true in all material respects on the Closing Date with the same effect as though made on and as of that date. 5.3 Compliance With This Agreement. The Company shall have performed and complied with all agreements and conditions contained herein which are required to be performed or complied with by the Company on or before the Closing Date. 36 5.4 Officers' Certificate. The Company shall have delivered to the Purchaser a certificate dated the Closing Date and signed by the Chairman of the Board, the President or any Vice President and by the chief financial officer of the Company, certifying that the conditions specified in Sections 5.2 and 5.3 have been fulfilled. 5.5 Corporate Existence And Authority. The Purchaser shall have received, in form and substance reasonably satisfactory to the Purchaser, such documents and evidence with respect to the Company and its Subsidiaries as the Purchaser may reasonably request in order to establish the existence and good standing of the Company and its Subsidiaries and the authorization of the transactions contemplated by this Agreement. 5.6 Consent Of Holders Of Other Securities. Any consents or approvals required to be obtained from any holder or holders of any outstanding security of the Company and any amendments of agreements pursuant to which any securities may have been issued which shall be necessary to permit the consummation of the transactions contemplated hereby on each Closing Date shall have been obtained by the Company and all such consents or amendments shall be reasonably satisfactory in form and substance to the Purchaser. 5.7 Proceedings Satisfactory. All proceedings taken in connection with the sale of the Securities to be sold by the Company to the Purchaser and all documents and papers relating thereto shall be reasonably satisfactory to the Purchaser and the Purchaser shall have received copies of such documents and papers as the Purchaser may reasonably request in connection therewith all in form and substance reasonably satisfactory to the Purchaser. 5.8 Absence of Material Adverse Effect Since April 30, 1997, no event resulting in, or which could result in, a Material Adverse Effect has occurred. Since June 12, 1997, no event resulting in or which could result in a material adverse effect on the business, condition (financial or otherwise), operations, performance, properties or prospects of Wolf Mountain Corporation has occurred. 5.9 Fees. The fees required to be paid on each Closing Date pursuant to Section 2.12 of this Agreement and the fees and expenses incurred by Schulte Roth & Zabel LLP in connection with the preparation of this Agreement and related documents shall be paid concurrently with the issuance and sale of Securities to be sold on each Closing Date. 5.10 Wire Instructions The Purchaser shall have received not less than two Business Days prior to each Closing Date wire instructions prepared by the Company as to all wire transfers or other payments to be effected on such Closing Date in connection with the transactions to be consummated on such Closing Date pursuant to this Agreement, which wire instructions shall identify the payor and payee of such wire transfer or payment, shall describe the manner of transfer or payment, shall direct that all funds be transferred to a bank chartered under the laws of the United States of America or 37 any state thereof located within the United States of America, and shall otherwise be satisfactory in form and substance to the Purchaser. 5.11 Solvency Letter The Purchaser shall have received a solvency letter relating to the Company, signed by its chief financial officer and dated the Closing Date, in form and substance satisfactory to the Purchaser. 5.12 Real Estate Appraisals The Purchaser shall have received real estate appraisals, in form and substance satisfactory to the Purchaser, with respect to the real Property of the Company and its Subsidiaries, and the real Property to be acquired in connection with the Wolf Mountain Acquisition. SECTION 6. COMPANY COVENANTS. From and after each Closing Date and continuing so long as any amount remains unpaid on any Security: 6.1 Financial Reports. So long as any of the Securities remain outstanding, the Company will provide the following reports to the Purchaser: (a) as soon as practicable and in any event within 45 days after the end of each quarterly period (other than the last quarterly period) in each fiscal year, consolidated statements of operations, stockholders' equity and cash flows of the Company and its Subsidiaries for the period from the beginning of the current fiscal year to the end of such quarterly period, and a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarterly period, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, and certified by the chief financial officer of the Company, subject to changes resulting from year-end adjustments, all in the form of the certificate attached hereto as Exhibit J; (b) as soon as practicable and in any event within 90 days after the end of each fiscal year, consolidated statements of operations, stockholders' equity and cash flows of the Company and its Subsidiaries for such year, and the consolidated balance sheet of the Company and its Subsidiaries as at the end of such year, setting forth in each case in comparative form corresponding consolidated figures from the preceding annual audit, all in form of the certificate attached hereto as Exhibit G and certified to the Company by independent public accountants of recognized national standing selected by the Company; (c) as soon as practicable and in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year, a certificate in form of that attached hereto as Exhibit H and certified by the chief financial officer of the Company as to compliance with Section 6.17 hereof, and as soon as practicable and in any event within 60 days after the end of each fiscal year, a certificate in form of that attached hereto as Exhibit I and certified by the chief financial officer of the Company as to compliance with Section 6.17 hereof; 38 (d) promptly after their becoming available, copies of all registration statements and reports which the Company or any of its Subsidiaries shall have filed with the Securities and Exchange Commission or any national securities exchange or quotation system; (e) promptly after the mailing thereof to the Holders of the Securities of the Company, copies of all financial statements, reports and proxy statements so mailed; (f) promptly after their becoming available, copies of all reports and compliance certificates filed in connection with the Bank Credit Agreements, provided, that if there is an amendment to the reporting requirements for the Bank Credit Agreements, the Purchaser shall receive monthly unaudited consolidated and consolidating (a) balance sheets, (b) income statements and (c) statements of cash flow for the Company and its Subsidiaries; and (g) annually, and prior to the beginning of each fiscal year, the Company's annual budget for such fiscal year as approved by the Company's Board of Directors and Management Committees, within thirty (30) days of such approval, or, in any case, if the annual budget has not been approved, such budget shall be delivered in whatever form it exists as of the beginning of such fiscal year. The Holder of any Security may obtain a copy of any of the foregoing reports and certificates. Upon the occurrence of a Change of Control or an Initial Public Offering, the Obligation of the Company to provide the Purchaser with reports in accordance with this Section 6.1 shall cease, and the Purchaser shall be entitled to receive, promptly after their becoming available, copies of all registration statements and reports filed by the Applicable Company with the Securities and Exchange Commission or any national securities exchange or quotation system. 6.2 Restrictions On Charter Amendments. Neither the Company nor any of its Restricted Subsidiaries shall amend its charter documents except as required by law or except to the extent that such amendment would not have a material adverse effect on the ability of the Company to perform its obligations under this Agreement or the Securities or the rights of the holders of the Securities. 6.3 Payment of Securities Obligations. (a) The Company shall pay or cause to be paid, the Redemption Price and dividends on the Preferred Shares in the manner provided in the Certificate of Designation. The Redemption Price and dividends shall be considered paid on the due date if the Purchaser receives, as of 2:00 p.m. Eastern Time on the due date, money deposited by the Company in immediately available funds (or, in the case of PIK Dividends, PIK Shares) designated for and sufficient to pay all Liquidation Preference, premium, if any, and dividends then due. 39 (b) The Company shall pay or cause to be paid the Redemption Price and interest on the Notes on the dates and in the manner provided in the Notes. The Redemption Price and interest shall be considered paid on the date due if the Purchaser receives, as of 2:00 p.m. Eastern Time on the due date, money deposited by the Company in immediately available funds (or, in the case of PIK Interest, PIK Notes) designated for and sufficient to pay all principal, premium, if any, and interest then due. 6.4 Maintenance of Office or Agency. (a) The Company shall maintain an office or agency where Securities may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Securities may be served. The Company shall give prompt written notice to the Purchaser of the location, and any change in the location, of such office or agency. (b) The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency for such purposes. The Company shall give prompt written notice to the Purchaser of and such designation or rescission and of any change in the location of any such other office or agency. 6.5 Use of Proceeds The Company shall use the proceeds of the sale of the Securities solely in accordance with the provisions of Section 2.7 hereof. 6.6 Compliance Certificate. (a) The Company shall deliver to the Purchaser, within 45 days after the end of each fiscal quarter, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Agreement, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Agreement and is not in default in the performance or observance of any of the terms, provisions and conditions of this Agreement (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of (i) the principal of, or interest on, the Notes or (ii) the Liquidation Preference of, or dividends on, the Preferred Shares, are prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute Of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 6.1 above shall be accompanied by a written statement of 40 the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Section 6.17 hereof, or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation; and provided, that the obligation of the Company to provide such a written statement from its independent public accountant shall cease upon the occurrence of an Initial Public Offering of the Common Stock of an IPO Entity or a Change of Control. (c) The Company shall, so long as any of the Securities are outstanding, deliver to the Purchaser, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. 6.7 Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Securities. 6.8 Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Agreement; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but shall suffer and permit the execution of every such power as though no such law has been enacted. 6.9 Restricted Payments. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, (i) declare or pay any dividend or make any other payment or distribution on account of the Company's Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Subsidiaries) or to any direct or indirect holder of the Company's Equity Interests; (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; (iii) make any principal payment on, or purchase, redeem, defease or otherwise acquire or retire for value, or create any sinking funds or set asides for, any Indebtedness that is subordinated to the Securities; (iv) make any Restricted Investment; or (v) make an Investment in an Unrestricted Subsidiary (all such payments and other actions set forth in clauses (i) through (v) above being collectively referred to as "Restricted Payments"); provided, however, that the Restricted Subsidiaries shall be 41 permitted to make Restricted Payments if at the time of and after giving effect to such Restricted Payment no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and, either (A) the Restricted Subsidiary 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 Permitted Indebtedness; or (B) such Restricted Subsidiary is able to make the Restricted Payment under the terms of the Indenture dated as of June 28, 1996 among ASC, the Persons party thereto, and United States Trust Company of New York (the "ASC Indenture"), regardless of whether the ASC Indenture remains in effect at the time of such Restricted Payment. For purposes of the test in clause (A) above, Indebtedness shall not include any Indebtedness incurred under items (i) through (x) listed in Section 6.10 hereof. The foregoing restrictions regarding Restricted Payments shall not apply to transactions among Restricted Subsidiaries. 6.10 Incurrence of Indebtedness and Issuance of Preferred Stock. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, cause, 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 the Company shall not, and shall 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 Subsidiaries may incur Indebtedness (including Acquired Debt), and may issue preferred stock (collectively, with items (i) through (x) below, the "Permitted Indebtedness"), 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 "Debt Incurrence Test". The foregoing restrictions on the incurrence by the Company and its Subsidiaries of Indebtedness and issuance of preferred stock shall not apply to: (x) Indebtedness of the Utah Subsidiaries arising under term loan and revolving credit facilities (or any refinancing thereof) (the "Utah Subsidiary Guarantee"); 42 provided, however, that such credit facilities shall be senior secured obligations of the Utah Subsidiaries and the liability of the Company in respect of the Utah Subsidiary Guarantee shall not exceed the aggregate amount of $10 million; (y) Indebtedness of ASCU arising under the $6.5 million Promissory Note, dated as of July 3, 1997 (the "Seller Note") made by ASCU in favor of Wolf Mountain, L.C.; provided, however, that the liability of the Company in respect of the Seller Note shall not exceed the aggregate amount of $6.5 million pursuant to the Guaranty dated July 3, 1997 given by the Company in favor of Wolf Mountain, L.C.; and (z) Indebtedness of ASCU arising under the Ground Lease Agreement dated July 3, 1997 (the "Ground Lease") between Wolf Mountain, L.C. and ASCU pursuant to the Ground Lease Guaranty dated July 3, 1997 given by the Company in favor of Wolf Mountain, L.C. (ii) the incurrence by the Company and its Restricted Subsidiaries of Existing Indebtedness and the incurrence of Indebtedness by ASC and its Restricted Subsidiaries permitted under the ASC Indenture; (iii) the incurrence by the Company and any of its Restricted Subsidiaries of Indebtedness, and the issuance by the Company or any of its Restricted Subsidiaries of any preferred stock, to the Purchaser; (iv) the assumption and incurrence by the Utah Subsidiaries of Indebtedness of Wolf Mountain Corporation in connection with the Wolf Mountain Acquisition. (v) 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; (vi) the incurrence by ASCU and any Unrestricted Subsidiaries of the Company of Non-Recourse Debt, provided that if any such Indebtedness ceases to be Non-Recourse Debt of such Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company; (vii) the incurrence by the Company or any of its Subsidiaries of Permitted Refinancing Debt in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund Permitted Indebtedness; (viii) the incurrence by ASCU and its Subsidiaries of Indebtedness in connection with Capital Lease Obligations or purchase money Indebtedness incurred for the acquisition of equipment; (ix) the incurrence by the Subsidiaries of Indebtedness for vendor accounts payable in the ordinary course of business; and 43 (x) the incurrence by the Company or any Restricted Subsidiary (other than the Utah Subsidiaries) of Indebtedness in connection with the acquisition of additional ski properties ("Acquisition Debt"); provided, that the sum of (i) the amount of Permitted Investment by the Company or any Restricted Subsidiary in any Subsidiary which acquires additional ski properties and (ii) such Indebtedness incurred in connection with the acquisition of such properties, including Acquired Debt, does not exceed six times the historical Skiing and Lodging EBITDA of the acquired property. (xi) the incurrence by any new Subsidiary of Indebtedness which is recourse to the Company and its Subsidiaries solely due to a Guarantee by the Company which is subordinated to the Company's Obligations under the Securities and shall provide that no payment shall be made on such Guarantee until the Securities have been indefeasably paid for in full. (b) The Notes may be exchanged into Preferred Stock by the Company, so long as there is no Indebtedness of the Company outstanding on the exchange date, other than the Utah Subsidiary Guarantee, and provided that subsequent to such exchange the Company shall not be permitted to incur Permitted Indebtedness unless such Indebtedness is incurred through the issuance of preferred stock junior in terms of liquidation preference to the Preferred Stock, and with dividends payable only in-kind (so long as the Company pays dividends on the Preferred Shares only in-kind) and a mandatory redemption date (including by mandatory offer to purchase) no earlier than the Maturity Date of the Preferred Stock. 6.11 Asset Sales. The Company shall not, and shall not permit any of its Subsidiaries to, engage in an Asset Sale; provided, however, that (i) the Company may sell the Common Stock of ASC or the Common Stock of ASCU, in an arm's length transaction for fair market value, so long as the Net Proceeds from such Asset Sale are first applied to redeem all outstanding Securities, on a pro-rata basis with respect to Preferred Shares and Notes, for an amount per Security equal to the Redemption Price, fixed as of the date of the Asset Sale; (ii) an Asset Sale by the Company or any Restricted Subsidiary, other than the sale of the Common Stock of ASC or ASCU, shall be permitted if it is an arm's length transaction for fair market value, and the Net Proceeds from such Asset Sale is applied to the making of capital expenditures or the acquisition of long-term assets in the same line of business that the Company or such Restricted Subsidiary was engaged in immediately prior to such Asset Sale; and (iii) an Asset Sale by ASC shall be permitted if it is an arm's length transaction for fair market value, and provided that it is permitted under the terms of the ASC Indenture, regardless of whether the ASC Indenture remains in effect. 6.12 Transactions with Affiliates. The Company shall not, and shall 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 44 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 Purchaser (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1 million, a resolution of the Board of Directors of the Company certified to in an Officers' Certificate certifying also that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the members of the Board of Directors of the Company and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate 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 hereof 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) Restricted Payments and Permitted Investments that are permitted by the provisions of Section 6.9 hereof, and (iii) transactions among Restricted Subsidiaries, in each case, shall not be deemed Affiliate Transactions. 6.13 Liens. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist any Lien 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. 6.14 Corporate Existence. The Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its respective Restricted Subsidiaries. 6.15 Offer to Repurchase Or Exchange Upon Change of Control. (a) Upon a Change of Control, the Company shall (or shall cause the Acquiring Person to), in accordance with the procedures set forth in this Section 6.15, (i) offer to repurchase all or any part of the Purchaser's Securities pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to the Redemption Price fixed as of the date of the Change of Control (the "Change of Control Payment"), and (ii) in the event the Change of Control is of the type specified in clauses (i), (ii), (iii), or (iv) of the definition thereof, and the Acquiring Person is a Designated Acquiring Person and a Public Company, offer to exchange all or any part of the Securities for Repriced Converts or Common Stock of the Acquiring Person on the terms specified in Section 6.15(c) (the "Exchange"). Not later than 30 days prior to any Change of Control, the Company shall 45 (or shall cause the Acquiring Person to) mail a notice (a "Change of Control Notice") to the Purchaser stating: (1) that a Change of Control is to occur, describing the terms thereof in reasonable detail, including the identity of the Acquiring Person, and its capitalization; (2) that the Change of Control Offer is being made pursuant to this Section 6.15 and that all Securities (including PIK Notes and PIK Shares issued thereon) tendered shall be accepted for payment or Exchange; (3) the purchase price and the purchase date, if the Purchaser elects the repurchase option, or the date of Exchange, if the Purchaser elects the Exchange option, which in either which shall be no later than the date the Change of Control shall occur (the "Change of Control Payment Date"); (4) the material terms of the offering of the Repriced Converts per $1,000 Principal Amount or Liquidation Preference of Securities exchanged (including the number of shares of Common Stock of the Acquiring Person into which they are convertible and the Applicable Conversion Price per share of Common Stock) and the material terms of the offering of the Common Stock, including the Market Value per share of Common Stock of the Acquiring Person, (5) that the Repriced Converts will be issued pursuant to the Repriced Converts Indenture or the Repriced Converts Certificate of Designation, that the Repriced Converts have been duly authorized by the Acquiring Person, and upon issuance thereof, will be legal, valid and binding obligations of the Acquiring Person enforceable in accordance with their terms, and that the Conversion Shares of the Acquiring Person will be, upon consummation of the Exchange or conversion of the Repriced Converts, as the case may be, legally and validly issued, fully paid and non-assessable, free of pre-emptive rights, (6) that any Security not tendered or Exchanged shall continue to accrue dividends or interest, as applicable; (7) that, unless the Company defaults in the payment of the Change of Control Payment or the Exchange, all Securities accepted for payment pursuant to the Change of Control Offer shall cease to accrue dividends or interest, as applicable after the Change of Control Payment Date; (8) the Purchaser shall be required to surrender the Securities sold or exchanged pursuant to a Change of Control Offer to the Company by close of business on the Business Day preceding the Change of Control Payment Date; (9) that the Purchaser is entitled to withdraw or change its election if the Company receives, not later than the close of business on the fifth Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter including a statement that the Purchaser is withdrawing or changing its election to have the Securities purchased or exchanged (specifying in detail the nature of such change); and (10) that in the event Securities are being purchased or exchanged only in part, the Purchaser shall be issued new Securities of the same type equal in Principal Amount or Liquidation Preference to the unpurchased portion of the Securities surrendered. The Company and the Acquiring Person shall comply with the applicable securities laws and regulations thereunder to the extent such laws and regulations are applicable to the repurchase or exchange of Securities in connection with a Change of Control. (b) On the Change of Control Payment Date, the Company shall, or shall cause the Acquiring Person to, accept for payment or exchange all Securities or portions thereof properly tendered pursuant to the Change of Control Offer and promptly mail to the Purchaser the Change of Control Payment or the Repriced Converts or 46 Common Stock of the Acquiring Person issued in exchange for such Securities. The Company shall promptly deliver to the Purchaser a new Security of the same series equal in Liquidation Preference or Principal Amount, as applicable, to any unpurchased or unexchanged portion of the Securities surrendered. (c) If the Purchaser elects the option to exchange pursuant to the Change of Control Offer, the Securities shall be exchanged for (i) a number of shares of Common Stock of the Designated Acquiring Person that is a Public Company determined by dividing the Redemption Price on the date of exchange for Securities being exchanged by the Market Valuation per share of Common Stock of the Acquiring Person, or (ii) Repriced Converts in a Principal Amount or Liquidation Preference for the Securities being exchanged, which shall be convertible into Common Stock of the Designated Acquiring Person that is a Public Company. The Repriced Converts may be issued in the form of debentures or preferred stock, as the Company or any Designated Acquiring Person that is a Public Company may specify in the Change of Control Notice. Any Repriced Converts shall be issued pursuant to an indenture substantially in the form of the Repriced Converts Indenture, or pursuant to a Certificate of Designation substantially in the form of the Repriced Converts Certificate of Designations. The Repriced Converts shall be convertible into Common Stock of the Designated Acquiring Person that is a Public Company at an initial conversion price (subject to adjustment as provided in the Repriced Converts Indenture or the Repriced Converts Certificate of Designations) per share of Common Stock of such Designated Acquiring Person at a price equal to the Market Valuation thereof on the date of the Change of Control, multiplied by the difference between one (1) minus the Conversion Discount Percentage. The Common Stock of the Designated Acquiring Person that is a Pubic Company, the Repriced Converts of such Designated Acquiring Person and the Common Stock of such Designated Acquiring Person issuable upon conversion thereof shall be, at the Change of Control Closing Date, fully registered under the Securities Act in accordance with the Registration Rights Agreement, and freely saleable by the Purchaser under the Securities Act. (d) If the Purchaser elects to retain the Securities and permits the Change of Control Offer to expire, the Securities shall no longer be exchangeable into Repriced Converts or Common Stock of any Person provided, however, that (i) thereafter the Securities will be redeemable at any time, at the option of the Company, at a price equal to the Redemption Price as of the date of the Change of Control, plus accrued and unpaid interest and dividends to the date of redemption, (ii) the foregoing limitation shall not be applicable to a Change of Control of a type specified in clause (v) of the definition thereof and (iii) the provisions of this clause (d) shall not apply if the Acquiring Person is a Designated Acquiring Person that is not a Public Company on the date of the Change of Control. (e) "Acquiring Person" shall mean (i) in the case of a transaction described in clause (i) or (ii) of the definition of "Change of Control", the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant 47 to such transaction or transactions, and (ii) in the case of a transaction described in clause (iii) or (iv) of the definition of "Change of Control", the Person that is the issuer of any securities into which shares of Holdings Common Stock are converted in any merger or consolidation, and if no securities are so issued, the Person that is the other party to the merger or consolidation (including, if applicable, the Company, if it is the surviving corporation), provided that if the Change of Control is not pursuant to a merger or consolidation the Acquiring Person shall be the party holding the greatest number of shares of Common Stock immediately following such Change of Control; provided, further, that in any such case, (1) if the Common Stock of any of the foregoing Acquiring Persons is not at the time registered under Section 12 of the Exchange Act, and such Person is a direct or indirect subsidiary of Affiliate of another Person the Common Stock of which is and has been so registered, "Acquiring Person" shall refer to such other Person; (2) in case such Person is a subsidiary, directly or indirectly, or Affiliate of more than one Person, the shares of Common Stock of two or more of which are and have been so registered, "Acquiring Person" shall refer to whichever of such Persons is the issuer of the Common Stock having the greatest aggregate market value; and (3) in case such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set forth in (1) and (2) above shall apply to each of the chains of ownership having an interest in such joint ventures and the Acquiring Persons in each such chain shall bear the obligations set forth in this Section 6.15 in the same ratio as their direct or indirect interests in such Person bear to the total of such interests. (f) The Company shall not permit a Change of Control to occur unless prior thereto the Company and each Acquiring Person and each other Person who may become an Acquiring Person as a result of such Change of Control shall have executed and delivered to the Purchaser a supplemental agreement providing for the terms set forth in this Section 6.15 and agreeing to be bound by the Registration Rights Agreement. 6.16 Pension Plans (i) Each of the Company, its Subsidiaries and each ERISA Affiliate will furnish to the Agent forthwith upon filing or receipt, as the case may be, a copy of (A) any notice by the Company, its Subsidiaries, or any ERISA Affiliate of a Benefit Plan termination sent to the PBGC under Section 4041 of ERISA, or (B) any notice sent or received by the Company, its Subsidiaries or any ERISA Affiliate under Section 4041, 4042, 4043, 4063, 4065, 4066 or 4068 of ERISA. (ii) Each of the Company and its Subsidiaries shall notify the Agent within ten (10) Business Days after receipt by any of the Company, its Subsidiaries or any ERISA Affiliate of a notice from a Multiemployer Plan regarding the imposition of withdrawal liability and shall send copies of each such notice. 48 (iii) Each of the Company, its Subsidiaries and each ERISA Affiliate will furnish to the Agent as soon as practicable upon filing a copy of each Annual Report (Form 5500) in respect of each Benefit Plan. 6.17 Financial Covenants. (a) Indebtedness to Consolidated Cash Flow. The Company shall not permit the ratio of its Consolidated Indebtedness as of each date set forth below to Consolidated Cash Flow for the four consecutive fiscal quarters ended on such date, to exceed the corresponding amount set forth opposite such date. For purposes of this Section 6.17(a) only, Indebtedness shall not include (i) Indebtedness incurred through the issuance of the Securities, (ii) the Utah Subsidiary Guarantee and (iii) Non-Recourse Real Estate Debt. Fiscal Quarter Ended Ratio -------------------- ----- April 1998 6.0 July 1998 5.75 October 1998 5.75 January 1999 5.75 April 1999 5.75 July 1999 5.25 October 1999 5.25 January 2000 5.25 April 2000 5.25 July 2000 5.25 October 2000 5.00 January 2001 5.00 April 2001 5.00 July 2001 5.00 October 2001 5.00 January 2002 5.00 April 2002 5.00 (b) Minimum Consolidated Cash Flow. The Company shall not permit its Consolidated Cash Flow, measured as of each date set forth below for the period of four consecutive fiscal quarters of the Company ended on such date, to be less then the corresponding amount set forth opposite such date. Measurement Date Minimum Consolidated Cash Flow ---------------- ------------------------------ First Quarter 1998 28 Million Second Quarter 1998 $32 Million Third Quarter 1998 $38 Million Fourth Quarter 1998 $42 Million First Quarter 1999 $42 Million 49 Second Quarter 1999 $42 Million Third Quarter 1999 $43 Million Fourth Quarter 1999 $44 Million First Quarter 2000 $44 Million Second Quarter 2000 $44 Million Third Quarter 2000 $45 Million Fourth Quarter 2000 $46 Million First Quarter 2001 $46 Million Second Quarter 2001 $46 Million Third Quarter 2001 $47 Million Fourth Quarter 2001 $48 Million First Quarter 2002 $48 Million Second Quarter 2002 $48 Million Third Quarter 2002 $49 Million Fourth Quarter 2002 $50 Million (c) Maintenance of Interest Coverage. The Company will not permit the ratio of (i) Consolidated Cash Flow, to (ii) Consolidated Interest Expense (excluding (i) any interest or dividends paid in respect of the Securities and (ii) any interest accrued and unpaid or payable on the Subordinated Indebtedness which is not paid in cash), measured as of each date set forth below for the period of four consecutive full fiscal quarters of the Company ended on such date, to be less than the ratio set forth opposite such date; provided, however, that in the case of any such measuring date which is earlier than April, 1998, the applicable measuring period shall be the period from the Closing Date to and including such measuring date: Fiscal Quarter Ended Ratio -------------------- ----- April 1998 1.6 July 1998 1.6 October 1998 1.6 January 1998 1.6 April 1999 1.7 July 1999 1.7 October 1999 1.7 January 1999 1.7 April 2000 1.8 July 2000 1.8 October 2000 1.8 January 2000 1.8 50 6.18 Negative Pledge (a) The Company will not create, incur, assume or suffer to exist, any mortgage, deed of trust, pledge, lien, security interest, hypothecation or other preferential arrangement, charge or encumbrance (including, without limitation, any conditional sale, or other title retention agreement, or finance lease) of any nature, upon or with respect to all of the Company's Capital Stock, as well as all of the Company's owned or hereafter acquired (i) Capital Stock of ASC, (ii) Capital Stock of ASCU, and (iii) Capital Stock of Wolf Mountain Company. 6.19 Governmental Consent. The Company shall, and shall cause its Subsidiaries and Affiliates to, obtain all consents, permits and approvals, and shall make all filings, required under applicable law or regulations of any governmental authority or regulatory body in connection with the exercise of any exchange or conversion rights with respect to the Securities and the Repriced Converts. 6.20 Wolf Mountain Acquisition. The consummation of the Wolf Mountain Acquisition shall occur contemporaneously with the Closings hereunder. 6.21 No Further Issuance Without the prior written consent of the Purchaser, neither ASC nor ASCU shall issue any instruments, other than the Securities and Repriced Converts, that are convertible into or exchangeable for any shares of Capital Stock of ASC or ASCU, nor shall it issue or authorize any rights to subscribe for or purchase, or any options or warrants for the purchase of, or any agreements (contingent or otherwise) providing for the issuance of, or any calls, commitments or claims of any character relating to, any shares of Capital Stock of ASC or ASCU, or any securities convertible into or exchangeable for any such shares, provided, however, that subsequent to the occurrence of a Change of Control or IPO, or if all of the Securities have been exchanged into Repriced Converts, then the limitations upon ASC or ASCU under this Section 6.21 shall no longer have effect. 6.22 Undertakings The Company and any IPO Entity shall undertake to reserve for issuance prior to the exercise of the conversion privileges in the Securities or Repriced Converts, (a) Conversion Shares which, when issued and delivered against payment, will be duly authorized, validly issued, fully paid and non-assessable and subject to no Liens in respect of the issuance thereof, or (b) Repriced Converts, each in an amount sufficient to meet the obligations under all the outstanding Securities in the event the conversion options therein are exercised. 6.23 Representations and Warranties. The Company, the Acquiring Person or the IPO Entity shall cause the representations and warranties contained in Section 4.3 to continue to be true until the Maturity Date. 6.24 Limitations on IPO For as long as any Securities remain outstanding, the Company shall not permit any of its Subsidiaries, or any Affiliates over which it exercises Control, to be the subject of an Initial Public Offering of the Common Stock of such Person. 51 6.25 Holding Company Formation. The Company will not permit any Holding Company Affiliate to be formed unless such Holding Company Affiliate agrees to be bound by Section 6.15 and Section 8.1 hereof and by the Registration Rights Agreement as if they were a party thereto. SECTION 7. EVENTS OF DEFAULT. 7.1 Events Of Default. An "Event of Default" shall exist if any of the following occurs: (a) The Company fails to (i) redeem the Preferred Stock or (ii) make any payment of principal on any Note on the date such payment is due, whether at maturity or otherwise; (b) The Company breaches any of its covenants or fails to fulfill its obligations hereunder contained in any subsection of Section 6 hereof; (c) The Company fails to make any financial report required to be made by it under Section 6.1 of this Agreement and such Default shall continue for a period of thirty (30) Business Days; (d) The Company or any of its Subsidiaries fails to comply with any provision of this Agreement or the Securities, other than the covenants specified in subparagraphs (a) and (c) above, and such failure continues for more than 30 days after the earlier of (1) the receipt of notice thereof by the Company from the Purchaser or (2) the day on which such failure shall first become known to any executive officer of the Company; (e) Any warranty, representation or other statement by or on behalf of the Company contained in this Agreement, the Securities or in any certificate or instrument furnished in compliance with this Agreement or the Securities shall fail to be true and correct in any material respect when made and such failure has had, or is reasonably likely to have, a Material Adverse Effect; (f) A custodian, receiver, liquidator or trustee of the Company, or any of its Subsidiaries which holds a substantial part of the Properties of the Company and its Subsidiaries (taken as a whole), is appointed by court order and such order remains in effect for more than 90 days; or the Company, or any of its Subsidiaries which holds a substantial part of the Company and its Subsidiaries (taken as a whole), is adjudicated bankrupt or insolvent; or any substantial part of the Properties of the Company and its Subsidiaries (taken as a whole), is sequestered by court order and such order remains in effect for more than 90 days; or petition is filed against the Company or any of its Subsidiaries which holds a substantial part of the Properties under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, and is not dismissed or stayed within 90 days after such filing; 52 (g) The Company or any of its Restricted Subsidiaries files a petition in voluntary bankruptcy or seeking relief under provision of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law or regulation, whether now or hereafter in effect, or consents to the filing of any petition against it under such law; (h) The Company or any of its Restricted Subsidiaries fails generally to pay its debts as such debts become due except for debts which the Company or such Restricted Subsidiary may contest in good faith, or becomes insolvent or bankrupt, consents to the entry of an order for relief against it in an involuntary bankruptcy case, or the Company or any of its Restricted Subsidiaries makes any assignment for the benefit of its creditors, or consents to the appointment of a custodian (including, without limitation, a receiver, liquidator or trustee) of the Company or any Restricted Subsidiary; (i) The Company or any Restricted Subsidiary (whether as primary obligor or as guarantor or other surety) shall fail, after the expiration of any applicable grace period, to make any payment due on, or to otherwise redeem, when due, any Indebtedness of such Person, provided that the amount of the overdue payment exceeds $1 million; (j) The Company or any Restricted Subsidiary shall fail to perform or observe any agreement, term or condition contained in any agreement under which an Indebtedness is created (or if any other event thereunder or under any other agreement shall occur and be continuing) and the holders of such Indebtedness shall have elected as a result thereof to cause such Indebtedness to become due (or to be repurchased by the Company or such other Restricted Subsidiary) prior to the stated maturity thereof (provided that the amount of Indebtedness which becomes due exceeds $1 million); (k) any final judgment or judgments for the payment of money is or are outstanding against the Company or any Restricted Subsidiary (provided that the aggregate amount payable under such judgments exceeds $1 million) and has been outstanding for more than sixty (60) days from the date of its entry and shall not have been discharged in full or stayed by appeal, bond or otherwise; (l) The Purchaser shall not have received, on or before July 28, 1997, from the law firm of Pierce Atwood, special counsel to the Company, a favorable legal opinion dated as of the date of the Initial Closing and addressed to the Purchaser, covering the matters specified in the attached Exhibit F and such other matters incident to the transactions contemplated herein as the Purchaser may request; or (m) The Subsequent Closing shall not have occurred on or before July 28, 1997. 7.2 Default Remedies. (a) If any Event of Default described in subparagraph (a) through (m) of Section 7.1 (other than an Event of Default under subparagraph (b), of Section 7.1 if such Event of Default is with respect to the covenants 53 in Section 6.17) occurs and is continuing, there shall be a Mandatory Redemption of the Securities by the Company unless the Purchaser shall, in its sole discretion, elect instead to have visitation rights with respect to (A) meetings of the Board of Directors of each of the Company, ASC, and any of the Utah Subsidiaries, as such may occur, and (B) meetings of the Management Committees of each of the Company, ASC and any of the Utah Subsidiaries, as such may occur. Such visitation rights shall continue until the Event of Default is cured. b) If an Event of Default occurs and is continuing due to a breach of the covenants of Section 6.17, the Purchaser shall only be entitled to visitation rights with respect to (A) meetings of the Board of Directors of each of the Company, ASC, and any of the Utah Subsidiaries, as such may occur, and (B) meetings of the Management Committees of each of the Company, ASC and any of the Utah Subsidiaries, as such may occur until the Event of Default is cured. 7.3 Annulment Of Event of Default. The Purchaser may, by written instrument filed with the Company, rescind and annul any declaration of an Event of Default made by it and the consequences thereof, if all existing Events of Default have been cured or waived by it; provided, however, that such rescission and annulment shall not serve as a waiver of any subsequent declaration of an Event of Default. SECTION 8. OFFER TO EXCHANGE IN IPO 8.1 Conversion And Exchange of Securities. (a) In connection with an IPO, the Company shall offer (or shall cause the IPO Entity to Offer) to exchange pursuant to the offer described below (the "IPO Offer") all or any part of the Securities into Repriced Converts or Common Stock of the IPO Entity on the terms specified in this Section (the "IPO Exchange"). At least 45 days prior to the filing of a registration statement in connection with an IPO, the Company shall (or shall cause the IPO Entity to) provide written notice (an "Offering Notice") to the Purchaser relating to the proposed IPO stating: (1) The identity of the IPO Entity and a brief description thereof, including the capitalization thereof, the estimated price range (the "IPO Price Range") for the IPO Common Stock proposed to be offered, if such offering is an underwritten public offering, with the breadth of such range not to exceed 10% of the lower price of such estimated range, and including a pro-forma balance sheet giving effect to such offering, (3) the material terms of the Repriced Converts per $1,000 Principal Amount of Liquidation Preference of Securities exchanged (including the number of shares of Common Stock of the IPO Entity into which they are convertible and the Applicable Conversion Price per share of Common Stock of the IPO Entity) and the material terms of the offering, including the size of the offering (in $US), (the "Offering Amount") of the IPO Common Stock, including the number of Conversion Shares which the Purchaser may include for sale in the IPO, and (4) that the Repriced Converts will be issued pursuant to the Repriced Converts Indenture or Repriced Converts Certificate of Designation, that the Repriced Converts have been duly authorized by the IPO Entity and, upon issuance thereof, will be legal, valid and binding obligations of the IPO Entity 54 enforceable in accordance with their terms, and that the Conversion Shares of the IPO Entity will be, upon consummation of the IPO Exchange or conversion of the Repriced Converts, legally and validly issued, fully-paid and non-assessable, free of pre-emptive rights. The Offering Notice shall be accompanied by a reasonably complete draft of the Registration Statement for the IPO. The Purchaser may accept the IPO Offer, in whole or in part, by delivering to the Company, within 20 days of its receipt of an Offering Notice and such draft registration statement, a written notice (an "Offering Response Notice") specifying the Principal Amount or Liquidation Preference of Securities which it intends to exchange for Conversion Shares or Repriced Converts, and the number of Conversion Shares, if any, it intends to include for sale in the IPO. In the event that Purchaser fails to deliver to the Company an Offering Response Notice within the 20 day period specified above, the Purchaser shall be deemed to have irrevocably waived any continuing right to convert the Securities into Conversion Shares or Repriced Converts unless the IPO, on the terms specified in the Offering Notice, is not consummated within 180 days of the expiration of such 20-day period. The Purchaser's acceptance or failure to accept the IPO Offer shall be irrevocable unless (i) the actual price to the public of the IPO Common Stock proposed by the underwriters, as notified to the Purchaser in writing, differs from the IPO Range (at either the high or low end of the range) by more than 10%, or (ii) the actual size (in $US) of the offering differs from the Offering Amount by 15% or more, in either which case the Purchaser shall have the right to provide the Company with a revised response to the Offering Notice (a "Revised Response Notice"), given within three (3) business days of receipt of such notice, regarding its revised election to exchange, or not exchange, Securities into Conversion Shares or Repriced Converts. The Company and the IPO Entity shall comply with the applicable securities laws and regulations thereunder to the extent that such laws or regulations are applicable to the exchange of securities in connection with an Offering Notice. (b) On the effective date of the Registration Statement for the IPO, or if later, the date of the underwriting agreement with respect thereto is executed, if the Securities specified in the Response Notice or Revised Response Notice, as the case may be, are to be exchanged for Conversion Shares or Repriced Converts of the IPO Entity, the number of Conversion Shares shall be determined by dividing the Redemption Price of the Securities by the IPO Price. The Repriced Converts may be issued in the form of debentures or preferred stock, as the Company or the IPO Entity may specify in the Offering Notice. Any Repriced Converts shall be issued pursuant to an indenture substantially in the form of the Repriced Convert Indenture or pursuant to a Certificate of Designation substantially in the form of the Repriced Convert Certificate of Designations and shall be in a Principal Amount or Liquidation Preference of the Securities being exchanged. The Repriced Converts shall be convertible into IPO Common Stock at an initial conversion price (subject to adjustment as provided in the Repriced Converts Indenture or the Repriced Converts Certificate of Designations) per share of IPO Common Stock equal to the IPO Price multiplied by the difference between one (1) minus the Conversion Discount Percentage. As promptly as practicable thereafter, the Company or IPO Entity shall issue and deliver to the Purchaser new Securities in a Principal Amount or Liquidation Preference equal to the portions of the Securities not 55 being exchanged and certificates for the Conversion Shares or the Repriced Converts of the IPO Entity being issued. The Conversion Shares of the IPO Entity, the Repriced Converts of the IPO Entity and the Conversion Shares issuable upon conversion thereof shall, at the closing of the IPO, be fully registered under the Securities Act in accordance with the provisions of the Registration Rights Agreement and freely saleable by the Purchaser under the Securities Act. (c) The Company shall not, and shall cause any Holding Company Affiliate or Designated Acquiring Person not to, initiate an IPO unless the Company and any proposed IPO Entity shall have complied with the provisions of this Section and, if the IPO Entity is not already a party to the Registration Rights Agreement, unless such entity shall have executed a supplemental agreement agreeing to be bound by the Registration Rights Agreement. The Company shall not permit any direct or indirect Subsidiary of the Company to initiate or consummate an IPO. (d) If the Purchaser elects to retain the Securities and permits the IPO Offer to expire, subject to the provisions of the fifth and sixth sentences of Section 8.1(a), the Securities shall no longer be exchangeable into Repriced Converts or Common Stock of any Person provided, that thereafter the Securities will be redeemable at any time, at the option of the Company, at a price equal to the Redemption Price of the Securities as of the date of the IPO, plus dividends and interest accrued thereon. SECTION 9. MISCELLANEOUS. 9.1 Notices; Payments. (a) All notices and other communications under this Agreement or in respect of the Securities shall be given or made in writing and telecopied or mailed by registered airmail, return receipt requested, postage prepaid, air courier, or delivered personally to the intended recipient, (1) if to the Purchaser, to: Madeleine LLC c/o Cerberus Partners 450 Park Avenue, 28th Floor New York, NY 10022 Attn: Mr. Robert Davenport Tel: 212-891-2118 Fax: 212-758-5305 with a copy to: Schulte Roth & Zabel LLP 900 Third Avenue New York, NY 10022 Attn: Mark A. Neporent, Esq. Stuart D. Freedman, Esq. 56 , or (2) if to the Company, to: ASC Holdings, Inc. Sunday River Access Road P.O. Box 450 Bethal, Maine 04217 Att: Mr. Chris Howard Tel: 207-824-8100 Fax: 207-824-5158 (b) All such notices and other communication shall be deemed to have been duly given when transmitted by telecopy, subject to telephone confirmation of receipt, or when personally delivered or, in the case of a mailed notice, ten days after being duly deposited in the mails, in each case given or addressed as aforesaid. (c) All payments of principal and interest due on any Note, dividends on Preferred Shares or any other amount due under this Agreement shall be made in strict compliance with the written payment instructions as such Purchaser or any subsequent holder of such Notes or Preferred Shares may provide to the Company in accordance with this Section 9.1. 9.2 Governing Law. This Agreement and the Notes and all other documents contemplated hereby (except for the Certificate of Designation and the Preferred Shares) shall be deemed to be contracts made under, and shall be construed in accordance with and governed by the laws of the State of New York (without reference to the conflicts of laws principles thereof) and the laws of the United States of America. The Certificate of Designation and Preferred Shares shall be deemed to be contracts made under, and shall be construed in accordance with and governed by, the laws of the State of Maine (without reference to conflicts of law principles) and the laws of the United States of America. 9.3 Severability. If any provision of this Agreement is held to be invalid or unenforceable by any judgment of a tribunal of competent jurisdiction, the remainder of this Agreement shall not be affected by such judgment, and the Agreement shall be carried out as nearly as possible according to its original terms and intent. 9.4 Survival. All representations, warranties and covenants made by the Company herein or in any certificate or other instrument delivered or other instrument delivered by it or on its behalf under this Agreement shall be considered to have been relied upon by the Purchaser and shall survive the delivery of the Securities and the Conversion Shares regardless of any investigation made by the Purchaser or on the Purchaser's behalf. All statements in any such certificate or other instrument shall constitute warranties and representations by the Company hereunder. 57 9.5 Successors And Assigns. (a) This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties and holders of the Securities. The provisions of this Agreement are for the benefit of, and shall be binding upon, each successive holder, from time to time, of any of the Securities issued under this Agreement, and shall be enforceable by and against any such holder, whether or not any express assignment to such holder of rights, or delegation and assumption or acceptance by a subsequent holder of rights, or delegation and assumption or acceptance by a subsequent holder of the Securities or obligations and limitations, under this Agreement has been made by you or your successor or assign of any holder of Securities. (b) The Company shall not consolidate with or merge into, or transfer or lease all or substantially all of its Properties or assets to, any Person unless: (i) the Person is a corporation; (ii) the Person assumes by supplemental agreement(s) all of the obligations of the Company under the Securities and the conversion right of each holder of the Securities; and (iii) immediately after the transaction, no Event of Default exits and is continuing. The surviving, transferee or lessee corporation shall be the successor Company, but the predecessor Company in the case of a transfer or lease shall not be released from the obligation to pay the principal of and interest on the Securities. The Company shall provide to the Purchaser a legal opinion from the Company's counsel as conclusive evidence that any such consolidation, merger, transfer or lease complies with the applicable provisions of this Agreement. 9.6 Amendment. (a) Prior to the Closing, this Agreement may be amended, and the observance of any term of this Agreement may be waived, with (and only with) the written consent of the Company and the Purchaser. Subsequent to the Closing, the Agreement may be amended, and the observance of any term of this Agreement may be waived, with (and only with) the written consent of a majority of the Holders of the Notes and a majority of the Holders of the Preferred Stock. (b) So long as any Securities are outstanding, the Company will not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement or the Securities unless each holder of the Securities (irrespective of the amount of Securities then owned by it) shall be informed thereof by the Company and shall be afforded the opportunity of considering the same and shall be supplied by the Company with sufficient information to enable it to make an informed decision with respect thereto. Executed or true and correct copies of any waiver or consent effected pursuant to the provisions of this Section 9.6 shall be delivered by the Company to each holder of outstanding Securities forthwith following the date on which 58 the same shall have been executed and delivered by the holder or holders of the outstanding Securities. The Company will not, directly or indirectly, pay or cause to be paid nay remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any holder of the Securities as consideration for or as an inducement to the entering into by any holder of the Securities of any waiver or amendment of any of the terms and provisions of this Agreement unless such remuneration is concurrently paid on the same terms, ratably to the holders of the notes the outstanding. (c) Any such amendment or waiver shall apply equally to all the holders of the Securities and shall be binding upon them and upon each future holder of any Security and upon the Company whether or not such Security shall have been marked to indicate such amendment or waiver. No such amendment or waiver shall extend to or affect any obligation not expressly amended or waived or impair any right consequent thereon. (d) Prior to the issuance of the Repriced Converts, the Repriced Converts Certificate of Designation may be amended with the approval of a majority of the Holders of Preferred Shares and a majority of the Holders of the Notes. 9.7 Counterparts. This Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one Agreement. 9.8 Specific Performance. The parties hereto recognize and agree that if for any reason any of the material provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached, immediate and irreparable harm or injury would be caused for which money damages would not be an adequate remedy. Accordingly, each party agrees that, in addition to any other available remedies, the other party shall be entitled to an injunction restraining any violation or threatened violation of the provisions of this Agreement. In the event that any action should be brought in equity to enforce the provisions of the Agreement, no party will allege, and each party hereby waives the defense, that there is an adequate remedy at law 59 9.9 Headings And Table Of Contents. The headings of the sections of this Agreement and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof. The execution by the parties below shall constitute a contract between such parties for the uses and purposes herein above set forth. Dated as of the day and year first above written. ASC HOLDINGS, INC. MADELEINE LLC By: /s/ Christopher E. Howard By: /s/ Bob Davenport ------------------------- ----------------- Name: Christopher E. Howard Name:_________________________________ Title: Chief Administrative Title:________________________________ Officer 60 TABLE OF CONTENTS Page ---- SECTION 1. DEFINITIONS ................................................. 1 1.2 Rules of Construction ........................................ 21 SECTION 2. PURCHASE AND SALE OF THE SECURITIES ......................... 21 2.1 Purchase and Sale of the Securities .......................... 21 2.2 Authorization of Notes and Repriced Converts ................. 21 2.3 Payment of Principal and Interest ............................ 22 2.4 Conversion Rights ............................................ 24 2.5 Seniority .................................................... 24 2.6 Closings ..................................................... 24 2.7 Use of Proceeds .............................................. 25 2.8 Replacement Certificates ..................................... 25 2.9 Delivery Expenses ............................................ 26 2.10 Issue Taxes .................................................. 26 2.11 Closing Fee .................................................. 26 2.12 Transfer Restrictions ........................................ 26 SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ............. 26 3.1 Organization and Qualification ............................... 27 3.2 Authority Relative to this Agreement ......................... 27 3.3 Financing Arrangements ....................................... 27 3.4 Investment Intent ............................................ 27 SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............... 27 4.1 Corporate Organization And Authority Of The Company And Subsidiaries ................................... 27 4.2 Authorized Capital Stock ..................................... 28 4.3 Sale Is Legal And Authorized ................................. 28 4.4 No Defaults .................................................. 29 4.5 Governmental Consent ......................................... 29 4.6 Conversion Shares, Legends ................................... 30 4.7 Legal Proceedings ............................................ 30 4.8 Full Disclosure .............................................. 30 4.9 Use Of Proceeds .............................................. 31 4.10 Certain Laws ................................................. 31 4.11 Capital Stock ................................................ 31 4.12 Business Operations and Other Information: Financial Condition .................................................. 31 4.13 Subsidiaries ................................................. 33 -i- 4.14 No Conflicts with Agreements, Statutes, Orders, Etc. ......... 33 4.15 Intentionally Omitted ........................................ 33 4.16 Assets and Properties ........................................ 33 4.17 Taxes ........................................................ 34 4.18 Intentionally Omitted ........................................ 34 4.19 Offering of Securities ....................................... 34 4.20 Broker's or Finder's Commissions ............................. 34 4.21 Environmental Matters ........................................ 35 4.22 ERISA ........................................................ 35 4.23 Material Contracts ........................................... 35 4.24 Insurance .................................................... 36 4.25 Related Documents ............................................ 36 4.26 Solvency ..................................................... 36 4.27 Consents and Approvals ....................................... 36 SECTION 5. CLOSING CONDITIONS .......................................... 36 5.1 [Intentionally Omitted] ...................................... 36 5.2 Representations And Warranties True .......................... 36 5.3 Compliance With This Agreement ............................... 36 5.4 Officers' Certificate ........................................ 37 5.5 Corporate Existence And Authority ............................ 37 5.6 Consent Of Holders Of Other Securities ....................... 37 5.7 Proceedings Satisfactory ..................................... 37 5.8 Absence of Material Adverse Effect ........................... 37 5.9 Fees ......................................................... 37 5.10 Wire Instructions ............................................ 37 5.11 Solvency Letter .............................................. 38 5.12 Real Estate Appraisals ....................................... 38 SECTION 6. COMPANY COVENANTS ........................................... 38 6.1 Financial Reports ............................................ 38 6.2 Restrictions On Charter Amendments ........................... 39 6.3 Payment of Securities Obligations ............................ 39 6.4 Maintenance of Office or Agency .............................. 40 6.5 Use of Proceeds .............................................. 40 6.6 Compliance Certificate ....................................... 40 6.7 Taxes ........................................................ 41 6.8 Stay, Extension and Usury Laws ............................... 41 6.9 Restricted Payments .......................................... 41 6.10 Incurrence of Indebtedness and Issuance of Preferred Stock .............................................. 42 6.11 Asset Sales .................................................. 44 6.12 Transactions with Affiliates ................................. 45 6.13 Liens ........................................................ 45 6.14 Corporate Existence .......................................... 45 6.15 Offer to Repurchase Or Exchange Upon Change of Control ...................................................... 45 -ii- 6.16 Pension Plans ................................................ 48 6.17 Financial Covenants .......................................... 49 6.18 Negative Pledge .............................................. 51 6.19 Governmental Consent ......................................... 51 6.20 Wolf Mountain Acquisition .................................... 51 6.21 No Further Issuance .......................................... 51 6.22 Undertakings ................................................. 51 6.23 Representations and Warranties ............................... 51 6.24 Limitations on IPO ........................................... 51 6.25 Holding Company Formation .................................... 52 SECTION 7. EVENTS OF DEFAULT ........................................... 52 7.1 Events Of Default ............................................ 52 7.2 Default Remedies ............................................. 53 7.3 Annulment Of Event of Default ................................ 54 SECTION 8. OFFER TO EXCHANGE IN IPO .................................... 54 8.1 Conversion And Exchange of Securities ........................ 54 SECTION 9. MISCELLANEOUS ............................................... 56 9.1 Notices; Payments ............................................ 56 9.2 Governing Law ................................................ 57 9.3 Severability ................................................. 57 9.4 Survival ..................................................... 57 9.5 Successors And Assigns ....................................... 58 9.6 Amendment .................................................... 58 9.7 Counterparts ................................................. 59 9.8 Specific Performance ......................................... 59 9.9 Headings And Table Of Contents ............................... 60 EXHIBITS Exhibit A - Form of Preferred Shares Certificate of Designation Exhibit B - Form of Note Exhibit C - Form of Repriced Converts Certificate of Designation Exhibit D - Form of Repriced Converts Indenture Exhibit E - Form of Registration Rights Agreement Exhibit F - Form of Opinion of Company Counsel Exhibit G - Form of Certificate of Independent Accountant Exhibit H - Form of Officer's Certificate (Quarterly) Exhibit I - Form of Officer's Certificate (Annual) Exhibit J - Form of Chief Financial Officer's Certificate -iii- EX-10.67 19 SENIOR CONVERTIBLE EXCHANGEABLE NOTES EXHIBIT 10.67 EXHIBIT B [FORM OF FACE OF SECURITY] #1 ASC HOLDINGS, INC. $17,500,000.00 14% Senior Exchangeable Note Due 2002 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES. ASC Holdings, Inc. promises to pay to Madeleine, LLC ----------------------------------- or registered assigns the principal sum of Seventeen Million Five Hundred Thousand Dollars on July 15, 2002 ----------------------------------------------- INTEREST Payment Dates: January 15, April 15, July 15 and October 15 Record Dates: December 30, March 30, June 30 and September 30 This Note is exchangeable and convertible as set forth in, inter alia, Sections 6.15 and 8.1 of the ASC Holdings, Inc. Securities Purchase Agreement (the "Agreement"), dated as of July 2, 1997, Re: Series A Exchangeable Preferred Stock, 14% Senior Exchangeable Notes Due 2002. Additional provisions of this Note are set forth on the other side of this Note. IN WITNESS THEREOF, ASC Holdings, Inc. has caused this instrument to be duly executed in its corporate name and the facsimile of its corporate seal to be affixed hereunto or imprinted hereon. ASC HOLDINGS, INC. By /s/ Christopher E. Howard ----------------------------- July 28, 1997 Name: Christopher E. Howard Title: Chief Administrative Officer and General Counsel [SEAL] Attest: B-1 (REVERSE OF SECURITY) ASC HOLDINGS, INC. 14% SENIOR EXCHANGEABLE NOTE DUE 2002 1. Interest. ASC Holdings, Inc. (the "Company"), a Maine corporation, promises to pay interest on the principal amount of this Note at the rate per annum, compounded monthly, of fourteen (14%) percent. The Company will pay interest in cash or PIK Notes quarterly, in arrears, on January 15, April 15, July 15 and October 15 of each year, beginning October 15, 1997. Interest on this Note will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from October 15, 1997. Interest will be computed on the basis of a 360-day year of twelve 30-day months, and shall be compounded monthly. In the event that (a) the holder of this Note is not permitted to convert or exchange this Note in accordance with the terms of the Agreement, (b) an Event of Default occurs and is continuing or (c) the Company fails to make any Mandatory Redemption on the date required, then, in such event, this Note shall bear interest at the rate of nineteen (19%) percent per annum, compounded daily, and shall be payable on demand. 2. Method of Payment. The Company will pay interest on this Note (except defaulted interest) to the Persons who are registered holders of Notes as of the close of business on the December 30, March 30, June 30 and September 30 next preceding each Interest Payment Date. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts or, at the Company's option, in PIK Notes. The Company may, however, pay principal and interest by its check payable in such money. It may mail an interest check to a Holder's registered address. 3. Agreement. The Company issued this Note under the Agreement. The terms of this Note are included in the Agreement and this Note is subject to all such terms. This Note is a senior general unsecured obligation of the Company limited to the principal amount set forth above, except as otherwise provided herein or in the Agreement. The Agreement limits other Indebtedness as provided in Section 2.5 of the Agreement. 4. Optional Redemption. This Note may be redeemed, at the option of the Company, in accordance with Section 2.3(b) of the Agreement. 5. Exchange, Conversion and Offer to Purchase. The Holder shall have the right to exchange, convert or require the Company to purchase this Note in accordance with the provisions of Sections 6.15 and 8.1 of the Agreement. 6. Denominations, Transfer. This Note will be issued in the denominations set forth in Section 2.2(b) of the Agreement. Transfer of this Note is limited in the manner set forth in Section 2.12 of the Agreement. B-2 7. Amendment, Supplement, Waiver. Subject to certain exceptions, the Agreement or this Note may be amended or supplemented with (and only with) the written consent of the Holders of at least a majority of the outstanding Securities, and any past default or noncompliance with any provision may be waived with the consent of the Holders of a majority of the outstanding Securities. Any and all such amendments, supplements or waivers shall be in accordance with the provisions of Section 9.6 of the Agreement. 8. Defaults and Remedies. Events of Default under this Note shall be those set forth in Section 7.1 of the Agreement, and the Holder's remedies upon the occurrence of any such Event of Default shall be as set forth in Section 7.2 of the Agreement. 9. Definitions. All capitalized terms used herein shall have the meanings ascribed to them in the Agreement, unless otherwise defined herein. The Company will furnish to any holder of this Note upon written request and without charge a copy of the Agreement. B-3 ASSIGNMENT FORM If you the Holder want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert assignee's social security or tax I.D. number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (print or type assignee's name, address and zip code) and irrevocably appoint - -------------------------------------------------------------------------------- agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: Your signature: --------------------- ------------------------------------- (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ------------------------------------------------------------ B-4 EXCHANGE OR CONVERSION NOTICE A. If you the Holder want to convert or exchange this Note into Conversion Shares, check the Box and state the amount: |_| Amount: $____________ B. If you the Holder want to convert this Note into Repriced Converts, check the Box and state the amount: |_| Amount: $____________ If you want the certificate for such Conversion Shares or Repriced Converts made out in another Person's name, fill in the form below: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert other Person's social security or tax ID number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type other Person's name, address and zip code) Date: Your signature: --------------------- ------------------------------------- (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ------------------------------------------------------------ B-5 EX-10.68 20 1ST AMENDMENT TO SECURITIES PURCHASE AGREEMENT EXHIBIT 10.68 FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT FIRST AMENDMENT, dated as of July 25, 1997, to the SECURITIES PURCHASE AGREEMENT, dated as of July 2,1997 (as amended, supplemented or otherwise modified from time to time the "Agreement"), among ASC Holdings, Inc., a Maine corporation (the "Company"), and MADELEINE LLC, a New York limited liability company, as Purchaser (the "Purchaser"). Preamble The Company and the Purchaser desire to amend the Agreement to provide, inter alia, (i) that $11 million of the proceeds from the sale of the Securities (as defined in the Agreement) may, subject to certain conditions, be used to pay a deposit with respect to the proposed acquisition by the Company of the Steamboat Ski Resort and the Heavenly Valley Ski Resort, (ii) for the payment of certain fees to the Purchaser in connection with the First Amendment and (iii) the Purchaser with certain rights with respect to future financings by the Company or its Subsidiaries. Accordingly, the Company and the Purchaser hereby agree as follows: 1. Definitions. All terms used herein which are defined in the Agreement and not otherwise defined herein are used herein as defined therein. 2. New Definition. The following definitions are hereby added to Section 1.01 of the Agreement in their appropriate alphabetical place: "Deposit" shall mean $11 million of the proceeds of the Initial Closing used by the Company to make a deposit with respect to the Second Acquisition. "First Amendment" shall mean the First Amendment, dated as of July 25, 1997, to the Agreement. "Second Acquisition" shall mean the proposed acquisition by the Company of the Steamboat Ski Resort and the Heavenly Valley Ski Resort. 3. Use of Proceeds. (a) Subclause (d) of the first sentence of Section 2.7 of the Loan Agreement is hereby amended to insert the following after "(d)" and before "up to $5 million": "(i) $11 million to be used by the Company to pay the Deposit or (ii) if the Company does not pay the Deposit, " 4. Fees. The Agreement is hereby amended by adding the following Section 2.13 after Section 2.12 thereof: "2.13 Amendment Fee. The Company shall pay to the Purchaser on the earlier of (A) October 31, 1997 or (B) the date of consummation of an Initial Public Offering or the Second Acquisition either (i) $150,000 in the event that either (w) an Initial Public Offering is consummated on or prior to October 31, 1997 or (x) the Second Acquisition is consummated on or prior to October 31, 1997, or (ii) $350,000 in the event that neither (y) an Initial Public Offering is consummated prior to October 31, 1997 nor (z) the Second Acquisition is consummated on or prior to October 31, 1997. 5. Covenants. Section 6 of the Agreement is hereby amended to include the following additional covenants: "6.26 Deposit Forfeit. If the Second Acquisition is not consummated by the Company, and the Deposit is forfeited, then within twelve (12) months from the date the Deposit is forfeited the Company shall, or shall cause ASC to, raise $11 million to be contributed as capital to the Company's Utah Subsidiaries for the development of the properties acquired in the Wolf Mountain Acquisition." "6.27 Right of First Refusal. The Purchaser shall have the right of first refusal to participate, in whole or in part, in all financings by the Company or any of its Subsidiaries involving capital contributions or borrowed moneys in excess of $5,000,000 proposed during the twelve (12) months following the date of the First Amendment, upon the same terms and conditions as other participants therein, or if there are no other participants upon terms and conditions available to the Company from other sources, other than: (i) an Initial Public Offering, (ii) Non-Recourse Real Estate Debt and (iii) refinancing of Existing Indebtedness with TFC Textron, (iv) senior secured borrowings provided by financial institutions or (v) purchase money borrowing from traditional purchase money lenders." 6. Conditions to Effectiveness. This First Amendment shall be deemed effective as of July 25, 1997, subject to the satisfaction in full, or the waiver by the Purchaser, of the following conditions precedent (such date being herein called the "Effective Date"): (a) The Purchaser shall have received a counterpart of this First Amendment executed by the Company. (b) The Purchaser shall have received from Pierce Atwood, special counsel to ASCH, a favorable legal opinion dated as of the date hereof and addressed to the Purchaser, covering the matters specified in the attached Exhibit A and such other matters incident to the transactions contemplated herein as the Purchaser may request. -2- (c) The representations and warranties contained in this First Amendment and in Section 4 of the Agreement shall be correct in all material respects on and as of the Effective Date as though made on and as of such date (except where such representations and warranties relate to an earlier date in which case such representations and warranties shall be true and correct as of such earlier date); no Default or Event of Default shall have occurred and be continuing on the Effective Date or result from this First Amendment becoming effective in accordance with its terms. 7. Representations and Warranties. The Company hereby represents and warrants to the Purchaser as follows: (a) The execution and delivery and performance by the Company of this First Amendment and the performance by the Company of the Agreement as amended hereby (A) have been duly authorized by all necessary corporate action, and (B) do not and will not contravene its organizational documents or any applicable law. (b) This First Amendment and the Agreement, as amended hereby, constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (c) The representations and warranties contained in Section 4 of the Agreement are correct on and as of the Effective Date as though made on and as of the Effective Date (except to the extent such representations and warranties expressly relate to an earlier date), and no Event of Default has occurred and is continuing on and as of the Effective Date. 8. Continued Effectiveness of Agreement. The Company hereby (i) confirms and agrees that the Agreement to which it is a party is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects except that on and after the Effective Date of this First Amendment all references in any related document to "the Agreement", the "Securities Purchase Agreement", "thereto", "thereof", "thereunder" or words of like import referring to the Agreement shall mean the Agreement as amended by this First Amendment. 9. Miscellaneous. (a) This First Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. -3- (b) Section and paragraph headings herein are included for convenience of reference only and shall not constitute a part of this First Amendment for any other purpose. (c) This First Amendment shall be governed by, and construed in accordance with, the laws of the State of New York (without reference to conflicts of laws principles thereof) and the laws of the United States of America. (d) The Company will pay on demand all reasonable fees, costs and expenses of the Purchaser in connection with the preparation, execution and delivery of this First Amendment, including, without limitation, reasonable legal fees and disbursements. COMPANY ASC HOLDINGS, INC. By /s/ Christopher E. Howard ------------------------- Name: Christopher E. Howard Title: Senior Vice President and Chief Executive Officer PURCHASER MADELEINE LLC By /s/ Bob Davenport ----------------- Name: Title: -4- EX-10.69 21 REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.69 REGISTRATION RIGHTS AGREEMENT by and between ASC HOLDINGS, INC. and MADELEINE L.L.C. Dated as of July 2, 1997 REGISTRATION RIGHTS AGREEMENT (this or the "Agreement") dated as of July 2, 1997, by ASC Holdings, Inc., a Maine corporation (the "Company"), and Madeleine L.L.C. (the "Initial Holder"). W I T N E S S E T H : WHEREAS, simultaneously herewith, the Company and the Initial Holder are entering into a Securities Purchase Agreement (its "Purchase Agreement"), pursuant to which the Company is issuing, and the Initial Holder is purchasing, certain securities of the Company; and WHEREAS, in order to induce the Initial Holder to enter into the Purchase Agreement, the Company and its Subsidiaries have agreed to provide certain registration rights on the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the premises and of the mutual agreements contained herein, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows: 1. DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings: "Acquiring Person" has the meaning specified in the Purchase Agreement. "Affiliate" shall mean with respect to any Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such 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, however, that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "Certificate of Designation" shall mean the Certificate of Designation, Number, Voting Powers, Preferences and Rights of the Preferred Stock of the Company and Rights of the Convertible Preferred Stock, as filed with the Secretary of State of the State of Maine. "Change of Control" shall have the meaning set forth in the Purchase Agreement. "Common Shares" shall mean shares of Common Stock, of an IPO Entity. "Common Stock" shall mean the class of Common Stock to be issued to the public, as such Common Stock may be constituted from time to time. "Company" shall have the meaning set forth in the preamble. "Conversion Shares" shall mean the Common Shares or other equity securities issued or issuable upon conversion of the Convertible Securities. "Convertible Securities" shall mean the Notes, Preferred Stock and Repriced Converts. "Demand Registration" shall mean a registration required to be effected by an IPO Entity pursuant to Section 2.1. "Demand Registration Statement" shall mean a registration statement of an IPO Entity which covers the Registrable Securities requested to be included therein pursuant to the provisions of Section 2.1 and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference (or deemed to be incorporated by reference) therein. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations thereunder, or any similar or successor statute. "Holders" shall mean the Initial Holder for so long as it owns any Registrable Securities and such of its respective heirs, successors and permitted assigns (including any permitted transferees of Registrable Securities) who acquire or are otherwise the transferee of Registrable Securities, directly or indirectly, from such Initial Holder (or any subsequent Holder), for so long as such heirs, successors and permitted assigns own any Registrable Securities. For purposes of this Agreement, a Person will be deemed to be a Holder whenever such Person holds an option to purchase, or a security convertible into or exercisable or exchangeable for, Registrable Securities, whether or not such purchase, conversion, exercise or exchange has actually been effected and disregarding any legal restrictions upon the exercise of such rights. Registrable Securities issuable upon exercise of an option or upon conversion, exchange or exercise of another security shall be deemed outstanding for the purposes of this Agreement. "Holders' Counsel" shall mean one firm of counsel (per registration) to the Holders of Registrable Securities participating in such registration, which counsel shall be selected (i) in the case of a Demand Registration or an S-3 Registration, by the Initiating Holders holding a majority of the Registrable Securities for which registration was requested in the Request, and (ii) in all other cases, by the Majority Holders of the Registration. -2- "Incidental Registration" shall mean a registration required to be effected by the Company pursuant to Section 2.2. "Incidental Registration Statement" shall mean a registration statement of an IPO Entity which covers the Registrable Securities requested to be included therein pursuant to the provisions of Section 2.2 and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference (or deemed to be incorporated by reference) therein. "Initial Holder" shall mean [Madeleine L.L.C.]. "Initial Public Offering" has the meaning specified in the Purchase Agreement. "Initiating Holders" shall mean, with respect to a particular registration, the Holders who initiated the Request for Registration. "Inspectors" shall have the meaning set forth in Section 4.1(g). "IPO Entity" has the meaning specified in the Purchase Agreement. "Majority Holders" shall mean one or more Holders of Registrable Securities who would hold a majority of the Registrable Securities then outstanding. "Majority Holders of the Registration" shall mean, with respect to a particular registration, one or more Holders of Registrable Securities who would hold a majority of the Registrable Securities to be included in such registration. "NASD" shall mean the National Association of Securities Dealers, Inc. "Notes" shall have the meaning set forth in the Purchase Agreement. "Person" shall mean any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or any other entity or organization, including a government or agency or political subdivision thereof (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business), and shall include any successor (by merger or otherwise) of such entity. "Preferred Stock" shall have the meaning set forth in the Purchase Agreement. "Prospectus" shall mean the prospectus included in a Registration Statement (including, without limitation, any preliminary prospectus and any prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the -3- Securities Act), and any such Prospectus as amended or supplemented by any prospectus supplement, and all other amendments and supplements to such Prospectus, including post-effective amendments, and in each case including all material incorporated by reference (or deemed to be incorporated by reference) therein. "Purchase Agreement" shall have the meaning set forth in the preamble. "Registrable Securities" shall mean (i) any Conversion Shares issued or issuable upon conversion of the Convertible Securities issued to the Initial Holder pursuant to the Purchase Agreement, (ii) Repriced Converts, and (iii) any other securities of an IPO Entity (or any successor or assign of the IPO Entity, whether by merger, consolidation, sale of assets or otherwise) which may be issued or issuable with respect to, in exchange for, or in substitution of, Registrable Securities referenced in clauses (i) and (ii) above by reason of any dividend or stock split, combination of shares, merger, consolidation, recapitalization, reclassification, reorganization, sale of assets or similar transaction. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (A) a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (B) such securities are sold pursuant to Rule 144 (or any similar provisions then in force) under the Securities Act, (C) such securities have been otherwise transferred, a new certificate or other evidence of ownership for them not bearing the legend restricting further transfer shall have been delivered by the relevant IPO Entity and subsequent public distribution of them shall not require registration under the Securities Act, (D) such securities shall have ceased to be outstanding or (E) such securities are freely tradable under the Securities Act. A Holder of Convertible Securities shall be deemed to be a holder of Registrable Securities unless the right to exchange such Convertible Securities into Registrable Securities shall have terminated pursuant to Section 6.15 or 8.1 of the Purchase Agreement. "Registration Expenses" shall mean any and all expenses incident to the performance of or compliance with this Agreement by each IPO Entity, including, without limitation (i) all SEC, stock exchange, NASD and other registration, listing and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws and compliance with the rules of any stock exchange (including fees and disbursements of counsel in connection with such compliance and the preparation of a blue sky memorandum and legal investment survey), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing, distributing, mailing and delivering any Registration Statement, any Prospectus, any underwriting agreements, transmittal letters, securities sales agreements, securities certificates and other documents relating to the performance of or compliance with this Agreement, (iv) the fees and disbursements of counsel for the IPO Entity, (v) the fees and disbursements of Holders' Counsel, (vi) the fees and disbursements of all independent public accountants (including the expenses of any audit and/or "cold comfort" letters) and the fees and expenses of other Persons, including experts, retained by an IPO Entity, (vii) the -4- expenses incurred in connection with making road show presentations and holding meetings with potential investors to facilitate the distribution and sale of Registrable Securities which are customarily borne by the issuer, (viii) any fees and disbursements of underwriters customarily paid by issuers or sellers of securities, (ix) premiums and other costs of policies of insurance against liabilities arising out of the public offering of the Registrable Securities being registered and (x) discounts and commissions payable to underwriters, selling brokers, dealer managers or other similar Persons engaged in the distribution of any of the Registrable Securities; provided, however, that in any case where Registration Expenses are not to be borne by an IPO Entity, such expenses shall not include salaries of such IPO Entity's personnel or general overhead expenses of such IPO Entity, auditing fees, premiums or other expenses relating to liability insurance required by underwriters of such IPO Entity or other expenses for the preparation of financial statements or other data normally prepared by such IPO Entity in the ordinary course of its business or which such IPO Entity would have incurred in any event; and provided, further, that in the event such IPO Entity shall, in accordance with Section 2.2 or Section 2.6 hereof, not register any securities with respect to which it had given written notice of its intention to register to Holders, notwithstanding anything to the contrary in the foregoing, all of the costs incurred by the Holders in connection with such registration shall be deemed to be Registration Expenses. "Registration Statement" shall mean any registration statement of an IPO Entity which covers any Registrable Securities and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference (or deemed to be incorporated by reference) therein. "Repriced Converts" shall have the meaning set forth in the Purchase Agreement. "Request" shall have the meaning set forth in Section 2.1(a). "S-3 Registration" shall mean a registration required to be effected by the Company pursuant to Section 2.3(a). "SEC" shall mean the Securities and Exchange Commission, or any successor agency having jurisdiction to enforce the Securities Act. "Securities Act" shall mean the Securities Act of 1933, as amended from time to time, and the rules and regulations thereunder, or any similar or successor statute. "Shelf Registration" shall have the meaning set forth in Section 2.1(a). "Underwriters" shall mean the underwriters, if any, of the offering being registered under the Securities Act. -5- "Underwritten Offering" shall mean a sale of securities of an IPO Entity to an Underwriter or Underwriters for reoffering to the public. "Withdrawn Demand Registration" shall have the meaning set forth in Section 2.1(a). "Withdrawn Request" shall have the meaning set forth in Section 2.1(a). 2. REGISTRATION UNDER THE SECURITIES ACT. 2.1 Demand Registrations. (a) In the event that any Holder shall receive an Offering Notice in accordance with Section 8.1 of the Purchase Agreement, an Offering Notice in accordance with Section 2.3(b)(ii) of the Purchase Agreement or a Change of Control Offer in which Conversion Shares or Repriced Converts of a Designated Acquiring Person that is a Public Company are being offered to the Holders in accordance with Section 6.15(a)(ii), then the IPO Entity or Designated Acquiring Person either, as elected by the Holders of the Majority of Registrable Securities, (i) include all of the Repriced Converts and Conversion Shares in the IPO of the IPO Entity or Designated Acquiring Entity as an Incidental Registration in accordance with the provisions of Section 2.2 hereof, or (ii) cause the registration of all of the Repriced Converts and Conversion Shares in a registration by the IPO Entity or Designated Acquiring Entity separate from the registration of the IPO as a Demand Registration in accordance with the provisions of Section 2.1(b) hereof, such Demand Registration to become effective at the same time as the date on which the IPO of the IPO Entity or Designated Acquiring Person, or the Change of Control, as the case may be, is consummated. (b) (i) In connection with a Demand Registration contemplated by Section 2.1(a) or (ii) in the event that, in their sole discretion, the Holders have consented to receiving on the closing date of the IPO or Change of Control Conversion Shares or Repriced Converts (including Conversion Shares issuable upon conversion thereof) that are registered and freely tradable under the Securities Act, the Holders shall have the right to request in writing that an IPO Entity register all or part of such Holders' Registrable Securities (a "Request") (which Request shall specify the amount of Registrable Securities intended to be disposed of by such Holders and the intended method of disposition thereof) by filing with the SEC a Demand Registration Statement. As promptly as practicable, but no later than 10 days after receipt of a Request, the relevant IPO Entity shall give written notice of such requested registration to all Holders of Registrable Securities. Subject to Section 2.1(b), the relevant IPO Entity shall include in a Demand Registration (i) the Registrable Securities intended to be disposed of by the Initiating Holders and (ii) the Registrable Securities intended to be disposed of by any other Holder which shall have made a written request (which request shall specify the amount of Registrable Securities to be registered and the intended method of disposition thereof) to the relevant IPO Entity for inclusion thereof in such registration within 20 days after the receipt of such written notice from such IPO Entity. The IPO Entity -6- shall, as expeditiously as possible following a Request, cause to be filed with the SEC a Demand Registration Statement providing for the registration under the Securities Act of the Registrable Securities which the relevant IPO Entity has been so requested to register by all such Holders, to the extent necessary to permit the disposition of such Registrable Securities so to be registered in accordance with the intended methods of disposition thereof specified in such Request or further requests (including, without limitation, by means of a shelf registration pursuant to Rule 415 under the Securities Act (a "Shelf Registration") if so requested and if such IPO Entity is then eligible to use such a registration). The Company shall cause such Demand Registration Statement to be declared effective by the SEC as soon as practicable thereafter and to keep such Demand Registration Statement continuously effective for the period specified in Section 3.1(b). Notwithstanding anything contained herein to the contrary pursuant to clause (ii) of Section 2.1(b), if a Request is made within 90 days of the effective date (the "Applicable Effective Date") of a Registration Statement for an Initial Public Offering, the Company shall cause the applicable Demand Registration Statement to be declared effective (and the associated offering to be consummated), at the earliest possible time, and as soon as market conditions permit, but no later than six months following the Applicable Effective Date. A Request may be withdrawn prior to the filing of the Demand Registration Statement by the Majority Holders of the Registration (a "Withdrawn Request") and a Demand Registration Statement may be withdrawn prior to the effectiveness thereof by the Majority Holders of the Registration (a "Withdrawn Demand Registration"), and such withdrawals shall be treated as a Demand Registration which shall have been effected pursuant to this Section 2.1, unless the Holders of Registrable Securities to be included in such Registration Statement reimburse the Company for its reasonable out-of-pocket Registration Expenses relating to the preparation and filing of such Demand Registration Statement (to the extent actually incurred); provided, however, that if a Withdrawn Request or Withdrawn Registration Statement is made (A) because of a material adverse change in the business, financial condition or prospects of the relevant IPO Entity or (B) because the sole or lead managing Underwriter advises that the amount of Registrable Securities to be sold in such offering be reduced pursuant to Section 2.1(b) by more than 15% of the Registrable Securities to be included in such Registration Statement, then such withdrawal shall not be treated as a Demand Registration effected pursuant to this Section 2.1 and such IPO Entity shall pay all Registration Expenses in connection therewith. Any Holder requesting inclusion in a Demand Registration may, at any time prior to the effective date of the Demand Registration Statement (and for any reason) revoke such request by delivering written notice to such IPO Entity revoking such requested inclusion. (c) Priority in Demand Registrations. If a Demand Registration involves an Underwritten Offering, and the sole or lead managing Underwriter, as the case may be, of such Underwritten Offering shall advise the relevant IPO Entity in writing (with a copy to each Holder requesting registration) on or before the date five -7- days prior to the date then scheduled for such offering that, in its opinion, the amount of Registrable Securities requested to be included in such Demand Registration exceeds the number which can be sold in such offering within a price range acceptable to the Majority Holders of the Registration (such writing to state the basis of such opinion and the approximate number of Registrable Securities which may be included in such offering) such IPO Entity shall include in such Demand Registration, to the extent of the number which the Company is so advised may be included in such offering or separate registration, the Registrable Securities requested to be included in the Demand Registration by the Holders allocated pro rata in proportion to the number of Registrable Securities requested to be included in such Demand Registration by each of them. In the event the IPO Entity shall not, by virtue of this Section 2.1(b), include in any Demand Registration all of the Registrable Securities of any Holder requesting to be included in such Demand Registration, such Holder may, upon written notice to such IPO Entity given within five days of the time such Holder first is notified of such matter, reduce the amount of Registrable Securities it desires to have included in such Demand Registration, whereupon only the Registrable Securities, if any, it desires to have included will be so included and the Holders not so reducing shall be entitled to a corresponding increase in the amount of Registrable Securities to be included in such Demand Registration. (d) Underwriting; Selection of Underwriters. If the Initiating Holders holding a majority of the Registrable Securities for which registration was requested in the Request so elect, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an Underwritten Offering in customary form; and such Initiating Holders may require that all Persons (including other Holders) participating in such registration sell their Registrable Securities to the Underwriters at the same price and on the same terms of underwriting applicable to the Initiating Holders. If any Demand Registration involves an Underwritten Offering, the sole or managing Underwriters and any additional investment bankers and managers to be used in connection with such registration shall be selected by the IPO Entity, subject to the approval of the Holders of a majority of the Registrable Securities for which registration was requested in the Request (such approval not to be unreasonably withheld). If any Demand Registration is being requested concurrently with the IPO or other offering by the Company and such registration is for an Underwritten Offering, the sole or managing Underwriters for such registration shall be the same as selected by the Company for the registration of the IPO or such offering. (e) Registration of Other Securities. Whenever an IPO Entity shall effect a Demand Registration, no securities other than the Registrable Securities shall be covered by such registration unless the Majority Holders of the Registration shall have consented in writing to the inclusion of such other securities. (f) Effective Registration Statement; Suspension. A Demand Registration Statement shall not be deemed to have become effective (and the related registration will not be deemed to have been effected) (i) unless it has been declared effective by the SEC and remains effective in compliance with the provisions of the -8- Securities Act with respect to the disposition of all Registrable Securities covered by such Demand Registration Statement for the time period specified in Section 3.1(b), (ii) if the offering of any Registrable Securities pursuant to such Demand Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, or (iii) if, in the case of an Underwritten Offering, the conditions to closing specified in an underwriting agreement to which an IPO Entity is a party are not satisfied other than by the sole reason of any breach or failure by the Holders of Registrable Securities or are not otherwise waived. (g) Other Registrations. During the period (i) beginning on the date of a Request for an Underwriting Offering and (ii) ending on the date that is 90 days after the date that a Demand Registration Statement filed pursuant to such Request has been declared effective by the SEC (or ending on such earlier date as the Holders shall have withdrawn such Request or such Demand Registration Statement), the relevant IPO Entity shall not, without the consent of the Majority Holders of the Registration, file a registration statement pertaining to any other securities of such IPO Entity. (h) Registration Statement Form. Registrations under this Section 2.1 shall be on such appropriate registration form of the SEC (i) as shall be selected by the Initiating Holders holding a majority of the Registrable Securities for which registration was requested in the Request, and (ii) which shall be available for the sale of Registrable Securities in accordance with the intended method or methods of disposition specified in the requests for registration. Each IPO Entity shall include in any such Registration Statement, in addition to such information as the IPO Entity may desire, all additional information which any selling Holder, upon advice of counsel, shall reasonably request. 2.2 Incidental Registration. (a) Right to Include Registrable Securities. If any IPO Entity at any time, or from time to time, proposes to engage in an Initial Public Offering or any subsequent public offering of its securities (other than on Form S-8 or S-4) while this Agreement is in effect, such IPO Entity shall deliver prompt written notice (which notice shall be given at least 45 days prior to such proposed registration) to all Holders of Registrable Securities of such IPO Entity's intention to undertake such Offering, describing in reasonable detail the proposed registration and distribution (including in the case of an Initial Public Offering the anticipated range of the proposed offering price, the breadth of which shall not exceed 10% of the lowest price of the estimated range, and the case of all registrations, the class and number of securities proposed to be registered and the distribution arrangements) and of such Holders' right to participate in such registration under this Section 2.2 as hereinafter provided. Subject to the other provisions of this paragraph (a) and Section 2.2(b), upon the written request of any Holder made within 20 days after the receipt of such written notice (which request shall specify the amount of Registrable Securities to be registered (based on the estimated range) and the intended method of disposition thereof), the Company shall effect the registration under the Securities Act of all Registrable Securities requested by Holders to be so registered -9- (an "Incidental Registration"), to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered, by inclusion of such Registrable Securities in the Registration Statement which covers the securities which the relevant IPO Entity proposes to register and shall cause such Registration Statement to become and remain effective with respect to such Registrable Securities in accordance with the registration procedures set forth in Section 3. Immediately upon notification to the relevant IPO Entity from the Underwriter of the price at which such securities are to be sold, such IPO Entity shall so advise each participating Holder. If in the case of an Initial Public Offering such price differs from the high or low end of the estimated price range by more than 10%, the Holders requesting inclusion in an Incidental Registration may, at any time prior to the effective date of the Incidental Registration Statement, revoke or change such request by delivering written notice to such IPO Entity revoking or changing (specifying such change in reasonable detail) such requested inclusion within such reasonable time period as may be required by the Underwriter. (b) Priority in Incidental Registration. If the sole or the lead managing Underwriter, as the case may be, shall advise the relevant IPO Entity in writing (with a copy to each Holder requesting registration) on or before the date five days prior to the date then scheduled for such offering that, in its opinion, the amount of securities (including Registrable Securities) requested to be included in such registration exceeds the amount which can be sold in such offering without materially interfering with the successful marketing of the securities being offered (such writing to state the basis of such opinion and the approximate number of such securities which may be included in such offering without such effect), such IPO Entity shall include in such registration, to the extent of the number which it is so advised may be included in such offering without such effect, (i) in the case of a registration initiated by such Entity, (A) first, the securities that such IPO Entity proposes to register for its own account, (B) second, the Registrable Securities requested to be included in such registration by the Holders, allocated pro rata in proportion to the number of Registrable Securities requested to be included in such registration by each of them, and (C) third, other securities of such IPO Entity to be registered on behalf of any other Person, and (ii) in the case of a registration initiated by a Person other than such IPO Entity, (A) first, the Registrable Securities requested to be included in such registration by the Holders, allocated pro rata in proportion to the number of securities requested to be included in such registration by each of them, (B) second, the Registrable Securities requested to be included in such registration by any Persons initiating such registration, allocated pro rata in proportion to the number of securities requested to be included in such registration by each of them, (C) third, the securities that such IPO Entity proposes to register for its own account, and (D) fourth, other securities of such IPO Entity to be registered on behalf of any other Person; provided, however, that in the event such IPO Entity will not, by virtue of this Section 2.2(b), include in any such registration all of the Registrable Securities of any Holder requested to be included in such registration, such Holder may, upon written notice to such IPO Entity given within three days of the time such Holder first is notified of such matter, reduce the amount of Registrable Securities it desires to have included in such -10- registration, whereupon only the Registrable Securities, if any, it desires to have included will be so included and the Holders not so reducing shall be entitled to a corresponding increase in the amount of Registrable Securities to be included in such registration. In addition, to the extent that an Initial Holder is not permitted to register all of its Registrable Securities in such registration, the relevant IPO Entity shall register the balance of such Registrable Securities pursuant to the terms of this Agreement, which registration shall be filed as soon as practicable thereafter and which the relevant IPO Entity shall cause to become effective no later than the six month anniversary of the Applicable Effective Date. (c) Selection of Underwriters. The sole or managing Underwriter(s) and any additional investment bankers and managers to be used in connection with an IPO shall be selected by the IPO Entity, subject to the approval of the Majority Holders of the Registration (such approval not to be unreasonably withheld). 2.3 S-3 Registration; Shelf Registration (a) S-3 Registration. If, at any time, an IPO Entity's Initial Public Offering with respect to which the Holders have not been permitted to register all of their Registrable Securities pursuant to Section 2.1(a), (i) one or more Holders of Registrable Securities representing 25% or more of the Registrable Securities then outstanding request that an IPO Entity file a registration statement on Form S-3 or any successor form thereto for a public offering of all or any portion of the shares of Registrable Securities held by such Holder or Holders, the reasonably anticipated aggregate price to the public of which would exceed $10 million, and (ii) such IPO Entity is a registrant entitled to use Form S-3 or any successor form thereto to register such securities, then such IPO Entity shall, as expeditiously as possible following such Request, use its best efforts to register under the Securities Act on Form S-3 or any successor form thereto, for public sale in accordance with the intended methods of disposition specified in such Request or any subsequent requests (including, without limitation, by means of a Shelf Registration) the Registrable Securities specified in such Request and any subsequent requests; provided, that if such registration is for an Underwritten Offering, the terms of Sections 2.1(b) and 2.1(d) shall apply (and any reference to "Demand Registration" therein shall, for purposes of this Section 2.3, instead be deemed a reference to "S-3 Registration"). If the sole or lead managing Underwriter (if any) or the Majority Holders of the Registration shall advise the relevant IPO Entity in writing that in its opinion additional disclosure not required by Form S-3 is of material importance to the success of the offering, then such Registration Statement shall include such additional disclosure. Whenever an IPO Entity is required by this Section 2.3 to use its best efforts to effect the registration of Registrable Securities, each of the procedures and requirements of Sections 2.1(a) and 2.1(e) (including but not limited to the requirements that such IPO Entity (A) notify all Holders of Registrable Securities from whom such Request for registration has not been received and provide them with the opportunity to participate in the offering and (B) use its best efforts to have such S-3 Registration Statement declared and remain effective for the time period specified herein) shall apply to such registration (and any reference in -11- such Sections 2.1(a) and 2.1(e) to "Demand Registration" shall, for purposes of this Section 2.3, instead be deemed a reference to "S-3 Registration"). There is no limitation on the number of S-3 Registrations that an IPO Entity is obligated to effect; provided that no such registration shall be required in respect of Registrable Securities that are freely tradable under the Securities Act. The registration rights granted pursuant to the provisions of this Section 2.3(a) shall be in addition to the registration rights granted pursuant to the other provisions of this Section 2. (b) Shelf Registration. If a request made pursuant to Section 2.1 or 2.3(a) is for a Shelf Registration, the relevant IPO Entity shall use its best efforts to keep the Shelf Registration continuously effective through the date on which all of the Registrable Securities covered by such Shelf Registration may be sold pursuant to Rule 144(k) under the Securities Act (or any successor provision having similar effect); provided, however, that prior to the termination of such Shelf Registration, such IPO Entity shall first furnish to each Holder of Registrable Securities participating in such Shelf Registration (i) an opinion, in form and substance reasonably satisfactory to the Majority Holders of the Registration, of counsel for such IPO Entity reasonably satisfactory to the Majority Holders of the Registration stating that such Registrable Securities are freely salable pursuant to Rule 144(k) under the Securities Act (or any successor provision having similar effect) or (ii) a "No-Action Letter" from the staff of the SEC stating that the SEC would not recommend enforcement action if the Registrable Securities included in such Shelf Registration were sold in a public sale other than pursuant to an effective registration statement. 2.4 Expenses. Each IPO Entity shall pay all of its Registration Expenses and all discounts and commissions payable to underwriters, selling brokers, managers or other similar Persons engaged in the distribution of such Holder's Registrable Securities pursuant to any registration pursuant to this Section 2 in connection with any Demand Registration, Incidental Registration, S-3 Registration or Shelf Registration, whether or not such registration shall become effective and whether or not all Registrable Securities originally requested to be included in such registration are withdrawn or otherwise ultimately not included in such registration, except as otherwise provided with respect to a Withdrawn Request and a Withdrawn Demand Registration in Section 2.1(b). 2.5 Underwritten Offerings. (a) Demand Underwritten Offerings. If requested by the sole or lead managing Underwriter for any Underwritten Offering effected pursuant to a Demand Registration or an S-3 Registration, the relevant IPO Entity shall enter into a customary underwriting agreement with the Underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to each Holder of Registrable Securities participating in such offering and to contain such representations and warranties by such IPO Entity and such other terms as are generally prevailing in agreements of that type, -12- including, without limitation, indemnification and contribution to the effect and to the extent provided in Section 5. (b) Holders of Registrable Securities to be Parties to Underwriting Agreement. The Holders of Registrable Securities to be distributed by Underwriters in an Underwritten Offering contemplated by Section 2 shall be parties to the underwriting agreement among the relevant IPO Entity and such Underwriters and may, at such Holders' option, require that any or all of the representations and warranties by, and the other agreements on the part of, the relevant IPO Entity to and for the benefit of such Underwriters shall also be made to and for the benefit of such Holders of Registrable Securities and that any or all of the conditions precedent to the obligations of such Underwriters under such underwriting agreement be conditions precedent to the obligations of such Holders of Registrable Securities; provided, however, that such IPO Entity shall not be required to make any representations or warranties with respect to written information specifically provided by a selling Holder for inclusion in the Registration Statement. No Holder shall be required to make any representations or warranties to, or agreements with, such IPO Entity or the Underwriters other than representations, warranties or agreements regarding such Holder, such Holder's Registrable Securities and such Holder's intended method of disposition. (c) Participation in Underwritten Registration. Notwithstanding anything herein to the contrary, no Person may participate in any underwritten registration hereunder unless such Person (i) agrees to sell its securities on the same terms and conditions provided in any underwritten arrangements approved by the Persons entitled hereunder to approve such arrangements and (ii) accurately completes and executes in a timely manner all questionnaires, powers of attorney, indemnities, custody agreements, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 2.6 Conversions; Exercises. Notwithstanding anything to the contrary herein, in order for any Registrable Securities that are issuable only upon the exercise of conversion rights, to be included in any registration pursuant to Section 2 hereof, the exercise of such conversion rights must be effected no later than immediately prior to the closing of any sales under the Registration Statement pursuant to which such Registrable Securities are to be sold. 3. REGISTRATION PROCEDURES. 3.1 Obligations of the IPO Entities. Whenever an IPO Entity is required to effect the registration of Registrable Securities under the Securities Act pursuant to Section 2 of this Agreement, such IPO Entity shall, as expeditiously as possible: (a) prepare and file with the SEC (promptly, and in any event within 60 days after receipt of a request to register Registrable Securities) the requisite Registration Statement to effect such registration, which Registration Statement shall comply as to form in all material respects with the requirements of the applicable form -13- and include all financial statements required by the SEC to be filed therewith, and such IPO Entity shall use its best efforts to cause such Registration Statement to become effective (provided, that such IPO Entity may discontinue any registration of its securities that are not Registrable Securities, and, under the circumstances specified in Section 2.2, its securities that are Registrable Securities); provided, however, that before filing a Registration Statement or Prospectus or any amendments or supplements thereto, or comparable statements under securities or blue sky laws of any jurisdiction, such IPO Entity shall (i) provide Holders' Counsel and any other Inspector with an adequate and appropriate opportunity to participate in the preparation of such Registration Statement and each Prospectus included therein (and each amendment or supplement thereto or comparable statement) to be filed with the SEC, which documents shall be subject to the review and reasonable comment of Holders' Counsel, and (ii) not file any such Registration Statement or Prospectus (or amendment or supplement thereto or comparable statement) with the SEC to which Holder's Counsel, any selling Holder or any other Inspector shall have reasonably objected on the grounds that such filing does not comply in all material respects with the requirements of the Securities Act or of the rules or regulations thereunder; (b) prepare and file with the SEC such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary (i) to keep such Registration Statement effective, and (ii) to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such Registration Statement, in each case until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller(s) thereof set forth in such Registration Statement; provided, that except with respect to any Shelf Registration, such period need not extend beyond nine months after the effective date of the Registration Statement; and provided further, that with respect to any Shelf Registration, such period need not extend beyond the time period provided in Section 2.3, and which periods, in any event, shall terminate when all Registrable Securities covered by such Registration Statement have been sold (but not before the expiration of the 90 day period referred to in Section 4(3) of the Securities Act and Rule 174 thereunder, if applicable); (c) furnish, without charge, to each selling Holder of such Registrable Securities and each Underwriter, if any, of the securities covered by such Registration Statement, such number of copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits), and the Prospectus included in such Registration Statement (including each preliminary Prospectus) in conformity with the requirements of the Securities Act, and other documents, as such selling Holder and Underwriter may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by such selling Holder (each IPO Entity hereby consenting to the use in accordance with applicable law of each such Registration Statement (or amendment or post-effective amendment thereto) and each such Prospectus (or preliminary prospectus or supplement thereto) by each such selling Holder of -14- Registrable Securities and the Underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Registration Statement or Prospectus); (d) prior to any public offering of Registrable Securities, use its best efforts to register or qualify all Registrable Securities and other securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions as any selling Holder of Registrable Securities covered by such Registration Statement or the sole or lead managing Underwriter, if any, may reasonably request to enable such selling Holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such selling Holder and to continue such registration or qualification in effect in each such jurisdiction for as long as such Registration Statement remains in effect (including through new filings or amendments or renewals), and do any and all other acts and things which may be necessary or advisable to enable any such selling Holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such selling Holder; provided, however, that an IPO Entity shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3.1(d), (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to general service of process in any such jurisdiction; (e) use its best efforts to obtain all other approvals, consents, exemptions or authorizations from such governmental agencies or authorities as may be necessary to enable the selling Holders of such Registrable Securities to consummate the disposition of such Registrable Securities; (f) promptly notify Holders' Counsel, each Holder of Registrable Securities covered by such Registration Statement and the sole or lead managing Underwriter, if any: (i) when the Registration Statement, any pre-effective amendment, the Prospectus or any prospectus supplement related thereto or post-effective amendment to the Registration Statement has been filed and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the SEC or any state securities or blue sky authority for amendments or supplements to the Registration Statement or the Prospectus related thereto or for additional information, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or the initiation or threat of any proceedings for that purpose, (iv) of the receipt by the relevant IPO Entity of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation of any proceeding for such purpose, (v) of the existence of any fact of which the relevant IPO Entity becomes aware or the happening of any event which results in (A) the Registration Statement containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make any statements therein not misleading, or (B) the Prospectus included in such Registration Statement containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make any statements therein, in the light of the circumstances -15- under which they were made, not misleading, (vi) if at any time the representations and warranties contemplated by Section 2.5(b) cease to be true and correct in all material respects, and (vii) of the relevant IPO Entity's reasonable determination that a post-effective amendment to a Registration Statement would be appropriate or that there exists circumstances not yet disclosed to the public which make further sales under such Registration Statement inadvisable pending such disclosure and post-effective amendment; and, if the notification relates to an event described in any of the clauses (ii) through (vii) of this Section 3.1(f), such IPO Entity shall promptly prepare a supplement or post-effective amendment to such Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that (1) such Registration Statement shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (2) as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances under which they were made not misleading (and shall furnish to each such Holder and each Underwriter, if any, a reasonable number of copies of such Prospectus so supplemented or amended); and if the notification relates to an event described in clause (iii) of this Section 3.1(f), the relevant IPO Entity shall take all reasonable action required to prevent the entry of such stop order or to remove it if entered; (g) make available for inspection by any selling Holder of Registrable Securities, any sole or lead managing Underwriter participating in any disposition pursuant to such Registration Statement, Holders' Counsel and any attorney, accountant or other agent retained by any such seller or any Underwriter (each, an "Inspector" and, collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the relevant IPO Entity and any subsidiaries thereof as may be in existence at such time (collectively, the "Records") as shall be necessary, in the opinion of such Holders' and such Underwriters' respective counsel, to enable them to exercise their due diligence responsibility and to conduct a reasonable investigation within the meaning of the Securities Act, and cause such IPO Entity's and any of its subsidiaries' officers, directors and employees, and the independent public accountants of such IPO Entity, to supply all information reasonably requested by any such Inspectors in connection with such Registration Statement; (h) obtain an opinion from the relevant IPO Entity's counsel and a "cold comfort" letter from such IPO Entity's independent public accountants who have certified such IPO Entity's financial statements included or incorporated by reference in such Registration Statement, in each case dated the effective date of such Registration Statement (and if such registration involves an Underwritten Offering, dated the date of the closing under the underwriting agreement), in customary form and covering such matters as are customarily covered by such opinions and "cold comfort" letters delivered to underwriters in underwritten public offerings, which opinion and letter shall be reasonably satisfactory to the sole or lead managing Underwriter, if any, and to the -16- Majority Holders of the Registration, and furnish to each Holder participating in the offering and to each Underwriter, if any, a copy of such opinion and letter addressed to such Holder (in the case of the opinion) and Underwriter (in the case of the opinion and the "cold comfort" letter); (i) provide a CUSIP number for all Registrable Securities and provide and cause to be maintained a transfer agent and registrar for all such Registrable Securities covered by such Registration Statement not later than the effectiveness of such Registration Statement; (j) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC and any other governmental agency or authority having jurisdiction over the offering, and make available to its security holders, as soon as reasonably practicable but no later than 90 days after the end of any 12-month period, an earnings statement (i) commencing at the end of any month in which Registrable Securities are sold to Underwriters in an Underwritten Offering and (ii) commencing with the first day of the relevant IPO Entity's calendar month next succeeding each sale of Registrable Securities after the effective date of a Registration Statement, which statement shall cover such 12-month periods, in a manner which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (k) if so requested by the Majority Holders of the Registration, use its best efforts to cause all such Registrable Securities to be listed (i) on each national securities exchange on which the relevant IPO Entity's securities are then listed or (ii) if securities of such IPO Entity are not at the time listed on any national securities exchange (or if the listing of Registrable Securities is not permitted under the rules of each national securities exchange on which such IPO Entity's securities are then listed), on a national securities exchange reasonably acceptable to the Majority Holders of the Registration; (l) keep each selling Holder of Registrable Securities advised as to the initiation and progress of any registration under Section 2 hereunder; (m) enter into and perform customary agreements (including, if applicable, an underwriting agreement in customary form) and provide officers' certificates and other customary closing documents; (n) cooperate with each selling Holder of Registrable Securities and each Underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD and make reasonably available its employees and personnel and otherwise provide reasonable assistance to the Underwriters (taking into account the needs of the relevant IPO Entity's businesses and the requirements of the marketing process) in the marketing of Registrable Securities in any Underwritten Offering; (o) furnish to each Holder participating in the offering and the sole or lead managing Underwriter, if any, without charge, at least one manually-signed copy of -17- the Registration Statement and any post-effective amendments thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those deemed to be incorporated by reference); (p) cooperate with the selling Holders of Registrable Securities and the sole or lead managing Underwriter, if any, to facilitate the timely preparation and delivery of certificates not bearing any restrictive legends representing the Registrable Securities to be sold, and cause such Registrable Securities to be issued in such denominations and registered in such names in accordance with the underwriting agreement prior to any sale of Registrable Securities to the Underwriters or, if not an Underwritten Offering, in accordance with the instructions of the selling Holders of Registrable Securities at least three business days prior to any sale of Registrable Securities; (q) if requested by the sole or lead managing Underwriter or any selling Holder of Registrable Securities, immediately incorporate in a prospectus supplement or post-effective amendment such information concerning such Holder of Registrable Securities, the Underwriters or the intended method of distribution as the sole or lead managing Underwriter or the selling Holder of Registrable Securities reasonably requests to be included therein and as is appropriate in the reasonable judgment of the relevant IPO Entity, including, without limitation, information with respect to the number of shares of the Registrable Securities being sold to the Underwriters, the purchase price being paid therefor by such Underwriters and with respect to any other terms of the Underwritten Offering of the Registrable Securities to be sold in such offering; make all required filings of such Prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; and supplement or make amendments to any Registration Statement if requested by the sole or lead managing Underwriter of such Registrable Securities; and (r) use its best efforts to take all other steps necessary to expedite or facilitate the registration and disposition of the Registrable Securities contemplated hereby. 3.2 Seller Information. An IPO Entity may require each selling Holder of Registrable Securities as to which any registration is being effected to furnish to it such information regarding such Holder, such Holder's Registrable Securities and such Holder's intended method of disposition as such IPO Entity may from time to time reasonably request in writing; provided that such information shall be used only in connection with such registration. If any Registration Statement or comparable statement under "blue sky" laws refers to any Holder by name or otherwise as the Holder of any securities of the relevant IPO Entity, then such Holder shall have the right to require (i) the insertion therein of language, in form and substance satisfactory to such Holder and such IPO Entity, to the effect that the holding by such Holder of such securities is not to be -18- construed as a recommendation by such Holder of the investment quality of such IPO Entity's securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of such IPO Entity, and (ii) in the event that such reference to such Holder by name or otherwise is not in the judgment of such IPO Entity, as advised by counsel, required by the Securities Act or any similar federal statute or any state "blue sky" or securities law then in force, the deletion of the reference to such Holder. 3.3 Notice to Discontinue. Each Holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice from an IPO Entity of the happening of any event of the kind described in Section 3.1(f)(ii) through (vii), such Holder shall forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3.1(f) and, if so directed by such IPO Entity, such Holder shall deliver to such IPO Entity (at such IPO Entity's expense) all copies, other than permanent file copies, then in such Holder's possession of the Prospectus covering such Registrable Securities which is current at the time of receipt of such notice. If such IPO Entity shall give any such notice, such IPO Entity shall extend the period during which such Registration Statement shall be maintained effective pursuant to this Agreement (including, without limitation, the period referred to in Section 3.1(b)) by the number of days during the period from and including the date of the giving of such notice pursuant to Section 3.1(f) to and including the date when the Holder shall have received the copies of the supplemented or amended prospectus contemplated by and meeting the requirements of Section 3.1(f). 4. INDEMNIFICATION; CONTRIBUTION. 4.1 Indemnification by the IPO Entities. Each IPO Entity agrees to indemnify and hold harmless, to the fullest extent permitted by law, each Holder of Registrable Securities, its officers, directors, partners, members, shareholders, employees, Affiliates and agents (collectively, "Agents") and each Person who controls such Holder (within the meaning of the Securities Act) and its Agents with respect to each registration which has been effected pursuant to this Agreement, against any and all losses, claims, damages or liabilities, joint or several, actions or proceedings (whether commenced or threatened) in respect thereof, and expenses (as incurred or suffered and including, but not limited to, any and all expenses incurred in investigating, preparing or defending any litigation or proceeding, whether commenced or threatened, and the reasonable fees, disbursements and other charges of legal counsel) in respect thereof (collectively, "Claims"), insofar as such Claims arise out of or are based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (including any preliminary, final or summary prospectus and any amendment or supplement thereto) related to any such registration or any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by an IPO Entity of the Securities Act or any rule or -19- regulation thereunder applicable to an IPO Entity and relating to action or inaction required of an IPO Entity in connection with any such registration, or any qualification or compliance incident thereto; provided, however, that an IPO Entity will not be liable in any such case to the extent that any such Claims arise out of or are based upon any untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact so made in reliance upon and in conformity with written information furnished to an IPO Entity in an instrument duly executed by such Holder specifically stating that it was expressly for use therein. Each IPO Entity shall also indemnify any Underwriters of the Registrable Securities, their Agents and each Person who controls any such Underwriter (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Holders of Registrable Securities. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of any Person who may be entitled to indemnification pursuant to this Section 5 and shall survive the transfer of securities by such Holder or Underwriter. 4.2 Indemnification by Holders. Each Holder, if Registrable Securities held by it are included in the securities as to which a registration is being effected, agrees to, severally and not jointly, indemnify and hold harmless, to the fullest extent permitted by law, the relevant IPO Entity, its directors and officers, each other Person who participates as an Underwriter in the offering or sale of such securities of the relevant IPO Entity and its Agents and each Person who controls such IPO Entity or any such Underwriter (within the meaning of the Securities Act) and its Agents against any and all Claims, insofar as such Claims arise out of or are based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (including any preliminary, final or summary prospectus and any amendment or supplement thereto) related to such registration, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to such IPO Entity in an instrument duly executed by such Holder specifically stating that it was expressly for use therein; provided, however, that the aggregate amount which any such Holder shall be required to pay pursuant to this Section 4.2 shall in no event be greater than the amount of the net proceeds received by such Holder upon the sale of the Registrable Securities pursuant to the Registration Statement giving rise to such Claims less all amounts previously paid by such Holder with respect to any such Claims. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party and shall survive the transfer of such securities by such Holder or Underwriter. 4.3 Conduct of Indemnification Proceedings. Promptly after receipt by an indemnified party of notice of any Claim or the commencement of any action or proceeding involving a Claim under this Section 4, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 5, (i) notify the indemnifying party in writing of the Claim or the commencement -20- of such action or proceeding; provided, that the failure of any indemnified party to provide such notice shall not relieve the indemnifying party of its obligations under this Section 4, except to the extent the indemnifying party is materially and actually prejudiced thereby and shall not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than under this Section 4, and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however, that any indemnified party shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (A) the indemnifying party has agreed in writing to pay such fees and expenses, (B) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such indemnified party within 10 days after receiving notice from such indemnified party that the indemnified party believes it has failed to do so, (C) in the reasonable judgment of any such indemnified party, based upon advice of counsel, a conflict of interest may exist between such indemnified party and the indemnifying party with respect to such claims (in which case, if the indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such indemnified party) or (D) such indemnified party is a defendant in an action or proceeding which is also brought against the indemnifying party and reasonably shall have concluded that there may be one or more legal defenses available to such indemnified party which are not available to the indemnifying party. No indemnifying party shall be liable for any settlement of any such claim or action effected without its written consent, which consent shall not be unreasonably withheld. In addition, without the consent of the indemnified party (which consent shall not be unreasonably withheld), no indemnifying party shall be permitted to consent to entry of any judgment with respect to, or to effect the settlement or compromise of any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim), unless such settlement, compromise or judgment (1) includes an unconditional release of the indemnified party from all liability arising out of such action or claim, (2) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party, and (3) does not provide for any action on the part of any party other than the payment of money damages which is to be paid in full by the indemnifying party. 4.4 Contribution. If the indemnification provided for in Section 4.1 or 4.2 from the indemnifying party for any reason is unavailable to (other than by reason of exceptions provided therein), or is insufficient to hold harmless, an indemnified party hereunder in respect of any Claim, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Claim in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and the indemnified party, on the other hand, in connection with the actions which resulted in such Claim, as well as any other relevant equitable considerations. The relative fault of such indemnifying party -21- and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. If, however, the foregoing allocation is not permitted by applicable law, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative faults but also the relative benefits of the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by a party as a result of any Claim referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth in Section 4.3, any legal or other fees, costs or expenses reasonably incurred by such party in connection with any investigation or proceeding. Notwithstanding anything in this Section 4.4 to the contrary, no indemnifying party (other than the relevant IPO Entity) shall be required pursuant to this Section 4.4 to contribute any amount in excess of the net proceeds received by such indemnifying party from the sale of the Registrable Securities pursuant to the Registration Statement giving rise to such Claims, less all amounts previously paid by such indemnifying party with respect to such Claims. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 4.5 Other Indemnification. Indemnification similar to that specified in the preceding Sections 4.1 and 4.2 (with appropriate modifications) shall be given by each IPO Entity and each selling Holder of Registrable Securities with respect to any required registration or other qualification of securities under any Federal or state law or regulation of any governmental authority, other than the Securities Act. The indemnity agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract. 4.6 Indemnification Payments. The indemnification and contribution required by this Section 4 shall be made by periodic payments of the amount thereof during the course of any investigation or defense, as and when bills are received or any expense, loss, damage or liability is incurred. 5. GENERAL 5.1 Adjustments Affecting Registrable Securities. The IPO Entity agrees that it shall not effect or permit to occur any combination or subdivision of shares which -22- would adversely affect in any material respects the ability of the Holder of any Registrable Securities to include such Registrable Securities in any registration contemplated by this Agreement or the marketability of such Registrable Securities in any such registration. 5.2 Registration Rights to Others. Other than as listed on Schedule 4.14 of the Purchase Agreement, the IPO Entity is not a party to any agreement (other than this Agreement) with respect to its securities granting any registration rights to any Person. If any IPO Entity shall at any time hereafter provide to any holder of any securities of an IPO Entity rights with respect to the registration of such securities under the Securities Act, such rights shall not be in conflict with or adversely affect any of the rights provided in this Agreement to the Holders. 5.3 [Intentionally Omitted]. 5.4 Amendments and Waivers. The provisions of this Agreement may not be amended, modified, supplemented or terminated in any material respect, and waivers or consents to departures from the provisions hereof may not be given, without the written consent of the Company and the Holders of not less than 50% of the Registrable Securities then outstanding; provided, however, that no such amendment, modification, supplement, waiver or consent to departure shall reduce the aforesaid percentage of Registrable Securities without the written consent of all of the Holders of Registrable Securities; and provided further, that nothing herein shall prohibit any amendment, modification, supplement, termination, waiver or consent to departure the effect of which is limited only to those Holders who have agreed to such amendment, modification, supplement, termination, waiver or consent to departure. 5.6 Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, telecopier, any courier guaranteeing overnight delivery or first class registered or certified mail, return receipt requested, postage prepaid, addressed to the applicable party at the address set forth below or such other address as may hereafter be designated in writing by such party to the other parties in accordance with the provisions of this Section: (i) If to the IPO Entities, to: ASC Holdings, Inc. Sunday River Access Road P.O. Box 450 Bethel, Maine 04217 Attn.: Mr. Chris Howard Telecopy: 207-824-5158 Telephone: 207-824-8100 (ii) If to the Initial Holders, to: Madeleine, LLC -23- 450 Park Avenue 28th Floor New York, New York 10022 Attn: Mr. Robert Davenport Telecopy: 212-758-5305 Telephone: 212-891-2118 With a copy to: Schulte Roth & Zabel LLP 900 Third Avenue New York, New York 10022 Attn: Mark A. Neporent, Esq. Telecopy: (212) 593-5955 Telephone: (212) 756-2000 (iii) If to any subsequent Holder, to the address of such Person set forth in the records of the Company. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; when receipt is acknowledged, if telecopied; on the next business day, if timely delivered to a courier guaranteeing overnight delivery; and five days after being deposited in the mail, if sent first class or certified mail, return receipt requested, postage prepaid. 5.7 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors and permitted assigns (including any permitted transferee of Registrable Securities). Any Holder may assign to any permitted (as determined under the Purchase Agreement transferee of its Registrable Securities (other than a transferee that acquires such Registrable Securities in a registered public offering or pursuant to a sale under Rule 144 of the Securities Act (or any successor rule)), its rights and obligations under this Agreement; provided, however, if any permitted transferee shall take and hold Registrable Securities, such transferee shall promptly notify the Company and, by taking and holding such Registrable Securities, such permitted transferee shall automatically be entitled to receive the benefits of and be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement as if it were a party hereto (and shall, for all purposes, be deemed a Holder under this Agreement). If the Company shall so request, any heir, successor or permitted assign (including any permitted transferee) shall agree in writing to acquire and hold the Registrable Securities subject to all of the terms hereof. For purposes of this Agreement, "successor" for any entity other than a natural person shall mean a successor to such entity as a result of such entity's merger, consolidation, liquidation, dissolution, sale of substantially all of its assets, or similar transaction. Except as provided above or otherwise permitted by this Agreement, neither this -24- Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by any party hereto without the consent of the other parties. 5.8 Counterparts. This Agreement may be executed in two or more counterparts, each of which, when so executed and delivered, shall be deemed to be an original, but all of which counterparts, taken together, shall constitute one and the same instrument. 5.9 Descriptive Headings, Etc. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein. Unless the context of this Agreement otherwise requires: (1) words of any gender shall be deemed to include each other gender; (2) words using the singular or plural number shall also include the plural or singular number, respectively; (3) the words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and paragraph references are to the Sections and paragraphs of this Agreement unless otherwise specified; (4) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation," unless otherwise specified; (5) "or" is not exclusive; and (6) provisions apply to successive events and transactions. 5.10 Severability. In the event that any one or more of the provisions, paragraphs, words, clauses, phrases or sentences contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision, paragraph, word, clause, phrase or sentence in every other respect and of the other remaining provisions, paragraphs, words, clauses, phrases or sentences hereof shall not be in any way impaired, it being intended that all rights, powers and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law. 5.11 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York (without giving effect to the conflict of laws principles thereof). 5.12 Remedies; Specific Performance. The parties hereto acknowledge that money damages would not be an adequate remedy at law if any party fails to perform in any material respect any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to seek to compel specific performance of the obligations of any other party under this Agreement, without the posting of any bond, in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. Except as otherwise provided by law, a delay or omission by a party hereto in exercising any right or remedy accruing upon any such breach shall not -25- impair the right or remedy or constitute a waiver of or acquiescence in any such breach. No remedy shall be exclusive of any other remedy. All available remedies shall be cumulative. The failure to file a Demand Registration Statement within __ days of a Request under Section 2.1 or 2.3 shall constitute, in the absence of an injunction having been imposed or a Withdrawn Request, a breach thereof entitling the Holders to remedies hereunder. 5.13 Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises or undertakings, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings among the Company and the other parties to this Agreement with respect to such subject matter. 5.14 Nominees for Beneficial Owners. In the event that any Registrable Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its election in writing delivered to the Company (on behalf of the IPO Entities), be treated as the holder of such Registrable Securities for purposes of any request or other action by any holder or holders of Registrable Securities pursuant to this Agreement or any determination of any number or percentage of shares of Registrable Securities held by any holder or holders of Registrable Securities contemplated by this Agreement. If the beneficial owner of any Registrable Securities so elects, the Company may require assurances reasonably satisfactory to it of such owner's beneficial ownership of such Registrable Securities. 5.16 Consent to Jurisdiction. Each party to this Agreement hereby irrevocably and unconditionally agrees that any legal action, suit or proceeding arising out of or relating to this Agreement or any agreements or transactions contemplated hereby may be brought in any federal court of the Southern District of New York or any state court located in New York County, State of New York, and hereby irrevocably and unconditionally expressly submits to the personal jurisdiction and venue of such courts for the purposes thereof and hereby irrevocably and unconditionally waives any claim (by way of motion, as a defense or otherwise) of improper venue, that it is not subject personally to the jurisdiction of such court, that such courts are an inconvenient forum or that this Agreement or the subject matter may not be enforced in or by such court. Each party hereby irrevocably and unconditionally consents to the service of process of any of the aforementioned courts in any such action, suit or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the address set forth or provided for in Section 5.5 of this Agreement, such service to become effective 10 days after such mailing. Nothing herein contained shall be deemed to affect the right of any party to serve process in any manner permitted by law or commence legal proceedings or otherwise proceed against any other party in any other jurisdiction to enforce judgments obtained in any action, suit or proceeding brought pursuant to this Section. -26- 5.15 Further Assurances. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 5.17 No Inconsistent Agreements. Each IPO Entity will not hereafter enter into any agreement which is inconsistent with the rights granted to the Holders in this Agreement. 5.18 Construction. Each of the parties hereto acknowledges that it has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Agreement with its legal counsel and that this Agreement shall be construed as if jointly drafted by the parties. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. ASC HOLDINGS, INC. MADELEINE L.L.C.: By: /s/ Christopher E. Howard By: /s/ Bob Davenport ------------------------- ----------------- Its Senior Vice President and Chief Administrative Officer -27- TABLE OF CONTENTS ----------------- Page ---- 1. DEFINITIONS....................................................... 1 2. REGISTRATION UNDER THE SECURITIES ACT............................. 6 2.1 DEMAND REGISTRATION......................................... 6 2.2 INCIDENTAL REGISTRATION..................................... 9 2.3 S-3 REGISTRATION; SHELF REGISTRATION........................ 11 2.4 EXPENSES.................................................... 12 2.5 UNDERWRITTEN OFFERINGS...................................... 12 2.6 CONVERSIONS; EXERCISES...................................... 13 3. REGISTRATION PROCEDURES........................................... 13 3.1 OBLIGATIONS OF THE IPO ENTITIES............................. 13 3.2 SELLER INFORMATION.......................................... 18 3.3 NOTICE TO DISCONTINUE....................................... 19 4. INDEMNIFICATION; CONTRIBUTION..................................... 19 4.1 INDEMNIFICATION BY THE IPO ENTITIES......................... 19 4.2 INDEMNIFICATION BY HOLDERS.................................. 20 4.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS...................... 20 4.4 CONTRIBUTION................................................ 21 4.5 OTHER INDEMNIFICATION....................................... 22 4.6 INDEMNIFICATION PAYMENTS.................................... 22 5. GENERAL........................................................... 22 5.1 ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES................ 22 5.2 REGISTRATION RIGHTS TO OTHERS............................... 23 5.3 [INTENTIONALLY OMITTED]..................................... 23 5.4 AMENDMENTS AND WAIVERS...................................... 23 5.6 NOTICES..................................................... 23 5.7 SUCCESSORS AND ASSIGNS...................................... 24 5.8 COUNTERPARTS................................................ 25 5.9 DESCRIPTIVE HEADINGS, ETC................................... 25 5.10 SEVERABILITY................................................ 25 5.11 GOVERNING LAW............................................... 25 5.12 REMEDIES; SPECIFIC PERFORMANCE.............................. 25 5.13 ENTIRE AGREEMENT............................................ 26 5.14 NOMINEES FOR BENEFICIAL OWNERS.............................. 26 5.15 CONSENT TO JURISDICTION..................................... 26 5.15 FURTHER ASSURANCES.......................................... 27 5.17 NO INCONSISTENT AGREEMENTS.................................. 27 5.18 CONSTRUCTION................................................ 27 -i- EX-10.70 22 FORM OF REPRICED CONVERTS INDENTURE EXHIBIT 10.70 INDENTURE dated as of ______________* between ___________________,** a ________ corporation (the "Company"), and ______________***, a banking corporation duly organized and existing under the laws of the state of New York, as Trustee (the "Trustee"). Both parties agree as follows for the benefit of the other and for the equal and ratable benefit of the registered holders of the Company's 6% Convertible Subordinated Debentures due ______**** . ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.1 Definitions. "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 the purposes of this definition, "control" when used with respect to any person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent" means any Registrar, Paying Agent or Conversion Agent. "Adjusted IPO Price" means the IPO Price as adjusted for the events specified in Section 4.6(a). "Board of Directors" means the Board of Directors of the Company or any authorized committee of the Board of Directors. "Business Day" means a day that is not a Legal Holiday. "Capitalized Lease Obligation" means indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with generally accepted accounting principles; the amount of such indebtedness shall be the capitalized amount of such obligations determined in accordance with such principles. "Cash" or "cash" means such coin or currency of the United States as at any time of payment is legal tender for the payment of public and private debts. - ---------- * Date of Issuance. ** Acquiring Person/IPO Entity. *** Insert name of trustee. **** Five years from date of Issuance. "Certificated Securities" means Securities that are in the form of the Securities attached hereto as Exhibit A-1. "Common Stock" means the class of common stock of the Company to be issued to the public, as such Common Stock as it exists on the date of this Indenture or as it may be constituted from time to time. "Company" means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture, and thereafter means the successor. "Conversion Price" has the meaning ascribed to such term in Section 4.1. "Corporate Trust Office" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered which office at the date of the execution of this Indenture is located at ____________________________________________, ____________________________________________ or at any other time at such other address as the Trustee may designate from time to time by notice to the Company. "Default" or "default" means any event which is, or after notice or passage of time, or both, would be an Event of Default. "Holder" or "Securityholder" means the person in whose name a Security is registered on the Registrar's books. "Indenture" means this Indenture as amended or supplemented from time to time pursuant to the terms of this Indenture. "Officer" means the Chairman or any Co-Chairman of the Board, any Vice Chairman of the Board, the President, any Vice President, the Chief Financial Officer, the Secretary or any Assistant Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers; provided, however, that for purposes of Section 6.4, "Officers' Certificate" means a certificate signed by the principal executive officer, principal financial officer or principal accounting officer of the Company. "Opinion of Counsel" means a written opinion from legal counsel. The counsel may be an employee of or counsel to the Company or the Trustee. "Person" or "person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, or any other entity or organization, including a government or political subdivision or instrumentality thereof. "Principal" or "principal" of a debt security, including the Securities, means the principal of the security plus, when appropriate, the premium, if any, on the security. 2 "Redemption Date" or "redemption date," when used with respect to any Security to be redeemed, means the date fixed for such redemption pursuant to this Indenture. "Redemption Price" or "redemption price," when used with respect to any Security to be redeemed, means the price fixed for such redemption pursuant to this Indenture, as set forth in the form of Security annexed as Exhibit A-1 hereto. "SEC" or "Commission" means the Securities and Exchange Commission. "Securities" means the 6% Convertible Subordinated Debentures due _______* or any of them (each, a "Security"), as amended or supplemented from time to time, that are issued under this Indenture. "Securities Act" means the Securities Act of 1933, as amended. "Senior Indebtedness" means the following: (a) the principal of and premium, if any, and interest (including, without limitation, any interest accruing subsequent to the filing of a petition or other action concerning bankruptcy or other similar proceedings, whether or not constituting an allowed claim in any such proceedings) on, and fees, costs, enforcement expenses (including legal fees and disbursements), collateral protection expenses and other reimbursement or indemnity obligations in respect of, the following, whether presently outstanding or hereafter incurred or created: all indebtedness or obligations of the Company to any person, including, but not limited to, banks and other lending institutions, for money borrowed (other than that evidenced by the Securities) or in respect of credit or other banking facilities and which is evidenced by a note, bond, debenture, loan agreement, a lease intended as security or similar instrument or agreement (including purchase money obligations with an original maturity in excess of one year and noncontingent obligations to reimburse any bank or other person in respect of amounts paid under letters of credit); (b) commitment or standby fees due and payable to lending institutions with respect to credit facilities available to the Company; (c) all noncontingent obligations of the Company (i) for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, (ii) under interest rate swaps, caps, collars, options and similar arrangements, and (iii) under any foreign exchange contract, currency swap agreement, futures contract, currency option contract, or other foreign currency hedge; (d) all obligations of the Company for the payment of money relating to a Capitalized Lease Obligation; (e) any liabilities of others described in the preceding clauses (a), (b), (c) and (d) which the Company has guaranteed or which are otherwise its legal liability; and (f) renewals, extensions, refundings, restructurings, amendments and modifications of any such indebtedness or guarantee. Notwithstanding anything to the contrary in this Indenture or the Securities, "Senior Indebtedness" shall not include (x) any particular indebtedness, lease, fee, obligation, renewal, extension, refunding, restructuring, amendment or modification if, under the express provisions of the instrument creating or evidencing the same, or pursuant to which the same is outstanding, such indebtedness, lease, fee, obligation, renewal, extension, refunding, restructuring, amendment or modification thereof is stated to be not superior in right of payment - ---------- * Insert date five years from date of Issuance. 3 to the Securities, (y) indebtedness of the Company (i) owing, directly or indirectly, to any person under or in respect of any employee benefit plan of the Company, or (ii) owing, directly or indirectly, to any employee of the Company or any Affiliate of the Company, and (z) the Securities. "Subsidiary" means any corporation of which at least a majority of the outstanding capital stock having voting power under ordinary circumstances to elect directors of such corporation shall at the time be held, directly or indirectly, by the Company, by the Company and one or more Subsidiaries, or by one or more Subsidiaries. "TIA" means the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 and as in effect on the date of this Indenture, except as provided in Section 11.3, and except to the extent any amendment to the Trust Indenture Act expressly provides for application of the Trust Indenture Act as in effect on another date. "Trading Day" means, with respect to any security, each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on which securities are not generally traded on the exchange or market in which such security is traded. "Trustee" means the party named as such in this Indenture until a successor replaces it in accordance with the provisions of this Indenture, and thereafter means the successor. "Trust Officer" means, with respect to the Trustee, any officer assigned to the Corporate Trust office, including any managing director, vice president, assistant vice president, assistant treasurer, assistant secretary or any other officer of the Trustee customarily performing functions similar to those performed by any of the above-designated officers and having direct responsibility for the administration of this Indenture, and also, with respect to a particular matter, any other officer, to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. Section 1.2 Other Definitions. Term Defined in Section ---- ------------------ "Agent Members" 2.1 "Bankruptcy Law" 8.1 "Company Order" 2.2 "Conversion Agent" 2.3 "Conversion Date" 4.2 "Conversion Price" 4.6 "Conversion Shares" 4.6 "Custodian" 8.1 "DTC" 2.1 "Default Notice" 5.5 "Depositary" 2.1 4 "Determination Date" 4.6 "Distribution Date" 4.6 "Event of Default" 8.1 "Exchange Act" 3.8 "Legal Holiday" 12.7 "Paying Agent" 2.3 "Registrar" 2.3 "Rights" 4.6 "Transfer Restricted Security" 2.12 "Triggering Distribution" 4.6 "Unissued Shares" 3.8 "U.S. Government Obligations" 10.1 Section 1.3 Trust Indenture Act Provisions. Whenever this Indenture refers to a provision of the TIA, that provision is incorporated by reference in and made a part of this Indenture. The Indenture shall also include those provisions of the TIA required to be included herein by the provisions of the Trust Indenture Reform Act of 1990. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC; "indenture securities" means the Securities; "indenture security holder" means a Securityholder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the indenture securities means the Company or any other obligor on the Securities. All other terms used in this Indenture that are defined in the TIA, defined by TIA reference to another statute or defined by SEC rule and not otherwise defined herein have the meanings assigned to them therein. Section 1.4 Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles in effect on the date hereof, and any other reference in this Indenture 5 to "generally accepted accounting principles" refers to generally accepted accounting principles in effect on the date hereof; (3) words in the singular include the plural, and words in the plural include the singular; (4) provisions apply to successive events and transactions; and (5) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. ARTICLE II THE SECURITIES Section 2.1 Form and Dating. The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A-1, which is incorporated in and made part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage. The Company shall approve, with the consent of the Trustee, the form of the Securities and any notation, legend or endorsement thereon. Each Security shall be dated the date of its authentication. Section 2.2 Execution and Authentication. Two Officers shall sign the Securities for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Securities. Typographic and other minor errors or defects in any such reproduction of the seal or any such signature shall not affect the validity or enforceability of any Security which has been authenticated and delivered by the Trustee. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate and make available for delivery Securities for original issue in the aggregate principal amount of up to $____________ upon a written order or orders of the Company signed by two officers of the Company (a "Company Order"). The Company Order shall specify the amount of Securities to be authenticated and the date on which the original issue of Securities is to be authenticated. The aggregate principal amount of Securities outstanding at any time may not exceed $___________, except as provided above and in Section 2.7. 6 The Trustee shall act as the initial authenticating agent. Thereafter, the Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate of the Company. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. Section 2.3 Registrar, Paying Agent and Conversion Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar"), an office or agency where Securities may be presented for payment (the "Paying Agent"), an office or agency where Securities may be presented for conversion (the "Conversion Agent") and an office or agency where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Company fails to maintain a Registrar, Paying Agent, Conversion Agent or agent for service of notices and demands, or fails to give the foregoing notice, the Trustee shall act as such. The Company or any Affiliate of the Company may act as Paying Agent (except for the purposes of Section 6.1 and Article 10), Registrar or Conversion Agent. The Company initially appoints the Trustee as Registrar, Paying Agent, Conversion Agent and agent for service of notices and demands in connection with the Securities. Section 2.4 Paying Agent to Hold Money In Trust. On or prior to each due date of the principal of or interest on any Securities, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal or interest so becoming due. Subject to Section 5.7, the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities, and shall notify the Trustee of any default by the Company (or any other obligor on the Securities) in making any such payment. If the Company or an Affiliate of the Company acts as Paying Agent, it shall, on or before each due date of the principal of or interest on any Securities, segregate the money and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and the Trustee may at any time during the continuance of any default, upon written request to a Paying Agent, require such Paying Agent to forthwith pay to the Trustee all sums so held in trust 7 by such Paying Agent. Upon doing so, the Paying Agent (other than the Company) shall have no further liability for the money. Section 2.5 Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each semiannual interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. Section 2.6 Transfer and Exchange. (a) When a Security is presented to the Registrar with a request to register a transfer thereof or to exchange such Security for an equal principal amount of Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested; provided, however, that every Security presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by the Holder thereof or his or her attorney duly authorized in writing. To permit registration of transfers and exchanges, upon surrender of any Security for registration of transfer or exchange at the office or agency maintained pursuant to Section 2.3, the Company shall execute and the Trustee shall authenticate Securities of a like aggregate principal amount at the Registrar's request. Any exchange or transfer shall be without charge, except that the Company or the Registrar may require payment of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in relation thereto, and provided further that this sentence shall not apply to any exchange pursuant to Section 2.10, 3.6, 3.11, 4.2 (last paragraph) or 11.5. Neither the Company, the Registrar nor the Trustee shall be required to exchange or register a transfer of (a) any Securities for a period of 15 days next preceding any selection of Securities to be redeemed, or (b) any Securities or portions thereof selected or called for redemption (except, in the case of redemption of a Security in part, the portion not to be redeemed). All Securities issued upon any transfer or exchange of Securities shall be valid obligations of the Company, evidencing the same debt and entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. (b) Successive registrations and registrations of transfers and exchanges as aforesaid may be made from time to time as desired, and each such registration shall be noted on the register for the Securities. (c) Any Registrar appointed pursuant to Section 2.3 hereof shall provide to the Trustee such information as the Trustee may reasonably require in connection with the delivery by such Registrar of Securities upon transfer or exchange of Securities. 8 (d) No Registrar shall be required to make registrations of transfer or exchange of Securities during any periods designated in the text of the Securities or in this Indenture as periods during which such registration of transfers and exchanges need not be made. Section 2.7 Replacement Securities. If any mutilated Security is surrendered to the Company, the Registrar or the Trustee, or the Company, the Registrar and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company, the Registrar and the Trustee such Security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company, the Registrar or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute, and upon its written request the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount, bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, or is about to be redeemed or purchased by the Company pursuant to Article 3, the Company in its discretion may, instead of issuing a new Security, pay, redeem or purchase such Security, as the case may be. Upon the issuance of any new Securities under this Section 2.7, the Company may require the payment of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee or the Registrar) in connection therewith. Every new Security issued pursuant to this Section 2.7 in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section 2.7 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 2.8 Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee, except for those canceled by it, those delivered to it for cancellation and those described in this Section 2.8 as not outstanding. If a Security is replaced pursuant to Section 2.7, it ceases to be outstanding unless the Company receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. 9 If the Paying Agent (other than the Company) holds on a redemption date or maturity date money sufficient to pay the principal of, and premium, if any, and accrued interest on, Securities payable on that date, then on and after that date such Securities cease to be outstanding and interest on them ceases to accrue. Subject to the restrictions contained in Section 2.9, a Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. Section 2.9 Treasury Securities. In determining whether the Holders of the required principal amount of Securities have concurred in any notice, direction, waiver or consent, Securities owned by the Company or any other obligor on the Securities or by any Affiliate of the Company or of such other obligor shall be disregarded, except that, for purposes of determining whether the Trustee shall be protected in relying on any such notice, direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to the Securities and that the pledgee is not the Company or any other obligor on the Securities or any Affiliate of the Company or of such other obligor. Section 2.10 Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and execute, and, upon the order of the Company, the Trustee shall authenticate and deliver, temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company with the consent of the Trustee considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate and deliver definitive Securities in exchange for temporary Securities. Section 2.11 Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar, the Paying Agent and the Conversion Agent shall forward to the Trustee or its agent any Securities surrendered to them for transfer, exchange, payment or conversion. The Trustee and no one else shall cancel, in accordance with its standard procedures, all Securities surrendered for transfer, exchange, redemption, payment, conversion or cancellation and shall deliver the canceled Securities to the Company. The Company may not issue new Securities to replace Securities it has paid or delivered to the Trustee for cancellation or that any Holder has converted pursuant to Article 4. 10 ARTICLE III REDEMPTION AND PURCHASES Section 3.1 Right to Redeem; Notice to Trustee. The Securities may be redeemed at the election of the Company, as a whole or from time to time in part, at the redemption prices specified in paragraph 5 of the form of Security attached hereto as Exhibit A-1, together with accrued interest up to but not including the Redemption Date; provided that the Securities may not be so redeemed prior to the fifth anniversary of their issuance unless the closing price per share of the Common Stock for any 45 consecutive trading days ending no more than 30 calendar days prior to the date notice of redemption is first mailed is at least 140% of the Adjusted IPO Price then in effect. If the Company elects to redeem Securities pursuant to this Section 3.1 and paragraph 5 of the Securities, it shall notify the Trustee at least 100 days prior to the redemption date as fixed by the Company of the redemption date and the principal amount of Securities to be redeemed. If fewer than all of the Securities are to be redeemed, the record date relating to such redemption shall be selected by the Company and given to the Trustee, which record date shall not be less than five days after the date of notice to the Trustee. Section 3.2 Selection of Securities to Be Redeemed. If less than all of the Securities are to be redeemed, the Trustee shall, not more than 100 days prior to the redemption date, select the Securities to be redeemed by lot. The Trustee shall make the selection from the Securities outstanding and not previously called for redemption. Securities in denominations of $1,000 may only be redeemed in whole. The Trustee may select for redemption portions (equal to $1,000 or any multiple thereof) of the principal of Securities that have denominations larger than $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. Section 3.3 Notice of Redemption. At least 90 days but not more than 120 days before a redemption date, the Company shall mail or cause to be mailed a notice of redemption by first-class mail to each Holder of Securities to be redeemed at such Holder's address as it appears on the Registrar's books. The notice shall identify the Securities to be redeemed and shall state: (1) the redemption date; (2) the redemption price; (3) the then current Conversion Price; 11 (4) the name and address of the Paying Agent and the Conversion Agent; (5) that Securities called for redemption must be presented and surrendered to the Paying Agent to collect the redemption price; (6) that the Securities called for redemption may be converted at any time before the close of business on the redemption date; (7) that Holders who wish to convert Securities must satisfy the requirements in paragraph 8 of the Securities; (8) that, unless the Company defaults in making the redemption payment, interest on Securities called for redemption shall cease accruing on and after the redemption date and the only remaining right of the Holder shall be to receive payment of the redemption price upon presentation and surrender to the Paying Agent of the Securities; and (9) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the redemption date, upon presentation and surrender of such Security, a new Security or Securities in aggregate principal amount equal to the unredeemed portion thereof will be issued. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. Section 3.4 Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice, except for Securities that are converted in accordance with the provisions of Section 4.1. Upon presentation and surrender to the Paying Agent, Securities called for redemption shall be paid at the redemption price, plus accrued interest up to but not including the redemption date. Section 3.5 Deposit of Redemption Price. On or prior to 12:00 noon New York time on the redemption date, the Company shall deposit with the Paying Agent (or, if the Company acts as Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest on all Securities to be redeemed on that date, other than Securities or portions thereof called for redemption on that date which have been delivered by the Company to the Trustee for cancellation or have been converted. The Paying Agent shall return to the Company any money not required for that purpose because of the conversion of securities pursuant to Article 4 or 12 otherwise. If such money is then held by the Company in trust and is not required for such purpose, it shall be discharged from the trust. Section 3.6 Securities Redeemed in Part. Upon presentation and surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for and deliver to the Holder a new Security equal in principal amount to the unredeemed portion of the Security surrendered. Section 3.7 Conversion Arrangement on Call for Redemption. In connection with any redemption of Securities, the Company may arrange for the purchase and conversion of any Securities called for redemption by an agreement with one or more investment bankers or other purchasers to purchase such Securities by paying to the Paying Agent in trust for the Securityholders, on or before the close of business on the Redemption Date, an amount that, together with any amounts deposited with the Paying Agent by the Company for the redemption of such Securities, is not less than the Redemption Price, together with interest, if any, accrued to, but not including, the Redemption Date, of such Securities. Notwithstanding anything to the contrary contained in this Article 3, the obligation of the Company to pay the Redemption Price of such Securities, including all accrued interest, if any, shall be deemed to be satisfied and discharged to the extent such amount is so paid by such purchasers. If such an agreement is entered into, any Securities not duly surrendered for conversion by the Holders thereof may, at the option of the Company, be deemed, to the fullest extent permitted by law, acquired by such purchasers from such Holders and (notwithstanding anything to the contrary contained in Article 4) surrendered by such purchasers for conversion, all as of immediately prior to the close of business on the Redemption Date, subject to payment of the above amount as aforesaid. The Paying Agent shall hold and pay to the Holders whose Securities are selected for redemption any such amount paid to it for purchase and conversion in the same manner as it would moneys deposited with it by the Company for the redemption of Securities. Without the Paying Agent's prior written consent, no arrangement between the Company and such purchasers for the purchase and conversion of any Securities shall increase or otherwise affect any of the powers, duties, responsibilities or obligations of the Paying Agent as set forth in this Indenture, and the Company agrees to indemnify the Paying Agent from, and hold it harmless against, any loss, liability or expense arising out of or in connection with any such arrangement for the purchase and conversion of any Securities between the Company and such purchasers, including the costs and expenses incurred by the Paying Agent in the defense of any claim or liability arising out of or in connection with the exercise or performance of any of its powers, duties, responsibilities or obligations under this Indenture. 13 ARTICLE IV CONVERSION Section 4.1 Conversion Privilege. Subject to the further provisions of this Section 4.1, a Holder of a Security may convert such Security into Common Stock at any time prior to maturity, at the Conversion Price then in effect; provided, however, that, if such Security is called for redemption pursuant to Article 3, such conversion right shall terminate at the close of business on the redemption date for such Security (unless the Company shall default in making the redemption payment when due, in which case the conversion right shall terminate at the close of business on the date such default is cured and such Security is redeemed). The number of shares of Common Stock issuable upon conversion of a Security shall be determined by dividing the principal amount of the Security or portion thereof surrendered for conversion by the Conversion Price in effect on the Conversion Date. The initial Conversion Price is set forth in paragraph 7 of the Securities and is subject to adjustment as provided in this Article 4. A Holder may convert a portion of a Security equal to $1,000 or any integral multiple thereof. Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of a Security. A Holder of Securities is not entitled to any rights of a holder of Common Stock until such Holder has converted his or her Securities to Common Stock, and only to the extent such Securities are deemed to have been converted into Common Stock pursuant to this Article 4. Section 4.2 Conversion Procedure. To convert a Security, a Holder must (a) complete and manually sign the conversion notice on the back of the Security and deliver such notice to the Conversion Agent, (b) surrender the Security to the Conversion Agent, (c) furnish appropriate endorsements and transfer documents if required by the Registrar or the Conversion Agent, and (d) pay any transfer or similar tax, if required. The date on which the Holder satisfies all of those requirements is the "Conversion Date." As soon as practicable after the Conversion Date, the Company shall deliver to the Holder through the Conversion Agent a certificate for the number of whole shares of Common Stock issuable upon the conversion and cash in lieu of any fractional shares pursuant to Section 4.3. The person in whose name the certificate is registered shall be deemed to be a shareholder of record on the Conversion Date; provided, however, that no surrender of a Security on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the person or persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the person or persons entitled to receive such shares of Common Stock as the record holder or holders for all purposes at the close of business 14 on the next succeeding day on which such stock transfer books are open; provided, further, that such conversion shall be at the Conversion Price in effect on the Conversion Date as if the stock transfer books of the Company had not been closed. Upon conversion of a Security, such person shall no longer be a Holder of such Security. No payment or adjustment will be made for dividends or distributions on shares of Common Stock issued upon conversion of a Security. Upon conversion of a Security, the Holder shall be paid, in cash, an amount equal to accrued interest on the converted Security. If a Holder converts more than one Security at the same time, the number of shares of Common Stock issuable upon the conversion shall be based on the aggregate principal amount of Securities converted. Upon surrender of a Security that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Security equal in principal amount to the unconverted portion of the Security surrendered. Section 4.3 Fractional Shares. The Company will not issue fractional shares of Common Stock upon conversion of Securities. In lieu thereof, the Company will pay an amount in cash based upon the closing sale price of the Common Stock on the Trading Day immediately prior to the date of conversion. Section 4.4 Taxes on Conversion. If a Holder converts a Security, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon such conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder's name. The Conversion Agent may refuse to deliver the certificate representing the Common Stock being issued in a name other than the Holder's name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude any tax withholding required by law or regulation. Section 4.5 Company to Provide Stock. The Company shall, prior to issuance of any Securities hereunder, and from time to time as it may be necessary, reserve, out of its authorized but unissued Common Stock, a sufficient number of shares of Common Stock to permit the conversion of all outstanding Securities into shares of Common Stock. All shares of Common Stock delivered upon conversion of the Securities shall be newly issued shares or treasury shares, shall be duly authorized, validly issued, fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim. 15 The Company will endeavor promptly to comply with all federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Securities, if any, and will list or cause to have quoted such shares of Common Stock on each national securities exchange or in the over-the-counter market or such other market on which the Common Stock is then listed or quoted. Section 4.6 Adjustment of Conversion Price. The conversion price as stated in paragraph 8 of the Securities (the "Conversion Price") shall be adjusted from time to time by the Company as follows: (a) In case the Company shall (i) pay a dividend in shares of Common Stock to all holders of Common Stock, (ii) make a distribution in shares of Common Stock to all holders of Common Stock, (iii) subdivide its outstanding Common Stock into a greater number of shares, or (iv) combine its outstanding Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior thereto shall be adjusted so that the Holder of any Security thereafter surrendered for conversion shall be entitled to receive that number of shares of Common Stock which he or she would have owned had such Security been converted immediately prior to the happening of such event. An adjustment made pursuant to this subsection (a) shall become effective immediately after the record date in the case of a dividend in shares or distribution and shall become effective immediately after the effective date in the case of subdivision or combination. (b) In case the Company shall issue rights or warrants to all or substantially all holders of its Common Stock entitling them (for a period commencing no earlier than the record date described below and expiring not more than 60 days after such record date) to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price per share less than the current market price per share of Common Stock (as determined in accordance with subsection (e) of this Section 4.6) at the record date for the determination of shareholders entitled to receive such rights or warrants, the Conversion Price in effect immediately prior thereto shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to such record date by a fraction of which the numerator shall be the number of shares of Common Stock outstanding on such record date, plus the number of shares which the aggregate offering price of the total number of shares of Common Stock so offered (or the aggregate Conversion Price of the convertible securities so offered) would purchase at such current market price, and of which the denominator shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock offered (or into which the convertible securities so offered are convertible). Such adjustment shall be made successively whenever any such rights or warrants are issued, and shall become effective immediately after such record date. If at the end of the period during which such rights or warrants are exercisable not all rights or warrants shall have been exercised, the adjusted Conversion Price shall be immediately readjusted to what it would have been based upon the number of additional shares of Common Stock actually issued (or the number of shares of Common Stock issuable upon conversion of convertible securities actually issued). 16 (c) In case the Company shall distribute to all or substantially all holders of its Common Stock any shares of capital stock of the Company (other than Common Stock), evidences of indebtedness or other non-cash assets (including securities of any company other than the Company), or shall distribute to all or substantially all holders of its Common Stock rights or warrants to subscribe for or purchase any of its securities (excluding those referred to in subsection (b) of this Section 4.6), then in each such case the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the date of such distribution by a fraction of which the numerator shall be the current market price per share (as defined in subsection (e) of this Section 4.6) of the Common Stock on the record date mentioned below less the fair market value on such record date (as determined by the Board of Directors, whose determination shall be conclusive evidence of such fair market value) of the portion of the capital stock or assets or evidences of indebtedness so distributed or of such rights or warrants applicable to one share of Common Stock (determined on the basis of the number of shares of Common Stock outstanding on the record date), and of which the denominator shall be the current market price per share (as defined in subsection (e) of this Section 4.6) of the Common Stock on such record date. Such adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution. Notwithstanding the foregoing, in the event that the Company shall distribute rights or warrants (other than those referred to in subsection (b) of this Section 4.6) ("Rights") pro rata to holders of Common Stock, the Company may, in lieu of making any adjustment pursuant to this Section 4.6, make proper provision so that each holder of a Security who converts such Security (or any portion thereof) after the record date for such distribution and prior to the expiration or redemption of the Rights shall be entitled to receive upon such conversion, in addition to the shares of Common Stock issuable upon such conversion (the "Conversion Shares"), a number of Rights to be determined as follows: (i) if such conversion occurs on or prior to the date for the distribution to the holders of Rights of separate certificates evidencing such Rights (the "Distribution Date"), the same number of Rights to which a holder of a number of shares of Common Stock equal to the number of Conversion Shares is entitled at the time of such conversion in accordance with the terms and provisions of and applicable to the Rights and (ii) if such conversion occurs after the Distribution Date, the same number of Rights to which a holder of the number of shares of Common Stock into which the principal amount of the Security so converted was convertible immediately prior to the Distribution Date would have been entitled on the Distribution Date in accordance with the terms and provisions of and applicable to the Rights. (d) In case the Company shall, by dividend or otherwise, at any time distribute (a "Triggering Distribution") to all or substantially all holders of its Common Stock cash in an aggregate amount that, together with the aggregate amount of any other cash distributions to all or substantially all holders of its Common Stock made within the 12 months preceding the date of payment of the Triggering Distribution and in respect of which no Conversion Price adjustment pursuant to this Section 4.6 has been made, exceeds 15% of the product of the current market price per share of Common Stock (as determined in accordance with subsection (e) of this Section 4.6) on the Business Day (the "Determination Date") immediately preceding the day on which such Triggering Distribution is declared by the Company multiplied by the number of shares of Common Stock outstanding on such date (excluding shares held in the Treasury of the 17 Company), the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying such Conversion Price in effect immediately prior to the Determination Date by a fraction of which the numerator shall be the current market price per share of the Common Stock (as determined in accordance with subsection (e) of this Section 4.6) on the Determination Date less the amount of cash so distributed within such 12 months (including, without limitation, the Triggering Distribution) applicable to one share of Common Stock (determined on the basis of the number of shares of Common Stock outstanding on the Determination Date) and the denominator shall be such current market price per share of the Common Stock (as determined in accordance with subsection (e) of this Section 4.6) on the Determination Date, such reduction to become effective immediately prior to the opening of business on the day following the date on which the Triggering Distribution is paid. (e) For the purpose of any computation under subsections (b), (c) and (d) of this Section 4.6, the current market price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices for the 30 consecutive Trading Days commencing 45 Trading Days before (i) the Determination Date with respect to distributions under subsection (d) of this Section 4.6 or (ii) the record date with respect to distributions, issuances or other events requiring such computation under subsection (b) or (c) of this Section 4.6. The closing price for each day shall be the last reported sales price or, in case no such reported sale takes place on such date, the average of the reported closing bid and asked prices in either case on the NASDAQ National Market System or, if the Common Stock is not listed or admitted to trading on the NASDAQ National Market System, on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the closing sales price of the Common Stock as quoted by NASDAQ or, in case no reported sales takes place, the average of the closing bid and asked prices as quoted by NASDAQ or any comparable system or, if the Common Stock is not quoted on NASDAQ or any comparable system, the closing sales price or, in case no reported sale takes place, the average of the closing bid and asked prices, as furnished by any two members of the National Association of Securities Dealers, Inc. selected from time to time by the Company for that purpose. If no such prices are available, the current market price per share shall be the fair value of a share of Common Stock as determined by the Board of Directors of the Company. (f) In any case in which this Section 4.6 shall require that an adjustment be made following a record date or a Determination Date, as the case may be, established for purposes of this Section 4.6, the Company may elect to defer (but only until five Business Days following the filing by the Company with the Trustee of the certificate described in Section 4.9) issuing to the holder of any Security converted after such record date or Determination Date the shares of Common Stock and other capital stock of the Company issuable upon such conversion over and above the shares of Common Stock and other capital stock of the Company issuable upon such conversion only on the basis of the Conversion Price prior to adjustment; and, in lieu of the shares the issuance of which is so deferred, the Company shall issue or cause its transfer agents to issue due bills or other appropriate evidence prepared by the Company of the right to receive such shares. If any distribution in respect of which an adjustment to the Conversion Price is required to be made as of the record date, effective date or Determination Date therefor is 18 not thereafter made or paid by the Company for any reason, the Conversion Price shall be readjusted to the Conversion Price which would then be in effect if such record date had not been fixed or such effective date or Determination Date had not occurred. Section 4.7 No Adjustment. No adjustment in the Conversion Price shall be required unless the adjustment would require an increase or decrease of at least 1% in the Conversion Price as last adjusted; provided, however, that any adjustments which by reason of this Section 4.7 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article 4 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. No adjustment need be made for a transaction referred to in Section 4.6 if all Securityholders are entitled to participate in the transaction on a basis and with notice that the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of Common Stock participate in the transaction. The Company shall give 30 days prior notice to the Trustee and to the Holders of the Securities of any such determination. No adjustment need be made for rights to purchase Common Stock or issuances of Common Stock pursuant to a Company plan for reinvestment of dividends or interest. No adjustment need be made for a change in the par value or a change to no par value of the Common Stock. To the extent that the Securities become convertible into the right to receive cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. Section 4.8 Adjustment for Tax Purposes. The Company shall be entitled to make such reductions in the Conversion Price, in addition to those required by Section 4.6, as it in its discretion shall determine to be advisable in order that any stock dividends, subdivisions of shares, distributions of rights to purchase stock or securities or distributions of securities convertible into or exchangeable for stock hereafter made by the Company to its shareholders shall not be taxable; provided that no such reduction shall give rise to a right of the Company to optionally redeem the securities pursuant to Section 3.1. Section 4.9 Notice of Adjustment. Whenever the Conversion Price is adjusted, the Company shall promptly mail to Securityholders a notice of the adjustment and file with the Trustee an Officers' Certificate briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence of the correctness of such adjustment. 19 Section 4.10 Notice of Certain Transactions. In the event that: (1) the Company takes any action which would require an adjustment in the Conversion Price; (2) the Company consolidates or merges with, or transfers all or substantially all of its assets to, another corporation and shareholders of the Company must approve the transaction; or (3) there is a dissolution or liquidation of the Company, the Company shall mail to Securityholders and file with the Trustee a notice stating the proposed record or effective date, as the case may be. The Company shall mail the notice at least ten days before such date. Failure to mail such notice or any defect therein shall not affect the validity of any transaction referred to in clause (1), (2) or (3) of this Section 4.10. Section 4.11 Effect of Reclassification, Consolidation, Merger or Sale on Conversion Privilege. If any of the following shall occur, namely: (a) any reclassification or change of shares of Common Stock issuable upon conversion of the Securities (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination, or any other change for which an adjustment is provided in Section 4.6); (b) any consolidation or merger to which the Company is a party other than a merger in which the Company is the continuing corporation and which does not result in any reclassification of, or change (other than a change in name, or in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of Common Stock; or (c) any sale or conveyance of all or substantially all of the assets of the Company as an entirety, then the Company, or such successor or purchasing corporation, as the case may be, shall, as a condition precedent to such reclassification, change, consolidation, merger, sale or conveyance, execute and deliver to the Trustee a supplemental indenture providing that the Holder of each Security then outstanding shall have the right to convert such Security into the kind and amount of shares of stock and other securities and property (including cash) receivable upon such reclassification, change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock deliverable upon conversion of such Security immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Such supplemental indenture shall provide for adjustments of the Conversion Price which shall be as nearly equivalent as may be practicable to the adjustments of the Conversion Price provided for in this Article 4. If, in the case of any such consolidation, merger, sale or conveyance, the stock or other securities and property (including cash) receivable thereupon by a holder of Common Stock include shares of stock or other securities and property of a corporation other than the successor or purchasing corporation, as the case may be, in such consolidation, merger, sale or conveyance, then such supplemental indenture shall also be executed by such other corporation and shall contain such additional provisions to protect the 20 interests of the Holders of the Securities as the Board of Directors shall reasonably consider necessary by reason of the foregoing. The provisions of this Section 4.11 shall similarly apply to successive consolidations, mergers, sales or conveyances. In the event the Company shall execute a supplemental indenture pursuant to this Section 4.11, the Company shall promptly file with the Trustee (x) an Officers' Certificate briefly stating the reasons therefor, the kind or amount of shares of stock or securities or property (including cash) receivable by Holders of the Securities upon the conversion of their Securities after any such reclassification, change, consolidation, merger, sale or conveyance, any adjustment to be made with respect thereto and that all conditions precedent have been complied with and (y) an Opinion of Counsel that all conditions precedent have been complied with. Section 4.12 Trustee's Disclaimer. The Trustee has no duty to determine if the conditions precedent to the Company's redemption rights under Section 3 have been satisfied and to determine when an adjustment under this Article 4 should be made, how it should be made or what such adjustment should be, but may accept as conclusive evidence of that fact or the correctness of any such adjustment, and shall be protected in relying upon, an Officers' Certificate including the Officers' Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 4.9. The Trustee makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities, and the Trustee shall not be responsible for the Company's failure to comply with any provisions of this Article 4. The Trustee shall not be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture executed pursuant to Section 4.11, but may accept as conclusive evidence of the correctness thereof, and shall be fully protected in relying upon, the Officers' Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 4.11. ARTICLE V SUBORDINATION Section 5.1 Securities Subordinated to Senior Indebtedness. The Company covenants and agrees, and each holder of Securities issued hereunder by his or her acceptance thereof likewise covenants and agrees, that all Securities shall be issued subject to the provisions of this Article 5; and each person holding any Security, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. The payment of the principal of and interest on all Securities issued hereunder (including, without limitation, in connection with any redemption of Securities) shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to 21 the prior payment in full of all Senior Indebtedness, whether outstanding at the date of this Indenture or thereafter created, assumed or guaranteed. Section 5.2 Securities Subordinated to Prior Payment of All Senior Indebtedness on Dissolution, Liquidation, Reorganization, Etc., of the Company. Upon the payment or distribution of the assets of the Company of any kind or character, whether in cash, property or securities (including any collateral at any time securing the Securities), to creditors upon any dissolution, winding-up, total or partial liquidation or reorganization of the Company (whether voluntary or involuntary, or in bankruptcy, insolvency, reorganization, liquidation, receivership proceedings, or upon an assignment for the benefit of creditors, or any other marshalling of the assets and liabilities of the Company, or otherwise), then in such event: (a) all Senior Indebtedness (including principal thereof, interest thereon and fees and expenses relating thereto) and the reasonable fees and expenses of the Trustee shall first be paid in full, in cash, or have provision made for such payment, before any payment is made on account of the principal of or interest on the indebtedness evidenced by the Securities or any deposit is made pursuant to Section 6.3; (b) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (other than securities of the Company as reorganized or readjusted, or securities of the Company or any other company, trust or corporation provided for by a plan of reorganization or readjustment, junior, or the payment of which is otherwise subordinate, at least to the extent provided in this Article 5, with respect to the Securities, to the payment of all Senior Indebtedness at that time outstanding and to the payment of all securities issued in exchange therefor to the holders of the Senior Indebtedness at the time outstanding), to which the Holders or the Trustee on behalf of the Holders would be entitled except for the provisions of this Article 5, including any such payment or distribution which may be payable or deliverable by reason of the payment of another debt of the Company being subordinated to the payment of the Securities, shall be paid or delivered by any debtor, Custodian or other person making such payment or distribution, directly to the holders of the Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Indebtedness have been issued, ratably according to the aggregate amounts remaining unpaid on account of the principal of, interest on and fees and expenses relating to the Senior Indebtedness held or represented by each, for application to payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full after giving effect to any concurrent payment or distribution, or provision therefor, to the holders of such Senior Indebtedness; and (c) in the event that, notwithstanding the foregoing provisions of this Section 5.2, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities other than securities of the Company as reorganized or readjusted, or securities of the Company or any other Company, trust or corporation provided for by a plan of reorganization or readjustment, junior, or the payment of which is otherwise subordinate, at least 22 ******************************************************************************** ******************************************************************************** *******************************************************************************e Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon the happening of an Event of Default under this Indenture, subject to the provisions of Article 8, and the rights, if any, under this Article 5 of the holders of Senior Indebtedness in respect of assets, whether in cash, property or securities of the Company received upon the exercise of any such remedy. Section 5.5 Company Not to Make Payment With Respect to Securities in Certain Circumstances. (a) Upon the happening of a default in payment (whether at maturity or at a date fixed for prepayment or by acceleration or otherwise) of the principal of or interest on any Senior Indebtedness, as such default is defined under or in respect of such Senior Indebtedness or in any agreement pursuant to which such Senior Indebtedness has been incurred, then, unless and until the amount of such Senior Indebtedness then due shall have been paid in full or provision made therefor in a manner satisfactory to the holders of such Senior Indebtedness, or such default shall have been cured or waived or shall have ceased to exist, the Company shall not pay principal of or interest on the Securities or make any deposit pursuant to Section 6.3 or 10.1 and shall not repurchase, redeem or otherwise retire any Securities (collectively, "pay the Securities"). (b) Upon the happening of an event of default with respect to any Senior Indebtedness (other than under circumstances when the terms of subsection (a) of this Section 5.5 are applicable), as such event of default is defined under or in respect of such Senior Indebtedness or in any agreement pursuant to which such Senior Indebtedness has been incurred, permitting the holders thereof to accelerate the maturity thereof, and upon written notice thereof given to the Company and the Trustee by any holders of such Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Indebtedness have been issued (a "Default Notice"), then, unless and until such event of default shall have been cured or waived in writing by the holders of such Senior Indebtedness or shall have ceased to exist, no direct or indirect payment shall be made with respect to the principal of or interest on the Securities or to acquire any of the Securities or on account of the redemption or mandatory repurchase provisions of the Securities; provided, however, that this subsection (b) shall not prevent the making of any such payment (which is not otherwise prohibited by subsection (a) of this Section 5.5) for more than 120 days after the Default Notice shall have been given unless the Senior Indebtedness in respect of which such event of default exists has been declared due and payable in its entirety, in which case no such payment may be made until such acceleration has been waived, rescinded or 36 annulled, or such Senior Indebtedness shall have been paid in full, or payment thereof shall be duly provided for in cash or in any other manner satisfactory to the holders of such Senior Indebtedness. Notwithstanding the foregoing, not more than one Default Notice shall be given with respect to the same issue of Senior Indebtedness within a period of 360 consecutive days, and no event of default which existed or was continuing on the date of any Default Notice and was known to the holders of such issue of Senior Indebtedness shall be made the basis for the giving of a subsequent Default Notice by the holders of such issue of Senior Indebtedness. (c) In the event that, notwithstanding the foregoing provisions of this Section 5.5, any payment on account of the principal of or interest on the Securities shall be made by or on behalf of the Company and received by the Trustee, any Holder or any Paying Agent (or, if the Company is acting as its own Paying Agent, money for any such payment shall be segregated and held in trust), after the happening of a default under any Senior Indebtedness of the type specified in subsections (a) and (b) of this Section 5.5, then, unless and until the amount of such Senior Indebtedness then due shall have been paid in full, or provision made therefor or such default shall have been cured or waived, such payment (subject, in each case, to the provisions of Sections 5.6 and 5.7 and the proviso contained in subsection (b) of this Section 5.5) shall be held in trust for the benefit of, and shall be immediately paid over to, the holders of Senior Indebtedness or their representative or representatives or the trustee or trustees under any indenture under which any instruments evidencing any of the Senior Indebtedness may have been issued ratably according to the aggregate amounts remaining unpaid on account of the principal of and interest on, and fees and other charges in respect of, the Senior Indebtedness held or represented by each, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of Senior Indebtedness. Section 5.6 Notice to Trustee. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article 5 or any other provision of this Indenture, the Trustee shall not at any time be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee, unless and until the Trustee shall have received written notice thereof from the Company or from the holder or holders of Senior Indebtedness or from their representative or representatives or from the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Indebtedness have been issued; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Sections 9.1 and 9.2, shall be entitled to assume conclusively that such facts do not exist. The Trustee shall be entitled to rely conclusively on the delivery to it of a written notice by a person representing himself or herself to be a holder of Senior Indebtedness (or a representative of such holder or the trustee under any indenture pursuant to which any instruments evidencing any of such Senior Indebtedness have been issued) to establish that such notice has been given by a holder of Senior Indebtedness or a representative of any such holder. 37 In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article 5, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such person, the extent to which such person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of each person under this Article 5, and, if such evidence is not furnished, the Trustee may defer any payment to such person pending judicial determination as to the right of such person to receive such payment. Section 5.7 Application by Trustee of Monies Deposited With It. Money or U.S. Government Obligations deposited in trust with the Trustee pursuant to Sections 6.3 and 10.1 and not in violation of this Article 5 shall be for the sole benefit of Securityholders and shall thereafter not be subject to the subordination provisions of this Article 5. Otherwise, any deposit of monies by the Company with the Trustee or any Paying Agent (whether or not in trust) for the payment of the principal of or interest on any Securities shall be subject to the provisions of Sections 5.1, 5.2, 5.3 and 5.5; except that, if two Business Days prior to the date on which by the terms of this Indenture any such monies may become payable for any purpose (including, without limitation, the payment of either the principal of or interest on any Security) the Trustee shall not have received with respect to such monies the notice provided for in Section 5.6, then the Trustee or any Paying Agent shall have full power and authority to receive such monies and to apply such monies to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it on or after such date. This Section 5.7 shall be construed solely for the benefit of the Trustee and the Paying Agent and shall not otherwise affect the rights that holders of Senior Indebtedness may have to recover any such payments from the Holders in accordance with the provisions of this Article 5. Section 5.8 Subordination Rights Not Impaired by Acts or Omissions of Company or Holders of Senior Indebtedness. No right of any present or future holders of any Senior Indebtedness to enforce subordination, as herein provided, shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof which any such holder may have or be otherwise charged with. The holders of any Senior Indebtedness may extend, renew, modify or amend the terms of such Senior Indebtedness or any security therefor and release, sell or exchange such security and otherwise deal freely with the Company, all without affecting the liabilities and obligations of the parties to this Indenture or the Holders. No provision in any supplemental indenture which affects the superior position of the holders of the Senior Indebtedness shall be effective against the holders of the Senior Indebtedness unless the holders of such Senior Indebtedness (required pursuant to the terms of such Senior Indebtedness to give such consent) have consented thereto. 38 Section 5.9 Trustee to Effectuate Subordination. Each holder of a Security by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article 5 and appoints the Trustee his or her attorney-in-fact for any and all such purposes. Section 5.10 Right of Trustee to Hold Senior Indebtedness. The Trustee, in its individual capacity, shall be entitled to all of the rights set forth in this Article 5 in respect of any Senior Indebtedness at any time held by it to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall be construed to deprive the Trustee of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 9.7. Section 5.11 Article 5 Not to Prevent Events of Default. The failure to make a payment on account of the principal of or interest on the Securities by reason of any provision in this Article 5 shall not be construed as preventing the occurrence of an Event of Default under Section 8.1. Section 5.12 No Fiduciary Duty Created to Holders of Senior Indebtedness. Notwithstanding any other provision in this Article 5, the Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness by virtue of the provisions of this Article 5. Section 5.13 Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article 5 shall in such case (unless the context shall otherwise require) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article 5 in addition to or in place of the Trustee; provided, however, that Sections 5.6, 5.10 and 5.12 shall not apply to the Company if it acts as Paying Agent. ARTICLE VI COVENANTS Section 6.1 Payment of Securities. The Company shall promptly make all payments in respect of the Securities on the dates and in the manner provided in the Securities and this Indenture. An installment of 39 principal or interest shall be considered paid on the date it is due if the Paying Agent (other than the Company or any Affiliate thereof) holds on that date money, deposited by the Company or an Affiliate thereof, sufficient to pay the installment. The Company shall pay interest on overdue principal at the rate borne by the Securities per annum; it shall pay interest on overdue installments of interest at the same rate to the extent lawful. Section 6.2 SEC Reports. The Company shall file all reports and other information and documents which it is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, and within 15 days after it files them with the SEC, the Company shall file copies of all such reports, information and other documents with the Trustee. The Company will cause any quarterly and annual reports which it mails to its shareholders to be mailed to the Holders of the Securities. In the event the Company is at any time not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will prepare, for the first three quarters of each fiscal year, quarterly financial statements substantially equivalent to the financial statements required to be included in a report on Form 10-Q under the Exchange Act. The Company will also prepare, on an annual basis, complete audited consolidated financial statements, including, but not limited to, a balance sheet, a statement of operations, a statement of cash flows and all appropriate notes. All such financial statements will be prepared in accordance with generally accepted accounting principles. The Company will cause a copy of such financial statements to be filed with the Trustee and mailed to the Holders of the Securities within 50 days after the end of each of the first three quarters of each fiscal year and within 95 days after the close of each fiscal year. The Company will also comply with the other provisions of TIA Section 314(a). Section 6.3 Liquidation. Subject to the provisions of Article 5, so far as they may be applicable hereto, the Board of Directors or the shareholders of the Company may not adopt a plan of liquidation, which plan provides for, contemplates or the effectuation of which is preceded by (a) the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company otherwise than substantially as an entirety (any such sale, lease, conveyance or other disposition substantially as an entirety being governed by Article 7) and (b) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance or other disposition and of the remaining assets of the Company to the holders of the capital stock of the Company, unless the Company shall in connection with the adoption of such plan make provision for, or agree that prior to making any liquidating distributions it will make provision for, the satisfaction of the Company's obligations hereunder and under the Securities as to the payment of the principal and interest thereof. The Company shall be deemed to make provision for such payments only if (1) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations maturing as to principal and interest in such amounts and at such times as are sufficient, without consideration of any reinvestment of such interest, to pay the principal of and interest on the Securities then outstanding to maturity and to pay all other sums payable by it 40 hereunder or (2) there is an express assumption of the due and punctual payment of the Company's obligations hereunder and under the Securities and the performance and observance of all covenants and conditions to be performed by the Company hereunder, by the execution and delivery of a supplemental indenture in form satisfactory to the Trustee by a person who acquires, or will acquire (otherwise than pursuant to a lease), a portion of the assets of the Company, and which person will have assets (immediately after the acquisition) and aggregate earnings (for such person's four full fiscal quarters immediately preceding the acquisition) equal to not less than the assets of the Company (immediately preceding such acquisition) and the aggregate earnings of the Company (for its four full fiscal quarters immediately preceding the acquisition), respectively, and which is a corporation organized under the laws of the United States, any State thereof or the District of Columbia; provided, however, that the Company shall not make any liquidating distribution until after the Company (x) has certified to the Trustee with an Officers' Certificate at least five days prior to the making of any liquidating distribution that it has complied with the provisions of this Section 6.3 and (y) delivered to the Trustee an Opinion of Counsel that all conditions precedent to such liquidation have been complied with. Section 6.4 Compliance Certificates. The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year of the Company, an Officers' Certificate as to the signer's knowledge of the Company's compliance with all conditions and covenants on its part contained in this Indenture and stating whether or not the signer knows of any default or Event of Default. If such signer knows of such a default or Event of Default, the Officers' Certificate shall describe the default or Event of Default and the efforts to remedy the same. For the purposes of this Section 6.4, compliance shall be determined without regard to any grace period or requirement of notice provided pursuant to the terms of this Indenture. The Officers' Certificate need not comply with Section 12.4 hereof. Section 6.5 Notice of Defaults. In the event (a) that indebtedness of the Company in an aggregate amount in excess of $5,000,000 is declared due and payable before its maturity because of the occurrence of any default under such indebtedness, or (b) of the occurrence of any event which entitles the holder or holders of such indebtedness to declare such indebtedness due and payable before its maturity and with respect to which any applicable grace period has lapsed or expired, the Company will promptly give written notice to the Trustee of such declaration or event. Section 6.6 Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture. 41 ARTICLE VII SUCCESSOR CORPORATION Section 7.1 When Company May Merge, Etc. The Company shall not consolidate with or merge with or into, or transfer all or substantially all of its assets to, any person unless: (a) either the Company shall be the resulting or surviving entity or such person is a corporation organized and existing under the laws of the United States, a State thereof or the District of Columbia, and such person expressly assumes by supplemental indenture executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture (in which case all such obligations of the Company shall terminate); and (b) immediately before and immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company as a result of such transaction as having been incurred by the Company at the time of such transaction, no default or Event of Default shall have occurred and be continuing. The Company shall deliver to the Trustee prior to the proposed transaction an Officers' Certificate and an Opinion of Counsel, each of which shall comply with Section 12.4 and shall state that such consolidation, merger or transfer and such supplemental indenture comply with this Article 7 and that all conditions precedent herein provided for relating to such transaction have been complied with; provided, however, that such Opinion of Counsel shall not address Events of Default, except where such counsel has actual knowledge of any such Event of Default. Section 7.2 Successor Corporation Substituted. Upon any consolidation or merger, or any transfer of all or substantially all of the assets of the Company in accordance with Section 7.1, the successor corporation formed by such consolidation or into which the Company is merged or to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation had been named as the Company herein. 42 ARTICLE VIII DEFAULT AND REMEDIES Section 8.1 Events of Default. An "Event of Default" shall occur if: (1) the Company defaults in the payment of interest on any Security when the same becomes due and payable and the default continues for a period of 10 business days; (2) the Company defaults in the payment of the principal of any Security when the same becomes due and payable at maturity, upon redemption or otherwise; (3) the Company fails to comply with any of its other agreements contained in the Securities or this Indenture and the default continues for the period and after the notice specified below; (4) a default shall occur under any bond, debenture, note or other evidence of Indebtedness for money borrowed by the Company or any Restricted Subsidiary, which default shall have resulted in such Indebtedness becoming or being declared payable prior to the date on which it would otherwise have been due and payable (provided that the aggregate amount of such Indebtedness subject to acceleration exceeds $5 million), without such Indebtedness having been discharged, such acceleration having been rescinded or annulled or there having been deposited in trust a sum of money sufficient to discharge in full such Indebtedness; (5) the Company or any of its Subsidiaries fails to pay any principal or interest when due under any bond, debenture, note or other evidence of Indebtedness for money (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument evidencing or governing such Indebtedness, has expired (provided that the amount of such Indebtedness, and any interest or premium thereon, exceeds $5 million); (6) the Company pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case or proceeding; 43 (B) consents to the entry of an order for relief against it in an involuntary case or proceeding; (C) consents to the appointment of a Custodian of it or for all or substantially all of its property; or (D) makes a general assignment for the benefit of its creditors; or (7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company in an involuntary case or proceeding; (B) appoints a Custodian of the Company or for all or substantially all of its property; or (C) orders the liquidation of the Company; and in each case the order or decree remains unstayed and in effect for 60 days. The term "Bankruptcy Law" means Title 11 of the United States Code or any similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. A default under clause (3) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in principal amount of the Securities then outstanding notify the Company and the Trustee, of the default, and the Company does not cure the default within 30 days after receipt of such notice. The notice given pursuant to this Section 8.1 must specify the default, demand that it be remedied and state that the notice is a "Notice of Default." When a default is cured, it ceases. Subject to the provisions of Sections 9.1 and 9.2, the Trustee shall not be charged with knowledge of any Event of Default unless written notice thereof shall have been given to a Trust Officer at the Corporate Trust Office of the Trustee by the Company, the Paying Agent, any Holder or any agent of any Holder. Section 8.2 Acceleration. If an Event of Default (other than an Event of Default specified in clause (5) or (6) of Section 8.1) occurs and is continuing, the Trustee may, by notice to the Company, or the Holders of at least 25% in principal amount of the Securities then outstanding may, by notice to the Company and the Trustee, and the Trustee shall, upon the request of such Holders, declare all unpaid principal of and accrued interest to the date of acceleration on the Securities then outstanding (if not then due and payable) to be due and payable upon any such declaration, and 44 the same shall become and be immediately due and payable. If an Event of Default specified in clause (5) or (6) of Section 8.1 occurs, all unpaid principal of and accrued interest on the Securities then outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholder. The Holders of a majority in principal amount of the Securities then outstanding by notice to the Trustee may rescind an acceleration and its consequences if (a) all existing Events of Default, other than the nonpayment of the principal of and accrued interest on the Securities which has become due solely by such declaration of acceleration, have been cured or waived; (b) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid; (c) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction; and (d) all payments due to the Trustee and any predecessor Trustee under Section 9.7 have been made. Anything herein contained to the contrary notwithstanding, in the event of any acceleration pursuant to this Section 8.2, the Company shall not be obligated to pay any premium which it would have had to pay if it had then elected to redeem the Securities pursuant to paragraph 5 of the Securities, except 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 which it would have had to pay if it had then elected to redeem the Securities pursuant to paragraph 5 of the Securities, in which case an equivalent premium shall also become and be immediately due and payable to the extent permitted by law. Section 8.3 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of the principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. Section 8.4 Waiver of Defaults and Events of Default. Subject to Sections 8.7 and 11.2, the Holders of a majority in principal amount of the Securities then outstanding by notice to the Trustee may waive an existing default or Event of Default and its consequence, except a default in the payment of the principal of or interest on any Security as specified in clauses (1) and (2) of Section 8.1. When a default or Event of Default is waived, it is cured and ceases. 45 Section 8.5 Control by Majority. The Holders of a majority in principal amount of the Securities then outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of another Securityholder or the Trustee, or that may involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 8.6 Limitations on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities (except actions for payment of overdue principal or interest or for the conversion of the Securities pursuant to Article 4) unless: (1) the Holder gives to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in principal amount of the then outstanding Securities make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Securities then outstanding. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over such other Securityholder. Section 8.7 Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of the principal of and interest on the Security, on or after the respective due dates expressed in the Security, or to bring suit for the enforcement of any such payment on or after such respective dates, is absolute and unconditional and shall not be impaired or affected without the consent of the Holder. 46 Section 8.8 Collection Suit by Trustee. If an Event of Default in the payment of principal or interest specified in clause (1) or (2) of Section 8.1 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or another obligor on the Securities for the whole amount of principal and accrued interest remaining unpaid, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate per annum borne by the Securities and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 8.9 Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Securityholders allowed in any judicial proceedings relative to the Company (or any other obligor on the Securities), its creditors or its property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceeding is hereby authorized by each Securityholder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 9.7, and to the extent that such payment of the reasonable compensation, expenses, disbursements and advances in any such proceedings shall be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends, monies, securities and other property which the Securityholders may be entitled to receive in such proceedings, whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to, or, on behalf of any Securityholder, to authorize, accept or adopt any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding. Section 8.10 Priorities. If the Trustee collects any money pursuant to this Article 8, it shall pay out the money in the following order: First, to the Trustee for amounts due under Section 9.7; Second, to the holders of Senior Indebtedness to the extent required by Article 5; 47 Third, to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and Fourth, to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section 8.10. Section 8.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 8.11 does not apply to a suit made by the Trustee, a suit by a Holder pursuant to Section 8.7, or a suit by Holders of more than 10% in principal amount of the Securities then outstanding. Section 8.12 Waiver of Usury, Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE IX TRUSTEE Section 9.1 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee need perform only those duties as are specifically set forth in this Indenture and no others; and 48 (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. The Trustee, however, shall examine any certificates and opinions which by any provision hereof are specifically required to be delivered to the Trustee to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) this paragraph does not limit the effect of subsection (b) of this Section 9.1; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 8.5. (d) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability, expense or fee. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to subsections (a), (b), (c) and (d) of this Section 9.1. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 9.2 Rights of Trustee. Subject to Section 9.1: (a) The Trustee may rely conclusively on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Section 12.4(b). The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Certificate or Opinion. 49 (c) The Trustee may act through its agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. (e) The Trustee may consult with counsel, and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection in respect of any such action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. Section 9.3 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or an affiliate of the Company with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 9.10 and 9.11. Section 9.4 Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement in the Securities other than its certificate of authentication. Section 9.5 Notice of Default or Events of Default. If a default or an Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the default or Event of Default within 90 days after it occurs. Except in the case of a default or an Event of Default in payment of the principal of or interest on any Security, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interest of Securityholders. Section 9.6 Reports by Trustee to Holders. If such report is required by TIA Section 313, within 60 days after each April 15, beginning with the April 15 following the date of this Indenture, the Trustee shall mail to each Securityholder a brief report dated as of such April 15 that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b)(2) and (c). A copy of each report at the time of its mailing to Securityholders shall be mailed to the Company and filed with the SEC and each stock exchange, if any, on which the Securities are listed. The Company shall notify the Trustee whenever the Securities become listed on any stock exchange and any changes in the stock exchanges on which the Securities are listed. 50 Section 9.7 Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its services (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust). The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it. Such expenses may include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee for, and hold it harmless against, any loss, liability or expense (including reasonable legal fees and expenses) incurred by it in connection with its duties under this Indenture or any action or failure to act as authorized or within the discretion or rights or powers conferred upon the Trustee hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. The Trustee shall have the option of undertaking the defense of such claims; provided, however, that if the Trustee opts not to defend itself, the Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement without its written consent, which shall not be unreasonably withheld. The Company need not reimburse the Trustee for any expense or indemnify it against any loss or liability incurred by it resulting from its negligence or bad faith. To secure the Company's payment obligations in this Section 9.7, the Trustee shall have a senior claim to which the Securities are hereby made subordinate on all money or property held or collected by the Trustee, except such money or property held in trust to pay the principal of and interest on particular Securities. The obligations of the Company under this Section 9.7 to compensate or indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall be secured by a lien prior to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders of particular Securities. The obligations of the Company under this Section 9.7 shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in clause (5) or (6) of Section 8.1 occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. Section 9.8 Replacement of Trustee. The Trustee may resign by so notifying the Company. The Holders of a majority in principal amount of the Securities then outstanding may remove the Trustee by so notifying the Trustee and may, with the Company's written consent, appoint a successor Trustee. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 9.10; 51 (2) the Trustee is adjudged a bankrupt or an insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. If a successor Trustee does not take office within 45 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of 10% in principal amount of the Securities then outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 9.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee and be released from its obligations (exclusive of any liabilities that the retiring Trustee may have incurred while acting as Trustee) hereunder, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Securityholder. A retiring Trustee shall not be liable for the acts or omissions of any successor Trustee after its succession. Notwithstanding replacement of the Trustee pursuant to this Section 9.8, the Company's obligations under Section 9.7 shall continue for the benefit of the retiring Trustee. Section 9.9 Successor Trustee by Merger, Etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust assets to, another corporation, the resulting, surviving or transferee corporation, without any further act, shall be the successor Trustee, provided such transferee corporation shall qualify and be eligible under Section 9.10. Section 9.10 Eligibility; Disqualification. The Trustee shall always satisfy the requirements of paragraphs (1), (2) and (5) of TIA Section 310(a). If at any time the Trustee shall cease to satisfy any such requirements, it shall resign immediately in the manner and with the effect specified in this Article 9. The Trustee shall be subject to the provisions of TIA Section 310(b). Nothing herein shall prevent 52 the Trustee from filing with the SEC the application referred to in the penultimate paragraph of TIA Section 310(b). Section 9.11 Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE X SATISFACTION AND DISCHARGE OF INDENTURE Section 10.1 Termination of Company's Obligations. Subject to applicable rules of any stock exchange or system on which the Securities are listed or quoted, the Company may terminate all of its obligations under the Securities and this Indenture (excepting those obligations referred to in the immediately succeeding paragraph) if all Securities previously authenticated and delivered (other than destroyed, lost or stolen Securities which have been replaced or paid or Securities for whose payment money has theretofore been held in trust and thereafter repaid to the Company, as provided in Section 10.3) have been delivered to the Trustee or the Paying Agent for cancellation and the Company has paid all sums payable by it hereunder, or if the Company irrevocably deposits in trust with the Trustee or the Paying Agent, pursuant to a written trust agreement satisfactory to the Trustee, money or U.S. Government Obligations maturing as to principal and interest in such amounts and at such times as are sufficient, without consideration of any reinvestment of such interest, to pay the principal of and interest on the Securities then outstanding to maturity or to the date fixed for redemption and to pay all other sums payable by it hereunder. The Company may make an irrevocable deposit pursuant to this Section 10.1 only if at such time it is not prohibited from doing so under the provisions of Article 5 and the Company shall have delivered to the Trustee and any such Paying Agent an Officers' Certificate and an Opinion of Counsel to that effect and that all other conditions to such deposit have been complied with. The Company's obligations in paragraph 13 of the Securities and in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.11, 2.12, 6.1, 9.7, 9.8, 10.4 and Article 4 shall survive until the Securities are no longer outstanding. Thereafter, the Company's obligations in such paragraph 13 and in Section 9.7 shall survive. After such irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Securities and this Indenture, except for those surviving obligations specified above. "U.S. Government Obligations" means direct non-callable obligations of, or non-callable obligations guaranteed by, the United States of America for the payment of which obligation or guarantee the full faith and credit of the United States is pledged. 53 Section 10.2 Application of Trust Money. The Trustee or the Paying Agent shall hold in trust, for the benefit of the Holders, money or U.S. Government Obligations deposited with it pursuant to Section 10.1, and shall apply the deposited money and the money from U.S. Government Obligations in accordance with this Indenture to the payment of the principal of and interest on the Securities. Money and U.S. Government Obligations so held in trust shall not be subject to the subordination provisions of Article 5. Section 10.3 Repayment to Company. Subject to Section 10.1, the Trustee and the Paying Agent shall promptly pay to the Company upon request any excess money or U.S. Government Obligations held by them at any time. The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years after a right to such money has matured; provided, however, that the Trustee or such Paying Agent, before being required to make any such payment, may at the expense of the Company cause to be published once in a newspaper of general circulation in The City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein, which shall be at least 30 days from the date of such publication or mailing, any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Securityholders entitled to money must look to the Company for payment as general creditors unless otherwise prohibited by law. Section 10.4 Reinstatement. If the Trustee or the Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 10.1 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 10.1 until such time as the Trustee or the Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 10.1; provided, however, that if the Company has made any payment of the principal of or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive any such payment from the money or U.S. Government Obligations held by the Trustee or the Paying Agent. 54 ARTICLE XI AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 11.1 Without Consent of Holders. The Company and the Trustee may amend or supplement this Indenture or the Securities without notice to or consent of any Securityholder: (a) to comply with Sections 4.11, 6.3 and 7.1; (b) to provide for uncertificated Securities in addition to or in place of certificated Securities; (c) to cure any ambiguity, defect or inconsistency, or to make any other change that does not adversely affect the rights of any Securityholder; (d) to comply with the provisions of the TIA; or (e) to appoint a successor Trustee. Section 11.2 With Consent of Holders. The Company and the Trustee may amend or supplement this Indenture or the Securities without notice to any Securityholder with the written consent of the Holders of a majority in principal amount of the Securities then outstanding. The Holders of a majority in principal amount of the Securities then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture or the Securities without notice to any Securityholder. Subject to Section 11.4, without the written consent of each Securityholder affected, however, an amendment, supplement or waiver, including a waiver pursuant to Section 8.4, may not: (1) reduce the principal amount of Securities whose Holders must consent to an amendment, supplement or waiver; (2) reduce the rate of or change the time for payment of interest on any Security; (3) reduce the principal of or premium on or change the fixed maturity of any Security or alter the redemption provisions with respect thereto in a manner adverse to the Holder thereof; (4) alter the conversion provisions with respect to any Security in a manner adverse to the Holder thereof; (5) waive a default in the payment of the principal of or premium or interest on any Security; 55 (6) make any changes in Section 8.4 or 8.7 or in this sentence; (7) modify the provisions of Article 5 in a manner adverse to the Holders; or (8) make any Security payable in money other than that stated in the Security. It shall not be necessary for the consent of the Holders under this Section 11.2 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 11.2 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver. An amendment under this Section 11.2 may not make any change that adversely affects the rights under Article 5 of any holder of an issue of Senior Indebtedness unless the holders of that issue, pursuant to its terms, consent to the change. Section 11.3 Compliance With Trust Indenture Act. Every amendment to or supplement of this Indenture or the Securities shall comply with the TIA as in effect at the date of such amendment or supplement. Section 11.4 Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his or her Security or portion of a Security if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder, unless it makes a change described in any of clauses (1) through (8) of Section 11.2. In that case the amendment, supplement or waiver shall bind each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security. Section 11.5 Notation on or Exchange of Securities. If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may 56 place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Section 11.6 Trustee to Sign Amendments, etc. The Trustee shall sign any amendment or supplement authorized pursuant to this Article 11 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, in its sole discretion, but need not sign it. In signing or refusing to sign such amendment or supplement, the Trustee shall be entitled to receive and, subject to Section 9.1, shall be fully protected in relying upon, an opinion of Counsel stating that such amendment or supplement is authorized or permitted by this Indenture. The Company may not sign an amendment or supplement until the Board of Directors approves it. ARTICLE XII MISCELLANEOUS Section 12.1 Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by any of Sections 310 to 317, inclusive, of the TIA through operation of Section 318(c) thereof, such imposed duties shall control. Section 12.2 Notices. Any notice, request or communication shall be given in writing and delivered in person or mailed by first-class mail, postage prepaid, addressed as follows: If to the Company: If to the Trustee: Such notices or communications shall be effective when received. The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed by first-class mail to him or her at his or her address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or 57 communication to a Securityholder is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. Section 12.3 Communications by Holders With Other Holders. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and any other person shall have the protection of TIA Section 312(c). Section 12.4 Certificate and Opinion as to Conditions Precedent. (a) Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee at the request of the Trustee: (1) an Officer's Certificate stating that, in the opinion of the signers, all conditions precedent (including any covenants, compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent (including any covenants, compliance with which constitutes a condition precedent) have been complied with. (b) Each Officers' Certificate and opinion of Counsel with respect to compliance with a condition or covenant provided for in this Indenture (other than annual certificates provided pursuant to Section 6.4) shall include: (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with; provided, however, that with respect to matters of fact an Opinion of Counsel 58 may rely on an Officers' Certificate or certificates of public officials. Section 12.5 Record Date for Vote or Consent of Securityholders. The Company (or, in the event deposits have been made pursuant to Section 6.3 or 10.1, the Trustee) may set a record date for purposes of determining the identity of Securityholders entitled to vote or consent to any action by vote or consent authorized or permitted under this Indenture, which record date shall be the later of ten days prior to the first solicitation of such vote or consent or the date of the most recent list of Securityholders furnished to the Trustee pursuant to Section 2.5 prior to such solicitation. Notwithstanding the provisions of Section 11.4, if a record date is fixed, those persons who were Holders of Securities at such record date (or their duly designated proxies), and only those persons, shall be entitled to take such action by vote or consent or to revoke any vote or consent previously given, whether or not such persons continue to be Holders after such record date. Section 12.6 Rules by Trustee, Paying Agent, Registrar, Conversion Agent. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar, Paying Agent or Conversion Agent may make reasonable rules for its functions. Section 12.7 Legal Holidays. A "Legal Holiday" is a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York (or such other city and state where the Trustee's corporate trust operations are then located) are not required to be open. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. Section 12.8 Governing Law. Except as specifically provided in Section 3.8(a), the laws of the State of New York shall govern this Indenture and the Securities without regard to principles of conflicts of law. Section 12.9 No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 12.10 No Recourse Against Others. All liability described in paragraph 18 of the Securities of any director, officer, employee or shareholder, as such, of the Company is waived and released. 59 Section 12.11 Successors. All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. Section 12.12 Multiple Counterparts. The parties may sign multiple counterparts of this Indenture. Each signed counterpart shall be deemed an original, but all of them together represent the same agreement. Section 12.13 Separability. In case any provisions in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 60 Section 12.14 Table of Contents, Headings, etc. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of ________________________. [ISSUER] By: ------------------------------------ Name: Title: {SEAL} Attest: By: ------------------------------------ Name: Title: [TRUSTEE] By: ------------------------------------ Name: Title: {SEAL} By: ------------------------------------ Name: Title: 61 EXHIBIT A-1 [FORM OF FACE OF SECURITY] 6% Convertible Subordinated Debentures due _______(1) [NAME OF ISSUER] INCORPORATED UNDER THE LAWS OF THE STATE OF MAINE CUSIP: __________ R-__________ 6% Repriced Convertible Subordinated Debentures due _______(2) [Name of Issuer] promises to pay to _______________, or registered assigns, the principal sum of __________________ Dollars on _______(2). Interest Payment Dates: January 15, April 15, July 15 and October 15 Record Dates: December 30, March 30, June 30, and September 30 This Debenture is convertible as specified on the other side of this Debenture. Additional provisions of this Debenture are set forth on the other side of this Debenture. - ---------- (1) Insert five years from date of issuance. (2) Insert fifth anniversary of date of issuance. IN WITNESS WHEREOF, [Name of Issuer] has caused this instrument to be duly executed in its corporate name and the facsimile of its corporate seal to be affixed hereunto or imprinted hereon. [NAME OF ISSUER] By: ------------------------------------- President and Chief Executive Officer [SEAL] Attest: Dated: Trustee's Certificate of Authentication: This is one of the Securities referred to in the within-mentioned Indenture. [NAME OF TRUSTEE], as Trustee By: -------------------------------------- Authorized Signatory 1 [FORM OF REVERSE SIDE OF SECURITY] [NAME OF ISSUER] 6% Repriced Convertible Subordinated Debentures due _______(1) 1. Interest. [Name Of Issuer], a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Debenture at the rate per annum shown above. The Company shall pay interest quarterly on January 15, April 15, July 15 and October 15 of each year, commencing _____________.(2) Interest on the Debentures shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of first issuance of the Debentures under the Indenture (as defined below); provided, however, that if there is not an existing default in the payment of interest, and if this Debenture is authenticated between a record date referred to on the face hereof and the next succeeding interest payment date, interest shall accrue from such interest payment date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company shall pay interest on this Debenture (except defaulted interest) to the person who is the Holder of this Debenture at the close of business on the December 30, March 30, June 30 or September 30 next preceding the related interest payment date. The Holder must surrender this Debenture to the Paying Agent to collect payment of principal. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company may, however, pay principal and interest by its check or wire payable in such money. It may mail an interest check to the Holder's registered address. 3. Paying Agent, Registrar and Conversion Agent. Initially, [Insert Name of Trustee] (the "Trustee") will act as Paying Agent, Registrar and Conversion Agent. The Company may change any Paying Agent, Registrar or Conversion Agent without notice to the Holder. The Company or any of its Subsidiaries may act as Paying Agent, Registrar or Conversion Agent. - ---------- (1) Insert five years from date of issuance. (2) Insert first quarterly payment date after issuance. 2 4. Indenture, Limitations This Debenture is one of a duly authorized issue of Debentures of the Company designated as its 6% Convertible Subordinated Debentures due _______(1) (the "Debentures"), issued under an Indenture dated as of [insert date of issuance] (the "Indenture"), between the Company and the Trustee. The terms of this Debenture include those stated in the Indenture and those required by or made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended, and as in effect on the date of the Indenture. This Debenture is subject to all such terms and the Holder of this Debenture is referred to the Indenture and said Act for a statement of them. The Debentures are subordinated unsecured obligations of the Company limited to up to $____________ aggregate principal amount, subject to Section 2.2 of the Indenture. The Indenture does not limit other debt of the Company, secured or unsecured, including Senior Indebtedness. 5. Optional Redemption. The Debentures are subject to redemption, at any time as a whole or in part, at the election of the Company; provided that the Debentures may not be so redeemed prior to [insert the fifth anniversary of date of issuance] unless the closing price per share of the Common Stock for 45 consecutive trading days ending no more than 30 calendar days prior to the date notice of redemption is first mailed is at least 140% of the Adjusted IPO Price then in effect. The Redemption Price shall equal 100% of the principal amount thereof, in each case together with accrued interest through the Redemption Date. 6. Notice of Redemption. Notice of redemption will be mailed by first-class mail at least 90 days before the Redemption Date to each Holder of Debentures to be redeemed at his or her registered address. Debentures in denominations larger than $1,000 may be redeemed in part, but only in whole multiples of $1,000. On and after the Redemption Date, subject to the deposit with the Paying Agent of funds sufficient to pay the Redemption Price interest ceases to accrue on Debentures or portions of them called for redemption. 7. Conversion. A Holder of a Debenture may convert such Debenture into shares of Common Stock of the Company at any time prior to maturity; provided, however, that if the Debenture is called for redemption, the conversion right will terminate at the close of business on the redemption date for such Debenture (unless the Company shall default in making the redemption - ---------- (1) Insert five years from date of issuance. 3 payment when due, in which case the conversion right shall terminate at the close of business on the date such default is cured and such Debenture is redeemed); provided, further, that if the Holder of a Debenture presents such Debenture for redemption prior to the close of business on the redemption date for such Debenture, the right of conversion shall terminate upon presentation of the Debenture to the Trustee (unless the Company shall default in making the redemption payment when due, in which case the conversion right shall terminate on the close of business on the date such default is cured and such Debenture is redeemed). The initial conversion price is ___* per share, subject to adjustment under certain circumstances. The number of shares issuable upon conversion of a Debenture is determined by dividing the principal amount converted by the conversion price in effect on the Conversion Date. No payment or adjustment will be made for accrued interest on a converted Debenture or for dividends or distributions on shares of Common Stock issued upon conversion of a Debenture. No fractional shares will be issued upon conversion; in lieu thereof, an amount will be paid in cash based upon the closing sale price of the Common Stock on the last Trading Day prior to the Conversion Date. To convert a Debenture, a Holder must (a) complete and manually sign the conversion notice set forth below and deliver such notice to the Conversion Agent, (b) surrender the Debenture to the Conversion Agent, (c) furnish appropriate endorsements or transfer documents if required by the Registrar or the Conversion Agent, and (d) pay any transfer or similar tax, if required. If a Holder surrenders a Debenture for conversion after the close of business on the record date for the payment of an installment of interest and before the close of business on the related interest payment date then, notwithstanding such conversion, the interest payable on such interest payment date shall be paid to the Holder of such Debenture on such record date. In such event, the Debenture must be accompanied by payment of an amount equal to the interest payable on such interest payment date on the principal amount of the Debenture or portion thereof then converted. A Holder may convert a portion of a Debenture equal to $1,000 or any integral multiple thereof. A Debenture in respect of which a Holder had delivered a Change in Control Purchase Notice exercising the option of such Holder to require the Company to purchase such Debenture may be converted only if the Change in Control Purchase Notice is withdrawn as provided above and in accordance with the terms of the Indenture. 8. Conversion Arrangement on Call for Redemption. Any Securities called for redemption, unless surrendered for conversion before the close of business on the Redemption Date, may be deemed to be purchased from the Holders of such Securities at an amount not less than the Redemption Price, together with accrued interest, if any, to, but not including, the Redemption Date, by one or more investment bankers or other purchasers who may agree with the Company to purchase such Securities from the Holders, to - ---------- * Insert the initial conversion price determined pursuant to Section 6.15(c) or Section 8.1(b), as applicable, of the Securities Purchase Agreement, dated July 2, 1997, between ASC Holdings, Inc., and Madeleine LLC. 4 convert them into Common Stock of the Company and to make payment for such Securities to the Paying Agent in Trust for such Holders. 9. Subordination. The indebtedness evidenced by the Debentures is, to the extent and in the manner provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company. Any Holder by accepting this Debenture agrees to and shall be bound by such subordination provisions and authorizes the Trustee to give them effect. Such subordination provisions include certain rights of the holders of Senior Indebtedness to block the payment of principal and interest on the Debentures during the pendency of certain defaults in respect of such Senior Indebtedness. In addition to all other rights of Senior Indebtedness described in the Indenture, the Senior Indebtedness shall continue to be Senior Indebtedness and entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any terms of any instrument relating to the Senior Indebtedness or any extension or renewal of the Senior Indebtedness. 10. Denominations, Transfer, Exchange. The Debentures are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. A Holder may register the transfer of or exchange Debentures in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes or other governmental charges that may be imposed by law or permitted by the Indenture. 11. Persons Deemed Owners. The Holder of a Debenture may be treated as the owner of it for all purposes. 12. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent will pay the money back to the Company at its written request. After that, Holders entitled to money must look to the Company or payment. 13. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture or the Debentures may be amended or supplemented with the consent of the Holders of a majority in principal amount of the Debentures then outstanding and any past default or compliance with any provision may be 5 waived in a particular instance with the consent of the Holders of a majority in principal amount of the Debentures then outstanding. Without the consent of or notice to any Holder, the Company and the Trustee may amend or supplement the Indenture or the Debentures to, among other things, provide for uncertificated Debentures in addition to or in place of certificated Debentures, or to cure any ambiguity, defect or inconsistency or make any other change that does not adversely affect the rights of any Holder. 14. Successor Corporation. When a successor corporation assumes all the obligations of its predecessor under the Debentures and the Indenture in accordance with the terms and conditions of the Indenture, the predecessor corporation will be released from those obligations. 15. Defaults and Remedies. An Event of Default is: default for 10 business days in payment of interest on the Debentures; default in payment of principal on the Debentures when due; failure by the Company for 30 days after notice to it to comply with any of its other agreements contained in the Indenture or the Debentures; certain events of bankruptcy, insolvency or reorganization of the Company; and defaults in respect of certain other indebtedness. If an Event of Default (other than as a result of certain events of bankruptcy, insolvency or reorganization) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Debentures then outstanding may declare all unpaid principal of and accrued interest to the date of acceleration on the Debentures then outstanding to be due and payable immediately, all as and to the extent provided in the Indenture. If an Event of Default occurs as a result of certain events of insolvency or reorganization, unpaid principal of and accrued interest on the Debentures then outstanding shall become due and payable without any declaration or other act on the part of the Trustee, or all as and to the extent provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Debentures. Subject to certain limitations, Holders of a majority in principal amount of the Debentures then outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in their interests. The Company is required to file periodic reports with the Trustee as to the absence of default. 16. Trustee Dealings With the Company. [Insert name of Trustee], the Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from and perform services for the Company or an Affiliate of the Company, and may otherwise deal with the Company or an Affiliate of the Company, as if it were not the Trustee. 6 17. No Recourse Against Others. A director, officer, employee or shareholder, as such, of the Company shall not have any liability for any obligations of the Company under the Debentures or the Indenture nor for any claim based on, in respect of or by reason of such obligations or their creation. The Holder of this Debenture by accepting this Debenture waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Debenture. 18. Discharge Prior to Maturity. If the Company deposits with the Trustee or the Paying Agent money or U.S. Government Obligations sufficient to pay the principal of and interest on the Debentures to maturity, the Company will be discharged from the Indenture except for certain sections thereof. 19. Authentication. This Debenture shall not be valid until the Trustee or an authenticating agent signs the certificate of authentication on the other side of this Debenture. 20. Abbreviations and Definitions. Customary abbreviations may be used in the name of the Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act). All capitalized terms used in this Debenture and not specifically defined herein are defined in the Indenture and are used herein as so defined. 21. Indenture to Control. In the case of any conflict between the provisions of this Debenture and the Indenture, the provisions of the Indenture shall control. The Company will furnish to any Holder, upon written request and without charge, a copy of the Indenture. Requests may be made to: [Insert name and address]. 7 ASSIGNMENT FORM To assign this Debenture, fill in the form below: I or we assign and transfer this Debenture to ----------------------------------------------------- ----------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint ----------------------------------------------------- agent to transfer this Debenture on the books of the Company. The Agent may substitute another to act for him or her. Date:________________________________________________ Your signature: -------------------------------------- (Sign exactly as your name appears on the other side of this Debenture) ----------------------------------------------------- (Sign exactly as your name appears on the other side of this Debenture) **/Signature guaranteed by: ---------------------------- By: ----------------------------------------- - ---------- ** The signature must be guaranteed by a bank, a trust company or a member firm of the New York Stock Exchange. 8 CONVERSION NOTICE To convert this Debenture into Common Stock of the Company, check the box: |_| To convert only part of this Debenture, state the amount to be converted: $_____________ If you want the stock certificate made out in another person's name, fill in the form below: - ----------------------------------------------------- - ----------------------------------------------------- (Insert other person's soc. sec. or tax I.D. no.) - ----------------------------------------------------- - ----------------------------------------------------- - ----------------------------------------------------- - ----------------------------------------------------- (Print or type assignee's name, address and zip code) Date:________________________________________________ Your signature: _____________________________________ (Sign exactly as your name appears on the other side of this Debenture) - ----------------------------------------------------- (Sign exactly as your name appears on the other side of this Debenture) */Signature guaranteed by: --------------------------- By: -------------------------------------------------- - ---------- * The signature must be guaranteed by a bank, a trust company or a member firm of the New York Stock Exchange. 9 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE...........................1 Section 1.1 Definitions................................................1 Section 1.2 Other Definitions..........................................4 Section 1.3 Trust Indenture Act Provisions.............................5 Section 1.4 Rules of Construction......................................5 ARTICLE II THE SECURITIES......................................................6 Section 2.1 Form and Dating............................................6 Section 2.2 Execution and Authentication...............................6 Section 2.3 Registrar, Paying Agent and Conversion Agent...............7 Section 2.4 Paying Agent to Hold Money In Trust........................7 Section 2.5 Securityholder Lists.......................................8 Section 2.6 Transfer and Exchange......................................8 Section 2.7 Replacement Securities.....................................9 Section 2.8 Outstanding Securities.....................................9 Section 2.9 Treasury Securities.......................................10 Section 2.10 Temporary Securities.....................................10 Section 2.11 Cancellation.............................................10 ARTICLE III REDEMPTION AND PURCHASES..........................................11 Section 3.1 Right to Redeem; Notice to Trustee........................11 Section 3.2 Selection of Securities to Be Redeemed....................11 Section 3.3 Notice of Redemption......................................11 Section 3.4 Effect of Notice of Redemption............................12 Section 3.5 Deposit of Redemption Price...............................12 Section 3.6 Securities Redeemed in Part...............................13 Section 3.7 Conversion Arrangement on Call for Redemption.............13 ARTICLE IV CONVERSION.........................................................14 Section 4.1 Conversion Privilege......................................14 Section 4.2 Conversion Procedure......................................14 Section 4.3 Fractional Shares.........................................15 Section 4.4 Taxes on Conversion.......................................15 Section 4.5 Company to Provide Stock..................................15 Section 4.6 Adjustment of Conversion Price............................16 Section 4.7 No Adjustment.............................................19 Section 4.8 Adjustment for Tax Purposes...............................19 Section 4.9 Notice of Adjustment......................................19 Section 4.10 Notice of Certain Transactions............................20 i Section 4.11 Effect of Reclassification, Consolidation, Merger or Sale on Conversion Privilege......................20 Section 4.12 Trustee's Disclaimer.....................................21 ARTICLE V SUBORDINATION.......................................................21 Section 5.1 Securities Subordinated to Senior Indebtedness............21 Section 5.2 Securities Subordinated to Prior Payment of All Senior Indebtedness on Dissolution, Liquidation, Reorganization, Etc., of the Company.................22 Section 5.3 Securityholders to Be Subrogated to Right of Holders of Senior Indebtedness...............................32 Section 5.4 Obligations of the Company Unconditional..................36 Section 5.5 Company Not to Make Payment With Respect to Securities in Certain Circumstances.............................36 Section 5.6 Notice to Trustee.........................................37 Section 5.7 Application by Trustee of Monies Deposited With It........38 Section 5.8 Subordination Rights Not Impaired by Acts or Omissions of Company or Holders of Senior Indebtedness.........38 Section 5.9 Trustee to Effectuate Subordination.......................39 Section 5.10 Right of Trustee to Hold Senior Indebtedness.............39 Section 5.11 Article 5 Not to Prevent Events of Default...............39 Section 5.12 No Fiduciary Duty Created to Holders of Senior Indebtedness.........................................39 Section 5.13 Article Applicable to Paying Agents......................39 ARTICLE VI COVENANTS..........................................................39 Section 6.1 Payment of Securities.....................................39 Section 6.2 SEC Reports...............................................40 Section 6.3 Liquidation...............................................40 Section 6.4 Compliance Certificates...................................41 Section 6.5 Notice of Defaults........................................41 Section 6.6 Further Instruments and Acts..............................41 ARTICLE VII SUCCESSOR CORPORATION.............................................42 Section 7.1 When Company May Merge, Etc...............................42 Section 7.2 Successor Corporation Substituted.........................42 ARTICLE VIII DEFAULT AND REMEDIES.............................................43 Section 8.1 Events of Default.........................................43 Section 8.2 Acceleration..............................................44 Section 8.3 Other Remedies............................................45 Section 8.4 Waiver of Defaults and Events of Default..................45 Section 8.5 Control by Majority.......................................46 Section 8.6 Limitations on Suits......................................46 Section 8.7 Rights of Holders to Receive Payment......................46 ii Section 8.8 Collection Suit by Trustee................................47 Section 8.9 Trustee May File Proofs of Claim..........................47 Section 8.10 Priorities...............................................47 Section 8.11 Undertaking for Costs....................................48 Section 8.12 Waiver of Usury, Stay or Extension Laws..................48 ARTICLE IX TRUSTEE............................................................48 Section 9.1 Duties of Trustee.........................................48 Section 9.2 Rights of Trustee.........................................49 Section 9.3 Individual Rights of Trustee..............................50 Section 9.4 Trustee's Disclaimer......................................50 Section 9.5 Notice of Default or Events of Default....................50 Section 9.6 Reports by Trustee to Holders.............................50 Section 9.7 Compensation and Indemnity................................51 Section 9.8 Replacement of Trustee....................................51 Section 9.9 Successor Trustee by Merger, Etc..........................52 Section 9.10 Eligibility; Disqualification............................52 Section 9.11 Preferential Collection of Claims Against Company........53 ARTICLE 10. SATISFACTION AND DISCHARGE OF INDENTURE...........................53 Section 10.1 Termination of Company's Obligations.....................53 Section 10.2 Application of Trust Money...............................54 Section 10.3 Repayment to Company.....................................54 Section 10.4 Reinstatement............................................54 ARTICLE XI AMENDMENTS, SUPPLEMENTS AND WAIVERS................................55 Section 11.1 Without Consent of Holders...............................55 Section 11.2 With Consent of Holders..................................55 Section 11.3 Compliance With Trust Indenture Act......................56 Section 11.4 Revocation and Effect of Consents........................56 Section 11.5 Notation on or Exchange of Securities....................56 Section 11.6 Trustee to Sign Amendments, etc..........................57 ARTICLE XII MISCELLANEOUS.....................................................57 Section 12.1 Trust Indenture Act Controls.............................57 Section 12.2 Notices..................................................57 Section 12.3 Communications by Holders With Other Holders.............58 Section 12.4 Certificate and opinion as to Conditions Precedent.......58 Section 12.5 Record Date for Vote or Consent of Securityholders.......59 Section 12.6 Rules by Trustee, Paying Agent, Registrar, Conversion Agent................................................59 Section 12.7 Legal Holidays...........................................59 Section 12.8 Governing Law............................................59 Section 12.9 No Adverse Interpretation of Other Agreements............59 Section 12.10 No Recourse Against Others..............................59 iii Section 12.11 Successors..............................................60 Section 12.12 Multiple Counterparts...................................60 Section 12.13 Separability............................................60 Section 12.14 Table of Contents, Headings, etc........................61 Exhibit A-1 Form of Face of Security Exhibit A-2 Form of Face of Regulation S Temporary Global Security Exhibit B-1 Form of Certificate for Exchange or Registration of Transfer from Restricted Global Security to Regulation S Global Security Exhibit B-2 Form of Certificate for Exchange or Registration of Transfer from Regulation S Global Security to Restricted Global Security Exhibit B-3 Form of Certificate for Exchange or Registration of Transfer of Certificated Securities Exhibit B-4 Form of Certificate for Exchange or Registration of Transfer from Restricted Global Security or Regulation S Permanent Global Security to Certificated Security Exhibit B-5 Form of Certificate for Exchange or Registration of Transfer from Certificated Security to Restricted Global Security or Regulation S Permanent Global Security iv CROSS-REFERENCE TABLE* Indenture TIA Section Section - ---------- * This Cross-Reference Table shall not, for any purpose, be deemed a part of this Indenture. v EXHIBIT D 6% Repriced Convertible Subordinated Debentures due * ------------------------------------------- INDENTURE Dated as of [date of issuance] ------------------------------------------- --------------- Trustee ------------------------------------------- - ---------- * 5 years after date of issuance EX-10.71 23 LOAN AND SECURITY AGREEMENT EXHIBIT 10.71 ================================================================================ LOAN AND SECURITY AGREEMENT among GRAND SUMMIT RESORT PROPERTIES, INC., as Borrower and TEXTRON FINANCIAL CORPORATION, as Administrative Agent and THE LENDERS LISTED HEREIN, as Lenders Dated as of August 1, 1997 ================================================================================ TABLE OF CONTENTS Page ---- 1. INTERPRETATION OF THIS AGREEMENT............................... 1 1.1 Terms Defined............................................ 1 1.2 Directly or Indirectly................................... 31 1.3 Headings................................................. 31 1.4 Accounting Principles.................................... 31 2. ADVANCES AND NOTE.............................................. 32 2.1 Pre-Sale Advance......................................... 32 2.2 Subsequent Advances...................................... 33 2.3 Borrowing Mechanics; Advances Generally.................. 36 2.4 Issuance of Note; Interest Payments...................... 38 2.5 Collections; Sales Proceeds; Required Payments; Voluntary Prepayments of Loan............................ 42 2.6 Participating Lender..................................... 50 2.7 Commitment Fee........................................... 52 2.8 Right of First Refusal................................... 52 3. COLLATERAL..................................................... 53 3.1 Security................................................. 53 3.2 Undertakings Regarding Collateral........................ 56 3.3 Financing Statements..................................... 57 3.4 Location of Collateral; Books and Records................ 58 3.5 Insurance of Collateral.................................. 58 3.6 Condemnation............................................. 62 3.7 Taxes Affecting Collateral............................... 65 3.8 Discharge of Liens Affecting Collateral.................. 66 3.9 Use of the Projects; Voting Rights of Borrower........... 67 3.10 Other Quartershare Covenants............................. 70 3.11 Protection of Collateral; Assessments; Reimbursement..... 73 3.12 Interest on Lender Paid Expenses......................... 73 3.13 Lender Responsibility.................................... 73 3.14 Verification of Contracts................................ 73 3.15 Release of Lien on Quartershare Interests, Residential Units and Commercial Units............................... 74 3.16 Nondisturbance Agreements................................ 75 3.17 Filing of Declarations; Incorporation of Associations.... 77 3.18 Take-Out Facility........................................ 77 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS................... 77 4.1 Subsidiaries and Capital Structure....................... 77 4.2 Corporate Matters........................................ 78 4.3 Business and Property.................................... 78 4.4 Financial Statements..................................... 78 i TABLE OF CONTENTS Page ---- 4.5 Full Disclosure.......................................... 78 4.6 Pending Litigation....................................... 79 4.7 Title to Properties; Environmental Status................ 79 4.8 Trademarks; Licenses and Permits......................... 79 4.9 Transaction Is Legal and Authorized...................... 79 4.10 No Defaults.............................................. 80 4.11 Governmental Consent..................................... 80 4.12 Taxes.................................................... 80 4.13 Use of Proceeds.......................................... 80 4.14 Compliance with Law...................................... 81 4.15 Restrictions of Borrower................................. 81 4.16 Brokers' Fees............................................ 82 4.17 Deferred Compensation Plans.............................. 82 4.18 Labor Relations.......................................... 82 4.19 Validity of Contracts.................................... 82 4.20 Validity of Liens Granted to Lender...................... 82 4.21 Quartershare Regimen Reports............................. 82 4.22 Sale of Quartershare Interests........................... 82 4.23 Solvency................................................. 83 4.24 Attitash Project Quartershare Interests.................. 83 5. CONDITIONS PRECEDENT TO PRE-SALE ADVANCE....................... 84 5.1 Opinions of Counsel...................................... 84 5.2 Warranties and Representations True as of Closing Date... 85 5.3 Compliance with this Agreement........................... 85 5.4 Officer's Certificates; Secretary's Certificates; Good-Standing Certificates .............................. 85 5.5 Uniform Commercial Code Financing Statements............. 86 5.6 Assignment of Property-Related Contracts................. 86 5.7 Assignment of Declarant's Rights......................... 86 5.8 Subordination of Indebtedness............................ 86 5.9 Expenses................................................. 87 5.10 Note; Blanket Mortgages; Assignment of Rents............. 87 5.11 Title Insurance; Casualty Insurance...................... 87 5.12 Environmental Site Assessment Report..................... 88 5.13 Taxes.................................................... 89 5.14 Inspection............................................... 89 5.15 Survey................................................... 89 5.16 Delivery of Contracts.................................... 89 5.17 Budgets; Plans; Architect; Cost and Architect Certificates; Miscellaneous ............................. 89 5.18 Pre-Construction Cost Certificate........................ 90 5.19 Payoff of Existing Attitash Loan......................... 90 5.20 Proceedings Satisfactory................................. 91 6. SUBSEQUENT PROJECT ADVANCES CLOSING CONDITIONS................. 91 6.1 First Project Advance.................................... 91 ii TABLE OF CONTENTS Page ---- 6.2 Special Submissions...................................... 96 6.3 Requests for Subsequent Project Advance.................. 97 6.4 Final Construction Advance Conditions.................... 99 6.5 Defaults; Expenses; Miscellaneous........................ 99 6.6 Disbursements; Disbursement Agent Reports................100 6.7 Proceedings Satisfactory.................................101 6.8 Subcontracts.............................................101 6.9 Costs and Expenses.......................................101 7. COVENANTS......................................................101 7.1 Payment of Taxes and Claims..............................101 7.2 Maintenance of Properties; Company Existence; Indebtedness; Liens; Business............................101 7.3 Payment of Notes and Maintenance of Office...............103 7.4 Sale of Properties.......................................104 7.5 Consolidation and Merger.................................104 7.6 Guaranties...............................................104 7.7 Distributions............................................105 7.8 Compliance with Environmental Laws.......................105 7.9 Transactions with Affiliates; Principal Properties.......106 7.10 Use of the Lender Name...................................107 7.11 Subordinated Obligations.................................107 7.12 Notice of Legal Proceedings..............................107 7.13 Further Assurances.......................................107 7.14 Financial Statements.....................................108 7.15 Officers' Certificate....................................110 7.16 Inspection...............................................111 8. EVENTS OF DEFAULT..............................................111 8.1 Default..................................................111 8.2 Default Remedies.........................................113 9. REVIVAL OF OBLIGATIONS AND LIENS...............................117 10. ADMINISTRATIVE AGENT...........................................117 10.1 Appointment..............................................117 10.2 Powers; General Immunity.................................118 10.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness............................120 10.4 Right to Indemnity.......................................120 10.5 Successor Administrative Agent...........................120 10.6 Collateral Documents.....................................121 10.7 Designation of Additional Administrative Agents..........121 10.8 Payments.................................................121 iii TABLE OF CONTENTS Page ---- 11. MISCELLANEOUS..................................................122 11.1 Governing Law............................................122 11.2 Expenses and Closing Fees................................122 11.3 Parties, Successors and Assigns..........................124 11.4 Notices..................................................124 11.5 Total Agreement..........................................124 11.6 Survival.................................................125 11.7 Set-Off..................................................125 11.8 Ratable Sharing..........................................126 11.9 Litigation...............................................126 11.10 Power of Attorney........................................127 11.11 Survival of Indemnities..................................128 11.12 Conflicting Obligations; Rights and Remedies.............128 11.13 Independent Nature of Lenders' Rights....................128 11.14 Severability.............................................128 11.15 Duplicate Originals, Execution in Counterpart..t.........128 Schedule 1 - Description of Attitash Project Schedule 2 - Description of Jordan Bowl Schedule 3 - Description of Killington Schedule 4 - Schedule of Minimum Release Prices Schedule 5 - Description of Mt. Snow Schedule 6 - Schedule of Pay-Out Release Prices Schedule 7 - Permitted Exceptions Schedule 8 - Pricing Matrix Schedule 9 - Textron Financial Corporation Purchase Facility Schedule 10 - Payment Instructions for Proceeds Schedule 11 - Property-Related Contracts Schedule 12 - Names of Affiliates and Nature of Affiliation Schedule 13 - General Business Description Schedule 14 - Financial Statements of Borrower and Host Companies Schedule 15 - Litigation Schedule 16 - Permitted Leases Schedule 17 - Hazardous Substances Schedule 18 - Use of Proceeds Schedule 19 - Licenses, Permits etc not obtained Schedule 20 - Broker's Fees Schedule 21 - Deferred Compensation Plans Schedule 22 - List of certain Costs and Expenses for Approval of Lenders Schedule 23 - Addresses for Notices and Demands Schedule 24 - List of Fees Exhibit A - Escrow Account Acknowledgement Exhibit B - Form of Blanket Mortgage (New Hampshire, Maine and Vermont) Exhibit C - Form of Loan Disbursement Agreement iv TABLE OF CONTENTS Page ---- Exhibit D - Intentionally Omitted Exhibit E - Intentionally Omitted Exhibit F - Form of Validation Certificate Exhibit G - Form of Note Exhibit H - Form of Proxy Exhibit I - Form of Request of Release Exhibit J - Form of Partial Release of Mortgage Exhibit K - Form of Partial Release of Security Interest Exhibit L - Form of Instrument of Subordination Exhibit M - Form of Assignment of Declarant's Rights Exhibit N-1 - Form of Opinion of Borrower's Counsel Exhibit N-2 - Form of Opinion of Borrower's New Hampshire Counsel Exhibit N-3 - Form of Opinion of Borrower's Counsel Exhibit N-4 - Form of Opinion of Borrower's Maine Counsel Exhibit N-5 - Form of Opinion of Borrower's Vermont Counsel Exhibit O - Form of Officer's Certificate Exhibit P - Form of Secretary's Certificate of Borrower Exhibit Q - Form of Secretary's Certificate of Parent/Host Company Exhibit R - Form of Assignment of Property-Related Contracts Exhibit S - Form of Subordination Agreement Exhibit T - Form of Assignment of Rents (New Hampshire, Maine and Vermont) Exhibit U - Form of Assignment of Contracts Exhibit V - Form of Assignment of Architect's Contract Exhibit W - Form of Assignment of Construction Contract Exhibit X - Form of Request for Subsequent Project Advance v LOAN AND SECURITY AGREEMENT THIS LOAN AND SECURITY AGREEMENT (as amended from time to time, this "Agreement"), made and executed as of the 1st day of August, 1997, by and among GRAND SUMMIT RESORT PROPERTIES, INC., a Maine corporation, as debtor (herein referred to as the "Borrower"), the lenders listed on the signature pages hereof (each individually referred to herein as a "Lender" and, collectively, the "Lenders") and TEXTRON FINANCIAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity herein referred to as the "Administrative Agent"). RECITALS A. The Borrower desires that the Lenders extend certain credit facilities to the Borrower for the purposes hereinafter stated; B. The Lenders are agreeable, on the terms and conditions hereinafter stated, to extend such facilities; C. The Borrower is agreeable to (i) granting a lien and security interest to the Administrative Agent on behalf of the Lenders in, or (ii) otherwise conveying, encumbering and/or mortgaging to the Administrative Agent on behalf of the Lenders all of, the Collateral (as such term is hereinafter defined) in order to secure its obligations hereunder and under the other Security Documents; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Borrower, the Lenders and the Administrative Agent agree as follows: 1. INTERPRETATION OF THIS AGREEMENT 1.1 Terms Defined. As used in this Agreement, the following terms shall have the following respective meanings set forth below or set forth in the Section referred to following such term: Administrative Agent -- has the meaning set forth in the first paragraph of this Agreement. Advance -- means any one or more of the Interest Advances, Pre-Sale Advance or Project Advances, as the case may be. Advance Date -- means, with respect to the Pre-Sale Advance, the date on which the Pre-Sale Advance is made and, with respect to any Project Advance, the Subsequent Project Advance Date thereof. Affiliate -- means any Person (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Borrower; (b) which beneficially owns or holds 5% or more of any class of the Voting Equity of the Borrower; or (c) 5% or more of the Voting Equity of which is beneficially owned or held by the Borrower. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of Voting Equity, other voting Securities, by contract or otherwise. Aggregate Amounts Due -- as defined in Section 11.8 of this Agreement. Aggregate Project Borrowing Base -- means, on any date and with respect to all of the Projects, the lesser of (a) $55,000,000 minus the sum of (i) the outstanding principal balance of the Pre-Sale Advance as of such date plus (ii) the aggregate outstanding principal balance of the Interest Advances as of such date, or (b) the aggregate of the Project Borrowing Bases for each of the Projects as of such date. Agreement or this Agreement -- as defined in the preamble hereto. Applicable States -- means (i) New Hampshire, Maine and Vermont, and (ii) any other state in which the Borrower is or becomes qualified to sell Quartershare Interests, Residential Units and/or Commercial Units, provided that acceptable proof of such qualification has been delivered to the Administrative Agent. Approved Escrow Account -- means, (a) in the case of the Attitash Project and any Contract related thereto, account numbers 126674-3 and 523549 at the Berlin City Bank of Berlin, New Hampshire, (b) in the case of the Jordan Bowl Project and any Contract related thereto, account number 191824001090 at Key Bank of Maine, (c) in the case of the Killington Project and any Contract related thereto, account number 454645000323 at Key Bank in Rutland, Vermont, and (d) in the case of the Mt. Snow Project and any Contract related thereto, account 454645000281 at Key Bank in Rutland, Vermont, 2 provided that, in each case, the Borrower and the Title Company shall have acknowledged and agreed in writing (which writing shall be substantially in the form of Exhibit A hereto) that, upon the consummation of the sale of any Quartershare Interest subject to any such Contract (in accordance with the terms of such Contract), all cash on deposit in such escrow account will be paid directly to the Administrative Agent (less any customary and normal costs of closing of such Contract not previously deducted from other cash proceeds in respect of such sale). Architect -- means, individually or collectively (as the context may require), the Jordan Bowl Architect, the Killington Architect and the Mt. Snow Architect. Architect's Construction Cost Certificate -- means, with respect to the construction at any Under-Construction Project and any Construction Cost Certificate issued hereunder, a certificate, addressed to the Administrative Agent and in form and substance satisfactory to the Administrative Agent, from the Architect for such Under-Construction Project and the TFC Architect which (a) confirms that such Architect and such TFC Architect have inspected the construction at such Under-Construction Project and reviewed such Construction Cost Certificate and the attachments thereto, (b) confirms that such Construction Cost Certificate and the attachments thereto are satisfactory to them, (c) certifies that the construction of the building and the other improvements at such Under-Construction Project have been made in accordance with the Plans for such Under-Construction Project and in compliance with all applicable laws, (d) confirms that the unexpended construction portion of the Budget for such Under-Construction Project is adequate to complete the construction at such Under-Construction Project, (e) confirms that the aggregate principal amount of the Project Advances then outstanding used to finance Construction Costs for such Under-Construction Project is not more than 80% of aggregate cost of the construction work then in place for such Under-Construction Project plus the pre-development expenses and land values (net of mortgage debt) of such Under-Construction Project set forth on Schedule 22 hereto, (f) confirms that the completion of the construction of the building and the other improvements at such Under-Construction Project in connection therewith can reasonably be expected to occur on or before the Completion Date for such Under-Construction Project, and (g) states in detail any modifications or changes to the Budget for such Under-Construction Project or such Project Plans not previously disclosed in a prior Architect's Construction Cost Certificate for such Under-Construction Project. 3 Architect's Final Construction Cost Certificate -- means, with respect to the completion of the construction at any Under-Construction Project and the Final Construction Cost Certificate issued hereunder in respect thereof, a certificate, addressed to the Administrative Agent and in form and substance satisfactory to the Administrative Agent, from the Architect for such Under-Construction Project and the TFC Architect which (a) confirms that such Architect and such TFC Architect have inspected the construction at such Under-Construction Project and reviewed such Final Construction Cost Certificate and the attachments thereto, (b) confirms that such Final Construction Cost Certificate and the attachments thereto are satisfactory to them, (c) certifies that the construction of the building and the other improvements at such Under-Construction Project in connection therewith has been in accordance with Plans for such Under-Construction Project, is in compliance with all applicable laws and is complete as provided for in the Plans for such Under-Construction Project, and (d) has as an attachment a Certificate of Substantial Completion (AIA Document G704) executed by such Architect and the General Contractor with respect to such Under-Construction Project; the Final Architect's Construction Cost Certificate shall certify that the list of items to be completed set forth on such Certificate of Substantial Completion by such General Contractor shall have been completed in accordance with the Plans for such Under-Construction Project. Assignment of Rents -- as defined in Section 5.10(c) of this Agreement. Association(s) -- means individually or collectively (as the context may require), the Attitash Association, the Jordan Bowl Association, the Killington Association, and the Mt. Snow Association. Attitash Association -- means the Grand Summit Hotel Condominium Unit Owners' Association, Inc., a voluntary corporation established under the laws of New Hampshire, or any successor association thereto as provided in the Attitash Declaration. Attitash By-Laws -- means those certain By-Laws of Grand Summit Hotel and Crown Club at Attitash Bear Peak, a Condominium, which is recorded in Book 1692 at Page 1008 of the Register of Carroll County, New Hampshire, as amended from time to time in accordance with the provisions hereof. Attitash Common Areas -- means those areas at the Attitash Project that have been designated in accordance with the Attitash Declaration, on the Attitash Resort Map or by the Attitash Association as "Common Areas," as used and defined in the Attitash Declaration, for the primary or exclusive use of the owners of Attitash Residential Units, Attitash Quartershare Interests and Attitash Commercial Units. 4 Attitash Commercial Unit -- means a commercial condominium unit at the Attitash Project. Attitash Declaration -- means that certain Grand Summit Hotel and Crown Club at Attitash Declaration of Condominium and Interval Ownership Interests by the Borrower, as declarant, which is recorded in Book 1692 at Page 989 of the Register of Carroll County, New Hampshire, as amended from time to time in accordance with the provisions hereof. Attitash Easements -- means that certain Amended and Restated Declaration of Easements by and between L.B.O. Holding, Inc., a Maine corporation, and the Borrower, which is recorded in Book 1674 at Page 471 of the Register of Carroll County, New Hampshire, as amended from time to time in accordance with the provisions hereof. Attitash Escrow Agent -- means Berlin City Bank of Berlin, New Hampshire, or such escrowee duly authorized to act as such under applicable New Hampshire law. Attitash Limited Common Areas -- means those areas at the Attitash Project that have been designated in accordance with the Attitash Declaration, on the Attitash Resort Map or by the Attitash Association as "Limited Common Areas," as used and defined in the Attitash Declaration, for the primary or exclusive use of certain of the owners of Attitash Residential Units, Attitash Quartershare Interests and Attitash Commercial Units, as the case may be. Attitash Project -- means that certain resort property commonly known as The Grand Summit Hotel and Crown Club at Attitash, situated on certain land located in Bartlett, New Hampshire, and particularly described on Schedule 1 attached hereto and made a part hereof, and including all improvements now or hereafter located on said land, and all facilities, roadways, common furnishings, club furnishings, equipment and all other appurtenances thereunto belonging. Attitash Project shall include the Attitash Residential Units, the Attitash Quartershare Interests, the Attitash Common Area and the Attitash Limited Common Areas in respect of said land. Attitash Project Documents -- means the Attitash Declaration, the Articles of Incorporation and the By-Laws of the Attitash Association, and the rules and regulations of the Attitash Association. Attitash Quartershare Interest -- means the "Quarter-Interest," as described and defined in the Attitash Declaration and the Attitash By-Laws, with the owner of such interest being entitled to the exclusive right to the possession, use and occupancy of an Attitash Residential Unit during thirteen (13) calendar weeks of each calendar year, as more particularly provided in the Attitash Declaration. Attitash Residential Unit -- means a residential condominium unit at the Attitash Project. Attitash Resort Map -- means that (a) certain Condominium Plan Grand Summit Hotel at Attitash prepared by Thaddeus-Thorne Surveys, Inc., dated September 18, 1996, 5 parts I and II recorded in the Carroll County Registry of Deeds at Plan Book 157, Pages 56 and 57, as revised by revisions dated January 21, 1997 and March 25, 1997 and recorded on April 10, 1997 at Plan Book 159 Pages 77 and 78 and (b) that certain As Built Site Plan prepared by Thaddeus-Thorne Surveys, Inc. and As Built Floor Plans prepared by JSA, Inc., all dated March 27, 1997, recorded March 28, 1997 at Plan Book 159, Pages 53 through 65. Blanket Mortgage(s) -- means individually or collectively (as the context may require), each Combination Mortgage, Security Agreement and Fixture Financing Statement encumbering a Project substantially in the form of Exhibit B to this Agreement, as each may be amended from time to time. Books and Records -- means all books, records, computer tapes, disks, software and micro-fiche records of the Borrower. Borrower -- as defined in the preamble to this Agreement. Budget -- means, with respect to any Under-Construction Project, the budget submitted to the Administrative Agent by the Borrower for the acquisition costs or value, development, construction and furnishing of such Under-Construction Project in accordance with the Plans for such Under-Construction Project and the marketing and selling of the Quartershare Interests for such Under-Construction Project, which budget shall have been accepted by the Administrative Agent, as amended from time to time (each such amendment to have been accepted by the Administrative Agent in writing). Such budget shall include, among other things, all costs of materials, fixtures, furnishings, personal Property and labor to be incurred in the construction and furnishing of the Residential Units, the Common Elements and the Limited Common Elements, in each case for such Under-Construction Project, and the provision of all utilities to such Under-Construction Project. The Budget for such Under-Construction Project (and any amendment thereto) shall, among other things, consist of (a) a description of work, such work being classified and shown on a line item basis reasonably satisfactory to the Administrative Agent for the building and other improvements to be built at such Under-Construction Project, such classification to include: "construction line items" for sitework, concrete work, masonry work, rough carpentry work, finish carpentry and cabinet work, architectural carpentry work, waterproofing, insulation, fireproofing, drywall, ceiling work, flooring and base work, painting and finishing work, wall covering work, windows, ceramic tile work, bathroom fixtures and hardware, kitchen fixtures and hardware, HVAC, plumbing work, sprinkler work and electrical work; "furniture, fixtures and equipment line items"; "marketing costs line items;" "sale cost line items;" "commissions payable line items"; and "professional fee line items" (including architectural, engineering, accounting and legal services), (b) an allocation to each construction line item of a scheduled portion of the fixed construction price in the Construction Contract for such Under-Construction Project, and 6 (c) a completion timeline for each construction line item indicating when such item is anticipated to be 25%, 50%, 75% and 100% completed. Business Day -- means a day other than a Saturday or Sunday or a day on which banks in the State of Maine, the State of Rhode Island or the State of Connecticut are required or authorized by law to be closed (other than for a general banking moratorium or holiday for a period exceeding 4 consecutive days). By-Laws -- means individually or collectively (as the context may require), the by-laws of the Associations, as amended from time to time. CCR's --means individually or collectively (as the context may require), the Attitash Easements, the Jordan Bowl Easements, the Killington CCR's, and the Mt. Snow CCR's. Change in Management -- means the Parent shall cease to own, directly or indirectly, 100% of the voting power of all classes of Voting Stock or other equity interests of the Borrower, any Host Company or any Person which shall have managerial and/or supervisory operational responsibilities in respect of the Projects except as may be consented to in writing by the Required Lenders. For the avoidance of doubt, a public offering of common stock of the Parent shall not be deemed a Change in Management. Closing Date -- means August __, 1997. Closing Date Equity Contribution -- as such term is defined in Section 5.17(c) hereof. Collateral -- as defined Section 3.1 of this Agreement. Commercial Unit -- means a commercial condominium unit at any Project, the use of which is for commercial or other nonresidential uses to the extent permitted under the Declaration for such Project, the Plans for such Project, the CCR's for such Project, and under the zoning laws, land use laws, rules and regulations that are applicable for such Project. Commitment-- means, with respect to each Lender that is a party hereto, the amount set forth underneath its signature hereto, provided that the amount of such Commitment shall be adjusted to give effect to any assumptions of Commitments permitted under Section 2.3(a)(i) hereof and any assignments of Commitments permitted under Section 2.6(b) hereof. Commitment Letter -- means that certain letter dated July 14, 1997 from the Lenders to the Borrower, which letter was accepted by the Borrower on July 30, 1997. Commitment Period -- means the period commencing on the Closing Date and ending on the Termination Date. 7 Common Elements -- means individually or collectively (as the context may require), the Attitash Common Areas, the Jordan Bowl Common Elements, the Killington Common Elements, and the Mt. Snow Common Elements. Compensation -- as defined in Section 3.1(g) of this Agreement. Completion Date -- means individually or collectively (as the context may require), (a) June 1, 1998 for Jordan Bowl, (b) June 1, 1998 for Killington, and (c) June 1, 1998 for Mt. Snow. Condemnation Compensation -- as defined in Section 3.6(a)(i) of this Agreement. Consummation Date -- means the date on which the purchase and sale of a Quartershare Interest, Residential Unit or Commercial Unit for any Project is consummated. Construction Contract -- means individually or collectively (as the context may require), the Jordan Bowl Construction Contract, the Killington Construction Contract, and the Mt. Snow Construction Contract. Construction Cost Certificate -- means, as of any date and with respect to any Under-Construction Project, a certificate which is signed by the Borrower, is addressed, and is in form and substance satisfactory, to the Administrative Agent, and (a) includes as an attachment thereto an Application and Certificate for Payment from the General Contractor for such Under-Construction Project (AIA Document G702) (and a fully completed Continuation Sheet thereto (AIA Document G703)) executed by such General Contractor and duly notarized and certified and executed by the Architect for such Under-Construction Project; the Continuation Sheet shall show under the "Description of Work" each construction line item classification of the Budget for such Under-Construction Project and with respect thereto the scheduled value thereof (as listed in such Budget), (b) includes as an attachment thereto the Architect's Construction Cost Certificate for such Under-Construction Project, (c) includes as an attachment thereto a certificate from such General Contractor to the Borrower and the Administrative Agent that (i) certifies that the construction of the building and the other improvements at such Under-Construction Project in connection therewith has been in accordance with the Construction Documents (as such term is defined in the Construction Contract for such Under-Construction Project), 8 (ii) certifies that such General Contractor has fully paid for (except in respect of contractually permitted retainages) all progress payments or other costs in respect of the work, labor, fuel, materials and/or equipment incurred by it or by its subcontractors, materialmen and/or suppliers in respect of the construction at such Under-Construction Project through the date or dates of all prior applications and certificates in respect of which such General Contractor has been paid hereunder and/or has been paid by the Borrower (with Equity Moneys or otherwise), (iii) includes as an attachment copies of cancelled checks, paid-in-full invoices or other proof of payment (acceptable to the Lender) in respect of the payment of the aforesaid subcontractors, materialmen and/or suppliers together with unconditional lien waivers in respect thereof, (iv) includes as an attachment copies of (1) all invoices and bills of its costs or progress payments then due and (2) all invoices and bills of the costs of its subcontractors, materialmen and/or suppliers and/or applications for payment submitted to it by its subcontractors for progress payments to be satisfied (less any retained amount thereof), in whole or part, with any Project Advance to be made hereunder in connection with such Cost Construction Certificate, and (v) includes as an attachment appropriate mechanic's, materialman's and laborer's progress payment lien waivers or releases in respect of such aforesaid progress payments or costs to the extent that the same are so paid (and such condition of payment shall be the only condition to which such waivers or releases shall be subject); (d) certifies the accuracy and correctness of the application and certificates referred to in clauses (a), (b) and (c) above, (e) certifies (i) the aggregate costs incurred by the Borrower in respect of Construction Costs, FF&E Costs and Sales, Marketing & Other Costs in each case for such Under-Construction Project up to and including such date, (ii) the aggregate amount of Equity Moneys and Project Advances in each case for such Project utilized prior to such date to satisfy, in whole or part, such Costs and (iii) that the unutilized principal amount of this Agreement available for such Under-Construction Project, the Project Advances likely to be repaid and to be reborrowable in respect of such Under-Construction Project and the remaining Equity Moneys, if any, are sufficient to satisfy the remaining Construction Costs, FF&E Costs and Sales, Marketing & Other Costs for such Under-Construction Project, (f) certifies with respect to each construction line item in the Budget for such Under-Construction Project the total amount of the scheduled value thereof completed as of such date and the portion of such completed scheduled value 9 (i) paid for by Equity Moneys, (ii) paid for by prior Project Advances hereunder, (iii) deferred as retainage, and (iv) to be paid for by a currently requested Project Advance hereunder, (g) includes as an attachment evidence of the application of the proceeds of any prior Project Advances and Equity Moneys in each case for such Project not previously accounted for in a prior Construction Cost Certificate, Nonconstruction Cost Certificate or under subclause (c) above, in each case for such Under-Construction Project, (h) compares the actual costs incurred in respect of each line item in the Budget for such Under-Construction Project with the projected amount thereof as of such date and explains any material variance in respect thereof, and (i) includes as an attachment a current title report in respect of such Under-Construction Project issued by the title insurance company that shall have issued the Title Insurance Policy {Blanket} (or a current update of a title report in respect of such Under-Construction Project previously delivered to the Administrative Agent by such title insurance company) showing no Lien or exception to title other than the Permitted Exceptions and showing, in particular, no mechanic's, materialmen's, labor's or other similar Lien of record. Construction Costs -- means, with respect to any Under-Construction Project, any costs and expenses required to be paid by the Borrower under the Construction Contract for such Under-Construction Project to the General Contractor for such Under-Construction Project or otherwise identified as construction costs in the Budget for such Under-Construction Project and approved by the Administrative Agent (including, without limitation, site work and landscaping), provided that "Construction Costs" shall not include overhead costs of the Borrower or the General Contractor for such Under-Construction Project, FF&E Costs (other than costs of equipment that is to be incorporated into, and made a part of, the building to be built at such Under-Construction Project), insurance and bonding costs (except to the extent incorporated into the Construction Contract), Sales, Marketing & Other Costs or Pre-Construction Costs. Contract -- means any purchase contract between one or more Persons, as purchaser (the "Purchaser"), and the Borrower, as seller, which agreement provides for the sale by the Borrower to such Purchaser of one or more Quartershare Interests in any Project. Declaration(s) -- means individually or collectively (as the context may require), the Attitash Declaration, the Jordan Bowl Declaration, the Killington Declaration, and the Mt. Snow Declaration. 10 Declarant(s) -- means individually or collectively (as the context may require), the status of the Borrower as the declarant under applicable law and under the Declarations and the Articles of Incorporation and By-Laws of the Associations, as amended. Default -- means an event or condition the occurrence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. Default Rate -- means, at any time, the per annum rate of interest equal to the Interest Rate, then in effect, plus 2% per annum; provided, however, that the Default Rate shall in no event exceed the Maximum Rate. Disbursement Agent -- means Funds Administration Services, L.L.C. or such other Person as shall have been designated by the Administrative Agent. The "Disbursement Agent" shall be the exclusive agent of the Administrative Agent and the Lenders. Eligible Assignee -- means (a) any Lender that is a signatory hereto or any parent, affiliate or subsidiary of any such Lender, (b) any commercial bank organized under the laws of the United States of America or any state thereof that has combined capital and surplus of at least $100,000,000, (c) any savings and loan association or savings bank organized under the laws of the United States of America or any state thereof that has combined capital and surplus of at least $100,000,000, and (d) any other trust or entity organized under the laws of the United States of America or any state thereof that (i) is an "accredited investor" (as defined in Regulation D under the Securities Act of 1933, as amended), (ii) is a commercial finance company, insurance company or other financial institution that regularly makes commercial loans in the ordinary course of its business or (iii) has combined capital and equity of at least $100,000,000. Environmental Protection Law -- means each federal, state, county, regional or local law, statute, or regulation enacted in connection with or relating to the protection or regulation of the environment, including, without limitation, those laws, statutes, and regulations regulating the disposal, removal, production, storing, refining, handling, transferring, processing, or transporting of Hazardous Substances, and any regulations issued or promulgated in connection with such statutes by any governmental authority and any orders, decrees or judgments issued by any court of competent jurisdiction in connection with any of the foregoing. Equity Moneys -- means, at any time, cash equity contributions made to the Borrower by its Parent. 11 Escrow Agent -- means individually or collectively (as the context may require), the Attitash Escrow Agent, the Jordan Bowl Escrow Agent, the Killington Escrow Agent, and the Mt. Snow Escrow Agent. Event of Default -- as defined in Section 8.1 of this Agreement. Existing Attitash Loan -- means that certain Loan from Key Bank of Maine to L.B.O. Hotel Co. in the current outstanding principal amount of $4,063,646 and secured by that certain Mortgage dated October 3, 1996 and recorded in the Carroll County Registry of Deeds at Book 1674, Page 483, by that certain Collateral Assignment of Income, Revenues and Rentals dated March 26, 1997 and recorded in the Carroll County Registry of Deeds at Book 1694, Page 630 and that certain Conditional Assignment of Declarant's rights dated March 26, 1997 and recorded in the Carroll County Registry of Deeds at Book 1694, Page 624. FF&E Costs -- means, with respect to any Under-Construction Project, the costs of acquisition and delivery of furniture, fixtures and equipment to be installed and/or used in the building and the other improvements being constructed at such Under-Construction Project. "FF&E Costs" shall not include any Construction Costs or Pre-Construction Costs. Fair Market Value -- at any time with respect to any Property means the sale value of such Property that would be realized in an arm's-length sale at such time between an informed and willing buyer, and an informed and willing seller, under no compulsion to buy or sell, respectively. Final Construction Cost Advance -- means, with respect to any Under-Construction Project, the last Project Advance in respect of Construction Costs for such Under-Construction Project, which shall have as its sole purpose the financing of the payment of any unutilized Retainages under the Construction Contract for such Under-Construction Project. Final Construction Cost Certificate -- means, with respect to any Under-Construction Project, a certificate, addressed to the Administrative Agent and in form and substance satisfactory to the Administrative Agent, signed by the Borrower, which (a) includes as an attachment thereto a Certificate of Substantial Completion (AIA Document G704) executed by the Architect for such Under-Construction Project, the General Contractor for such Under-Construction Project and the Borrower; the list of items to be completed set forth on such Certificate shall have been completed to the satisfaction of the Architect for such Under-Construction Project and the TFC Architect and both of such Persons shall have so certified in the Architect's Final Construction Cost Certificate for such Under-Construction Project (which shall also be an attachment to such Final Construction Cost Certificate) (b) includes as an attachment thereto a certificate from such General Contractor to the Borrower and the Administrative Agent that 12 (i) the construction of the building and the other improvements at such Under-Construction Project in connection therewith has been completed in accordance with the Plans for such Under-Construction Project and in compliance with the Construction Documents (as such term is defined in the Construction Agreement of such General Contractor), (ii) such General Contractor has fully paid for all of the work, labor, fuel, materials and/or equipment furnished by it or by its subcontractors, materialmen and/or suppliers in respect of the construction at such Under-Construction Project, and (iii) attached thereto are mechanic's, materialman's and laborer's final lien waivers or releases in respect of such General Contractor and all subcontractors, materialmen and/or suppliers; (c) certifies the accuracy and correctness of the application and certificates referred to in clauses (a) and (b) above; (d) includes as an attachment appropriate insurance certificates evidencing the necessary insurance required by Section 3.5 and any necessary consents of any surety that shall have issued any performance or payment bond provided by the General Contractor for such Under-Construction Project, and (e) includes as an attachment a current title report in respect of such Under-Construction Project issued by the title insurance company that shall have issued the Title Insurance Policy {Blanket} (or a current update of a title report in respect of such Under-Construction Project previously delivered to the Administrative Agent by such title insurance company) showing no Lien or exception to title other than the Permitted Exceptions and showing, in particular, no mechanic's, materialmen's, labor's or other similar Lien of record. General Contractor(s) -- means individually or collectively (as the context may require), the Jordan Bowl General Contractor, the Killington General Contractor, and the Mt. Snow General Contractor. Hazardous Substances -- means any and all pollutants, contaminants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage or filtration of which is or shall be restricted, prohibited or penalized by any Environmental Protection Law (including, without limitation, asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls); provided, however, that "Hazardous Substances" shall not include any substance used by the Borrower or its agents in the ordinary course of business and in compliance with applicable Environmental Protection Laws. Host Company -- means, with respect to each of the Under-Construction Projects, the following companies: 13 (a) Jordan Bowl Project - Sunday River Skiway Corporation, a Maine corporation; (b) Killington Project - Killington, Ltd., a Vermont corporation; (c) Mt. Snow Project - Mount Snow, Ltd., a Vermont corporation; and (d) Attitash Project - L.B.O. Holding, Inc., a Maine corporation. Host Company Lease Agreement -- means each of the following: (a) with respect to the Jordan Bowl Project, that certain lease agreement to be entered into between the Borrower and Sunday River Skiway Corporation, a Maine corporation, with respect to certain infrastructure items located at the Jordan Bowl Project; (b) with respect to the Killington Project, that certain lease agreement to be entered into between the Borrower and Killington, Ltd., a Vermont corporation, with respect to certain infrastructure items located at the Killington Project; and (c) with respect to the Mt. Snow Project, that certain lease agreement to be entered into between the Borrower and Mount Snow, Ltd., a Vermont corporation, with respect to certain infrastructure items located at the Mt. Snow Project. For the avoidance of doubt, the Borrower represents and warrants that there is no, and will not be, a "Host Company Lease Agreement" in respect of the Attitash Project. Impositions -- as defined in Section 3.7 of this Agreement. Insurance Premiums -- as defined in Section 3.5(a)(iv) of this Agreement. Interest Advance -- as defined in Section 2.4(c)(iii) of this Agreement. Interest Rate -- means, with respect to any calendar month, a per annum rate of interest equal to the greater of: (a) 9.25%, or (b) the sum of (i) 1.5%, plus (ii) the Prime Rate then in effect for such month. The interest rate for each calendar month shall be based upon the Prime Rate in effect at 9:00 a.m. (Eastern time) on the 1st day of such month. The term "Prime Rate" shall 14 mean the "prime rate" as announced from time to time by Chase Manhattan Bank, New York, New York or any successor thereto. In the event Chase Manhattan Bank, New York, New York or any successor thereto, shall discontinue announcement of said Prime Rate, a comparable index designated by the Lender shall be used in calculating the Interest Rate. It is expressly agreed that the use of the term "prime rate" or any other similar designation is not intended to, nor does it, imply that said rate of interest is a preferred rate of interest or one which is offered by Chase Manhattan Bank, New York, New York or any successor thereto to its most creditworthy customers. Jordan Bowl Architect -- means a duly licensed architect under Maine law approved by the Administrative Agent. Jordan Bowl Association -- means The Jordan Grand Condominium Owners Association, a Maine non-profit corporation, or any successor association thereto as provided in the Jordan Bowl Declaration. Jordan Bowl Easements -- means that certain Declaration of Easements by and between the Borrower and Sunday River Skiway Corporation, a Maine corporation, which is to be recorded in the applicable land records of Oxford County, Maine, and which shall be satisfactory in form and substance to the Administrative Agent in its discretion, as amended from time to time in accordance with the provisions hereof. Jordan Bowl Common Elements -- means those areas at the Jordan Bowl Project that have been designated in accordance with the Jordan Bowl Declaration, on the Jordan Bowl Resort Map or by the Jordan Bowl Association as "Common Elements," as used and described in the Jordan Bowl Declaration, for the primary benefit of the owners of Jordan Bowl Residential Units and Jordan Bowl Commercial Units. Jordan Bowl Commercial Unit -- means any condominium unit at the Jordan Bowl Project that has been designated for commercial use. Jordan Bowl Construction Contract -- means that certain Standard Form of Agreement between the Borrower and the Jordan Bowl General Contractor, as amended from time to time, as approved by the Administrative Agent. Jordan Bowl Declaration -- means that certain Declaration of Condominium, The Jordan Grand at Sunday River, A Condominium by the Borrower, as declarant, which is to be recorded in the land records of Oxford County, Maine, and which shall be satisfactory to the Administrative Agent in form and substance in its discretion, as amended from time to time in accordance with the provisions hereof. Jordan Bowl Escrow Agent -- means Key Bank of Maine, or such escrowee duly authorized to act as such under applicable Maine law. Jordan Bowl General Contractor -- means such general contractor as shall be acceptable to the Administrative Agent. 15 Jordan Bowl Limited Common Elements -- means those areas at the Jordan Bowl Project that have been designated in accordance with the Jordan Bowl Declaration, on the Jordan Bowl Resort Map or by the Jordan Bowl Association as "Limited Common Elements," as defined in the Jordan Bowl Declaration, for the primary or exclusive use of only certain owners of Jordan Bowl Residential Units, the Jordan Bowl Quartershare Interests and the Jordan Bowl Commercial Units. Jordan Bowl Project -- means that certain resort property commonly known as The Jordan Grand at Sunday River, A Condominium, situated on certain land located in Oxford County, Maine, and particularly described on Schedule 2 attached hereto and made a part hereof, and including all improvements now or hereafter located on said land, and all facilities, roadways, common furnishings, club furnishings, equipment and all other appurtenances thereunto belonging. The Jordan Bowl Project shall include, when the Jordan Bowl Declaration is recorded, the Jordan Bowl Residential Units, the Jordan Bowl Quartershare Interests, the Jordan Bowl Commercial Units, the Jordan Bowl Common Elements and the Jordan Bowl Limited Common Elements. Jordan Bowl Project Advances -- as defined in Section 2.3(b)(iii) hereof. Jordan Bowl Project Documents -- means the Jordan Bowl Declaration, the Articles of Incorporation and the By-Laws of the Jordan Bowl Association, and the rules and regulations of the Jordan Bowl Association. Jordan Bowl Quartershare Interest -- means the "Quarter Share Estates" as defined and described in the Jordan Bowl Declaration, with such interest being entitled to the exclusive right to the possession, use and occupancy of a Jordan Bowl Residential Unit during thirteen (13) calendar weeks of each calendar year, as more particularly provided in the Jordan Bowl Declaration. Jordan Bowl Residential Unit -- means any condominium unit at the Jordan Bowl Project other than those units that have been designated for commercial use. Jordan Bowl Resort Map -- means the plats and plans in respect of the Jordan Bowl Project to be recorded in the real property records of Oxford County, Maine Registry of Deeds and which shall be satisfactory to the Administrative Agent. Killington Architect -- means a duly licensed architect under Vermont law approved by the Administrative Agent. Killington Association -- means Killington Grand Hotel and Crown Club Owners Association, Inc., a Vermont non-profit corporation, or any successor association thereto as provided in the Killington Declaration. Killington CCR's -- means (a) that certain Killington Grand Hotel and Crown Club at Killington Declaration of Protective Covenants by the Borrower, as declarant, which is to be recorded in the land records of the Town of Rutland, Vermont, and which shall be satisfactory to the Administrative Agent in its discretion, as amended from time to time in accordance with the provisions hereof and (b) that certain Declaration of Easements by 16 and between the Borrower and Killington, Ltd., a Vermont corporation, which is to be recorded in the applicable land records of Town of Rutland, Vermont, and which shall be satisfactory in form and substance to the Administrative Agent in its discretion, as amended from time to time in accordance with the provisions hereof. Killington Commercial Common Areas and Facilities -- means those areas at the Killington Project that have been designated in accordance with the Killington Declaration, on the Killington Resort Map or by the Killington Association as "Commercial Common Areas and Facilities," as defined in the Killington Declaration, for the primary or exclusive use of the owners of Killington Commercial Units. Killington Commercial Unit -- means a commercial condominium unit at the Killington Project. Killington Common Elements -- means the real estate and improvements located at the Killington Project other than those areas designated as Killington Residential Units or Killington Commercial Units and, with respect to the Killington Residential Units and Killington Quartershare Interests, shall mean the Killington Residential Common Areas and Facilities and the Killington Common Furnishings and the Killington General Common Areas and Facilities applicable thereto, and with respect to the Killington Commercial Units, means the Killington Commercial Common Areas and Facilities and the Killington Common Furnishings and the Killington General Common Areas and Facilities applicable thereto, in each case as more particularly provided for in the Killington Declaration. Killington Common Furnishings -- means all furniture, furnishings, appliances, fixtures and equipment, and all other personal property from time to time owned or leased by the Killington Association at the Killington Project for the use by the owners of Killington Residential Units, the Killington Quartershare Interests or the Killington Commercial Units. Killington Construction Contract -- means that certain Standard Form of Agreement between the Borrower and the Killington General Contractor, as amended from time to time, which shall be acceptable to the Administrative Agent. Killington Declaration -- means that certain Declaration of Condominium and Interval Ownership, Killington Grand Hotel and Crown Club at Killington, by the Borrower, as declarant, which is to be recorded in the applicable land records, and which shall be satisfactory to the Administrative Agent in its discretion, as amended from time to time in accordance with the provisions hereof. Killington Escrow Agent -- means Key Bank in Rutland, Vermont, or such escrowee duly authorized to act as such under applicable Vermont law. Killington General Common Areas and Facilities -- means all Common Areas and Facilities (as defined in the Killington Declaration) other than the Killington Residential Common Areas and Facilities and the Killington Commercial Common Areas and Facilities. 17 Killington General Contractor -- means such general contractor as shall be acceptable to the Administrative Agent. Killington Project -- means that certain resort property commonly known as the Killington Grand Hotel and Crown Club at Killington, situated on certain land located in Killington, Vermont, and particularly described on Schedule 3 attached hereto and made a part hereof, and including all improvements now or hereafter located on said land, and all facilities, roadways, common furnishings, club furnishings, equipment and all other appurtenances thereunto belonging. The Killington Project shall include, when the Killington Declaration is recorded, the Killington Residential Units, the Killington Quartershare Interests, the Killington Commercial Units and the Killington Common Elements. Killington Project Advances -- as defined in Section 2.3(b)(iii) hereof. Killington Project Documents -- means the Killington Declaration, the Articles of Incorporation and the By-Laws of the Killington Association, and the rules and regulations of the Killington Association. Killington Quartershare Interest -- means the "Interval Ownership Interests" as defined and described in the Killington Declaration, with the owner of such interest being entitled to the exclusive right to the possession, use and occupancy of a Killington Residential Unit during thirteen (13) calendar weeks of each calendar year, as more particularly provided in the Killington Declaration. Killington Residential Common Areas and Facilities -- means those areas at the Killington Project that have been designated in accordance with the Killington Declaration, on the Killington Resort Map or by the Killington Association as "Residential Common Areas and Facilities," as defined in the Killington Declaration, for the primary or exclusive use of the owners of Killington Residential Units or Killington Quartershare Interests. Killington Residential Unit -- means a residential condominium unit at the Killington Project. Killington Resort Map -- means the plat and floor plans for the Killington Project to be recorded in the real property records of the Town of Rutland, Vermont and which shall be satisfactory to the Administrative Agent. Land Costs -- the out-of-pocket costs of the Borrower in acquiring the "Land," as such term is defined in the Blanket Mortgages, for all of the Projects. Lenders -- as defined in the preamble to this Agreement, together with their successors and permitted assigns pursuant to Section 2.6(b) of this Agreement. Lien -- any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and including, but not limited to, attachments, judgments or tax liens and the security interest or lien arising from a mortgage, deed of 18 trust, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. The term "Lien" shall include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting Property. For the purpose of this Agreement, the Borrower shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes. Loan -- means, at any time, the aggregate principal balance of all Advances outstanding at such time. Loan Costs -- as defined in Section 11.2 of this Agreement. Loan Disbursement Agreement -- means that certain loan disbursement agreement of even date herewith among the Disbursement Agent, the Borrower and the Lenders, substantially in the form of Exhibit C hereto, as amended from time to time. Loan Exposure -- means, with respect to any Lender as of any date of determination, (a) prior to the termination of the Commitment Period, the Commitment of such Lender and (b) after the termination of the Commitment Period, the aggregate principal amount of the Loan made by, or assigned to, such Lender and outstanding on such date. Maturity Date -- means the first Business Day of the 40th month following the Closing Date (not counting the month in which the Closing Date falls). Maximum Rate -- as defined in Section 2.4(c)(iv) of this Agreement. Minimum Quartershare Interest Release Price -- means (a) in the case of the Attitash Project, means the dollar amounts or amounts set forth on Schedule 4 hereto, (b) in the case of the Jordan Bowl Project, means the dollar amounts or amounts set forth on Schedule 4 hereto, (c) in the case of the Killington Project, means the dollar amounts or amounts set forth on Schedule 4 hereto, and (d) in the case of the Mt. Snow Project, means the dollar amounts or amounts set forth on Schedule 4 hereto. Monthly Average Weighted Loan Balance -- means, for any calendar month, the quotient of (a) the aggregate of the Daily Loan Balances for each of the days of such month in respect of the Loan, divided by 19 (b) the number of days in such month. For purposes of this definition, "Daily Loan Balance" shall mean, for any day, the principal balance of the Loan outstanding as of the close of business of the Administrative Agent for such day after giving effect to all payments received and Advances made during such day. Monthly Rental Amount -- means, with respect to each Under-Construction Project and the Host Company Lease Agreement in respect thereof, the following: (a) Jordan Bowl Project - $71,400 per month, which shall commence to be payable upon the completion of the construction of the facilities being leased at the Jordan Bowl Project pursuant to the Host Company Lease Agreement in respect thereof; (b) Killington Project - $92,600 per month, which shall commence to be payable upon the completion of the construction of the facilities being leased at the Killington Project pursuant to the Host Company Lease Agreement in respect thereof; and (c) Mt. Snow Project - $29,000 per month, which shall commence to be payable upon the completion of the construction of the facilities being leased at the Mt. Snow Project pursuant to the Host Company Lease Agreement in respect thereof. Mt. Snow Architect -- means a duly licensed architect under Vermont law approved by the Administrative Agent. Mt. Snow Association -- means the Mount Snow Grand Summit Hotel and Crown Club Owners Association, a Vermont non-profit corporation, or any successor association thereto as provided in the Mt. Snow Declaration. Mt. Snow CCR's -- means (a) that certain Grand Summit Hotel and Crown Club at Mount Snow Declaration of Protective Covenants by the Borrower, as declarant, which is to be recorded in the land records of the Town of West Dover, Vermont, and which shall be satisfactory to the Administrative Agent in its discretion, as amended from time to time in accordance with the provisions hereof and (b) that certain Declaration of Easements by and between the Borrower and Mount Snow, Ltd., a Vermont corporation, which is to be recorded in the applicable land records of the Town of West Dover, Vermont, and which shall be satisfactory in form and substance to the Administrative Agent in its discretion, as amended from time to time in accordance with the provisions hereof. Mt. Snow Commercial Common Areas and Facilities -- means those areas at the Mt. Snow Project that have been designated in accordance with the Mt. Snow Declaration, on the Mt. Snow Resort Map or by the Mt. Snow Association as "Commercial Common Areas and Facilities," as defined in the Mt. Snow Declaration, for the primary or exclusive use of the owners of Mt. Snow Commercial Units. 20 Mt. Snow Commercial Unit -- means a commercial condominium unit at the Mt. Snow Project. Mt. Snow Common Elements -- means the real estate and improvements located at the Mt. Snow Project other than those areas designated as Mt. Snow Residential Units or Mt. Snow Commercial Units and, with respect to the Mt. Snow Residential Units and Mt. Snow Quartershare Interests, shall mean the Mt. Snow Residential Common Areas and Facilities and the Mt. Snow Common Furnishings and the Mt. Snow General Common Areas and Facilities applicable thereto, and with respect to the Mt. Snow Commercial Units, means the Mt. Snow Commercial Common Areas and Facilities and the Mt. Snow Common Furnishings and the Mt. Snow General Common Areas and Facilities applicable thereto, in each case as more particularly provided for in the Mt. Snow Declaration. Mt. Snow Common Furnishings -- means all furniture, furnishings, appliances, fixtures and equipment, and all other personal property from time to time owned or leased by the Mt. Snow Association at the Mt. Snow Project for the use by the owners of Mt. Snow Residential Units, the Mt. Snow Quartershare Interests or the Mt. Snow Commercial Units. Mt. Snow Construction Contract -- means that certain Standard Form of Agreement between the Borrower and the Mt. Snow General Contractor, as amended from time to time, and satisfactory to the Administrative Agent. Mt. Snow Declaration -- means that certain Declaration of Condominium and Interval Ownership, Grand Summit Hotel and Crown Club at Mount Snow, by the Borrower, as declarant, which is to be recorded in the land records of the Town of West Dover, Vermont, and which shall be satisfactory to the Administrative Agent in its discretion, as amended from time to time in accordance with the provisions hereof. Mt. Snow Escrow Agent -- means Key Bank in Rutland, Vermont, or such escrowee duly authorized to act as such under applicable Vermont law. Mt. Snow General Common Areas and Facilities -- means all "Common Areas and Facilities" (as defined in the Mt. Snow Declaration) other than the Mt. Snow Residential Common Areas and Facilities and the Mt. Snow Commercial Common Areas and Facilities. Mt. Snow General Contractor -- means such general contractor as shall be acceptable to the Administrative Agent. Mt. Snow Project -- means that certain resort property commonly known as the Grand Summit Hotel and Crown Club at Mount Snow, situated on certain land located at Mount Snow, West Dover, Vermont, and particularly described on Schedule 5 attached hereto and made a part hereof, and including all improvements now or hereafter located on said land, and all facilities, roadways, common furnishings, club furnishings, equipment and all other appurtenances thereunto belonging. The Mt. Snow Project shall include, when the Mt. Snow Declaration is recorded, the Mt. Snow Residential Units, the Mt. Snow 21 Quartershare Interests, the Mt. Snow Commercial Units and the Mt. Snow Common Elements. Mt. Snow Project Advances -- as defined in Section 2.3(b)(iii) hereof. Mt. Snow Project Documents -- means the Mt. Snow Declaration, the Articles of Incorporation and the By-Laws of the Mt. Snow Association, and the rules and regulations of the Mt. Snow Association. Mt. Snow Quartershare Interest -- means the "Interval Ownership Interests" as defined and described in the Mt. Snow Declaration, with the owner of such interest being entitled to the exclusive right to the possession, use and occupancy of a Mt. Snow Residential Unit during thirteen (13) calendar weeks of each calendar year, as more particularly provided in the Mt. Snow Declaration. Mt. Snow Residential Unit -- means a residential condominium unit at the Mt. Snow Project. Mt. Snow Residential Common Areas and Facilities -- means those areas at the Mt. Snow Project that have been designated in accordance with the Mt. Snow Declaration, on the Mt. Snow Resort Map or by the Mt. Snow Association as "Residential Common Areas and Facilities," as defined in the Mt. Snow Declaration, for the primary or exclusive use of the owners of Mt. Snow Residential Units or Mt. Snow Quartershare Interests. Mt. Snow Resort Map -- means the plat and floor plans for the Mt. Snow Project to be recorded in the real property records of the Town of West Dover, Vermont and which shall be satisfactory to the Administrative Agent. Net Sales Proceeds -- means, with respect to any Contract for the sale of any Quartershare Interval in any Project or any other contract for the purchase and sale of any Residential Unit or Commercial Unit in any Project, the sum of the cash downpayments, other cash payments, cash loan proceeds and cash purchase proceeds in respect of such Contract or other contract delivered to the Administrative Agent on the Consummation Date in respect thereof pursuant to Section 3.15 hereof (less any customary and normal costs of closing of such Contract or other contract not previously deducted from other cash proceeds in respect of such sale), provided that (i) for the avoidance of doubt, "cash purchase proceeds" delivered to the Administrative Agent pursuant to Section 3.15 shall not be deemed to include any amounts that are withheld from the full cash purchase price to be paid to the Borrower under the Take-Out Facility in respect of any Quartershare Note arising from the sale of any such Quartershare Interest, and (ii) such amount in cash shall not be less than the full purchase price to be paid by the Purchaser thereof (less any customary and normal costs of closing of such Contract or other contract not previously deducted from other cash proceeds in respect of such sale). Nonconstruction Cost Certificate -- means, as of any date and with respect to any Under-Construction Project, a certificate, addressed to the Administrative Agent and 22 in form and substance satisfactory to the Administrative Agent, signed by the Borrower, which (a) includes as an attachment thereto the TFC Architect's Nonconstruction Cost Certificate for such Under-Construction Project in the case of any Project Advance being made in respect of FF&E Costs, (b) includes as an attachment thereto copies of all invoices and bills in respect of FF&E Costs and/or Sales, Marketing & Other Costs for which the Borrower is to be reimbursed, in whole or part, by a Project Advance to be made hereunder in respect of such Under-Construction Project and certifies the accuracy and correctness of such invoices and bills, (c) certifies (i) the aggregate costs incurred by the Borrower in respect of Construction Costs, FF&E Costs and Sales, Marketing & Other Costs in each case for such Under-Construction Project up to and including such date, (ii) the aggregate amount of Equity Moneys and Project Advances in each case for such Under-Construction Project utilized prior to such date to satisfy, in whole or part, such Costs and (iii) that the unutilized principal amount of this Agreement for such Under-Construction Project, the Project Advances likely to be repaid and to be reborrowable in respect of such Under-Construction Project and the remaining Equity Moneys, if any, are sufficient to satisfy the remaining Construction Costs, FF&E Costs and Sales, Marketing & Other Costs for such Under-Construction Project, and (d) compares the actual costs incurred in respect of each line item in the Budget for such Under-Construction Project with respect to such FF&E and Sales, Marketing & Other Costs with the projected amount thereof as of such date and explains any material variance in respect thereof. Note -- as defined in Section 2.4(a) of this Agreement. Obligations -- means all sums now or hereafter loaned, advanced or incurred by any one or more of the Lenders or the Administrative Agent to or on behalf of the Borrower under this Agreement, the Notes and any other Security Document (including, without limitation, accrued and unpaid interest and Loan Costs), and the full, prompt and complete performance of all obligations owed by, or undertakings or indemnities of, Borrower arising hereunder or thereunder. "Obligations" shall also include the Borrower's obligations and undertaking to or in favor of Textron Financial Corporation under the Take-Out Facility and any "Note Purchase Agreement" or other documentation executed in connection therewith. Parent -- means American Skiing Company, a Maine corporation. Parent Indenture -- means each of the following: (a) that certain Indenture, dated as of June 28, 1996, with the Parent, as issuer, and United States Trust Company of New York, as trustee, in respect of the Series A and Series B 12% Senior Subordinated Notes due 2006 and (b) that certain Indenture, dated as of June 28, 1996, with the Parent, as 23 issuer, and United States Trust Company of New York, as trustee, in respect of the 13.75% Subordinated Discount Notes due 2007. Participating Lender -- means any Person which (a) shall have been granted the right by a Lender to participate in the Note of such Lender and (b) shall have entered into a participation agreement with such Lender which shall provide, inter alia, that such Participating Lender shall communicate and deal only with such Lender with respect to such Participating Lender's interest in such Note. Pay-Out Release Price -- means the dollar amount or amounts set forth on Schedule 6 hereto. Permitted Exceptions -- means the title exceptions set forth in Schedule 7 of this Agreement. Person -- means an individual, partnership, corporation, trust, unincorporated organization, limited liability company or a government or agency or political subdivision thereof. Plans -- means, with respect to any Under-Construction Project, those certain plans, specifications and designs prepared by the Architect for such Under-Construction Project in connection with the construction and development of such Under-Construction Project. Pre-Construction Costs -- means, with respect to the Projects, all out-of-pocket costs up to a maximum of $6,100,000 for the Projects incurred by the Borrower in connection with (a) the preliminary design and engineering work required in connection with the construction of the Projects, (b) obtaining necessary permits, consents, licenses and approvals under applicable zoning, design and land use ordinances, building codes, health and environmental laws and regulations and all other applicable laws, rules and regulations, (c) marketing the Projects and the Quartershare Interests relating thereto. Pre-Construction Cost Certificate -- means a certificate, addressed to the Administrative Agent and in form and substance satisfactory to the Administrative Agent, signed by the Borrower, which (a) includes as an attachment thereto the TFC Architect's PreConstruction Cost Certificate covering the portion of the Pre-Sale Advance being made in respect of Pre-Construction Costs, (b) includes as an attachment thereto copies of all invoices and bills in respect of Pre-Construction Costs for which the Borrower is to be reimbursed, in whole or part, by the Pre-Sale Advance and certifies the accuracy and correctness of such invoices and bills, (c) certifies (i) that the aggregate Pre-Construction Costs are less than $6,100,000, and (ii) that the aggregate amount of the Pre-Sale Advance is less than $10,000,000, and 24 (d) certifies that (i) the aggregate amount of the purchase prices payable under Validated Contracts for all of the Projects is not less than 45% of the aggregate amount of the Construction Costs for the Under-Construction Projects as set forth in the Budgets for the Under-Construction Projects (inclusive of the construction costs of all capital improvements at the Under-Construction Projects to be leased to a Host Company by the Borrower pursuant to a Host Company Lease Agreement), (ii) the aggregate amount of the purchase prices payable under Validated Contracts for all of the Projects is not less than 50% of the aggregate amount of the Construction Costs for the Under-Construction Projects as set forth in the Budgets for the Under-Construction Projects (exclusive of the construction costs of all capital improvements at the Under-Construction Projects to be leased to a Host Company by the Borrower pursuant to a Host Company Lease Agreement), (iii) for each of the Killington Project and the Jordan Bowl Project, the amount of the purchase prices payable under Validated Contracts for each such Project is not less than 35% of the aggregate amount of the Construction Costs for each such Project as set forth in the Budget for each such Project (exclusive of the construction costs of all capital improvements at each such Project to be leased to the relevant Host Company by the Borrower pursuant to the relevant Host Company Lease Agreement for each such Project), (iv) for the Mt. Snow Project, the amount of the purchase prices payable under Validated Contracts for such Project is not less than 30% of the aggregate amount of the Construction Costs for such Project as set forth in the Budget for such Project (exclusive of the construction costs of all capital improvements at such Project to be leased to the Host Company for such Project by the Borrower pursuant to the Host Company Lease Agreement for such Project) and (v) each of the conditions set forth in clauses (a) through (l), inclusive, of the definition of "Validated Contracts" are satisfied in all respects. Pre-Sale Advance -- as defined in Section 2.1 of this Agreement. Pricing Matrix -- means that certain schedule relating to sales of Quartershare Interests, Residential Units, and/or Commercial Units attached hereto as Schedule 8. Prime Rate -- as defined in the definition of "Interest Rate" in this Section 1.1. Project(s) -- means, individually or collectively (as the context may require), the Attitash Project, the Jordan Bowl Project, the Killington Project and the Mt. Snow Project. Project Advance -- as defined in Section 2.2 of this Agreement. Project Advance Request -- as defined in Section 6.3 of this Agreement. Project Borrowing Base -- means, on any date and with respect to any Under-Construction Project, 80% of the aggregate amount of (a) Construction Costs for such Under-Construction Project, FF&E Costs for such Under-Construction Project and Sales, Marketing & Other Costs for such Under-Construction Project incurred and paid for by the Borrower on or 25 prior to such date in respect of such Under-Construction Project under and in accordance with the Budget for such Under-Construction Project plus (b) pre-development expenses and land values (net of mortgage debt) for such Under-Construction Project set forth on Schedule 22 hereto, provided that the "Project Borrowing Base" in respect of each of the Under-Construction Projects shall, in no case, exceed the following maximum amounts: (i) Jordan Bowl Project: $21,270,000; (ii) Killington Project: $23,270,000; and (iii) Mt. Snow Project: $22,460,000. Project Documents -- means, individually or collectively (as the context may require), the Attitash Project Documents, the Jordan Bowl Project Documents, the Killington Project Documents, and the Mt. Snow Project Documents. Projected Inventory Loan Amount -- means, as of any Quarterly Testing Date, the principal amount of the Loan that would be outstanding on such Quarterly Testing Date assuming that each Release Price paid after the Closing Date and on or prior to such Quarterly Testing Date in respect of a Quartershare Interest was equal to the higher of the Pay-Out Release Price or the actual Release Price paid to the Administrative Agent. Property -- means any interest in any kind of property or asset of Borrower, whether real, personal or mixed, or tangible or intangible. Property-Related Contract -- as defined in Section 3.1(b) of this Agreement. Purchaser -- as defined in the definition of "Contract" in this Section 1.1. Quarterly Testing Date -- as defined in Section 2.5(c)(iii) of this Agreement. Quartershare Interest(s) -- means individually or collectively (as the context may require), an Attitash Quartershare Interest, a Jordan Bowl Quartershare Interest, a Killington Quartershare Interest, and/or a Mt. Snow Quartershare Interest. Quartershare Mortgage -- means, with respect to any Quartershare Note, a mortgage in and to the Quartershare Interest whose purchase is being financed, in whole or part, by such Quartershare Note. Quartershare Note -- means any promissory note made payable to the order of the Borrower which provides for payment of the deferred purchase price of one or more Quartershare Interests purchased by the Purchaser thereof. Release Percentage -- means 26 (a) 85%, in the case of the Attitash Project, (b) 80%, in the case of the Jordan Bowl Project, (c) 80%, in the case of the Killington Project, and (d) 80%, in the case of the Mt. Snow Project. Release Price -- means, (a) with respect to any Quartershare Interest in any Project to be sold pursuant to a Contract, an amount in cash equal to the result of the Release Percentage for such Project times the Net Sales Proceeds payable in connection with such sale, provided that in no event shall the Release Price for any Quartershare Interest be less than the Minimum Quartershare Interest Release Price for such Project, and (b) with respect to any Residential Unit to be sold as a condominium unit in its entirety at any Project or any Commercial Unit to be sold in its entirety at any Project, an amount in cash equal to the Net Sales Proceeds payable by the purchaser thereof in connection with such sale, provided that in no event shall the Release Price for any Residential Unit or Commercial Unit in any Project be less than the purchase price for such Residential Unit or Commercial Unit in such Project as set forth in the Pricing Matrix. If at any time during the Commitment Period, there are no Obligations outstanding, the release price in respect of the sale of any Quartershare Interest, Residential Unit or Commercial Unit shall be $0. Release Price Catch-Up Payment -- as defined in Section 2.5(c)(iii) of this Agreement. Required Lenders -- means any one or more Lenders having or holding 51% or more of the aggregate Loan Exposure of all Lenders. Residential Unit(s) -- means individually or collectively (as the context may require), an Attitash Residential Unit, a Jordan Bowl Residential Unit, a Killington Residential Unit, and/or a Mt. Snow Residential Unit. Resort Map(s) -- means individually or collectively (as the context may require), the Attitash Resort Map, the Jordan Bowl Resort Map, the Killington Resort Map, and the Mt. Snow Resort Map. Retainage Amount -- as defined in Section 2.2(d) of this Agreement. Sales, Marketing & Other Costs -- means, with respect to any Under-Construction Project, all out-of-pocket costs for such Under-Construction Project incurred by the Borrower in connection with selling and marketing of the Quartershare Interests, all 27 general and administrative out-of-pocket costs of the Borrower, all interest costs and loan fees of the Borrower relating to such Under-Construction Project, all professional fees of the Borrower relating to such Under-Construction Project (including architectural, accounting, engineering and legal fees) and all other out-of-pocket costs incurred by the Borrower in connection with the development (for purposes of the avoidance of doubt, "development" shall exclude construction), sale and operation of such Under-Construction Project and the maintenance of the Collateral relating to such Under-Construction Project, provided that "Sales, Marketing & Other Costs" shall not include Pre-Construction Costs. Security -- shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended. Security Documents -- means this Agreement, the Notes, all assignments of Contracts, all assignments of Property-Related Contracts, the Blanket Mortgages, the Subordination Agreements, the collateral assignment of declarant's rights provided for in Section 5.7 hereof, the proxy referred to in Section 3.9(c) hereof, the Loan Disbursement Agreement, and all assignments, instruments, certificates, notices and other documents now or hereafter executed and delivered in connection with the transactions contemplated herein. Senior Credit Facility -- means that certain Credit Agreement, dated as of June 28, 1996, among the Parent, Fleet National Bank, as Agent, and certain other persons and lenders party thereto, as amended from time to time. Subordination Agreement -- as defined in Section 5.8 of this Agreement. Subsequent Project Advance -- as defined in Section 6 of this Agreement. Subsequent Project Advance Date -- as defined in Section 6 of this Agreement. Subsequent Phase -- means (a) the expansion of any or all of the Projects and the Property and improvements located thereon (i) to include additional Property, (ii) to accommodate the construction of additional buildings constituting the Projects, and/or (iii) to accommodate the expansion of any buildings existing at the Projects at the time of such expansion or (b) the construction or development of any other hotel projects by the Borrower similar to any one or more of the Projects. Take-Out Facility -- means the Textron Financial Corporation purchase facility described on Schedule 9 hereto. Termination Date -- means the earliest of (a) the date on which the Lenders' obligations hereunder to make Advances are terminated pursuant to Section 8.2(a) of this Agreement, 28 (b) the date on which the Obligations are accelerated pursuant to Section 8.2(a) of this Agreement, (c) the date on which any of the Events of Default set forth in Section 8.1(e) shall have occurred, and (d) the first Business Day of the 24th month following the Closing Date (not counting the month in which the Closing Date falls). TFC Acceptance -- as defined in Section 2.8 of this Agreement. TFC Architect -- means such person or firm as the Administrative Agent shall select. TFC Architect's Nonconstruction Cost Certificate -- means, with respect to any Under-Construction Project and any Project Advance in respect of FF&E Costs and the Nonconstruction Cost Certificate in respect thereof, a certificate, addressed to the Administrative Agent and in form and substance satisfactory to the Administrative Agent, from the TFC Architect in respect of such Under-Construction Project which (a) confirms that such TFC Architect has inspected such Under-Construction Project and reviewed such Nonconstruction Cost Certificate and the attachments thereto, and (b) confirms that such Nonconstruction Cost Certificate and the attachments thereto are satisfactory to it. TFC Architect's Pre-Construction Cost Certificate -- means, with respect to the Pre-Sale Advance in respect of Pre-Construction Costs and the Pre-Construction Cost Certificate in respect thereof, a certificate, addressed to the Administrative Agent and in form and substance satisfactory to the Administrative Agent, from the TFC Architect in respect of the Attitash Project which (a) confirms that the TFC Architect has reviewed such Pre-Construction Cost Certificate and the attachments thereto, and (b) confirms that such Pre-Construction Cost Certificate and the attachments thereto are satisfactory to it. TFC First Refusal Offer -- as defined in Section 2.8 of this Agreement. Third-Party Offer -- as defined in Section 2.8 of this Agreement. Title Company -- means Lawyers Title Insurance Company, or any successor or other title company approved by the Administrative Agent from time to time. Title Insurance Policy {Blanket} -- as defined in Section 5.11 hereof. 29 Under-Construction Project(s) -- means, individually or collectively (as the context may require), the Jordan Bowl Project, the Killington Project and the Mt. Snow Project. For the avoidance of doubt, the Attitash Project shall not be an "Under-Construction Project" and no Project Advances shall be made in respect thereof. Uniform Commercial Code -- means the Uniform Commercial Code as adopted and in force in the State of Maine from time to time in effect. Validated Contract -- means each Contract in respect of a Quartershare Interest and any Project and in respect of which all of the following requirements shall have been satisfied: (a) such Contract shall arise from the agreement of any third-party Purchaser that is not an Affiliate of the Borrower to purchase, and the Borrower to sell, one or more Quartershare Interests in a Project; (b) the Purchaser shall be a legal resident of the United States of America or Canada and the payments under such Contract shall be payable in legal tender of the United States of America; (c) the executed original of such Contract, which shall be satisfactory to the Administrative Agent in form and substance, shall have been assigned by the Borrower to the Administrative Agent on behalf of the Lenders and a copy thereof shall have been delivered to the Administrative Agent; (d) the Administrative Agent shall have, at its option (if so directed by the Required Lenders), received the original of such Contract and shall, in any case, have a valid and perfected, first-priority Lien in and to such Contract and all proceeds arising therefrom; (e) (i) the Purchaser shall have paid to the Borrower, in connection with the execution and delivery of such Contract, a down payment (after giving effect to any discounts offered to such Purchaser) of not less than 5% of the purchase price (as set forth in such Contract) of the Quartershare Interest being so purchased by such Purchaser, (ii) such downpayment shall have been deposited by the Borrower in an Approved Escrow Account in respect of such Project and (iii) the Borrower shall have delivered to the Administrative Agent evidence reasonably satisfactory to the Administrative Agent of the depositing of such downpayment in such Approved Escrow Account and the clearing of such downpayment; (f) such Contract (and the execution and delivery thereof) shall comply with all requirements of United States and applicable state law, including, without limitation, any consumer credit code, as adopted and in effect from time to time in the State in which the Project is situated, any condominium ownership act as adopted and in effect from time to time in the State in which the Project is situated, any subdivision laws of the State in which the Project is situated, as amended, and the rules and regulations as adopted from time to time thereunder; 30 (g) all rights of rescission of the Purchaser in respect of such Contract under federal law, the law of the State in which the Project is located, the law of the state of the residence of the Purchaser and as expressly provided in such Contract shall have expired and such Purchaser shall have not at any time requested rescission in respect of such Contract or otherwise stated in writing that it does not intend to consummate such Contract; (h) such Contract is, subject to the terms and conditions thereof and applicable laws of rescission, a valid and binding obligation of the Purchaser; (i) the Purchaser under such Contract shall not be subject to any bankruptcy or insolvency proceeding; and (j) the Borrower shall have confirmed the existence and bona fide nature of such Contract and the satisfaction of such Contract of each of the foregoing criteria by delivering to the Administrative Agent a validation certificate in respect of such Contract, which shall be substantially in the form of Exhibit F hereto. Voting Equity -- means Securities of any class or classes of a corporation the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (or Persons performing similar functions) of such corporation or, in the case of a Person which is not a corporation, Securities or similar equity or partnership interests which entitle the holder thereof to elect, select or control the management or policies of such Person. 1.2 Directly or Indirectly. Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provisions shall be applicable whether such action is taken directly or indirectly by such Person. 1.3 Headings. Section headings have been inserted in this Agreement as a matter of convenience of reference only; such section headings are not a part of this Agreement and shall not be used in the interpretation of this Agreement. 1.4 Accounting Principles. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be determined or made in accordance with generally accepted accounting principles, procedures and practices consistently applied at the time in effect, to the extent applicable, except where such principles are inconsistent with the requirements of this Agreement. 31 2. ADVANCES AND NOTE 2.1 Pre-Sale Advance. Each of the Lenders agrees, pursuant to the terms of this Agreement and subject to the satisfaction of the conditions precedent in Section 5 of this Agreement, to make its Pro Rata Share of a one-time advance (such one-time advance is referred to herein as the "Pre-Sale Advance"") to the Borrower from time to time during the Commitment Period, provided that (a) the Pre-Sale Advance shall not be made (i) unless the proceeds thereof are to be used (A) first to pay off the Existing Attitash Loan and (b) then to satisfy the Pre-Construction Costs or to reimburse the Borrower for having paid in full such Pre-Construction Costs; or (ii) if a Default or Event of Default shall then exist; (iii) if the aggregate amount of the purchase prices payable under Validated Contracts for all Projects is less than 45% of the aggregate amount of the Construction Costs for the Under-Construction Projects, as more particularly set forth in the Budgets for the Under-Construction Projects (inclusive of the construction costs of all capital improvements at the Under-Construction Projects to be leased to a Host Company by the Borrower pursuant to a Host Company Lease Agreement), as determined on the date of the making of the Pre-Sale Advance; or (iv) if the aggregate amount of the purchase prices payable under Validated Contracts for all Projects is less than 50% of the aggregate amount of the Construction Costs for the Under-Construction Projects, as more particularly set forth in the Budgets for the Under-Construction Projects (exclusive of the construction costs of all capital improvements at the Under-Construction Projects to be leased to a Host Company by the Borrower pursuant to a Host Company Lease Agreement), as determined on the date of the making of the Pre-Sale Advance; or (v) if the amount of the purchase prices payable under Validated Contracts for the Killington Project is less than 35% of the aggregate amount of the Construction Costs for the Killington Project, as set forth in the Budget for the Killington Project, as determined on the date of the making of the Pre-Sale Advance (exclusive of the construction costs of all capital improvements at the Killington Project to be leased to the Host Company for the Killington Project by the Borrower pursuant to the Host Company Lease Agreement for the Killington Project); or (vi) if the amount of the purchase prices payable under Validated Contracts for the Jordan Bowl Project is less than 35% of the aggregate amount of the Construction Costs for the Jordan Bowl Project, as set forth in the Budget for the Jordan Bowl Project, as determined on the date of the making of the Pre- 32 Sale Advance (exclusive of the construction costs of all capital improvements at the Jordan Bowl Project to be leased to the Host Company for the Jordan Bowl Project by the Borrower pursuant to the Host Company Lease Agreement for the Jordan Bowl Project); or (vii) if the amount of the purchase prices payable under Validated Contracts for the Mt. Snow Project is less than 30% of the aggregate amount of the Construction Costs for the Mt. Snow Project, as set forth in the Budget for the Mt. Snow Project, as determined on the date of the making of the Pre-Sale Advance (exclusive of the construction costs of all capital improvements at the Mt. Snow Project to be leased to the Host Company for the Mt. Snow Project by the Borrower pursuant to the Host Company Lease Agreement for the Mt. Snow Project); (b) the principal amount of the Pre-Sale Advance shall not exceed $10,000,000; and (c) the Pre-Sale Advance shall be the first Advance under this Agreement. 2.2 Subsequent Advances. Each of the Lenders agrees, pursuant to the terms of this Agreement and subject to the satisfaction of the conditions precedent in Section 6 of this Agreement, to make its Pro Rata Share of one or more advances in respect of any of the Under-Construction Projects (such advances, with respect to any Project, are individually referred to herein as, a "Project Advance" and, with respect to any single Project or all of the Projects (as the context may require), are collectively referred to as the "Project Advances") to the Borrower from time to time during the Commitment Period, provided that (a) no Project Advance in respect of an Under-Construction Project shall be made (i) unless the proceeds thereof are to be used to satisfy Construction Costs in respect of such Under-Construction Project, FF&E Costs in respect of such Under-Construction Project and/or Sales, Marketing & Other Costs in respect of such Under-Construction Project and all Equity Moneys then on hand shall have first been utilized to satisfy such Costs; (ii) if the proceeds thereof are to be used to reimburse the Borrower for any Equity Moneys previously used to satisfy Construction Costs in respect of such Under-Construction Project, FF&E Costs in respect of such Under-Construction Project and/or Sales, Marketing & Other Costs in respect of such Under-Construction Project; (iii) if a Default or Event of Default shall then exist; (iv) if such Project Advance is the first Project Advance in respect of such Under-Construction Project, the Project Advance Request therefor shall not 33 have been delivered to the Administrative Agent on or prior to September 30, 1997; (v) if the aggregate amount of the purchase prices payable under Validated Contracts for all Projects is less than 45% of the aggregate amount of the Construction Costs for the Under-Construction Projects, as more particularly set forth in the Budgets for the Under-Construction Projects, as determined on the date of the making of such Project Advance (inclusive of the construction costs of all capital improvements at the Under-Construction Projects to be leased to a Host Company by the Borrower pursuant to a Host Company Lease Agreement); (vi) if the aggregate amount of the purchase prices payable under Validated Contracts for all Projects is less than 50% of the aggregate amount of the Construction Costs for the Under-Construction Projects, as more particularly set forth in the Budgets for the Under-Construction Projects, as determined on the date of the making of such Project Advance (exclusive of the construction costs of all capital improvements at the Under-Construction Projects to be leased to a Host Company by the Borrower pursuant to a Host Company Lease Agreement); (vii) if the amount of the purchase prices payable under Validated Contracts for the Killington Project is less than 35% of the aggregate amount of the Construction Costs for the Killington Project, as set forth in the Budget for the Killington Project, as determined on the date of the making of such Project Advance (exclusive of the construction costs of all capital improvements at the Killington Project to be leased to the Host Company for the Killington Project by the Borrower pursuant to the Host Company Lease Agreement for the Killington Project); (viii) if the amount of the purchase prices payable under Validated Contracts for the Jordan Bowl Project is less than 35% of the aggregate amount of the Construction Costs for the Jordan Bowl Project, as set forth in the Budget for the Jordan Bowl Project, as determined on the date of the making of such Project Advance (exclusive of the construction costs of all capital improvements at the Jordan Bowl Project to be leased to the Host Company for the Jordan Bowl Project by the Borrower pursuant to the Host Company Lease Agreement for the Jordan Bowl Project); or (ix) if the amount of the purchase prices payable under Validated Contracts for the Mt. Snow Project is less than 30% of the aggregate amount of the Construction Costs for the Mt. Snow Project, as set forth in the Budget for the Mt. Snow Project, as determined on the date of the making of such Project Advance (exclusive of the construction costs of all capital improvements at the Mt. Snow Project to be leased to the Host Company for the Mt. Snow Project by the Borrower pursuant to the Host Company Lease Agreement for the Mt. Snow Project); (b) (i) on the date of the making of any Project Advance in respect of an Under-Construction Project (and after giving effect thereto) the aggregate outstanding 34 principal amount of all Project Advances made hereunder with respect to all of the Under-Construction Projects shall not exceed the Aggregate Project Borrowing Base, determined as of such date, (ii) on the date of the making of any Project Advance hereunder in respect of such Under-Construction Project (and after giving effect thereto) the aggregate original principal amount of all Project Advances (with respect to all Under-Construction Projects), the aggregate original principal amount of all of the Interest Advances and the original principal amount of the Pre-Sale Advance shall not exceed $77,000,000 and (iii) on the date of the making of any Project Advance hereunder in respect of such Under-Construction Project (and after giving effect thereto), the outstanding principal amount of the Pre-Sale Advance, the aggregate outstanding principal amount of all Interest Advances and the aggregate outstanding principal amount of all Project Advances with respect to all Under-Construction Projects shall not exceed $55,000,000; (c) on the date of the making of any Project Advance in respect of an Under-Construction Project (and after giving effect thereto) the aggregate original principal amount of all Project Advances made hereunder with respect to such Under-Construction Project shall not exceed the Project Borrowing Base for such Under-Construction Project, determined as of such date; (d) the original principal amount of each Project Advance to be made in respect of Construction Costs of an Under-Construction Project, at the time of the making thereof, shall have been determined by excluding from such Construction Costs a contractor's retainage of not less than 10% of at least one-half of the applicable Construction Costs (such 10% so reserved from any such Construction Costs is referred to herein as the "Retainage Amount;" for purposes of the avoidance of doubt, the Retainage Amount shall be based upon the full amount of certified Construction Costs and shall remain as a retainage until the final payment thereof), provided that, in connection with the Final Construction Cost Advance for such Under-Construction Project and subject to the requirements of Section 6 hereof, this clause (d) shall not operate and the aggregate unutilized Retainage Amounts for such Under-Construction Project may then be borrowed in their entirety and provided further that the Administrative Agent, as directed by the Required Lenders and upon the Borrower's submission of a written request therefor (which request shall be based upon the completion of construction work at such Under-Construction Project by a subcontractor or by the General Contractor for such Under-Construction Project and the desire of the Borrower to pay such subcontractor or the General Contractor for such work), may agree to advance any or all of such unutilized Retainage Amounts prior to the making of the Final Construction Cost Advance for such Under-Construction Project upon such terms and conditions as it may require; and (e) the original principal amount of any Final Construction Cost Advance with respect to any Under-Construction Project, assuming compliance with clauses (b) and (c) above, shall not exceed 100% of the aggregate amount of the Retainage Amounts then owing to the General Contractor for such Under-Construction Project under the Construction Contract for such Under-Construction Project, as of the date of the making of such Final Construction Cost Advance; 35 (f) no more than one Project Advance in respect of any Under-Construction Project shall be made during any weekly period; (g) no Project Advance shall relate to or be attributable to more than one Under-Construction Project; and (h) no Project Advance shall be in an amount of less than $50,000. 2.3 Borrowing Mechanics; Advances Generally. (a) Borrowing Mechanics. (i) All requested advances under this Agreement shall be made by the Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender's obligation to make its share of a requested advance hereunder nor shall the Commitment of any Lender be increased or decreased as a result of a default by any other Lender in that other Lender's obligation to make its share of a requested advance hereunder, provided that any one or more of the nondefaulting Lenders may, in their sole discretion and by a written notice to the Borrower, the Administrative Agent and the defaulting Lender, elect to assume that portion of the Commitment of a defaulting Lender not then being honored by such defaulting Lender and, in any such case, the Commitment of such nondefaulting Lenders and the Commitment of such defaulting Lender shall be appropriately adjusted to reflect such assumption (if more than one nondefaulting Lender shall desire to effect the assumption referred to in this clause (a), such assumption shall be shared ratably among such nondefaulting Lenders in accordance with their Commitments, as determined immediately prior to such assumption) and new Notes shall be issued in exchange for the then outstanding Notes to reflect such assumption. (ii) Each Lender shall either (A) deliver the amount of each of its Pre-Sale Advances or Project Advances directly to the Administrative Agent on the applicable Advance Date in respect thereof as provided for herein or (B) deliver the amount of each of its Pre-Sales Advances or Project Advances as provided in Section 10.7(b) hereof. Each Lender shall inform the Administrative Agent in writing of its preferred way of making its Pro Rata Share of the Pre-Sale Advance and Project Advances hereunder. (iii) This clause (iii) shall apply with the respect to any Lender that shall have elected option (A) under Section 2.3(a)(ii) hereof; otherwise Section 10.7(b) hereof shall apply. Subject to the satisfaction of the conditions precedent set forth in Section 6 hereof, the Administrative Agent shall deliver the proceeds of the Pro Rata Share of each Pre-Sale Advance or Project Advance from each Lender delivered to it in immediately available funds to the Borrower on the applicable Advance Date in immediately available funds as provided for in Schedule 10 hereto. Unless the Administrative Agent shall have been notified by a Lender prior to any applicable Advance Date that such Lender does not intend to make 36 available to the Administrative Agent its Pro Rata Share of a Pre-Sale Advance or Project Advance in respect of such Advance Date, the Administrative Agent may assume, for purposes of this clause (iii), that such Lender will make such Pro Rata Share of such Pre-Sale Advance or Project Advance then requested available to the Administrative Agent on the applicable Advance Date, and the Administrative Agent may, in its sole discretion, but shall not be obligated to, deliver to the Borrower, as provided in clause (ii) above, the amount of such Pro Rata Share of such Advance. If such Lender does not in fact make such Pro Rata Share of such Pre-Sale Advance or Project Advance available to the Administrative Agent on the applicable Advance Date, the Administrative Agent shall be entitled to recover such amount from such Lender together with interest accrued thereon at the Interest Rate. If such Lender shall not pay to the Administrative Agent such amount (together with interest) forthwith upon the Administrative Agent's demand therefor, the Administrative Agent may promptly inform, in writing, the Borrower of such circumstances and the Borrower shall promptly repay such Pro Rata Share of such Pre-Sale Advance or Project Advance together with interest accrued thereon at the Interest Rate for the period of time such Pre-Sale Advance or Interest Advance shall have been outstanding. Nothing in this clause (iii) shall be deemed to relieve any Lender from its obligations to fulfill its Commitment hereunder and nothing in this clause (iii) shall be deemed to relieve any nondefaulting Lender from its rights under clause (i) above. (b) Advances Generally. (i) Other than as provided in Sections 2.5, 3.5 and 3.6 hereof, the Borrower may not prepay the Loan. It is the intention of Borrower and Lender that the Loan be available to the Borrower in a series of advances (including the Pre-Sale Advance, the Interest Advances and the Project Advances) to be made during the Commitment Period. The Borrower may not re-borrow any amount of the Pre-Sale Advance Loan that has been paid. The Borrower may not re-borrow any amount of any Interest Advance that has been paid. The Borrower may re-borrow, in accordance with the terms and conditions hereof, any Project Advance that has been paid except a Project Advance which is a Final Construction Cost Advance. (ii) The Loan shall be payable in the manner set forth in Sections 2.4 and 2.5 of this Agreement. The Loan shall be due and payable on the Maturity Date together with any accrued interest thereon then remaining unpaid and any other unpaid amounts outstanding under the Note or under any of the other Security Documents, provided that, if earlier than the Maturity Date, each Project Advance shall mature and be due and payable on the first day of the 37th month following the date on which the first Project Advance Request in respect of the Under-Construction Project related to such Project Advance shall have been submitted to the Administrative Agent. The Pre-Sale Advance shall be disbursed on terms and conditions set forth in Section 5 of this Agreement and otherwise satisfactory to the Lenders and the Administrative Agent, each Interest Advance shall be disbursed on terms set forth in Section 2.4(c) hereof and each Project 37 Advance hereunder shall be disbursed by the Administrative Agent in the manner set forth in Section 6 of this Agreement. (iii) Each Project Advance shall be attributable to a particular Under-Construction Project. Accordingly, each Project Advance will be characterized as follows: a Project Advance in respect of the Jordan Bowl Project (a "Jordan Bowl Project Advance" and, collectively, the "Jordan Bowl Project Advances"), a Project Advance in respect of the Killington Project (a "Killington Project Advance" and, collectively, the "Killington Project Advances") or a Project Advance in respect of the Mt. Snow Project (a "Mt. Snow Project Advance" and, collectively, the "Mt. Snow Project Advances"). For the avoidance of doubt, the Final Construction Cost Advance in respect of each Under-Construction Project shall be deemed to be and is a Project Advance and shall further be deemed to be and is a Jordan Bowl Project Advance, Killington Project Advance or Mt. Snow Project Advance, as the case may be. 2.4 Issuance of Note; Interest Payments. (a) Note. The Borrower shall authorize, issue and deliver to each Lender a promissory note (as amended from time to time, a "Note," and, collectively, the "Notes"), substantially in the form attached to this Agreement as Exhibit G, to evidence such Lender's Pro Rata Share of the Loan and in the original stated principal amount of such Lender's Commitment. Each of the Lenders is hereby authorized by the Borrower to record (in good faith) in the manual or data processing records of such Lender, or on the grid schedule annexed to the Note of such Lender, the date and amount of its Pro Rata Share of the Pre-Sale Advance and each Project Advance extended to the Borrower hereunder, the Under-Construction Project related to such Project Advance (i.e., whether such Project Advance is a Jordan Bowl Project Advance, a Killington Project Advance or a Mt. Snow Project Advance), whether the Advance is a Pre-Sale Advance or an Interest Advance, the date and amount of its Pro Rata Share of each repayment of principal of each such Advance and its Pro Rata Share of each payment of interest on account of each such Advance. In the absence of manifest error, such records and schedule shall be conclusive as to such Lender's Pro Rata Share of the outstanding principal amount of each Advance (and, in the case of a Project Advance, the Under-Construction Project related thereto) and of the Loan and such Lender's Pro Rata Share of the payment of interest accrued thereunder and hereunder; provided, that the failure to make any such record entry with respect to any such Advance, any such Under-Construction Project or any such payment shall not limit or otherwise affect the obligations of the Borrower to such Lender under this Agreement, the Note of such Lender or any other Security Document. (b) Assumptions as to Holders. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until an assignment agreement effecting the assignment or transfer thereof shall have been accepted by Administrative Agent as provided in Section 2.6(b) hereof. Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on 38 any subsequent holder, assignee or transferee of that Note or of any Note or Notes issued in exchange therefor. (c) Interest Payments. (i) Interest shall accrue on the Loan, as more particularly provided for in this clause (c), and shall be due and payable monthly in arrears on the 15th day of the month following the month in respect of which such interest accrued, provided that all accrued and unpaid interest on the Maturity Date shall be due on the Maturity Date. Subject to the accrual of interest on the Loan after the occurrence of a Default or Event of Default, as more particularly provided in this clause (c), the Monthly Average Weighted Loan Balance in respect of the Loan for each calendar month shall bear interest at a rate per annum equal to the Interest Rate. Interest shall be calculated on the basis of actual days elapsed over a period of a 360 day year. (ii) Each Lender's Pro Rata Share of an Advance shall bear interest as of the date of such Lender's wiring of funds thereof (or as otherwise provided with respect to an Interest Advance under Section 2.4(c) hereof) through the date of the receipt by such Lender of the repayment thereof (if the repayment of all or any portion of such Lender's Pro Rata Share of the principal amount thereof is received by such Lender later than 12:00 pm, Eastern time, then interest accrual thereon shall be through the next Business Day following such receipt). After the occurrence of an Event of Default or after the Maturity Date (if the aggregate outstanding principal balance of the Loan and any other sums due under any Security Document is not paid in full on the Maturity Date) or the maturity date of any Project Advances (if the aggregate outstanding principal balance of such Project Advances is not paid in full on such maturity date), each Lender's Pro Rata Share of such aggregate outstanding principal balance of the Loan will bear interest at the Default Rate. (iii) The Borrower hereby requests the Lenders (such request to be deemed a standing request unless rescinded in writing by the Borrower), and hereby authorizes the Lenders, to make an advance (each such advance is referred to herein as an "Interest Advance") to it on the 15th day of each calendar month in an amount equal to the lesser of (A) the amount of accrued interest due and payable on such day to the Lenders and (B) an amount, which when added to the aggregate outstanding principal amounts of all prior Advances made by the Lenders would not exceed $55,000,000, and the Lenders agree, subject only to the lack of existence of a Default or Event of Default, to extend their respective Pro Rata Shares of each such Interest Advance to the Borrower, provided that all of the proceeds of each such Pro Rata Share shall be used by the Lender related to such Pro Rata Share for the sole 39 purpose of satisfying (in whole or part, as the case may be) the accrued interest due and payable on such 15th day of such month and the Borrower hereby irrevocably authorizes and instructs such use. To the extent that the amount of any such Advance is insufficient to pay in full the amount of such interest due and payable on such 15th day of such month or no such Interest Advance is made, the Borrower shall pay, on such 15th day, the balance of interest due and payable on such 15th day. In connection with any such Interest Advance, the Borrower shall deliver to the Administrative Agent title insurance endorsements to the Title Insurance Policy {Blanket} in respect of all Projects in form and substance reasonably satisfactory to the Administrative Agent whereby the effective date of such Title Insurance Policy {Blanket} shall be made the date of such Interest Advance, all exclusions and/or exceptions not satisfactory to the Administrative Agent shall have been removed or appropriate endorsements in respect thereof shall have been obtained; such Title Insurance Policy {Blanket} shall be in an amount not less than the sum of the principal amount of the Loan outstanding after giving effect to such Interest Advance. All premiums in respect of such endorsement to such Title Insurance Policy {Blanket} shall have been paid in full and evidence thereof shall have been delivered to the Administrative Agent. (iv) The Borrower and each Lender intend to comply at all times with applicable usury laws. All agreements between the Borrower and such Lender, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of demand or acceleration of the maturity of any Note or otherwise, shall the interest contracted for, charged, received, paid or agreed to be paid to such Lender exceed the maximum amount permissible under applicable law (the "Maximum Rate"). Each Lender may, in determining the Maximum Rate in effect from time to time, take advantage of any law, rule or regulation in effect from time to time available to such Lender which exempts such Lender from any limit upon the rate of interest it may charge or grants to such Lender the right to charge a higher rate of interest than that otherwise permitted by applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to a Lender in excess of the Maximum Rate, the interest payable to such Lender shall be reduced to the Maximum Rate; and if from any circumstance such Lender shall ever receive anything of value deemed interest by applicable law in excess of the Maximum Rate, an amount equal to any excessive interest shall be applied to the reduction of the principal of the Pro Rata Share of the Loan allocable to such Lender hereunder and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal of such Pro Rata Share of the Loan, such excess shall be refunded to the Borrower by such Lender. All interest paid or agreed to be paid to a Lender shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal so that the interest on the portion of the Loan allocable to such Lender for such full period shall not exceed the Maximum Rate for such Lender. The Borrower agrees that in determining whether or not any interest payment under the Security Documents exceeds the Maximum Rate for a Lender, any non-principal payment (except payments specifically described in the Security Documents as "interest") including without limitation, fees and late charges, shall to the maximum extent not 40 prohibited by law, be an expense, fee or premium rather than interest in respect of such Lender. Each Lender hereby expressly disclaims any intent to contract for, charge or receive interest in an amount which exceeds the Maximum Rate for such Lender. The provisions of this Agreement, the Notes, and all other Security Documents are hereby modified to the extent necessary to conform with the limitations and provisions of this paragraph, and this paragraph shall govern over all other provisions in any document or agreement now or hereafter existing. This paragraph shall never be superseded or waived unless there is a written document executed by each Lender and the Borrower, expressly declaring the usury limitation set forth in this paragraph to be null and void, and no other method or language shall be effective to supersede or waive this paragraph. (d) Interest and Other Payments Due on Holidays. If any payment due on, or with respect to, this Agreement, the Notes or any other Security Document shall fall due on a day other than a Business Day, then such payment shall be made on the 1st Business Day following the day on which such payment shall have so fallen due; provided that if all or any portion of such payment shall consist of a payment of interest, for purposes of calculating such interest, such payment shall be deemed to have been originally due on such first following Business Day, and such interest shall accrue and be payable to (but not including, subject to clause (e) below) the actual date of payment. (e) Application of Payments Received after 12:00 pm. (i) Any payment to be made to the Administrative Agent and actually received by the Administrative Agent at or before 12:00 p.m. Eastern time, by federal funds wire transfer on any Business Day, shall be deemed to have been received by the Administrative Agent on such day. Any payment actually received by the Administrative Agent after 12:00 p.m. Eastern time, by federal funds wire transfer on any Business Day, shall be deemed to have been received on the next following Business Day. All payments received by the Administrative Agent on a day other than a Business Day, or in a manner other than by federal funds wire transfer, shall be deemed to have been received by such Person on the Business Day such amounts actually become available to such Person prior to 12:00 p.m. Eastern time in immediately available funds. (ii) All payments from the Borrower to the Administrative Agent or any Lender shall be by means of federal funds wire transfer as set forth in Schedule 10 hereto (or as otherwise instructed in a writing from the Administrative Agent or such Lender to the Borrower and delivered to the Borrower not less than 2 Business Days prior to any date of any payment that is to be subject to such new instructions). (iii) All payments from the Administrative Agent to the Borrower or any Lender shall be by means of federal funds wire transfer as set forth in Schedule 10 hereto (or as otherwise instructed in a writing from the Borrower or such Lender and delivered to the Administrative Agent not less than 2 Business Days prior to any date of any payment that is to be subject to such new instructions). 41 (f) No Defenses. All payments by the Borrower of principal, interest, fees and other Obligations hereunder and under the other Security Documents shall be made without defense, setoff or counterclaim and free of any restriction or condition. (g) Payments Pro Rata. For the avoidance of doubt, aggregate principal and interest payments hereunder and under the Notes shall be apportioned such that each Lender receives its Pro Rata Share thereof. 2.5 Collections; Sales Proceeds; Required Payments; Voluntary Prepayments of Loan. (a) Host Company Lease Agreements Payments. The Borrower shall direct or otherwise cause each Host Company to make all payments under its respective Host Company Lease Agreement (including, without limitation, all Monthly Rental Amounts in respect thereof) to the Administrative Agent. For the avoidance of doubt, the Borrower shall, on or before the fifteenth (15th) day of each month, cause each such Host Company to make each payment in respect of the Monthly Rental Amount that accrued in respect of the immediately preceding month to the Administrative Agent. All such payments in respect of Monthly Rental Amounts delivered to the Administrative Agent shall be in good, collected funds in legal tender of the United States of America and shall be applied as set forth in Section 2.5(d) hereof, provided that, if a Default or an Event of Default shall then exist, the entire amount of such payments shall be applied pursuant to Section 2.5(d) or Section 8.2(c) of this Agreement, whichever shall be applicable. If any payment under a Host Company Lease Agreement (other than a Monthly Rental Amount) is delivered to the Administrative Agent, then Section 2.5(e) hereof shall be applicable thereto. (b) Receipts from Sale Proceeds of Quartershare Interests, Commercial Units and Residential Units. (i) The Borrower shall promptly consummate the purchase and sale of (1) each Quartershare Interest under each Contract, (2) each Residential Unit, and (3) each Commercial Unit as soon as possible after the Project applicable thereto shall have received a permanent certificate of occupancy from the town or other municipality that covers such Project, and the Declaration and Resort Map for such Project shall have been recorded in the applicable office(s) or amendments thereto shall have been so recorded (as the case may be). The Borrower shall use its best efforts, as soon as practicable after the completion of the construction and furnishing of such Project to obtain a permanent certificate of occupancy in respect thereof and in respect of the Residential Units and Commercial Units (including, if permitted by the town or other municipality that covers such Project, obtaining certificates of 42 occupancy on a floor by floor basis) and to record the aforesaid Declarations, Resort Maps and amendments in the applicable offices. (ii) With respect to each sale of a Quartershare Interest in any Project, the Borrower shall deliver, or cause to be delivered, to the Administrative Agent all cash downpayments and all other cash payments received by the Borrower and paid by the Purchaser under each Contract on the Consummation Date of such sale. The Borrower agrees to instruct, and hereby so instructs, the Escrow Agent for such Project to deliver directly to the Administrative Agent all escrowed amounts in respect of each Contract that are held by such Escrow Agent and all additional payments received by such Escrow Agent on the Consummation Date in respect of such Contract upon receipt by such Escrow Agent of a written confirmation from either the Borrower or the Administrative Agent that such sale has been consummated. The Borrower agrees that all payments delivered by any Purchaser to the Borrower on the Consummation Date of its Contract shall be delivered by the Borrower to the applicable Escrow Agent and shall be subject to the terms and requirements of this clause (ii). The Borrower shall not permit any payments from the Purchaser under any Contract to be escrowed or retained after the Consummation Date in respect thereof. If the Borrower shall have provided financing to the Purchaser under any Contract in order to consummate such a sale and such Purchaser shall have executed and delivered to the Borrower a Quartershare Note and Quartershare Mortgage in respect thereof, the Borrower shall promptly sell such Quartershare Note and Quartershare Mortgage to Textron Financial Corporation under the Take-Out Facility. The Borrower shall irrevocably instruct Textron Financial Corporation under the Take-Out Facility to deliver all proceeds to the Administrative Agent which arise out of any purchases of the Quartershare Notes (including, without limitation, any payment to the Borrower by Textron Financial Corporation of cash reserves originally withheld from any purchase by Textron Financial Corporation of Quartershare Notes under and pursuant to the Take-Out Facility and subsequently paid back to the Borrower). To the extent that any of the cash downpayments, cash payments, loan proceeds and/or sale proceeds in respect of any Contract shall be paid to the Borrower, the Borrower shall hold the same in trust for the Administrative Agent and promptly deliver the same to the Administrative Agent. The escrow procedures and the escrow account being used by each Escrow Agent shall be satisfactory to the Administrative Agent. The Borrower shall cause such changes in such escrow procedures (in accordance with applicable law and the terms of any Contract and the escrow agreement in respect thereof and subject to the approval of any applicable governmental agency or agencies) as the Administrative Agent may reasonably request from time to time. Upon not less than 30 days' prior written notice from the Administrative Agent and subject to the receipt of all applicable governmental agency approvals, the Borrower shall establish a different escrowee for all Contracts to be entered into thereafter, which escrowee shall be subject to the terms and requirements set forth in this clause (ii) and shall be satisfactory in all respects to the Administrative Agent, provided that the Administrative Agent agrees not to request such a change of escrowee unless a sufficient cause, in the reasonable judgment of the Administrative Agent, shall have arisen to justify such change. All payments made hereunder to the Administrative Agent in respect of 43 proceeds from the sale of any Quartershare Interest under a Contract shall be net of all customary and normal costs of closing not previously deducted from other proceeds in respect of such Contract. On the Consummation Date of the sale of any Quartershare Interest in any of the Projects made in the normal and ordinary course of Borrower's business on an arm's-length basis to Persons that are not Affiliates (or, with the prior consent of the Administrative Agent, to an Affiliate), the cash downpayments, cash payments, loan proceeds and/or sale proceeds paid to Administrative Agent pursuant to this clause (ii) in respect thereof shall be applied to the Loan and the other amounts owing hereunder and under the Security Documents as provided in Section 2.5(d) hereof in an amount equal to the Release Price applicable to such sale and the remainder thereof shall be paid by the Administrative Agent to the Borrower, provided that (1) if a Default or an Event of Default shall then exist, the entire amount of such cash downpayments, cash payments, loan proceeds and/or sale proceeds shall be applied pursuant to Section 2.5(d) or Section 8.2(c) of this Agreement, whichever shall be applicable, or (2) the Borrower may apply the entire amount of such cash downpayments, cash payments, loan proceeds and/or sale proceeds to the payment or prepayment of any or all of the Obligations. Anything contained in this clause (ii) notwithstanding, if any Quartershare Interest in any of the Projects is sold in other than in the normal and ordinary course of Borrower's business, or on other than an arm's-length basis, or to Persons that are Affiliates (unless the Administrative Agent shall have consented thereto), then Section 2.5(e) hereof shall be applicable thereto. All payments to be applied to the Loan under this clause (ii) shall be in good, collected funds in legal tender of the United States of America. (iii) With respect to the each sale of a Residential Unit, as a condominium unit, the Borrower shall deliver, or cause to be delivered, to the Administrative Agent all cash downpayments and all other cash payments received by the Borrower and paid by the purchaser of such Residential Unit under the contract of purchase in respect thereof on the Consummation Date of such sale. The Borrower agrees to instruct, and hereby so instructs, any escrowee involved in connection with such sale to deliver directly to the Administrative Agent all escrowed amounts in respect of such contract of purchase held by it and any additional payments received by it on the Consummation Date of such sale upon receipt by such escrowee of a written confirmation from either the Borrower or the Administrative Agent that such sale shall have been consummated. The Borrower agrees that all payments delivered by any purchaser of a Condominium Unit to the Borrower on the Consummation Date shall be delivered by the Borrower to the Administrative Agent and shall be subject to the terms and requirements of this clause (c). The Borrower shall not permit any payments from any purchaser of a Condominium Unit to be escrowed or retained after Consummation Date. If the Borrower shall have provided financing to any purchaser of any Residential Unit in order to consummate the sale of such Residential Unit and such purchaser shall have executed and delivered to the Borrower a note and mortgage in respect thereof, the Borrower shall promptly sell or pledge, as the case may be, such note and mortgage to a 44 lender or purchaser under, and pursuant to the terms of, an appropriate take-out facility approved by the Administrative Agent. The Borrower shall irrevocably instruct the lender or purchaser under such take-out facility to deliver all proceeds to the Administrative Agent which arise out of any purchases of such notes. To the extent that any of the cash downpayments, cash payments, loan proceeds and/or sale proceeds in respect of any sale of a Condominium Unit shall be paid to the Borrower, the Borrower shall hold the same in trust for the Administrative Agent and promptly deliver the same to the Administrative Agent. The escrow procedures and the escrow account being used by the Borrower in connection with such sales shall be satisfactory to the Administrative Agent and subject to the approval of any applicable governmental agency or agencies. The Borrower shall cause such changes in such escrow procedures (in accordance with applicable law and the terms of any contract of purchase and the escrow agreement in respect thereof) as the Administrative Agent may reasonably request from time to time. Upon not less than 30 days' prior written notice from the Administrative Agent, the Borrower shall establish a different escrowee for all such contracts of purchase to be entered into thereafter, which escrowee shall be subject to the terms and requirements set forth in this clause (c) and shall be satisfactory in all respects to the Administrative Agent. All payments made hereunder to the Administrative Agent in respect of proceeds from the sale of any Residential Unit shall be net of all customary and normal costs of closing not previously deducted from other proceeds in respect of such sale. On the Consummation Date of the sale of any Residential Unit in any of the Projects made in the normal and ordinary course of Borrower's business on an arm's-length basis to Persons that are not Affiliates (or, with the prior consent of the Administrative Agent, to an Affiliate), the cash downpayments, cash payments, loan proceeds and/or sale proceeds paid to Administrative Agent pursuant to this clause (iii) in respect thereof shall be applied to the Loan and the other amounts owing hereunder and under the Security Documents as provided in Section 2.5(d) hereof in an amount equal to the Release Price applicable to such sale and the remainder thereof shall be paid by the Administrative Agent to the Borrower, provided that (y) if a Default or an Event of Default shall then exist, the entire amount of such cash downpayments, cash payments, loan proceeds and/or sale proceeds shall be applied pursuant to Section 2.5(d) or Section 8.2(c) of this Agreement, whichever shall be applicable and (z) the Borrower may apply the entire amount of such cash downpayments, cash payments, loan proceeds and/or sale proceeds to the payment or prepayment of any or all of the Obligations. Anything contained in this clause (iii) notwithstanding, if any Residential Unit in any of the Projects is sold in other than in the normal and ordinary course of Borrower's business, or on other than an arm's-length basis, or to Persons that are Affiliates (unless the Administrative Agent shall have consented thereto), then Section 2.5(e) hereof shall be applicable thereto. All payments to be applied to the Loan under this clause (iii) shall be in good, collected funds in legal tender of the United States of America. (iv) With respect to the each sale of a Commercial Unit, as a condominium unit, the Borrower shall deliver, or cause to be delivered, to the 45 Administrative Agent all cash downpayments and all other cash payments received by the Borrower and paid by purchaser of such Commercial Unit under the contract of purchase in respect thereof on the Consummation Date of such sale. The Borrower agrees to instruct, and hereby so instructs, any escrowee involved in connection with such sale to deliver directly to the Administrative Agent all escrowed amounts in respect of such contract of purchase held by it and any additional payments received by it on the Consummation Date of such sale upon receipt by such escrowee of a written confirmation from either the Borrower or the Administrative Agent that such sale shall have been consummated. The Borrower agrees that all payments delivered by any purchaser of such Commercial Unit to the Borrower on the Consummation Date shall be delivered by the Borrower to the Administrative Agent and shall be subject to the terms and requirements of this clause (iv). The Borrower shall not permit any payments from any purchaser of a Commercial Unit to be escrowed or retained after the Consummation Date of such sale. The Borrower shall require that the sale of any Commercial Unit be for an all cash consideration. To the extent that any of the cash downpayments and cash payments in respect of a sale of a Commercial Unit shall be paid to the Borrower, the Borrower shall hold the same in trust for the Administrative Agent and promptly deliver the same to the Administrative Agent. The escrow procedures and the escrow account being used by the Borrower in connection with such sales shall be satisfactory to the Administrative Agent. The Borrower shall cause such changes in such escrow procedures (in accordance with applicable law and the terms of any contract of purchase and the escrow agreement in respect thereof) as the Administrative Agent may reasonably request from time to time. Upon not less than 30 days' prior written notice from the Administrative Agent, the Borrower shall establish a different escrowee for all such contracts of purchase to be entered into thereafter, which escrowee shall be subject to the terms and requirements set forth in this clause (iv) and shall be satisfactory in all respects to the Administrative Agent. All payments made hereunder to the Administrative Agent in respect of proceeds from the sale of any Commercial Unit shall be net of all customary and normal costs of closing not previously deducted from other proceeds in respect of such sale. On the Consummation Date of the sale of any Commercial Unit in any of the Projects made in the normal and ordinary course of Borrower's business on an arm's-length basis to Persons that are not Affiliates (or, with the prior consent of the Administrative Agent, to an Affiliate), the cash downpayments, cash payments, loan proceeds and/or sale proceeds paid to Administrative Agent pursuant to this clause (iv) in respect thereof shall be applied to the Loan and the other amounts owing hereunder and under the Security Documents as provided in Section 2.5(d) hereof in an amount equal to the Release Price applicable to such sale and the remainder thereof shall be paid by the Administrative Agent to the Borrower, provided that (y) if a Default or an Event of Default shall then exist, the entire amount of such cash downpayments, cash payments, loan proceeds and/or sale proceeds shall be applied pursuant to Section 2.5(d) or Section 8.2(c) of this Agreement, whichever shall be applicable, or (z) the Borrower may apply the entire amount of such cash downpayments, cash payments, loan proceeds and/or sale proceeds to the payment or prepayment of any or all of the 46 Obligations. Anything contained in this clause (iv) notwithstanding, if any Commercial Unit in any of the Projects is sold in other than in the normal and ordinary course of Borrower's business, or on other than an arm's-length basis, or to Persons that are Affiliates (unless the Administrative Agent shall have consented thereto), then Section 2.5(e) hereof shall be applicable thereto. All payments to be applied to the Loan under this clause (iv) shall be in good, collected funds in legal tender of the United States of America. (c) Borrowing Base Prepayments; Release Price Catch-up Payment. (i) If on any date the aggregate original principal amount of all Project Advances made hereunder with respect to all of the Under-Construction Projects shall exceed the Aggregate Project Borrowing Base, determined as of such date, the Borrower shall immediately pay the amount of such excess to the Administrative Agent together with interest accrued thereon to (but not including) the date of such payment and such amounts shall be applied by the Administrative Agent when received in good, collected funds as set forth in Section 2.5(d) hereof. (ii) If on any date the aggregate original principal amount of all Project Advances made hereunder with respect to any Under-Construction Project shall exceed the Project Borrowing Base for such Under-Construction Project, determined as of such date, the Borrower shall immediately pay the amount of such excess to the Administrative Agent together with interest accrued thereon to (but not including) the date of such payment and such amounts shall be applied by the Administrative Agent when received in good, collected funds as set forth in Section 2.5(d) hereof. (iii) If, as of each March 31st, June 30th, September 30th and December 31st on and after the Closing Date (each such date is referred to as a "Quarterly Testing Date"), the outstanding principal balance of the Loan on such Quarterly Testing Date exceeds the Projected Inventory Loan Amount, determined for such Quarterly Testing Date, then the Borrower shall, promptly upon the receipt of a written notice from the Administrative Agent (as instructed by the Required Lenders), and in any case within 10 days after the receipt of such written notice, pay to the Administrative Agent the remainder of (A) the aforesaid principal balance of the Loan on such Quarterly Testing Date minus (B) such Projected Inventory Loan Amount, and such payment shall be applied to the then outstanding principal balance of the Loan as provided in Section 2.5(d) hereof. With respect to any Quarterly Testing Date, the aforesaid remainder is referred to herein as the "Release Price Catch-Up Payment." 47 (d) Application of Lease Payments, Sales Proceeds and Other Payments. Subject to the appropriate application of Section 8.2(c) hereof, the payments delivered to the Administrative Agent and/or Lenders under this Section 2.5 or under Sections 3.5 and 3.6 hereof in good, collected funds in legal tender of the United States of America shall be applied as follows to the Obligations: first, in the case of each payment under any Host Company Lease Agreement delivered to the Administrative Agent pursuant to Section 2.5(a) above, each payment in respect of a sale of any Quartershare Interest, Residential Unit or Commercial Unit delivered to the Administrative Agent pursuant to Section 2.5(b) above, each Borrowing Base prepayment delivered to the Administrative Agent pursuant to Section 2.5(c)(i) or (ii) above and each Release Price Catch-Up Payment, towards the fees, costs and expenses required to be paid under this Agreement, including, without limitation, the Loan Costs and all other fees, costs and expenses set forth in Section 11.2 of this Agreement, in each case, as the same may have arisen in respect of the Loan; second, in the case of each payment under any Host Company Lease Agreement delivered to the Administrative Agent pursuant to Section 2.5(a) above remaining after clause first above, each payment in respect of a sale of any Quartershare Interest, Residential Unit or Commercial Unit delivered to the Administrative Agent pursuant to Section 2.5(b) above remaining after clause first above, each Borrowing Base prepayment delivered to the Administrative Agent pursuant to Section 2.5(c)(i) or (ii) above remaining after clause first above and each Release Price Catch-Up Payment remaining after clause first above, towards the accrued and unpaid interest on the Loan at the Interest Rate or Default Rate for and in respect of each complete calendar month immediately preceding such payment (to the extent not paid by the making of an Interest Advance hereunder), and in the event that any such payment shall be insufficient to pay all of such accrued and unpaid interest, such payment shall be allocated ratably based on the accrued and unpaid interest outstanding in respect of each of the Advances and shall be applied towards the payment of such accrued and unpaid interest; third, in the case of each payment under any Host Company Lease Agreement delivered to the Administrative Agent pursuant to Section 2.5(a) above remaining after clauses first and second above, each payment in respect of a sale of any Quartershare Interest, Residential Unit or Commercial Unit delivered to the Administrative Agent pursuant to Section 2.5(b) above remaining after clauses first and second above, each Borrowing Base prepayment delivered to the Administrative Agent pursuant to Section 2.5(c)(i) or (ii) above remaining after clauses first and second above and each Release Price Catch-Up Payment remaining after clauses first and second above, towards the payment of the principal amount of any Interest Advances then outstanding, and in the event that any such payment shall be insufficient to pay-off all of such Interest Advances, such payment shall be allocated ratably based on the then outstanding principal amounts of each of the Interest Advances; 48 fourth, in the case of each payment under any Host Company Lease Agreement delivered to the Administrative Agent pursuant to Section 2.5(a) above remaining after clauses first, second and third above, each payment in respect of a sale of any Quartershare Interest, Residential Unit or Commercial Unit delivered to the Administrative Agent pursuant to Section 2.5(b) above remaining after clauses first, second and third above and each Borrowing Base prepayment delivered to the Administrative Agent pursuant to Section 2.5(c)(i) above remaining after clauses first, second and third above, towards the then remaining outstanding principal amount of the Pre-Sale Advance; fifth, (i) in the case of each payment under any Host Company Lease Agreement delivered to the Administrative Agent pursuant to Section 2.5(a) above and remaining unapplied after clauses first, second, third and fourth above, each payment in respect of a sale of any Quartershare Interest, Residential Unit or Commercial Unit delivered to the Administrative Agent pursuant to Section 2.5(b) above and remaining unapplied after clauses first, second, third and fourth above, each Borrowing Base prepayment delivered to the Administrative Agent pursuant to Section 2.5(c)(i) above and remaining unapplied after clauses first, second, third and fourth above, each Borrowing Base prepayment delivered to the Administrative Agent pursuant to Section 2.5(c)(ii) above and remaining unapplied after clauses first, second and third above and each payment delivered to the Administrative Agent pursuant to Section 3.5 and/or Section 3.6 hereof, towards the then-outstanding principal amount of the Project Advance for the Under-Construction Project in respect of which (w) the aforesaid Host Company Lease Agreement relates, (x) the aforesaid Quartershare Interest, Residential Unit or Commercial Unit is located, provided that any payments hereunder in respect of sales of Quartershare Interests, Residential Units or Commercial Units at the Attitash Project shall be allocated ratably among the Project Advances in accordance with the remaining outstanding principal amounts thereof and applied towards the payment of such remaining outstanding principal amounts, (y) the aforesaid Borrowing Base relates (except that, with respect to any payment made pursuant to Section 2.5(c)(i), such payment shall be allocated ratably across all Project Advances based on the then remaining outstanding principal thereof) and (z) the insurance or condemnation event that resulted in the payment under Section 3.5 or Section 3.6 hereof relates, provided that any payments hereunder in respect of insurance or condemnation proceeds of the Attitash Project shall be allocated ratably among the Project Advances in accordance with the remaining outstanding principal amounts thereof and applied towards the payment of such remaining outstanding principal amounts, 49 and the excess, if any, of any such payments shall be applied towards the remaining principal amounts of each of the other Advances having principal amounts then outstanding, and in the event that any such excess payment shall be insufficient to pay-off all of such remaining principal amounts of such Advances, such payment shall be allocated ratably among such Advances in accordance with the remaining outstanding principal amounts thereof to be applied towards the payment of such remaining outstanding principal amounts, sixth, in the case of each payment delivered to the Administrative Agent in connection with any Release Price Catch-Up Payment remaining after clauses first, second and third above, towards the then remaining outstanding principal amount of the Project Advances and in the event that any such payment shall be insufficient to pay-off all of such Project Advances, such payment shall be allocated ratably based on the then outstanding principal amounts of each of the Project Advances, and seventh, towards the payment of all other Obligations. At any time when the Obligations hereunder shall be equal to $0 during the Commitment Period, all cash payments, cash downpayments and other proceeds in respect of the sale of Quartershare Interests, Residential Units and/or Commercial Units and all other payments delivered to the Administrative Agent pursuant to this Section 2.5 or Sections 3.5 or 3.6 hereof may be retained by the Borrower or, if delivered to the Administrative Agent, shall be delivered to the Borrower by the Administrative Agent in the form so received. (e) No Voluntary Prepayments. Borrower shall not have the right to voluntarily prepay the Loan except in connection with the sales of Quartershare Interests, Residential Units and/or Commercial Units in any of the Projects made in the normal and ordinary course of Borrower's business on an arm's-length basis to Persons that are not Affiliates or, with the prior consent of the Administrative Agent, to an Affiliate, and except as otherwise set forth in this Section 2.5 or in Sections 3.5 or 3.6 hereof. The Borrower acknowledges and agrees that if any of the Quartershare Interests, Residential Units and/or Commercial Units in any of the Projects are sold in other than in the normal and ordinary course of Borrower's business, or on other than an arm's-length basis, or to Persons that are Affiliates (unless the Administrative Agent shall have consented thereto), then the Borrower shall not have the right to prepay the Loan. In such event, the Borrower's obligation to make the payments set forth in Section 2.5 hereof shall be mandatory but the Administrative Agent shall have the right to retain such payments as additional Collateral hereunder on behalf of the Lenders and not apply it as set forth in Section 2.5(d) hereof. 2.6 Participating Lender. (a) Participations. Each of the Lenders shall have the right, without prior notice to the Borrower or the approval of the Borrower, to designate one or more Participating Lenders and to grant to such Participating Lenders participations in such Lender's Pro Rata Share of the Loan on terms and conditions satisfactory to such Lender. 50 In the event that such Lender so designates such a Participating Lender and grants such Participating Lender a participation in its Pro Rata Share of the Loan, such Participating Lender shall communicate and deal only with such Lender in respect to such Participating Lender's interest in such Loan and neither the Borrower nor the Administrative Agent shall be obligated to communicate or deal with such Participating Lender. Anything contained in this Section 2.6(a) notwithstanding, the Borrower and each Lender hereby acknowledge and agree that, solely for purposes of Section 11.7 and Section 11.8 hereof, (i) any participation held by a Participating Lender will give rise to a direct obligation of Borrower to such Participating Lender and (ii) such Participating Lender shall be considered to be a "Lender" hereunder. (b) Assignments. Each Lender shall have the right, at any time, to sell, assign or transfer to any Eligible Assignee all or any part of its Commitment or its Pro Rata Share of the Loan, provided that (i) no such sale, assignment or transfer shall, without the prior written consent of the Borrower, require the Borrower to file a registration statement with the Securities and Exchange Commission or apply to qualify such sale, assignment or transfer under the securities laws of any state, and (ii) no such sale, assignment or transfer shall be effective unless and until an assignment agreement effecting such sale, assignment or transfer, in form and substance reasonably satisfactory to the Administrative Agent, shall have been accepted by the Administrative Agent, and (iii) no such sale, assignment or transfer shall be effected in an amount of less than $1,000,000. To the extent of any such assignment in accordance with the requirements of this Section 2.6(b), the assigning Lender shall be relieved of its obligations with respect to its Commitment and its Pro Rata Share of the Loans or the portion thereof so assigned. Upon such execution, deliver and acceptance from and after the effective date specified in the aforesaid assignment agreement, (A) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such assignment agreement, shall have the rights and obligations of a Lender hereunder and (B) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such assignment agreement, relinquish its rights and be released from its obligations under this Agreement. The Commitments hereunder shall be modified to reflect the Commitment of such assignee and any remaining Commitment of such assigning Lender and, if any such assignment occurs after the issuance of the Notes hereunder, the assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its Note to the Borrower for cancellation, and thereupon new Notes shall be issued by the Borrower to the assignee and to the assigning Lender, substantially in the form of Exhibit G attached hereto with appropriate insertions, to reflect the new Commitments of the assignee and the assigning Lender. Except as otherwise provided in this Section 2.6(b) and in Section 2.3(a)(i) hereof, no Lender shall, as between the Borrower and such 51 Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment or transfer of all or any part of its Commitment or its Pro Rata Share of the Loans. (c) Information. Each Lender and the Administrative Agent may furnish any information concerning the Borrower, any of the Projects, the Collateral and the Security Documents in the possession of such Person from time to time to assignees and Participating Lenders (including, without limitation, prospective assignees and participants), subject to the prior execution of a confidentiality agreement by any such assignee or Participating Lender or any such prospective assignee or prospective Participating Lender in form and substance substantially similar to the form of confidentiality agreement executed by such Lender or the Administrative Agent, provided that no such confidentiality agreement shall be required to be executed in connection with any such assignee or Participating Lender that is an affiliate of such Lender and would, pursuant to the terms of the confidentiality agreement executed by such Lender, be covered by such confidentiality agreement. 2.7 Commitment Fee. The Borrower agrees to pay to each of the Lenders its Pro Rata Share of a total commitment fee of $550,000 in connection with the Loan. Borrower and Lenders acknowledge the payment to the Lenders by Borrower of an aggregate amount of $75,000 in respect of the foregoing fee. An additional $475,000 of the foregoing fee shall be due and payable to the Lenders (to be shared in accordance with their Pro Rata Shares) on the date of the making of the Pre-Sale Advance. To the extent that the Borrower shall have paid the remaining $475,000 owing hereunder to the Administrative Agent, as required by Section 5.9 hereof, and any Lender fails to extend on or after the Closing Date its Pro Rata Share of the Pre-Sale Advance with respect to which all conditions precedent have been satisfied and for which the Borrower shall have not failed to perform any undertaking or Obligation required of it hereunder, such Lender shall, upon receipt of a written demand from the Borrower, pay to the Borrower its Pro Rata Share (based upon its Commitment) of such $550,000 less any Loan Costs incurred by such Lender. The full commitment fee of $550,000 shall be deemed to have been irrevocably earned upon the Lenders' willingness to advance the Pre-Sale Advance on or prior to August 31, 1997 and the Borrower being either unwilling to accept such Advance during such time period or having failed to satisfy the requisite conditions precedent set forth in Section 5 hereof with respect to such Advance during such time period. 2.8 Right of First Refusal. If, at any time during the Commitment Period or at any time thereafter when any Obligation shall be outstanding hereunder or the Take-Out Facility shall still be in effect, the Borrower or any Affiliate shall have obtained a bona fide third-party offer (the "Third-Party Offer") for the financing of any Subsequent Phase, the Borrower shall, in writing, promptly inform the Administrative Agent (such writing to the Administrative Agent is referred to herein as the "TFC First Refusal Offer") of such Third-Party Offer and the terms and conditions of such Third-Party Offer (and shall attach a copy of such Third-Party Offer to such TFC First Refusal Offer) and, in such TFC First Refusal Offer, shall offer, or shall cause its Affiliate to offer, to the Lenders a right of first refusal (based on their respective Pro Rata Shares) in respect of such financing. Such right of first refusal shall grant the Lenders the right to, within 20 Business Days after the receipt 52 of such TFC First Refusal Offer, deliver a writing to the Borrower or such Affiliate (the "TFC Acceptance") stating that Lenders agree to extend such financing on terms which shall be the same or better than both (a) the terms of financing under such Third-Party Offer (as such terms were communicated to the Administrative Agent by the Borrower) and (b) the terms of financing that would have applied hereunder if such financing were had hereunder. Upon receipt of the TFC Acceptance by the Borrower, the Lenders and the Borrower (or such Affiliate) shall be deemed to have reached an agreement for such financing on the terms set forth in such TFC Acceptance (subject to the satisfaction of appropriate conditions in respect of due diligence, documentation and other customary and commercial conditions precedent, including, without limitation, appropriate modifications and amendments to this Agreement, the Blanket Mortgages and the other Security Documents). If any Lender shall have declined to exercise its right under such TFC First Refusal Offer, or shall have failed to timely respond to such TFC First Refusal Offer or shall have offered a counterproposal to the Borrower (or such Affiliate) in respect of such TFC First Refusal Offer, the Borrower (or such Affiliate) shall be free to close such Third-Party Offer within 180 days of the date of such TFC First Refusal Offer on terms substantially similar to the terms thereof set forth in such Third-Party Offer (as communicated to the Administrative Agent), provided that if one Lender shall have declined to exercise its right under such TFC First Refusal Offer or shall have failed to timely respond, the other Lender may elect within the aforesaid 20 day period, to assume such declining or failing Lender's Pro Rata Share of the TFC First Refusal Offer. If the Borrower (or such Affiliate) shall have failed to so close such financing within said 180 days, then a new right of first refusal for the benefit of the Lenders with respect to such financing shall immediately arise. The Borrower agrees to inform any Person making a Third-Party Offer of the Lenders' rights under this Section 2.8 in respect thereof. This Section 2.8 shall survive the final payment of all of the Obligations and the resulting termination of this Agreement. With respect to any Third-Party Offer that is paired with a take-out facility with respect to the quartershare notes expected to be generated from the sale of quartershare interests in such Subsequent Phase, the Lenders shall only have a right to issue a TFC Acceptance if the Lenders pair such TFC Acceptance with an offer of a take-out facility with respect to the quartershare notes expected to be generated from the sale of quartershare interests in such Subsequent Phase that is on terms that are the same or better than both (i) the terms of the take-out facility associated with such Third-Party Offer and (ii) the terms under the Take-Out Facility if then maintained by Textron Financial Corporation. 3. COLLATERAL 3.1 Security. For the purpose of securing the prompt and complete payment and performance by the Borrower of all of the Obligations, the Borrower does unconditionally and irrevocably hereby grant to the Administrative Agent on behalf of the Lenders a security interest in, and a Lien upon, the following Property of the Borrower, whether now owned or hereafter acquired (such Property being herein referred to as the "Collateral"): (a) (i) all of the Borrower's right, title and interest in, to and under all Contracts (now or hereafter existing) together with all downpayments, deposits, accounts, accounts receivable, contract rights, general intangibles, chattel paper and other 53 receivables arising under or in connection with such Contracts or otherwise securing the obligations thereunder of the Purchasers in respect thereof, together with all payments and other proceeds thereunder (including, without limitation, all Quartershare Notes and all Quartershare Mortgages) and (ii) all of the Borrower's right, title and interest in, to and under any purchase contract for the acquisition of any Residential Unit or Commercial Unit, as a condominium unit, (now or hereafter existing) together with all downpayments, deposits, accounts, accounts receivable, contract rights, general intangibles, chattel paper and other receivables arising under or in connection with such purchase contracts or otherwise securing the obligations thereunder of the purchasers in respect thereof, together with all payments and other proceeds thereunder (including, without limitation, all notes and mortgages arising from the financing of the sales of such Residential Units and/or Commercial Units); (b) all of the Borrower's right, title and interest in, to and under (including, without limitation, all revenues, proceeds, rents and other benefits derived from) any franchises, permits, trade names, trademarks (and goodwill associated therewith), approvals, leasehold interests (whether as lessor or lessee or sublessor or sublessee), management contracts, marketing contracts, maintenance contracts, utility contracts, security contracts, other servicing contracts, licensing contracts, Project Documents or other similar contracts and all guaranties of any of the foregoing, including, without limitation, the contracts set forth on Schedule 11 to this Agreement (individually, a "Property-Related Contract" and, collectively, the "Property-Related Contracts"), relating, in each case, to any of the Projects, the Quartershare Interests, the Residential Units, the Commercial Units and/or the Common Elements; (c) all other accounts, contract rights, general intangibles, documents, instruments, chattel paper and proceeds of the Borrower related to the Property described in clause (a) or clause (b) above, or otherwise connected with, or related to, the operation and/or construction, management and use of any of the Projects, including, without limitation, any of the Borrower's right, title and interest in and to the Approved Escrow Accounts or any other trust account maintained by any Escrow Agent (or any successor escrow agent) for or on behalf of the Borrower; (d) all Books and Records; (e) all fixtures, inventory, fittings, machinery, appliances, equipment, apparatus, furnishings, and personal Property of every nature found on or used in connection with any of the Projects and any of the Common Elements; (f) all of the Borrower's right, title and interest of whatever character (whether as owner, vendor, mortgagee, chattel lessee, Declarant, Quartershare Interest owner, Residential Unit owner, Commercial Unit owner or otherwise, whether vested or contingent and whether now owned or hereafter acquired) in and to (i) any and all of the Projects, including, without limitation, all Quartershare Interests (now existing or hereafter created) relating thereto (whether sold or unsold), (ii) the Declarations (including, without limitation, its development rights under applicable law), (iii) all building materials, supplies and other Property now or hereafter stored at or delivered to any of the Projects or any other location for installation in or on any of the Projects, (iv) any and all plans, 54 specifications, drawings, books, records, marketing materials and similar items now or hereafter relating to any of the Projects the operation and use thereof, any rights of the Borrower thereto or any interest therein (including, without limitation, the Plans for each of the Projects), (v) the Construction Contract for each of the Under-Construction Projects and the architect and engineering contracts entered into or to be entered into by the Borrower in connection with the construction and development of each of the Under-Construction Projects and (vi) any payment, performance or other surety bonds obtained by any contractor or subcontractor in connection with the development and construction of each of the Under-Construction Projects; (g) all of the Borrower's right, title and interest of whatever character (whether as owner, chattel lessee, Declarant, Quartershare Interest owner, Residential Unit owner, Commercial Unit owner or otherwise, whether vested or contingent and whether now owned or hereafter acquired) in and to any and all judgments, settlements, claims, awards, insurance proceeds and other proceeds and compensation, and any interest thereon (collectively, "Compensation"), now or hereafter made or payable in connection with (i) any casualty or other damage to all or any part of any of the Projects, (ii) any condemnation proceedings affecting all or any part of any of the Projects or any rights thereto or any interest therein, (iii) any damage to or taking of all or any part of any of the Projects, or any rights thereto or any interest therein arising from or otherwise relating to any exercise of the power of eminent domain (including, without limitation, any and all Compensation for change of grade of streets or any other injury to or decrease in the value of any of the Projects), or any conveyance in lieu of or under threat of any such taking, (iv) any and all proceeds of any sale, assignment or other disposition of all or any part of any of the Projects or any rights thereto or any interest therein, (v) any and all proceeds of any other conversion (whether voluntary or involuntary) of all or any part of any of the Projects or any rights thereto or any interest therein or to cash or any liquidated claim, and (vi) any and all refunds and rebates of or with respect to any Insurance Premium, any Imposition or any other charge for utilities relating to all or any part of any of the Projects (including, without limitation, any and all refunds and rebates of or with respect to any deposit or prepayment relating to any such Insurance Premium, Imposition or charge), and any and all interest thereon, whether now or hereafter payable or accruing; and (h) all other "Mortgaged Property," under and as defined in any of the Blanket Mortgages, whether such Collateral shall be presently in existence or whether it shall be acquired or created by the Borrower at any time hereafter, wherever located, together with the products and proceeds thereof, and any replacements, additions and/or accessions thereto and substitutions thereof and after-acquired Property. The Borrower shall use its best efforts to the extent legally available to cause each Association for each Project to grant to the Administrative Agent a Lien and security interest in any all of its respective right, title and interest in, to and under (including, without limitation, all revenues, proceeds, rents and other benefits derived from) any management contracts, marketing contracts, maintenance contracts, utility contracts, security contracts, other servicing contracts, 55 licensing contracts, Project Documents or other similar contracts and all guaranties of any of the foregoing that may affect such Project. 3.2 Undertakings Regarding Collateral. (a) Maintenance of Perfection. Neither the Administrative Agent nor the Lenders shall be required to take any steps to perfect or maintain the perfection of its security interest in the Collateral and no loss of, or damage to, the Collateral shall release the Borrower from any of the Obligations. (b) Collections on all Contracts. The Administrative Agent shall have a security interest in, and may collect payments under, all of the Contracts of the Borrower and all of the contracts of purchase in respect of the Residential Units and/or Commercial Units. (c) No Assumption of Obligations. The execution and delivery of this Agreement, and the granting of the Liens in and to the Collateral, shall not subject the Administrative Agent or the Lenders to, or transfer or pass to the Administrative Agent or any Lender or in any way affect or modify, the liability of the Borrower under any or all of the Contracts, any of the contracts of purchase in respect of the Residential Units and/or Commercial Units, the Property-Related Contracts or in connection with any of the Projects, the Declarations, the Articles of Incorporation or By-Laws for the Associations or the other Project Documents, it being understood and agreed that notwithstanding this Agreement, and the granting of the Liens in and to the Collateral, all of the obligations of the Borrower (whether as owner, chattel lessee, vendor, mortgagee, Declarant, Residential Unit owner, Quartershare Interest owner, Commercial Unit owner or otherwise) to each and every other party under each and every one of the Contracts, the contracts of purchase in respect of the Residential Units and/or Commercial Units and the Property-Related Contracts and/or in connection with any of the Projects, the Declarations, the Articles of Incorporation or By-Laws for the Associations and the other Project Documents shall be and remain enforceable by such other party, its successors and assigns, only against the Borrower or Persons other than the Administrative Agent or the Lenders, and the neither the Administrative Agent nor the Lenders have assumed any of the obligations or duties of the Borrower under or with respect to any of the Contracts, such contracts of purchase or the Property-Related Contracts or otherwise in connection with any of the Projects, the Declarations, the Articles of Incorporation or By-Laws for the Associations or the other Project Documents. (d) No Obligation to Take Action. The Borrower hereby agrees and acknowledges that neither the acceptance of this Agreement or any other Security Document by the Administrative Agent or the Lenders nor the exercise of, or failure to exercise, any right, power or remedy in this Agreement or in any other Security Document conferred upon the any none or more of the Administrative Agent or the Lenders shall be deemed or construed to obligate the Administrative Agent or any of the Lenders to pay any sum of money, take any other action or incur any liability in connection with, or collect or realize upon, any of the Contracts or any other Collateral. It is further agreed and understood by the Borrower that the neither the Administrative Agent nor the Lenders shall be liable in any way for any cost, expense or liability connected with, or any charge 56 or liability arising from, any of the Contracts, any of the contracts of purchase in respect of the Residential Units and/or Commercial Units, any of the Property-Related Contracts or any other Collateral. (e) Indemnification. The Borrower hereby agrees to indemnify each of the Administrative Agent and the Lenders, and hold each of such Persons harmless, from any and all liability, loss or damage which such Person may or might incur by reason of any and all claims and demands whatsoever which may be asserted against such Person arising out of, as a result of, or otherwise connected with, the Liens hereby granted to the Administrative Agent for their benefit of the Lenders by the Borrower under or in respect of any of the Contracts or any other Collateral by reason of (i) the failure by the Borrower to perform any obligations or undertakings required to be performed by the Borrower under or in connection with any of such Contracts, the Property-Related Contracts or any other Collateral, (ii) any failure by the Borrower, in connection with any of such Contracts, the Property-Related Contracts or any other Collateral, to comply with any applicable federal, state or local consumer credit, sale rescission, blue-sky, securities or usury statute, including, without limitation, any such statute of any state in which a Purchaser may reside, the Consumer Credit Protection Act, as amended, the Federal Trade Commission Act, as amended, the Interstate Land Sales Full Disclosure Act, and all rules and regulations promulgated under the foregoing statutes, acts and codes, and (iii) failure by the Borrower to comply with any applicable federal, state or local statutes, ordinances or declarations and the restrictions, rules and regulations promulgated thereunder or contained therein pertaining to the construction, use or operation of any of the Projects (including, without limitation, the statutes, ordinances, declarations, restrictions, rules and regulations of the towns or other municipalities covering the areas in which the Project are situated, and the declarations, restrictions and requirements of the CCR's and Declarations affecting the Projects) or to otherwise discharge its duties and obligations under applicable law, under the Declarations or the Articles of Incorporation or By-Laws of the Associations, unless such claims or demands were directly a result of such Person's intentional misconduct or gross negligence. 3.3 Financing Statements. The Borrower agrees, at its own expense, to execute the financing statements required by the Administrative Agent together with any and all other instruments or documents and take such other action, including delivery of such instruments and documents, as may be necessary to perfect, and to continue the perfection of, the Administrative Agent's security interest and Liens in the Collateral and, unless prohibited by law, the Borrower hereby authorizes the Administrative Agent to execute and file any such financing statement on the Borrower's behalf. The parties agree that a legible carbon, photographic or other reproduction of this Agreement or of a financing statement shall be sufficient as a financing statement. The Borrower agrees, at its own expense, to use its best efforts to cause each Association to execute the financing statements required by the Administrative Agent together with any and all other instruments or documents and take such other action, including delivery of such instruments and documents, as may be necessary to perfect, and to continue the perfection of, the Lender's security interest and Liens in the collateral granted hereunder by such Association. 57 3.4 Location of Collateral; Books and Records. All tangible Collateral (other than Collateral delivered to the Administrative Agent or located in any Approved Escrow Account) which is personal Property is to remain, at all times, on the premises of the Borrower at Sunday River Road, in Bethel, Maine, or at the Projects and the Borrower represents and warrants to the Administrative Agent and the Lenders that all of the currently existing tangible Collateral is now located there, and the Borrower will not transfer the Collateral from such premises to other locations without the prior written approval of the Administrative Agent. The Borrower shall, upon receipt of a written request therefor from the Administrative Agent after the occurrence of an Event of Default, deliver to the Administrative Agent then current copies of all computer tapes, disks, software and micro-fiche records constituting, in whole or in part, the Books and Records. 3.5 Insurance of Collateral. (a) Maintenance of Insurance. (i) The Borrower agrees to maintain or cause to be maintained (including, without limitation, causing each General Contractor to maintain), or, as provided under the Declarations, cause each of the Associations to maintain (as to their respective Projects and the personal Property located thereon), insurance (with financially sound and reputable insurers) with respect to (1) each Project, (2) the personal Property located at the Projects (including, without limitation, the furniture, fixtures and furnishings thereof), (3) all other equipment and other personal Property of every nature whatsoever now or hereafter located in or on, or attached to, and used or intended to be used in connection with any of the Projects, and (4) the Books and Records and the other valuable papers of the Borrower, against casualties, contingencies, hazards and such other risks (including, without limitation, (A) fire, hurricane, tornado, wind damage, and such other risks insured against by a standard all-risk property and fire insurance policy and endorsement for extended coverage, (B) flood insurance, if applicable, and (C) builder's risk insurance in completed value form) and in such amounts as shall be reasonably satisfactory to the Administrative Agent (such insurance to be maintained during the construction and development of each Under-Construction Project and to cover materials in as well as adjacent to the structures so insured; such insurance (other than such builder's risk insurance) shall also be maintained after such development and construction as well); provided, however, that such casualty insurance shall (aa) in no case be in an amount less than an amount sufficient to rebuild each Project or the portions thereof which shall have suffered the loss and replace any of the personal Property located therein, (bb) be sufficient to avoid 58 any co-insurance requirements in respect of the Borrower and/or the Associations, and (cc) be sufficient to provide funds to fully compensate owners of Quartershare Interests, Residential Units and Commercial Units for any inability to utilize any such condominium units or the Common Elements during any period following a loss thereto. With respect to such insurance, the Borrower shall deliver or cause to be delivered, or cause the Associations to deliver (to the extent permitted by applicable law and the Declarations), certificates of insurance to the Administrative Agent, with satisfactory lender's loss payable endorsements naming the Administrative Agent on behalf of the Lenders as loss payee to the extent of its interest and as such interest may appear on the Closing Date. Each policy of such insurance or endorsement with respect thereto shall contain a clause requiring the insurer to give not less than 30 days' prior written notice to the Administrative Agent in the event of cancellation of the policy for any reason whatsoever and a clause that the interest of the Administrative Agent shall not be impaired or invalidated by any act or neglect of the Borrower or owner of the Property nor by the occupation of the premises for purposes more hazardous than are permitted by said policy. If the Borrower shall fail to provide for such insurance, or have the same provided for, the Administrative Agent may, at the Borrower's expense, procure the same, but shall not be required to do so. (ii) The Borrower shall maintain or cause to be maintained insurance with financially sound and reputable insurers with respect to its Property and business (including, without limitation, the Collateral) covering any public liability of the Borrower, its officers, agents or employees (including, without limitation, damage by Borrower or its officers, agents or employees to the Property of other Persons, any bodily injury caused by Borrower or its officers, agents or employees to any other Person, or any negligent act or other similar liability of Borrower or its officers, agents or employees) and in such amounts as are satisfactory to the Administrative Agent; the Administrative Agent and the Lenders shall be named as an additional insureds thereon. The Borrower shall, as provided in the Declarations, cause the Associations to maintain insurance with financially sound and reputable insurers with respect to the Projects covering any public liability of the Associations or their officers, agents or employees to the Property of other Persons, any bodily injury caused by the Associations or their officers, agents or employees to any other Person, or any negligent act or other similar liability of the Association or its officers, agents or employees) and in such amounts as are provided for in the Declarations. (iii) The Borrower shall, prior to renewal, submit, or cause the Associations to submit, to the Administrative Agent insurance certificates showing the type and amounts of insurance coverage maintained in respect of the Projects. The Borrower shall, to the extent permitted by applicable law and the Declarations, cause all casualty policies of insurance provided under the Declarations to have mortgagee endorsements in respect of the Administrative Agent's interests in and to the Quartershare Interests, Residential Units, and/or Commercial Units that are the subject of the Blanket Mortgages or any Quartershare Mortgage in which the Lender may have a security interest and Lien hereunder. 59 (iv) The Borrower shall pay, or cause the Associations to pay, all premiums on the aforesaid insurance policies and all other fees and charges payable in connection with such insurance policies (such premiums, fees and charges being collectively referred to herein as "Insurance Premiums") not later than the due date thereof. If the Borrower shall fail to pay, or cause the Associations to pay, any such Insurance Premiums, the Administrative Agent may (but shall not be obligated to), at Borrower's expense and upon the written instructions of the Required Lenders, pay the same. Any such payment shall be subject to Section 3.11 and Section 3.12 hereof. (v) If the Mortgaged Property (under and as defined in any of the Blanket Mortgages) or any portion is sold at a foreclosure sale or if any Lender shall acquire title to said Mortgaged Property or any such portion, such Lender shall have all of the right, title and interest of the Borrower in and to all insurance policies required under this Section 3.5(a) and the unearned premiums thereon, related to such Mortgaged Property or such portion, and in and to the proceeds resulting from any damage to said Mortgaged Property or such portion prior to such sale or acquisition. (vi) Borrower agrees to cause any contractor hired by it to effect any of the construction and development of any Under-Construction Project to carry adequate insurance in respect of bodily injury or other personal liability or property damage in respect of its employees or other third persons in connection with such construction and development. Borrower shall use its best efforts to cause certificates of such insurance to be filed with the Administrative Agent. (vii) Anything contained in this Section 3.5(a) to the contrary notwithstanding, any of the undertakings of the Borrower in this Section 3.5(a) in respect of insuring the Projects or in respect of causing the Associations to perform any undertaking under this Section 3.5(a) shall be subject to the requirements of the condominium acts or other common interest ownership acts as adopted and in effect from time to time in the States in which the Project are situated, and the rules and regulations as adopted from time to time thereunder and the Declarations. (b) Condominium Insurance Proceeds. (i) Any proceeds of insurance in respect of the Projects received by the Associations or any manager retained by it and then further paid by the Associations or such manager to the Borrower (whether as Declarant or otherwise), as provided for in the Declarations, shall be promptly paid and/or turned over by the Borrower to the Administrative Agent as proceeds of the Collateral and applied to the prepayment of the Loan as provided in Section 2.5(d) hereof. (ii) Without limiting the immediately preceding paragraph, any proceeds of insurance in respect of the Projects received by the Borrower at a time during which the insurance provisions of the relevant Declaration shall not be in effect as 60 to the affected Project shall be treated as provided in Section 3.5(c) of this Agreement. (c) Miscellaneous Application of Insurance Proceeds. In connection with, and pursuant to, Section 3.5(b)(ii) hereof, the Lenders and the Borrower agree to the following: (i) Following the occurrence of any Default or Event of Default (provided that if such Default or Event of Default is cured by the Borrower, then clause (ii) below and not this clause (i) shall thereafter apply), the Administrative Agent at the instruction of the Required Lenders is hereby authorized and empowered to adjust or compromise any loss under any insurance policies maintained pursuant to this Section 3.5, and to collect and receive the proceeds from any such policies. In such event, each insurance company is hereby authorized and directed to make payment for all such losses directly to the Administrative Agent, instead of to the Borrower (and/or the applicable Association) and the Administrative Agent jointly. In the event any insurance company fails to disburse directly and solely to the Administrative Agent but disburses instead either solely to the Borrower or to the Borrower (and/or any Association) and the Administrative Agent jointly, the Borrower agrees immediately to endorse and transfer, or cause to be endorsed and transferred, such proceeds to the Administrative Agent. Upon the failure of the Borrower to endorse and transfer such proceeds as aforesaid (or cause the same to be done), the Administrative Agent at the instruction of the Required Lenders may execute such endorsements or transfers for and in the name of the Borrower (whether as Declarant or otherwise) and the Borrower hereby unconditionally and irrevocably appoints the Administrative Agent as the Borrower's agent and attorney-in-fact, coupled with an interest, to endorse and transfer such proceeds to the Administrative Agent on behalf of the Lenders. After deducting from said insurance proceeds all of its expenses incurred in the collection and administration of such sums, including attorneys' fees, the Administrative Agent may apply the net proceeds or any part thereof, as instructed by the Required Lenders, (i) to payment of the Obligations, whether or not due, as provided in Section 2.5(d) hereof, (ii) to the repair and/or restoration of the applicable Project or (iii) for any other purposes or objects for which the Administrative Agent or the Lenders are entitled to advance funds under this Agreement or any of the other Security Documents; all without affecting the Liens and security interests of this Agreement and the other Security Documents. Neither the Administrative Agent nor the Lenders shall be held responsible for any failure to collect any insurance proceeds due under the terms of any policy regardless of the cause of such failure. (ii) Prior to the occurrence of any Default or Event of Default and if the Borrower gives the Administrative Agent notice of any casualty as provided in clause (d) below, the Borrower shall have the right to adjust and compromise losses under insurance policies and to collect and receive insurance proceeds and shall apply such insurance proceeds with respect to such losses solely and exclusively to the repair and restoration of the affected Project or, if consented to 61 by the Administrative Agent at the instruction of the Required Lenders, to the payment of the Obligations as the Borrower deems appropriate in its reasonable discretion. With respect to any such casualty loss, the Borrower shall have the right to use any insurance proceeds received on account of such loss to the repair and restoration of the affected Project, provided that prior written notice is given with respect thereto to the Administrative Agent and the scope and plans for the repair or restoration have been approved by the Administrative Agent, which approval shall not be unreasonably withheld or delayed if the repair or restoration will result in a new "resort" which is substantially comparable to the pre-existing "resort" at such Project in terms of overall usable square footage and types of functions served by such pre-existing "resort", the new "resort" is constructed with the same or better quality of materials and workmanship as such pre-existing "resort," and is constructed in accordance with the applicable requirements of then existing zoning, design and building codes and other applicable laws, the applicable CCR's and market considerations. All such repair and restoration shall be diligently prosecuted to completion by the Borrower and shall be completed on or prior to the Maturity Date or, if earlier, the maturity date of the Project Advances related to such Project if such Project is an Under-Construction Project. (d) Borrower Undertakings. In the event of any material casualty or loss in respect of any of the Projects (including, without limitation, any of the Collateral), (i) the Borrower shall immediately notify the Administrative Agent of the same and (ii) the Administrative Agent may, in addition to its rights as mortgagee under the Blanket Mortgages, elect (at the instruction of the Required Lenders) to exercise the voting rights of the Borrower as a mortgagee or a holder of a security interest in respect of any Quartershare Mortgage pledged to the Administrative Agent hereunder or as the owner of any Quartershare Interest, Residential Unit or Commercial Unit, as such voting rights are provided for under the applicable Declaration, regarding all matters of repair and restoration. In the event of any casualty or loss in respect of any Project (including, without limitation, any of the Collateral), the Borrower shall pay all assessments as required by the applicable Declaration and/or the applicable Articles of Incorporation or By-Laws for repair and restoration due to inadequacy of insurance. 3.6 Condemnation. (a) Condominium/Timeshare Condemnation Compensation. (i) Any compensation, awards, damages, claims, rights of action, proceeds, payment and other relief (collectively, "Condemnation Compensation") of, or on account of, any damage or taking of all or any part of the Projects in connection with any condemnation proceedings or any exercise of the power of eminent domain (or any conveyance in lieu of or under threat of any such taking), including, without limitation, any such Condemnation Compensation for change of grade of streets or any other injury to or decrease in the value of all or any part of the Projects, payable to any Association or any manager retained by it and paid further by such Association or such manager to the Borrower (whether as Declarant or otherwise), as provided for in the applicable Declaration, shall be 62 promptly paid and/or turned over to the Administrative Agent as proceeds of the Collateral or otherwise and, subject to clause (ii) below if such clause shall then be applicable, applied to the prepayment of the Loan, as provided in Section 2.5(d) hereof. (ii) Any Condemnation Compensation in respect of any of the Projects received by the Borrower at a time during which the condemnation provisions of the relevant Declaration shall not be in effect with respect to the affected Project shall be treated as provided in Section 3.6(b) below. (b) Miscellaneous Application of Condemnation Compensation. In connection with, and pursuant to, Section 3.6(a)(ii) hereof, the Lenders and the Borrower agree to the following: (i) if all or any portion of any Project shall be damaged or taken through condemnation (which term when used in this Agreement shall include any damage or taking by any governmental authority and any transfer by private sale in lieu thereof), so as to, either (A) temporarily or permanently, materially adversely affect the type or scope of resort operations existing prior to the condemnation or taking of, or the net operating income of, such Project (both being determined by Administrative Agent in its sole and absolute discretion), or (B) result in Condemnation Compensation in excess of $500,000, then the all of the Project Advances (together with accrued and unpaid interest thereon and such Project advances' ratable share of all Interest Advances then outstanding and the Pre-Sale Advance then outstanding) relating to such Project shall, at the option of the Required Lenders, become immediately due and payable. (ii) The Administrative Agent shall be entitled to receive all Condemnation Compensation payable with respect to any condemnation or taking. The application of such Condemnation Compensation shall be as set forth below in clause (iii) below. The Administrative Agent is hereby authorized, at the instruction of the Required Lenders, to commence, appear in and prosecute, in its own or in Borrower's name, any action or proceeding relating to any condemnation or taking, and to settle or compromise any claim in connection therewith. All Condemnation Compensation and the rights thereto are hereby assigned by Borrower to Administrative Agent on behalf of the Lenders. (iii) After deducting from any Condemnation Compensation all of its expenses incurred in the collection and administration thereof, including attorney's fees, the Administrative Agent shall, if no Default or Event of Default shall then exist, or may, at the instruction of the Required Lenders, if a Default or Event of 63 Default shall then exist, make the net Condemnation Compensation available to Borrower to repair and/or restore the affected Project, provided that (1) Borrower requests that such proceeds be made available for repairing or restoring such Project in a written notice delivered to Administrative Agent within 30 days after the occurrence of the condemnation or taking, (2) Administrative Agent and the Lenders approve Borrower's plans for repair and/or replacement of such Project, which approval shall not be unreasonably withheld or delayed, (3) any such repairs must restore such Project to at least as good condition as prior to the condemnation or taking, (4) any replacement shall be of the same or equal value to the Property replaced, and (5) Administrative Agent must determine that the repairs or replacement can be substantially completed prior to the Maturity Date or, if earlier, the maturity date of the Project Advances related to such Project. If Borrower fails to comply with any of the requirements set forth in the immediately preceding sentence or if a Default or Event of Default exists and the Administrative Agent shall have decided not to make such net Condemnation Compensation available to Borrower, the Administrative Agent may, at the instruction of the Required Lenders, apply such net Condemnation Compensation or any part thereof, (A) to the payment of the aforesaid Obligations, whether or not due, as provided in Section 2.5(d) hereof, or (B) for any other purposes or objects for which the Administrative Agent is entitled to advance funds under this Agreement, all without affecting the security interests or Liens of this Agreement or any of the other Security Documents. All net Condemnation Compensation to be disbursed by the Administrative Agent pursuant to this clause (iii) shall be disbursed in a manner acceptable to the Administrative Agent as the repair and/or replacement work proceeds. Neither the Administrative Agent nor the Lenders shall be held responsible for any failure to collect any condemnation regardless of the reason for such failure. Borrower agrees to execute such further assignment of any compensation, awards, damages, claims, rights of action and proceeds as the Administrative Agent may require. All repair and/or replacement work shall be diligently prosecuted to completion by the Borrower and shall be completed prior to the Maturity Date or, if earlier, the maturity date of the Project Advances related to such Project. (c) Borrower Undertakings. In the event of any condemnation or taking in respect of any Project (including, without limitation, any of the Collateral), (i) the Borrower shall immediately notify the Administrative Agent of the same, (ii) the Administrative Agent may, in addition to its rights under the Blanket Mortgages, elect to exercise the voting 64 rights of the Borrower as mortgagee or the holder of a security interest in respect of any Quartershare Mortgage pledged to it hereunder relating to such Project or as the owner of any Quartershare Interest, Residential Unit and/or Commercial Unit relating to such Project, as such voting rights are provided for under the applicable Declaration, regarding all matters of repair and restoration, and (iii) the Borrower shall pay all assessments as required by the applicable Declaration and/or Articles of Incorporation or By-Laws for repair and restoration due to inadequacy of the Condemnation Compensation. 3.7 Taxes Affecting Collateral. The Borrower shall pay or, as provided in the Declarations, cause the Associations to pay, on or before the last day when they may be paid without interest or penalty, all taxes, assessments, rates, dues, charges, fees, levies, excises, duties, fines, impositions, liabilities, obligations and encumbrances (including, without limitation, water and sewer rents and charges, charges for setting or repairing meters and charges for other utilities or services), general or special, ordinary or extraordinary, foreseen or unforeseen, of every kind whatsoever, now or hereafter imposed, levied or assessed by any public or quasi-public authority or instrumentality upon or against any of the Collateral or the use, occupancy or possession of any Project, or upon or against this Agreement, the Notes or the other Security Documents, the Obligations or the interest of the Administrative Agent or the Lenders in the Contracts, any of the contracts of purchase in respect of the Residential Units and/or Commercial Units or the Blanket Mortgages or any other item of Collateral (provided that this Section 3.7 shall not be construed to require the Borrower to pay any income tax imposed upon the general income of the Administrative Agent or the Lenders), as well as all assessments and other governmental or quasi-governmental charges imposed, levied or assessed in respect of any Collateral, and any and all interest, costs and penalties on or with respect to any of the foregoing (collectively, the "Impositions"). Upon request by the Administrative Agent, the Borrower shall deliver, or cause the Associations to deliver, to the Administrative Agent receipts or other satisfactory proof of payment of any Impositions. The Borrower shall not claim, demand or be entitled to receive any reduction of, or credit toward, any Imposition on account of the Obligations. No deduction shall be claimed from the taxable value of any Collateral or any Project by reason of the Obligations, any of the Security Documents or the interest of the Lender in the Collateral. If existing laws or procedures governing the taxation of mortgages, security documents or debts secured by deeds of trusts, mortgages or other security documents shall be changed in any manner after the date hereof so as to materially adversely impair the security of the Blanket Mortgages or the security interest herein granted or granted in any of the other Security Documents or to reduce the net income to any of the Lenders in respect of its Pro Rata Share of the Obligations (excluding from any such determination of net income any reduction in such net income attributable to a change in taxes imposed on, or measured by, the net income of such Lender), then, upon request by such Lender, the Borrower shall pay to such Lender or to the taxing authority (if so directed by such Lender), all taxes, charges and related costs for which the Lender may be liable as a result thereof. The Borrower shall pay, or cause to be paid, when due, any and all recording (deed of trust, mortgage or personal property), intangible property and documentary stamp taxes, all 65 similar taxes, and all filing, registration and recording fees, which are now or hereafter may become payable in connection with the Obligations, the Blanket Mortgages, this Agreement, any of the other Security Documents, the Quartershare Mortgages or any of the other Collateral. The Borrower shall pay when due any and all excise, transfer and conveyance taxes which are now or hereafter may become payable in connection with the Obligations, the Blanket Mortgages, any Quartershare Mortgage, this Agreement or any of the other Security Documents, or in connection with any foreclosure of the Blanket Mortgages, any Quartershare Mortgage or any other foreclosure of any Collateral under this Agreement or under any of the other Security Documents, or any other transfer of any item of Collateral in extinguishment of all or any part of the Obligations or any other enforcement of the rights of the Lender with respect thereto. 3.8 Discharge of Liens Affecting Collateral. If any mechanic's, laborer's, materialman's, statutory or other Lien shall be filed or otherwise imposed upon or against any item of the Collateral or any of the Projects, then the Borrower shall, within 30 days after being given notice of the filing of such Lien or otherwise becoming aware of the imposition of such Lien, cause such Lien to be vacated or discharged of record by payment, deposit, bond, final order of a court of competent jurisdiction or otherwise. The Borrower shall have the right, at its sole expense, to contest the validity of any such Lien or of the claim evidenced or secured thereby, by appropriate proceedings commenced prior to the expiration of the aforesaid 30-day period and thereafter diligently and continuously conducted in good faith to final determination, in which event the Borrower shall not be required to cause any such Lien to be vacated or discharged of record in accordance with the immediately preceding paragraph if, and only so long as: (a) no final judicial determination in respect of any foreclosure or other enforcement proceeding in respect of such Lien or the claim evidenced or secured thereby shall have been rendered and no nonjudicial foreclosure proceeding or sale in respect of such Lien or such claim shall have been commenced; (b) no claim for liability of any kind shall have been asserted against the Administrative Agent or any Lender in connection with such Lien or the claim evidenced or secured thereby; and (c) if such Lien shall secure a claim of more than $50,000, the Borrower shall have established an escrow with the Administrative Agent, or shall have delivered to the Administrative Agent a satisfactory bond issued by a surety acceptable to the Administrative Agent or a satisfactory letter of credit for the benefit of the Administrative Agent issued by a bank acceptable to the Administrative Agent, in each case in an amount estimated by the Administrative Agent to be adequate to cover (i) the unpaid amount of such claim, (ii) all interest, penalties and similar charges which reasonably can be expected to accrue by reason of such contest or by reason of such nonpayment, and (iii) all costs, fees and expenses (including, without limitation, attorneys' fees and disbursements) which reasonably can be expected to be incurred in connection therewith by the Administrative Agent, which escrow, bond or letter of credit shall be maintained in effect throughout such contest and the amount of which shall be increased from time to 66 time if reasonably required by the Lender to cover the foregoing amounts in subclause (i), subclause (ii) and subclause (iii). The Borrower shall inform the Administrative Agent, in advance and in writing, of its intention to contest any Lien securing a claim, or such claim itself, under this Section 3.8 if such claim shall exceed $50,000. Upon termination of any such contest (whether by final determination or otherwise), or at any time during the course of any such contest that the conditions relieving the Borrower of its obligation to cause such Lien to be vacated or discharged shall no longer be satisfied or shall be discovered not to have been satisfied, the Borrower shall cause such Lien to be vacated or discharged of record. At the Administrative Agent's option (at the instruction of the Required Lenders), the escrow established or bond or letter of credit, as the case may be, delivered pursuant to this Section 3.8 may be, in the case of the escrow, liquidated, or, in the case of the bond or the letter of credit, drawn upon, at such time and the proceeds thereof may be applied to payment of all or any part of the claim evidenced or secured by such Lien and the interest, penalties, charges, costs, fees and expenses (including, without limitation, attorneys' fees and disbursements) referred to in subclause (ii) and subclause (iii) of the immediately preceding paragraph. Promptly after such Lien has been vacated or discharged of record, the Borrower shall deliver to the Administrative Agent evidence reasonably satisfactory to the Administrative Agent that such Lien has been vacated or discharged of record. Thereafter, the amount then remaining in the escrow established pursuant to this Section 3.8 or such bond or letter of credit, as the case may be, shall be returned to the Borrower free and clear of the Lien of this Agreement or any other Security Document so long as no Event of Default shall have occurred and be continuing or, if an Event of Default shall have occurred and be continuing, shall be retained by the Administrative Agent as part of the Collateral. If any Lien shall not be vacated or discharged as required by this Section, then, in addition to any other right or remedy of the Lender, the Administrative Agent may, but shall not be obligated to, discharge such Lien in such manner as the Administrative Agent may select, and the Administrative Agent shall be entitled, if instructed by the Required Lenders, to compel the prosecution of an action for the foreclosure of such Lien by the lienor and to pay the amount of any judgment in favor of such lienor with interest, costs and allowances. Upon request by the Administrative Agent, the Borrower shall pay to the Administrative Agent, or to any other Person designated by the Administrative Agent, the amount of all payments made by the Administrative Agent as provided above and all costs, expenses and liabilities (including, without limitation, attorneys' fees and disbursements) incurred by the Administrative Agent in connection therewith, together with interest thereon at the Default Rate from the date paid or incurred by the Administrative Agent until the date so paid to, or as directed by, the Administrative Agent. To the extent permitted by law, the Administrative Agent shall thereupon be subrogated to the rights of such lienor and any such payments made by the Administrative Agent pursuant to this Section 3.8 shall be secured by the Collateral. 3.9 Use of the Projects; Voting Rights of Borrower. (a) Use of the Projects Generally. The Borrower shall not, as Declarant, Quartershare Interest owner, Residential Unit owner or Commercial Unit owner, without the prior written consent of the Administrative Agent, 67 (i) request or otherwise initiate or consent to any zoning classification or reclassification of any of the Projects or the adoption, issuance, imposition or amendment of any other law, ordinance, rule, regulation, order, judgment, injunction or decree relating to the use, occupancy, operation, development, disposition or design of any of the Projects which would limit the use of the Quartershare Interests, Residential Units or Commercial Units in a manner that materially reduces their Fair Market Value, (ii) request or otherwise initiate or consent to the annexation of any part of any of the Projects by or into any municipality or other governmental or quasi-governmental unit, (iii) execute, file or record any subdivision plat affecting any of the Projects (other than as contemplated in the Plans or other than pursuant to a request of a purchaser of a Commercial Unit to subdivide the Commercial Unit being so purchased or other than in respect of an amendment to a Declaration for the purpose of submitting any Project to such Declaration) or request or otherwise initiate, consent to or acquiesce in any subdivision of any Project (other than as contemplated and provided for in the Declarations or the Plans), (iv) enter into, consent to or otherwise cause, permit or suffer any Project to become subject to any covenant, agreement or other arrangement restricting or limiting the use, occupancy, operation, development or disposition thereof (other than any covenant of this Agreement or the other Security Documents, the Declarations, and the CCR's), (v) materially and substantially modify, alter, remove or improve any of the Common Elements without the prior written consent of the Administrative Agent (except for the creation of additional common elements and limited common elements resulting from the construction and development of the Residential Units, Commercial Units and the Projects in accordance with the Plans), (vi) maintain the Quartershare Interests, Residential Units or Commercial Units owned by it for lease or as a rental project (except as expressly permitted in the Declarations), (vii) add or withdraw real Property from any of the Projects or create additional club interests, club units or commercial units beyond those existing or planned for in accordance with, and pursuant to, the Declarations and the Plans, or (viii) permit the Quartershare Interests or Residential Units to be used for other than for nonpermanent residential purposes. (b) Use by Public. The Borrower shall not cause, permit or suffer any Project to be used by the public without restriction (except as required by applicable law or as otherwise provided with respect to the Commercial Units, the Declarations and the CCR's) 68 or in any manner that might tend to impair the Borrower's right, title and interest in and to the Projects or in any manner that might make possible any claim of adverse usage or adverse possession by the public or any claim of implied dedication of all or any part of the Projects. (c) Voting Rights. The Borrower hereby appoints and constitutes the Administrative Agent as its attorney-in-fact (with full power of substitution) to exercise all of its voting rights pertaining to any Quartershare Interest, Residential Unit and/or Commercial Unit owned by the Borrower or in which the Borrower has an interest giving rise to the right to vote (whether as Declarant, as a holder of any Quartershare Mortgage or otherwise). This power of attorney is coupled with an interest and shall be irrevocable for so long as any Obligations are owing by the Borrower to the any Lender. This power of attorney may be used from time to time in the sole discretion of the Administrative Agent if there shall exist an Event of Default, or a material casualty or a material condemnation or taking (as contemplated in Section 3.6(b)(i) hereof) shall have occurred with respect to the Projects or any part thereof. The Borrower agrees to execute, from time to time, such other documents as the Administrative Agent may request (including, without limitation, the form of proxy substantially in the form of Exhibit H to this Agreement; which proxy shall, at the request of the Administrative Agent, be periodically renewed) and file the same with the Secretary of the applicable Association in accordance with such Association's By-Laws. If any voting rights pertaining to any Quartershare Interest, Residential Unit and/or Commercial Unit owned by the Borrower or in which the Borrower has an interest giving rise to the right to vote (whether as Declarant, as a holder of a Quartershare Mortgage or otherwise) shall be exercisable pursuant to a written ballot distributed by the applicable Association in accordance with the terms of the By-Laws of said Association, the Borrower agrees to exercise its right to vote in respect of such written ballot in accordance with the rights of the Administrative Agent under the first paragraph of this Section 3.9(c) as if the proxy referred to therein were directly applicable to such written ballot (any provision in said By-Laws to the contrary notwithstanding) and to promptly give the Administrative Agent written notice of any such written ballot if the Administrative Agent shall then be entitled to exercise the voting rights in respect thereof. If any voting rights pertaining to any Quartershare Interest, Residential Unit and/or Commercial Unit owned by the Borrower or in which the Borrower has an interest giving rise to the right to vote (whether as Declarant, as a holder of a Quartershare Mortgage or otherwise) shall be exercisable pursuant to the attendance by the Borrower at a meeting of the members of the applicable Association in accordance with the terms of the By-Laws of such Association, the Borrower agrees to exercise its right to vote in respect of such attendance in accordance with the rights of the Administrative Agent under the first paragraph of this Section 3.9(c) as if the proxy referred to therein were directly applicable to such meeting (any provision in said By-Laws to the contrary notwithstanding) and to promptly give the Administrative Agent written notice of its intention to attend any such meeting if the Administrative Agent shall then be entitled to exercise the voting rights in respect thereof. 69 Except with the prior written consent of the Administrative Agent, the Borrower shall not propose or vote for or consent to any modification of, or amendment to, any Declaration or any Association's Articles of Incorporation or By-Laws which could have (in the reasonable sole opinion of the Administrative Agent or the Required Lenders) a material adverse effect on the Collateral or the operation or prospects of any Project. In each case under any Declaration and/or any Association's Articles of Incorporation or ByLaws in which the consent or the vote of a holder of a mortgage in respect of the Quartershare Interests, Residential Units and/or Commercial Units (including any such case in which the Borrower would be considered to be a holder of a mortgage by virtue of any Quartershare Mortgage) is provided for or is required, or in which the Borrower's consent is required (as Declarant or as an owner of a Quartershare Interest, Residential Unit or Commercial Unit or as a vendor or mortgagee) for any proposed action, the Borrower shall not vote or give such consent without obtaining the prior written consent of the Administrative Agent if such action (in the reasonable sole opinion of the Administrative Agent) could have an material adverse effect on the Collateral or the operation or prospects of any Project. 3.10 Other Quartershare Covenants. (a) Access. With respect to the consummation of each sale of a Quartershare Interest in respect of any Project to a Purchaser under a Contract, the Borrower shall cause the owner of such Quartershare Interest to have access to a publicly dedicated road within such Project and shall cause all private roadways and parking lots or areas in each Project to be Common Elements in respect of such Quartershare Interest, as the case may be, under the applicable Declaration. (b) Utilities. With respect to the consummation of each sale of a Quartershare Interest in respect of any Project to a Purchaser under a Contract, the Borrower shall cause electric, sewer, and water service and other necessary utilities to be available to such Project and the Residential Units for such Project in sufficient capacity to service the same and shall pay, or cause to be paid, all tap fees or other connection charges in respect thereof). (c) Use of Amenities. With respect to the consummation of each sale of a Quartershare Interest in respect of any Project to a Purchaser under a Contract, the Borrower shall cause the owner of such Quartershare Interest to have access to, and the use of, all of the amenities and public utilities relating to such Project and such Quartershare Interest (consistent with the contractual provisions and rules and regulations existing with respect to such amenities and public utilities). (d) Timeshare Regimen. With respect to the consummation of each sale of a Quartershare Interest in respect of any Project to a Purchaser under a Contract, the Borrower shall do all things necessary in order to preserve the condominium and quartershare regimens in respect of such Quartershare Interest. (e) Local Legal Compliance. The Borrower shall comply, and shall cause each Project and the Quartershare Interests and the Residential Units and Commercial Units relating to such Project to comply, with all applicable restrictive covenants, zoning, 70 design and land use ordinances and building codes, all applicable health and environmental laws and regulations and all other applicable laws, rules and regulations and all approvals, consents and licenses (including, without limitation, the CCR's); and the Borrower shall use its best efforts to obtain all certificates of occupancy in respect of the use and operation of each Project and the Residential Units and the Commercial Units relating thereto as promptly as possible after the completion of the construction of such Project, and the Borrower shall keep such certificates in full force and effect. (f) Registration Compliance. The Borrower shall maintain, or cause to be maintained, all necessary consents, franchises, approvals, and exemption certificates in connection with, and the Borrower will make, or cause to be made, all registrations or declarations with any government or any agency or department thereof required in connection with, the occupancy, use and operation of each Project and the marketing and sale of the Quartershare Interests, the Residential Units and/or the Commercial Units relating thereto. (g) Records. The Borrower shall maintain accurate and complete files relating to the Contracts, the Quartershare Notes and the other Collateral to the reasonable satisfaction of the Administrative Agent, and such files will contain copies of each Contract, Quartershare Note, Quartershare Mortgage, all relevant credit memoranda, and all collection information and correspondence in respect thereof. (h) Forms of Project Documents. Instruments in substantially the form of the Contract, the form of statement of rescission rights required by the law of the State in which the Project is located or the law of any of the Applicable States, and the form of other instruments and documents related thereto, in each case in form and substance acceptable to the Administrative Agent, shall be used by the Borrower for all purchase and sale transactions of Quartershare Interests consummated during the Commitment Period. The Borrower shall not materially modify, amend or otherwise alter any of the terms of such forms without the Administrative Agent's prior written consent, except as may be required by any regulatory agency or applicable law. Notwithstanding the Administrative Agent and/or Lenders' review and determination of acceptability, if any, of such forms, the Borrower shall remain solely liable for all aspects of such forms and their use; any determination of acceptability, if any, by the Administrative Agent or any Lender relating to such forms shall only be for the Administrative Agent's and each Lender's benefit and no other Person shall be entitled to rely thereon in any manner. Instruments in substantially the form of the Quartershare Note, the form of the Quartershare Mortgage, the form of the special warranty deed, the form of the Truth-in-Lending Statement and the form of the other instruments and documents related thereto, that, in each case, are in form and substance reasonably acceptable to the Administrative Agent and the Lenders, shall be used by the Borrower for all sales of Quartershare Interests which may be closed after the Closing Date and for so long as any Obligation remains outstanding. The Borrower shall not materially modify, amend or otherwise alter such forms or any of the terms of such forms without the Administrative Agent's prior written consent, except as may be required by any regulatory agency or applicable law. Notwithstanding the Administrative Agent's or any Lender's review and determination of acceptability, if any, of such forms, the Borrower shall remain solely liable for all aspects 71 of such forms and their use; any determination of acceptability, if any, by the Administrative Agent or any Lender relating to such forms shall only be for the Administrative Agent's and the Lenders' benefit and no other Person shall be entitled to rely thereon in any manner. (i) Payments on Validated Contracts and Other Purchase Agreements. The Borrower, except as specifically consented to in writing by the Administrative Agent, shall not grant any extensions of time for the payment of, compromise for less than the full face value of, release in whole or in any part any Person liable for the payment of, allow any credit whatsoever except for the amount of cash to be paid upon, or otherwise modify or amend, any Validated Contract or any purchase contract in respect of any Residential Unit or Commercial Unit. (j) Property-Related Contracts. Except as required by applicable law, the Borrower shall not materially modify or amend, or (subject to the rights and obligations of the Associations under the Declarations or the Articles of Incorporation or By-Laws of the Associations) permit to be materially modified or amended, any material Property-Related Contract without the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld, or enter into, or (subject to the rights and obligations of the Associations under the Declaration or Articles of Incorporation or By-Laws of the Associations) permit to be entered into, any new material Property-Related Contract without the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld. The Borrower shall perform all of its obligations in a timely fashion under each Property-Related Contract. (k) Undertaking. The Borrower shall perform each and every covenant, agreement, and undertaking applicable to the Borrower (whether as Declarant, owner of a Quartershare Interest, Residential Unit or Commercial Unit or otherwise) under the Declarations and the Articles of Incorporation and By-Laws of the Associations. (l) Notices. The Borrower shall promptly deliver to the Administrative Agent copies of each written notice or request, financial statement, budget or other information received by the Borrower under or with respect to the Declarations and/or the Articles of Incorporation or By-Laws of the Associations, whether in its capacity as Declarant, owner of a Quartershare Interest, Residential Unit or Commercial Unit, holder of a mortgage, deed of trust or other security interest or otherwise. (m) Quartershare Interests. Except as the Lender may have otherwise agreed to in writing, the Borrower shall subject each of the Residential Units to the "quartershare interest" regime contemplated under each of the Declarations. It is the intention of the Borrower to hold for sale not less than 2,048 Quartershare Interests in respect of 512 Residential Units in the Projects. Each Residential Unit shall have a full kitchen or kitchenettes, a dining area and a video cassette player. Each Project shall have a grand ballroom (other than the Jordan Bowl Project), a conference room, a restaurant, a three-level atrium lobby, retail space, a health club with an outdoor pool and other recreational amenities. The Borrower shall use its best efforts to cause each of the following Projects to be accepted by Resorts Condominium International, Inc. into its timeshare exchange program and to maintain itself and such projects in good standing as participants in such 72 timeshare exchange program: Attitash Project, Jordan Bowl Project, Killington Project and Mt. Snow Project. 3.11 Protection of Collateral; Assessments; Reimbursement. All Insurance Premiums and all expenses of protecting, storing, warehousing, insuring, handling, maintaining and shipping the Collateral, any and all Impositions on any of the Collateral or in respect of the sale or other disposal thereof shall be borne and paid by the Borrower or the Borrower shall cause the Associations or any manager retained by it to pay the same, as provided for in the Declarations and/or the Articles of Incorporation or By-Laws of the Associations. The Borrower shall promptly pay, as the same become due and payable, its share of all Insurance Premiums, expenses, Impositions and/or assessments as required by the Declarations and/or the Articles of Incorporation or By-Laws of the Associations. If the Borrower shall fail to pay, or cause to be paid, any such Insurance Premiums, expenses, Impositions and/or assessments, the Administrative Agent may, at the Borrower's expense, pay the same. If, by reason of any suit or proceeding of any kind, nature or description against the Borrower, or by the Borrower or any other party against any other Person, or by reason of any other facts or circumstances, which in the Administrative Agent's or any Lender's sole discretion makes it advisable for such Person to seek counsel for the protection and preservation of the Collateral, or to defend its own interest, such expenses and counsel fees shall be allowed to such Person and borne and paid by the Borrower. 3.12 Interest on Lender Paid Expenses. All sums paid or incurred by the Administrative Agent or any Lender under this Section 3, and any and all other sums for which the Borrower may become liable hereunder, and all costs and expenses (including payments to other Lien holders and attorneys' fees, legal expenses and court costs) which the Administrative Agent or any Lender may incur in enforcing or protecting its Liens on, or rights and interest in, the Collateral or any of its rights or remedies under this Agreement or any other Security Document or in respect of any of the transactions contemplated herein or therein shall (a) be considered as additional indebtedness owing by the Borrower to the Administrative Agent or such Lender hereunder and, as such, shall be secured by all of the Collateral and (b) accrue interest at the Default Rate from the date paid or incurred until paid in full by the Borrower. 3.13 Lender Responsibility. Neither the Administrative Agent nor any Lender shall be (a) obligated or responsible for, the payment of any of the amounts or sums referred to in this Section 3, or (b) liable or responsible in any way for the safekeeping of any of the Collateral or for any loss or damage thereto. 3.14 Verification of Contracts. Upon prior notification to the Borrower, the Administrative Agent may contact any Purchaser in order to verify the Contract to which such Purchaser is a party and the Borrower shall render such assistance to the Administrative Agent in connection therewith as the Administrative Agent may reasonably request. 73 3.15 Release of Lien on Quartershare Interests, Residential Units and Commercial Units. (a) Release for Quartershare Interests, Residential Units and Commercial Units. The Administrative Agent agrees to execute and deliver to the Borrower or its escrowee the documents referred to below pursuant to which the security interest and Lien in and to any Quartershare Interest, Residential Unit or Commercial Unit in any Project created by this Agreement, the Blanket Mortgages or any other Security Document will be released if, but only if, all of the following conditions shall have been fully satisfied: (i) such Quartershare Interest, Residential Unit or Commercial Unit in such Project is being sold in the ordinary course of Borrower's business, (ii) the full Release Price in respect of such Quartershare Interest, Residential Unit or Commercial Unit in such Project shall have been paid to the Administrative Agent or its agent in good, collected funds; (iii) a request, substantially in the form of Exhibit I attached hereto, shall have been completed and executed by the Borrower and submitted to the Administrative Agent not less than 2 Business Days in advance of the date on which the Borrower desires to obtain such release; and (iv) a partial release of mortgage substantially in the form of Exhibit J attached hereto, and a partial release of security interest, substantially in the form of Exhibit K attached hereto, in each case, in respect of such Project, shall have been completed by the Borrower and submitted to the Administrative Agent with the aforesaid request. The Borrower shall bear the responsibility of recording any and all documents executed by the Administrative Agent under this Section. The Borrower shall pay all escrow costs and recording and transfer costs in respect of such documents. The Borrower shall establish an escrow in respect of any release under this Section. The Administrative Agent shall deposit the documents to be executed by it pursuant to clause (iv) above in such escrow if, but only if, (1) the documentation establishing such escrow is in form and substance satisfactory to the Administrative Agent and such documentation shall have been submitted to the Administrative Agent together with the written request referred to in clause (ii) above, (2) the escrowee under such escrow documentation is satisfactory to the Administrative Agent, (3) such escrow documentation provides that simultaneously with the release from such escrow of the documents referred to in clause (iv) above, the Release Price in respect of such Quartershare Interest, Residential Unit or Commercial Unit for such Project to be so released shall have been wired via 74 Federal Reserve Bank wire (in immediately available funds) to the Administrative Agent and a confirmation of such wire shall have been obtained, (4) such escrow documentation provides that such escrow will be consummated within 5 Business Days of the Administrative Agent's depositing of such release documents therein or such release documents shall be returned to the Administrative Agent by the escrowee of such escrow, and (5) at the time of the depositing of such documentation into such escrow, all of the conditions in clauses (ii) through (iv) above shall have been fully satisfied. (b) Full Release of Collateral and Blanket Mortgages. Upon the full, final and indefeasible payment of all Obligations and the termination of the Commitment Period, the Administrative Agent shall release its security interests and Liens in and to the Collateral, shall execute in favor of the Borrower any UCC release or termination statement in respect thereof, shall release the Blanket Mortgages, Assignment of Rents and any other recorded Security Document and shall reassign and deliver to the Borrower all Contracts and the other Collateral then in the physical possession of the Administrative Agent or its agent (without recourse and without representations or warranties of any kind). The Borrower shall bear all out-of-pocket expenses (including, without limitation, legal fees and disbursements of the Administrative Agent) in connection with such release, reassignment and delivery. All such release and/or termination documentation shall be reasonably satisfactory to the Administrative Agent, the Lenders and their counsel. 3.16 Nondisturbance Agreements. Anything contained herein to the contrary notwithstanding, the Administrative Agent and the Lenders hereby agree to do, or cause to be done, each of the following: (a) the Administrative Agent shall subordinate its Liens and security interests in and to each Under-Construction Project to the Lien and terms of the Declaration, the Resort Map, and the Common Elements for such Under-Construction Project and to the rights of any owner of a Quartershare Interest, Residential Unit or Commercial Unit in such Under-Construction Project and the Association under such Declaration if (i) such Declaration and Resort Map are in form and substance satisfactory to the Administrative Agent and the Required Lenders; (ii) no Default or Event of Default shall then exist; (iii) such Declaration and Resort Map shall have been recorded in the applicable recording offices; (iv) the instrument of subordination shall be substantially in the form thereof set forth in Exhibit L hereto; 75 (v) a title insurance endorsement to the Title Insurance Policy {Blanket} in form and substance satisfactory to the Administrative Agent and the Required Lenders shall have been delivered to the Administrative Agent whereby the effective date of the Title Insurance Policy {Blanket} for such Under-Construction Project shall be extended through the date of such instrument of subordination, which contains no exclusions and/or exceptions unsatisfactory to the Administrative Agent or the Required Lenders (including the removal of any exceptions or exclusions in respect of mechanic's, materialmen's or laborer's liens or any exceptions in respect of the failure to deliver a current survey, provided that any exclusions or exceptions previously approved by the Lenders shall be deemed satisfactory to the Administrative Agent and the Required Lenders and any Lien which (in the sole opinion of Required Lenders) shall not have a material adverse effect upon the Borrower, any of the Projects or the Collateral shall be deemed to be satisfactory) and in respect of which all premiums shall have been paid; (vi) the Blanket Mortgage in respect of such Under-Construction Project constitutes a first priority Lien in and to all unsold Quartershare Interests, Residential Units and Commercial Units in such Under-Construction Project and all payments under the Host Company Lease Agreement in respect of such Under-Construction Project shall continue to be assigned to the Administrative Agent under such Blanket Mortgage and under the Assignment of Rents in respect of such Under-Construction Project and all payments in respect thereof shall continue to be made directly to the Administrative Agent; (vii) the Administrative Agent shall have received a satisfactory legal opinion from counsel to the Borrower as to the effectiveness of such Declaration to establish the "quartershare interest" regime in respect of such Under-Construction Project, the continued validity and enforceability of this Agreement, such Blanket Mortgage and the other Security Documents and such other matters as the Administrative Agent or the Required Lenders may reasonably request; and (viii) the Borrower shall have paid for all of the costs and expenses incurred by the Administrative Agent and the Lenders in connection with the preparation and recordation of such instrument of subordination (including, without limitation, attorney's fees and expenses); and (b) if the Administrative Agent or any Lender shall acquire all or any Common Elements in any Project or any of the rights of any Association in any Project in respect of any management contract, marketing contract, maintenance contract, utility contract, security contract, other servicing contract, licensing contract, Project Document or other similar contract pursuant to the rights and remedies provided for herein, in the Blanket Mortgages or in any other Security Document, the Administrative Agent or such Lender shall take such Common Elements or such rights subject to the rights of owners of the Quartershare Interests, the owners of the Residential Units and the owners of the Commercial Units in and to such Project and subject to the rights of the Association for such Project and shall not interfere with the rights of such owners or such Association, as provided for in the Declaration and the other Project Documents. 76 3.17 Filing of Declarations; Incorporation of Associations. Notwithstanding anything to the contrary contained herein, the Borrower shall cause the Declaration and the Resort Map of each Under-Construction Project to be recorded in the applicable recording offices with respect thereto not later than October 31, 1998. Upon the recording of each such Declaration, (a) the Borrower shall undertake to assist the Administrative Agent in (i) recording an assignment of the Borrower's rights (but not obligations) as developer and declarant under each such Declaration, which assignment shall be substantially in the form of Exhibit M hereof, and (ii) filing the proxy referenced in Section 3.9(c) above with the Secretary of the applicable Association, and (b) the Borrower shall deliver to the Administrative Agent duly recorded copies of each such Declaration. Notwithstanding anything to the contrary contained herein, the Borrower shall cause each Association to be duly incorporated under the laws of the State in which the applicable Under-Construction Project is located not later than October 31, 1998. Upon the effecting of each such incorporation, the Borrower shall have delivered to the Administrative Agent, in form satisfactory to the Administrative Agent, (1) a certificate of the Secretary of such State certifying the due corporate existence of each such Association, (2) copies of recorded Articles of Incorporation and all amendments thereto of each such Association certified to be true and correct by the Secretary of such State, and (3) copies of the By-Laws of each such Association certified to be true and correct by a senior officer of the Borrower. Said Articles of Incorporation and By-Laws shall be reasonably satisfactory to the Required Lenders in both form and substance. 3.18 Take-Out Facility. The Borrower shall irrevocably direct Textron Financial Corporation under the Take-Out Facility to pay all amounts owing to the Borrower directly to the Administrative Agent on behalf of the Lenders in respect of any moneys to be paid to the Borrower by Textron Financial Corporation, including, without limitation, any moneys that are a return of a reserve in respect of, or that are a payment of the deferred purchase price of, a Quartershare Note purchased under such Take-Out Facility. 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS As an inducement to the Lenders to make the Loan, the Borrower warrants and represents, as of the date hereof, and covenants to the Lenders as follows: 4.1 Subsidiaries and Capital Structure. The Borrower owns no Voting Equities in any Person. The Parent owns 100% of the Voting Equity of Borrower and of each Host Company. Schedule 12 to this Agreement states the name of each Affiliate of the Borrower and the nature of the affiliation. 77 4.2 Corporate Matters. The Borrower (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Maine; (b) has all requisite company power and authority and necessary licenses and permits to own, construct and operate each Project and to carry on its business as now conducted and contemplated to be conducted in the future; and (c) has duly qualified and is authorized to do business as a foreign corporation in each jurisdiction where the character of its Properties or the nature of its activities makes such qualification necessary or desirable. 4.3 Business and Property. Schedule 13 to this Agreement correctly describes the general nature of the businesses and Properties (including all owned real Property, leases and leasehold interests) of the Borrower. The Borrower has not changed its name or acquired all or substantially all of the assets of any Person. The Projects are the Borrower's sole operating assets. The construction and development of each Project and the proposed operation of each Project has not caused, and there have not been, any public demonstrations in respect of, injunctions obtained against, legislation or ordinances passed or introduced to regulate or restrict, or any governmental administrative action directed at preserving any species or any natural resources that may be adversely affected by, such construction, development or proposed operation. 4.4 Financial Statements. The financial statements of the Borrower set forth on Schedule 14 hereto have been delivered to each Lender and, except as set forth on said Schedule 14, present fairly the financial position of the Borrower as at the date set forth on said Schedule and the results of its operations for the period set forth on said Schedule. The Borrower intends to engage in no other business other than the ownership and operation of each Project and the sale of Quartershare Interests, Residential Units and Commercial Units in respect thereof. The financial statements of each of the Host Companies set forth on Schedule 14 hereto have been delivered to each Lender and, except as set forth on said Schedule 14, present fairly the financial position of such Host Company as at the date set forth on said Schedule and the results of its operations for the period set forth on said Schedule. 4.5 Full Disclosure. Neither this Agreement nor any written statement made by the Borrower or any Affiliate in connection with this transaction contains any untrue statement of a material fact or omits a material fact necessary to make the statements contained herein or therein not misleading. There is no fact which the Borrower or any Affiliate has not disclosed to the Lenders in writing which materially affects adversely or, so far as the Borrower can now foresee, will materially affect 78 adversely the Property, business, prospects, profits or condition (financial or otherwise) of the Borrower or the ability of the Borrower to perform its Obligations under this Agreement, the Notes or the other Security Documents. 4.6 Pending Litigation. Except as set forth in Schedule 15 to this Agreement, there are no proceedings pending, or to the knowledge of the Borrower threatened, against or affecting the Borrower, any Affiliate or any Project in any court or before any governmental authority or arbitration board or tribunal (a) which either involve the possibility of materially and adversely affecting the Property, business, prospects, profits or condition (financial or otherwise) of the Borrower or the ability of the Borrower to perform its obligations under this Agreement, the Notes or the other Security Documents or (b) in respect of which more than $50,000 is sought in damages. Neither the Borrower nor any Affiliate nor any Project is in default with respect to any order of any court, governmental authority, quasi-governmental authority or arbitration board or tribunal. 4.7 Title to Properties; Environmental Status. The Borrower has good and marketable title in fee simple (or its equivalent under applicable law) to all the real Property which it purports to own free from Liens except as set forth on Schedule 7 to this Agreement, and has good title to, and is the sole owner of, all personal Property which it purports to own (including, without limitation, the personal Property constituting the Collateral), which personal Property is free from all Liens except as set forth on Schedule 7 to this Agreement. Except as set forth on Schedule 16 hereto and except for the Host Company Lease Agreements, the Projects are not subject to any leases. The Projects are not under investigation with respect to, and are not in violation of, any Environmental Protection Law. No proceedings have been commenced against, nor notice received by, the Borrower or any Affiliate concerning any alleged violation of any Environmental Protection Law. The Projects are not, and have not been, the subject of any threatened, proposed or actual cleanup or other protective or remedial action relating to any Hazardous Substances, whether pursuant to any Environmental Protection Law or otherwise. There are no Hazardous Substances in, on, or under any of the Projects, except as set forth on Schedule 17 to this Agreement. 4.8 Trademarks; Licenses and Permits. The Borrower owns or possesses all of the trademarks, service marks, trade names, copyrights, franchises and licenses, and rights with respect thereto necessary for the conduct of its business as now conducted and as proposed to be conducted, without any known conflict with the rights of others. 4.9 Transaction Is Legal and Authorized. The execution and delivery of this Agreement, the Notes and the other Security Documents by the Borrower and the grant of the Liens to the Lender with respect to the Collateral by the Borrower and compliance by the Borrower with all of the provisions of this Agreement, the Notes and the other Security Documents are: 79 (a) within the corporate powers of the Borrower; and (b) valid and legal acts and will not conflict with, or result in any breach in any of the provisions of, or constitute a default under, or result in the creation of any Lien (except Liens contemplated under this Agreement or any other Security Document) upon any Property of the Borrower under the provisions of, any agreement, articles or organization, or other instrument to which the Borrower is a party or by which its Property may be bound. 4.10 No Defaults. No Default or Event of Default exists, and there is no violation in any material respect of any term of any agreement, charter instrument, bylaw or other instrument to which the Borrower is a party or by which it may be bound. 4.11 Governmental Consent. Neither the nature of the Borrower nor its business or Properties, nor any relationship between the Borrower and any other Person, or any circumstance in connection with the execution or delivery of this Agreement, the Notes or the other Security Documents, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of the Borrower, as a condition of the execution, delivery or performance of this Agreement, the Notes or any other Security Document. 4.12 Taxes. The Borrower is not in default with respect to the payment of any taxes levied or assessed against it or any of its assets and has not failed to file any tax return required to be filed by it. 4.13 Use of Proceeds. The proceeds from the Pre-Sale Advance will be used (a) first, to pay the Loan Costs incurred in connection with the closing of this Agreement, (b) second, to pay for the Pre-Construction Costs and to pay off the Existing Attitash Loan, all as more particularly set forth on Schedule 18 hereto. The proceeds of Project Advances will be used (i) first, to pay any Loan Costs then due at the time of the making of such Subsequent Project Advances and (ii) second, to pay for or otherwise provide for the payment of Construction Costs, FF&E Costs and Sales, Marketing & Other Costs. 80 The proceeds of the Interest Advances will be used to pay interest accrued on the Loan and due and payable upon the date of the making of such Interest Advances; cash will not be disbursed by the Lenders in connection with any Interest Advance. None of the transactions contemplated in this Agreement will violate or result in the violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations issued pursuant thereto, including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The Borrower does not intend to carry or purchase any "margin security" within the meaning of said Regulation G. None of the proceeds will be used to purchase or carry (or refinance any borrowing, the proceeds of which were used to purchase or carry) any "margin security" within the meaning of said Regulation. 4.14 Compliance with Law. The Borrower (a) is not in violation of any laws, ordinances, governmental rules or regulations to which it is subject; and (b) except as set forth in Schedule 19 hereto, has not failed to obtain any licenses, permits, franchises or other governmental authorizations, or make or cause to be made any registrations or declarations with any government or agency or department thereof or quasi-governmental entity or under the CCR's, necessary to the ownership of its Property or to the conduct of its business (including, without limitation, a small loan license under New Hampshire Revised Statutes Annotated Chapter 399-A, as amended); which violation or failure to obtain or register would materially adversely affect the business, prospects, profits, Property or condition (financial or otherwise) of the Borrower. 4.15 Restrictions of Borrower. The Borrower is not a party to any contract or agreement which restricts its right or ability to incur indebtedness, or prohibits the execution of, or compliance with, this Agreement or any of the other Security Documents by the Borrower. The Borrower has not agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its Property constituting the Collateral, whether now owned or hereafter acquired, to be subject to a Lien other than the Liens provided for herein, in the other Security Documents and in the Declaration. Without limiting the scope of the immediately preceding paragraph, the Borrower qualifies as a "Real Estate Subsidiary" under, and as defined in, the Parent Indenture. The Board of Directors of the Parent has designated the Borrower as such "Real Estate Subsidiary." The Loan constitutes "Non-Recourse Real Estate Debt" under, and as defined in, the Parent Indenture. 81 4.16 Brokers' Fees. Except as set forth on Schedule 20 hereto, there are no brokers or finders which are entitled to receive compensation for their services rendered to the Borrower with respect to the transactions described in this Agreement and with which the Borrower has had dealings. 4.17 Deferred Compensation Plans. Except as set forth on Schedule 21 hereto, the Borrower does not have a pension, profit sharing or other compensatory or similar plan providing for a program of deferred compensation for any employee or officer which is subject to any requirement of the Employee Retirement Income Security Act of 1974, as amended. 4.18 Labor Relations. Borrower is not a party to any collective bargaining agreement, there are no material grievances, disputes or controversies with any union or any other organization of Borrower's employees, or threats of strikes, work stoppages or any asserted pending demands for collective bargaining by any union or organization. 4.19 Validity of Contracts. Each of the Contracts is a bona fide, genuine and true contract for the purchase of a Quartershare Interest from the Borrower by the Purchaser in respect thereof and is valid and binding against such Purchaser (subject to the terms and conditions thereof and any right of rescission granted under applicable law or referred to in that certain letter from the Borrower to the Administrative Agent dated the Closing Date). 4.20 Validity of Liens Granted to Lender. Except with respect to the Permitted Exceptions and as provided for in Section 3.16 and Section 3.17 hereof, all Liens granted to the Lender in respect of the Collateral are, and shall continue to be, prior in right and superior to all other Liens granted to, or held by, any other Person. 4.21 Quartershare Regimen Reports. Subject to Section 3.17 hereof, the Borrower has furnished to the Administrative Agent true and correct copies of all Project Documents and all filings and/or recordations in order to establish the condominium and the quartershare ownership regimens in respect of each Project have been done and all applicable laws and statutes in connection therewith have been complied with. 4.22 Sale of Quartershare Interests. The sale and offering of sale of Quartershare Interests and Residential Units (i) do not and will not constitute the sale, or the offering of sale, of Securities subject to the registration requirements of the Securities Act of 1933, as amended, or the blue-sky securities laws of any 82 of the Applicable States, (ii) are done and will only be done in the State in which the Project is situated (and no solicitation and no advertising in respect of the sale of Quartershare Interests or Residential Units that would, in either case, be in violation of applicable law is done or will be done in any States other than the Applicable States), (iii) except as set forth in that certain letter from the Borrower to the Administrative Agent dated the Closing Date, do not violate and will not violate any applicable federal, state or local consumer credit or sale rescission statute, including, without limitation, any such statute of any State in which a Purchaser may reside, and (iv) do not violate and will not violate any other applicable federal, state or local law, statute or regulation (including, without limitation, any timeshare or subdivision law applicable to the Projects or to the sale of Quartershare Interests and in effect in any Applicable State or in any other State in which a Purchaser may reside or in which the sale of any such Quartershare Interest to such Purchaser was closed). Without limiting the generality of the immediately preceding paragraph, the Borrower has, to the extent required by its activities and businesses, fully complied with and will continue to fully comply with (1) (A) the Federal Trade Commission Act, as amended, (B) except as set forth in that certain letter from the Borrower to the Administrative Agent dated the Closing Date, the Interstate Land Sales Full Disclosure Act, as amended, (C) all other applicable federal statutes and laws pertaining to the Projects and (D) the rules and regulations promulgated under such Acts, statutes and laws and (2) all of the applicable provisions of any law of any State (and the rules and regulations promulgated thereunder) or municipality or other governmental or quasi-governmental authority relating to the operation of the Projects. The sale and offering of sale of Quartershare Interests is not affected and will not be affected by any home solicitations. 4.23 Solvency. The Borrower is not entering into this Agreement and the transactions contemplated hereby, and does not intend to incur any obligations hereunder or otherwise make any transfers in connection herewith, with the actual intent to hinder, delay or defraud either present or future creditors. After giving effect to the consummation of the transactions contemplated by this Agreement and the making of the Advances hereunder, (a) the assets of the Borrower at a fair valuation thereof on a going concern basis will not be less than its debts, (b) the Borrower is not currently engaged in or about to engage in a business or transaction for which its remaining assets are unreasonably small in relation to such business or transaction, and (c) the Borrower will be able to pay its respective debts as they become due. "Debt" for purposes of this Section 4.23 means any liability on a claim, and "claim" means (i) any right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (ii) any right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured. 4.24 Attitash Project Quartershare Interests. (a) Access. The owners of Attitash Quartershare Interests in the Attitash Project have direct access from the Attitash Project to a publicly dedicated road, and all roadways inside the Attitash Project are Common Elements under the Attitash Declaration. 83 (b) Utilities. On and after the Closing Date, electric, sewer, water facilities and other necessary utilities will be available in sufficient capacity to service each of the Attitash Residential Units and Attitash Commercial Units at the Attitash Project. (c) Amenities. On and after the Closing Date, each purchaser of a Attitash Quartershare Interest at the Attitash Project will have access to, and the use of, all of the amenities and public utilities relating to the Attitash Project and the Attitash Common Elements (subject to only the requirements of the Attitash Project Documents). (d) Laws. The Attitash Residential Units and the Attitash Quartershare Interests in respect thereof in the Attitash Project comply with all applicable restrictive covenants, zoning and land use ordinances and regulations and building codes, all applicable health and environmental laws and regulations and all other applicable laws, rules and regulations and all approvals, consents, licenses and certificates of occupancy in respect of the use and operation of such Attitash Residential Units and Attitash Quartershare Interests have been obtained and are in full force and effect. (e) Sale of Quartershare Interests. The sale, offering of sale, and financing of Attitash Quartershare Interests in the Attitash Project (i) do not constitute the sale, or the offering of sale, of Securities subject to the registration requirements of the Securities Act of 1933, as amended, or the blue-sky securities laws of the State of New Hampshire, (ii) are only done in the State of New Hampshire (and no solicitation and no advertising in respect of the sale of Attitash Quartershare Interests in the Attitash Project that would, in either case, be in violation of applicable law is done in any other state or province other than the Applicable States), (iii) except as set forth in that certain letter from the Borrower to the Administrative Agent dated the Closing Date, do not violate any applicable federal, state or local consumer credit, sale rescission or usury statute, including, without limitation, any such statute of any state in which an obligor of a Quartershare Note in respect of an Attitash Quartershare Interest may reside, and (iv) do not violate in any material respect any other applicable federal, state or local law, statute or regulation. (f) Exchange Program. The Attitash Project has been accepted by Resorts Condominium International, Inc. into its timeshare exchange program and the Borrower and the Attitash Project are in good standing as participants in such timeshare exchange program and have satisfied all eligibility requirements in respect thereof. 5. CONDITIONS PRECEDENT TO PRE-SALE ADVANCE The obligation of the Lenders to make the Pre-Sale Advance shall be subject to the following conditions precedent (all deliveries required in this Section 5 shall be made to the Administrative Agent and the Disbursement Agent not less than 15 Business Days prior to the date of the making of the Pre-Sale Advance): 5.1 Opinions of Counsel. The Administrative Agent shall have received from Christopher Howard, general counsel for the Borrower and L.B.O. Holding, Inc., a closing opinion substantially in the form of Exhibit N-1 attached to this Agreement dated the Closing Date and from Wadleigh, Starr, Peters, Dunn 84 & Chiesa, local counsel for the Borrower and L.B.O. Holding, Inc. for the State of New Hampshire, closing opinions substantially in the forms thereof set forth in Exhibit N-2 attached to this Agreement and dated the Closing Date. 5.2 Warranties and Representations True as of Closing Date. (a) The warranties and representations contained in this Agreement shall be true in all material respects on the Closing Date. (b) The Borrower shall not have taken any action, or permitted any condition to exist which would have been prohibited by any provision of this Agreement if such provision had been binding and effective at all times during the period from July 2, 1997 to and including the Closing Date. 5.3 Compliance with this Agreement. The Borrower shall have performed and complied with all covenants, agreements and conditions contained herein (including all of the conditions set forth in this Section 5) which are required to be performed or complied with by it before or on the Closing Date. 5.4 Officer's Certificates; Secretary's Certificates; Good-Standing Certificates. (a) The Administrative Agent shall have received a certificate, substantially in the form of Exhibit O to this Agreement, dated as of the Closing Date and signed by the chief financial officer or other senior officer of the Borrower, certifying that the conditions specified in Sections 5.2 and 5.3 of this Agreement have been fulfilled. (b) The Administrative Agent shall have received a certificate of the secretary or assistant secretary of the Borrower, substantially in the form of Exhibit P to this Agreement, dated as of the Closing Date, certifying (i) the adoption by the board of directors of the Borrower of a resolution authorizing the Borrower to enter into this Agreement and the transactions and instruments contemplated hereby (including, without limitation, the execution and delivery of the Security Documents to which the Borrower is a party and the granting of the Liens in and to the Collateral), and (ii) as to the incumbency of, and verifying the specimen signatures of, the signatories of the Borrower. (c) The Borrower shall have delivered to the Administrative Agent, in form satisfactory to the Administrative Agent, a recent good standing certificate from the Secretary of State of Maine certifying the Borrower's good standing together with a certified copy of its articles of organization duly recorded with the Secretary of State of Maine (and all amendments thereto) and a copy of its By-Laws, certified by a senior officer of the Borrower to be true and correct. (d) The Administrative Agent shall have received a certificate of the Secretary or any Assistant Secretary of each of the Parent and L.B.O. Holding, Inc. substantially in the form of Exhibit Q to this Agreement, dated as of the Closing Date, certifying (i) the adoption by the Board of Directors of Parent and L.B.O. Holding, Inc., as the case may be, of a resolution authorizing the Parent and L.B.O. Holding, Inc. to enter into the 85 subordination agreement contemplated hereby and (ii) the incumbency and authority of, and verifying the specimen signatures of, the officers of the Parent and L.B.O. Holding, Inc., as the case may be, authorized to execute and deliver such subordination agreement. (e) Each of the Parent and L.B.O. Holding, Inc. shall have delivered to the Administrative Agent, in form satisfactory to the Administrative Agent, a recent good standing certificate from the Secretary of State of Maine certifying the Parent's and L.B.O. Holding, Inc.'s due corporate existence and including a certified copy of its articles of organization duly recorded with the Secretary of State of Maine (and all amendments thereto) and a copy of its By-Laws, certified by a senior officer of the Parent and L.B.O. Holding, Inc., as the case may be, to be true and correct. Each of the Parent and L.B.O. Holding, Inc. shall have delivered to the Administrative Agent, in form satisfactory to the Administrative Agent, a recent certificate from the Secretary of State of New Hampshire certifying the Parent's and L.B.O. Holding's status as a foreign corporation duly qualified to transact business in the State of New Hampshire. 5.5 Uniform Commercial Code Financing Statements. All filings of Uniform Commercial Code financing statements and all other filings and actions necessary to perfect the Administrative Agent's security interests in and to the Collateral shall have been filed and confirmation thereof received. 5.6 Assignment of Property-Related Contracts. The Borrower shall have delivered to the Administrative Agent certified copies of all material Property-Related Contracts in respect of the Attitash Project and executed and delivered in favor of the Administrative Agent an assignment or assignments thereof, in substantially the form of Exhibit R attached to this Agreement. All such Property-Related Contracts shall be satisfactory to the Administrative Agent in form and substance. Each Person (other than the Borrower) which is a party to any such Property-Related Contract set forth on Schedule 11 hereto shall have been notified of the assignment thereof. 5.7 Assignment of Declarant's Rights. The rights (but not the obligations) of the Borrower as declarant under the Attitash Declaration shall have been assigned to the Administrative Agent pursuant to an assignment substantially in the form of Exhibit M hereof, and the Attitash Association shall have consented to the same. 5.8 Subordination of Indebtedness. The Borrower, the Parent and L.B.O. Holding, Inc., a Maine company, shall have entered into one or more Subordination Agreements, substantially in the form of Exhibit S attached to this Agreement (as amended, individually, a "Subordination Agreement" and, collectively, the "Subordination Agreements"). 86 5.9 Expenses. The Borrower shall have paid all fees and expenses required to be paid under this Agreement, including, without limitation, the fees and expenses set forth in Section 11.2 of this Agreement and the commitment fee referred to in Section 2.7 hereof. 5.10 Note; Blanket Mortgages; Assignment of Rents. (a) Notes. The Borrower shall have executed and delivered the Notes to the Lenders. (b) Blanket Mortgages. The Borrower shall have executed and delivered to the Administrative Agent the Blanket Mortgage encumbering all of the unsold Attitash Quartershare Interests, Residential Units and Commercial Units as of the Closing date as well as the Declarant's rights in respect of the convertible lands under, and as defined in, the Attitash Declaration. Such Blanket Mortgage shall have been recorded, as of the Closing Date, in the applicable recording office in Carroll County, New Hampshire and all taxes, recording fees and other fees and charges required by applicable law to be paid in connection therewith shall have been duly paid in full. Such Blanket Mortgage shall have created a valid Lien in and to the unsold Attitash Quartershare Interests, Residential Units and Commercial Units as of the Closing date and in and to said convertible lands in respect of the Obligations, subject to no other Liens except for the Permitted Exceptions. (c) Assignment of Rents. The Borrower shall have executed and delivered to the Administrative Agent assignments of leases and rents for the Attitash Project (such assignment of leases and rents and the other assignments of leases and rents to be obtained in the other Projects are referred to herein, individually, as an "Assignment of Rents," and, collectively (as the context may require), the "Assignments of Rents"; each reference to an Assignment of Rents shall mean such Assignment of Rents as amended from time to time), substantially in the form of Exhibit T to this Agreement (with such changes to such form as may be required by Administrative Agent for the use of such form in the State of New Hampshire). Such Assignment of Rents shall have been recorded in the applicable recording office of Carroll County, New Hampshire and all taxes, recording fees and other fees and charges required by applicable law to be paid in connection therewith shall have been duly paid in full. Such Assignment of Rents shall have created a valid Lien in and to the Property referred to therein in respect of the Obligations subject to no other Liens except for the Permitted Exceptions. (d) TFC Architect. The TFC Architect shall have accepted its appointment. 5.11 Title Insurance; Casualty Insurance. (a) Title Insurance Policy {Blanket} The Borrower shall have delivered to the Administrative Agent a mortgagee's title insurance policy (issued to the Administrative Agent and in full force and effect) in respect of the Blanket Mortgage encumbering the Attitash Project (said mortgagee's title insurance policy together with the other mortgagee's title insurance policies in respect of the other Blanket Mortgages, the "Title 87 Insurance Policy {Blanket}") together with such endorsements thereto as the Administrative Agent may require, dated the Closing Date. The Title Insurance Policy {Blanket} in respect of the Blanket Mortgage encumbering the Attitash Project (a) shall have been issued by a title insurance company which is satisfactory to the Administrative Agent, (b) shall be in form and substance satisfactory to the Administrative Agent and its special counsel, (c) shall be in amount not less than the principal amount of the Pre-Sale Advance, (d) shall insure that such Blanket Mortgage creates a valid first Lien in and to the Attitash Project free and clear of all defects, encumbrances and other Liens unacceptable to the Administrative Agent and (e) shall contain such further endorsements and affirmative coverage as the Administrative Agent may request, including, without limitation, automatic increases in the amount of the insurance upon the making of future Project Advances and/or Interest Advances by the Lenders so that, at all times, the amount of the insurance provided by the Title Insurance Policy {Blanket} shall equal or exceed the aggregate outstanding amount of all Advances, provided that the maximum value of such insurance in respect of the Attitash Project shall be limited to $10,000,000 and provided further that no mechanic's, materialmen's or laborer's liens endorsement or current survey or easement endorsement shall be required in respect of the so-called mechanic's lien, easement and survey exceptions in such Title Insurance Policy {Blanket}. All premiums in respect of such Title Insurance Policy {Blanket} shall have been paid in full and evidence thereof shall have been delivered to the Administrative Agent. (b) Insurance. The Borrower shall have delivered to the Administrative Agent certificates of insurance evidencing the insurance policies and endorsements relating to the Attitash Project that are required to be delivered pursuant to Section 3.5 hereof, together with copies of such insurance policies certified by the Borrower to be true and correct. All premiums in respect of such insurance policies shall have been paid in full and evidence thereof shall have been delivered to the Administrative Agent. 5.12 Environmental Site Assessment Report. The Borrower (at its own expense) shall have delivered to the Administrative Agent not less than 15 Business Days prior to the Closing Date a "Phase I" environmental survey of the Attitash Project, provided that if such "Phase I" environmental survey is not available or is unsatisfactory to the Administrative Agent (in its sole determination), the Borrower (at its own cost) shall have delivered to the Administrative Agent an engineering report or reports which shall be in form and substance satisfactory to the Administrative Agent and shall confirm the following items: (a) the absence of Hazardous Substances on or under the Attitash Project and any portion thereof; and (b) that the engineering firm has obtained, reviewed and included within its report a printout from the Comprehensive Environmental Response Compensation and Liability Information System of the Environmental Protection Agency and all other applicable state and local authorities and such other information as the Administrative Agent may reasonably require, all of which information shall confirm that there is no reason to believe that any Hazardous Substances exist on or under the Attitash Project 88 and that there is no known or suspected Hazardous Substance waste site located at the Attitash Project or in such proximity thereto as to create a material risk of contamination of the Attitash Project. Each environmental survey and engineering report delivered pursuant to this Section shall provide that the Lenders may rely thereon in connection with its making Advances hereunder. 5.13 Taxes. The Borrower shall have delivered to the Administrative Agent copies of the most recent tax receipts for the Attitash Project (or certificates in respect thereof) evidencing no delinquency in the payment thereof. 5.14 Inspection. The Borrower shall have permitted the Administrative Agent, the Lenders, the TFC Architect, and/or any of their representatives to make an inspection/audit of its books, accounts and records and such other papers as they may desire and of its premises and of the Attitash Project, as the Lenders may in its sole discretion determine. Such inspection/audit shall have been satisfactory to the Lenders (in its sole determination). 5.15 Survey. The Borrower shall have delivered to the Administrative Agent a survey of the Attitash Project, prepared by a licensed surveyor acceptable to the Administrative Agent and shall contain a certification noted thereon in form and substance satisfactory to the Administrative Agent; such survey shall show no easements, rights-of-way, encroachments, streets or alleys which interfere with the use, enjoyment or market value of the Attitash Project. 5.16 Delivery of Contracts; Assignments of Certain Other Contracts. (a) Assignment of Contracts. The Borrower shall have delivered to the Administrative Agent copies of all of its Contracts relating to the Attitash Project or any other Project and an instrument (substantially in the form of Exhibit U attached to this Agreement) confirming the collateral assignment to the Administrative Agent hereunder of all of the Borrower's right, title and interest in and to each of such Contracts. (b) Loan Disbursement Agreement. The Borrower and the Disbursement Agreement shall have executed the Loan Disbursement Agreement and delivered an executed copy thereof to the Administrative Agent. All costs and expenses of the Disbursement Agent shall have been paid in full. All Disbursement Agent reports required to be delivered to the Administrative Agent under the Loan Disbursement Agreement in respect of the Pre-Sale Advance shall have been delivered to the Administrative Agent and shall be reasonably satisfactory to it. 5.17 Budgets; Plans; Architect; Cost and Architect Certificates; Miscellaneous. 89 (a) Escrow Letter. The Attitash Escrow Agent shall have executed and delivered to the Administrative Agent the escrow account acknowledgement letter set forth in Exhibit A attached to this Agreement. (b) Take-Out Facility. Borrower shall have received a Take-Out Facility commitment or letter of intent and shall have executed the same and returned the same to Textron Financial Corporation. (c) Equity Moneys. The Borrower shall have delivered to the Administrative Agent a certificate executed by the chief financial officer or other senior officer of the Borrower showing that the Borrower has received Equity Moneys and other contributions to its equity in an aggregate amount of not less than the greater of $14,400,000 or 20% of the fair market value of the land of the Projects and the other costs and expenses set forth on Schedule 22 hereto (such Equity Moneys and other contributions are referred to herein as "Closing Date Equity Contributions"). 5.18 Pre-Construction Cost Certificate. With respect to the portion of the Pre-Sale Advance being used to reimburse the Borrower for the Pre-Construction Costs, (a) the Borrower shall have certified the same, in writing, to the Administrative Agent and submitted to the Lender a fully executed and completed Pre-Construction Cost Certificate (with all attachments thereto, including, without limitation, the TFC Architect's Pre-Construction Cost Certificate), and (b) the Borrower shall have delivered a writing to the Administrative Agent (i) requesting the making of the Pre-Sale Advance, (ii) certifying that the conditions to borrowing set forth in this Section 5 and in Section 2.1 hereof are satisfied in respect of such Pre-Sale Advance, and (iii) certifying that no Default or Event of Default exists. The foregoing shall be forwarded to the Administrative Agent not less than 5 Business Days prior to the date on which the Pre-Sale Advance shall have been requested to be made, and shall be satisfactory to both the Administrative Agent and the TFC Architect. The Borrower acknowledges that the Lenders shall not make Advances in respect of costs which have not been approved by the Administrative Agent. 5.19 Payoff of Existing Attitash Loan. With respect to the portion of the Pre-Sale Advance being used to pay-off the Existing Attitash Loan, (a) the Borrower shall have delivered to the Administrative Agent a copy of a payoff letter in respect of the Existing Attitash Loan showing the amount required to payoff such Loan in full, and (b) the Existing Attitash Loan lender shall have executed and delivered a release or releases of the mortgage, assignment of rents and collateral assignment of 90 declarant's rights encumbering the Attitash Project that shall be recorded upon funding of the Pre-Sale Advance or are otherwise subject to escrow arrangements that are satisfactory to the Administrative Agent. Such portion of the Pre-Sale Advance shall be funded directly to the Existing Attitash Loan lender or to the Title Company or in such other manner as the Administrative Agent may require in order to assure Lenders that such portion is received by the Existing Attitash Loan lender. 5.20 Proceedings Satisfactory. All actions taken in connection with the execution of this Agreement, the Notes, any other Security Document and all documents and papers relating thereto shall be satisfactory to the Lenders and their counsel. The Lenders shall be satisfied with its physical inspection of the Attitash Project. The Lenders and their counsel shall have received copies of such documents and papers as the Lenders or such counsel may reasonably request in connection therewith, all in form and substance satisfactory to the Lenders and their counsel. 6. SUBSEQUENT PROJECT ADVANCES CLOSING CONDITIONS After the making of the Pre-Sale Advance, the obligation of the Lenders to make Project Advances in respect of any Under-Construction Project (individually a "Subsequent Project Advance") on a Business Day of any month (herein referred to as a "Subsequent Project Advance Date") shall be subject to the satisfaction of all of the following conditions precedent as applicable to such Under-Construction Project: 6.1 First Project Advance. The following conditions shall be satisfied if the Subsequent Project Advance is the first Project Advance: (a) Opinions of Counsel. The Administrative Agent shall have received from Christopher Howard, general counsel for the Borrower, Sunday River Skiway Corporation, Killington, Ltd. and Mount Snow, Ltd. substantially in the form of Exhibit N-3 attached to this Agreement dated the Closing Date, a closing opinion substantially in the form of Exhibit N-4 attached to this Agreement dated the Closing Date, from Pierce Atwood, local counsel for the Borrower and Sunday River Skiway Corporation for the State of Maine and a closing opinion substantially in the form of Exhibit N-5 attached to this Agreement dated the Closing Date and from Reiber, Kenlan, Schweibert & Facey, local counsel for the Borrower, Killington, Ltd. and Mount Snow, Ltd. for the State of Vermont. (b) Assignment of Property-Related Contracts. The Borrower shall have delivered to the Administrative Agent certified copies of all material Property-Related Contracts in respect of the Jordan Bowl, Killington and Mt. Snow Projects and executed and delivered in favor of the Administrative Agent an assignment or assignments thereof, in substantially the form of Exhibit R attached to this Agreement. All such Property-Related Contracts shall be satisfactory to the Administrative Agent in form and substance. Each Person (other than the Borrower) which is a party to any such Property-Related 91 Contract set forth on Schedule 11 hereto shall have been notified of the assignment thereof. (c) Assignment of Declarant's Rights. The rights (but not the obligations) of the Borrower as declarant under the Jordan Bowl, Killington and Mt. Snow Declarations shall have been assigned to the Administrative Agent pursuant to an assignment substantially in the form of Exhibit M hereof, and the Jordan Bowl, Killington and Mt. Snow Associations, respectively, shall have consented to the same. (b) Blanket Mortgages. The Borrower shall have executed and delivered Blanket Mortgages encumbering the Jordan Bowl Project, the Killington Project and the Mt. Snow Project, respectively, to the Administrative Agent. Such Blanket Mortgages shall have been recorded, as of the Closing Date, in the applicable recording office in Maine and Vermont and all taxes, recording fees and other fees and charges required by applicable law to be paid in connection therewith shall have been duly paid in full. Such Blanket Mortgages shall have created a valid Lien in and to the Jordan Bowl Project, the Killington Project and the Mt. Snow Project, respectively, in respect of the Obligations, subject to no other Liens except for the Permitted Exceptions. (c) Assignment of Rents. The Borrower shall have executed and delivered to the Administrative Agent Assignments of Rents, and which shall assign to Administrative Agent, among other things, all of the Borrower's right, title and interest in and to the Host Company Lease Agreement relating to the Jordan Bowl Project, the Killington Project and the Mt. Snow Project, respectively. Such Assignments of Rents shall have been recorded in the applicable recording office of Maine and Vermont and all taxes, recording fees and other fees and charges required by applicable law to be paid in connection therewith shall have been duly paid in full. Such Assignments of Rents shall have created a valid Lien in and to the Property referred to therein in respect of the Obligations subject to no other Liens except for the Permitted Exceptions. The appropriate Host Company shall have acknowledged in writing its obligation to make all payments under such Host Company Lease Agreements directly to the Administrative Agent. (d) Title Insurance Policy {Blanket}. The Borrower shall have delivered to the Administrative Agent Title Insurance Policies {Blanket} (issued to the Administrative Agent and in full force and effect) in respect of the Blanket Mortgages encumbering the Jordan Bowl Project, the Killington Project and the Mt. Snow Project together with such endorsements thereto as the Administrative Agent may require, dated the Closing Date. Such Title Insurance Policies {Blanket} (a) shall have been issued by a title insurance company which is satisfactory to the Administrative Agent, (b) shall be in form and substance satisfactory to the Administrative Agent and its special counsel, (c) shall be in a maximum amount not less than $55,000,000 subject to such tie-in or coordination endorsements as shall be acceptable to the Administrative Agent and shall be reflective of the values set forth in the first proviso set forth below, (d) shall insure that such Blanket Mortgages create a valid first Lien in and to the Jordan Bowl Project, the Killington Project and the Mt. Snow Project, respectively, free and clear of all defects, encumbrances and other Liens unacceptable to the Administrative Agent and (e) shall contain such further endorsements and affirmative coverage as the Administrative Agent may request, 92 including, without limitation, automatic increases in the amount of the insurance upon the making of future Project Advances and/or Interest Advances by the Lenders so that, at all times, the amount of the insurance provided by the Title Insurance Policy {Blanket} shall equal or exceed the aggregate outstanding amount of all Advances, provided that the maximum value of such insurance in respect of the Jordan Bowl Project shall be limited to $21,270,000, the maximum value of such insurance in respect of the Killington Project shall be limited to $23,270,000 and the maximum value of such insurance in respect of the Mt. Snow Project shall be limited to $22,460,000, and provided further that no mechanic's, materialmen's or laborer's liens endorsement or current survey or easement endorsement shall be required in respect of the so-called mechanic's lien, easement and survey exceptions in such Title Insurance Policies {Blanket}. All premiums in respect of such Title Insurance Policies {Blanket} shall have been paid in full and evidence thereof shall have been delivered to the Administrative Agent. The Borrower shall have delivered to the Administrative Agent a title insurance endorsement to the Title Insurance Policy {Blanket} in respect of the Blanket Mortgage for the Attitash Project in form and substance reasonably satisfactory to it whereby the effective date of such Title Insurance Policy {Blanket} shall be made such Subsequent Project Advance Date, all exclusions and/or exceptions not satisfactory to the Administrative Agent shall have been removed or appropriate endorsements in respect thereof shall have been obtained. Such Title Insurance Policy {Blanket} shall be in a maximum amount of not less than $55,000,000 subject to such tie-in or coordination endorsements as shall be acceptable to the Administrative Agent and shall be reflective of the values set forth above and a value of $10,000,000 for the Attitash Project. All premiums in respect of such endorsement to such Title Insurance Policy {Blanket} shall have been paid in full and evidence thereof shall have been delivered to the Administrative Agent. (e) Insurance. The Borrower shall have delivered to the Administrative Agent certificates of insurance evidencing the insurance policies and endorsements relating to the Jordan Bowl, Killington and Mt. Snow Projects that are required to be delivered pursuant to Section 3.5 hereof, together with copies of such insurance policies certified by the Borrower to be true and correct. All premiums in respect of such insurance policies shall have been paid in full and evidence thereof shall have been delivered to the Administrative Agent. (f) Environmental Site Assessment Report. The Borrower (at its own expense) shall have delivered to the Administrative Agent not less than 15 Business Days prior to the Subsequent Project Advance Date a "Phase I" environmental survey of the Jordan Bowl Project, the Killington Project and the Mt. Snow Project, provided that if such "Phase I" environmental survey is not available or is unsatisfactory to the Administrative Agent (in its sole determination), the Borrower (at its own cost) shall have delivered to the Administrative Agent an engineering report or reports which shall be in form and substance satisfactory to the Administrative Agent and shall confirm the following items: (i) the absence of Hazardous Substances on or under the Jordan Bowl Project, the Killington Project and the Mt. Snow Project and any portion thereof, respectively; and 93 (ii) that the engineering firm has obtained, reviewed and included within its report a printout from the Comprehensive Environmental Response Compensation and Liability Information System of the Environmental Protection Agency and all other applicable state and local authorities and such other information as the Administrative Agent may reasonably require, all of which information shall confirm that there is no reason to believe that any Hazardous Substances exist on or under the Jordan Bowl Project, the Killington Project and the Mt. Snow Project and that there is no known or suspected Hazardous Substance waste site located at the Jordan Bowl Project, the Killington Project and the Mt. Snow Project or in such proximity thereto as to create a material risk of contamination of the Jordan Bowl Project, the Killington Project and the Mt. Snow Project. The Borrower (at its own expense) shall have also delivered to the Administrative Agent an engineering report in respect of the soil conditions at the Jordan Bowl Project, the Killington Project and the Mt. Snow Project and the ability of such soil to support the improvements contemplated in the Plans for the Jordan Bowl Project, the Killington Project and the Mt. Snow Project. Each such engineering report shall be accompanied by a satisfactory opinion to the Lenders from the TFC Architect regarding such engineering report and the ability of the soil at the Jordan Bowl Project, the Killington Project and the Mt. Snow Project to support the improvements contemplated in the Plans for the Jordan Bowl Project, the Killington Project and the Mt. Snow Project. Each environmental survey and engineering report delivered pursuant to this clause (f) shall provide that the Lenders may rely thereon in connection with its making Advances hereunder. (g) Taxes. The Borrower shall have delivered to the Administrative Agent copies of the most recent tax receipts for the Jordan Bowl Project, the Killington Project and the Mt. Snow Project (or certificates in respect thereof) evidencing no delinquency in the payment thereof. (h) Inspection. The Borrower shall have permitted the Administrative Agent, the Lenders, the TFC Architect, and/or any of their representatives to make an inspection/audit of the Jordan Bowl Project, the Killington Project and the Mt. Snow Project as the Lenders may in its sole discretion determine. Such inspection/audit shall have been satisfactory to the Lenders (in its sole determination). (i) Survey. The Borrower shall have delivered to the Administrative Agent a survey of each of the Jordan Bowl Project, the Killington Project and the Mt. Snow Project showing its perimeter; such survey shall be prepared in accordance with ALTA/ACSM 1992 Minimum Survey Requirements by a licensed surveyor acceptable to the Administrative Agent and shall be dated (or re-certified) as of a recent date and shall contain a certification noted thereon in form and substance satisfactory to the Administrative Agent; such survey shall show no easements, rights-of-way, encroachments, streets or alleys which interfere with the use, enjoyment or market value of the Jordan Bowl Project, the Killington Project and the Mt. Snow Project, respectively. 94 (j) Permits. The Borrower shall have delivered to the Administrative Agent a copy of all of the permits allowing the construction and development of the Jordan Bowl Project, the Killington Project and the Mt. Snow Project, respectively. (k) Architect's Contract. The Borrower shall have delivered to the Administrative Agent and the TFC Architect a copy of the architectural contract with the Architect for each of Jordan Bowl Project, the Killington Project and the Mt. Snow Project. The Borrower shall have delivered to the Administrative Agent an assignment of its rights under each such contract (duly consented to by each such Architect) substantially in the form of Exhibit V hereto. Each Such Architect and each such architectural contract shall be satisfactory to the Administrative Agent. (l) Construction Contract. The Borrower shall have delivered to the Administrative Agent and the TFC Architect a copy of the Construction Contract with the General Contractor for each of the Jordan Bowl Project, the Killington Project and the Mt. Snow Project. The Borrower shall have delivered to the Administrative Agent an assignment of its rights under each such Construction Contract (duly consented to by each such General Contractor), which assignment shall be substantially in the form of Exhibit W hereto, and an assignment of each payment and performance bond covering each such General Contractor, which bonds and the surety(s) issuing the same shall be satisfactory to the Administrative Agent and shall name Administrative Agent on behalf of the Lenders as dual obligee. Each such General Contractor and each such Construction Contract shall be satisfactory to the Administrative Agent. The Borrower shall have delivered to the Administrative Agent and the TFC Architect a copy of each subcontract in respect of the Jordan Bowl Project, the Killington Project and the Mt. Snow Project in excess of $50,000. (m) Budgets. The Borrower shall have submitted to the Administrative Agent the Budget for each of Jordan Bowl Project, the Killington Project and the Mt. Snow Project and such Budget shall be reasonably satisfactory to the Administrative Agent and the TFC Architect, and shall have been certified as being true and correct by the chief financial officer of Borrower. No such Budget shall have been modified or supplemented without the prior written consent of the Administrative Agent. (n) Plans. The Borrower shall have delivered to the Administrative Agent and the TFC Architect a copy of the Plans for each of Jordan Bowl Project, the Killington Project and the Mt. Snow Project and each such Plan shall be reasonably satisfactory to the Administrative Agent and to the TFC Architect. No such Plan shall have been modified or supplemented without the prior written consent of the Administrative Agent. (o) Architect's Certificate. The Architect shall have delivered a certificate to the Administrative Agent to the effect that (i) the Plans for each of Jordan Bowl Project, the Killington Project and the Mt. Snow Project are complete, (ii) the construction and furnishing of the Jordan Bowl Project, the Killington Project and the Mt. Snow Project pursuant to the Plans for each of such Projects and the intended use of each of such Projects complies with all zoning and other ordinances, rules, regulations and building and use restrictions applicable thereto, (iii) all necessary architectural, design and 95 landscaping approvals have been obtained under applicable law and (iv) the construction and furnishing of Jordan Bowl Project, the Killington Project and the Mt. Snow Project in accordance with the Plans therefor can be completed within the construction budget criteria therefor as set forth in the respective Budgets for such Projects. Such certificate shall be reasonably satisfactory to the Administrative Agent and to the TFC Architect and shall address such other issues or matters as the Administrative Agent may reasonably request. (p) Escrow Letter. Each of the Jordan Bowl Escrow Agent, the Killington Escrow Agent and the Mt. Snow Escrow Agent shall have executed and delivered to the Administrative Agent the escrow account acknowledgement letter set forth in Exhibit A attached to this Agreement. (q) Secretary's Certificate. The Administrative Agent shall have received a certificate of the Secretary or any Assistant Secretary of each of Host Companies of the Under-Construction Projects substantially in the form of Exhibit Q to this Agreement, dated as of the Closing Date, certifying (i) the adoption by the Board of Directors of such Host Company of a resolution authorizing the such Host Company to enter into the subordination agreement contemplated hereby and its Host Company Lease Agreement and (ii) the incumbency and authority of, and verifying the specimen signatures of, the officers of such Host Company authorized to execute and deliver such subordination agreement and such Host Company Lease Agreement. (r) Good Standing Certificates. Each Host Company of an Under-Construction Project shall have delivered to the Administrative Agent, in form satisfactory to the Administrative Agent, a recent good standing certificate from the Secretary of State of Maine or Vermont, as the case may be, certifying such Host Company's due corporate existence and including a certified copy of its articles of organization duly recorded with the Secretary of State of Maine or Vermont, as the case may be, (and all amendments thereto) and a copy of its By-Laws, certified by a senior officer of such Host Company (s) Host Company Lease Agreements; Subordination Agreements. The Borrower shall have delivered to the Administrative Agent fully executed and valid Host Company Lease Agreement for each of the Under-Construction Projects. Each of the Host Companies in respect of the Under-Construction Projects and the Borrower shall have executed and delivered to the Administrative Agent a Subordination Agreement. 6.2 Special Submissions. (a) Amendments to Plans and Budgets. The Borrower shall have submitted to the Administrative Agent any amendments and/or modifications to the Plans for such Under-Construction Project and any of the other Under-Construction Projects, which amendments and modifications shall be acceptable to the Administrative Agent in its reasonable discretion. The Borrower shall have submitted to the Administrative Agent any amendments and/or modifications to the Budget for such Under-Construction Project and any of the other Under-Construction Projects, which amendments and/or modifications shall be acceptable to the Administrative Agent in its reasonable discretion. 96 (b) Declaration Requirements. The Borrower shall have complied with the requirements of Section 3.17 hereof. (c) Take-Out Facility. The Take-Out Facility letter of intent shall be in full force and effect or, if the Take-Out Facility shall have been documented, the undertakings of the Textron Financial Corporation thereunder shall be in full force and effect. (d) Change Orders. No change orders in respect of the Construction Contract for such Under-Construction Project or for any of the other Under-Construction Projects shall have been effected without the prior written consent of the Administrative Agent if any such change order for such Under-Construction Project has a cost of in excess of $50,000 or if such change order and all other such change orders for such Under-Construction Project have an aggregate cost in excess of $200,000. (e) Material Change Orders. No change orders in respect of the Construction Contract for such Under-Construction Project or any of the other Under-Construction Projects shall have been effected without the prior written consent of the Administrative Agent if any such change order involved (i) a material modification in the architectural, mechanical or structural design of the building to be constructed in respect of such Under-Construction Project or such other Under-Construction Projects or (ii) a material change in the quality of workmanship or materials to be used in any such building or (iii) a delay in the final completion date for the construction of such building beyond October 31, 1998. (f) Modifications to Other Contracts. No modifications to the architectural contract with the Architect for such Under-Construction Project or any other Under-Construction Project shall have been effected without the prior written consent of the Administrative Agent. (g) Construction Contract Default. No material default shall exist in respect of the Construction Contract for such Under-Construction Project or any other Under-Construction Project. (i) Delivery of Contracts. The Borrower shall have delivered to the Administrative Agent all of its Contracts for such Under-Construction Project and any other Under-Construction Project to the extent not previously delivered. (j) Section 2.2 Conditions. All of the conditions to lending set forth in Section 2.2 shall have been satisfied. 6.3 Requests for Subsequent Project Advance. A request for such Subsequent Project Advance in respect of any Under-Construction Project (a "Project Advance Request") (a) shall be in writing, 97 (b) shall state the name of the Under-Construction Project to which such Subsequent Project Advance relates, (b) if all or portion of such Subsequent Project Advance is to be used to satisfy Construction Costs for such Under-Construction Project, the Borrower shall have certified the same in such request to the Administrative Agent and shall attach to such request a fully executed and completed Construction Cost Certificate for such Under-Construction Project (with all attachments thereto, including, without limitation, an Architect's Construction Cost Certificate for such Under-Construction Project), (c) if all or portion of such Subsequent Project Advance is to be used to satisfy FF&E Costs for such Under-Construction Project and/or Sales, Marketing & Other Costs for such Under-Construction Project, the Borrower shall have certified the same to the Administrative Agent in such request and shall attach to such request a fully executed and completed Nonconstruction Cost Certificate for such Under-Construction Project (with all attachments thereto, including, without limitation in the case of a Subsequent Project Advance financing FF&E Costs for such Under-Construction Project, a TFC Architect's Nonconstruction Cost Certificate for such Under-Construction Project), (d) shall state what portion of such Subsequent Project Advance is to defray Construction Costs, FF&E Costs and/or Sales, Marketing & Other Costs, in each case, in respect of such Under-Construction Project, shall show the calculation of any Retainage Amounts in respect thereof of the portion of such Subsequent Project Advance in respect of Construction Costs for such Under-Construction Project, shall certify that the conditions to borrowing set forth in Section 2.2 hereof are satisfied in respect of such Subsequent Project Advance and shall certify that no Default or Event of Default exists, (e) if such Subsequent Project Advance is to also constitute a Final Construction Cost Advance for such Under-Construction Project, shall so identify such Subsequent Project Advance as the "Final Construction Cost Advance", shall show and certify all calculations in respect of the aggregate amount of all contractually required Retainage Amounts to be financed thereby, and shall have attached thereto the Final Construction Cost Certificate for such Under-Construction Project (including all attachments thereto, which shall include the Architect's Final Construction Cost Certificate for such Under-Construction Project), (f) shall have been delivered to the office of the Administrative Agent and the TFC Architect at least 10 Business Days in advance of the Subsequent Project Advance Date, and (g) shall otherwise be substantially in the form of Exhibit X attached to this Agreement. The requirements in clause (a) through clause (g) above shall be satisfied in the sole opinion of the Administrative Agent and the TFC Architect. The Borrower acknowledges that the Lenders shall not make Project Advances in respect of costs which have not been approved by it. The Lenders agree with the Borrower that the costs set forth in the Budget for each Under-Construction Project are acceptable to them and that neither they nor the Administrative Agent 98 shall unreasonably withhold its approval in respect of costs corresponding to those in any such Budget subject to (i) such costs conforming to the amounts, conditions, assumptions and requirements of such Budget, (ii) the proper incurrence and documentation of such costs, and (iii) the submission of proper written certification in respect of such costs from the Borrower, the General Contractor for such Under-Construction Project, the Architect for such Under-Construction Project and the TFC Architect, as provided for above. The Borrower agrees to submit one Project Request Advance for each Under-Construction Project for which a Project Advance is needed; the Borrower agrees not to use one Project Request Advance to request Project Advances for more than one Under-Construction Project. 6.4 Final Construction Advance Conditions. If such Subsequent Project Advance for any such Under-Construction Project shall constitute, in whole or part, a Final Construction Cost Advance, then the following additional conditions shall apply to the making thereof: (a) As-Built Survey. The Borrower shall have delivered to the Administrative Agent an as-built survey showing the location of the building as well as the remainder of such Under-Construction Project and the other improvements thereon; such survey shall be prepared in accordance with ALTA/ACSM 1992 Minimum Survey Requirements and in accordance with the applicable rules and regulations of the appropriate state licensing board by a licensed surveyor acceptable to the Lender and shall be dated a date not more than 15 days prior to such Subsequent Project Advance Date and shall contain a certification noted thereon in form and substance satisfactory to the Administrative Agent and the Title Company issuing the Title Insurance Policy {Blanket} in respect of such Under-Construction Project; such survey shall show no easement, rights-of-way, party walls, encroachments, streets or alleys which interfere with the use, enjoyment or market value of the building constructed at such Under-Construction Project, the Residential Units or Commercial Units therein and the Common Elements relating thereto. All easements in respect of egress and ingress, all amenity easements, all utility easements, parking easements and all other easements shall be drawn on, and/or otherwise shown or referred to in, such survey and/or certificate; and (b) Certificate of Occupancy. The Borrower shall have delivered to the Administrative Agent a copy (certified to be true and correct) of a permanent and unconditional certificate of occupancy in respect of the building to be built at such Under-Construction Project and each of the Residential Units and Commercial Units therein. The Borrower shall have delivered to the Administrative Agent a copy (certified to be true and correct) of any other governmental certificates or licenses necessary for the occupancy of such building and the Residential Units and Commercial Units therein. 6.5 Defaults; Expenses; Miscellaneous. (a) No Default or Event of Default. No Default or Event of Default shall exist immediately prior to the making of such Subsequent Project Advance or, after giving effect thereto, immediately after the making of such Subsequent Project Advance. 99 (b) Insufficient Availability. No such Subsequent Project Advance shall be made if the Administrative Agent shall have determined that the remaining availability under this Agreement (including any Project Advances then outstanding and anticipated to be repaid and then reborrowed) and any additional Equity Moneys contributed to the Borrower (in addition to the Closing Date Equity Contributions) are insufficient to cover the remaining costs to complete the construction, furnishing and marketing of either (i) such Under-Construction Project, as contemplated in the Plans for such Under-Construction Project and the Budget for such Under-Construction Project, or (ii) all of the other Under-Construction Projects, as contemplated in the Plans for all such other Under-Construction Projects and the Budgets for all such other Under-Construction Projects. (c) Fees and Expenses. The Borrower shall have paid all fees and expenses required to be paid under this Agreement (including, without limitation, the fees and expenses set forth in Section 11.2 of this Agreement) in connection with such requested Subsequent Project Advance. (d) Title Insurance Endorsement. The Borrower shall have delivered to the Administrative Agent title insurance endorsements to the Title Insurance Policy {Blanket} in respect of all Projects in form and substance reasonably satisfactory to the Administrative Agent whereby the effective date of such Title Insurance Policy {Blanket} shall be made such Subsequent Project Advance Date, all exclusions and/or exceptions not satisfactory to the Administrative Agent shall have been removed or appropriate endorsements in respect thereof shall have been obtained. Such Title Insurance Policy {Blanket} shall be in an amount not less than the sum of the principal amount of the Loan outstanding on such Subsequent Project Advance Date, after giving effect to the making of such Subsequent Project Advance. All premiums in respect of such endorsement to such Title Insurance Policy {Blanket} shall have been paid in full and evidence thereof shall have been delivered to the Administrative Agent. (e) Warranties and Representations True. The warranties and representations contained in this Agreement shall be true in all material respects as of Subsequent Project Advance Date. (f) Legal Opinion Updates. If reasonably requested by the Administrative Agent, the Borrower shall have delivered to the Administrative Agent updates and confirmations of the legal opinions delivered to the Administrative Agent pursuant to Section 5.1 and/or Section 6.1(a) hereof, which updates and confirmations shall be satisfactory to the Administrative Agent in form and substance. 6.6 Disbursements; Disbursement Agent Reports. The proceeds of such Subsequent Project Advance that are to defray Construction Costs or are in respect of the Final Construction Cost Advance shall be disbursed by the Disbursement Agent directly to the General Contractor or as the General Contractor may direct in writing. The proceeds of such Subsequent Project Advance that are to defray FF&E Costs and/or Sales, Marketing & Other Costs shall be disbursed by the Disbursement Agent to the Borrower or as the Borrower may direct in writing. All Disbursement Agent reports required to be delivered to the Administrative Agent under the Loan Disbursement Agreement in respect of such Subsequent 100 Project Advance shall have been delivered to the Administrative Agent and shall be reasonably satisfactory to it. 6.7 Proceedings Satisfactory. All actions taken in connection with the Subsequent Project Advance shall be reasonably satisfactory to the Administrative Agent and its counsel. The Administrative Agent and its counsel shall receive copies of such documents and papers as the Administrative Agent or such counsel may reasonably request in connection with any such Subsequent Project Advance, all in form and substance satisfactory to the Administrative Agent and its counsel. 6.8 Subcontracts. The Borrower shall have delivered to the Administrative Agent and the TFC Architect a copy of each subcontract in respect of any Under-Construction Project in excess of $50,000 that have not been previously so delivered. 6.9 Costs and Expenses. All costs and expenses of the Disbursement Agent and all other Loan Costs shall have been paid in full. 7. COVENANTS The Borrower covenants that on and after the date hereof and so long as any Obligation of the Borrower to the Lenders exists as follows: 7.1 Payment of Taxes and Claims. Except as otherwise provided for in Section 3.7 and Section 3.8 hereof, the Borrower shall pay, or cause to be paid, before they become delinquent: (a) all taxes, assessments and governmental charges or levies imposed upon it or its Property, including, without limitation, the Collateral; and (b) all claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons which, if unpaid, might result in the creation of a Lien upon its Property, including, without limitation, the Collateral. 7.2 Maintenance of Properties; Company Existence; Indebtedness; Liens; Business. The Borrower shall: (a) Property -- maintain its Property in good repair, working order and condition and make all necessary renewals, repairs, replacements, additions, betterments and improvements thereto and, without limiting the generality of the foregoing, promptly complete the construction and development of each Under-Construction Project in 101 accordance with the Plans for such Under-Construction Project on or prior to October 31, 1998 and thereafter maintain, or cause to be maintained, each Project in good repair, working order and condition and make, or cause to be made, all necessary repairs, replacements, additions, betterments and improvements to each Project; (b) Insurance -- maintain, or cause to be maintained, insurance as required by Section 3.5 of this Agreement; (c) Financial Records -- (i) keep true books of records and accounts (including, without limitation, the Books and Records) in which full and correct entries will be made of all its business transactions and (ii) reflect in its financial statements adequate accruals and appropriations to reserves, all in accordance with generally accepted accounting principles, practices and procedures at the time in effect and consistently applied or on a cash basis consistently applied; (d) Company Existence and Rights -- do or cause to be done all things necessary or required to preserve and keep in full force and effect its corporate existence, rights, powers and franchises, including, without limitation, its authorization to do business in the state in which the Projects are located; (e) Compliance with Law -- except as set forth in that certain letter from the Borrower to the Administrative Agent dated the Closing Date, not be in violation of (i) any laws, ordinances, governmental rules and regulations to which it is subject, and to that end, the Borrower shall not fail to obtain any licenses, permits, franchises or other governmental authorizations necessary to the ownership of its Properties or to the conduct of its business, which violation or failure to obtain might materially and adversely affect the business, prospects, profits, Property or condition (financial or otherwise) of the Borrower, including, without limitation, any zoning laws, land use, design controls, subdivision controls or Environmental Protection Laws applicable to its real Property (including, without limitation, the Projects), (ii) any statutes, rules and regulations, whether now or hereafter in force, in any jurisdiction in which the Borrower may make sales of Quartershare Interests relating to the right to do business in such jurisdiction and (iii) any applicable federal, state or municipal statutes, rules and regulations relating to sales of Quartershare Interests and the manner of evidencing and financing the same to the end that all of the Contracts shall be valid, binding and legally enforceable in accordance with their respective terms subsequent to the assignment thereof to the Administrative Agent; (f) Deferred Compensation Plans -- to the extent that it has one or more pension, profit sharing or other compensatory or similar plans providing for a program of deferred compensation for any employee or officer, be in compliance with all requirements of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated in connection therewith; (g) Development and Construction of the Projects -- retain only duly licensed and qualified architects, engineers, contractors and subcontractors to complete the development and construction of the Under-Construction Projects; 102 (h) Indebtedness -- not incur any liability for any indebtedness for borrowed money (other than the Loan and other than as permitted in Section 7.6 hereof), whether such indebtedness is secured or unsecured, and whether such liability is direct or indirect or contingent or noncontingent, and not, as Declarant, permit any Association to incur any liability for any indebtedness for borrowed money, whether secured or unsecured, other than in the ordinary course of the operation and maintenance of the Projects, provided that the Borrower may incur borrowed money indebtedness owing to the Parent or any other Affiliate of the Borrower if (i) such indebtedness is incurred in the ordinary course of business of the Borrower, (ii) at the time of the incurrence of such indebtedness (and after giving effect thereto), no Default or Event of Default shall exist, (iii) such indebtedness is unsecured and (iv) such indebtedness is subordinated to the Loan as provided for in Section 7.11 hereof; (i) Liens -- (i) not allow any Liens or encumbrances whatsoever to attach to the Collateral other than the Liens and security interests of the Administrative Agent created by the Security Documents, any Liens in favor of the Associations under the Declarations and the other Liens set forth on Schedule 7 hereto and (ii) cause the Liens and security interests of the Administrative Agent created by the Security Documents in and to the Collateral to continue to be valid, enforceable, perfected Liens and security interests subject to no other Liens except as set forth in this Agreement or in any other Security Document and in Schedule 7 hereto; (j) Business -- have as its sole business activity the ownership of the Projects and the sale of Quartershare Interests, Residential Units and Commercial Units in respect thereof and not pursue any other business activities or own any other Property, provided that the Borrower may own, construct, develop, operate and/or manage, and sell quartershare interests or condominium units in, other hotel projects if such other hotel projects are part of the "Projects" hereunder, become additional "Projects" hereunder or are otherwise financed by the Lenders; (k) Material Adverse Effect -- not undertake any action that would have a material adverse effect on the operation of the Projects or the Collateral; and (l) Notification of Claims -- promptly notify the Administrative Agent of any claim, action or proceeding affecting title to the Collateral, or any part thereof, or any of the security interests granted hereunder, and, at the request of the Administrative Agent, appear in and defend, at the Borrower's expense, any such claim, action or proceeding. 7.3 Payment of Notes and Maintenance of Office. The Borrower shall punctually pay or cause to be paid the principal and interest to become due in respect of each of the Notes according to the terms thereof (all of which are incorporated herein by reference) and shall make all other payments required hereunder and under any other Security Documents. All payments hereunder or under the Notes to the Administrative Agent or the Lenders shall be made in accordance with the payment instructions for such Persons set forth in Schedule 10 to this Agreement or such other payment instructions that the Administrative Agent or any Lender shall deliver, in writing, to the Borrower and the 103 Administrative Agent not less than 2 Business Days prior to any date on which a payment is to be made hereunder or under the Notes. The Borrower shall maintain an office at Sunday River Road, P.O. Box 450, Bethel, Maine, where notices, presentations and demands in respect of this Agreement, the Notes or any other Security Document may be made upon the Borrower. Such offices shall be maintained at said address of the Borrower until such time as the Borrower shall so notify the Administrative Agent, in writing, of any change of location of such offices. The Books and Records of the Borrower shall be maintained at said address. The Borrower shall not change its name without 30-day prior written notice to the Administrative Agent. 7.4 Sale of Properties. Without the prior written consent of the Administrative Agent, the Borrower shall not sell, lease, transfer or otherwise dispose of any of the Collateral, provided that the Borrower (a) may sell the unsold Quartershare Interests, the Residential Units and the Commercial Units in the ordinary course of its business to unaffiliated consumers or, if consented to by Lender, to Affiliates or affiliated consumers, (b) may sell and dispose of (and receive the proceeds thereof) in the ordinary course of its business, free from any Lien created or contemplated by this Agreement, items of Collateral consisting of inventory, and (c) may remove and dispose of (and receive the proceeds thereof) in the ordinary course of its business, free from any Liens created or contemplated by this Agreement, items of Collateral consisting of fixtures, fittings, machinery, appliances, equipment, apparatus, furnishings and other personal Property which shall have become worn out or obsolete and provided further that the Borrower may sell Quartershare Notes pursuant to the Take-Out Facility on the condition that all cash proceeds thereof not withheld or reserved under such Take-Out Facility be delivered to the Administrative Agent and applied to the payment of the Loan to the extent required in this Agreement. 7.5 Consolidation and Merger. The Borrower shall not consolidate with or merge into any other Person or permit any other Person to consolidate with or merge into it. The Borrower shall not permit a Change in Management to occur. 7.6 Guaranties. The Borrower shall not become or be liable in respect of any guaranty except (a) the endorsement in the ordinary course of business of negotiable instruments for deposit or collection, (b) the guarantees provided for under the Parent Indenture, provided that such guarantees are unsecured and junior and subordinate in payment to the Obligations as provided for in the Parent Indenture as of the Closing Date and (c) the guarantee provided for in the Senior Credit Facility issued, provided that such guarantee is unsecured and junior and 104 subordinate in payment to the Obligations, as provided in that certain subordination agreement of even date herewith. The Borrower shall not consent to or permit any modification or change in any of the terms and provisions of any of the subordination provisions referred to in clauses (b) and (c) above. 7.7 Distributions. The Borrower shall not after the Closing Date declare, make or pay any dividend or other distribution or redeem any of its capital stock (in cash or Property) if (a) after giving effect thereto a Default or Event of Default would exist, (b) if after giving effect thereto, it would be rendered insolvent, made unable to pay its debts as they come due or be left without adequate capital to pursue its business or (c) if after giving effect thereto, the Borrower would not have on hand free, unencumbered and unrestricted cash (except for the Liens and restrictions of the Security Documents) in an amount of not less than $2,000,000. 7.8 Compliance with Environmental Laws. The Borrower shall comply, and shall cause each Project to be in compliance, with (a) all Environmental Protection Laws (including, without limitation, all federal, state and local environmental or pollution-control laws, regulations, orders and decrees governing the emission of waste water effluent, the treatment, transportation, disposal, generation and storage of solid and hazardous waste, hazardous and toxic substances and air pollution, and/or setting forth general environmental conditions), (b) any other applicable requirements for conducting, on a timely basis, periodic tests and monitoring for contamination of ground water, surface water, air and/or land, and for biological toxicity of the aforesaid, and (c) the regulations of each relevant federal, state or local authority administering environmental laws, ordinances or regulations, to the extent that the failure to so comply could have a material and adverse effect on the business, prospects, profits, Property or condition (financial or otherwise) of the Borrower or any one or more of the Projects. Without limiting the generality of the foregoing, the Borrower shall not release or otherwise dispose of any Hazardous Substance or any other substance regulated, controlled or described as hazardous under any Environmental Protection Law on or beneath any real Property owned, leased or otherwise used by the Borrower or allow the same to occur with any of the Projects in violation of any Environmental Protection Law; and no asbestos, urea formaldehyde foam, polychlorinated biphenyls, aluminum wire or lead-containing paint shall be installed or used on any such Property or any Project. The Borrower shall not take or suffer to be taken any act or omission that would subject it or any Project to liability under any Environmental Protection Law which liability could have a material and adverse effect on the business, prospects, profits, Property or condition (financial or otherwise) of the Borrower or any one or more of the Projects. 105 The Administrative Agent shall have the right, but shall not be obligated, to notify any state, federal or local governmental authority of information which may come to its attention with respect to Hazardous Substances on or emanating from any Project and the Borrower irrevocably releases the Administrative Agent and the Lenders from any claims of loss, damage, liability, expense or injury relating to or arising from, directly or indirectly, any such disclosure. The Administrative Agent will notify the Borrower prior to or contemporaneously with any action taken by the Administrative Agent pursuant to this paragraph, provided that the failure by the Administrative Agent to provide such notification shall not affect any action so taken. Without limiting the scope and the effectiveness of the foregoing undertakings in this Section 7.8, the Borrower agrees to indemnify and hold the Administrative Agent and the Lenders harmless from and against any losses, liabilities, damages, claims, causes of action, costs or expenses (including, without limitation, attorneys' fees and disbursements), arising from, incurred by, or asserted against, any one or more of the Administrative Agent or the Lenders in connection with any cleanup, removal or similar protective or remedial action that may be required or undertaken by any governmental authority as a result of the presence of any Hazardous Substances at any Project, the release of any other Hazardous Substance on or from any Project or the generation, treatment, storage, handling or disposal of any Hazardous Substances on or from any Project (unless such presence, release, generation, treatment, storage, handling or disposal is directly caused by the Administrative Agent and/or the Lenders or by any agent of the Administrative Agent or the Lenders acting under the Administrative Agent's or the Lenders' direct orders). The liability of the Borrower to Administrative Agent or any Lender under this paragraph shall survive any assignment, transfer, discharge or foreclosure of the Blanket Mortgages or any transfer of any Project (or any portion thereof) by deed in lieu of foreclosure or otherwise, and any one or more transfers of any Project (or any portion thereof) by deed or otherwise, by whosoever made. If the Borrower fails to diligently take any action required under this Section 7.8 or by any governmental entity with respect to the cleanup, control or reporting of any Hazardous Substances, materials or wastes in, on, from or under any Project, the Administrative Agent, at the instruction of the Required Lenders, may enter upon such Project, retain such experts and consultants at the expense of the Borrower and take such action as the Administrative Agent deems advisable, and the Administrative Agent may, in its sole discretion, advance such sums of money as it deems necessary, with respect to the cleanup, control or reporting of any such substances, materials or wastes in, on or under such Project. The Borrower shall pay to the Administrative Agent immediately and upon demand, all sums of money so advanced or expended by the Administrative Agent pursuant to this paragraph, together with interest on each such advance at the Default Rate, and all such sums, and the interest thereon, shall be secured by the Collateral. The Administrative Agent will notify the Borrower prior to or contemporaneously with any action taken by the Administrative Agent pursuant to this paragraph, provided that the failure by the Administrative Agent to provide such notification shall not affect any action so taken. 7.9 Transactions with Affiliates; Principal Properties. The Borrower shall not enter into any transaction including, without limitation, the purchase, sale or exchange of Property or the rendering of any service with any Affiliate except in the ordinary course of, and pursuant to the reasonable requirements of, the Borrower's 106 business and upon fair and reasonable terms no less favorable to the Borrower than would be obtained in a comparable arm's-length transaction with a Person not an Affiliate. The Borrower shall have no investments in any Voting Equities. Anything contained in this Section 7.9 shall not prohibit or affect any of the Host Company Lease Agreements. 7.10 Use of the Lender Name. The Borrower shall not, nor shall it permit any Affiliate to, without the prior written consent of the Administrative Agent, use the name of the Administrative Agent or any Lender or the name of any affiliate of any Lender in connection with any of its respective businesses or activities, except in connection with internal business matters and as required in dealings with governmental agencies or as may be required by law. 7.11 Subordinated Obligations. The Borrower shall not, directly or indirectly, (a) permit any payment to be made in respect of any indebtedness, liabilities or obligations, direct or contingent, which are subordinated by the terms thereof or by separate instrument to the payment of principal of, and interest and premium on, the Notes except in accordance with the terms of such subordination, (b) permit the amendment, rescission or other modification of any such subordination provisions of any of the Borrower's subordinated obligations in such a manner as to affect adversely the Administrative Agent's Lien or the prior position of the Notes, or (c) permit the unscheduled prepayment or redemption of all or any part of any subordinated obligations of the Borrower except in accordance with the terms of such subordination. The Borrower shall cause each of the Parent and the Host Companies to subordinate all of its indebtedness, liabilities or obligations, direct or contingent, owing to it from the Borrower to the payment of the Obligations. The Borrower shall cause each of its other Affiliates to subordinate all indebtedness, liabilities or obligations, direct or contingent, owing to it from the Borrower to the payment of the Obligations. The terms of such subordination shall be satisfactory to the Administrative Agent. Such subordination may permit payments by the Borrower in respect of such subordinated indebtedness, liabilities or obligations if (i) no Default or Event of Default then exists or, after giving effect to such payment, would exist and (ii) the Borrower would not be rendered insolvent, made unable to pay its debts as they come due or be left without adequate capital to pursue its business after giving effect to such payment. 7.12 Notice of Legal Proceedings. Promptly upon becoming aware of the existence thereof, the Borrower shall deliver to the Administrative Agent written notification of the institution of any litigation, legal proceeding or dispute with any Person, entity or governmental authority in any way involving the Borrower, any Project, the Collateral or any of the Borrower's other assets as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, would materially adversely affect the Borrower, any Project, the Collateral or any of the Borrower's other assets. 7.13 Further Assurances. The Borrower shall from time to time execute and deliver to the Administrative Agent such other instruments, certificates and documents and shall take such other action and do all other 107 things as may from time to time be reasonably requested by the Administrative Agent or the Required Lenders in order to implement or effectuate the provisions of, or more fully perfect the rights granted or intended to be granted by the Borrower to the Administrative Agent or the Lenders pursuant to the terms of, this Agreement, the Notes or any other Security Document. The Borrower agrees, in its capacity as Declarant (to the extent permitted by applicable law), to cause each Association to take such action and to do all other things as may from time to time be reasonably requested by the Administrative Agent or the Required Lenders in order to implement or effectuate the provisions of this Agreement and the other Security Documents. 7.14 Financial Statements. The Borrower shall submit to the Lender the following: (a) Annual Statements -- As soon as practicable after the end of each fiscal year of the Borrower, and in any event no later than 90 days thereafter, duplicate copies of: (i) a balance sheet of the Borrower as at the end of such fiscal year, and (ii) a statement of income of the Borrower for such fiscal year, and (iii) a statement of changes in cash flows of the Borrower during such fiscal year, (iv) a statement of material changes of accounting policies, presentations or principles during such fiscal year, and (v) notes to such financial statements. Each of the above shall have been prepared (as an unaudited compilation) by an independent certified public accounting firm, selected by the Borrower and acceptable to the Administrative Agent, in reasonable detail and shall set forth, in each case, in comparative form the figures for the previous fiscal year, and shall be certified as complete and correct by the chief financial officer of the Borrower. The Borrower shall also deliver to the Administrative Agent with the above financial statements a report, certified as complete and correct by the chief financial officer of the Borrower, showing all sales and cancellations made in respect of Quartershare Interests, Residential Units and Commercial Units at each of the Projects for the fiscal year of the Borrower then most recently ended and in respect of which said financial statements shall have been prepared. The above financial statements shall be accompanied by a certificate of the chief financial officer of the Borrower, which certificate shall be acceptable to the Administrative Agent and shall, without qualification, state that such financial statements fairly present the financial condition of the Borrower and have been prepared consistently with past practices. In the event that the aforesaid annual financial statements are not in form and content satisfactory to the Required Lenders, in their sole determination, the Borrower 108 shall, within 90 days of the receipt of the Administrative Agent's written request therefor, deliver to the Administrative Agent duplicate copies of the aforesaid financial statements together with an unqualified opinion thereon of an independent certified public accounting firm, selected by the Borrower and satisfactory to the Administrative Agent, which opinion shall state that such financial statements present fairly the financial condition of the Borrower, have been prepared in accordance with generally accepted accounting principles, procedures and practices consistently applied (except for changes in application in which such accountants concur) and that the examination of such financial statements by such accountants has been made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as were considered necessary in the circumstances. The aforesaid audited financial statements shall be in form and content satisfactory to the Administrative Agent. If the amount shown on Borrower's aforesaid unaudited statement of income for "total operating income," as such term is defined in accordance with generally accepted accounting principles, does not vary by more than 5% from the amount shown on Borrower's aforesaid unqualified audited statement of income for "total operating income" and if the amount shown on Borrower's aforesaid unaudited statement of income for "net operating income," as such term is defined in accordance with generally accepted accounting principles, does not vary by more than 5% from the amount shown on Borrower's aforesaid unqualified audited statement of income for "net operating income," the Lenders shall bear, in accordance with their Pro Rata Shares, the cost and expense of the certified public accounting firm utilized to deliver the aforesaid audited financial statements and accountancy opinion; otherwise, the Borrower shall bear all such costs and expenses. (b) Quarterly Statements -- As soon as practicable after the end of each fiscal quarter of the Borrower, and in any event no later than 60 days thereafter, duplicate copies of: (i) a balance sheet of the Borrower as at the end of such fiscal quarter, (ii) a statement of income of the Borrower for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, (iii) a statement of changes in cash flows of the Borrower during such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, and (iv) a statement of material changes of accounting policies, presentations or principles during such quarter. Each of the above shall have been prepared in reasonable detail and in accordance with generally accepted accounting principles, procedures and practices consistently applied (other than the preparation of notes to such financial statements), 109 subject to changes resulting from year-end adjustments, and shall set forth in each case in comparative form the figures for the corresponding periods in the immediately preceding fiscal year, and shall be certified as complete and correct by the chief financial officer of the Borrower. (c) Notice of Default or Event of Default -- Promptly upon becoming aware of the existence of any condition or event which constitutes a Default or an Event of Default, a written notice specifying the nature and period of existence thereof and what action the Borrower is taking or proposes to take with respect thereto. (d) Notice of Claimed Default -- Immediately upon becoming aware that the holder of any obligation or of any evidence of indebtedness or other Security of the Borrower has given notice or taken any other action with respect to a claimed default or event of default thereunder, a written notice specifying the notice given or action taken by such holder and the nature of the claimed default or event of default and what action the Borrower is taking or proposes to take with respect thereto. (e) Material Adverse Developments -- Immediately upon becoming aware of any development or other information which may materially and adversely affect the Property, business, prospects, profits or condition (financial or otherwise) of the Borrower or the ability of the Borrower to perform its obligations under this Agreement, the Notes or the other Security Documents, telephonic, telefax or telegraphic notice specifying the nature of such development or information and the anticipated effect. (f) Financial Information -- As promptly as possible after the receipt thereof, all financial statements, budgets and other information distributed by the Associations. The Borrower, as Declarant or otherwise, shall cause each Association to prepare annual financial statements and an annual budget, and shall deliver each to the Administrative Agent within 90 days of the end of each of each Association's fiscal years. (g) Sales Information -- On or before the 15th day of each month, a report showing (by Purchaser and in the aggregate) the previous month's sales of, and cancellations of sales of, Quartershare Interests, Residential Units and Commercial units with respect to each of the Projects. (h) Requested Information -- With reasonable promptness, such other data and information as from time to time may be reasonably requested by the Administrative Agent or the Required Lenders. 7.15 Officers' Certificate. The financial statements delivered to the Administrative Agent pursuant to Section 7.14(a) and Section 7.14(b) of this Agreement shall be accompanied by a certificate of the chief financial officer of the Borrower setting forth: (a) Covenant Compliance -- the information required in order to establish whether the Borrower was in compliance with all financial covenants contained in 110 Section 7 of this Agreement during the period covered by the financial statements or reports then being furnished; and (b) Event of Default -- a statement that the signers have reviewed the relevant terms of this Agreement (and all other agreements and exhibits between the parties) and have made, or caused to be made, under their supervision, a review of the transactions and conditions of the Borrower from the beginning of the period covered by the financial statements or reports being delivered therewith to the date of the certificate and that such review has not disclosed the existence during such period of any condition or event which constitutes a Default or Event of Default or, if any such condition or event existed or exists or will exist, specifying the nature and period of existence thereof and what action the Borrower has taken or proposes to take with respect thereto. 7.16 Inspection. The Borrower shall permit the Administrative Agent or its representatives to make such inspections/audits of its books, accounts, records, orders, original correspondence and such other papers as it may desire and of its premises, the Projects and the other Collateral, from time to time, as the Administrative Agent may in its sole discretion determine. The Borrower shall supply copies of such records and papers as the Administrative Agent may reasonably request, and shall permit the Administrative Agent to discuss the Borrower's affairs, finances and accounts with the Borrower's managers, officers, employees and independent public accountants (and by this provision the Borrower hereby authorizes said accountants to discuss with the Administrative Agent the finances and affairs of the Borrower), all at reasonable times and as often as may be desired by the Administrative Agent. The Borrower further agrees to supply the Administrative Agent with such other reasonable information relating to the Borrower and the Collateral as the Administrative Agent may request. With respect to any inspections and/or audits referred to in this Section 7.16, the Borrower shall pay for all out-of-pocket costs and expenses incurred by the Administrative Agent (including, without limitation, travel expenses, but excluding salaries of employees of the Administrative Agent) and shall promptly reimburse the Administrative Agent therefor upon receipt by the Borrower of a written demand therefor from the Administrative Agent, provided that, for so long as no Default or Event of Default shall exist, the Borrower shall not be obligated to reimburse the Administrative Agent for such costs and expenses in excess of $10,000 during any calendar year. 8. EVENTS OF DEFAULT 8.1 Default. The Borrower hereby covenants, agrees and acknowledges that an Event of Default shall exist under this Agreement if any of the following events or conditions (each, an "Event of Default") shall occur and be continuing: (a) Payments -- (i) failure to make any payment of interest on any Note on or before 5 days after the due date thereof; (ii) failure to make any payment of principal of any Note on or before the due date thereof; or (iii) failure to make any other payment required pursuant to the terms of this Agreement, the Notes or any other Security Document on or before 10 days after the due date thereof; or 111 (b) Warranties or Representations -- any warranty, representation or other statement made or furnished to the Administrative Agent or the Lenders by or on behalf of the Borrower, the Parent or any Host Company in this Agreement or any other Security Document proves to have been false or misleading in any material respect when made or furnished; or (c) Other Covenants -- the failure by the Borrower, the Parent or any Host Company to comply with any covenant relating to such Person contained in any Security Document to which such Person is a party, and the continuance of such failure for more than 30 days after such failure shall have first become known to any manager, officer or director of the Borrower, the Parent or such Host Company; or (d) Material Adverse Change -- any material adverse change in or in respect of the Collateral or any one or more of the Projects (including, without limitation, the termination of any applicable quartershare interest or condominium regimen {whether by consent of the condominium owners or quartershare interest owners or otherwise} with respect to any Project, any modification or amendment to the Declarations of any of the Projects which is reasonably likely to adversely affect the Collateral or the operations or prospects of any of the Projects, or the substantial destruction of any Project, if not fully insured) or in the financial condition of the Borrower; or (e) Insolvency -- (i) a receiver, liquidator, custodian or trustee of the Borrower, the Parent or any Host Company of all or any of the Property of any of them shall be appointed by court order and such order remains in effect for more than 60 days; or an order for relief shall be entered with respect to the Borrower, the Parent or any Host Company, or the Borrower, the Parent or any Host Company shall be adjudicated a bankrupt or insolvent; or any of the Property of any of them shall be sequestered by court order and such order remains in effect for more than 60 days; or a petition shall be filed against the Borrower, the Parent or any Host Company under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, and shall not be dismissed within 60 days after such filing; or (ii) the Borrower, the Parent or any Host Company shall file a petition in voluntary bankruptcy or seeking relief under any provision of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, or shall consent to the filing of any petition against it under any such law; or (iii) the Borrower, the Parent or any Host Company shall make an assignment for the benefit of its creditors, or shall admit in writing its inability, or shall fail, to pay its debts generally as they become due, or shall consent to the appointment of a receiver, liquidator or trustee of the Borrower, the Parent or any Host Company, or of all or any part of the Property of any of them; or (f) Judgment -- final judgment or judgments for the payment of money, the aggregate of which exceeds $500,000, shall be outstanding against the Borrower, the Parent or any Host Company and any of such judgments shall have been outstanding for more than 30 days from the date of its entry and shall not have been discharged in full or stayed; or 112 (g) Default in Lender Agreements -- any default (after giving effect to the expiration of any applicable grace periods) under, and as defined in, any other agreement, now existing or hereafter entered into, between the Borrower and any one or more of the Lenders or any affiliate of any Lender, including, without limitation, any default under the Take-Out Facility or any "Note Purchase Agreement" executed in connection therewith or in that certain letter from the Borrower to the Administrative Agent dated the Closing Date; or (h) Default by Borrower in Other Agreements -- any default by the Borrower in the payment of material indebtedness for borrowed money or any guarantee issued by the Borrower in respect of borrowed money (including, without limitation, any guarantee issued by the Borrower under the Parent Indenture or any under the Senior Credit Facility); any other default under such indebtedness which accelerates or permits the acceleration (after the giving of notice or passage of time, or both) of the maturity of such indebtedness, whether or not such default has been waived by the holder of such indebtedness; or (i) Suspension of Sales -- the issuance of any stay order, cease and desist order or similar judicial or nonjudicial sanction limiting or otherwise affecting the sale of Quartershare Interests, Residential Units or Commercial Units and any such order or sanction shall have been outstanding for more than 30 days from the date of its entry and shall not have been discharged in full or stayed by appeal, bond or otherwise; or (j) Host Companies -- any Host Company shall cease to be in business or to operate the ski facilities adjacent to its respective Project; any Host Company shall be in default (after the elapse of all applicable grace or cure periods) under its Host Company Lease Agreement; or any Host Company shall not allow Quartershare Interest owners at its respective Project to have access and use of its ski facilities (except if such owners do not comply with the rules or regulations of such facilities or fail to comply with the payment terms or other conditions of use of such facilities that are generally applicable to users of such facilities); or (k) Parent Indenture; Senior Credit Facility -- if the Borrower is not, or no longer qualifies as, a "Real Estate Subsidiary" under, and as defined in, the Parent Indenture; or if the Loan is not, or no longer qualifies as, "Non-Recourse Real Estate Debt" under, and as defined in, the Parent Indenture; if the Borrower is not, or no longer qualifies as, an "Unrestricted Subsidiary" under the Senior Credit Facility; if the guarantees issued by the Borrower under the Parent Indenture or in respect of the Senior Credit Facility are not junior and subordinate to the Loan to the same extent as provided for in the respective controlling documents on the Closing Date. 8.2 Default Remedies. (a) Acceleration of Obligations; Right To Dispose of Collateral. (i) If an Event of Default under Section 8.1(e) of this Agreement shall occur, then the Obligations shall, automatically and without notice or demand by the Administrative Agent or the Lenders, become at once due and payable and 113 all Commitments shall at once terminate, and the Borrower will forthwith pay to the Lenders, in addition to any and all sums and charges otherwise due in respect of the Obligations, the entire principal of and interest accrued on the Notes. If any other Event of Default shall occur, all of the Obligations shall, at the option of the Required Lenders, and without notice or demand by the Administrative Agent or the Lenders, become at once due and payable and all Commitments shall at once terminate, and the Borrower will forthwith pay to the Lenders, in addition to any and all sums and charges otherwise due in respect of the Obligations, the entire principal of and interest accrued on the Notes. The Administrative Agent on behalf of the Lenders shall have all the rights and remedies of a secured party under the Uniform Commercial Code, all the rights and remedies under the Blanket Mortgages and the Assignment of Rents and all other legal and equitable rights to which it may be entitled, including, without limitation and without further notice to Borrower, the right to collect and/or continue to collect all payments being made or to be made on the Contracts and to apply such payments to the Obligations and to sue in its own name (or the name of the Borrower) the Purchaser under any Contract. The Administrative Agent shall also have the right to require the Borrower to assemble the Collateral or any portion thereof, at the Borrower's expense, and make it available to the Administrative Agent at a place to be designated by the Administrative Agent, which is reasonably convenient to both parties, and the Administrative Agent shall have the right to take immediate possession of the Collateral or such portion and may enter any of the premises of the Borrower or wherever the Collateral or such portion shall be located, in accordance with applicable law, and to keep and store the same on said premises until sold (and if said premises be the Property of the Borrower, the Borrower agrees not to charge the Administrative Agent or the Lenders for storage thereof for a period of at least 90 days after sale or disposition of such Collateral). The Administrative Agent shall have the right to sell the Collateral or any part thereof in one or more parcels at public or private sale for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as the Required Lenders may deem commercially reasonable. The Borrower, the Administrative Agent and the Lenders agree that 10 days' notice to the Borrower of any public or private sale or other disposition of Collateral or any portion shall be reasonable notice thereof and such sale shall be at such location(s) as the Administrative Agent shall designate in said notice. The Administrative Agent shall have the right to bid at any such sale on behalf of the Lenders and each Lender shall have the right to bid at any such sale on its own behalf and, in connection with any such bid, such Person shall be entitled, for the purpose of making settlement or payment in respect of any such accepted bid, to use and apply any amounts to be paid to it under Section 8.2(c) hereof as a credit against the purchase price payable by it in respect of such accepted bid. Each purchaser at any such sale shall hold the Property so sold absolutely free from any claim or right on the part of the Borrower, and the Borrower hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Administrative Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Administrative Agent may adjourn any public or private 114 sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (ii) In view of the fact that federal and state securities laws may impose certain restrictions on the methods by which a sale of Collateral, if comprised of Securities, may be effected after an Event of Default, the Borrower agrees that, upon the occurrence and continuance or existence of an Event of Default, the Administrative Agent may, from time to time, attempt to sell all or any part of such Collateral by means of a private placement restricting the bidding and prospective purchasers to those who will represent and agree that they are purchasing for investment only and not for, or with a view to, distribution. In so doing, and without limiting any other means of private placement, the Administrative Agent may solicit offers to buy such Collateral, or any part of it for cash, from a limited number of investors deemed by the Administrative Agent, in its reasonable judgment, to be responsible parties who might be interested in purchasing the Collateral, and if the Administrative Agent solicits such offers from not less than 4 such investors (and otherwise acts in good faith), then the acceptance by the Administrative Agent of the highest offer obtained therefrom shall be deemed to be a commercially reasonable method of disposition of such Collateral. (iii) At any time after the Obligations have become accelerated and due and payable at the option of the Required Lenders pursuant to clause (i) above, the Required Lenders, by written notice to the Borrower, may rescind and annul such acceleration and its consequences if (1) the Borrower has paid all overdue interest on the Notes, all principal due and payable on any Notes other than by reason of such declaration, and all interest on such overdue principal, if any, and all other costs and expenses then due and payable hereunder or under any of the other Security Documents, (2) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 11.5, and (3) no judgment or decree has been entered against the Borrower for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this clause (iii) will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. (b) Application of Collateral; Termination of Agreements. Upon the occurrence of any Event of Default, the Required Lenders may, with or without the Administrative Agent's proceeding with any aforesaid sale or foreclosure or the Required Lenders' demanding acceleration of the payment of the Obligations, without notice, terminate each Lender's Commitment, without further liability or obligation by such Lender. Upon the occurrence of any Event of Default, but otherwise subject to Section 11.8 hereof, each Lender may, at any time, appropriate and apply (as provided below) to any Obligations owing to such Lender any and all Collateral in its possession and any and all balances, credits, deposits, accounts, reserves, indebtedness or other monies due or owing to the Borrower held by such Lender hereunder or under any other financing agreement or otherwise, whether accrued or not. Neither the termination of Commitments, nor the termination of this Agreement by lapse of time, the giving of notice 115 or otherwise, shall absolve, release or otherwise affect the liability of the Borrower in respect of transactions prior to such termination, or affect any of the Liens, security interests, rights, powers and remedies of the Administrative Agent or the Lenders hereunder or under any other Security Document, but they shall, in all events, continue until all of the Obligations are satisfied. (c) Application of Proceeds. The proceeds of any exercise of rights with respect to Collateral or any part thereof shall be paid to and applied as follows: First, to the payment of (i) all costs and charges in connection therewith, including, without limitation, (1) attorneys' fees for advice, counsel or other legal services, (2) costs and expenses incurred as a result of pursuing, reclaiming, seeking to reclaim, taking, keeping, removing, storing, advertising for sale, selling and foreclosing on the Collateral and any and all other charges and expenses in connection therewith, and (3) any costs and expenses (including, without limitation, costs and expenses in the management and operation of the Projects) provided for in the Assignment of Rents, the Blanket Mortgages or any other Security Document, (ii) all taxes, assessments or Liens superior to the Lien of this Agreement or the other Security Documents, except any taxes, assessments or other superior Liens subject to which any sale of Collateral may have been made, and (iii) all Loan Costs; Second, towards the payment of all accrued and unpaid interest then due and payable in respect of the Loan (all amounts under this clause to be paid to each of the Lenders ratably in accordance with the amount of interest owing to each such Lender), Third, to the payment of the principal amount of the Loan (all amounts under this clause to be paid to each of the Lenders ratably in accordance with the amount of principal owing to each such Lender under its Note), Fourth, to the payment of any other Obligations remaining outstanding (all amounts under this clause to be paid to each of the Lenders ratably in accordance with the amount of such Obligations owing to each such Lender), and Fifth, to the payment of the surplus, if any, to the Borrower, its successors and assigns, or to whomsoever may be lawfully entitled to receive the same, provided that if any Obligations shall not have been paid in full, any such surplus shall continue to be held as Collateral hereunder and shall continue to be subject to the terms and conditions hereof until such Obligations shall have been paid in full. The Borrower shall remain liable hereunder for payment of any deficiency owing on the Obligations after application of such proceeds. 116 (d) Remedies Cumulative; No Waivers. All covenants, conditions, provisions, warranties, guaranties, indemnities and other undertakings of the Borrower, the Parent and/or any Host Company contained in this Agreement, or in any document referred to herein or contained in any agreement supplementary hereto or in any schedule given to any one or more of the Administrative Agent and/or the Lenders or contained in any other agreement among any one or more of the Lenders, the Borrower, the Parent, the Host Companies and/or the Administrative Agent, heretofore, concurrently or hereafter entered into, including, without limitation, the Blanket Mortgages or any other Security Document, shall be deemed cumulative to and not in derogation or substitution of any of the terms, covenants, conditions or agreements of the Borrower herein contained. The failure or delay of the Administrative Agent or any Lender to exercise or enforce any rights, Liens, powers or remedies hereunder or under any of the aforesaid agreements or other documents or security or Collateral shall not operate as a waiver of such Liens, rights, powers and remedies, but all such Liens, rights, powers and remedies shall continue in full force and effect until the Loan and all other Obligations shall have been fully satisfied. All Liens, rights, powers and remedies herein provided for are cumulative and none are exclusive. The acceptance by the Administrative Agent or any Lender at any time and from time to time of partial payments of the Obligations shall not be deemed to be a waiver of any Event of Default then existing. No waiver by the Administrative Agent or any Lender of any Event of Default shall be deemed to be a waiver of any other or subsequent Event of Default. No delay or omission by the Administrative Agent or any Lender in exercising any right or remedy under the Security Documents shall impair such right or remedy or be construed as a waiver thereof or an acquiescence therein, nor shall any single or partial exercise of any such right or remedy preclude other or further exercise thereof, or the exercise of any other right or remedy under the Security Documents or otherwise. 9. REVIVAL OF OBLIGATIONS AND LIENS Neither the Administrative Agent nor any Lender shall be under any obligation to marshall any assets in favor of the Borrower, the Parent, any Host Company or any other party hereto or to any other Security Document or against or in payment of any or all of the Obligations. The Borrower expressly agrees that if the Borrower makes a payment to the Administrative Agent or any Lender, which payment or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, or otherwise required to be repaid to a trustee, receiver or any other party under any bankruptcy act, state or federal law, common law or equitable cause, then to the extent of such repayment, the Obligations or any part thereof intended to be satisfied and the Liens provided for hereunder securing the same shall be revived and continued in full force and effect as if said payment had not been made. 10. ADMINISTRATIVE AGENT 10.1 Appointment. Textron Financial Corporation is hereby appointed Administrative Agent hereunder and under the other Security Documents and each Lender hereby authorizes the Administrative Agent to act as its agent in accordance with the terms of this Agreement and the other Security 117 Documents. The Administrative Agent agrees to act upon the express conditions contained in this Agreement and the other Security Documents, as applicable. The provisions of this Section 10 are solely for the benefit of the Administrative Agent and the Lenders, and the Borrower agrees it shall have no rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties under this Agreement, the Administrative Agent shall act solely as an agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Borrower, the Parent, any Host Company or any Affiliate. 10.2 Powers; General Immunity. (a) Duties Specified. Each Lender irrevocably authorizes the Administrative Agent to take such action on such Lender's behalf and to exercise such powers hereunder and under the other Security Documents as are specifically delegated to the Administrative Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. The Administrative Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Security Documents and it may perform such duties by or through its agents or employees. The Administrative Agent shall not have, by reason of this Agreement or any of the other Security Documents, a fiduciary relationship in respect of any Lender; and nothing in this Agreement or any of the other Security Documents, expressed or implied, is intended to or shall be so construed as to impose upon the Administrative Agent any obligations in respect of this Agreement or any of the other Security Documents except as expressly set forth herein or therein. It is expressly understood that the Administrative Agent's role hereunder will be primarily administrative in nature. To the extent that any provision hereof or any other Security Document requires the Administrative Agent to make disbursements or payments to any Lender of amounts received by the Administrative Agent, such disbursements or payments shall be subject to the Administrative Agent's having received good, collected, immediately available funds prior to 12:00 p.m. on the Business Day prior to the date on which such disbursement or payment is to be made. (b) No Responsibility for Certain Matters. The Administrative Agent shall not be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any other Security Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by the Administrative Agent to any one or more of the Lenders or by or on behalf of Borrower, the Parent or any Host Company to the Administrative Agent or any Lender in connection with the Security Documents and the transactions contemplated thereby or for the financial condition or business affairs of the Borrower, the Parent, any Host Company or any other Person liable for the payment of any Obligations, nor shall the Administrative Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Security Documents or as to the use of the proceeds of the Loan or as to the existence or possible existence of any Default or Event of Default. 118 (c) Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees or agents shall be liable to any one or more of the Lenders for any action taken or omitted by the Administrative Agent under or in connection with this Agreement or any of the other Security Documents except to the extent caused by the Administrative Agent's gross negligence or willful misconduct. If the Administrative Agent shall request instructions from the Lenders with respect to any act or action (including the failure to take an action) in connection with this Agreement or any of the other Security Documents, the Administrative Agent shall be entitled to refrain from such act or taking such action unless and until the Administrative Agent shall have received instructions from the Required Lenders or the Lenders, as may be required hereunder. Without prejudice to the generality of the foregoing, (i) the Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for the Borrower, the Parent, any Host Company or any Affiliate), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against the Administrative Agent as a result of Administrative Agent's acting or refraining from acting under this Agreement or any of the other Security Documents in accordance with the instructions of the Required Lenders or the Lender, as may be required hereunder. The Administrative Agent shall be entitled to refrain from exercising any power, discretion or authority vested in it under this Agreement or any of the other Security Documents unless and until it has obtained the instructions of the Lenders or the Required Lenders, as the case may be, and such indemnification as it may reasonably request. The Administrative Agent shall not be liable to any Lender with respect to its failure to take any action under any Security Document directed by the Lenders or Required Lenders, as may be required hereunder, if such action would, in the good faith opinion of the Administrative Agent, be unlawful or contrary to the terms and provisions of this Agreement or any other Security Document, or would subject the Administrative Agent to liability under any Environmental Protection Law. For the avoidance of doubt, unless otherwise expressly provided for herein or in any Security Document, the Administrative Agent may rely upon instructions given to it by the Required Lenders. (d) Administrative Agent Entitled to Act as Lender. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, the Administrative Agent in its individual capacity as a Lender hereunder. With respect to its participating in the Loan, the Administrative Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent and its affiliates may lend money to and generally engage in any kind of financial or other business with the Borrower, the Parent, any Host Company or any of the Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from the Borrower, the Parent, any Host Company and the Affiliates for services in connection with this Agreement and otherwise without having to account for the same to the Lenders. 119 (e) Advancing of Own Funds. The Administrative Agent shall not be required to advance, expend or risk its own funds or otherwise incur personal liability in the performance of its duties or in the exercise of any rights or remedies hereunder or under the other Security Documents. 10.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness. Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of the Borrower, the Parent, each Host Company and the Projects in connection with entering into this Agreement and the making of the Advances hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of the Borrower, the Parent, each Host Company and the Projects. The Administrative Agent shall not have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of the Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Advances or at any time or times thereafter, and the Administrative Agent shall not have any responsibility with respect to the accuracy of or the completeness of any information provided, directly or indirectly, to the Lenders by the Borrower, the Parent, any Host Company, any Affiliate or any employee, officer, director or agent thereof. 10.4 Right to Indemnity. Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify the Administrative Agent, to the extent that the Administrative Agent shall not have been reimbursed by the Borrower, for and against any and all liabilities, obligations, losses, claims, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in performing its duties hereunder or under the other Security Documents or otherwise in its capacity as the Administrative Agent in any way relating to or arising out of this Agreement or the other Security Documents, provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, claims, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful misconduct. If any indemnity furnished to the Administrative Agent for any purpose in connection with its performance of its duties hereunder or under any other Security Document shall, in the opinion of the Administrative Agent, be insufficient or become impaired, the Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. 10.5 Successor Administrative Agent. The Administrative Agent may resign at any time by giving 30 days' prior written notice thereof to the Lenders and the Borrower, and the Administrative Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to the Borrower and the Administrative Agent and signed by the Required Lenders. Upon any such notice of resignation or any such removal, the Required Lenders shall have the right, upon 5 Business Days' notice to the Borrower, to appoint a successor Administrative Agent. Upon the 120 acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, that successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Administrative Agent and the retiring or removed Administrative Agent shall be discharged from its duties and obligations under this agreement. After any retiring or removed Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Section 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Security Documents. 10.6 Collateral Documents. Each Lender hereby approves the forms of the Security Documents attached as Exhibits to this Agreement and further authorizes the Administrative Agent to accept from the Borrower, the Parent and each Host Company and to execute and deliver as Administrative Agent the Security Documents, as secured party on behalf of and for the benefit of the Lenders, and agrees to be bound by the terms of the Security Documents, in each case substantially in the form of such Exhibits with such changes, additions or deletions as the Administrative Agent, in its sole discretion, may approve as necessary or appropriate to accomplish the purposes of such Security Documents. Anything contained in any of the Security Documents to the contrary notwithstanding, each Lender agrees that no Lender shall have any right individually to realize upon any of the Collateral under the Security Documents, it being understood and agreed that all rights and remedies under the Security Documents may be exercised solely by the Administrative Agent for the benefit of Lenders in accordance with the terms thereof. 10.7 Designation of Additional Administrative Agents. Whenever the Administrative Agent shall deem it necessary or prudent in order either to conform to any law of any jurisdiction in which all or any part of the Collateral shall be situated or to make any claim or bring any suit with respect to the Collateral or the Security Documents, or in the event that the Administrative Agent shall have been requested to do so by the Required Lenders, the Administrative Agent and, to the extent necessary, the Borrower, the Parent and the Host Companies shall execute and deliver a supplemental agreement and all other instruments and agreements necessary or proper to constitute a bank or trust company or one or more other Persons approved by the Administrative Agent, either to act as Administrative Agent or agents with respect to all or any part of the Collateral, in any such case with such powers of the Administrative Agent as may be provided in such supplemental agreement, and to vest in such bank, trust company or other Person as such Administrative Agent or separate trustee, as the case may be, any property, title, right, or power of the Administrative Agent deemed necessary or advisable by the Administrative Agent. 10.8 Payments. (a) Notification of Advance Request. When the Borrower gives the Administrative Agent notice that it desires an Advance hereunder, the Administrative Agent shall promptly notify each of the Lenders of the notice for an Advance from such Lender, which notice shall specify the amount of the Advance desired from such Lender and the amount of such Lender's Pro Rata Share of the requested advance. 121 (b) Direct Funding Alternative. If the aforesaid notice is received by a Lender on or before 12:00 p.m. (Lender's time), such Lender shall wire, transfer or deliver good funds by 11:00 a.m. the next Business Day or such other later Business Day as may have been indicated in such notice of its Pro Rata Share of the requested advance to the Borrower. If such notice is received after 12:00 p.m. (Lender's time), then such Lender shall wire, transfer or deliver good funds by 11:00 a.m. the second Business Day or such other later Business Day as may have been indicated in such notice of its Pro Rata Share of the requested advance to the Borrower. If a Lender desires this clause (b) to be the effective means by which it funds advances hereunder (rather than Section 2.3(a)(ii)(A) hereof), it shall notify the Administrative Agent, in writing, of such election. (c) Distributions to Lenders. The Administrative Agent shall distribute to each Lender, such Lender's Pro Rata Share of all amounts representing collections in reference to the Loan by 11:00 a.m. on the next Business Day after good, collected funds in respect thereof shall have been received or collected if such funds are received or collected prior to 12:00 p.m. (Administrative Agent's time). If such funds shall be received or collected after 12:00 p.m. (Administrative Agent's time), Administrative Agent shall promptly distribute such funds to Lender by 11:00 a.m. on the second Business Day after such funds shall have been received or collected. (d) Delay in Disbursing. If funds required for an Advance from a Lender or for payment by the Administrative Agent are not distributed to the Borrower or the applicable Lender, as the case may be, within the time set forth herein for such distribution for any reason other than an "Act of God" or the nonoperation of the Federal Reserve Bank wire transfer system, the party entitled to such funds shall be entitled to interest on such funds from the Person obligated to disburse the same at the rate of the prevailing Federal Funds rate from and including the date such funds were received or to be disbursed, but excluding the date such funds are received by the recipient thereof. 11. MISCELLANEOUS 11.1 Governing Law. This Agreement and all transactions, assignments and transfers hereunder, and all the rights of the parties hereto shall be governed as to the validity, construction, enforcement and in all other respects by the internal laws of the State of Maine. To the extent any provision of this Agreement is not enforceable under applicable law, such provision shall be deemed null and void and shall have no effect on the remaining portions of this Agreement. 11.2 Expenses and Closing Fees. Whether or not the transactions contemplated hereunder are completed, the Borrower shall pay all expenses of any one or more of the Lenders and/or the Administrative Agent relating to negotiating, preparing, documenting, closing and enforcing this Agreement, relating to the making by any one or more of the Lenders of any Advances hereunder to the Borrower and/or relating to the performance of the duties of the Administrative Agent hereunder and under the other Security Documents, including, but not limited to: 122 (a) the cost of reproducing this Agreement, the Notes and the other Security Documents; (b) the fees and disbursements of each of the Lender's counsel and the Administrative Agent's counsel; (c) each of the Lender's and the Administrative Agent's out-of-pocket expenses in connection with any audits in respect of the Borrower and/or the Collateral conducted by such Lender or the Administrative Agent prior to the date hereof per Schedule 24 hereto; (d) all fees and expenses (including fees and expenses of counsel to each of the Lenders and counsel to the Administrative Agent) relating to any amendments, waivers, consents or review of documents in connection with this Agreement or relating to the funding of any Advance hereunder; (e) all costs, outlays, attorneys' fees and expenses of every kind and character had or incurred in (i) the enforcement of any of the provisions of, or rights and remedies under, this Agreement, any assignment agreement, or any other Security Document and (ii) the preparation for, negotiations regarding, consultations concerning, or the defense of legal proceedings involving, any claim or claims made or threatened against any one or more of the Lenders and/or the Administrative Agent arising out of this transaction or the protection of the Collateral securing the Obligations, expressly including, without limitation, the defense by any Lender or the Administrative Agent of any legal proceedings instituted or threatened by any Person to seek to recover or set aside any payment or setoff theretofore received or applied by such Lender or the Administrative Agent with respect to the Obligations; (f) all expenses relating to the Approved Escrow Accounts; (g) all expenses relating to the safekeeping of the Contracts by the Administrative Agent (including, without limitation, the retention by the Administrative Agent of any custodian or trust department to safekeep such Contracts); (h) all filing and recording fees, costs and expenses which may be incurred by any one or more of the Lenders and/or the Administrative Agent with respect to the filing or recording of any document or instrument relating to the transactions described in this Agreement or the other Security Documents; (i) the Administrative Agent's advances (together with interest thereon as provided for herein) in respect of any of the Borrower's expenses or undertakings to make payments set forth herein or in any other Security Document for which the Administrative Agent shall have paid such expenses or made such payments in accordance with the terms and conditions hereof or such other Security Documents, and (j) all costs and expenses owing to the Disbursement Agent under the Loan Disbursement Agreement, 123 (all of the foregoing in this Section 11.2 being referred to herein as, the "Loan Costs"). 11.3 Parties, Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns (except that the Borrower may not assign any of its rights hereunder), and all representations, covenants, provisions and agreements by or on behalf of the Borrower which are contained in this Agreement shall inure to the benefit of the successors and assigns of the Lenders and the Administrative Agent. Except as provided in this Section 11.3, this Agreement shall not create and shall not be construed as creating any rights enforceable by, or benefits in favor of, any Person not a party hereto. 11.4 Notices. All notices or demands by any Person hereunder to any other Person hereunder relating to this Agreement or any other Security Document shall, except as otherwise provided herein, be in writing and sent by certified or registered United States mail, first class postage prepaid and return receipt requested, or by a nationally recognized overnight courier service with all delivery fees prepaid. Notices shall be deemed received (a) on the 3rd succeeding Business Day following deposit in the United States mail, certified or registered and first class postage prepaid and return receipt requested, provided that notices to the Administrative Agent shall not be effective until received or (b) upon delivery if sent by nationally recognized overnight courier with all delivery fees prepaid. Notices and demands shall be addressed, if to the Borrower, at the mailing address set forth on Schedule 23 to this Agreement or to such other address as the Borrower may from time to time specify in writing or, if to a Lender, at the mailing address of such Lender set forth on Schedule 23 hereto or to such other address as such Lender may from time to time specify in writing to the Borrower or, if to the Administrative Agent, at the mailing address of the Administrative Agent set forth on Schedule 23 hereto or to such other address as the Administrative Agent may from time to time specify in writing to the Borrower and the Lenders. 11.5 Total Agreement. This Agreement, including the Exhibits, the Schedules and the other agreements referred to herein, is the entire agreement between the parties hereto relating to the subject matter hereof, incorporates or rescinds all prior agreements and understandings between the parties hereto relating to the subject matter hereof, and may not be changed or terminated orally or by course of conduct. Any provision of this Agreement may be modified, changed or waived only in a writing executed by the Required Lenders and the Borrower, provided that (a) any such modification, change or waiver which (i) increases the amount of any of the Commitments or reduces the principal amount of the Loan, (ii) changes any Lender's Pro Rata Share or Loan Exposure, (iii) changes the defined term "Required Lenders" or "Maturity Date," (iv) decreases the Interest Rate or the Default Rate, (v) 124 postpones the date on which any interest or any fees are payable or how proceeds from the sale of Quartershare Interests, Residential Units or Condominium Units are collected and distributed to the Lenders, (vi) releases all, substantially all, or any material portion of the Collateral (other than as expressly contemplated herein and in the other Security Documents) or (vii) changes any provision of this Section 11.5, shall become effective only after having been consented to in writing by all of the Lenders, (b) any such modification, change or waiver in respect of any provision of any Note (other than a provision incorporated by reference therein to which another clause of this Section 11.5 is applicable) shall become effective only after having been consented to in writing by the Lender holding such Note and (c) any such modification, change or waiver which affects any of the rights, duties or obligations of the Administrative Agent hereunder or under any other Security Document (including, without limitation, any modification or change in Section 10 hereof) shall become effective only after being consented to, in writing, by the Administrative Agent. The failure or delay of any Lender or the Administrative Agent to exercise or enforce any rights, Liens, powers, remedies, conditions or other terms hereunder or under any other agreement or instrument executed in connection herewith shall not operate as a waiver of any such rights, Liens, powers, remedies, conditions or other terms. 11.6 Survival. All warranties, representations and covenants made by the Borrower herein or in any certificate or other instrument delivered by it or on its behalf under this Agreement shall be considered to have been relied upon by the Lenders and shall survive the delivery to the Lenders of the Notes regardless of any investigation made by the Lenders or on its behalf. All statements in any such certificate or other instrument shall constitute warranties and representations by the Borrower hereunder. 11.7 Set-Off. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default each Lender is hereby authorized by the Borrower at any time or from time to time, without notice to the Borrower or any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other indebtedness at any time held or owing by such Lender to or for the creditor or the account of the Borrower against and on account of the obligations and liabilities of the Borrower to such Lender under this Agreement and participations therein and the other Security Documents, including, but not limited to, all claims of any nature or description arising out of or connected with this Agreement or any other Security Document, irrespective of whether or not (a) such Lender shall have made any demand hereunder or (b) the principal of or the interest on the Loan or any other amounts due hereunder shall have become due and 125 payable pursuant to Section 8 hereof and although said obligations and liabilities, or any of them, may be contingent or unmatured. 11.8 Ratable Sharing. The Lenders hereby agree among themselves that if any of them shall (whether by voluntary payment, by realization upon security, through the exercise of any right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any right under the Security Documents or otherwise) receive payment or reduction of a proportion of the aggregate amount of principal, interest, amounts payable in respect of the Loan and other amounts then due and owing to such Lender hereunder or under the other Security Documents (collectively, the "Aggregate Amounts Due" to such Lender) which is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then such Lender receiving such proportionately greater payment shall (a) notify the Administrative Agent and each other Lender of the receipt of such payment and (b) apply a portion of such payment to purchase participations (which it shall be deemed to have purchased from each seller of a participation simultaneously upon the receipt by such seller of its portion of such payment) in the Aggregate Amounts Due to the other Lenders so that all such recoveries in respect of all Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to each of them; provided that if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of the Borrower or otherwise, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. The Borrower expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker's lien, set-off or counterclaim with respect to any and all monies owing by the Borrower to that holder with respect thereto as fully as if that holder were owed the amount of the participation held by that holder. 11.9 Litigation. THE BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED ARISING OUT OF THIS AGREEMENT, THE NOTES, ANY OTHER SECURITY DOCUMENT, THE COLLATERAL OR ANY ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER AMONG THE BORROWER, THE LENDERS AND/OR THE ADMINISTRATIVE AGENT OF ANY KIND OR NATURE. THE BORROWER, EACH OF THE LENDERS AND THE ADMINISTRATIVE AGENT HEREBY AGREE THAT THE FOLLOWING COURTS: STATE COURT: (1) SUPERIOR COURT OF THE STATE OF MAINE FOR OXFORD COUNTY SITTING AT SOUTH PARIS or (2) THE SUPERIOR COURT OF THE STATE OF RHODE ISLAND SITTING AT PROVIDENCE; FEDERAL COURT: (1) UNITED STATES DISTRICT COURT FOR MAINE SITTING AT PORTLAND, or (2) UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND SITTING AT PROVIDENCE, 126 SHALL HAVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES AMONG THE BORROWER, THE LENDERS AND/OR THE ADMINISTRATIVE AGENT PERTAINING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, ANY OTHER SECURITY DOCUMENT OR ANY MATTER ARISING HEREFROM OR THEREFROM. THE BORROWER, EACH OF THE LENDERS AND THE ADMINISTRATIVE AGENT EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN ANY SUCH COURT. THE STIPULATIONS OF THE BORROWER IN THIS SECTION 11.9 SHALL SURVIVE THE FINAL PAYMENT OF ALL OF THE OBLIGATIONS OF THE BORROWER AND THE RESULTING TERMINATION OF THIS AGREEMENT. NEITHER THE LENDERS NOR THE ADMINISTRATIVE AGENT SHALL BE RESPONSIBLE FOR ANY LOST PROFITS OF THE BORROWER ARISING FROM ANY BREACH OF CONTRACT, TORT (EXCLUDING ANY LENDER'S OR THE ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) FOR ANY OTHER WRONG ARISING FROM THE ESTABLISHMENT, ADMINISTRATION, FAILURE TO FUND OR COLLECTION OF THE CREDIT EXTENDED UNDER THIS AGREEMENT. 11.10 Power of Attorney. The Borrower hereby makes, constitutes and appoints the Administrative Agent the true and lawful agent and attorney-in-fact of the Borrower, with full power of substitution, (a) during the existence of any Event of Default, to receive, open and dispose of all mail addressed to the Borrower relating to the Contracts; (b) during the existence of any Event of Default, to open all such mail and remove therefrom any notes, checks, acceptances, drafts, money orders or other instruments constituting Collateral, with full power to endorse the name of the Borrower upon any such notes, checks, acceptances, drafts, money orders, instruments or other documents, and to effect the deposit and collection thereof, and the Administrative Agent shall have the further right and power to endorse the name of the Borrower on any documents relating to the Collateral; (c) to execute on behalf of the Borrower assignments, notices of assignment, financing statements and other public records and notices in respect of the Contracts; (d) during the existence of any Event of Default, to notify Purchasers of the Contracts to make all payments thereunder directly to the Administrative Agent at an address to be designated by the Administrative Agent and to execute and send other notices to such Purchasers and obligors as the Administrative Agent may deem necessary in order to protect and/or collect the same; and (e) to do any and all things necessary or take action in the name and on behalf of the Borrower to carry out the intent of this Agreement, including, without limitation, the grant of the security interest provided herein and to perfect and protect the security interest granted to the Administrative Agent with respect to the Collateral and the Administrative Agent's rights created under this Agreement, to act on behalf of the Borrower in connection with obtaining funds from any Approved Escrow Account and to endorse any checks or other instruments of payment in respect of any payment, performance or other surety bond made payable to Borrower or to Borrower and the Administrative Agent jointly. The Borrower agrees that neither the Administrative Agent nor any of its agents, designees or attorneys-in-fact will be liable for any acts of commission or omission, or for any error of judgment or mistake of fact or law with respect to the exercise of the power of attorney granted under this Section 11.10 except for its 127 own gross negligence or willful misconduct. The power of attorney granted under this Section 11.10 is coupled with an interest and shall be irrevocable during the term of this Agreement. 11.11 Survival of Indemnities. All indemnities set forth in this Agreement shall survive the execution and delivery of this Agreement and the execution and delivery of the Notes as well as the payment in full of the Notes and the otherwise full performance of this Agreement. 11.12 Conflicting Obligations; Rights and Remedies. To the extent that the terms of any of the Security Documents contain conflicting obligations, the terms set forth in this Agreement shall be deemed to be the controlling terms, provided that all rights and remedies of the Administrative Agent under the Security Documents are cumulative and in addition to every other right or remedy, and no right or remedy is intended to be exclusive of any other right or remedy. 11.13 Independent Nature of Lenders' Rights. Nothing contained herein or in any other Security Document, and no action taken by the Lenders pursuant hereto or thereto, shall be deemed to constitute the Lenders as a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement, and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. 11.14 Severability. In case any provision in or obligation under this Agreement or the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 11.15 Duplicate Originals, Execution in Counterpart. Two or more duplicate originals of this Agreement may be signed by the parties hereto, each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party hereto, and each set of counterparts which, collectively, show execution by each party hereto shall constitute one duplicate original. [Remainder of page intentionally left blank. Next page is signature page.] 128 IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Borrower: Lender: GRAND SUMMIT RESORT TEXTRON FINANCIAL CORPORATION PROPERTIES, INC. By /s/ Mark P. Girard By /s/ Nicholas L. Mecca ------------------------------ --------------------------------- Name: Mark P. Girard Name: Nicholas L. Mecca Title: Vice President Title: Vice President Commitment: $30,000,000 Lender: GREEN TREE FINANCIAL SERVICING CORPORATION By ----------------------------------- Name: Title: Commitment: $25,000,000 Administrative Agent: TEXTRON FINANCIAL CORPORATION By /s/ Nicholas L. Mecca ----------------------------------- Name: Nicholas L. Mecca Title: Vice President IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Borrower: Lender: GRAND SUMMIT RESORT TEXTRON FINANCIAL CORPORATION PROPERTIES, INC. By By /s/ Nicholas L. Mecca ------------------------------ --------------------------------- Name: Name: Nicholas L. Mecca Title: Title: V.P. Commitment: $30,000,000 Lender: GREEN TREE FINANCIAL SERVICING CORPORATION By ----------------------------------- Name: Title: Commitment: $25,000,000 Administrative Agent: TEXTRON FINANCIAL CORPORATION By /s/ Nicholas L. Mecca --------------------------------- Name: Nicholas L. Mecca Title: V.P. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Borrower: Lender: GRAND SUMMIT RESORT TEXTRON FINANCIAL CORPORATION PROPERTIES, INC. By By ------------------------------ --------------------------------- Name: Name: Title: Title: Commitment: $30,000,000 Lender: GREEN TREE FINANCIAL SERVICING CORPORATION By /s/ Christopher A. Goibros ----------------------------------- Name: Christopher A. Goibros Title: V.P., GENERAL MANAGER Commitment: $25,000,000 Administrative Agent: TEXTRON FINANCIAL CORPORATION By ----------------------------------- Name: Title: EX-10.72 24 (WATERVILLE) PROMISSORY NOTE EXHIBIT 10.72 SUBORDINATED PROMISSORY NOTE $2,750,000 Portland, Maine November 27, 1996 FOR VALUE RECEIVED, the undersigned Booth Creek Ski Acquisition Corp., Waterville Valley Ski Resort, Inc. and Mount Cranmore Ski Resort, Inc. (collectively referred to as "maker") jointly and severally promise to pay to the order of American Skiing Company (together with any subsequent holder of this Note herein referred to as "holder"), a corporation organized and existing under the laws of the State of Maine, with a principal place of business in the Town of Newry, Maine, the principal sum of Two Million Seven Hundred Fifty Thousand and 00/100 Dollars ($2,750,000) together with interest upon the principal sum hereof from time to time outstanding, computed from the date hereof at the rate of twelve percent (12%) per annum. Subject to the terms and provisions hereinafter contained, interest shall be payable semi-annually on December 31 and June 30 of each year beginning June 30, 1997 and continuing until maturity. Subject to the terms and provisions hereinafter contained, principal shall be payable in installments as follows: Date Principal Amount Due ---- -------------------- 1/10/97 $250,000 1/31/98 $100,000 1/31/99 $150,000 1/31/00 $200,000 1/31/01 $250,000 1/31/02 $300,000 1/31/03 $350,000 6/30/04 Remaining Principal Payments under this Subordinated Promissory Note (this "Note") shall be applied as follows: (1) first to the interest on the unpaid balance of the debt evidenced hereby and (2) then the remainder to the unpaid principal balance of the debt until the same is paid in full. Payments of principal and interest under this Note not made within fifteen (15) days following the date due shall bear interest at a rate per annum equal to 15% until so paid. This Note is subject to the condition that at no time shall the maker be obligated or required to pay interest at a rate which could subject the holder hereof to either civil or criminal liability, forfeiture or loss of principal, interest or other sums as a result of being in excess of the maximum interest rate which maker is permitted by law to pay. If by the terms of this Note maker would at any time be required or obligated to pay interest at a rate in excess of such maximum rate, then the rate of interest under this Note shall be deemed to be immediately reduced to such maximum rate for so long as such maximum rate shall be in effect and shall thereafter be payable at the rate herein provided. In case of failure to make payment within fifteen (15) days following the due date of any installments of, principal of, or interest on, this Note or in case of default (not cured within any applicable grace period) in the terms or conditions of (i) the Second Mortgage Deed, Security Agreement and Financing Statement dated as of the date hereof and executed by Waterville Valley Ski Resort, Inc. in favor of holder (as amended or otherwise modified from time to time, the "Waterville Mortgage") and (ii) the Second Mortgage Deed, Security Agreement and Financing Statement dated as of the date hereof and executed by Mount Cranmore Ski Resort, Inc. in favor of holder (as amended or otherwise modified from time to time, the "Cranmore Mortgage" and, together with the Waterville Mortgage, the "Mortgages"), subject to the terms and provisions hereinafter contained the holder of this Note shall have the option, upon delivery of written notice to the maker, to declare due and payable at once the entire principal balance hereof together with accrued interest at the rates hereinabove provided. All payments due hereunder and any notice given by the maker to the holder hereof shall be addressed to American Skiing Company, P.O. Box 450, Sunday River Access Road, Bethel, Maine 04217, Attn: Chief Administrative Officer unless written notice of another holder or address be given to the maker. Any notice given by the holder to the maker shall be addressed to Booth Creek Ski Acquisition Corp., 1000 South Frontage Road, Vail, Colorado 81657, Attn: Chairman unless written notice of another address be given to the holder. This Note evidences a loan for business and commercial purposes. Each maker is jointly and severally liable for all obligations hereunder. The maker and all other parties that may be or become liable herefor, whether principal, guarantor, endorser or otherwise, hereby severally waive demand, notice and protest, and waive all recourse to suretyship and guarantorship defenses generally, including but not limited to, any extensions of time for payment or performance which may be granted to the maker or to any other party, any modification or amendments to this Note or any document securing payment and performance hereof, any release of security, any release of a liable party or parties, and all other indulgences of any type which may be granted by the holder hereof to any or all of maker or any other party that may be or become liable herefor, and do also agree to pay all reasonable costs and expenses of any nature, whether incurred in or out of court, and whether incurred before or after this Note shall become due at its maturity date or otherwise, including but not limited to reasonable attorney's fees and costs, which the holder hereof may deem necessary or proper in connection with the collection or satisfaction of the indebtedness evidenced hereby or in the administration, supervision, preservation or protection (including but not limited to the maintenance of adequate insurance) of or realization upon any collateral security herefor. 2 Maker and all parties that may be or become liable herefor shall have the right to prepay the principal hereof in full or in part together with accrued interest to the date of payment on the principal amount being prepaid, at any time and from time to time without premium or penalty. The obligations of the maker hereunder are hereby made subordinate and junior in right of payment, to the extent and in the manner provided herein, to the prior payment in full in cash of all Senior Debt (as hereinafter defined) of the maker (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed). The following terms shall have the meanings hereinafter set forth: "Insolvency or Liquidation Proceeding" means any insolvency or bankruptcy or similar case or proceeding, or any reorganization, receivership, liquidation, dissolution or winding up of maker, whether voluntary or involuntary, or any assignment for the benefit of creditors or any other marshaling of assets and liabilities of the maker. "Post-Petition Interest" means all interest accrued or accruing on such indebtedness after the commencement of any Insolvency or Liquidation Proceeding against the obligor on such indebtedness in accordance with and at the contract rate (including, without limitation, any rate applicable upon default) specified in the agreement or instrument creating, evidencing or governing such indebtedness, whether or not, pursuant to applicable law or otherwise, the claim for such interest is allowed as a claim in such Insolvency or Liquidation Proceeding. "Representative" means, with respect to any Senior Debt, the agent or other representative(s), if any, of holders of such Senior Debt. "Senior Debt" means and includes all principal of, premium and interest on, and any other penalties, premiums, fees, charges, obligations, expense reimbursement or other liabilities (including, but not limited to, Post-Petition Interest) existing from time to time under (i) any indebtedness of maker (other than the Subordinated Obligation) incurred or established to finance the purchase price payable under that certain Purchase and Sale Agreement among Waterville Valley Ski Area, Ltd., Cranmore, Inc., American Skiing Company and Booth Creek Ski Acquisition Corp. dated as of August 30, 1996, and including any amendments, restatements, supplements, modifications, renewals and extensions thereof and any complete or partial refinancing and replacements thereof, (ii) any indebtedness of maker incurred or established with one or more financial institutions unrelated to maker to fund working capital requirements for the Waterville Valley Ski Resort in Waterville Valley, New Hampshire and/or the Mt. Cranmore ski resort in North Conway, New Hampshire (the "Resorts") and including any amendments, restatements, supplements, modifications, renewals and extensions thereof and any complete or partial refinancing and replacements thereof, (iii) indebtedness of maker incurred or established to finance the purchase or improvement, or any capitalized leases, of property or assets to be used in the operation of the Resorts and including any amendments, restatements, supplements, modifications, renewals and extensions thereof and any complete or partial refinancings and replacements thereof, and (iv) any other indebtedness of maker owing to the financial institutions that provided the financing described in clauses (i), (ii) and (iii) above, including their successors and assigns. 3 "Subordinated Obligation" means this Note and all obligations of payment hereunder and under the Mortgages including principal, interest, premium and costs, expenses and other charges. Upon any distribution of cash, securities or other property to creditors of the maker in a liquidation or dissolution of the maker or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the maker or its property, in an assignment for the benefit of creditors or any marshaling of the maker's assets and liabilities; (1) holders of Senior Debt shall be entitled to receive payment in full in cash of all Senior Debt before the holder of this Note shall be entitled to receive any payment with respect to this Note; and (2) until all Senior Debt (as provided in subsection (1) above) is paid in full in cash, any distribution to which holders of this Note would be entitled but for the subordination provisions of this paragraph shall be made to holders of such Senior Debt, as their interests may appear. The maker may not make any payment or distribution to any holder of this Note until all Senior Debt has been paid in full in cash; provided, however, that the maker may make payments of principal and interest on this Note unless: (1) a default in the payment of the principal of or premium or interest on Senior Debt (a "Payment Default") occurs and is continuing; or (2) a default, other than a Payment Default (a "Non-Payment Default"), under any agreement, indenture, or other document governing Senior Debt occurs and is continuing that permits holders of Senior Debt as to which such default relates to accelerate its maturity and the holder of this Note receives a notice of such default (a "Payment Blockage Notice") from any holder of Senior Debt. If the holder of this Note receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice shall be effective for purposes of this subsection (2) unless and until at least 179 days shall have elapsed since the delivery of the immediately prior Payment Blockage Notice. No Non-Payment Default that existed or was continuing on the date of delivery of any Payment Blockage Notice shall be, or made, the basis for a subsequent Payment Blockage Notice. The maker may and shall resume all payments on this Note upon: (1) in the case of a default referred to in subsection (1) above, the date upon which such default is cured or waived; or (2) in the case of a default referred to in subsection (2) above, the earlier of the date upon which the 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. 4 If payment of this Note is accelerated because of any default hereunder or under the Mortgages, the maker shall promptly notify holders of Senior Debt of the acceleration. In the event that any holder of this Note receives any payment with respect to this Note at a time when such payment is prohibited hereby, such payment shall be held by such holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to the holders of Senior Debt as their interests may appear under the indenture or other agreement (if any) pursuant to which such Senior Debt may have been issued, as their respective interests may appear or as directed by final, non-appealable action of a court of competent jurisdiction for application to the payment of all Senior Debt remaining unpaid to the extent necessary to pay all Senior Debt in full in accordance with its terms, after giving affect to any concurrent payment or distribution to or for the holders of such Senior Debt. With respect to the holders of Senior Debt, the holder hereof undertakes to perform only such obligations as are specifically set forth herein, and no implied covenants or obligations with respect to the holders of such Senior Debt shall be read into this Note against the holder hereof. The holder hereof shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the holder hereof shall accept or retain money or assets to which any holders of such Senior Debt shall be entitled by virtue of this Note, except if such payment is made at a time when the terms of this Note prohibit such payment. The maker shall promptly notify the holder hereof in writing of any facts known to the maker that would cause a payment under this Note to violate this Note, but failure to give such notice shall not affect the subordination of this Note to the Senior Debt of the maker as provided herein. After all Senior Debt is paid in full in cash and until this Note is paid in full the holder of this Note shall be subrogated to the rights of holders of such Senior Debt to receive distributions applicable to such Senior Debt to the extent that distributions otherwise payable to the holder hereof have been applied to the payment of such Senior Debt. A distribution made hereunder to holders of Senior Debt that otherwise would have been made to the holder hereof is not, as between the maker and holder hereof a payment by the maker. The holder may not unilaterally commence proceedings to enforce any rights or remedies that it may have against the maker of any of its assets under this Note or the Mortgages or accelerate this Note until the passage of 360 days after the receipt by maker and the holders of the Senior Debt of notice from the holder hereof that a default has occurred under this Note or the Mortgages. 5 The foregoing provisions defines the relative rights of the holder of this Note and holders of Senior Debt of the maker. Nothing in this Note shall: (1) impair, as between the maker, and the holder of this Note, the obligation of the maker, which is absolute and unconditional, to pay principal of and premium, interest and other fees, charges and expenses, if any, on this Note in accordance with its terms; or (2) affect the relative rights of the holder of this Note and creditors of the maker other than the rights of the holder of this Note in relation to holders of the Senior Debt; or (3) except as expressly limited hereunder, prevent the holder of this Note from exercising its available remedies upon a default hereunder or under the Mortgages, subject to the rights of holders of such Senior Debt to receive distributions and payments otherwise payable to the holder of this Note. If the maker fails because of the foregoing provisions to pay principal of or premium, interest or other fees, charges and expenses, if any, on this Note on the due date, the failure shall none-the-less constitute a default hereunder. No right of any holder of Senior Debt to enforce the subordination of the indebtedness evidenced by this Note shall be impaired by any act or failure to act by the maker or any holder of Senior Debt or the failure of the maker or any holder to comply with this Note. The holders of any Senior Debt of the maker may, at any time and from time to time, without the consent of or notice to the holder hereof, without incurring any liabilities to the holder hereof and without impairing or releasing the subordination and other benefits provided herein or the obligations of the holder of this Note to the holders of such Senior Debt, even if any holder's right of reimbursement or subrogation or other right or remedy is affected, impaired or extinguished thereby, do any one or more of the following: (i) amend, renew, exchange, extend, modify, increase or supplement in any manner such Senior Debt or any instrument evidencing or guaranteeing or securing such Senior Debt or any agreement under which such Senior Debt is outstanding (including, but not limited to, changing the manner, place or terms of payment or changing or extending the time of payment of, or renewing, exchanging, amending, increasing, releasing, terminating or altering any such instrument or agreement), (ii) sell, exchange, release, surrender, realize upon, enforce or otherwise deal with in any manner and in any order any property pledged, mortgaged or otherwise securing such Senior Debt or any liability of any obligor thereon, to such holder, or any liability incurred in respect thereof; (iii) settle or compromise any such Senior Debt or any other liability of any obligor of such Senior Debt to such holder or any security therefor or any liability incurred in respect thereof and apply any sums by whomsoever paid and however realized to any liability (including, without limitation, payment of any Senior Debt) in any manner or order; and (iv) release, terminate or otherwise cancel, or fail to take or to record or otherwise perfect, for any reason or for no reason, any lien or security interest securing such Senior Debt by whomsoever granted, exercise or delay in or refrain from exercising any right or remedy against any obligor or any guarantor or any other person, elect any remedy and otherwise deal freely with any obligor and any security for such Senior Debt or any liability of any obligor to the holders of such Senior Debt or any liability incurred in respect to such Senior Debt. 6 Upon any payment or distribution of assets of the maker referred to herein, the holder of this Note shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of an authorized representative of the holders of Senior Debt or the maker or of the liquidating trustee or agent or other person making any distribution to the holder of this Note for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Debt and other indebtedness of the maker, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto. For all purposes of this Note, a "payment or distribution on account of Subordinated Obligations" shall include, without limitation, any direct or indirect payment or distribution on account of the purchase, prepayment, redemption, retirement, defeasance or acquisition of this Note, any recovery by the exercise of any right of set-off, any direct or indirect payment of principal, premium or interest with respect to or in connection with any mandatory or optional redemption or purchase provisions, any direct or indirect payment or distribution payable or distributable by reason of any Subordinated Obligations, and any direct or indirect payment or recovery on any claim relating to or arising under this Note. If any obligation or portion of this promissory note is determined to be invalid or unenforceable under law, it shall not affect the validity or enforceability of the remaining obligations or portions hereof. If there is more than one party signatory hereto, the liability of all such parties whether principal, guarantor, endorser or otherwise hereunder shall be joint and several. This Note shall be governed by and construed in accordance with the laws of the State of Maine without regard to the conflicts of laws and provisions thereof. Maker hereby consents to and acknowledges the pledge and assignment of this Note to Fleet National Bank, as agent, pursuant to that certain Security Agreement among American Skiing Company certain subsidiaries thereof and Fleet National Bank, as agent, dated June 28, 1996. 7 The provisions of this Note regarding subordination and other matters relating to the holders of Senior Debt are for the benefit of the holders of Senior Debt and may be enforced directly by them against the holder of this Note. The holder of this Note acknowledges and agrees, by acceptance hereof, that the holders of the Senior Debt have relied upon and will continue to rely upon the subordination provided for herein in entering into the transaction to which they are a party and making the extensions of credit comprising the Senior Debt. The holder of this Note hereby waives notice of or proof of reliance hereon. BOOTH CREEK SKI ACQUISITION CORP. By: /s/ [Illegible] ---------------------------- Name: -------------------------- Title: ------------------------- WATERVILLE VALLEY SKI RESORT, INC. By: /s/ [Illegible] ---------------------------- Name: -------------------------- Title: ------------------------- MOUNT CRANMORE SKI RESORT, INC. By: /s/ [Illegible] ---------------------------- Name: -------------------------- Title: ------------------------- EX-10.74 25 PURCHASE AND SALE AGREEMENT EXHIBIT 10.74 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASE AND SALE AGREEMENT by and between WOLF MOUNTAIN RESORTS, L.C. ("Seller") and ASC UTAH, INC. ("Buyer") dated as of July 3, 1997 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page AGREEMENT......................................................................1 ARTICLE I PURCHASE AND SALE....................................................1 1.01 Subsidiaries......................................................1 1.02 Ski Areas Improvements............................................2 1.03 Personal Property.................................................2 1.04 Licenses and Permits..............................................2 1.05 Books and Records.................................................2 1.06 Intellectual Property.............................................2 1.07 Contract Rights...................................................2 1.08 Water Rights......................................................3 1.09 Claims, Suits, etc................................................3 1.10 Accounts Receivable; Deposits.....................................3 ARTICLE II EXCLUDED ASSETS.....................................................3 2.01 Cash..............................................................3 2.02 Accounts Receivable...............................................4 2.03 Other Assets......................................................4 2.04 Ground Lease Assets...............................................4 2.05 Legal Restrictions................................................4 2.06 Concert Contract..................................................4 ARTICLE III NO ASSUMPTION OF LIABILITIES.......................................4 3.01 No Assumption by Buyer............................................4 ARTICLE IV PURCHASE AND SALE...................................................4 4.01 Purchase Price....................................................4 4.02 Purchase Price Adjustment.........................................5 4.03 Consulting Agreement..............................................6 4.04 Adjustment for Taxes, Prepayments and Deposits....................7 4.05 Adjustment for Utilities..........................................7 4.06 Transfer Taxes....................................................7 4.07 Adjustment Payment................................................8 ARTICLE V CLOSING..............................................................8 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SELLER............................8 6.01 Corporate Organization............................................8 6.02 Authorization of Agreement........................................8 6.03 Compliance with Laws..............................................9 6.04 Licenses and Permits..............................................9 6.05 Environmental Matters; Health and Safety..........................9 6.06 Title............................................................10 6.07 Applicable Zoning and Use........................................10 6.08 Litigation.......................................................10 6.09 Warranty of Purchased Assets.....................................10 TABLE OF CONTENTS (continued) Page 6.10 Seller Not "Foreign Persons\.....................................11 6.11 Taxes............................................................11 6.12 Contracts and Commitments........................................11 6.13 Intellectual Property............................................11 6.14 Employee Benefit Plans...........................................12 6.15 Labor and Employee Relations.....................................12 6.16 General Provisions Regarding Article VI..........................12 ARTICLE VII REPRESENTATIONS AND WARRANTIES OF BUYER...........................12 7.01 Corporate Organization...........................................13 7.02 Authorization of Agreement.......................................13 7.03 Financial Status.................................................13 7.04 Litigation.......................................................13 ARTICLE VIII CONDITIONS PRECEDENT TO CLOSING BY BUYER ON THE CLOSING DATE.....14 8.01 Compliance.......................................................14 8.02 No Material Adverse Change.......................................14 8.03 Closing Documents................................................14 8.04 Permits and Licenses.............................................15 8.05 Failure to Deliver the Purchased Assets by the Closing Date......16 8.06 Litigation and Regulatory Action.................................16 ARTICLE IX CONDITIONS PRECEDENT TO CLOSING BY SELLER ON THE CLOSING DATE......16 9.01 Compliance.......................................................16 9.02 Closing Documents................................................16 9.03 Payment of Money.................................................17 ARTICLE X COVENANTS OF SELLER AS TO INTERIM OPERATION.........................17 10.01 Conduct of Business.............................................17 10.02 Risk of Loss....................................................18 10.03 Access..........................................................18 10.04 Insurance Coverage..............................................19 10.05 Maintenance of Purchased Assets.................................19 10.06 Competing Offers................................................19 10.07 Further Assurances..............................................20 10.08 Specific Arrangements...........................................20 ARTICLE XI INDEMNITY..........................................................20 11.01 Seller's Indemnity..............................................20 11.02 Buyer's Indemnity...............................................20 ii TABLE OF CONTENTS (continued) Page ARTICLE XII MISCELLANEOUS.....................................................21 12.01 Consents to Assignment by Third Parties.........................21 12.02 Confidentiality.................................................21 12.03 Brokers.........................................................21 12.04 Representations and Warranties..................................21 12.05 Further Assurances..............................................21 12.06 Tax Matters.....................................................22 12.07 Amendment.......................................................22 12.08 Governing Law; Severability.....................................22 12.09 Retention of Books and Records..................................22 12.10 Waiver..........................................................23 12.11 Headings........................................................23 12.12 Counterparts....................................................23 12.13 Notices.........................................................23 12.14 Assignment......................................................24 12.15 Expenses........................................................24 12.16 Third Party Beneficiaries.......................................24 12.17 Entire Agreement................................................24 12.18 Reconveyance....................................................24 iii PURCHASE AND SALE AGREEMENT THIS AGREEMENT is made and entered into as of this 3rd day of July, 1997, between Wolf Mountain Resorts, L.C., a Utah limited liability company with a place of business in Summit County, Utah ("Seller") and ASC Utah, a Maine corporation with a principal place of business at Newry, Maine ("Buyer"). RECITALS 1. Seller owns, leases or has a real property interest in the land used in the operation of the Wolf Mountain Ski Resort and intends to lease or sublease such land to Buyer pursuant to a Ground Lease Agreement more particularly described herein. 2. Seller owns or leases buildings, improvements and personal property constituting a portion of, or used in connection with, the Wolf Mountain Ski Resort, as more specifically identified in this Agreement. 3. Seller wishes to sell to Buyer, and Buyer wishes to purchase from Seller all of Seller's buildings, improvement and personal property owned or leased by Seller constituting a portion of, or used in connection with, the Wolf 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, Seller agrees to sell, convey, transfer, set over, assign and deliver to Buyer, and Buyer agrees to purchase and accept from Seller, all of Seller's right, title and interest in and to the following assets (the "Purchased Assets"): 1.01 Subsidiaries. (a) All right, title and interest of the Seller in and to all issued and outstanding capital stock in Community Water Co., a Utah corporation ("Subsidiaries"). (b) Seller shall cause to be conveyed to Buyer all real, personal and mixed property of any nature whatsoever owned by OGM, L.C., under the same terms and conditions as specified herein for the same categories of Purchased Assets of Seller. 1.02 Ski Areas Improvements. All buildings (including, without limitation, lift buildings, base lodges, restaurants sports facilities, condominium units, service buildings and pumphouse buildings), structures, lifts, towers, snowmaking equipment, fixtures and other improvements owned by Seller which are utilized in any way in the operation of the Wolf Mountain Ski Resort including without limitation the items listed in Schedule 1.02 (the "Ski Area Improvements"). 1.03 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 Seller which constitute a portion of or are utilized in any way in the operation of the Wolf Mountain Ski Resort, including without limitation the personal property described in Schedule 1.03 (the "Personal Property"). 1.04 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 by Seller and involving the Purchased Assets ("Ski Area Business"), including but not limited to the licenses and permits listed on Schedule 1.04 ("Assumed Permits"). 1.05 Books and Records. Copies of all books, records, reports, studies, data and other information owned by or under control of Seller and that relate in any way to the Purchased Assets or the Ski Area Business ("Records"). 1.06 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 Purchased Assets or the Ski Area Business, including without limitation as listed on Schedule 1.06 ("Intellectual Property Rights"). 1.07 Contract Rights. All right, title and interest of Seller 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 operation of the Purchased Assets or the Ski Area Business, except Seller's interests in leases being subleased to Buyer pursuant to the Resort Ground Lease, including those interests listed in Schedule 1.07. 2 1.08 Water Rights. All right, title and interest of Seller in and to any and all water rights or entitlements of any nature whatsoever, including without limitation decree rights, appropriated rights, paper water rights, wet water rights, actual diversion rights or water storage rights and/or capacity, to the extent such rights do not pass to Buyer under the Resort Ground Lease for the term thereof ("Water Rights"). Water Rights include without limitation the rights listed in Schedule 1.08, but excluding the Water Rights described on Schedule 2.03. 1.09 Claims, Suits, etc. All claims, suits, and causes of action that Seller has against third parties with respect to the Purchased Assets or the Ski Area Business, 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 Seller's accounts receivable (or pro rata portion thereof) 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 (or pro rata portion thereof) relating thereto. It is the intention of Seller and Buyer that the foregoing description of the Purchased Assets be construed broadly so as to identify any and all tangible or intangible real, personal or mixed property and property interests, of any nature whatsoever, owned by Seller that constitutes a portion of, relates to or is in any way associated with the Ski Area Business, excepting the Excluded Assets. Seller hereby acknowledges and agrees that Buyer will undertake a comprehensive asset search prior to Closing and that Seller and Buyer may refine the descriptions of the Purchased Assets set forth above and attached hereto in the Schedules identified above prior to Closing with the consent of both parties, in which event the more comprehensive asset descriptions shall be used in transferring and conveying Seller's right, title and interest in and to Purchased Assets at the Closing. ARTICLE II EXCLUDED ASSETS Notwithstanding the foregoing, the assets listed below shall be excluded from the Purchased Assets and retained by Seller (the "Excluded Assets"): 2.01 Cash. All of the Seller's cash on hand and any cash equivalents in the form of bank accounts, investment securities, notes and other deposits, prepaid expenses and refunds, excepting those identified in Section 1.10. 3 2.02 Accounts Receivable. All of Seller's accounts receivable (or pro rata portion thereof) 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. 2.04 Ground Lease Assets. Assets leased under the Resort Ground Lease including without limitation, all of the land covered thereby (the "Resort Land"). 2.05 Legal Restrictions. Those assets identified in Schedule 2.05, with respect to which Seller is prohibited by law from transferring assets to Buyer. 2.06 Concert Contract. The United Concerts contract for the summer concert series. ARTICLE III NO ASSUMPTION OF LIABILITIES 3.01 No Assumption by Buyer. Except for the liabilities of Seller hereby assumed by Buyer as described in Schedule 3.01 hereof or as otherwise expressly provided for in this Agreement ("Assumed Liabilities"), Buyer does not, and shall not be obligated to assume or become liable for any of Seller liabilities, obligations, debts, contracts or other commitments whatsoever, whether known or unknown, fixed or contingent, now existing or hereafter arising. ARTICLE IV PURCHASE AND SALE 4.01 Purchase Price. In consideration of Seller's sale, assignment and transfer of the Purchased Assets to Buyer and Seller's 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 Seller the amount of Seven Million Seven Hundred Thousand Dollars ($7,700,000) in the manner and upon the conditions specified below (the "Purchase Price"): (a) Deposit. Upon the execution of this Agreement Two Hundred Thousand Dollars ($200,000.00) (the "Deposit") shall be deposited with Seller as an earnest money deposit. 4 (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 Seller 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 Seller of the conditions set forth in Article VIII hereof, and the Seller is not in breach of this Agreement in any material respect, then upon termination of this Agreement Seller shall be entitled to retain the Deposit, together with any earnings thereon, for their own account in addition to any and all other claims, actions or remedies which Seller 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 Seller the amount of One Million Two Hundred Thousand Dollars ($1,200,000.00), less 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) Promissory Note. At Closing Buyer shall deliver to Seller a Promissory Note in the principal amount of Six Million Five Hundred thousand Dollars ($6,500,000), bearing interest at a rate of twelve percent (12%) per annum, payable as of the 1st day of each month and with principal payable in two installments as follows: Date Principal Payment ---- ----------------- January 31, 1998 $2,300,000 Earlier of (1) any public offering by Tenant, Buyer or Holdings (defined below), or (2) April 15, 2005 $4,200,000 The Promissory Note shall be guaranteed by ASC Holdings, Inc. ("Holdings") 4.02 Purchase Price Adjustment. (a) The portion of the Purchase Price payable to Seller at Closing shall be used and applied at Closing on a dollar-for-dollar basis by the amount necessary to the amounts set forth in this Schedule 4.02 to deliver title to all Purchased Assets, in accordance with the terms hereof. (b) All Purchase Price payable to Seller on a post-Closing basis shall be subject to reduction on a dollar-for-dollar basis by the amount required to be paid by Buyer to satisfy any further or additional liens or encumbrances upon, or claims to or against the 5 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, but only to the extent such liens, encumbrances, claims, liabilities or obligations (i) do not represent Assumed Liabilities, (ii) result from the breach or violation of the representation, warranties or covenants of Seller under this Agreement (as limited by Section 6.16 below), or (iii) constitute an Indemnified Expense as defined below. 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 Seller with written notice of any such 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. Seller shall have a period of ten (10) days following receipt of such notice to advise Buyer in writing whether Seller disputes 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, effect any such reduction or agree with any claimant to do the same unless each of the following conditions exist: (A) 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, within thirty days, immediately enforceable against the Purchased Assets, or any portion thereof, in such a fashion as would materially interfere with Buyer's possession or use of such assets or the Buyer, (B) Seller fails 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 pending the completion of the proceedings to appeal or contest, and (C) the full amount thereof is neither bonded by the Seller nor secured by other collateral posted by the Seller 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 Seller, at the Seller's 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 Seller to act on Buyer's behalf in respect of such claims. Seller 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 Seller's sole cost and expense, and in Seller's 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 Seller's position as to such matters, at Buyers sole cost and expense. (c) Nothing set forth in this Agreement shall in any way limit or restrict any rights or entitlements Buyer may have at low or in equity. 4.03 Consulting Agreement. Separate and apart from the Purchase Price, as a condition of Closing, Buyer shall enter into a consulting agreement with Mr. Kenneth Griswold pursuant to which Griswold shall agree 6 to provide consulting services to Buyer on a basis acceptable to both Buyer and Griswold for a period of two years following 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 as mutually agreed by Buyer and Seller prior to Closing. 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 as mutually agreed by Buyer and Seller prior to Closing. Seller's and Buyer's obligation to make post-Closing Date adjustments for taxes, prepayments and deposits shall survive the Closing. Seller's obligations hereunder not funded separately by Seller at Closing shall be deducted from cash payable to Seller at Closing and paid by Buyer. 4.05 Adjustment for Utilities. Seller 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 Seller 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 as mutually agreed by Buyer and Seller prior to Closing based on the most recent bills therefor. The Seller 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. Seller's and Buyer's obligation to make such post-Closing Date adjustments for utilities shall survive the Closing. Seller's obligations hereunder not funded separately by Seller at Closing shall be deducted from cash payable to Seller 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. Seller shall pay any land gain tax or similar tax due upon sale of the 7 Purchased Assets. Seller's obligations hereunder not funded separately by Seller at Closing shall be deducted from cash payable to Seller 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 Parsons, Behle and Latimer in Salt Lake City or such other location in the Salt Lake City, Utah area as Buyer and Seller 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, or at such other time and place as the parties may agree in writing. Notwithstanding the foregoing if the Closing does not occur on or before July 31, 1997, this Agreement may be terminated by either party. The date of Closing is sometimes referred to herein as the "Closing Date". ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants to Buyer as follows: 6.01 Corporate Organization. Seller is a limited liability company duly organized and legally and validly existing under the laws of the State of Utah, and has full power and authority to own or lease its properties and to carry on its businesses as now conducted and to execute and deliver this Agreement and to carry out the terms hereof. OGM, L.C. is a limited liability company duly organized and legally and validly existing under the laws of the State of Utah, and has full power and authority to own or lease its properties and to carry on its businesses as now conducted. Community Water Co. is a corporation duly organized and legally and validly existing under the laws of the State of Utah, and has full power and authority to own or lease its properties and to carry on its businesses as now conducted . 6.02 Authorization of Agreement. The execution and delivery of this Agreement and the agreements contemplated hereby (the "Related Agreements") by Seller and the performance by Seller of the obligations to be performed hereunder and thereunder have been duly authorized by all necessary and appropriate action by Seller under its Operating Agreement. Except as listed in Schedule 6.02 the execution 8 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 Seller is a party, or by which it or the Purchased 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 Seller 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, Seller (a) does not have any Seller's Knowledge (as defined herein) of any 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 Area Business, including without limitation, environmental and health and safety laws rules and regulations, and (b) has not received written notification of any asserted uncured material past or present failure by any of them to operate the Purchased Assets and the Ski Area Business in accordance with any such law, ordinance or regulation, or of any event that has occurred which with notice or the passage of time would constitute any such failure. 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 1.04. (b) The Seller has 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 that is currently required for the operation of the Ski Area Business. (c) Except as reported in Schedule 1.04, the Licenses and Permits listed on Schedule 1.04 are all of the governmental licenses, permits, authorizations, approvals and certificates which are, to Seller's Knowledge, required for the current use of the Purchased Assets for the Ski Area Business. 6.05 Environmental Matters; Health and Safety. (a) Except as disclosed in Schedule 6.05, to Seller's Knowledge, there are no outstanding or, threatened actions, claims, proceedings, determinations or judgments by any party, including, but not limited to, any governmental authority or agency, against or involving the Seller, 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 9 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 environmentally contaminated condition or substance. Except as listed in Schedule 6.05, there are, to the Seller's Knowledge, no outstanding or 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. 6.06 Title. Except as set forth in Schedules 6.06, Seller holds and shall convey to Buyer at Closing good and marketable title to all Purchased Assets 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 materially interfere with the current use of the Purchased Assets for Ski Area Business, and the sale of the Purchased Assets does not require the consent of any person or entity. Except for those listed on Schedule 6.12, Seller have no outstanding leases, licenses, occupancy agreements or any contracts or agreements with respect to the Purchased Assets. 6.07 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 applicable federal, state and local laws, rules and regulations and under the Assumed Permits held by Seller. 6.08 Litigation. Except as provided in Schedule 6.08, there is, to Seller's Knowledge, 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 threatened, against Seller with respect to the Ski Area Business or any of the Purchased Assets. 6.09 Warranty of Purchased Assets. All of the Purchased Assets consisting of buildings, machinery and equipment and other tangible personal property or improvements to real estate are being purchased "As-Is, Where-Is", and Seller specifically disclaims any representations or warranties with respect thereto, including without limitation, any warranty of merchantability, condition or fitness for a particular purpose. 10 6.10 Seller Not "Foreign Persons". Seller is not a "foreign person" as defined in Internal Revenue Code (the "Code") Section 1445, and Seller will execute and deliver to Buyer at Closing an affidavit in compliance with Code Section 1445(b)(2). 6.11 Taxes. Except as described in Schedule 6.11, Seller has timely filed all tax returns, tax information returns and other tax reports required to be filed with any applicable governmental authorities through the Closing Date which relate to the Purchased Assets or the Ski Area Business, 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 Seller may be contesting in good faith in appropriate proceedings. Seller is not delinquent in the payment of any tax assessment or governmental charge which relates to any of the Purchased Assets, no written notices asserting deficiencies for any taxes which relate to any of the Purchased Assets have been received, and no requests for waivers of the time to assess or pay any such tax are pending, except such as are listed in Schedule 6.11 or that 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 except as listed in Schedule 6.11 or that will be paid and discharged at Closing. 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. 6.12 Contracts and Commitments. Schedule 6.12 sets forth a description of all material contracts, agreements and commitments of Seller, constituting the Purchased Assets. Each executed contract or commitment set forth in Schedule 6.12 hereto is in full force and effect and, except as set forth in Schedule 6.12, the Seller is not in default under any such contract or commitment and such contracts and commitments may be freely assigned to Buyer without the consent or approval of any third parties. 6.13 Intellectual Property. Attached as Schedule 1.06 is a list of Seller's 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). Seller have not granted any outstanding licenses or other rights to use any Intellectual Property Rights, and Seller is not liable, nor Seller 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 Seller in, to or under any Intellectual Property Rights will be adversely affected by the consummation of the transactions contemplated hereby. To Seller's Knowledge, the use of the Intellectual Property Rights in the manner conducted by Seller during the 1996-1997 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. 11 6.14 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 Seller or applicable to its employees is listed in Schedule 6.15. Each of the above plans has been, to Seller's Knowledge, operated and administered in accordance with applicable laws, including ERISA and the Code. Buyer assumes no responsibility, liability or obligation with respect to such plans and such plans shall be administered by Seller following the Closing. 6.15 Labor and Employee Relations. Except as listed in Schedule 6.15, Seller has no ongoing employment relationships other than employment of its employees at will. No persons have employment obligations to Seller that will restrict their freedom to become the employees of Buyer if Buyer so desires. Buyer is under no obligation to employ any of Seller's employees. 6.16 General Provisions Regarding Article VI. (a) The representations and warranties contained in this Article VI shall survive the Closing and continue in force for the periods set forth below: (i) Section 6.11 - no time limit; (ii) Sections 6.05 and 6.06 - Seven years following Closing; and (iii) Sections 6.01 - 6.04, 6.07 - 6.10 and 6.12 - 6.16 - three years following Closing. (b) Sellers disclaim any express or implied warranties not set forth in this Agreement, the Resort Ground Lease or any agreements, documents, instruments, deeds or other written material executed by Seller and delivered at Closing. (c) "Seller's Knowledge" - Seller will be deemed to have "knowledge" of a particular fact or other matter by any one or more of Michael Baker, Kenneth Griswold or Paul Peters, Beth Moon, Steve Bench, Steve Huntzberger and Dick Reynolds: (i) Is actually aware of such fact or other matter; or (ii) Any one or more of such persons could reasonably be expected to become aware of such fact or other matter in the ordinary course of business. ARTICLE VII REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby represents and warrants to Seller as follows: 12 7.01 Corporate Organization. Buyer 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 and to execute, deliver and perform its obligations hereunder and under the Related Agreements. Buyer is qualified as a foreign corporation under the laws of the State of Utah. Buyer is a Maine corporation, qualified to do business in the State of Utah, all of the issued and outstanding common stock of which is owned beneficially and of record by Holdings. Holdings is a Maine corporation, all of the outstanding voting stock of which is owned beneficially and of record by Leslie B. Otten. American Skiing Company, a Maine corporation ("ASC"), is a subsidiary of ASC Holdings, Inc. 96% of the issued and outstanding stock of ASC is owned by Holdings. 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 Articles 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. 7.03 Financial Status. (a) There has been no material change in the financial condition of American Skiing Company since the date of filing of American Skiing Company's most recent Form 10Q with the Securities and Exchange Commission. (b) American Skiing Company is not in default under its $120,000,000 12% Senior Subordinated Notes due 2006 or its $39,132,000 13 3/4% Subordinated Discount Notes due 2007, nor has any event or conditioned occurred which, with the passage of time or the giving of notice or both would constitute a default thereunder. 7.04 Litigation. There is no action, suit or 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 Buyer's knowledge, threatened against Buyer, ASC or 13 Holdings, that if adversely determined would have a material adverse impact upon any such entity's financial condition. 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 Seller 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 Seller 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. Seller 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) The Resort Ground Lease in the form attached hereto as Schedule 8.03(b), but with such additional provisions or grants of other interests, mortgages, commitments or agreements added thereto prior to the execution and delivery thereof by Buyer and Seller as may be necessary, in Buyer's reasonable judgment, to protect Buyer's leasehold estate established under the Resort Ground Lease from being adversely affected by Sellers bankruptcy, insolvency, receivership or other financial distress. (b) An owner's title insurance policy or commitments, as applicable, 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, insuring (i) Buyer's leasehold interest under the Resort Ground Lease and (ii) all real estate that is the subject of any contracts, agreements or options to acquire real estate included in the Purchased Assets or the Resort Ground Lease, and (iii) any and all real estate owned by the Subsidiaries, issued by a title insurance company acceptable to Buyer, at Buyer's expense, insuring such interests and/or such real property in the amount of at least $36 million containing only such Schedule B exceptions as are acceptable to Buyer; and 14 Seller shall have provided to the extent reasonably possible all statements, affidavits, and certificates which are customarily required of Seller 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 reasonable efforts to obtain. (c) Bills of sale, stock powers, assignments or other appropriate conveyance documents conveying all Purchased Assets to Buyer duly executed by Seller (Seller 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) together with all consents, waivers and authorizations of any person required in order to validly convey such Purchased Assets; (d) Assignments of all Assigned Contracts identified in Schedule 1.07, together with all consents, waivers and authorizations of any person required for the valid assumption of the Assigned Contracts. (e) Certified copies of the authorization by Seller of the sale of the Purchased Assets to Buyer in accordance with this Agreement and Seller's execution and delivery of this Agreement; (f) An affidavit, under penalty of perjury, indicating Seller's United States taxpayer identification number and stating that Seller 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 Utah for each of Seller and the Subsidiaries and incumbency certificates of Seller and the Subsidiaries, together with a certified copy of each of Seller's and the Subsidiaries' Operating Agreement and other organizational documents; (h) To the extent provided by Utah taxing authorities, a written statement from Utah taxing authorities certifying that the Seller and the Subsidiaries have no past-due state income or employment tax liability, except such as will be satisfied at Closing with the proceeds of the sale; and (i) Such other documents and certificates as are contemplated hereby or as Buyer or its counsel may reasonably request. 8.04 Permits and Licenses. Seller 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, to the extent available from applicable governmental authorities, required for the ownership and operation of the Purchased Assets and the Resort Land consistent with its historical operations. 15 8.05 Failure to Deliver the Purchased Assets by the Closing Date. If Seller is 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 not have the right to terminate this Agreement, but 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 Seller or the Subsidiaries, 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 Seller or the Subsidiaries, or the Purchased Assets, in any pending proceedings. ARTICLE IX CONDITIONS PRECEDENT TO CLOSING BY SELLER ON THE CLOSING DATE The obligations of Seller 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 Seller 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. Seller and Buyer shall have received any and all approvals required under the Hart, Scott, Rodino Act, any applicable bulk sales laws or other governmental approvals. 9.02 Closing Documents. Buyer shall have delivered to Seller, in a form reasonably satisfactory to counsel for Seller: (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 Seller 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 such company's execution and deliver of this Agreement and the guaranty attached to this Agreement; 16 (b) an assumption agreement or agreements in form acceptable to Seller with respect to the Assumed Liabilities; (c) a guaranty of Buyer's obligations under subsection 4.01(c) hereof and of the Resort Ground Lease by Holdings. in form attached hereto; (d) such other documents and certificates as are contemplated hereby or as Seller or their counsel may reasonably request including without limitation, the Resort Ground Lease and the Consulting Agreement referred to in Section 4.03 above; (e) Agreement of Buyer and ASC in recordable form to honor six (6) lifetime pass commitment of Mike Baker to Annette R. Baker as well as agreement to provide Mike Baker and Kenneth Griswold with the same skiing privileges and merchandise and food and beverage discounts as made available to American Skiing Company senior vice presidents; and (f) a sublease to Kenneth Griswold for facilities necessary for 15-22 dates to continue the United Concert summer concert series, with the general terms therefor summarized in Schedule 9.02(g). 9.03 Payment of Money. Buyer shall have paid the Deposit as provided in Section 4.01(a), the cash portion of the Purchase Price to the Seller as provided in Section 4.01(b), and delivered the note described in Section 4.01(c). ARTICLE X COVENANTS OF SELLER AS TO INTERIM OPERATION Seller hereby covenant and agree with Buyer as follows: 10.01 Conduct of Business. From the date hereof to the Closing Date, Seller 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 Seller outside of the ordinary course of business consistent with past practices. Without limiting the foregoing, except as specifically contemplated in this Agreement, from the date of this Agreement to the Closing, Seller will: (a) not engage in any transaction 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; 17 (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 Seller; (e) not cause a breach of any material contract or commitment, collective bargaining agreement, employee benefit plan, or any other material agreement to which 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 if such violation will have or is reasonably likely to have a material adverse affect upon the ability to continue the Ski Area Business or develop any of the Resort Land 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; and (h) not enter into, or become obliged under, any contract, agreement, lease or other commitment relating to the Purchased Assets or the Ski Area Business, other than any contract, agreement, lease or other commitment entered into in the ordinary course of business consistent with past practice. 10.02 Risk of Loss. Seller 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 Seller. In the event of any such material loss or damage, Seller 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. 10.03 Access. (a) From the date hereof to the Closing Date, Seller will afford to the representatives of Buyer, including its counsel and auditors, during normal business hours and upon reasonable advance written or oral notice, 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 Seller's Ski Area Business in advance of the Closing Date as it shall reasonably desire, and the officers of Seller will confer with representatives of Buyer and will 18 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 Seller 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 Resort Land and undertake all such actions as may be necessary to prepare the Purchased Assets to open for the 1997 - - 1998 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 Seller 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 access to and activities involving the Purchased Assets or action, or failure to act, at the Resort Land, including without limitation, any such claims, liability, damages, loss costs or expense resulting from the negligence of Seller (but not gross negligence) or relating to premises or other strict liability of Seller as the owner/lessee of the Resort Land. Buyer shall extend the same liability insurance as is currently in place at ASC's existing Ski Resorts to the Resort Land during the period of Buyer's use or occupancy of the same under this Section 10.03(b), and shall have the Seller 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 Seller for the value of any improvements made to the Purchased Assets. 10.04 Insurance Coverage. Existing insurance coverages for the Purchased Assets shall be maintained in effect by Seller between the date hereof and the Closing Date. 10.05 Maintenance of Purchased Assets. At all times from the execution of this Agreement to the Closing Date, Seller agrees to maintain the Purchased Assets in substantially the same condition as of the date of this Agreement. Seller shall (i) not alter, disassemble or remove any Purchased Assets from the Resort Land 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 Business, and (ii) maintain in full force and effect any and all contracts, permits and licenses which are Purchased Assets or Assumed Liabilities. Seller shall notify Buyer promptly of any material change in the condition of the Purchased Assets. 10.06 Competing Offers. Seller 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 19 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. 10.07 Further Assurances. From and after the Closing Date, Seller and Buyer shall execute and deliver to each other all such further assignments, assumptions, endorsements and other documents as the other may reasonably request for the purpose of effecting transfer and assumption of Seller's title to and operation of the Purchased Assets and/or carrying out the provisions of this Agreement. 10.08 Specific Arrangements. Buyer and Seller have made arrangements to deal with certain transactions scheduled to occur between the date hereof and Closing. Those arrangements are described in detail in Schedule 10.09. Has to be agreed to by both parties (see 12.17 below). ARTICLE XI INDEMNITY 11.01 Seller's Indemnity. Seller shall 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 material breach of any representation or warranty made by Seller in this Agreement, (ii) any material breach of Seller's covenants contained herein, (iii) claims by third parties, including applicable governmental authorities, relating to Seller's operations, activities or use of the Purchased Assets prior to the Closing Date, and (iv) any and all actions, suits, proceedings, demands, assessments, penalties, judgments, costs and legal fees and other expenses incurred by Buyer associated with any of the foregoing. Seller shall have no obligation to indemnify Buyer with respect to an Indemnified Expense unless notice of the Indemnified Expense is provided to Seller 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 Seller or the Subsidiaries relating to any period ended on or before Closing and in addition, shall not extend the liability of Seller on any of the representations or warranties of Seller set forth in this Agreement beyond the limitation periods set forth in Section 6.17(a). Buyer hereby acknowledges and agrees that nothing set forth in this Section 11.01 shall in any way limit or restrict its obligations under Section 11.02. 11.02 Buyer's Indemnity. Buyer shall indemnify and hold harmless Seller and the Subsidiaries, their 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 any material breach of any of Buyer's representations, warranties or covenant contained herein or to the operation of the Purchased Assets by Buyer following the Closing and any and all 20 actions, suits, proceedings, demands, assessments, penalties, judgments, costs and legal fees and other expenses incurred by Buyer associated with any of the foregoing. Seller hereby acknowledges and agrees that nothing set forth in this Section 11.02 shall in any way limit or restrict its 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 Seller or Buyer thereunder. 12.02 Confidentiality. Buyer acknowledges that in the course of preparing this Agreement, Buyer has obtained information concerning the business of Seller 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 Seller 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 Seller 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 Seller 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. Seller 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, Seller shall execute and deliver all documents, make all rightful oaths, 21 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 Seller in accordance with Section 1060 of the Code and the regulations thereunder, as set forth in Schedule 12.06 attached hereto, as revised by mutual agreement of Buyer and Seller at Closing. Buyer and Seller covenant and agree that the Buyer and Seller 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 Seller set forth in this Section shall survive the Closing and shall continue so long as the Buyer or Seller (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 Seller 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 signed by duly authorized representatives of Seller 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 Utah. The parties agree that the state and federal courts located in Utah 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 Seller 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 22 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 Seller 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 Seller, to: Prior to Closing: Michael Baker Kenneth Griswold 4000 Parkwest Drive Park City, Utah 84060 After Closing: c/o Clark Thompson Bracewell & Patterson, L.L.P. South Tower Penzoil Place 711 Louisiana Street, Suite 2800 Houston, TX 770002-2781 23 and, in the case of Buyer, to Christopher E. Howard Chief Administrative Officer and General Counsel American Skiing Company P.O. Box 450 Bethel, ME 04217 or to such other address as Seller or Buyer may designate by at least ten (10) days prior 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 Assignment. This Agreement may not be transferred, assigned, pledged or hypothecated by any party hereto without the prior written consent of the other parties hereto, except that subsequent to the Closing, Seller shall be permitted to transfer all of its rights hereunder to any party, provided that Seller shall remain obligated to perform all its obligations hereunder and shall continue to be subject to al liabilities imposed hereunder notwithstanding such assignment. 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 Seller or Buyer in connection with the closing of transactions contemplated hereby, including without limitation, engineering, legal, advisory, investment banking and accounting fees, shall be, except as otherwise provided herein, the responsibility of and for the account of the party or parties who ordered the particular service or particular expense. 12.16 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. 12.17 Entire Agreement. This Agreement and the related closing documents executed and delivered in connection herewith constitute the entire agreement between Seller and Buyer with respect to the transactions contemplated hereby, superseding all prior understandings and agreements among Seller and Buyer with respect to the subject matter hereof. 12.18 Reconveyance. In the event the Resort Ground Lease is lawfully terminated or expires in accordance with its terms, the Buyer shall reconvey or convey to the Seller the following assets: 24 (a) Rights to establish and maintain ski terrain on the so-called Condas property, lands owned by the Osguthorpe Family or individuals under any then-existing agreement with such parties, or their successors, assigns or transferees; (b) All water rights transferred and conveyed hereunder; (c) All Assumed Permits; and (d) All Intellectual Property Rights. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed under seal as of the day and year first above written. WOLF MOUNTAIN RESORTS, LC. By: /s/ Kenneth Griswold ---------------------- Kenneth Griswold Member ASC UTAH, INC. By: /s/ Jullianne Cloutier ---------------------- Its Vice President 25 GUARANTY COMMITMENT ASC Holdings, Inc., 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 this 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. ASC UTAH, INC. By: /s/ Jullianne Cloutier ---------------------- Its Vice President EX-10.75 26 2ND MORTGAGE DEED (WATERVILLE) EXHIBIT 10.75 SECOND MORTGAGE DEED, SECURITY AGREEMENT AND FINANCING STATEMENT KNOW ALL BY THESE PRESENTS, that WATERVILLE VALLEY SKI RESORT, INC., a Delaware corporation, having a mailing address of One Ski Area Road, Waterville Valley, New Hampshire 03215, (hereinafter called "Grantor"), does hereby GIVE, GRANT, BARGAIN, SELL, ASSIGN and CONVEY unto American Skiing Company, a Maine corporation (hereinafter called "Grantee"), its successors and assigns forever, WITH MORTGAGE COVENANTS to secure payment of that certain Subordinated Promissory Note dated as of the date hereof from Booth Creek Ski Acquisition Corp., Waterville Valley Ski Resort, Inc. and Mount Cranmore Ski Resort, Inc., as co-makers, in the principal amount of Two Million Seven Hundred Fifty Thousands Dollars ($2,750,000) with interest and other charges, as applicable, in accordance with the terms and conditions of the said Subordinated Promissory Note, which note, together with any extensions, amendments, modifications, replacements or substitutions thereof or thereto, is referred to herein as the "Note", all as hereafter set forth, a certain lot or parcel of land situated in Grafton County, New Hampshire, and all improvements thereon and all easements, rights and appurtenances thereto, which lot or parcel is bounded and described on Exhibit A attached hereto and by this reference incorporated herein; provided, however, that all grants contained herein and all rights of Grantee hereunder are subordinated to the prior and superior rights of the holders of Senior Debt (as such term is defined in the Note) pursuant to the terms and conditions set forth in the Note. Also hereby conveying all of the Grantor's right, title and interest in and to the fee underlying all public or private rights-of-way, easements, streets and alleys over, contiguous, benefiting or appurtenant to the premises conveyed hereby. (All of the above are collectively referred to herein as the "Premises".) As additional security for payment and performance of the Note and the covenants and agreements described herein, Grantor hereby transfers, assigns and grants a second mortgage and security interest to Grantee in the following property and in all additions, accessions, substitutions and replacements thereto and therefor (which personal property, together with all additions, accessions, substitutions and replacements thereto and therefor are collectively referred to herein as the "Personal Property Collateral"), such second mortgage and security interest to be subject to and subordinate to the prior and superior rights of the holders of Senior Debt pursuant to the terms and conditions set forth in the Note: (a) All rents, profits, revenues, royalties, rights and benefits under any and all leases or tenancies now existing or hereafter created of the Premises or any part thereof and all deposits granted to secure the tenants' performance thereunder, and all other income, receivables, general intangibles, products and proceeds derived from the ownership, management and operation of the Premises, with the right to receive and apply the same to the obligations secured hereby, and Grantee may demand, sue for and recover such payments, but shall not be required to do so; provided, however, that so long as Grantor is not in default hereunder, as hereinafter defined, the right to receive and retain such rents, issues, profits and income is reserved to Grantor. Nothing herein shall obligate Grantee to perform the duties of Grantor as landlord or lessor under any such leases or tenancies, which duties Grantor hereby covenants and agrees to well and punctually perform; (b) All judgments, awards of damages and settlements hereafter made as a result or in lieu of any taking of the Premises or any interest therein or part thereof under the power of eminent domain, or for any damage (whether caused by such taking or otherwise) to the Premises, or the improvements thereon or any part thereof, including any award for change of grade of streets, now existing or hereafter arising. Grantee may apply all such sums or any part thereof so received to the obligations secured hereby in such manner as it elects or, at its option, the entire amount, or any part thereof so received, may be released. Grantor hereby irrevocably authorizes and appoints Grantee as Grantor's attorney-in-fact to collect and receive any such judgments, awards and settlements from the authorities or entities making the same, to appear in any proceeding therefor, to give receipts and acquaintances therefor, and to apply the same to payment on account of the obligations secured hereby, whether then matured or not; and Grantor will execute and deliver to Grantee on demand such assignments and other instruments as Grantee may require for said purposes and will reimburse Grantee for its costs (including counsel fees) in the collection of such judgments and settlements; and (c) All machinery, equipment, construction materials and supplies, furniture, fixtures and other personal property, including inventory, of Grantor, now owned or hereafter acquired by Grantor, located at or on the Premises, including without limitation all ski lifts, snowmaking equipment, snow grooming equipment, compressors, pumps and pumphouse structures, plumbing, electrical, heating, ventilating, lighting and air conditioning equipment or apparatus, water tanks, mantels, screens, storm doors and windows, screen doors, window shades, awnings, garbage incinerators and receptacles, elevators and elevator machinery, boilers, tanks, motors, sprinkler and fire extinguishing systems, doorbell and alarm systems, and all other personal property of whatever kind or nature now or hereafter affixed to the Premises together with all accessions and additions thereto, substitutions and replacements thereof, electronic programs and software used with, and parts and accessories therefor, all cash or non-cash proceeds thereof (although no disposition thereof by Grantor is thereby authorized) including, without limitation, insurance proceeds. (d) All permits, licenses, authorizations and approvals relating to the operation of the Premises as a ski resort (other than any permits, licenses, authorization or approvals for which an assignment or grant of a security interest is prohibited by the contractual terms thereof or under applicable law); (e) All contracts, agreements, leases and commitments necessary for, or used or useful in the operation of the Premises as a ski resort (other than any contracts, agreements, leases or commitments for which an assignment or grant of a security interest is prohibited by the contractual terms thereof or under applicable law). Receipt of rents, awards and any other monies or evidences thereof, pursuant to the provisions of the foregoing paragraphs (a) through (e) and any disposition of the same by Grantee shall not constitute a waiver of the right of foreclosure by Grantee in the event of default or failure of performance by Grantor of any covenant or agreement contained herein or in the note secured hereby which right of foreclosure is limited pursuant to paragraph 7 hereof. TO HAVE AND TO HOLD, subject to the prior and superior rights of the holders of Senior Debt pursuant to the Note, the aforegranted and bargained Premises and Personal Property Collateral, with all the privileges and appurtenances thereof (all of which are collectively referred to hereinafter as the "Mortgaged Property"), to Grantee, its successors and assigns, to their use forever; PROVIDED, NEVERTHELESS, that if Grantor pays to Grantee the sum of TWO MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($2,750,000.00) together with interest thereon and such other amounts as may become due and payable under the terms of the Note, and performs all of Grantor's obligations, covenants and agreements contained herein, then this Second Mortgage Deed, Security Agreement and Financing Statement shall be void, otherwise it shall remain in full force. Grantor, for itself, its successors and assigns, covenants and agrees with Grantee, its successors and assigns, as follows: 1. Grantor is lawfully seized of an indefeasible estate in fee simple, free from encumbrances other than Permitted Liens (as defined below), and has good right and power to convey the Mortgaged Property to Grantee to hold as aforesaid and that Grantor shall and will Warrant and Defend the same to Grantee forever against the claims and demands of all persons other than holders of Senior Debt. For purposes herein, "Permitted Liens" shall mean (a) liens and encumbrances in favor of the United States of America or any political subdivision thereof to secure partial payments under contracts, (b) all liens and encumbrances incurred or deposits made in connection with workers' compensation, unemployment insurance and other types of social security benefits, or to secure the performance of statutory obligations, surety and appeal bonds, bids, leases, performance and return-of-money bonds and other similar obligations, (c) liens and encumbrances for taxes, assessments or governmental charges not then due, (d) liens and encumbrances arising in connection with court proceedings, (e) liens and encumbrances in the nature of zoning restrictions, easements, rights and restrictions of record on the use of real property, and all exceptions to title as are set forth in the title insurance policy or title commitment delivered to Grantor, (f) liens and encumbrances incidental to the conduct of business or the ownership of properties and assets (including warehousemen's and attorney's liens, mechanics; liens, materialmen's liens, carriers' liens and statutory landlords' liens) and liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other liens of a like general nature, and (g) liens and encumbrances securing Senior Debt. 2. Grantor shall pay all sums secured hereby pursuant to the terms of the Note. 3. Grantor shall pay, when due, all taxes and assessments of every type or nature levied or assessed against the Mortgaged Property and any claim, lien or encumbrance against the Premises, the buildings, improvements, fixtures and personal property thereon. 4. Grantor shall have and maintain on the Premises and the buildings, improvements, fixtures and personal property thereon, insurance against fire and other casualty and general liability insurance in amounts and with coverages consistent with customary industry practices, which insurance shall contain the Standard Maine Mortgagee Clause with loss payable to the holders of Senior Debt and the Grantee as their interests may appear. Receipt of any insurance proceeds and any disposition of the same by Grantee shall not constitute a waiver of any rights of Grantee, statutory or otherwise, and specifically shall not constitute a waiver of the right of foreclosure by Grantee in the event of default or failure of performance by Grantor of any covenant or agreement contained herein or any note secured hereby. 5. Grantor shall maintain the Mortgaged Property in good condition and repair, ordinary wear and tear excepted, shall not commit or suffer any material waste thereof and shall comply in all material respects with all laws, ordinances, regulations, covenants, conditions and restrictions affecting the Mortgaged Property except where the failure to so comply could not reasonably be expected to have a material adverse effect on the business of Grantor. 6. If Grantor fails to pay any claim, lien or encumbrance or any tax, assessment or insurance premium when due, unless being contested in good faith, or to keep the Mortgaged Property in good condition and repair, ordinary wear and tear excepted, or shall commit or permit any material waste, or if there be commenced any action or proceeding affecting this Mortgage or the indebtedness secured hereby, the lien established hereunder upon the Mortgaged Property, then Grantee, at its option, may pay said claim, lien, encumbrance, tax, assessment or premium, with right of subrogation thereunder, may procure such abstracts or other evidence of title as it deems reasonably necessary, may make such repairs and take such steps as it deems reasonably necessary to prevent or cure such waste, and may appear in any such action or proceeding and retain counsel therein, and take such action therein as Grantee deems reasonably necessary, and for any of said purposes Grantee may advance such sums of money as it deems reasonably necessary. 7. The Grantee may not unilaterally commence proceedings to enforce any rights or remedies that it may have against the Grantor or any of the Mortgaged Property under this Mortgage until the later to occur of the passage of 179 days after the receipt by Grantor and the holders of Senior Debt of notice from Grantee that a default has occurred under this Mortgage. 8. This Mortgage shall constitute a security agreement with respect to the Personal Property Collateral whether now owned or hereafter acquired. Grantor hereby grants and conveys to Grantee, its successors and assigns, a security interest in the Personal Property Collateral. The security interest and other rights established hereunder are subject to and subordinate to the prior and superior security interest of the holders of Senior Debt. Grantee shall give Grantor notice, by registered mail, postage prepaid, of the time and place of any public sale of any of the Personal Property Collateral or of the time any private sale or other intended disposition thereof is to be made by sending notice to Grantor at least ten (10) days before the time of the sale or other disposition, which provisions for notice Grantor and Grantee hereby agree are reasonable; provided, however, that nothing herein shall preclude Grantee from proceeding as to both real and personal property in accordance with Grantee's rights and remedies in respect of the real property covered hereby. Grantee shall have all of the remedies of a secured party under the Uniform Commercial Code as now in effect in the State of New Hampshire and such further remedies as may from time to time hereafter be provided in New Hampshire for a secured party subject to the prior and superior right of the holders of Senior Debt. Grantor agrees that all rights of Grantee as to said Personal Property Collateral and as to said real estate, and rights and interests appurtenant thereto, may be exercised together or separately and further agrees that in exercising its power of sale as to said Personal Property Collateral and as to said real estate, and rights and interests appurtenant thereto, Grantee may sell the Personal Property Collateral or any part thereof, either separately from or together with the said real estate, rights and interests appurtenant thereto, or any part thereof, all as Grantee in its discretion elects subject to the prior and superior right of the holders of Senior Debt. 9. This instrument is intended to serve as a FINANCING STATEMENT under the New Hampshire Uniform Commercial Code with respect to the Personal Property Collateral. The address of Grantor (Debtor) is One Ski Area Road, Waterville Valley, New Hampshire 03215. The address of Grantee (Secured Party) is P.O. Box 450, Bethel, Maine 04217. 10. Subject to the prior and superior right of the holders of Senior Debt, it is an additional condition of Grantor herein for breach of which foreclosure may be claimed and for breach of which all indebtedness secured hereby may be declared due and payable at once, that legal or beneficial title to the within described Mortgaged Property shall not pass from Grantor by deed, mortgage, pledge, encumbrance, lien, lease of the Mortgaged Property in its entirety or substantially in its entirety to one person or entity for a term in excess of one year, conditional sale, title retention agreement or operation of law, or from any subsequent title holder, either voluntarily or involuntarily. Any change in the legal or equitable title or ownership of the Premises or the Personal Property Collateral or in the beneficial ownership of the Premises or Personal Property Collateral, whether or not of record and whether or not for consideration, or any sale, transfer or other disposition or new issuance of any or all of the stock of Grantor if Grantor is a corporation, or of any or all of the partnership interest of Grantor or admission of new partners, if Grantor is a limited or general partnership, shall be deemed to be a sale of the Premises and the Personal Property Collateral and shall, unless done with the prior written consent of Grantee, constitute a breach of this covenant and shall be a default hereunder. This condition shall continue until all indebtedness and obligations secured hereby are satisfied, and permission given or election not to foreclose or accelerate said indebtedness by Grantee, its successors or assigns, as to any one such transfer, shall not constitute a waiver of any rights of Grantee, its successors or assigns, as to any subsequent such transfer of title as to which this condition shall remain in full force and effect. The term title as used herein shall mean the estate of Grantor subject to the lien of this Mortgage. 11. The covenants and agreements herein contained shall bind, and the benefits and advantages thereof shall inure to, the respective heirs, executors, administrators, successors and assigns of Grantor, Grantee and the holders of Senior Debt. Wherever used, the singular number shall include the plural, the plural shall include the singular and the use of any gender shall be applicable to all genders. 12. This Mortgage is given upon the STATUTORY CONDITION, a breach of which shall be an event of default hereunder. The covenants and agreements set forth herein are in addition to the covenants and agreements set forth in the Statutory Condition. 13. The Grantee, its heirs, personal representatives, successors and assigns, for breach of any term, condition, covenant or agreement contained or referred to herein or upon breach of the Statutory Condition, shall have the right of foreclosure and any and all other rights and remedies given to a Mortgagee and Secured Party under the law of New Hampshire as of the date hereof or at the time of such breach, including without limitation the STATUTORY POWER OF SALE, which is expressly incorporated herein by reference, to the extent authorized by any present or future law of the State of New Hampshire subject to the limitations set forth in Paragraph 7. This Mortgage is given primarily for a business, commercial or agricultural purpose. Grantor warrants that the loan proceeds secured by this Mortgage will be used for, and this Mortgage is given primarily for, business, commercial or agricultural purposes. 14. If any obligation or portion of this Mortgage is determined to be invalid or unenforceable under law, it shall not affect the validity or enforcement of the remaining obligations or portions hereof. The provisions of this Mortgage regarding subordination and other matters relating to the holders of Senior Debt are for the benefit of the holders of Senior Debt and may be enforced directly by them against the Grantee. The Grantee acknowledges and agrees, by acceptance hereof, that the holders of the Senior Debt have relied upon and will continue to rely upon the subordination provided for herein in entering into the transaction to which they are a party and making the extensions of credit comprising the Senior Debt. The Grantee hereby waives notice of or proof of reliance hereon. IN WITNESS WHEREOF, the undersigned party hereto has caused its duly authorized officer to execute and deliver this Second Mortgage Deed, Security Agreement and Financing Statement as of this 27th day of November, 1996. SIGNED, SEALED AND DELIVERED IN THE PRESENCE OF: WATERVILLE VALLEY SKI RESORT, INC. /s/ [Illegible] By: /s/ Jeffrey J. Joyce - ---------------------------- ------------------------------ Print Name: Jeffrey J. Joyce ---------------------- Its: Vice President ----------------------------- STATE OF MASSACHUSETTS COUNTY OF SUFFOLK , ss On November 27, 1996, personally appeared the above-named Jeffrey J. Joyce, as Vice President of said Waterville Valley Ski Resort, Inc., and acknowledged the foregoing instrument to be his free act and deed in his said capacity, and the free act and deed of said corporation. Before me, [NOTARY STAMP] /s/ Saundra L. O'Malley --------------------------------------------- Notary Public/Maine Attorney Typed or Printed Name: Saundra L. O'Malley EX-10.76 27 PROM. NOTE 8/15 $30,000,000 GRAND SUMMIT&TEXTRON Exhibit 10.76 PROMISSORY NOTE $30,000,000 August 15, 1997 Hartford, Connecticut FOR VALUE RECEIVED and pursuant to the terms of this Promissory Note (this "Note"), the undersigned, GRAND SUMMIT RESORT PROPERTIES, INC., a Maine corporation (the "Borrower"), promises to pay to the order of TEXTRON FINANCIAL CORPORATION (the "Lender") (the Lender and all subsequent holders of this Note being hereinafter referred to as the "Holder"), at 333 East River Drive, East Hartford, Connecticut or at such other place as the Holder hereof may designate in writing, the principal sum of up to THIRTY MILLION DOLLARS ($30,000,000), or so much thereof as shall be outstanding hereunder from time to time as a result of advances of principal by the Lender to the Borrower pursuant to that certain Loan and Security Agreement dated as of August 1, 1997 among the Borrower, the Lender, Green Tree Financial Servicing Corporation and Textron Financial Corporation, as Administrative Agent (as amended from time to time, the "LSA"), together with interest on the unpaid principal amount from time to time outstanding under this Note at the rate or rates of interest provided therefor in the LSA. The aforesaid principal amount and interest thereon shall be due and payable on the dates and in the manner as provided in the LSA. All principal, interest and any other amounts due under this Note shall be payable in lawful money of the United States of America at the place or places above stated. Unless and until an assignment agreement effecting the assignment or transfer of this Note shall have been accepted by the Administrative Agent, as provided for in Section 2.6(b) of the LSA, the Borrower and the Administrative Agent shall be entitled to deem and treat the Lender as the owner and holder of this Note. The Borrower may only prepay the principal sum outstanding from time to time hereunder as provided in the LSA. This Note is secured by a security interest in the Collateral (as such term is defined in the LSA). This Note is one of the Borrower's "Notes" in the aggregate principal amount of $55,000,000 and has been issued pursuant to the LSA, and all of the terms, covenants and conditions of the LSA (including all Exhibits and Schedules thereto) and all other instruments evidencing or securing the indebtedness hereunder are hereby made a part of this Note and are deemed incorporated herein in full. In the event of an Event of Default (as such term is defined in the LSA), the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the LSA. The Borrower and the Holder intend to comply at all times with applicable usury laws. All agreements between the Borrower and the Holder, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of demand or acceleration of the maturity of this Note or otherwise, shall the interest contracted for, charged, received, paid or agreed to be paid to the Holder exceed the maximum amount permissible under applicable law (the "Maximum Rate"). The Holder may, in determining the Maximum Rate in effect from time to time, take advantage of any law, rule or regulation in effect from time to time available to the Holder which exempts the Holder from any limit upon the rate of interest it may charge or grants to the Holder the right to charge a higher rate of interest than that otherwise permitted by applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to a Holder in excess of the Maximum Rate, the interest payable to the Holder shall be reduced to the Maximum Rate; and if from any circumstance the Holder shall ever receive anything of value deemed interest by applicable law in excess of the Maximum Rate, an amount equal to any excessive interest shall be applied to the reduction of the outstanding principal hereunder and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal hereof, such excess shall be refunded to the Borrower by the Holder. All interest paid or agreed to be paid to the Holder shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period hereof until payment in full of the principal so that the interest hereon for such full period shall not exceed the Maximum Rate for the Holder. The Borrower agrees that in determining whether or not any interest payment hereunder exceeds the Maximum Rate for the Holder, any non-principal payment (except payments specifically described in the Security Documents (as defined in the LSA) as "interest") including without limitation, fees and late charges, shall to the maximum extent not prohibited by law, be an expense, fee or premium rather than interest in respect of the Holder. The Holder hereby expressly disclaims any intent to contract for, charge or receive interest in an amount which exceeds the Maximum Rate for the Holder. Time is of the essence for the performance and observance of each agreement and obligation of the Borrower under this Note, the LSA and under the Security Documents. This Note also evidences Borrower's obligation to repay with interest all additional moneys advanced or expended from time to time by the Holder to or for the account of the Borrower or otherwise to be added to the principal balance hereof as provided in any of the Security Documents, whether or not the principal amount hereof shall thereby exceed the principal amount above stated. The Borrower and all sureties, endorsers, guarantors and all other parties now or hereafter liable for the payment of this Note, in whole or in part, hereby severally waive presentment for payment, demand and protest and notice of protest, acceleration, or dishonor and non-payment of this Note, and expressly consent to any extension of time of payment hereof or of any installment hereof, to the release of any party liable for this obligation, to the release, change or modification of any of the Collateral, and any such extension, modification or release may be made without notice to any of said parties and without in any way affecting or discharging this liability. No single or partial exercise of any power hereunder, under the LSA or under any other Security Document shall preclude other or further exercise thereof or the exercise of any other power. No delay or omission on the part of the Holder in exercising any right or remedy hereunder or the acceptance of one or more installments from any person after a default hereunder, under the LSA or under any other Security Document shall operate as a 2 waiver of such right or remedy or of any other right or remedy under this Note nor as a waiver of such right or remedy in connection with any future default. In the event any one or more of the provisions contained in this Note shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Note, but this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. The Holder is hereby authorized by the Borrower to record in the manual or data processing records of the Holder, or on the grid schedule annexed to this Note, the date, type and amount of each Advance extended to the Borrower by the Holder hereunder and the date, type and amount of each repayment of principal and each payment of interest on account thereof. In the absence of manifest error, such records and schedule shall be conclusive as to the outstanding principal amount of all Advances and the payment of interest accrued hereunder; provided, however, that the failure of the Holder to make any such record entry with respect to any Advance or any payment in respect thereof shall not limit or otherwise affect the obligations of the Borrower under this Note or the other Security Documents. The Borrower promises to pay all costs and expenses as provided in Section 11.2 of the LSA. [Remainder of page intentionally left blank. Next page is signature page.] 3 THIS NOTE AND ALL TRANSACTIONS HEREUNDER OR EVIDENCED HEREIN SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF MAINE. The Borrower has caused this Note to be signed by a duly authorized officer on the date first above written. BORROWER: GRAND SUMMIT RESORT PROPERTIES, INC. By: /s/ Mark P. Girard ---------------------------- Name: Mark P. Girard Title: Vice President 4 SCHEDULE TO PROMISSORY NOTE ================================================================================ Date Principal Amount Amount of Amount of Unpaid of Advance Principal Repaid/ Interest Principal Made/Type of Type of Advance: Paid Balance of: Advance: Pre-Sale Pre-Sale Advance, Pre-Sale Advance, Interest Interest Advance, Advances, Advance, Jordan Jordan Bowl aggregate Bowl Project Project Advance, amount of Advance, Killington Killing-ton Project Interest Project Advance or Advance or Mt. Advances and Mt. Snow Project Snow Project Jordan Bowl Advance Advance Project Advance, Killington Project Advance or Mt. Snow Project Advance - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ 5 ================================================================================ Date Principal Amount Amount of Amount of Unpaid of Advance Principal Repaid/ Interest Principal Made/Type of Type of Advance: Paid Balance of: Advance: Pre-Sale Pre-Sale Advance, Pre-Sale Advance, Interest Interest Advance, Advances, Advance, Jordan Jordan Bowl aggregate Bowl Project Project Advance, amount of Advance, Killington Killing-ton Project Interest Project Advance or Advance or Mt. Advances and Mt. Snow Project Snow Project Jordan Bowl Advance Advance Project Advance, Killington Project Advance or Mt. Snow Project Advance - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ 6 EX-10.78 28 2ND MORTGAGE DEED (MT. CRANMORE) EXHIBIT 10.78 SECOND MORTGAGE DEED, SECURITY AGREEMENT AND FINANCING STATEMENT KNOW ALL BY THESE PRESENTS, that MOUNT CRANMORE SKI RESORT, INC., a Delaware corporation, having a mailing address of Skimobile Road, North Conway, New Hampshire, (hereinafter called "Grantor"), does hereby GIVE, GRANT, BARGAIN, SELL, ASSIGN and CONVEY unto American Skiing Company, a Maine corporation (hereinafter called "Grantee"), its successors and assigns forever, WITH MORTGAGE COVENANTS to secure payment of that certain Subordinated Promissory Note dated as of the date hereof from Booth Creek Ski Acquisition Corp., Waterville Valley Ski Resort, Inc. and Mount Cranmore Ski Resort, Inc., as co-makers, in the principal amount of Two Million Seven Hundred Fifty Thousands Dollars ($2,750,000) with interest and other charges, as applicable, in accordance with the terms and conditions of the said Subordinated Promissory Note, which note, together with any extensions, amendments, modifications, replacements or substitutions thereof or thereto, is referred to herein as the "Note", all as hereafter set forth, a certain lot or parcel of land situated in Carroll County, New Hampshire, and all improvements thereon and all easements, rights and appurtenances thereto, which lot or parcel is bounded and described on Exhibit A attached hereto and by this reference incorporated herein; provided, however, that all grants contained herein and all rights of Grantee hereunder are subordinated to the prior and superior rights of the holders of Senior Debt (as such term is defined in the Note) pursuant to the terms and conditions set forth in the Note. Also hereby conveying all of the Grantor's right, title and interest in and to the fee underlying all public or private rights-of-way, easements, streets and alleys over, contiguous, benefiting or appurtenant to the premises conveyed hereby. (All of the above are collectively referred to herein as the "Premises".) As additional security for payment and performance of the Note and the covenants and agreements described herein, Grantor hereby transfers, assigns and grants a second mortgage and security interest to Grantee in the following property and in all additions, accessions, substitutions and replacements thereto and therefor (which personal property, together with all additions, accessions, substitutions and replacements thereto and therefor are collectively referred to herein as the "Personal Property Collateral"), such second mortgage and security interest to be subject to and subordinate to the prior and superior rights of the holders of Senior Debt pursuant to the terms and conditions set forth in the Note: (a) All rents, profits, revenues, royalties, rights and benefits under any and all leases or tenancies now existing or hereafter created of the Premises or any part thereof and all deposits granted to secure the tenants' performance thereunder, and all other income, receivables, general intangibles, products and proceeds derived from the ownership, management and operation of the Premises, with the right to receive and apply the same to the obligations secured hereby, and Grantee may demand, sue for and recover such payments, but shall not be required to do so; provided, however, that so long as Grantor is not in default hereunder, as hereinafter defined, the right to receive and retain such rents, issues, profits and income is reserved to Grantor. Nothing herein shall obligate Grantee to perform the duties of Grantor as landlord or lessor under any such leases or tenancies, which duties Grantor hereby covenants and agrees to well and punctually perform; (b) All judgments, awards of damages and settlements hereafter made as a result or in lieu of any taking of the Premises or any interest therein or part thereof under the power of eminent domain, or for any damage (whether caused by such taking or otherwise) to the Premises, or the improvements thereon or any part thereof, including any award for change of grade of streets, now existing or hereafter arising. Grantee may apply all such sums or any part thereof so received to the obligations secured hereby in such manner as it elects or, at its option, the entire amount, or any part thereof so received, may be released. Grantor hereby irrevocably authorizes and appoints Grantee as Grantor's attorney-in-fact to collect and receive any such judgments, awards and settlements from the authorities or entities making the same, to appear in any proceeding therefor, to give receipts and acquaintances therefor, and to apply the same to payment on account of the obligations secured hereby, whether then matured or not; and Grantor will execute and deliver to Grantee on demand such assignments and other instruments as Grantee may require for said purposes and will reimburse Grantee for its costs (including counsel fees) in the collection of such judgments and settlements; and (c) All machinery, equipment, construction materials and supplies, furniture, fixtures and other personal property, including inventory, of Grantor, now owned or hereafter acquired by Grantor, located at or on the Premises, including without limitation all ski lifts, snowmaking equipment, snow grooming equipment, compressors, pumps and pumphouse structures, plumbing, electrical, heating, ventilating, lighting and air conditioning equipment or apparatus, water tanks, mantels, screens, storm doors and windows, screen doors, window shades, awnings, garbage incinerators and receptacles, elevators and elevator machinery, boilers, tanks, motors, sprinkler and fire extinguishing systems, doorbell and alarm systems, and all other personal property of whatever kind or nature now or hereafter affixed to the Premises together with all accessions and additions thereto, substitutions and replacements thereof, electronic programs and software used with, and parts and accessories therefor, all cash or non-cash proceeds thereof (although no disposition thereof by Grantor is thereby authorized) including, without limitation, insurance proceeds. (d) All permits, licenses, authorizations and approvals relating to the operation of the Premises as a ski resort (other than any permits, licenses, authorization or approvals for which an assignment or grant of a security interest is prohibited by the contractual terms thereof or under applicable law); (e) All contracts, agreements, leases and commitments necessary for, or used or useful in the operation of the Premises as a ski resort (other than any contracts, agreements, leases or commitments for which an assignment or grant of a security interest is prohibited by the contractual terms thereof or under applicable law). 2 Receipt of rents, awards and any other monies or evidences thereof, pursuant to the provisions of the foregoing paragraphs (a) through (e) and any disposition of the same by Grantee shall not constitute a waiver of the right of foreclosure by Grantee in the event of default or failure of performance by Grantor of any covenant or agreement contained herein or in the note secured hereby which right of foreclosure is limited pursuant to paragraph 7 hereof. TO HAVE AND TO HOLD, subject to the prior and superior rights of the holders of Senior Debt pursuant to the Note, the aforegranted and bargained Premises and Personal Property Collateral, with all the privileges and appurtenances thereof (all of which are collectively referred to hereinafter as the "Mortgaged Property"), to Grantee, its successors and assigns, to their use forever; PROVIDED, NEVERTHELESS, that if Grantor pays to Grantee the sum of TWO MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($2,750,000.00) together with interest thereon and such other amounts as may become due and payable under the terms of the Note, and performs all of Grantor's obligations, covenants and agreements contained herein, then this Second Mortgage Deed, Security Agreement and Financing Statement shall be void, otherwise it shall remain in full force. Grantor, for itself, its successors and assigns, covenants and agrees with Grantee, its successors and assigns, as follows: 1. Grantor is lawfully seized of an indefeasible estate in fee simple, free from encumbrances other than Permitted Liens (as defined below), and has good right and power to convey the Mortgaged Property to Grantee to hold as aforesaid and that Grantor shall and will Warrant and Defend the same to Grantee forever against the claims and demands of all persons other than holders of Senior Debt. For purposes herein, "Permitted Liens" shall mean (a) liens and encumbrances in favor of the United States of America or any political subdivision thereof to secure partial payments under contracts, (b) all liens and encumbrances incurred or deposits made in connection with workers' compensation, unemployment insurance and other types of social security benefits, or to secure the performance of statutory obligations, surety and appeal bonds, bids, leases, performance and return-of-money bonds and other similar obligations, (c) liens and encumbrances for taxes, assessments or governmental charges not then due, (d) liens and encumbrances arising in connection with court proceedings, (e) liens and encumbrances in the nature of zoning restrictions, easements, rights and restrictions of record on the use of real property, and all exceptions to title as are set forth in the title insurance policy or title commitment delivered to Grantor, (f) liens and encumbrances incidental to the conduct of business or the ownership of properties and assets (including warehousemen's and attorney's liens, mechanics; liens, materialmen's liens, carriers' liens and statutory landlords' liens) and liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other liens of a like general nature, and (g) liens and encumbrances securing Senior Debt. 3 2. Grantor shall pay all sums secured hereby pursuant to the terms of the Note. 3. Grantor shall pay, when due, all taxes and assessments of every type or nature levied or assessed against the Mortgaged Property and any claim, lien or encumbrance against the Premises, the buildings, improvements, fixtures and personal property thereon. 4. Grantor shall have and maintain on the Premises and the buildings, improvements, fixtures and personal property thereon, insurance against fire and other casualty and general liability insurance in amounts and with coverages consistent with customary industry practices, which insurance shall contain the Standard Maine Mortgagee Clause with loss payable to the holders of Senior Debt and the Grantee as their interests may appear. Receipt of any insurance proceeds and any disposition of the same by Grantee shall not constitute a waiver of any rights of Grantee, statutory or otherwise, and specifically shall not constitute a waiver of the right of foreclosure by Grantee in the event of default or failure of performance by Grantor of any covenant or agreement contained herein or any note secured hereby. 5. Grantor shall maintain the Mortgaged Property in good condition and repair, ordinary wear and tear excepted, shall not commit or suffer any material waste thereof and shall comply in all material respects with all laws, ordinances, regulations, covenants, conditions and restrictions affecting the Mortgaged Property except where the failure to so comply could not reasonably be expected to have a material adverse effect on the business of Grantor. 6. If Grantor fails to pay any claim, lien or encumbrance or any tax, assessment or insurance premium when due, unless being contested in good faith, or to keep the Mortgaged Property in good condition and repair, ordinary wear and tear excepted, or shall commit or permit any material waste, or if there be commenced any action or proceeding affecting this Mortgage or the indebtedness secured hereby, the lien established hereunder upon the Mortgaged Property, then Grantee, at its option, may pay said claim, lien, encumbrance, tax, assessment or premium, with right of subrogation thereunder, may procure such abstracts or other evidence of title as it deems reasonably necessary, may make such repairs and take such steps as it deems reasonably necessary to prevent or cure such waste, and may appear in any such action or proceeding and retain counsel therein, and take such action therein as Grantee deems reasonably necessary, and for any of said purposes Grantee may advance such sums of money as it deems reasonably necessary. 7. The Grantee may not unilaterally commence proceedings to enforce any rights or remedies that it may have against the Grantor or any of the Mortgaged Property under this Mortgage until the later to occur of the passage of 360 days after the receipt by Grantor and the holders of Senior Debt of notice from Grantee that a default has occurred under this Mortgage. 4 8. This Mortgage shall constitute a security agreement with respect to the Personal Property Collateral whether now owned or hereafter acquired. Grantor hereby grants and conveys to Grantee, its successors and assigns, a security interest in the Personal Property Collateral. The security interest and other rights established hereunder are subject to and subordinate to the prior and superior security interest of the holders of Senior Debt. Grantee shall give Grantor notice, by registered mail, postage prepaid, of the time and place of any public sale of any of the Personal Property Collateral or of the time any private sale or other intended disposition thereof is to be made by sending notice to Grantor at least ten (10) days before the time of the sale or other disposition, which provisions for notice Grantor and Grantee hereby agree are reasonable; provided, however, that nothing herein shall preclude Grantee from proceeding as to both real and personal property in accordance with Grantee's rights and remedies in respect of the real property covered hereby. Grantee shall have all of the remedies of a secured party under the Uniform Commercial Code as now in effect in the State of New Hampshire and such further remedies as may from time to time hereafter be provided in New Hampshire for a secured party subject to the prior and superior right of the holders of Senior Debt. Grantor agrees that all rights of Grantee as to said Personal Property Collateral and as to said real estate, and rights and interests appurtenant thereto, may be exercised together or separately and further agrees that in exercising its power of sale as to said Personal Property Collateral and as to said real estate, and rights and interests appurtenant thereto, Grantee may sell the Personal Property Collateral or any part thereof, either separately from or together with the said real estate, rights and interests appurtenant thereto, or any part thereof, all as Grantee in its discretion elects subject to the prior and superior right of the holders of Senior Debt. 9. This instrument is intended to serve as a FINANCING STATEMENT under the New Hampshire Uniform Commercial Code with respect to the Personal Property Collateral. The address of Grantor (Debtor) is Skimobile Road, North Conway, New Hampshire. The address of Grantee (Secured Party) is P.O. Box 450, Bethel, Maine 04217. 10. Subject to the prior and superior right of the holders of Senior Debt, it is an additional condition of Grantor herein for breach of which foreclosure may be claimed and for breach of which all indebtedness secured hereby may be declared due and payable at once, that legal or beneficial title to the within described Mortgaged Property shall not pass from Grantor by deed, mortgage, pledge, encumbrance, lien, lease of the Mortgaged Property in its entirety or substantially in its entirety to one person or entity for a term in excess of one year, conditional sale, title retention agreement or operation of law, or from any subsequent title holder, either voluntarily or involuntarily. Any change in the legal or equitable title or ownership of the Premises or the Personal Property Collateral or in the beneficial ownership of the Premises or Personal Property Collateral, whether or not of record and whether or not for consideration, or any sale, transfer or other disposition or new issuance of any or all of the stock of Grantor if Grantor is a corporation, or of any or all of the partnership interest of Grantor or admission of new partners, if Grantor is a limited or general partnership, shall be deemed to be a sale of the Premises and the Personal Property Collateral and shall, unless done with the prior written consent of Grantee, constitute a breach of this covenant and shall be a default hereunder. 5 This condition shall continue until all indebtedness and obligations secured hereby are satisfied, and permission given or election not to foreclose or accelerate said indebtedness by Grantee, its successors or assigns, as to any one such transfer, shall not constitute a waiver of any rights of Grantee, its successors or assigns, as to any subsequent such transfer of title as to which this condition shall remain in full force and effect. The term title as used herein shall mean the estate of Grantor subject to the lien of this Mortgage. 11. The covenants and agreements herein contained shall bind, and the benefits and advantages thereof shall inure to, the respective heirs, executors, administrators, successors and assigns of Grantor, Grantee and the holders of Senior Debt. Wherever used, the singular number shall include the plural, the plural shall include the singular and the use of any gender shall be applicable to all genders. 12. This Mortgage is given upon the STATUTORY CONDITION, a breach of which shall be an event of default hereunder. The covenants and agreements set forth herein are in addition to the covenants and agreements set forth in the Statutory Condition. 13. The Grantee, its heirs, personal representatives, successors and assigns, for breach of any term, condition, covenant or agreement contained or referred to herein or upon breach of the Statutory Condition, shall have the right of foreclosure and any and all other rights and remedies given to a Mortgagee and Secured Party under the law of New Hampshire as of the date hereof or at the time of such breach, including without limitation the STATUTORY POWER OF SALE, which is expressly incorporated herein by reference, to the extent authorized by any present or future law of the State of New Hampshire subject to the limitations set forth in Paragraph 7. This Mortgage is given primarily for a business, commercial or agricultural purpose. Grantor warrants that the loan proceeds secured by this Mortgage will be used for, and this Mortgage is given primarily for, business, commercial or agricultural purposes. 14. If any obligation or portion of this Mortgage is determined to be invalid or unenforceable under law, it shall not affect the validity or enforcement of the remaining obligations or portions hereof. The provisions of this Mortgage regarding subordination and other matters relating to the holders of Senior Debt are for the benefit of the holders of Senior Debt and may be enforced directly by them against the Grantee. The Grantee acknowledges and agrees, by acceptance hereof, that the holders of the Senior Debt have relied upon and will continue to rely upon the subordination provided for herein in entering into the transaction to which they are a party and making the extensions of credit comprising the Senior Debt. The Grantee hereby waives notice of or proof of reliance hereon. 6 IN WITNESS WHEREOF, the undersigned party hereto has caused its duly authorized officer to execute and deliver this Second Mortgage Deed, Security Agreement and Financing Statement as of this 27th day of November, 1996. SIGNED, SEALED AND DELIVERED IN THE PRESENCE OF: MOUNT CRANMORE SKI RESORT, INC. /s/ [Illegible] By: /s/ Jeffrey J. Joyce - ---------------------------- ------------------------------ Print Name: Jeffrey J. Joyce ---------------------- Its: Vice President ----------------------------- STATE OF MASSACHUSETTS COUNTY OF SUFFOLK , ss On November 27th, 1996, personally appeared the above-named Jeffrey J. Joyce, as Vice President of said Mount Cranmore Ski Resort, Inc., and acknowledged the foregoing instrument to be his free act and deed in his said capacity, and the free act and deed of said corporation. Before me, [NOTARY STAMP] [SEAL] /s/ Saundra L. O'Malley --------------------------------------------- Notary Public/Maine Attorney Typed or Printed Name: _____________________ 7 EX-10.79 29 PROMISSORY NOTE (8/15 GRAND SUMMIT & GREEN TREE) Exhibit 10.79 PROMISSORY NOTE $25,000,000 August 15, 1997 Hartford, Connecticut FOR VALUE RECEIVED and pursuant to the terms of this Promissory Note (this "Note"), the undersigned, GRAND SUMMIT RESORT PROPERTIES, INC., a Maine corporation (the "Borrower"), promises to pay to the order of GREEN TREE FINANCIAL SERVICING CORPORATION (the "Lender") (the Lender and all subsequent holders of this Note being hereinafter referred to as the "Holder"), at 100 North Point Center, East, Suite 200, Alpharette, Georgia or at such other place as the Holder hereof may designate in writing, the principal sum of up to TWENTY-FIVE MILLION DOLLARS ($25,000,000), or so much thereof as shall be outstanding hereunder from time to time as a result of advances of principal by the Lender to the Borrower pursuant to that certain Loan and Security Agreement dated as of August 1, 1997 among the Borrower, the Lender, Textron Financial Corporation and Textron Financial Corporation, as Administrative Agent (as amended from time to time, the "LSA"), together with interest on the unpaid principal amount from time to time outstanding under this Note at the rate or rates of interest provided therefor in the LSA. The aforesaid principal amount and interest thereon shall be due and payable on the dates and in the manner as provided in the LSA. All principal, interest and any other amounts due under this Note shall be payable in lawful money of the United States of America at the place or places above stated. Unless and until an assignment agreement effecting the assignment or transfer of this Note shall have been accepted by the Administrative Agent, as provided for in Section 2.6(b) of the LSA, the Borrower and the Administrative Agent shall be entitled to deem and treat the Lender as the owner and holder of this Note. The Borrower may only prepay the principal sum outstanding from time to time hereunder as provided in the LSA. This Note is secured by a security interest in the Collateral (as such term is defined in the LSA). This Note is one of the Borrower's "Notes" in the aggregate principal amount of $55,000,000 and has been issued pursuant to the LSA, and all of the terms, covenants and conditions of the LSA (including all Exhibits and Schedules thereto) and all other instruments evidencing or securing the indebtedness hereunder are hereby made a part of this Note and are deemed incorporated herein in full. In the event of an Event of Default (as such term is defined in the LSA), the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the LSA. The Borrower and the Holder intend to comply at all times with applicable usury laws. All agreements between the Borrower and the Holder, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of demand or acceleration of the maturity of this Note or otherwise, shall the interest contracted for, charged, received, paid or agreed to be paid to the Holder exceed the maximum amount permissible under applicable law (the "Maximum Rate"). The Holder may, in determining the Maximum Rate in effect from time to time, take advantage of any law, rule or regulation in effect from time to time available to the Holder which exempts the Holder from any limit upon the rate of interest it may charge or grants to the Holder the right to charge a higher rate of interest than that otherwise permitted by applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to a Holder in excess of the Maximum Rate, the interest payable to the Holder shall be reduced to the Maximum Rate; and if from any circumstance the Holder shall ever receive anything of value deemed interest by applicable law in excess of the Maximum Rate, an amount equal to any excessive interest shall be applied to the reduction of the outstanding principal hereunder and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal hereof, such excess shall be refunded to the Borrower by the Holder. All interest paid or agreed to be paid to the Holder shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period hereof until payment in full of the principal so that the interest hereon for such full period shall not exceed the Maximum Rate for the Holder. The Borrower agrees that in determining whether or not any interest payment hereunder exceeds the Maximum Rate for the Holder, any non-principal payment (except payments specifically described in the Security Documents (as defined in the LSA) as "interest") including without limitation, fees and late charges, shall to the maximum extent not prohibited by law, be an expense, fee or premium rather than interest in respect of the Holder. The Holder hereby expressly disclaims any intent to contract for, charge or receive interest in an amount which exceeds the Maximum Rate for the Holder. Time is of the essence for the performance and observance of each agreement and obligation of the Borrower under this Note, the LSA and under the Security Documents. This Note also evidences Borrower's obligation to repay with interest all additional moneys advanced or expended from time to time by the Holder to or for the account of the Borrower or otherwise to be added to the principal balance hereof as provided in any of the Security Documents, whether or not the principal amount hereof shall thereby exceed the principal amount above stated. The Borrower and all sureties, endorsers, guarantors and all other parties now or hereafter liable for the payment of this Note, in whole or in part, hereby severally waive presentment for payment, demand and protest and notice of protest, acceleration, or dishonor and non-payment of this Note, and expressly consent to any extension of time of payment hereof or of any installment hereof, to the release of any party liable for this obligation, to the release, change or modification of any of the Collateral, and any such extension, modification or release may be made without notice to any of said parties and without in any way affecting or discharging this liability. No single or partial exercise of any power hereunder, under the LSA or under any other Security Document shall preclude other or further exercise thereof or the exercise of any other power. No delay or omission on the part of the Holder in exercising any right or remedy hereunder or the acceptance of one or more installments from any person after a default hereunder, under the LSA or under any other Security Document shall operate as a 2 waiver of such right or remedy or of any other right or remedy under this Note nor as a waiver of such right or remedy in connection with any future default. In the event any one or more of the provisions contained in this Note shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Note, but this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. The Holder is hereby authorized by the Borrower to record in the manual or data processing records of the Holder, or on the grid schedule annexed to this Note, the date, type and amount of each Advance extended to the Borrower by the Holder hereunder and the date, type and amount of each repayment of principal and each payment of interest on account thereof. In the absence of manifest error, such records and schedule shall be conclusive as to the outstanding principal amount of all Advances and the payment of interest accrued hereunder; provided, however, that the failure of the Holder to make any such record entry with respect to any Advance or any payment in respect thereof shall not limit or otherwise affect the obligations of the Borrower under this Note or the other Security Documents. The Borrower promises to pay all costs and expenses as provided in Section 11.2 of the LSA. [Remainder of page intentionally left blank. Next page is signature page.] 3 THIS NOTE AND ALL TRANSACTIONS HEREUNDER OR EVIDENCED HEREIN SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF MAINE. The Borrower has caused this Note to be signed by a duly authorized officer on the date first above written. BORROWER: GRAND SUMMIT RESORT PROPERTIES, INC. By: /s/ Mark P. Girard ---------------------------- Name: Mark P. Girard Title: Vice President 4 SCHEDULE TO PROMISSORY NOTE ================================================================================ Date Principal Amount Amount of Amount of Unpaid of Advance Principal Repaid/ Interest Principal Made/Type of Type of Advance: Paid Balance of: Advance: Pre-Sale Pre-Sale Advance, Pre-Sale Advance, Interest Interest Advance, Advances, Advance, Jordan Jordan Bowl aggregate Bowl Project Project Advance, amount of Advance, Killington Killing-ton Project Interest Project Advance or Advance or Mt. Advances and Mt. Snow Project Snow Project Jordan Bowl Advance Advance Project Advance, Killington Project Advance or Mt. Snow Project Advance - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ 5 ================================================================================ Date Principal Amount Amount of Amount of Unpaid of Advance Principal Repaid/ Interest Principal Made/Type of Type of Advance: Paid Balance of: Advance: Pre-Sale Pre-Sale Advance, Pre-Sale Advance, Interest Interest Advance, Advances, Advance, Jordan Jordan Bowl aggregate Bowl Project Project Advance, amount of Advance, Killington Killing-ton Project Interest Project Advance or Advance or Mt. Advances and Mt. Snow Project Snow Project Jordan Bowl Advance Advance Project Advance, Killington Project Advance or Mt. Snow Project Advance - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ 6 EX-10.80 30 SUBSCRIPTION AGREEMENT (6/27/97) OTTEN & ASC EAST Exhibit 10.80 SUBSCRIPTION AGREEMENT RECITALS A. Leslie B. Otten, an individual with a mailing address of P.O. Box 450, Bethel, Maine, 04217, is the sole shareholder of the following five Maine corporations: Sunday River Skiway Corporation, Sunday River, Ltd., Perfect Turn, Inc., L.B.O. Holding, Inc., Sunday River Transportation, Inc. and the following three Vermont corporations: Sugarbush Resort Holdings, Inc., Sugarbush Leasing Company, Sugarbush Restaurants, Inc. (collectively, the "Corporations"). B. Leslie B. Otten now wishes to convey all his shares in the Corporations to the American Skiing Company, a Maine Corporation (the "Company") in exchange for shares of the Company. NOW THEREFORE, Leslie B. Otten hereby agrees to transfer to the Company all shares now owned by him in the Corporations. In consideration thereof, the Company agrees to issue to Leslie B. Otten, and Leslie B. Otten hereby subscribes for, 938,168 shares of common stock of the Company. To ensure the transfer of stock from Leslie B. Otten to the Company is not treated as a taxable event, as such is allowed under Section 351 of the Internal Revenue Code, Leslie B. Otten hereby makes the representations set forth on Exhibit A attached hereto. The closing date for the transfer and exchange of stock contemplated herein shall be on or before June 28, 1996. This agreement shall be governed and interpreted in accordance with the laws of the State of Maine. IN WITNESS WHEREOF, this Subscription Agreement was duly executed on this 27 day of June, 1996. /s/ Christopher E. Howard /s/ Leslie B. Otten - ----------------------------- ----------------------------------- Witness Leslie B. Otten /s/ Christopher E. Howard THE AMERICAN SKIING COMPANY - ----------------------------- ----------------------------------- Witness By: /s/ Leslie B. Otten ------------------------------- Leslie B. Otten President EX-10.81 31 SUGARLOAF JOINDER EXHIBIT 10.81 SUGARLOAF JOINDER JOINDER OF SUGARLOAF MOUNTAIN CORPORATION SUGARTECH and MOUNTAINSIDE August 30, 1996 Fleet National Bank, as Agent One Federal Street Boston, MA 02211 Ladies and Gentlemen: Reference is made to that certain Credit Agreement dated as of June 28, 1996, as from time to time in effect (the "Credit Agreement"), by and among American Skiing Company, a Maine corporation ("American Ski"), certain of its subsidiaries (together with American Ski, the "Borrowers"), Fleet National Bank, as agent (the "Agent") and the lenders party thereto. All capitalized terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings so defined. Immediately following the execution and delivery hereof, the undersigned, Sugarloaf Mountain Corporation, a Maine corporation ("Sugarloaf"), Sugartech, a Maine corporation ("Sugartech"), and Mountainside, a Maine corporation ("Mountainside"), will be wholly-owned Subsidiaries of American Ski. To induce the Lenders to make Revolving Credit Advances and Swing Line Loans from time to time to the Borrowers and in accordance with Section 2.15 of the Credit Agreement, Sugarloaf, Sugartech and Mountainside hereby (a) become Borrowers under the Credit Agreement, jointly and severally, and (b) consent and agree (i) to be jointly and severally liable for all Lender Obligations currently outstanding or hereafter created, and (ii) to be bound by all representations, warranties, covenants and agreements of the Borrowers under the Credit Agreement, the Notes and all Lender Agreements in each case, with the same force and effect as if Sugarloaf, Sugartech and Mountainside were signatories to such documents and were expressly named therein. Without limiting the generality of the foregoing, from and after the date hereof, S-K-I Limited will maintain legal and beneficial ownership of 100% of the equity interests of Sugarloaf and its Subsidiaries in accordance with Section 10.1(l) of the Credit Agreement. Sugarloaf, Mountainside and Sugartech hereby represent and warrant that all conditions precedent to the Sugarloaf Joinder set forth in Section 2.15 of the Credit Agreement have been satisfied in full. Upon execution of this Joinder and satisfaction of all conditions set forth in Section 2.15 of the Credit Agreement, the Unlimited Guaranty dated as of June 28, 1996 executed by Sugarloaf in favor of the Agent shall terminate. Upon execution of this Joinder and satisfaction of all conditions set forth in Section 2.15 of the Credit Agreement, the Unlimited Guaranty dated as of June 28, 1996 executed by Sugartech in favor of the Agent shall terminate. Upon execution of this Joinder and satisfaction of all conditions set forth in Section 2.15 of the Credit Agreement, the Unlimited Guaranty dated as of June 28, 1996 executed by Mountainside in favor of the Agent shall terminate. EXECUTED as an instrument under seal as of the date first written above. WITNESS: SUGARLOAF MOUNTAIN CORPORATION /s/ [Illegible By: /s/ Thomas M. Richardson - ------------------------ --------------------------------- Name: Name: Thomas M. Richardson Title: Treasurer WITNESS: SUGARTECH /s/ [Illegible By: /s/ Thomas M. Richardson - ------------------------ --------------------------------- Name: Name: Thomas M. Richardson Title: Treasurer WITNESS: MOUNTAINSIDE /s/ [Illegible By: /s/ Thomas M. Richardson - ------------------------ --------------------------------- Name: Name: Thomas M. Richardson Title: Treasurer 2 Acknowledged and Agreed: FLEET NATIONAL BANK, AS AGENT ON BEHALF OF EACH OF THE LENDERS By: /s/ David B. Henderson - ---------------------------- Name: David B. Henderson Title: Vice President The undersigned Borrowers hereby (a) acknowledge the foregoing Joinder, (b) agree to be jointly and severally liable for all obligations of Sugarloaf Mountain Corporation, Sugartech and Mountainside under the Credit Agreement, the Notes and the other Lender Agreements, (c) confirm and restate as of the date hereof, after giving effect to the foregoing Joinder, the representations and warranties of the Borrowers contained in Article 5 of the Credit Agreement, and (d) certify that no Default has occurred under the Credit Agreement. AMERICAN SKIING COMPANY SUNDAY RIVER SKIWAY CORPORATION SUNDAY RIVER LTD. PERFECT TURN, INC. SUNDAY RIVER TRANSPORTATION INC. LBO HOLDING, INC. CRANMORE, INC. SUGARBUSH RESORT HOLDINGS INC. SUGARBUSH LEASING COMPANY SUGARBUSH RESTAURANTS, INC. S-K-I LTD. KILLINGTON, LTD. MOUNT SNOW LTD. WATERVILLE VALLEY SKI AREA LTD. PICO SKI AREA MANAGEMENT COMPANY RESORT SOFTWARE SERVICES, INC. KILLINGTON RESTAURANTS RESORTS TECHNOLOGIES, INC. DOVER RESTAURANTS, INC. 3 DEERFIELD OPERATING COMPANY MOUNTAIN WASTEWATER TREATMENT, INC. By: /s/ Thomas M. Richardson ------------------------------------- Name: Thomas M. Richardson Title: Treasurer 4 JOINDER TO REVOLVING CREDIT NOTES AND SWING LINE NOTE DATED JUNE 28, 1996 The undersigned, Sugarloaf Mountain Corporation, a Maine corporation, Sugartech, a Maine corporation and Mountainside, a Maine corporation, hereby consent and agree to be jointly and severally bound as a "Borrower" under the terms of those certain Revolving Credit Notes and Swing Line Note, each dated June 28, 1996 in favor of the holders of such notes, with the same force and effect as if the undersigned was a signatory thereto and expressly named therein. The holders of such Notes may attach this Joinder to such notes. EXECUTED as an instrument under seal as of August 29, 1996. WITNESS: SUGARLOAF MOUNTAIN CORPORATION /s/ [Illegible] By: /s/ Thomas M. Richardson - ----------------------------- ------------------------------------- Name: [Illegible] Name: Thomas M. Richardson Title: Treasurer WITNESS: SUGARTECH /s/ [Illegible] By: /s/ Thomas M. Richardson - ----------------------------- ------------------------------------- Name: [Illegible] Name: Thomas M. Richardson Title: Treasurer WITNESS: MOUNTAINSIDE /s/ [Illegible] By: /s/ Thomas M. Richardson - ----------------------------- ------------------------------------- Name: [Illegible] Name: Thomas M. Richardson Title: Treasurer 5 EX-10.82 32 MORTGAGE AGREEMENT (8/1 GRAND SUMMIT & TEXTRON) Exhibit 10.82 RECEIVED CARROLL COUNTY REGISTRY 009968 1997 AUG 21 PM 3:47 /s/ Lillian O. Brookes REGISTER OF DEEDS MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (Attitash) THIS MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (this "mortgage" or "Mortgage") made as of August 1, 1997, by GRAND SUMMIT RESORT PROPERTIES, INC., a Maine corporation ("Mortgagor"), having a mailing address of P.O. Box 450, Sunday River Road, Bethel, ME 04217 in favor of TEXTRON FINANCIAL CORPORATION, a Delaware corporation, as administrative agent for Textron Financial Corporation, as lender, and Green Tree Financial Servicing Corporation, as lender (collectively, the "Lenders") (in such capacity herein referred to as the "Mortgagee"), having a mailing address of 40 Westminster Street, Providence, Rhode Island 02903. W I T N E S S E T H: THAT Mortgagor has entered into a certain Loan and Security Agreement (as amended from time to time, the "LSA"), dated as of August 1, 1997, with Mortgagee and the Lenders, pursuant to which, among other things, the Lenders have agreed, subject to the terms and conditions therein stated, to make one or more loan advances to the Mortgagor in the aggregate maximum principal amount of FIFTY-FIVE MILLION DOLLARS ($55,000,000), as evidenced by Mortgagor's promissory notes, dated August 15, 1997, in said aggregate principal amount (as amended, restated, extended, renewed or otherwise modified from time to time, collectively, the "Note"), in which Note Mortgagor promises to pay said principal amount (or so much thereof as may be outstanding from time to time), together with interest thereon at a variable per annum rate of interest equal to the greater of (a) 9.25%, or (b) the sum of (i) 1.5%, plus (ii) the Prime Rate (as defined in the LSA) then in effect for such month, as more particularly set forth in the LSA, and other amounts at the rates, at the times, and in amounts as in the Note or LSA provided, until the entire principal and accrued interest have been paid, but in any event, the unpaid balance (if any) remaining due on the Note shall be due and payable not later than December 1, 2000 ("Maturity Date"); THAT all capitalized terms that are not otherwise defined herein shall have the meanings ascribed to such terms in the LSA; and THAT in order to secure the indebtedness evidenced by the Note, Mortgagor has entered into certain Security Documents (including the LSA). NOW, THEREFORE, to secure the payment of the aforesaid indebtedness and all future advances made in accordance with the terms and conditions hereof, of the Note, and of the LSA, and all extensions, renewals, refinancings, replacements and substitutions thereof, After recording please return to: Jeffery S. Kuperstock, Esq. Hebb & Gitlin A Professional Corporation One State Street Hartford, Connecticut 06103 and the performance of the covenants and agreements contained herein and therein and in the Security Documents, and also to secure the payment of any and all other indebtedness, direct or contingent, that may now or hereafter become owing from Mortgagor to Mortgagee or the Lenders whether under the Note, under this Mortgage, or under any other Security Document or otherwise, Mortgagor does by these presents hereby grant, mortgage, assign and transfer unto Mortgagee, as administrative agent for the Lenders, its successors and assigns forever, with MORTGAGE COVENANTS, all of the following (all of the following, together with any additional property from time to time added to the following, is hereinafter collectively referred to as the "Mortgaged Property"): (a) all of Mortgagor's right, title and interest in and to the "Quarter Interests" set forth on Exhibit A hereto, consisting of undivided one-quarter fee interests in the Units of the Condominium set forth on said Exhibit A, as provided for in, and as such terms are defined in, that certain Declaration of Condominium Grand Summit Hotel and Crown Club at Attitash Bear Peak, A Condominium, dated March 26, 1997, recorded on March 28, 1997, in Book 1692, at Page 989, of the Office of the Registry of Deeds of Carroll County, New Hampshire, as amended from time to time (as amended from time to time, the "Declaration"), and according to that certain map entitled "Condominium Plan Grand Summit Hotel and Crown Club at Attitash Bear Peak, A Condominium", dated March 27, 1997, and recorded as Plan Number 159 / 53-65 in the Office of the Registry of Deeds of Carroll County, New Hampshire; (b) all of Mortgagor's right, title and interest in respect of the Units or the "Quarter Interests", including, without limitation, (i) Mortgagor's membership interest in and to the Grand Summit Hotel Condominium Unit Owner's Association, Inc. and Mortgagor's voting rights relating thereto, (ii) Mortgagor's interest in and to all furniture, furnishings, fixtures and personal property of every nature relating thereto, (iii) Mortgagor's interest in and to any Common Areas and Limited Common Areas (as such terms are defined in the Declaration), and (iv) Mortgagor's rights to insurance or condemnation proceeds payable in respect thereof and to the proceeds of any sales, assignments or other dispositions thereof; (c) all of Mortgagor's rights, benefits and privileges from time to time existing under or in respect of the Declaration and any and all other documents or instruments now or hereafter relating to the Declaration, the Condominium, any Unit and/or any of the "Quarter Interests", and Mortgagor's rights relating to the management, government and administration of the affairs of the Condominium, any Unit and/or any of the "Quarter Interests"; (d) all of Mortgagor's right, title and interest in, to and under any and all other leases, subleases, use or occupancy agreements, purchase agreements, concession agreements or other agreements of any kind now or hereafter relating to the Condominium, any Unit and/or any of the "Quarter Interests", and all rents, issues, proceeds and profits accruing and to accrue therefrom; and (e) all of Mortgagor's right, title and interest in and to the Convertible Land (which Convertible Land is more particularly described and defined in the Declaration), whether such right, title or interest arises under or pursuant to the Declaration, 2 applicable law or otherwise, including, without limitation, Mortgagor's development rights, declarant rights and rights to construct improvements thereon, together with (i) all fixtures of any kind or nature owned by Mortgagor located on or in, or used or intended to be used in connection with the Convertible Land, the buildings, structures, improvements thereon, the Units and/or the common elements and limited common elements in respect thereof, (ii) all tenements, hereditaments, easements, appurtenances, riparian rights, water rights, mineral rights, rents, issues, profits, condemnation awards, judgments, settlements, claims, insurance proceeds and other proceeds and compensation, option payments and any and all proceeds of any sales, assignments or other dispositions, accounts, accounts receivable, option rights, contract rights, general intangibles, permits, licenses, approvals, bonuses, actions and rights in action, rights in trade names and other rights now or hereafter belonging or in any way pertaining to the Convertible Land or the buildings, structures, improvements thereon or the Units, (iii) all building materials, furniture, furnishings, equipment and all other personal property owned by Mortgagor and now or hereafter located in or on, or used or intended to be used in connection with, the Convertible Land, the buildings, structures, improvements thereon, the Units and/or the common elements and limited common elements in respect thereof, and all renewals or replacements thereof or articles in substitution therefor, whether or not the same are or shall be attached to said buildings, structures or improvements in any manner, (iv) all of Mortgagor's right, title and interest, whether now owned or hereafter acquired, in and to any construction contract, architect's contract or engineering contract in connection with the construction and development of the Convertible Lands, (v) all of Mortgagor's right, title and interest, whether now owned or hereafter acquired, in and to any payment, performance or other surety bonds obtained by any contractor or subcontractor in connection with the development and construction of the Convertible Lands and (vi) all of Mortgagor's right, title and interest, whether now owned or hereafter acquired, in and to all rents, issues, proceeds and profits accruing and to accrue from the Convertible Land; (f) all proceeds and after-acquired title of any of the above. TO HAVE AND TO HOLD the same unto the Mortgagee, as administrative agent for the Lenders, its successors and assigns forever, for the purposes and uses herein set forth. THIS MORTGAGE SECURES, AMONG OTHER THINGS, FUTURE ADVANCES AND FUTURE EXTENSIONS OF CREDIT. Each and every loan, future advance and other extension of credit made under the Note, the LSA or any of the other Security Documents shall be secured by this Mortgage equally with, and with the same priority as, the proceeds initially advanced in respect of the Indebtedness (as hereinafter defined). The maximum amount secured by this Mortgage is $75,000,000, which includes an aggregate maximum principal amount of $55,000,000 of debt under the Note (whether currently outstanding or by future advances), together with, interest, fees and charges under the Note or the LSA, advances by Mortgagee of taxes or assessments and/or insurance and/or other monies to protect the collateral, plus costs of collection, including attorneys' fees and all other indebtedness referred to above or otherwise herein (collectively, referred to herein as the "Indebtedness"). 3 This mortgage is upon the STATUTORY CONDITIONS and upon the other terms and conditions of the Note and the Security Documents, and upon the further condition that in the event of any breach thereof or upon the occurrence of any Event of Default (as hereinafter defined), Mortgagee shall have the STATUTORY POWER OF SALE. To the extent permitted by law, the lien of this Mortgage shall attach automatically, without the necessity of any action by Mortgagor or any other person, to all right, title and interest of Mortgagor in and to any and all after-acquired property similar in character or type to any property constituting the Mortgaged Property. Mortgagor shall promptly execute and deliver to Mortgagee such documents and instruments as may be requested by Mortgagee to confirm such lien. Mortgagor hereby irrevocably authorizes and appoints Mortgagee the agent and attorney-in-fact of Mortgagor to execute all such documents and instruments on behalf of Mortgagor, which appointment shall be deemed to be coupled with an interest. Mortgagor represents that it is the absolute owner in fee simple of the Quarter- Interests described in Exhibit A, free and clear of any liens or encumbrances except as set out in Exhibit B attached hereto, and except for taxes which are not yet due or delinquent. Mortgagor shall forever warrant and defend the title to the Mortgaged Property against all claims and demands of all persons whomsoever and will on demand execute any additional instrument which may be required to give Mortgagee a valid first lien on all of the Mortgaged Property, except as stated in Exhibit B. MORTGAGOR COVENANTS AND AGREES AS FOLLOWS: 1. Mortgagor will duly and punctually pay any and all amounts evidenced by the Note in accordance with the terms thereof and all other Indebtedness, when and as due and payable. The provisions of the Note and the LSA are hereby incorporated by reference into this Mortgage as fully as if set forth at length herein. All payments received by Mortgagee or the Lenders from Mortgagor under the Note or this Mortgage shall be applied as set forth in the LSA. 2. Mortgagor shall not create, incur or suffer to exist any lien, security interest, encumbrance or charge on the Mortgaged Property or any part thereof, other than as permitted pursuant to the terms of the LSA. Mortgagor shall pay when due and as required by the LSA all assessments and dues and other amounts required under any declaration or other instrument affecting the Mortgaged Property. 3. Mortgagor shall comply with all present and future statutes, laws, rules, orders, regulations and ordinances, and any easements, protective covenants or other restrictions affecting the Mortgaged Property, any part thereof or the use thereof. 4. Mortgagor (a) shall keep or cause to be kept the Mortgaged Property in safe and good repair and condition; (b) shall not commit waste of the Mortgaged Property, and (c) shall not remove any of the fixtures or personal property included in the Mortgaged Property unless the same is promptly replaced with property of at least equal value and utility and this Mortgage becomes a valid first lien on such property or unless such removal is otherwise permitted under the LSA. 4 5. Mortgagor shall pay, or cause to be paid, all charges made by utility companies, whether public or private, for electricity, gas, heat, water, or sewer, furnished or used in connection with the Mortgaged Property or any part thereof, and will, upon written request of Mortgagee, furnish proper receipts evidencing such payment. 6. Mortgagor shall permit the Mortgagee, the Lenders or their respective agents to enter upon the Mortgaged Property at all reasonable times for the purposes of inspecting the Mortgaged Property or any part thereof, as more particularly provided for in the LSA. Notwithstanding the foregoing, neither the Mortgagee nor any of the Lenders shall have any duty to make any such inspections. 7. If Mortgagor fails to perform or comply with any of the covenants and agreements contained in this Mortgage or in any of the other Security Documents or if any action or proceeding is commenced which affects the Mortgaged Property or the interest of the Mortgagee therein, or the title thereto, then the Mortgagee, acting pursuant to the direction of the Required Lenders or otherwise in accordance with the LSA, may perform such covenants and agreements, defend against and/or investigate such action or proceeding, and/or pay any money which Mortgagor is required to pay hereunder or with respect to the permitted encumbrances described in Exhibit B hereto, and/or take such other action as Mortgagee or the Required Lenders deem necessary to protect their interests in the exercise of their judgment. Mortgagee shall be entitled to rely on an opinion of counsel as to the legality, validity and priority of any claim, lien, encumbrance, tax, assessment, charge and premium paid by it and shall be the sole judge of the amount necessary to be paid in satisfaction thereof. Mortgagee is hereby given the irrevocable power of attorney (which power is coupled with an interest) to enter upon the Mortgaged Property as Mortgagor's agent in Mortgagor's name to perform any and all covenants and agreements to be performed by Mortgagor as herein provided. Mortgagee will notify Mortgagor prior to or contemporaneously with any action taken by Mortgagee pursuant to this paragraph 7, provided that the failure by Mortgagee to provide such notification shall not affect any action so taken. Any amounts or expenses disbursed or incurred by Mortgagee or the Lenders pursuant to this paragraph 7, or to otherwise enforce any provisions of this Mortgage or to preserve any of the rights, powers or privileges of Mortgagee or the Lenders granted or created hereby, including, without limitation, attorneys' fees, including fees and costs incurred in any appeal, with interest thereon as hereinafter stated, shall become additional Indebtedness of Mortgagor secured by this Mortgage. Unless Mortgagor and Mortgagee agree in writing to other terms of repayment, such amounts shall be immediately due and payable, and, subject to paragraph 24 hereof, shall bear interest from the date of disbursement at the Default Rate. Mortgagee shall, at its option, be subrogated to the lien of any mortgage, deed of trust, or other lien discharged in whole or in part by the Indebtedness or by Mortgagee under the provisions hereof, and any such subrogation rights shall be additional and cumulative security for this Mortgage. Nothing contained in this paragraph 7 shall require Mortgagee or the Lenders to incur any expense or do any act hereunder, and neither Mortgagee nor the Lenders shall be liable to Mortgagor for any damages or claims arising out of action taken by Mortgagee or the Lenders pursuant to this paragraph 7 or out of any failure to so act. 8. Mortgagor hereby irrevocably assigns to Mortgagee, as administrative agent for the Lenders, any award or payment which pursuant to the Declaration becomes payable to 5 Mortgagor by reason of any taking of the Mortgaged Property, or any part thereof, whether directly or indirectly, temporarily or permanently, in or by condemnation or other eminent domain proceedings or the settlement thereof (hereinafter called "Taking"). Forthwith upon receipt by Mortgagor of notice of the institution of any proceedings or negotiations for a Taking, Mortgagor shall give notice thereof to Mortgagee. Mortgagor, notwithstanding that Mortgagee may not be a party to any such proceeding, will promptly give to Mortgagee copies of all notices, pleadings, judgments, determinations and other papers received by Mortgagor therein. Mortgagor will not consent to, or enter into, any agreement permitting or consenting to the Taking of the Mortgaged Property, or any part thereof, or providing for the conveyance thereof in lieu of condemnation, with anyone authorized to acquire the same in condemnation or by eminent domain unless Mortgagee, acting pursuant to the direction of the Required Lenders or otherwise in accordance with the LSA, shall first have consented thereto in writing. All awards or payments payable as a result of a Taking shall be paid to Mortgagee, and said awards or payments shall be applied (after first deducting expenses, including, but not limited to attorney's fees, incurred by Mortgagee or the Lenders in the collection thereof) to the reduction of Indebtedness (whether or not then due) pursuant to the LSA. 9. (a) Mortgagor shall not create or permit to be created any subordinate lien on the Mortgaged Property or any part thereof for borrowed money or otherwise. (b) Mortgagor shall pay, or cause to be paid, all taxes, assessments and related charges pursuant to, and in accordance with the terms of the LSA. (c) Mortgagor shall maintain, or cause to be maintained, policies of insurance and shall pay the premiums associated therewith pursuant to, and in accordance with the terms of the LSA. (d) Mortgagor shall not sell, convey or transfer the Mortgaged Property other than as permitted in the LSA. (e) Mortgagor shall perform each of its obligations, and shall enforce each obligation of third-parties, under every lease or other agreement that is assigned to Mortgagee pursuant to this Mortgage. Mortgagor shall perform each of its obligations as declarant under the Declaration. 10. Mortgagor hereby assigns to Mortgagee, as administrative agent for the Lenders, directly and absolutely, and not merely collaterally, the rents, issues, profits, proceeds, security deposits, royalties, and other payments payable under or in respect of all leases, subleases, use or occupancy agreements, purchase agreements, concession agreements or other agreements now or hereafter burdening or affecting the Mortgaged Property or any part thereof, and all of Mortgagor's right, title, interest and income accruing to Mortgagor under any contracts for the sale, transfer and other conveyance of the Mortgaged Property or any part thereof, with the right to receive the same and apply them to the Indebtedness as provided in the LSA, provided that prior to the existence of an Event of Default and subject to the Mortgagor's undertakings and the rights and remedies of the Mortgagee hereunder and in the LSA, Mortgagor is authorized to collect such rents, issues, profits, proceeds, security deposits, royalties, and other payments. During the occurrence of 6 an Event of Default, all such rents, issues, profits, proceeds, security deposits, royalties, and other payments shall be accepted and held for Mortgagee in trust and shall not be commingled with the funds and property of Mortgagor, but shall be promptly paid over to Mortgagee. 11. It is the intention of Mortgagor and Mortgagee that the assignment effectuated by this Mortgage with respect to the aforesaid rents, issues, profits, proceeds, security deposits, royalties, and other payments payable under the leases, subleases, use or occupancy agreements or other agreements now or hereafter burdening or affecting the Mortgaged Property or any part thereof (collectively, the "Leases"), and other amounts payable under such Leases shall be a direct and currently effective assignment and shall not constitute merely the granting of a lien, security interest or pledge for the purpose of securing the Indebtedness secured hereby. In the event that a court of competent jurisdiction determines that, notwithstanding such expressed intent of the parties, Mortgagee's interest in such rents, issues, profits, proceeds, security deposits, royalties, and other payments and amounts payable under the Leases constitutes a lien on or security interest in or pledge thereof, it is agreed and understood that the forwarding of a notice to Mortgagor after the occurrence of a default, advising Mortgagor of the revocation of any authorization then in favor of Mortgagor to collect such rents or other amounts payable under the Leases, or of the existence of a default, shall be sufficient action by Mortgagee to (a) perfect and/or enforce such lien on or security interest in or pledge of such rents, issues, profits, proceeds, security deposits, royalties, and other payments and other amounts payable under the Leases (to the extent such lien, security interest or pledge shall not have theretofore been perfected or enforced under applicable law) and (b) entitle Mortgagee to immediate and direct payment of such rents, issues, profits, proceeds, security deposits, royalties, and other payments payable and other amounts payable under the Leases (to the extent Mortgagee shall not have theretofore had the right to immediately and directly receive such rents, issues, profits, proceeds, security deposits, royalties, and other payments), for application as provided in this paragraph 11, all without the necessity of any further action by Mortgagee, including, without limitation, any action to obtain possession of the Mortgaged Property. Mortgagee may apply any such rents, issues, profits, proceeds, security deposits, royalties and other payments so received or collected, less costs and expenses of operation and collection, including attorneys' fees and costs and attorneys' fees and costs on appeal, upon any Indebtedness secured hereby, at Mortgagee's option and in such order as Mortgagee may determine, all pursuant to the direction of the Required Lenders or otherwise in accordance with the LSA, and, if such costs and expenses and attorneys' fees and costs shall exceed the amount received or collected, the excess shall be immediately due and payable. Notwithstanding the direct and absolute assignment of the rents and other amounts payable under the Leases as herein described, there shall be no pro tanto reduction in any portion of the Indebtedness secured by this Mortgage except with respect to rents and other amounts payable under the Leases actually received by Mortgagee and applied by Mortgagee toward payment of the Indebtedness, as provided for in the LSA. The receipt collection of any rents, issues, profits, proceeds, security deposits, royalties and other payments and the application thereof as aforesaid shall not (i) be deemed to constitute mortgagee-in-possession, or (ii) cure or waive any Event of Default or notice of default hereunder or under any other Security Document or invalidate any act done pursuant to such notice. Failure or discontinuance of Mortgagee at any time, or from time to time, to receive or collect any such moneys shall not impair in any manner the subsequent enforcement by Mortgagee of the right, power and authority herein 7 conferred on Mortgagee. Nothing contained herein, including the exercise of any right, power or authority herein granted to Mortgagee, shall be, or be construed to be, an affirmation by Mortgagee or any of the Lenders of any tenancy, lease or option, or an assumption of liability under, or the subordination of the lien or charge of this Mortgage to any such tenancy, lease or option. Mortgagor hereby agrees that, in the event Mortgagee exercises its rights as in this paragraph provided, Mortgagor waives any right to compensation for the use of Mortgagor's furniture, furnishings or equipment located in or at the Mortgaged Property for the period such assignment of rents or receivership is in effect, it being understood that the rents, issues, profits, proceeds, security deposits, royalties, other payments and installments of money derived from the use of any such items shall be applied to Mortgagor's obligations hereunder as above provided. 12. The occurrence of an "Event of Default" under, and as defined in, the LSA shall constitute an event of default (an "Event of Default") under this Mortgage. 13. Upon the occurrence of any Event of Default, in addition to any other rights or remedies provided in this Mortgage, the Security Documents, at law, in equity or otherwise, Mortgagee shall have the STATUTORY POWER OF SALE and shall have the right to foreclose the lien hereof. In any suit to foreclose the lien hereof and in any sale of the Mortgaged Property (whether pursuant to the statutory power of sale or otherwise and whether as an entirety or in separate portions), there shall be allowed and included as additional Indebtedness payable by Mortgagor to Mortgagee and secured hereby, all expenditures and expenses which may be paid or incurred by or on behalf of Mortgagee for attorneys' fees and costs, including attorneys' fees and costs on appeal, appraisers' fees, auctioneer's and/or broker's commissions and fees, expenditures for documentary and expert evidence, stenographer's charges, publication and advertising costs, survey costs, environmental audits and costs (which may be estimated as to items to be expended after the entry of any decree) of procuring all such abstracts of title, title searches and examinations, title insurance policies, Torrens certificates and similar data and assurances with respect to title as Mortgagee deems reasonably necessary either to prosecute such suit or to consummate such sale or to evidence to bidders at any sale the true condition of the title to or the value of the Mortgaged Property. 14. This Mortgage is subject to the STATUTORY CONDITIONS and upon the further condition that all covenants and agreements of Mortgagor herein and in the Security Documents shall be fully or timely performed, time being of the essence under this Mortgage. No breach of the STATUTORY CONDITIONS or any such other covenant or agreement shall be permitted, and in the event of any such breach or upon the occurrence of any Event of Default, Mortgagee shall have the STATUTORY POWER OF SALE, and this mortgage shall be subject to foreclosure as provided by NHRSA 479:25 et seq., as amended, or as otherwise provided by law, and Mortgagee may also (i) take any one or more of the actions and exercise and enforce any one or more of the rights, powers and remedies provided in this Mortgage or in any of the other Security Documents, or (ii) exercise and enforce any other right, power or remedy available to Mortgagee, at law or in equity. Mortgagee may take such actions and exercise and enforce such rights, powers and remedies, at Mortgagee's option, separately or concurrently and in such order as Mortgagee may desire, either with or without entry in or on or taking possession of all or any part of the Mortgaged Property and whether 8 or not all or any part of the Indebtedness shall have been declared to be immediately due and payable or shall otherwise be due and payable. 15. The proceeds of any foreclosure sale, sale pursuant to the statutory power of sale or other sale of the Mortgaged Property in accordance with the terms hereof or as permitted by law, shall be distributed and applied as provided for in the LSA. 16. During the continuance of any Event of Default, Mortgagor shall forthwith upon demand of Mortgagee surrender to Mortgagee possession of the Mortgaged Property, and Mortgagee shall be entitled to take actual possession of the Mortgaged Property or any part thereof personally or by its agents or attorneys, and Mortgagee acting pursuant to the direction of the Required Lenders or otherwise in accordance with the LSA, may, with or without force and with or without process of law, enter upon and take and maintain possession of all or any part of the Mortgaged Property together with all documents, books, records, papers and accounts of the Mortgagor or the then owner of the Mortgaged Property relating thereto, and may exclude Mortgagor, its agents or assigns wholly therefrom, and may as attorney-in-fact or agent of the Mortgagor, or in its own name as Mortgagee and under the powers herein granted: (a) hold, operate, manage or control the Mortgaged Property and conduct the business, if any, thereof, either personally or by its agents, and with full power to use such measures, legal or equitable, as in its discretion it deems proper or necessary to enforce the payment or security of the income, rents, issues and profits of the Mortgaged Property, including actions for the recovery of rent, actions in forcible detainer and actions in distress for rents, hereby granting full power and authority to exercise each and every of the rights, privileges and powers herein granted at any and all times hereafter, without notice to Mortgagor; (b) cancel or terminate any Lease for any cause or on any ground which would entitle Mortgagor to cancel the same; (c) elect to cancel any Lease made subsequent to this Mortgage or subordinated to the lien hereof unless this Mortgage has specifically been made subordinate to such Lease; (d) extend or modify any then existing Lease and make new Leases, which extensions, modifications or new Leases may provide for terms to expire, or for options to lessees to extend or renew terms to expire, beyond the Maturity Date of the Note and the issuance of a deed or deeds to a purchaser or purchasers at a foreclosure sale or other sale of the Mortgaged Property pursuant to the statutory power of sale or otherwise, it being understood and agreed that all such Leases, and the options or other such provisions to be contained therein, shall be binding upon Mortgagor and all persons whose interests in the Mortgaged Property are subject to the lien hereof and shall be binding also upon the purchaser or purchasers at any foreclosure or other sale, notwithstanding any redemption from sale, discharge of the Indebtedness secured hereby, satisfaction of any foreclosure decree, or issuance of any certificate of sale or deed to any purchaser; and 9 (e) make all necessary or proper repairs, decorating, renewals, replacements, alterations, additions, betterments and improvements to the Mortgaged Property as it may deem judicious, insure and reinsure the same and all risks incidental to Mortgagee's possession, operation and management thereof, and receive all income, rents, issues and profits. Neither Mortgagee nor any Lender shall be obligated to perform or discharge, nor does any such Person hereby undertake to perform or discharge, any obligation, duty or liability under any Lease, and the Mortgagor shall and does hereby agree to indemnify and to hold Mortgagee and each Lender harmless of and from all liability, loss or damage which it might incur under said Leases or under or by reason of the assignment thereof, and of and from any and all claims or demands whatsoever which may be asserted against it by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements contained in said Leases. Should Mortgagee or any Lender incur any such liability, loss or damage under any of said Leases, or under or by reason of the assignment thereof, or in the defense of any claims or demands, the amount thereof, including costs, expenses and attorneys' fees and costs, including attorneys' fees and costs on appeal, shall be secured hereby and Mortgagor shall reimburse Mortgagee therefor immediately upon demand, together with interest at the Default Rate from the date of payment by Mortgagee to the date of reimbursement. Mortgagee in the exercise of the rights and powers hereinabove conferred upon it shall have the full power to use and apply the avails, rents, issues and profits of the Mortgaged Property to the payment of or on account of the following, at the election of Mortgagee and in such order as Mortgagee may determine, in each case acting pursuant to the direction of the Required Lenders or otherwise in accordance with the LSA: (i) to the payment of the expenses of operating the Mortgaged Property, including cost of management and leasing thereof (which shall include reasonable compensation to Mortgagee and its agent or agents if management is delegated to an agent or agents, and shall also include lease commissions and other compensation and expenses of seeking and procuring tenants and entering into Leases), established claims for damages, if any, and premiums on insurance as hereinabove authorized; (ii) to the payment of taxes and special assessments now due or which may hereafter become due on the Mortgaged Property; (iii) to the payment of all repairs, decorating, renewals, replacements, alterations, additions, betterments and improvements of the Mortgaged Property and of placing the Mortgaged Property in such condition as will in the judgment of Mortgagee make it readily rentable; and/or (iv) to the payment of any Indebtedness secured hereby or any deficiency which may result from any foreclosure sale or other sale of the Mortgaged Property pursuant to the statutory power of sale or otherwise. 17. During the continuance of any Event of Default under this Mortgage, Mortgagee, acting pursuant to the direction of the Required Lenders or otherwise in 10 accordance with the LSA, may apply to any court having jurisdiction for the appointment of a receiver of the Mortgaged Property. Such appointment may be made either before or after sale, without notice, without regard to the solvency or insolvency of Mortgagor at the time of application for such receiver and without regard to the then value of the Mortgaged Property or the adequacy of Mortgagee's security. The receiver shall have power to collect the rents, issues and profits of the Mortgaged Property during the pendency of any foreclosure proceedings and, in case of a sale, during the full redemption period, if any, as well as during any further times when Mortgagor, except for the intervention of such receiver, would be entitled to collect such rents, issues and profits. In addition, the receiver shall have all other powers which shall be necessary or are usual in such cases for the protection, possession, control, management and operation of the Mortgaged Property during the whole of said period. The court from time to time may authorize the receiver to apply the net income in his hands at Mortgagee's election and in such order as Mortgagee may determine (in accordance with the LSA) in payment in full or in part of: (i) the Indebtedness secured hereby or provided by any decree foreclosing this mortgage, or any tax, special assessment or other lien which may be or become superior to the lien hereof or of such decree, provided such application is made prior to foreclosure sale; and (ii) the deficiency in case of a sale and deficiency. 18. (a) Mortgagor agrees that all costs, charges and expenses, including attorneys' fees, incurred or expended by Mortgagee or any of the Lenders arising out of or in connection with any action, proceeding or hearing, legal, equitable or quasi-legal, including the preparation therefor and any appeal therefrom, in any way affecting or pertaining to this Mortgage, the Note, the LSA, the other Security Documents or the Mortgaged Property, shall be promptly paid by Mortgagor. All such sums not promptly paid by Mortgagor shall be added to the Indebtedness secured hereby and shall bear interest at the Default Rate from the date of such advance and shall be due and payable on demand. (b) Mortgagor hereby agrees that upon the occurrence of an Event of Default and the acceleration of the principal sum secured hereby pursuant to the LSA, to the full extent that such rights can be lawfully waived, Mortgagor hereby waives and agrees not to insist upon, plead, or in any manner take advantage of, any notice of acceleration, any stay, extension, exemption, homestead, marshaling or moratorium law or any law providing for the valuation or appraisement of all or any part of the Mortgaged Property prior to any sale or sales thereof under any provision of this Mortgage or before or after any decree, judgment or order of any court or confirmation thereof, or claim or exercise any right to redeem all or any part of the Mortgaged Property so sold and hereby expressly waives to the full extent permitted by applicable law on behalf of itself and each and every person or entity acquiring any right, title or interest in or to the all or any part of the Mortgaged Property, all benefit and advantage of any such laws which would otherwise be available to Mortgagor or any such person or entity, and agrees that neither Mortgagor nor any such person or entity will invoke or utilize any such law to otherwise hinder, delay or impede the exercise of any remedy granted or delegated to Mortgagee herein but will permit the exercise of such remedy as though any such laws had not been enacted. Mortgagor hereby further expressly waives to the full extent permitted by applicable law on behalf of itself and each and every person or 11 entity acquiring any right, title or interest in or to all or any part of the Mortgaged Property any and all rights of redemption from any sale (whether pursuant to the statutory power of sale or otherwise) or any order or decree of foreclosure obtained pursuant to provisions of this mortgage. 19. (a) Mortgagor has executed and delivered that certain Assignment of Leases and Rents assigning to Mortgagee, as administrative agent, directly and absolutely, and not merely collaterally, the interest of Mortgagor as lessor under the existing leases of the Mortgaged Property, as well as all other leases which may hereafter be made in respect of the Mortgaged Property, and the rents and other income arising thereunder and from the use and/or sale of the Mortgaged Property. Said Assignment of Leases and Rents grants to Mortgagee, as said administrative agent, specific rights and remedies, and such rights and remedies so granted shall be cumulative of those granted herein. (b) Upon any foreclosure sale, Mortgagee on behalf of all of the Lenders or any Lender on its own behalf (in either case in accordance with the LSA) may bid for and purchase all or any part of the Mortgaged Property and, upon compliance with the terms of sale, may hold, retain, possess and dispose of such property in its own absolute right without further accountability. Upon any foreclosure sale, Mortgagee or such Lender may, if permitted by law, and after allowing for costs and expenses of the sale, compensation and other charges, in paying the purchase price, apply all or any part of the Indebtedness in lieu of cash to the extent of the net proceeds of such sale distributable to the Lenders or such Lender in respect of such Indebtedness. 20. All rights and remedies granted to Mortgagee or any of the Lenders in the Security Documents shall be in addition to and not in limitation of any rights and remedies to which they are entitled in equity, at law or by statute, and the invalidity of any right or remedy herein provided by reason of its conflict with applicable law or statute shall not affect any other valid right or remedy afforded to Mortgagee or any Lender. No waiver of any Event of Default or of any default in the performance of any covenant contained in the Note or the LSA or any other instrument securing the Note or the LSA shall at any time thereafter be held to be a waiver of any rights of the Mortgagee or the Lenders hereunder, nor shall any waiver of a prior Event of Default or default operate to waive any subsequent Event of Default or default. All remedies provided for herein, in the Note, in the LSA and in any other instrument securing or guarantying all or any portion of the Note or the Indebtedness evidenced thereby are cumulative and may, at the election of Mortgagee in accordance with the LSA, be exercised alternatively, successively, or concurrently. No act of Mortgagee or any Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision or to proceed against one portion of the Mortgaged Property to the exclusion of any other portion. 21. Mortgagee and the Lenders may enforce their rights, powers and remedies with respect to, and realize upon any guaranty of all or any part of the Indebtedness secured hereby or any additional security now or hereafter held by Mortgagee or the Lenders in connection with all or any part of the Indebtedness secured hereby, either before or concurrently with or after a foreclosure or other enforcement of this Mortgage (including, without limitation, any sale of the Mortgaged Property pursuant to the Statutory Power of Sale) or of any of the other Security Documents, without being deemed to have waived any 12 rights, benefits, liens or security interests evidenced by or arising under or in connection with this Mortgage or any of the other Security Documents and without being deemed to have made an election thereby or to have accepted the benefits of any of such guaranties or such additional security (or the proceeds thereof) in full settlement of such Indebtedness secured hereby and of their rights with respect thereto. No judgment, order or decree with respect to the Note or with respect to any such guaranty or such additional security whether rendered in the State of New Hampshire or elsewhere, shall in any manner affect the security of this Mortgage, and any deficiency or other debt represented by any such judgment, order or decree shall, to the extent permitted by law, be secured by this Mortgage to the same extent that the Indebtedness shall have been secured by this Mortgage prior to the rendering of such judgment, order or decree. Mortgagor, for itself and for any and all persons who may at any time claim through or under Mortgagor, hereby irrevocably waives and releases, to the extent permitted by law, all benefit of any and all laws that would limit or prohibit the effectiveness of anything set forth in this paragraph 21. 22. Notwithstanding anything contained herein to the contrary, neither Mortgagee nor any of the Lenders shall be under any duty to Mortgagor, any of its affiliates or any other person or entity to exercise, exhaust or first resort to all or any of the rights, powers and remedies available to Mortgagee or the Lenders, whether under the Note, this Mortgage or the other Security Documents prior to the sale of the Mortgaged Property or any other enforcement of this Mortgage. Furthermore, Mortgagor and such other persons and entities waive all rights relating to marshaling and agree that neither Mortgagee nor the Lenders shall be compelled to release any part of the security of this Mortgage or the other Security Documents or be prevented from foreclosing or enforcing this Mortgage or the other Security Documents upon all or any part of such security unless the Note and all other amounts due under the Security Documents shall have been fully and finally paid and that neither Mortgagee nor the Lenders shall be compelled to accept or allow any apportionment of the Note or said amounts to or among any of the property encumbered by this Mortgage or the other Security Documents. 23. By accepting payment of any sum secured hereby after its due date, Mortgagee and the Lenders do not waive their right either to require prompt payment when due of all other sums or installments so secured or to declare a default for failure to pay such other sums or installments. 24. Notwithstanding anything herein, in the Note, or in any other Security Document to the contrary, any provision contained herein which purports to obligate Mortgagor to pay any amount of interest or any fees, costs or expenses which are in excess of the Maximum Rate, as defined in and provided for in Section 2.4(c) of the Loan and Security Document, shall be subject to such Maximum Rate and said Section 2.4(c). 25. In the event one or more provisions of the Security Documents shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Mortgage shall be construed as if any such provision had never been contained herein. 26. If the payment of the Indebtedness secured hereby or of any part thereof shall be extended or varied, or if any part of the security be released, all persons now or at any 13 time hereafter liable therefor, or interested in the Mortgaged Property, shall be held to assent to such extension, variation or release, and their liability and the lien and all provisions hereof shall continue in full force, the right of recourse against all such persons being expressly reserved by Mortgagee notwithstanding such variation or release. 27. Upon payment in full of the Indebtedness secured hereby and the performance by Mortgagor of all of the obligations imposed on Mortgagor in the Security Documents, then, these presents shall be null and void, and Mortgagee shall release this Mortgage and the lien hereof in full by proper instrument executed in recordable form. Mortgagee shall grant partial releases under this Mortgage in respect of sales of Units or the Quarter-Interests in respect of the Mortgaged Property as provided for in Section 3.15 of the LSA. 28. Any notice which any party hereto may desire or be required to give to the other shall be deemed to be an adequate and sufficient notice if given in conformity with the requirements of Section 11.4 of the LSA. 29. This Mortgage and all the provisions hereof shall extend to and be binding upon Mortgagor and all persons claiming by, under or through Mortgagor, and the word "Mortgagor" when used herein shall include all such persons and all persons liable for the payment of the Indebtedness secured hereby or any part thereof, whether or not such persons have executed the Note, this Mortgage or any other Security Document. The word "Mortgagee" as used herein shall include the successors and assigns of the Mortgagee named herein. Each and every decision, determination, estimate, request, consent or similar matter to be made or given by Mortgagee from time to time pursuant to or in connection with this Mortgage or any of the other Security Documents shall be within Mortgagee's sole, absolute and unlimited discretion (subject to the rights of the Lenders set forth in the LSA). All rights, powers and remedies of Mortgagee under this Mortgage or any of the other Security Documents may be exercised by Mortgagee itself or by its officers, employees, agents, contractors, attorneys or other representatives. 30. Mortgagor has had the opportunity to fully negotiate and modify the terms of this Mortgage. Therefore, the terms of this Mortgage shall be construed and interpreted without any presumption, inference, or rule requiring construction or interpretation of any provision of this Mortgage against the interest of the party causing this Mortgage or any portion of it to be drafted. Mortgagor is entering into this Mortgage freely and voluntarily without any duress, economic or otherwise. Mortgagor acknowledges that it has received an accurate and complete copy of this instrument. 31. The substantive laws of the State of New Hampshire shall govern the validity, construction, enforcement and interpretation of this Mortgage, to the extent required by principles of conflicts of laws recognized in such State; otherwise, the laws of the State of Maine shall govern. 32. MORTGAGOR HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED ARISING OUT OF THIS MORTGAGE, THE NOTE, THE LSA, ANY OTHER SECURITY DOCUMENT, THE COLLATERAL OR ANY ASSIGNMENT THEREOF OR 14 BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER AMONG MORTGAGOR, THE LENDERS AND/OR THE MORTGAGEE OF ANY KIND OR NATURE. 33. The Mortgagor represents and warrants that this Mortgage and the Indebtedness secured hereby is for the sole purpose of conducting or acquiring a lawful business, professional or commercial activity or for the acquisition or management of real or personal property as a commercial investment, and all proceeds of such Indebtedness shall be used for said business or commercial investment purpose and that the Mortgaged Property secured hereby is not a residence or homestead or used for mining, grazing, agriculture, timber or farming purposes. 34. Unless Mortgagee shall otherwise direct in writing, Mortgagor shall appear in and defend all actions or proceedings purporting to affect the security hereunder, or any right or power of the Mortgagee. The Mortgagee (on behalf of the Lenders) shall have the right to appear in such actions or proceedings. Mortgagor shall save Mortgagee and each Lender harmless from all costs and expenses, including attorneys' fees and costs of a title search, continuation of abstract and preparation of survey, incurred by reason of any action, suit, proceeding, hearing, motion or application before any court or administrative body in and to which Mortgagee or any Lender may be or become a party by reason hereof. Such proceedings shall include but not be limited to condemnation, bankruptcy, probate and administration proceedings, as well as any other action, suit, proceeding, right, motion or application wherein proof of claim is by law required to be filed or in which it becomes necessary to defend or uphold the terms of this Mortgage or otherwise purporting to affect the security hereof or the rights or powers of Mortgagee or any Lender. All money paid or expended by Mortgagee or any Lender in that regard, together with interest thereon from date of such payment at the Default Rate shall be additional Indebtedness secured hereby and shall be immediately due and payable by Mortgagor without notice. 15 35. The Mortgaged Property is not homestead property; and Mortgagor releases all rights of homestead and other interests therein. 36. This Mortgage is a fixture filing pursuant to the Uniform Commercial Code of the State of New Hampshire. [Remainder of page intentionally blank; next page is signature page] 16 IN WITNESS WHEREOF, Mortgagor has caused this mortgage to be duly executed and delivered as a sealed instrument as of the date first above written. Signed and Acknowledged GRAND SUMMIT RESORT PROPERTIES, INC. in the Presence of: /s/ Deirdre M. O'Callaghan By /s/ Mark P. Girard - ---------------------------- ---------------------------- Name: Deirdre M. O'Callaghan Name: Mark P. Girard Its: Vice President [Sign in black ink] STATE OF CONNECTICUT ) ) ss. COUNTY OF HARTFORD ) The foregoing instrument was acknowledged before me this 14th day of August, 1997, by Mark P. Girard, the Vice President of GRAND SUMMIT RESORT PROPERTIES, INC., a Maine corporation, on behalf of said corporation. /s/ Lori L. Bridwell --------------------------------------- Notary Public My Commission Expires: LORI L BRIDWELL NOTARY PUBLIC MY COMMISSION EXPIRES NOV. 30, 2000 Grantee's Mailing Address: Textron Financial Corporation, as administrative agent 40 Westminster Street Providence, Rhode Island 02903 17 EXHIBIT A LEGAL DESCRIPTION Certain condominium quarter-share units in Grand Summit Hotel and Crown Club at Attitash/Bear Peak, A Condominium, Bartlett, Carroll County, New Hampshire, as established by a Declaration of Condominium, Grand Summit Hotel and Crown Club at Attitash/Bear Peak, A Condominium, dated March 26, 1997, recorded at Book 1692, Page 989, being more particularly described in said Declaration, and as more particularly shown on As-Built Site Plans prepared by Thaddeus Thorne-Surveys, Inc., and As Built Floor Plans, prepared by JSA, Inc., all dated March 27, 1997, recorded March 28, 1997, at Plan Book 159, Pages 53 through 65, as Units: Unit 1 (Commercial Unit) Unit Number Quarter-share Intervals 102 1, 2 & 3 103/105 2, 3 & 4 104 1, 2, 3 & 4 107 1, 2, 3 & 4 109/111 1, 2, 3 & 4 110 1, 2, 3 & 4 114/116 1, 2, 3 & 4 118 1, 2, 3 & 4 120 1, 2, 3 & 4 122/124 1, 2, 3 & 4 125/127 1, 3 & 4 126 1, 2, 3 & 4 128 1, 2, 3 & 4 129 1, 2, 3 & 4 130 1 & 2 131 1, 2, 3 & 4 132 3 134/136 1 & 3 137 1, 2, 3 & 4 138 3 139 1, 2, 3 & 4 140/142 1, 2, 3 & 4 EXHIBIT A-1 Unit Number Quarter-share Intervals 141/143 1, 2, 3 & 4 144 1, 2, 3 & 4 145/147 1, 2, 3 & 4 149 1, 2, 3 & 4 150 2 152 1, 2, 3 & 4 201/203 2 202 1, 2, 3 & 4 204 1, 2, 3 & 4 205 3 & 4 206/208 1, 2, 3 & 4 207 1, 2, 3 & 4 209/211 1, 3 & 4 210/212 1 & 4 213 1, 2, 3 & 4 214 1, 2, & 3 216 1, 2, 3 & 4 219 1, 2, 3 & 4 220 3 & 4 221 1, 2, 3 & 4 222 1, 2, 3 & 4 223/225 1 & 2 224/226 1, 2, & 3 228/230 1, 2, 3 & 4 232/234 1, 2, 3 & 4 235/237 1, 2, 3 & 4 236 1, 3 & 4 238 1, 2, 3 & 4 239 1 240 1, 2, 3 & 4 241 1, 2, 3 & 4 243 1 & 2 244 1, 2, 3 & 4 245 1, 2, 3 & 4 246/248 1, 2, 3 & 4 247/249 1, 2, 3 & 4 EXHIBIT A-2 Unit Number Quarter-share Intervals 250 1, 2, 3 & 4 251 1, 2, 3 & 4 252/254 4 253/255 1, 2, 3 & 4 256/258 1, 2 & 4 260 3 & 4 301 1, 2 & 3 302 2, 3 & 4 304/306 1, 2, 3 & 4 305/307 1, 2, 3 & 4 308 1, 2, 3 & 4 309 1, 2, 3 & 4 310/312 3 & 4 311 1, 2, 3 & 4 314/316 1, 2, 3 & 4 315 1, 2, 3 & 4 317 1 318/320 1, 2, 3 & 4 322/324 1, 2, & 3 326 1 & 2 328 1 & 3 330/332 2 331 2 & 4 333 1, 2, 3 & 4 335 1, 2 & 4 337 1, 2, 3 & 4 333/340 1, 2, 3 & 4 339 1, 3 & 4 341 1, 2, 3 & 4 342/344 1, 2, 3 & 4 343 1, 2 & 3 345 1 & 3 346 1, 2, 3 & 4 348 1, 2, 3 & 4 350/352 1 354 1, 2, 3 & 4 EXHIBIT A-3 EXHIBIT B PERMITTED EXCEPTIONS 1. Any taxes which are not yet due and payable. 2. Rights of parties in possession of Unit 1 (the Commercial Unit) under unrecorded leases. 3. Declaration of Easements and Restrictive Covenants by Mount Attitash Lift Corp. recorded December 1, 1993 at Book 1555, Page 97. 4. Amended and Re-Stated Declaration of Easements by and between L.B.O. Holding, Inc. and LBO Hotel Co., recorded at Books 1674, Page 471. 5. Those matter shown on the following Plans of Land as pertaining to Parcel 2 as shown on said Plans: a. "Condominium Plan Grand Summit Hotel at Attitash", prepared by Thaddeus - -Thorne Surveys, Inc., dated September 18, 1996, parts I and II recorded in the Carroll County Registry of Deeds at Plan Book 157, Pages 56 and 57, as revised by revisions dated January 21, 1997, and March 25, 1997, recorded April 10, 1997, at Plan Book 159 Pages 77 and 78. b. Plan of Land entitled "Subdivision Plat, Grand Summit Hotel at Attitash" prepared by Thaddeus-Thorne Surveys, Inc., dated March 7, 1996, revised to May 20, 1996, recorded at Plan Book 156, Pages 40 and 41, as revised by revision dated July 11, 1996, recorded at Plan Book 157, Pages 1 and 2. c. As Built Site prepared by Thaddeus Thorne-Surveys, Inc., and As Built Floor Plans, prepared by JSA, Inc., all dated March 27, 1997, recorded March 28, 1997, at Plan Book 159, Pages 53 through 65. 6. Provisions of Certificate of Registration for Grand Summit Hotel and Crown Club at Attitash Bear Peak, Bartlett, New Hampshire, dated March 27, 1997, recorded at Book 1692, Page 988, 7. Declaration of Condominium, Grand Summit Hotel and Crown Club at Attitash Bear Peak, a Condominium, dated March 26, 1997, recorded at Book 1692, Page 989. 8. Articles of Agreement of Grand Summit Hotel Condominium Unit Owners Association, Inc., recorded at Book 1693, Page 3. EXHIBIT B-1 9. Notice of Lease between L.B.O. Holding Company, d/b/a Grand Summit Hotel, and MAC-GRAY Co., Inc., dated April 27, 1997, recorded at Book 1701, Page 492, referencing the laundry rooms at the Grand Summit Hotel. 10. The provisions of NH RSA 356-B, the Condominium Act. NOTE: the rights of the Declarant to convert convertible land is subject to limitations, as set forth in the Declaration of Condominium and the Condominium Act. EXHIBIT B-2 EX-10.83 33 LETTER AGREEMENT 8/30 FLEET EXHIBIT 10.83 FLEET NATIONAL BANK One Federal Street Boston, MA 02211 THE FIRST NATIONAL BANK OF BOSTON 100 Federal Street Boston, MA 02110 KEY BANK OF MAINE 286 Water Street Augusta, ME 04332 August 30, 1996 American Skiing Company Sunday River Skiway Corporation Sunday River Ltd. Perfect Turn, Inc. Sunday River Transportation Inc. LBO Holding, Inc. Cranmore, Inc. Sugarbush Resort Holdings Inc. Sugarbush Leasing Company Sugarbush Restaurants, Inc. S-K-I Ltd. Killington, Ltd. Mount Snow Ltd. Waterville Valley Ski Area Ltd. Pico Ski Area Management Company Resort Software Services, Inc. Killington Restaurants Resorts Technologies, Inc. Dover Restaurants, Inc. Deerfield Operating Company Mountain Wastewater Treatment, Inc. c/o American Skiing Company P.O. Box 450 Bethel, ME 04217 Ladies and Gentlemen: Reference is made to that certain Credit Agreement dated as of June 28, 1996, as from time to time in effect (the "Credit Agreement"), by and among American Skiing Company, a Maine corporation ("American Ski"), certain of its subsidiaries (together with American Ski, the "Borrowers"), Fleet National Bank, as agent (the "Agent") and the lenders party thereto (the "Lenders"). All capitalized terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings so defined. You have informed us that S-K-I, a Borrower under the Credit Agreement and a wholly-owned subsidiary of American Ski, is exercising its right to purchase the Sugarloaf Minority Interests (the "Acquisition"). You have also informed us that in connection with the Acquisition, S-K-I is entering into a letter agreement (the "Sugarloaf Letter Agreement") whereby S-K-I has agreed to pay, in addition to the purchase price, an additional performance-based purchase price for the shares (the "Additional Purchase Price"). The Acquisition and the Sugarloaf Letter Agreement require certain consents under and modifications of the Credit Agreement. The Agent, the Lenders and the Borrowers hereby agree as follows: 1. The incurrence of Indebtedness by S-K-I under the Sugarloaf Letter Agreement will be deemed permitted Indebtedness pursuant to Section 9.1 of the Credit Agreement. 2. The purchase of the Sugarloaf Minority Interests and the payment, if any, of the Additional Purchase Price in accordance with the terms of the Sugarloaf Letter Agreement, will be deemed a permitted Distribution pursuant to Section 9.8 of the Credit Agreement. Not less than five (5) Business Days prior to making any payments of the Additional Purchase Price under the Sugarloaf Letter Agreement, S-K-I shall provide the Agent with written notice of the amount of such payment and the calculation thereof. 3. The purchase of the Sugarloaf Minority Interests and the payment, if any, of the Additional Purchase Price in accordance with the terms of the Sugarloaf Letter Agreement, will be deemed a permitted transaction with Affiliates pursuant to Section 9.10 of the Credit Agreement. 4. Schedules 5.2, 5.4, 5.13, 5.16 and 5.25 to the Credit Agreement shall be deleted in their entirety and the new Schedules 5.2, 5.4, 5.13, 5.16 and 5.25, attached hereto, shall be substituted thereof. EXECUTED as an instrument under seal as of the date first written above. AGENT: FLEET NATIONAL BANK, as Agent By: /s/ David B. Henderson ---------------------------- Name: David B. Henderson Title: Vice President 2 LENDERS: FLEET NATIONAL BANK By: /s/ David B. Henderson --------------------------- Name: David B. Henderson Title: Vice President THE FIRST NATIONAL BANK OF BOSTON By: /s/ Andrew T. Fay --------------------- Name: Andrew T. Fay Title: Vice President KEY BANK OF MAINE By: /s/ Richard E. Rummler ----------------------- Name: Richard E. Rummler Title: Senior Vice President AMERICAN SKIING COMPANY SUNDAY RIVER SKIWAY CORPORATION SUNDAY RIVER LTD. PERFECT TURN, INC. SUNDAY RIVER TRANSPORTATION INC. LBO HOLDING, INC. CRANMORE, INC. SUGARBUSH RESORT HOLDINGS INC. SUGARBUSH LEASING COMPANY SUGARBUSH RESTAURANTS, INC. S-K-I LTD. KILLINGTON, LTD. MOUNT SNOW LTD. WATERVILLE VALLEY SKI AREA LTD. PICO SKI AREA MANAGEMENT COMPANY RESORT SOFTWARE SERVICES, INC. KILLINGTON RESTAURANTS RESORTS TECHNOLOGIES, INC. DOVER RESTAURANTS, INC. DEERFIELD OPERATING COMPANY MOUNTAIN WASTEWATER TREATMENT, INC. By: /s/ Thomas M. Richardson ------------------------ Name: Thomas M. Richardson Title: Treasurer 3 EX-10.84 34 SECURITY AGREEMENT EXHIBIT 10.84 SECURITY AGREEMENT SECURITY AGREEMENT dated as of August 30, 1996 between SUGARLOAF MOUNTAIN CORPORATION, a Maine corporation, MOUNTAINSIDE, a Maine corporation, and SUGARTECH, a Maine corporation, (each a "Debtor" and collectively, the "Debtors") and FLEET NATIONAL BANK, as agent (the "Agent") for itself and the other lenders which are, or may in the future become, parties to that certain Credit Agreement (as hereinafter defined). Recitals Pursuant to a joinder of even date herewith, the Debtors are parties to that certain Credit Agreement dated as of June 28, 1996 (as amended and in effect from time to time, the "Credit Agreement"), among the Debtors, the banks and other financial institutions from time to time parties thereto (together with their successors and assigns, the "Lenders"), and the Agent. Capitalized terms used and not defined herein shall have the same definition as in the Credit Agreement. Pursuant to the Credit Agreement, the Lenders have, upon the terms and subject to the conditions contained therein, agreed to make loans and otherwise extend credit to the Debtors. It is a condition precedent to the Lenders making any loans or otherwise extending credit to the Debtors under the Credit Agreement that the Debtors execute and deliver to the Agent, for the benefit of the Lenders and the Agent, this Security Agreement, as security for the payment and performance of all obligations of each of the Debtors to the Agent and the Lenders. NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE 1. GRANT OF SECURITY Section 1.1 Grant of Security. Each Debtor hereby grants to the Agent a continuing security interest ("Security Interest") in and to all personal property and fixtures of the Debtor, whether now or hereafter existing or now or hereafter acquired and wherever located, including all equipment, accounts, inventory and general intangibles, all as more fully described as follows (the "Collateral"): (a) All money, cash, bank accounts, deposit accounts, goods, inventory, equipment, computer hardware and software, instruments, securities, documents, documents of title, chattel paper, accounts, accounts receivable, lease receivables and leases including but not limited to, rights to rentals thereunder and the Debtor's reversionary interest in property leased thereunder and any equity rights in leases sold to third parties, contract rights, licenses, general intangibles, copyrights, patents and patents pending, trademarks and goodwill, trade secrets, credits, claims, demands and all other property of the Debtor (including but not limited to leasehold improvements); but excluding the capital stock and other equity interests held by the Debtors in their Subsidiaries and any assets held by U.S. Trust Company of New York (or its successor), as Collateral Agent under the Pledge and Disbursement Agreement of even date herewith, by and between American Skiing Company and U.S. Trust Company of New York; (b) All equipment, including without limitation all fixtures, machinery, equipment, molds, dies, motor vehicles, and other goods whether now owned or hereafter acquired by the Debtor, wherever located, all replacements, substitutions and all parts thereof and all accessions thereto, as well as all of the Debtor's right, title and interest in and to any such goods now or hereafter held or used by the Debtor under any lease, lease-purchase, conditional sales, use or other agreements under which the Debtor is entitled to the use and possession thereof, with any other rights and benefits flowing from such agreements, all as may be used or useful in connection with the Debtor's business as now or hereafter carried on, any operations incidental to or associated with the same, or for any other purpose (any and all such equipment, machinery and fixtures, parts and accessions being the "Equipment"); (c) All inventory in all of its forms, wherever located, now or hereafter existing including, but not limited to (i) raw materials and work in process therefor, finished goods thereof, and materials used or consumed in the manufacture or production thereof, and (ii) goods which are returned to or repossessed by the Debtor and all accessions thereto and products thereof (any and all such inventory, accessions and products being the "Inventory"); (d) All accounts receivable, including without limitation accounts, contracts, contract rights, chattel paper, instruments, licenses and other obligations of any kind whether now existing or hereafter arising, including without limitation any arising out of or in connection with the operation, management or rental by Debtor of skiing, recreational, commercial, hotel, retail, conference facility, food service, condominium, residential, and any other type of real estate, and all rights now or hereafter existing in and to all security agreements, leases, and other contracts securing or otherwise relating to any such accounts, contract rights, chattel paper, instruments, general intangibles or obligations (any and all such accounts, contract rights, chattel paper, instruments, general intangibles and obligations being the "Receivables," and any and all such leases, security agreements and other contracts being the "Contracts"); (e) All general intangibles including without limitation, tradenames, trademarks, servicemarks, tax refunds, the corporate name and all product names; and (f) All products and proceeds of any and all of the foregoing Collateral and, to the extent not otherwise included, all payments under insurance (whether or not the Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral. 2 Section 1.2 Security for Obligations. This Agreement and the Security Interest shall secure the payment and performance of the Obligations. ARTICLE 2 GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS Each Debtor represents, warrants and covenants, which representations, warranties and covenants shall survive execution and delivery of this Agreement, as follows: Section 2.1 Necessary Filings. All filings, registrations and recordings necessary or appropriate to create, preserve and perfect the security interest granted by such Debtor to the Agent hereby in respect of the Collateral have been accomplished and the security interest granted to the Agent pursuant to this Agreement in and to the Collateral constitutes, upon satisfaction of such filings, registrations and recordings, a perfected security interest therein (to the extent that the same can be perfected by filing, registration or recording and excepting therefore railroad cars, locomotives and other rolling stock, titled vehicles and aircraft) prior to the rights of all other Persons therein (other than any such rights pursuant to Permitted Liens) and subject to no other Liens (other than Permitted Liens) and is entitled to all the rights, priorities and benefits afforded by the Uniform Commercial Code to perfected security interests. Section 2.2 No Liens. Such Debtor is, and as to Collateral acquired by it from time to time after the date hereof such Debtor will be, the owner of all Collateral pledged by it hereunder free from any Lien, security interest, encumbrance or other right, title or interest of any Person (other than Permitted Liens), and such Debtor shall defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein (other than in connection with Permitted Liens) adverse to the Agent. Section 2.3 Other Financing Statements. As of the date hereof, there is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Collateral (other than financing statements filed in respect of Permitted Liens), and so long as any Lender Obligations or commitments with respect thereto are outstanding, such Debtor will not execute or authorize to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Collateral, except financing statements filed or to be filed in respect of and covering the security interests granted hereby by such Debtor or in connection with Permitted Liens. Section 2.4 Chief Executive Office; Records. As of the date hereof, the chief executive office of such Debtor is located at the address indicated on Exhibit A hereto for such Debtor. Such Debtor will not move its chief executive office except to such new location as such Debtor may establish in accordance with the last sentence of this Section 2.4. A complete set of books of account and records of such Debtor relating to the Receivables and the 3 Contract Rights are, and will continue to be, kept at such chief executive office, at one or more of the other record locations set forth on Exhibit A hereto for such Debtor or at such new locations as such Debtor may establish in accordance with the last sentence of this Section 2.4. All Receivables and Contract Rights of such Debtor are, and will continue to be, maintained at, and controlled and directed (including, without limitation, for general accounting purposes) from, the office locations described above or such new location established in accordance with the last sentence of this Section 2.4. No Debtor shall establish new locations for such offices until (a) it shall have given to the Agent not less than 30 days' prior written notice of its intention to do so, clearly describing such new location and providing such other information in connection therewith as the Agent may reasonably request and (b) with respect to such new location, it shall have taken all action reasonably satisfactory to the Agent, to maintain the security interest of the Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. Section 2.5 Location of Inventory and Equipment. As of the date hereof, all Inventory and Equipment held by each Debtor is located at one of the locations shown on Exhibit B hereto for such Debtor. Each Debtor agrees that all Inventory and Equipment now held or subsequently acquired by it shall be kept at (or shall be in transport to) any one of the locations shown on Exhibit B hereto, or such new location as such Debtor may establish in accordance with the last sentence of this Section 2.5. Any Debtor may establish a new location for Inventory and Equipment only if (a) it shall have given to the Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as the Agent may reasonably request and (b) with respect to such new location, it shall have taken all action reasonably satisfactory to the Agent to maintain the security interest of the Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. Section 2.6 Recourse. This Agreement is made with full recourse to each Debtor and pursuant to and upon all the warranties, representations, covenants and agreements on the part of such Debtor contained herein, in the other Lender Agreements and otherwise in writing in connection herewith or therewith. Section 2.7 Trade Names; Change of Name. As of the date hereof, no Debtor has or operates in any jurisdiction under, or in the preceding 12 months has had or has operated in any jurisdiction under, any trade names, fictitious names or other names except its legal name. No Debtor shall change its legal name or assume or operate in any jurisdiction under any trade, fictitious or other name and new names established in accordance with the last sentence of this Section 2.7. No Debtor shall assume or operate in any jurisdiction under any new trade, fictitious or other name until (a) it shall have given to the Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new name and the jurisdictions in which such new name shall be used and providing such other information in connection therewith as the Agent may reasonably request and (b) with respect to such new name, it shall have taken all action reasonably requested by the Agent, to maintain the security 4 interest of the Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. ARTICLE 3 SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS Section 3.1 Additional Representations and Warranties. As of the time when each of its Receivables arises, each Debtor shall be deemed to have represented and warranted that such Receivable, and all records, papers and documents relating thereto are what they purport to be in all material respects, and that such Receivable will, to the best knowledge of such Debtor, evidence true and valid obligations of the account debtor named therein. Section 3.2 Maintenance of Records. Each Debtor will keep and maintain at its own cost and expense, records of its Receivables and Contracts and such Debtor will make the same available on an Debtor's premises to the Agent for inspection, at such Debtor's own cost and expense, at any and all reasonable times upon reasonable prior notice to such Debtor. Upon the occurrence and during the continuance of an Event of Default and at the reasonable request of the Agent, such Debtor shall, at its own cost and expense, deliver all tangible evidence of its Receivables and Contract Rights (including, without limitation, all documents evidencing the Receivables and all Contracts) and such books and records to the Agent or to its representatives (copies of which evidence and books and records may be retained by such Debtor). If the Agent so directs, upon the occurrence and during the continuance of an Event of Default such Debtor shall legend, in form and manner satisfactory to the Agent, the Receivables and the Contracts, as well as books, records and documents of such Debtor evidencing or pertaining to such Receivables and Contracts with an appropriate reference to the fact that such Receivables and Contracts have been assigned to the Agent and that the Agent has a security interest therein. Section 3.3 Direction to Account Debtors; Contracting Parties; etc. Upon the occurrence and during the continuance of an Event of Default, and if the Agent so directs any Debtor, such Debtor agrees (a) to cause all payments on account of the Receivables and Contracts to be made directly to the Cash Collateral Account, (b) that the Agent may, at its option, directly notify the obligors with respect to any Receivables and/or under any Contracts to make payments with respect thereto as provided in preceding clause (a) and (c) that the Agent may enforce collection of any such Receivables and Contracts and may adjust, settle or compromise the amount of payment thereof, in the same manner and to the same extent as such Debtor. Without notice to or assent by any Debtor, the Agent may apply any or all amounts then in, or thereafter deposited in, the Cash Collateral Account which application shall be effected in the manner provided in Section 7.4 of this Agreement. The reasonable costs and expenses (including reasonable attorneys' fees) of collection, whether incurred by the relevant Debtor or the Agent, shall be borne by the relevant Debtor. The Agent shall deliver a 5 copy of each notice referred to in the preceding clause (b) to the relevant Debtor; provided, that the failure by the Agent to so notify such Debtor shall not affect the effectiveness of such notice or the other rights of the Agent created by this Section 3.3. Section 3.4 Modification of Terms; etc. No Debtor shall rescind or cancel any indebtedness evidenced by any Receivable or under any Contract, or modify any term thereof or make any adjustment with respect thereto, or extend or renew the same, or compromise or settle any material dispute, claim, suit or legal proceeding relating thereto, or sell any Receivable or Contract, or interest therein, without the prior written consent of the Agent, except in accordance with such Debtor's reasonable business practices. Section 3.5 Collection. Each Debtor shall endeavor in accordance with reasonable business practices to cause to be collected from the account debtor named in each of its Receivables or obligor under any Contract, as and when due (including, without limitation, amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures) any and all amounts owing under or on account of such Receivable or Contract, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Receivable or under such Contract. The reasonable costs and expenses (including, without limitation, attorneys' fees) of collection, if incurred by an Debtor or the Agent, shall be borne by the relevant Debtor. Section 3.6 Instruments. If any Debtor owns or acquires any Instrument constituting Collateral, such Debtor will within 10 Business Days notify the Agent thereof, and upon request by the Agent will promptly deliver such Instrument to the Agent appropriately endorsed to the order of the Agent as further security hereunder. ARTICLE 4 SPECIAL PROVISIONS CONCERNING TRADEMARKS Section 4.1 Additional Representations and Warranties. Each Debtor represents and warrants that, as of the date hereof, it is the true and lawful owner of all right, title and interest to or otherwise has the right to use the registered Marks listed in Exhibit C hereto for such Debtor and that, as of the date hereof said listed Marks constitute all the marks and applications for marks registered in the United States Patent and Trademark Office that such Debtor presently owns or uses in connection with its business. Each Debtor represents and warrants that it owns, is licensed to use or otherwise has the right to use all material Marks that it uses. Each Debtor further warrants that it has no knowledge of any third party claim that any aspect of such Debtor's present or contemplated business operations infringes or will infringe any trademark, service mark or trade name in any respect which could reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities or condition (financial or otherwise) of the Borrowers and their Restricted Subsidiaries taken as a whole. Each Debtor represents and warrants that except as listed on 6 Exhibit C, as of the date hereof it is the beneficial and record owner of all trademark registrations and applications listed in Exhibit C hereto for such Debtor and that said registrations are valid and subsisting, and that such Debtor is not aware of any third-party claim that any of said registrations in respect of any material Mark is invalid or unenforceable. Each Debtor hereby grants to the Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of an Event of Default, any document which may be required by the United States Patent and Trademark Office in order to effect an absolute assignment of all right, title and interest in each Mark, and record the same. Section 4.2 Infringements. Each Debtor agrees, promptly upon learning thereof, to notify the Agent in writing of the name and address of, and to furnish such pertinent information that may be available with respect to, any party who such Debtor believes is infringing or diluting or otherwise violating in any material respect any of such Debtor's rights in and to any material Mark, or with respect to any party claiming that such Debtor's use of any material Mark violates in any material respect any property right of that party. Each Debtor further agrees to prosecute any Person infringing any material Mark in accordance with reasonable business practices. Section 4.3 Preservation of Marks. Each Debtor agrees to use its Marks as required in each of the applicable jurisdictions during the time in which this Agreement is in effect, sufficiently to preserve such Marks (and any registrations thereto) as trademarks or service marks under the laws of the United States and any other applicable law; provided, that, prior to any Default, no Debtor shall be obligated to preserve any Mark in the event such Debtor determines, in its reasonable business judgment, that the preservation of such Mark is no longer desirable in the conduct of its business. Section 4.4 Maintenance of Registration. Each Debtor shall, at its own expense, diligently process all documents required by the Trademark Act of 1946, 15 U.S.C. ss.ss. 1051 et seq. to maintain trademark registrations, including but not limited to affidavits of use and applications for renewals of registration in the United States Patent and Trademark Office for all of its registered Marks pursuant to 15 U.S.C. ss.ss. 1058(a), 1059 and 1065, and shall pay all fees and disbursements in connection therewith and shall not abandon any such filing of affidavit of use or any such application of renewal prior to the exhaustion of all administrative and judicial remedies without prior written consent of the Agent; provided, that, prior to any Default, no Debtor shall be obligated to maintain any Mark in the event that such Debtor determines, in its reasonable business judgment, that the maintenance of such Mark is no longer necessary or desirable in the conduct of its business. Section 4.5 Future Registered Marks. If any Mark registration issues hereafter to any Debtor as a result of any application now or hereafter pending before the United States Patent and Trademark Office, within 60 days of receipt of such certificate, such Debtor shall deliver to the Agent a copy of such certificate, and an assignment for security in such Mark, to the Agent and at the expense of such Debtor, confirming the assignment for security in such 7 Mark to the Agent hereunder, the form of such security to be substantially the same as the form hereof or in such other form as may be reasonably satisfactory to the Agent. Section 4.6 Remedies. If an Event of Default shall occur and be continuing, the Agent may take any or all of the following actions: (a) declare the entire right, title and interest of such Debtor in and to each of the Marks, together with all trademark rights and rights of protection to the same, vested in the Agent for the benefit of the Lenders, in which event such rights, title and interest shall immediately vest, in the Agent for the benefit of the Lenders, and the Agent shall be entitled to exercise the power of attorney referred to in Section 4.1 hereof to execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency; (b) take and use or sell the Marks and the goodwill of such Debtor's business symbolized by the Marks and the right to carry on the business and use the assets of such Debtor in connection with which the Marks have been used; and (c) direct such Debtor to refrain, in which event such Debtor shall refrain, from using the Marks in any manner whatsoever, directly or indirectly, and, if requested by the Agent, change such Debtor's corporate name to eliminate therefrom any use of any Mark and execute such other and further documents that the Agent may request to further confirm this and to transfer ownership of the Marks and registrations and any pending trademark application in the United States Patent and Trademark Office to the Agent. Section 4.7 Collateral Assignment. In addition to, and not in limitation of, the grant of the security interest in Article 1 above, each Debtor hereby grants, assigns, transfers, conveys and sets over to the Agent, for the benefit of the Lenders, Debtor's entire right, title and interest in and to the Marks and Proceeds. Debtors have delivered to the Agent an Assignment of Trademarks (the "Assignment") and the Agent is hereby authorized to file such Assignment with the United States Patent and Trademark Office. Upon payment in full of all Obligations, the Agent will assign the Marks to the Debtors. ARTICLE 5 SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND TRADE SECRETS Section 5.1 Additional Representations and Warranties. Each Debtor represents and warrants that, as of the date hereof, it is the true and lawful owner of all rights in (a) all material Trade Secrets and Proprietary Information necessary to operate the business of such Debtor, (b) the Patents listed in Exhibit D hereto for such Debtor and that said Patents constitute all the patents and applications for patents that such Debtor owns on the date hereof and (c) the Copyrights listed in Exhibit E hereto for such Debtor and that said Copyrights constitute all registrations of copyrights and applications for copyright registrations that such Debtor owns on the date hereof. Each Debtor further warrants that it has no knowledge of any third party claim that any aspect of such Debtor's present or contemplated business operations infringes or will infringe any patent or any copyright or such Debtor has 8 misappropriated any Trade Secret or Proprietary Information, in each case in any respect which could reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities or condition (financial or otherwise) of the Borrowers and their Restricted Subsidiaries taken as a whole. Each Debtor hereby grants to the Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of an Event of Default, any document which may be required by the United States Patent and Trademark Office or the United States Copyright Office in order to effect an absolute assignment of all right, title and interest in each Patent and Copyright, and to record the same. Section 5.2 Infringements. Each Debtor agrees, promptly upon learning thereof, to furnish the Agent in writing with all pertinent information available to such Debtor with respect to any infringement, contributing infringement or active inducement to infringe in any material respect any material Patent or Copyright or to any claim that the practice of any material Patent or the use of any material Copyright violates in any material respect any property right of a third party, or with respect to any misappropriation of any material Trade Secret Right or any claim that practice of any material Trade Secret Right violates in any material respect any property right of a third party. Each Debtor further agrees, to the extent consistent with reasonable business practices, to prosecute any Person infringing any Patent or Copyright or any Person misappropriating any Trade Secret Right. Section 5.3 Maintenance of Patents. At its own expense, each Debtor shall make timely payment of all post-issuance fees required pursuant to 35 U.S.C. ss. 41 to maintain in force rights under each Patent, absent prior written consent of the Agent; provided, that no Debtor shall be obligated to maintain any Patent in the event such Debtor determines, in its reasonable business judgment, that the maintenance of such Patent is no longer necessary or desirable in the conduct of its business. Section 5.4 Prosecution of Patent Application. At its own expense, each Debtor shall diligently prosecute all applications for Patents for such Debtor and shall not abandon any such application prior to exhaustion of all administrative and judicial remedies, absent written consent of the Agent; provided, that no Debtor shall be obligated to prosecute any application in the event such Debtor determines, in its reasonable business judgment, that the prosecuting of such application is no longer necessary or desirable in the conduct of its business. Section 5.5 Other Patents and Copyrights. Within 60 days of the acquisition or issuance of a Patent, registration of a Copyright, or acquisition of a registered copyright, the relevant Debtor shall deliver to the Agent a copy of said Copyright or certificate or registration of said patents, as the case may be, with an assignment for security as to such Patent or Copyright, as the case may be, to the Agent and at the expense of such Debtor, confirming the assignment for security, the form of such assignment for security to be substantially the same as the form hereof or in such other form as may be reasonably satisfactory to the Agent. 9 Section 5.6 Remedies. If an Event of Default shall occur and be continuing, the Agent may take any or all of the following actions: (a) declare the entire right, title, and interest of such Debtor in each of the Patents and Copyrights vested in the Agent for the benefit of the Lenders, in which event such right, title, and interest shall immediately vest in the Agent for the benefit of the Lenders, in which case the Agent shall be entitled to exercise the power of attorney referred to in Section 5.1 hereof to execute, cause to be acknowledged and notarized and to record said absolute assignment with the applicable agency; (b) take and practice or sell the Patents and Copyrights; and (c) direct such Debtor to refrain, in which event such Debtor shall refrain, from practicing the Patents and using the Copyrights directly or indirectly, and such Debtor shall execute such other and further documents as the Agent may request further to confirm this and to transfer ownership of the Patents and Copyrights to the Agent for the benefit of the Lenders. ARTICLE 6 PROVISIONS CONCERNING ALL COLLATERAL Section 6.1 Protection of Agent's Security. Each Debtor will at all times keep its Inventory and Equipment insured in favor of the Agent, at such Debtor's own expense to the extent and in the manner provided in the Lender Agreements; all policies or certificates with respect to such insurance (and any other insurance maintained by such Debtor) (a) shall be endorsed to the Agent's reasonable satisfaction for the benefit of the Agent (including, without limitation, by naming the Agent as additional insured and loss payee) and (b) shall state that such insurance policies shall not be canceled without 30 days' prior written notice thereof by the insurer to the Agent; and certified copies of such policies or certificates with respect thereto shall be deposited with the Agent. If any Debtor shall fail to insure its Inventory and Equipment in accordance with the preceding sentence, or if any Debtor shall fail to so endorse and deposit all policies or certificates with respect thereto, the Agent shall have the right (but shall be under no obligation), upon prior written notice to such Debtor, to procure such insurance and such Debtor agrees to promptly reimburse the Agent for all costs and expenses of procuring such insurance. The Agent shall, at the time any proceeds of such insurance are distributed to the Lenders, apply such proceeds in accordance with Section 7.4 hereof except as otherwise provided by the Credit Agreement. Each Debtor assumes all liability and responsibility in connection with the Collateral acquired by it and the liability of such Debtor to pay the Obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to such Debtor. Section 6.2 Further Actions. Each Debtor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Agent from time to time such lists, descriptions and designations of its Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers 10 of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Collateral and other property or rights covered by the security interest hereby granted, which the Agent deems reasonably appropriate or advisable to perfect, preserve or protect its security interest in the Collateral. Section 6.3 Financing Statements. Each Debtor agrees to execute and deliver to the Agent such financing statements, in form reasonably acceptable to the Agent, as the Agent may from time to time reasonably request or as are necessary or desirable in the reasonable opinion of the Agent to establish and maintain a valid, enforceable, first priority perfected security interest in the Collateral as provided herein and the other rights and security contemplated hereby all in accordance with the UCC as enacted in any and all relevant jurisdictions or any other relevant law. Each Debtor will pay any applicable filing fees, recordation taxes and related expenses relating to its Collateral. Each Debtor hereby authorizes the Agent to file any such financing statements without the signature of such Debtor where permitted by law. ARTICLE 7 REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT Section 7.1 Remedies; Obtaining the Collateral Upon Default. Each Debtor agrees that, if an Event of Default shall have occurred and be continuing, then and in every such case, the Agent, in addition to any rights now or hereafter existing under applicable law, shall have all rights as a secured creditor under the UCC in all relevant jurisdictions and may: (i) personally, or by agents or attorneys, immediately take possession of the Collateral or any part thereof, from such Debtor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon such Debtor's premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of such Debtor; (ii) instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Receivables and the Contracts) constituting the Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Agent; (iii) withdraw all monies, securities and instruments in the Cash Collateral Account and/or in any other cash collateral account for application to the Obligations in accordance with Section 7.4 hereof; (iv) sell, assign or otherwise liquidate any or all of the Collateral or any part thereof in accordance with Section 7.2 hereof, or direct the relevant Debtor to sell, 11 assign or otherwise liquidate any or all of the Collateral or any part thereof, and, in each case, take possession of the proceeds of any such sale or liquidation; (v) take possession of the Collateral or any part thereof, by directing the relevant Debtor in writing to deliver the same to the Agent at any place or places reasonably designated by the Agent, in which event such Debtor shall at its own expense: (x) forthwith cause the same to be moved to the place or places so designated by the Agent and there delivered to the Agent; (y) store and keep any Collateral so delivered to the Agent at such place or places pending further action by the Agent as provided in Section 7.2 hereof; and (z) while the Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition; and (vi) license or sublicense, whether on an exclusive or nonexclusive basis, any Marks, Patents or Copyrights included in the Collateral for such term and on such conditions and in such manner as the Agent shall in its reasonable judgment determine; it being understood that each Debtor's obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Agent shall be entitled to a decree requiring specific performance by such Debtor of said obligation. The Lenders agree that this Agreement may be enforced only by the action of the Agent acting upon the instructions of the Majority Banks and that no other Lender shall have any right individually to seek to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Agent for the benefit of the Lenders upon the terms of this Agreement. Section 7.2 Remedies: Disposition of the Collateral. Any Collateral repossessed by the Agent under or pursuant to Section 7.1 hereof and any other Collateral whether or not so repossessed by the Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Agent may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable. Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Agent or after any overhaul or repair at the expense of the relevant Debtor which the Agent shall determine to be commercially reasonable. Any such disposition which shall be a private sale or other private proceedings permitted by such requirements shall be made upon 12 not less than 10 days' written notice to the relevant Debtor specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the 10 days after the giving of such notice, to the right of the relevant Debtor or any nominee of such Debtor to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified. Any such disposition which shall be a public sale permitted by such requirements shall be made upon not less than 10 days' written notice to the relevant Debtor specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the Agent's option, be subject to reserve), after publication of notice of such auction not less than 10 days prior thereto in two newspapers in general circulation in Boston, Massachusetts. To the extent permitted by any such requirement of law, the Agent may bid for and become the purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section without accountability to the relevant Debtor. If, under mandatory requirements of applicable law, the Agent shall be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to the relevant Debtor as hereinabove specified, the Agent need give such Debtor only such notice of disposition as shall be reasonably practicable in view of such mandatory requirements of applicable law. Section 7.3 Waiver of Claims. Except as otherwise provided in this Agreement, (a) EACH DEBTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE AGENT'S TAKING POSSESSION OR THE AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH DEBTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and (b) each Debtor hereby further waives, to the extent permitted by law: i. all damages occasioned by such taking of possession except any damages which are determined by a final, non-appealable court order to have been caused by the Agent's gross negligence or willful misconduct; and ii. all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Agent's rights hereunder; and (c) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Collateral or any portion thereof, and each Debtor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws. 13 Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the relevant Debtor therein and thereto, and shall be a perpetual bar both at law and in equity against such Debtor and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under such Debtor. 7.4 Application of Proceeds. (a) All moneys collected by the Agent upon any sale or other disposition of the Collateral, together with all other moneys received by the Agent hereunder, shall be applied as provided in Section 10.3 of the Credit Agreement. (b) Each of the Lenders agrees and acknowledges that if the Lenders are to receive a distribution on account of undrawn amounts with respect to Letters of Credit issued under the Credit Agreement (which shall only occur after all outstanding Loans and unpaid Reimbursement Obligations with respect to such Letters of Credit have been paid in full), such amounts shall be paid to the Agent under the Credit Agreement and held by it, for the equal and ratable benefit of the Lenders, as cash security for the repayment of Obligations owing to the Lenders as such. If any amounts are held as cash security pursuant to the immediately preceding sentence, then upon the termination of all outstanding Letters of Credit, and after the application of all such cash security to the repayment of all Obligations owing to the Lenders after giving effect to the termination of all such Letters of Credit, if there remains any excess cash, such excess cash shall be distributed in accordance with Section 10.3 of the Credit Agreement. (c) It is understood and agreed that the Debtors shall remain jointly and severally liable to the extent of any deficiency between the amount of the proceeds of the Collateral hereunder and the aggregate amount of the Obligations. Section 7.5 Remedies Cumulative. Each and every right, power and remedy hereby specifically given to the Agent shall be in addition to every other right, power and remedy specifically given under this Agreement, the other Lender Agreements or now or hereafter existing at law, in equity or by statute and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Agent. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of the exercise of one shall not be deemed a waiver of the right to exercise any other or others. No delay or omission of the Agent in the exercise of any such right, power or remedy and no renewal or extension of any of the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Default or Event of Default or an acquiescence therein. No notice to or demand on any Debtor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Agent to any other or further action in any circumstances without notice or 14 demand. In the event that the Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Agent may recover reasonable expenses, including reasonable attorneys' fees, and the amounts thereof shall be included in such judgment. Section 7.6 Discontinuance of Proceedings. In case the Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Agent, then and in every such case the relevant Debtor, the Agent and each holder of any of the Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Agent shall continue as if no such proceeding had been instituted. ARTICLE 8 DEFINITIONS In addition to terms defined elsewhere herein, the following terms shall have the meanings herein specified. Such definitions shall be equally applicable to the singular and plural forms of the terms defined. "Agreement" shall mean this Security Agreement as the same may be modified, supplemented or amended from time to time in accordance with its terms. "Cash Collateral Account" shall mean a non-interest bearing cash collateral account maintained with, and in the sole dominion and control of, the Agent for the benefit of the Lenders. "Chattel Paper" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the Commonwealth of Massachusetts. "Contract Rights" shall mean all rights of any Debtor (including, without limitation, all rights to payment) under each Contract. "Copyrights" shall mean any United States copyright owned (or subject to the rights of ownership) by any Debtor, including any registrations of any copyright, in the United States Copyright Office, as well as any application for a copyright registration now or hereafter made with the United States Copyright Office by any Debtor. "Default" shall mean any event which, with notice or lapse of time, or both, would constitute an Event of Default. 15 "Documents" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the Commonwealth of Massachusetts. "Event of Default" shall mean any Event of Default under, and as defined in, the Credit Agreement and shall in any event, without limitation, include any payment default on any of the Obligations after the expiration of any applicable grace period. "General Intangibles" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the Commonwealth of Massachusetts. "Goods" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the Commonwealth of Massachusetts. "Instrument" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the Commonwealth of Massachusetts. "Liens" shall mean any security interest, mortgage, pledge, lien, claim, charge, encumbrance, title retention agreement, lessor's interest in a financing lease or analogous instrument, in, of, or on any Debtor's property. "Marks" shall mean any United States trademarks, service marks and trade names now owned, subject to a right of ownership or hereafter acquired by any Debtor, including any registration of, or application for, any trademarks and service marks in the United States Patent and Trademark Office, and any trade dress including logos and/or designs used by any Debtor in the United States. "Obligations" shall mean (a) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities of each Debtor now existing or hereafter incurred under, arising out of or in connection with any Lender Agreement to which such Debtor is a party and the due performance and compliance by each Debtor with the terms of each such Lender Agreement; (b) any and all sums advanced by the Agent in order to preserve the Collateral or preserve its security interest in the Collateral; (c) in the event of any proceeding for the collection or enforcement of any obligations or liabilities referred to in clause (a), after an Event of Default shall have occurred and be continuing, the reasonable expenses of re-taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Agent of its rights hereunder, together with reasonable attorneys' fees and court costs; (d) all amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement under Section 8.1 of this Agreement; and (e) all other Lender Obligations. "Patents" shall mean any United States patent owned, subject to a right of ownership by or hereafter acquired by any Debtor and any divisions, continuations, reissues, reexaminations, extensions or renewals thereof, as well as any application for a United States patent now or hereafter made by any Debtor or subject to a right of ownership in such Debtor. 16 "Proceeds" shall have the meaning provided in the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts on the date hereof or under other relevant law and, in any event, shall include, but not be limited to, (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Agent or any Debtor from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable to any Debtor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any person acting under color of govern-mental authority) and (c) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Proprietary Information" means all information and know-how worldwide, including, without limitation, technical data, manufacturing data, research and development data, manufacturing data, research and development data, data relating to compositions, processes and formulations, manufacturing and production know-how and experience, management know-how, training programs, manufacturing, engineering and other drawings, specifications, performance criteria, operating instructions, maintenance manuals, technology, technical information, software, engineering and computer data and databases, design and engineering specifications, catalogs, promotional literature and financial, business and marketing plans, inventions and invention disclosures. "Termination Date" shall have the meaning provided in Section 10.8(a) of this Agreement. "Trade Secrets" means any secretly held existing engineering and other data, information, production procedures and other know-how relating to the design, manufacture, assembly, installation, use, operation, marketing, sale and servicing of any products or business of the Debtor worldwide whether written or not written. ARTICLE 9 MISCELLANEOUS Section 9.1 Notices. Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made when delivered to the party to which such notice, request, demand or other communication is required or permitted to be given or made under this Agreement, addressed as follows: (a) if to any Debtor: c/o America Skiing Company P.O. Box 450 17 Bethel, Maine 04217 Attn: Thomas Richardson (b) if to the Agent: Fleet National Bank, as Agent One Federal Street Boston, MA 02211 Attention: Mr. David B. Henderson (c) if to any Lender, at such address as such Lender shall have specified in the Credit Agreement. or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. Section 9.2 Waiver; Amendment. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Debtor directly affected thereby and the Agent (with the consent of the Majority Lenders (or, to the extent required by Section 11.1 of the Credit Agreement, all of the Lenders). Section 9.3 Obligations Absolute. The obligations of each Debtor hereunder shall remain in full force and effect without regard to, and shall not be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of such Debtor; (b) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege under or in respect of this Agreement or any other Lender Agreement; or (c) any amendment to or modification of any Lender Agreement or any security for any of the Obligations whether or not any Debtor shall have notice or knowledge of any of the foregoing. Section 9.4 Successors and Assigns. This Agreement shall be binding upon each Debtor and its successors and assigns and shall inure to the benefit of the Agent and the Lenders and their respective successors and assigns. All agreements, statements, representations and warranties made by each Debtor herein or in any certificate or other instrument delivered by such Debtor or on its behalf under this Agreement shall be considered to have been relied upon by the Lenders and shall survive the execution and delivery of this Agreement and the other Lender Agreements regardless of any investigation made by the Agent or the Lenders or on their behalf. Section 9.5 Headings Descriptive. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 18 Section 9.6 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS. Section 9.7 Debtor's Duties. It is expressly agreed, anything herein contained to the contrary notwithstanding, that each Debtor shall remain liable to perform all of the obligations, if any, assumed by it with respect to the Collateral and the Agent shall not have any obligations or liabilities with respect to any Collateral by reason of or arising out of this Agreement, nor shall the Agent be required or obligated in any manner to perform or fulfill any of the obligations of each Debtor under or with respect to any Collateral. Section 9.8 Termination; Release. After the Termination Date, this Agreement shall terminate (provided that all indemnities set forth in the Credit Agreement shall survive such termination) and the Agent, at the request and expense of the respective Debtor, will promptly execute and deliver to such Debtor a proper instrument or instruments (including Uniform Commercial Code termination statements on form UCC-3) acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to such Debtor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Agent and has not theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement, "Termination Date" shall mean the date upon which all Obligations have been paid in full, all commitments with respect thereto have terminated, no Note is outstanding (and all Loans have been repaid in full), all Letters of Credit have been terminated and all other Obligations then due and payable have been paid in full. Section 9.9 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Debtor and the Agent. Section 9.10 The Agent. The Agent will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Agent as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Agent shall act hereunder on the terms and conditions set forth in this Agreement and in Section 12 of the Credit Agreement. 19 WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. DEBTORS: SUGARLOAF MOUNTAIN CORPORATION MOUNTAINSIDE SUGARTECH By /s/ Thomas M. Richardson --------------------------- Name: Thomas M. Richardson Title: Treasurer AGENT: FLEET NATIONAL BANK, as Agent By /s/ David B. Henderson --------------------------- Name: David B. Henderson Title: Vice President 20 EXHIBIT A to SECURITY AGREEMENT SCHEDULE OF CHIEF EXECUTIVE OFFICES AND OTHER RECORD LOCATIONS DEBTOR ADDRESS PRINCIPAL FUNCTION - -------------------------------------------------------------------------------- Sugarloaf Mountain Corporation RR#1, Box 500, Kingfield, Maine 04947-9799 21 EXHIBIT B to SECURITY AGREEMENT SCHEDULE OF INVENTORY AND EQUIPMENT LOCATIONS Principal Owned/ Name Address Function Leased - -------------------------------------------------------------------------------- Sugarloaf Mountain Corporation Maine: Newry, Maine 04217 Executive Both Offices Maine: Kingfield, Maine 04947 Ski resort Both Sugartech Maine: Newry, Maine 04217 Executive Both Offices Maine: Kingfield, Maine 04947 Ski Resort Both Mountainside Maine: Newry, Maine 04217 Executive Both Offices Maine: Kingfield, Maine 04947 Ski resort Both 22 EXHIBIT C to SECURITY AGREEMENT LIST OF MARKS Sugarloaf Mountain Corporation Serial No. 74-613,971 12/20/94 SUPERQUAD Registration No. 930,239 2/29/72 SUGARLOAF, U.S.A. and Design 23 EXHIBIT D to SECURITY AGREEMENT LIST OF PATENTS AND APPLICATIONS NONE 24 EXHIBIT E to SECURITY AGREEMENT LIST OF COPYRIGHTS AND APPLICATIONS NONE 25 EX-10.85 35 FEE AND LEASEHOLD AGREEMENT EXHIBIT 10.85 FEE AND LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, FINANCING STATEMENT AND SECURITY AGREEMENT This Fee and Leasehold Mortgage, Assignment of Leases and Rents, Financing Statement and Security Agreement (the "Mortgage") is made as of August __, 1996, from Sugarloaf Mountain Corporation, a Maine corporation having a place of business at c/o American Skiing Company, P.O. Box 450, Bethel, Maine 04217 (the "Mortgagor") to Fleet National Bank, as Agent under the Credit Agreement referred to below having a place of business at One Federal Street, Boston, MA 02211 the ("Mortgagee"). All capitalized terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement (as defined below). 1. Grant of Mortgage. For consideration paid, the Mortgagor, to secure: (a) The full and prompt payment and performance when due, whether by acceleration or otherwise, with such interest, commitment fees, prepayment fees and other charges as may accrue thereon, either before or after maturity thereof, by Mortgagor, its successors or assigns, and/or American Skiing Company and the other Borrowers named in the Credit Agreement and their respective successors or assigns (together with the Mortgagor, are collectively referred to herein as the "Borrowers") of that certain Credit Agreement dated as of June 28, 1996, together with any and all renewals, amendments, modifications, consolidations and extensions thereof (the "Credit Agreement"), TOGETHER WITH accompanying Revolving Credit Notes and Swing Line Notes dated as of June 28, 1996 in the principal face amount of up to SIXTY FIVE MILLION DOLLARS ($65,000,000.00), all together with any amendments renewals, modifications, consolidations and extensions of the foregoing (all collectively the "Notes"); (b) Any and all future advances made by Mortgagee to or for the benefit of the Mortgagor, Borrowers or any one or more of them, whether jointly or severally liable, direct or indirect, up to a maximum principal amount outstanding from time to time (exclusive of costs and amounts advanced to protect the security) of up to ONE HUNDRED MILLION DOLLARS ($100,000,000.00) together with interest, fees, costs, prepayment fees, and other amounts now existing or hereafter arising: (c) The full and prompt payment and performance of all of the provisions, agreements, covenants and obligations set forth in this Mortgage (the "Mortgage") or in any other Lender Agreements (as defined in the Credit Agreement); (d) Any and all additional advances made to preserve, enforce and protect the Property, the Leases, the security interest created hereby on the Property, or this Agreement and the Lender Agreements, including, without limitation, taxes, assessments or insurance premiums or for performance of any of the Borrowers obligations under the Lender Agreements (whether or not the original Borrower remains the owner of the Property at the time of such advances); and (e) Any and all other indebtedness, however incurred, which may now or hereafter be due and owing from Borrowers or any one or more of them, whether joint or several, to Mortgagee, now existing or hereafter coming into existence, however and whenever incurred or evidenced, whether expressed or implied, direct or indirect, absolute or contingent, or due or to become due, and all renewals, modifications, consolidations and extensions thereof. (all collectively the "Secured Obligations") Does hereby GIVE, GRANT, BARGAIN, SELL, ASSIGN and CONVEY unto Mortgagee, its successors and assigns, forever, WITH MORTGAGE COVENANTS all of the following described property (hereinafter collectively referred to as the "Property"): I. All real estate owned by Mortgagor located in Franklin County, Maine, whether now owned or hereafter acquired, including, without limitation, the following described parcels of real estate with the buildings and improvements now or hereafter situated thereon (the "Owned Property"): II. Lease by and among Mortgagor and the Town of Carrabassett Valley dated June 3, 1987. All relating to real estate located in Franklin County, Maine with the buildings and improvements now or hereafter situated thereon: SEE EXHIBIT A ATTACHED HERETO AND MADE A PART HEREOF FOR A DESCRIPTION OF SAID OWNED AND LEASED REAL ESTATE together with all easements and rights relating, arising out of or appurtenant thereto, including any and all extensions or renewals of the leases, or substitutions or replacements thereof, and All rights, privileges and benefits now existing or hereafter arising under the leases, including, without limitation all rights to exercise options to extend or renew the leases or to purchase the fee title to the leasehold estates and appurtenances thereto, and all rights to insurance proceeds, eminent domain awards or payments in lieu thereof, and 2 All rights of the Borrower in and to the premises described in Exhibit A and the buildings, fixtures, improvements, alterations, or additions now or hereafter acquired or erected on the leased premises (individually, as amended to date, a "Lease", all collectively the "Leasehold Estate," or the "Leases" and together with the Owned Property the "Real Property") III. Together with: (a) All right, title and interest of Mortgagor, including, without limitation, any after-acquired fee title or reversion in and to the said Real Property and the rights-of-ways, streets and easements adjacent or appurtenant thereto, and all easements, rights-of-way, licenses, operating agreements, condominium rights, abutting strips and gores of land, streets, ways, passages, rights, waters, water courses, water and flowage rights and powers, minerals and soil, plants, and standing and fallen timber and other emblements now or hereafter located on the Real Property or under or above same, and all other appurtenances whatsoever belonging or relating to said Real Property or any part thereof, or which hereafter shall in any way belong, relate or be appurtenant thereto, whether now owned or hereafter acquired by Mortgagor and the reversion and reversions, remainder and remainders, and all the estate, right, title, interest, property, possession, claim and demand whatsoever at law, as well as in equity, of the Mortgagor of, in and to the same (all hereinafter referred to as the "Land"); and (b) All buildings, structures, parking areas, snowmaking and water rights, landscaping, and other improvements of every nature now or hereafter situated, erected or placed on the Land or appurtenant thereto, including, without limitation, all plumbing, electrical, heating, ventilating, air conditioning, and all other building components, (the "Improvements"), and all materials intended for construction, reconstruction, alteration and repairs of the Improvements now or hereafter erected, all of which materials shall be deemed to be included within the Improvements immediately upon the delivery thereof to the Land; and (c) All fixtures, machinery, equipment, furniture, inventory, building supplies, skilifts, snowmaking equipment, appliances and other articles of personal property (the "Personal Property") and all other fixtures and equipment now or hereafter owned by Mortgagor and located in, on or about, or used or intended to be used with or in connection with the Land or the Improvements, whether installed in such a way as to become a part thereof or not, including all additions, improvements, betterments, renewals and replacements of any of the foregoing, whether now owned or hereafter acquired by Mortgagor; and 3 (d) All right, title and interest of Mortgagor in and to all policies of insurance, licenses, franchises, permits, leases, approvals, service and maintenance contracts, property management agreements, equipment leases, tradenames, trademarks, servicemarks, computer programs, information and data, logos, goodwill, accounts, chattel paper and general intangibles as defined in the Uniform Commercial Code as enacted in the State of Maine, which in any way now or hereafter belong, relate or appertain to the Land, the Improvements or the Personal Property or any part thereof, all whether now owned or hereafter acquired by Mortgagor, including, without limitation, all condemnation payments, insurance proceeds, accounts and escrow funds and all other property of Mortgagor deposited with Mortgagee or held by Mortgagee pursuant to the Credit Agreement or the Lender Agreements (the "Intangible Property"); and (e) All present and future leases, tenancies, occupancies and licenses, whether written or oral, of the Land, the Improvements, the Personal Property and the Intangible Property, or any combination or part thereof (the "Rental Leases"), and all income, revenues, receipts, rents, issues, royalties, profits, rent rolls, security deposits and other benefits of the Land, the Improvements, the Personal Property and the Intangible Property, from time to time accruing, and all payments under the Rental Leases (the "Revenues"); (f) All the right, title, interest of Mortgagor in and to all engineering, survey and architectural specifications, plans and data, all other records, plans and specifications relating to the Improvements on the Land and Personal Property (hereinafter collectively referred to as the "Plans"); and (g) All proceeds, products, substitutions and accessions of the foregoing of every type, all whether now owned or hereafter acquired. (h) All judgments, awards of damages and settlements hereafter made as a result or in lieu of any taking of the Property under the power of eminent domain, or for any damage to the Property. Also granting to Mortgagee hereby the right, upon any default hereunder or demand upon any of the obligations secured hereby, to foreclose and sell the aforesaid Property by any means permitted by law, including pursuant to the STATUTORY POWER OF SALE. TO HAVE AND TO HOLD the Property, with all the privileges and appurtenances to the same belonging, to the Mortgagee, its respective successors and assigns, to Mortgagee and its use and behoof forever; 4 Advances secured hereby may be made to or for the benefit of the Mortgagor, any Borrower or any one or more of them. Mortgagor COVENANTS and AGREES with Mortgagee as follows: 2. Secured Obligations. Mortgagor shall promptly pay and perform the Secured Obligations. The parties may from time to time extend, renew, alter, and amend the Secured Obligations secured hereby. All provisions of this Mortgage shall apply to each further advance as well as to all other Secured Obligations secured hereby regardless of whether the advance is designated as being secured hereby. Nothing herein contained, however, shall limit the amount secured by this Mortgage if such amount is increased by accrued interest, advances made by Mortgagee, as herein elsewhere provided for to protect the security or is increased by costs of collection and foreclosure. 3. Representations. The Mortgagor warrants and represents that (i) this Mortgage has been duly authorized, executed and delivered by and on behalf of the Mortgagor, (ii) the Mortgagor is duly existing and in good standing with all power, authority and legal right to engage in the transaction contemplated by this Mortgage and the Lender Agreements, (iii) the execution and delivery of this Mortgage and the Lender Agreements and the carrying out of the transaction contemplated thereby will not conflict with or result in a breach of the terms of any agreement or law or order of any court or governmental body, (iv) there are no material actions, suits or proceedings, including, without limitation, eminent domain proceedings pending, or to the knowledge of the Mortgagor, threatened before any court or other governmental body or agency which would have a material adverse effect on the Property or the Mortgagor or the Mortgagor's ability to perform its obligations under this Mortgage or under the other Lender Agreements, (v) the Land is in material compliance with applicable zoning, building, environmental and all other laws, ordinances and regulations relating to the use and occupancy thereof and the Mortgagor has no knowledge of any claim of violation of any such legal requirements, (vi) all material licenses and permits necessary for the use and occupancy of the Land have been issued and are in full force and effect, (vii) the material improvements on the Land and the tangible Personal Property are in good working order and free from structural defects, (viii) the Mortgagor has no knowledge of any claim challenging the Mortgagor's title to the Real Property, and (ix) the Mortgagor has no knowledge of any existing default, or claim thereof, under any leases or other arrangements for the use of the Real Property, either on the part of the Mortgagor or any other party thereto. 4. Title. Except as disclosed or referred to in Exhibit B, Mortgagor has good, record and marketable title to an indefeasible estate in fee simple in the Owned Property and good title to the Personal Property, free and clear of all liens and encumbrances, except as expressly permitted under the Credit Agreement. Mortgagor has good right and power to convey the Real Property, Land, Personal Property and Improvements to Mortgagee to hold 5 as aforesaid, that this Mortgage is and will remain a valid and enforceable first lien and security interest on the aforesaid property, and that Mortgagor shall and will warrant and defend the same to Mortgagee forever against the claims and demands of all persons except as aforesaid. 5. Leasehold Estate. Mortgagor holds a valid and binding leasehold interest in the Leasehold Estate, which Leasehold Estate is subject to no prior liens, conveyances or encumbrances except as set forth on Exhibit B hereto; Mortgagor may lawfully mortgage and assign the same and this Mortgage does not violate any other agreement by which the Mortgagor is bound. Mortgagor shall not hereafter assign, sublease, encumber or transfer any interest in or under the Leasehold Estate or consent to any subordination of the Leasehold Estate while the Secured Obligations remain outstanding or committed for, except with the prior written consent of the Mortgagee. Each Lease is in full force and effect in accordance with its terms and there have been no changes, alterations or amendments to the Leases. Mortgagor will make no material, adverse changes, alterations or amendments to the Leases without prior written consent of Mortgagee, its successors or assigns; any such changes to be void and of no effect without such consent. Except as disclosed in writing to Mortgagee, all rents and payments under the Leases have been paid to the extent payable to date; and no defaults exist under the Leases, and no event has occurred or is occurring which, with the passage of time or service of notice, or both, would constitute an event of default thereunder. Mortgagor will well and truly perform, or cause to be performed, all its obligations and agreements as lessee under the Leases, and under any renewals or extensions thereof and will not do or suffer anything which will impair any Lease or which would be an event of default thereunder. Mortgagor shall exercise all renewals of the term of any Lease while the obligations secured hereby remain outstanding or committed for, except where the failure to so renew would not constitute a Material Adverse Effect (as defined in the Credit Agreement). Mortgagor, for itself, its successors and assigns, acknowledges that Mortgagee, its successors and assigns, shall have no obligation to perform the responsibilities of the lessee under any Lease, such responsibilities being those of Mortgagor. Upon reasonable request of the Mortgagee, Mortgagor shall use its best efforts to procure from each Landlord to any Lease a certificate stating that the Lease is in good standing. Mortgagor shall promptly notify Mortgagee of any default under the Lease or the occurrence of any event under any Lease, which with the passage of time or service of notice or both, would constitute an event of default, and of any oral or written claim or notice of default received from a Landlord under any Lease; and in addition to any other rights contained herein Mortgagor shall permit the Mortgagee, its agents and employees to enter upon and inspect the premises subject to such Lease at all reasonable times and upon reasonable notice. 6 6. Taxes and Assessments. Mortgagor shall promptly pay and discharge, when due, all taxes and assessments of every type or nature levied or assessed against the Real Property, all water and sewerage charges, and any other governmental claim, obligation or encumbrance against the Real Property which may be or become superior to this Mortgage (collectively, the "Impositions") except as permitted in accordance with the provisions of the Credit Agreement. Subject to the provisions of the Credit Agreement, if at any time the Mortgagee does not require the escrow of payments pursuant to Paragraph 7 herein, Mortgagor shall deliver to Mortgagee receipts evidencing payments of such taxes, assessments, charges and encumbrances not later than twenty days after the final date for payment without interest or penalty. 7. Monthly Reserve Payments. Upon the occurrence of an Event of Default, which has not been waived in writing by the Mortgagee and the Required Lenders, Mortgagee may require that the Mortgagor pay to the Mortgagee monthly, on the first day of each month, a sum reasonably determined by the Mortgagee to be sufficient to provide in the aggregate a fund adequate to pay each Imposition at least thirty (30) days before it becomes delinquent, and, in addition, shall pay to the Mortgagee on demand any balance necessary to pay in full each Imposition at least thirty (30) days before the date on which it becomes due and payable. Such sums shall not bear interest and may be commingled with the general assets of the Mortgagee. The Mortgagor shall furnish to the Mortgagee all original bills relating to any Imposition promptly upon issuance. Mortgagor agrees that should there be insufficient funds so deposited with Mortgagee for said taxes, assessments, charges and premiums when due, it will upon demand by Mortgagee promptly pay to Mortgagee amounts necessary to make such payments in full; any surplus of such reserve funds may be applied toward the payment of the Secured Obligations or credited toward such taxes, assessments charges and premiums. Upon the occurrence of an Event of Default, the Mortgagee may apply such funds toward the payment of the Secured Obligations without causing thereby a waiver of any rights, statutory or otherwise, and specifically such application shall not constitute a waiver of the right of foreclosure hereunder. Mortgagor hereby pledges to Mortgagee all the foregoing sums so held hereunder for such purposes. Subject to the above, the Mortgagee may discharge taxes, liens, security interests, or other encumbrances at any time levied against or placed on the Property except as noted herein and except those which are permitted or are being contested in accordance with the provisions of the Credit Agreement, pay any premiums on any insurance to be carried by Mortgagor, or provide for the maintenance and preservation of the Real Property and add the expense thereof to the Secured Obligations secured hereby and charge interest thereon as provided hereinafter without waiving any default. The Mortgagor shall have the right, after giving written notice to the Mortgagee and subject to the conditions stated below, to contest by appropriate legal proceedings the amount or validity of any Imposition. In no event shall the Mortgagor be entitled to delay payment of any Imposition if the delay in payment could subject any portion of the Mortgaged 7 Property to possible foreclosure or in any event unless the Mortgagor deposits with Mortgagee a sum of money or such other security as the Mortgagee deems reasonable to cover the amount of such Imposition plus any interest or penalty that may become due as a result of such contest. 8. Insurance. (a) Mortgagor shall keep the Real Property, Personal Property and Improvements insured against loss or damage by fire, the perils against which insurance is afforded by the extended coverage endorsement, and such other risks and perils as Mortgagee may reasonably require from time to time, including, without limitation, insurance against flood damage if the Improvements are located in a flood hazard area or required by federal law or regulation (to the minimum amount required by federal law or regulation) and insurance against loss of rental income. Such policy or policies of such insurance shall be in such form and shall be in such amounts as Mortgagee may reasonably require. Whenever requested by Mortgagee, such policies shall be delivered immediately to Mortgagee. Any and all amounts received by Mortgagee under any of such policies may be applied by Mortgagee to the Secured Obligations secured hereby in such manner as Mortgagee may elect, or, at the option of Mortgagee, the entire amount so received or any part thereof may be released. Upon foreclosure of this Mortgage or other acquisition of the Property or any part thereof by Mortgagee, such policies shall become the absolute property of Mortgagee, but receipt of any insurance proceeds and any disposition of the same by Mortgagee shall not constitute a waiver of any rights of Mortgagee, statutory or otherwise, and specifically shall not constitute a waiver of the right of foreclosure by Mortgagee upon an Event of Default. (b) Mortgagor shall pay all premiums on insurance policies, and at Mortgagee's option, shall pay in the manner provided under Section 7. The liability insurance policies shall name Mortgagee as an "additional insured." The property insurance policies shall name Mortgagee as "mortgagee and loss payee" shall be first payable in case of loss to Mortgagee, and shall contain mortgage clauses and lender's loss payable endorsements in form and substance reasonably acceptable to Mortgagee. Mortgagor shall deliver proof of all such insurance to Mortgagee, and upon request, Mortgagor shall promptly furnish to Mortgagee all renewal notices and all receipts of paid premiums. (c) All policies of insurance required by this Mortgage shall contain clauses or endorsements to the effect that (i) no act or omission of either Mortgagor or anyone acting for Mortgagor (including, without limitation, any representations made by Mortgagor in the procurement of such insurance), which might otherwise 8 result in a forfeiture of such insurance or any part thereof, no occupancy or use of the Property for purposes more hazardous than permitted by the terms of the policy, and no foreclosure or any other change in title to the Property or any part thereof, shall affect the validity or enforceability of such insurance insofar as Mortgagee is concerned, (ii) the insurer waives any right of setoff, counterclaim, subrogation, or any deduction in respect of any liability of Mortgagor and Mortgagee, (iii) such insurance is primary and without right of contribution from any other insurance which may be available, (iv) such policies shall not be modified, canceled or terminated without the insurer thereunder giving at least thirty (30) days prior written notice to Mortgagee by certified or registered mail, and (v) that Mortgagee shall not be liable for any premiums thereon or subject to any assessments thereunder, and shall in all events be in amounts sufficient to avoid any coinsurance liability. (d) All policies of insurance required by this Mortgage shall be issued by companies licensed to do business in the State of Maine and shall be reasonably acceptable to Mortgagee. (e) In the event of any loss or damage to the Real Property, Improvements or Personal Property in excess of One Hundred Thousand dollars ($100,000.00), Mortgagor shall give immediate written notice to the insurance carrier and Mortgagee and shall promptly proceed to satisfy all conditions to the receipt of insurance proceeds. Upon an Event of Default which has not been waived in writing by the Mortgagee and the Required Lenders, Mortgagor hereby irrevocably authorizes and empowers Mortgagee, at Mortgagee's option and in Mortgagee's sole discretion, as attorney in fact for Mortgagor, to make proof of such loss, to adjust and compromise any claim under insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom Mortgagee's reasonable expenses incurred in the collection of such proceeds. Subject to the foregoing conditions, Mortgagor further authorizes Mortgagee, at Mortgagee's option, to (i) apply the balance of such proceeds to the payment of the Secured Obligations whether or not then due, or (ii) if Mortgagee shall require the reconstruction or repair of the Property, to hold the balance of such proceeds to be used to pay Impositions and the Secured Obligations as they become due during the course of reconstruction or repair of the Property and to reimburse Mortgagor, in accordance with such terms and conditions as Mortgagee may prescribe, for the costs of reconstruction or repair of the Property, and upon completion of such reconstruction or repair to apply any excess to the payment of the Secured Obligations. If the Property is sold or the Property is acquired by Mortgagee, all right, title and interest of Mortgagor in and to any insurance policies and unearned premiums thereon and in and to the proceeds thereof resulting from loss or damage to the Property prior to the sale or acquisition shall pass to Mortgagee or any other successor in interest to Mortgagor or purchaser or grantor of the Property 9 but receipt of any insurance proceeds and any disposition of the same by Mortgagee shall not constitute a waiver of any rights of Mortgagee, statutory or otherwise, and specifically shall not constitute a waiver of the right of foreclosure by Mortgagee upon an Event of Default or failure of performance by Mortgagor of any of the Secured Obligations. In the event any loss or damage to the Real Property, Improvements or Personal Property is less than One Hundred Thousand dollars ($100,000.00), the Mortgagor shall promptly restore the damaged property to its condition prior to such damage. 9. Preservation and Maintenance of the Property. (a) Mortgagor shall not permit or commit waste, impairment, or deterioration of the Property or abandon the Property; shall restore or repair promptly and in a good and workmanlike manner all or any part of the Property in the event of any material damage, injury or loss thereto, to the substantial equivalent of its condition prior to such damage, injury or loss, or such other condition as Mortgagee may approve in writing (provided, however, the insufficiency of such proceeds shall not relieve Mortgagor of its obligations to restore hereunder), shall keep the Property, including the Improvements and the Personal Property, in good order, repair and working condition and shall replace fixtures, equipment, machinery and appliances on the Property when necessary to keep such items in good order, repair, and working condition and in accordance with the requirements of all fire underwriters and licensing boards, and shall comply with all laws, ordinances, regulations and requirements of any governmental body applicable to the Property unless such non-compliance does not have a Material Adverse Effect. (b) Mortgagor covenants and agrees that Mortgagor and the Property shall at all times comply with the requirements of all present and future federal, state, and local land use and zoning statutes, regulations, ordinances, licenses, permits, agreements and orders; except as would not constitute a Material Adverse Effect. (c) Mortgagor covenants and agrees to give Mortgagee prompt notice of any non-compliance with such laws, ordinances, regulations or requirements and of any notice of non-compliance therewith which it receives or any threatened or pending proceedings in respect thereto or with respect to the Property (including, without limitation, material changes in zoning classifications or land use requirements) which, if adversely determined, would result in a Material Adverse Effect. (d) Neither Mortgagor nor any tenant or other person shall remove, demolish or alter any Improvements now existing or hereafter erected on the Property 10 or any Personal Property in or on the Property except when incident to the replacement of Personal Property with items of like kind and value. Except as specifically provided in the Credit Agreement, Mortgagor further covenants and agrees that, without the prior written consent of Mortgagee, herein, no additional part of the Property shall be declared, or become the subject of, a condominium under the Maine Condominium Act (33 M.R.S.A. ss.1601-101), as it may be amended or supplemented, or become the subject of any covenants or restrictions, or any planned unit development, or any other type of development that would control or restrict the uses to which the Land and Improvements may be put or the scheme or arrangement or its development or the design, location or character of its buildings or improvements, or which would impose Impositions or assessments of any type upon any owners or tenants of the Property, or upon any other parties who may use or enjoy the Property. (e) If at any time the then existing structure located on or use or occupancy of the Property shall be permitted pursuant to any zoning or other law, ordinance or regulation, only so long as such use or occupancy shall continue, that Mortgagor shall not cause or permit such use or occupancy to be discontinued without the prior written consent of the Mortgagee, unless such discontinuance would not result in a Material Adverse Effect. 10. Inspection. Subject to the provisions of the Credit Agreement, Mortgagee shall have the right to visit and inspect the Property and any other of the properties of the Mortgagor, to examine the records and books of account of the Mortgagor, and to discuss the affairs, finances and accounts of the Mortgagor with and to be advised as to the same by its and their officers, all at such reasonable times and intervals as the Mortgagee may desire. Mortgagor shall permit the Mortgagee and its representatives to examine said books and records and all supporting vouchers and data any time and from time to time upon request by the Mortgagee at the mortgaged Property or at such other place as such books and records are customarily kept; and Mortgagor hereby agrees to furnish to Mortgagee financial statements in such form and detail as required by the Credit Agreement. 11. Releases, Amendments, Etc. Without affecting the liability of Mortgagor or any other person (except any person expressly released in writing) for payment or for performance of any of the Secured Obligations contained herein, and without affecting the rights of Mortgagee with respect to any other security not expressly released in writing, and without impairing the validity or priority of this Mortgage, Mortgagee may at any time and from time to time, either before or after the maturity of the Secured Obligations without notice or consent: 11 (i) Release in whole or part the liability of any person or of any other security for payment or performance of all or any part of the Secured Obligations, (ii) Extend the time or otherwise alter, increase or decrease the terms of payment or interest rate subject to the terms of the Credit Agreement of all or any part of the Secured Obligations or modify or waive any Secured Obligations, or subordinate, release, modify or otherwise deal with the lien or charge hereof, (iii) Exercise or refrain from exercising or waive any right Mortgagee may have, including, without limitation, the declaration of default under and foreclosure of this Mortgage without first exhausting other remedies or collateral or taking any other action against any other person, (iv) Accept additional security of any kind, or (v) Release or otherwise deal with any property, real or personal, securing the Secured Obligations, including all or any part of the Property. No delay by Mortgagee in exercising any right or remedy hereunder, or otherwise afforded by law, shall operate as a waiver thereof or preclude the exercise thereof during the continuance of any default hereunder. Without limiting the generality of the foregoing, Mortgagor agrees to the provisions of any instrument evidencing, securing or otherwise executed in connection with the Secured Obligations, and agrees that the obligations of any Borrower hereunder shall not be released or discharged, in whole or in part, or otherwise affected by (i) the failure of the Mortgagee to assert any claim or demand or to enforce any right or remedy against any other Borrower; (ii) any extensions or renewals of the Secured Obligations; (iii) any rescissions, waivers, amendments or modifications of any of the terms or provisions of the Secured Obligations, the Credit Agreement or of the Lender Agreements or any other agreement evidencing, securing or otherwise executed in connection with this Secured Obligations or the Credit Agreement; (iv) the substitution or release of any entity primarily or secondarily liable for the Secured Obligations or Credit Agreement or the Lender Agreements; (v) the adequacy of any rights the Mortgagee may have against any collateral or other means of obtaining repayment of the Secured Obligations and the Credit Agreement; (vi) the impairment of any collateral securing the Secured Obligations and the Credit Agreement, including, without limitation, the failure to perfect or preserve any rights the Mortgagee 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 12 vary the risk of the Mortgagor or otherwise operate as a release or discharge of any Borrower, all of which may be done without notice to the Mortgagor. Any agreement hereafter made by Mortgagor and Mortgagee pursuant to or amending this Mortgage and the Secured Obligations shall be superior to the rights of the holder of any intervening lien or encumbrance to the extent allowed by law. 12. Further Assurances. Mortgagor at Mortgagor's expense will do, execute, acknowledge and deliver to Mortgagee such further deeds, acts, conveyances, mortgages, assignments, transfers and assurances as Mortgagee in its discretion may reasonably require from time to time to better establish and perfect the property and rights created or intended by Mortgagee to be created hereunder or to facilitate the Mortgagor's performance hereunder, including, without limitation, the execution and delivery, recording and/or filing and from time to time thereafter at such time and in such offices and places as shall be deemed desirable by Mortgagee, any and all such other and further assignments, mortgages, security agreements, financing statements, continuation statements, instruments of further assurance, certificates and other documents as may, in the opinion of Mortgagee, be necessary or desirable in order to effectuate, complete, or perfect, or to continue and preserve (a) the obligations of Mortgagor under this Mortgage, and (b) the lien and security interest created by this Mortgage upon the Property. 13. Transfers, Etc. Except as expressly permitted in the Credit Agreement, the Mortgagor herein shall not sell, convey, assign, option, mortgage, encumber, hypothecate or otherwise dispose of the Property or any portion thereof or interest therein, whether legal or equitable, either voluntarily or involuntarily, by any means whatsoever, or create or suffer to exist any lien, encumbrance, security interest, pledge, restriction, mechanics lien, attachment or other charge upon the Real Property, Personal Property or Improvements, including, without limitation, any lease with an option to purchase, bond for deed, purchase and sale contract coupled with transfer of possession or lease with a term of more than two (2) years not approved hereunder. This condition shall continue until all Secured Obligations secured hereby are satisfied, and permission given or election not to foreclose or accelerate said Secured Obligations by Mortgagee, its successors or assigns, as to any one such transfer, shall not constitute a waiver of any rights as to any subsequent such transfer of title as to which this condition shall fully remain in force and effect. 14. Events of Default. This Mortgage and the Secured Obligations shall at the option of the Mortgagee herein become immediately due and payable upon each of the following (an "Event of Default"): (a) An Event of Default under the Credit Agreement; (b) Breach of any covenant contained in Sections 6, 7, 8 or 14 herein. 13 (c) Mortgagor fails to duly observe or perform any other term, covenant, condition or agreement contained in this Mortgage, and the continuance of such failure for a period of twenty (20) days after written notice thereof from Mortgagee, except as otherwise provided herein; or (d) any representation or warranty made in writing by or on behalf of Mortgagor or any Borrower herein or in connection with any of the transactions contemplated hereby shall prove to have been false or incorrect in any material respect on the date as of which made. 15. Remedies. If an Event of Default has occurred which has not been waived in writing by the Mortgagee and the Required Lenders, Mortgagee may, at its option, without notice of its election and without demand, do any one or more of the following, all of which are authorized by Mortgagor: (a) To the extent not otherwise provided in the Credit Agreement, declare the Secured Obligations whether evidenced by any instrument or agreement and whether or not secured hereby, and the underlying agreements of other parties securing the Secured Obligations, immediately due and payable. (b) To the extent not otherwise provided in the Credit Agreement, cease advancing money or extending credit to or for the benefit of the Mortgagor under any agreement, whether or not secured hereby without need for the expiration of any applicable cure period. (c) Foreclose this Mortgage under any method of foreclosure in existence at the time or now existing, or under any other applicable law. The Mortgagee shall have the STATUTORY POWER OF SALE in addition to all other rights and remedies. Advertising of any foreclosure notice shall be in any newspaper of state-wide circulation or of general circulation in the county where the Property is located or as otherwise permitted by law. Such foreclosure may be against the entire Property or such portions thereof in such order and at such times as Mortgagee may determine all in its discretion, and the deferral or delay in foreclosure against any portion of the Property shall not impair the right of Mortgagee to subsequently foreclose (d) To the extent not otherwise provided in the Credit Agreement, exercise all of the remedies of a secured party under the Uniform Commercial Code as now in effect in the State of Maine, and such further remedies as may from time to time hereafter be provided in the State of Maine for a secured party or creditor. Mortgagor agrees that all rights of Mortgagee as to Personal Property, Intangible Property and Plans as to the Land, Improvements and Revenues, and rights and 14 interest appurtenant thereto, may be exercised together or separately and in such order as the Mortgagee may elect. Mortgagor further agrees that in exercising its power of sale as to the Property constituting personal property and/or fixtures and rights and interest appurtenant thereto, the Mortgagee may sell said collateral or any part thereof, either separately from or together with the said real estate, rights and interests appurtenant thereto, or any part thereof, all as the Mortgagee may in its discretion elect. In particular, the Mortgagee may proceed to enforce rights against, seek the replevin of, and/or sell personal property collateral prior to or during the pendency of any real estate foreclosure proceeding, redemption period, or foreclosure sale without waiving said foreclosure. (e) Enter upon and take possession of the Property or any part thereof, either directly or through a receiver, and exclude the Mortgagor, its agents, managers and servants, and to perform any acts Mortgagee deems necessary or proper to conserve the security, and to collect and receive all Revenues, General Intangibles, proceeds and profits thereof, including those past due as well as those accruing thereafter, and use, manage, operate and control the Property. Mortgagee or a receiver may also take possession of, and for these purposes use, any and all Property used by Mortgagor in the operation, rental or leasing thereof or any part thereof. The expense (including receiver's fees, counsel fees, costs and agent's compensation) incurred pursuant to the powers herein contained shall be secured hereby. Mortgagee shall (after payment of all costs and expenses incurred) apply such Revenues received by it on the Secured Obligations in such order as Mortgagee determines; and Mortgagor agrees that exercise of such rights and disposition of such funds shall not constitute a waiver of any foreclosure once commenced nor preclude the later commencement of foreclosure for breach hereof. The right to enter and take possession of said property, to manage and operate the same, and to collect the income, rents, issues and profits thereof, whether by a receiver or otherwise, shall be cumulative to any other right or remedy hereunder or afforded by law, and may be exercised concurrently therewith or independent thereof. Mortgagee shall be liable to account only for such income, rents, security deposits, proceeds and profits actually received by Mortgagee. (f) Prevent or cure any defaults under the Leases as Mortgagee deems necessary or desirable in order to preserve the Leases, without awaiting the expiration of any grace period, including any default specified in a notice of default from any of the landlords under the Leases; (g) In the name of the Mortgagor or otherwise perform the Mortgagor's obligations under the Leases and exercise all rights, options, powers and privileges of the Mortgagor granted under the Leases without notice to the Mortgagor and with full power to renew, amend or alter the Leases or disclaim any subleases; 15 (h) Reassign any part or all of the Mortgagor's right, title and interest in and to the Leases with notice to the Mortgagor, but without liability on the part of the Mortgagor to cure defaults or to pay damages relating to the default; (i) Sell or otherwise dispose of the Property (in its then condition or after further construction and preparation thereof, utilizing in connection therewith any of Mortgagor's assets, without charge or liability therefor), at foreclosure or secured party's sale (which sale Mortgagee may postpone from time to time to the extent permitted by law), all as Mortgagee deems advisable, for cash or credit; provided, however, that Mortgagor shall be credited with the net proceeds of such sale only when such proceeds are finally collected by Mortgagee and the Mortgagor shall pay any deficiency on demand. Mortgagee may become the purchaser at any such sale. (j) Use or transfer, without charge or liability to Mortgagee therefore, any of Mortgagor's General Intangibles, Plans, trade names, service marks, trademarks, licenses, certificates of authority or advertising materials in advertising for the operation, sale and selling of the Property. (k) Mortgagor recognizes that in the event Mortgagor defaults, no remedy of law will provide adequate relief to Mortgagee, therefore, Mortgagor agrees that Mortgagee shall be entitled to temporary and permanent injunctive relief to cure such default in any such case without the necessity of proving actual damages. Mortgagor shall pay to Mortgagee, immediately and without demand, all sums of money advanced by Mortgagee, together with interest on each such advancement at a rate of interest at the highest interest rate per annum required by the Credit Agreement secured hereby, and all such sums and interest thereon shall be secured hereby. Mortgagee in its discretion, after the payment of expenses and the costs of protection, preservation and sale of the Property, may apply the net proceeds of the Property to the Secured Obligations. If an Event of Default shall have occurred which has not been waived in writing by the Mortgagee and the Required Lenders, Mortgagee, upon application to a court of competent jurisdiction, shall be entitled as a matter of strict right and without regard to the asserted value of any security for the Secured Obligations to the appointment of a receiver to take possession of and to operate the Property and to collect and apply the Revenues. The receiver shall have all of the rights and powers permitted under the laws of the State of Maine. Mortgagor will pay to Mortgagee upon demand, all expenses, including receiver's fees, reasonable attorneys' fees, costs and agent's compensation, incurred pursuant to such appointment and all such expenses shall be a portion of the Secured Obligations. The entering upon and taking possession of and maintaining of control of the Property by Mortgagee or the receiver and the application of Revenues as provided herein shall not cure or waive any Event of Default or invalidate any other right or remedy of Mortgagee hereunder. 16 All remedies provided in this Mortgage are distinct and cumulative to any other right or remedy under this Mortgage, the Notes, the Credit Agreement or under the other Lender Agreements or afforded by law or equity, and may be exercised concurrently, independently or successively against Mortgagor or any Borrower or any other collateral for the Secured Obligations, without waiving or impairing this Mortgage. All of Mortgagee's rights and remedies are cumulative and non-exclusive. 16. Expenses. The Mortgagor shall pay to or reimburse the Mortgagee on demand and as a part of the Secured Obligations secured hereby any and all reasonable expenses, including, without limitation, reasonable counsel fees and expenses and/or receiver's expenses, incurred or paid by the Mortgagee in connection with the preparation, execution, administration, preservation, collection or enforcement of this Mortgage, the Property or the Secured Obligations, or such expenses to be paid include without limitation those incurred in any litigation, contest, dispute, suit or proceeding (whether instituted by Mortgagee, Mortgagor, any Borrowers or any other party) to protect, collect, enforce, sell, take possession of or liquidate any of the Property, to enforce any rights of Mortgagee against Mortgagor, any Borrowers or against any other person and those expenses incurred by Mortgagee in defending, settling or satisfying any claim, action or demand asserted by any receiver, trustee, creditor's committee or debtor-in-possession in any bankruptcy or reorganization, any assignee or assignee for the benefit of creditors, creditor, stockholder, or by any other person, whether in connection with the Mortgagor, any Borrowers, the Secured Obligations or any documents, transaction or Collateral related thereto, or any alleged theory of preference, fraudulent conveyance, subordination, usury, ultra vires, invalidity, interference, control, misrepresentation, conspiracy, or similar theory, or otherwise. 17. Survival. All representations and warranties of Mortgagor, and all terms, provisions, conditions and agreements to be performed by Mortgagor contained herein, and in any of the other agreements shall be true and satisfied at the time of the execution of this Mortgage, and shall survive the closing hereof and the execution and delivery of this Mortgage. 18. Governing Law. This Mortgage shall be construed in accordance with, and governed by, the laws of the State of Maine. Wherever possible, each provision of this Mortgage shall be interpreted in such manner as to be effective and valid under applicable law, but if any provisions of this Mortgage shall conflict with, be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Mortgage. In the event that any provision or clause of this Mortgage or the other Lender Agreements conflicts with applicable law, such conflict shall not affect other provisions which can be given effect without the conflicting provision, and to this end, the provisions of this Mortgage are declared to be severable. 17 19. Payments. Mortgagor irrevocably waives the right to direct the application of any and all payments at any time or times hereafter received by Mortgagee from Mortgagor, and Mortgagor do hereby irrevocably agree that Mortgagee shall have the continuing exclusive right to apply and reapply any and all payments received at any time or times hereafter against the Secured Obligations hereunder in such manner as Mortgagee may deem advisable. 20. Binding Effect Etc. The covenants and agreements herein contained shall bind, and the benefits and advantages thereof shall inure to, the respective heirs, executors, administrators, successors and assigns of the Mortgagor and Mortgagee. Wherever used, the singular number shall include the plural, the plural the singular, the use of any gender shall be applicable to all genders. 21. Notices. Except as otherwise specified in this Mortgage, any and all notices, demands, elections or requests provided for or permitted to be given pursuant to this Mortgage (hereinafter in this Section referred to as "Notice") shall be in writing to the parties at the addresses provided in the introductory paragraph and shall otherwise be given in accordance with the provisions of the Credit Agreement. 22. Collateral Agent/Administration. The Lenders have authorized Mortgagee to act as Agent as attorney in fact for the Lenders in order to represent and act on behalf of the Lenders in the administration, enforcement, collection, and foreclosure of this Mortgage and the Lender Agreements, with the specific right and authority to execute releases, discharges, partial releases, joinders, and consents hereunder in the name of and on behalf of the Lenders. This power of attorney and the authority conferred thereby shall remain in effect until written notice to the contrary is recorded in the Registry in which this Mortgage is recorded. No person dealing with Mortgagee shall be required to inquire further as to the scope of said authority until and unless such notice is recorded. The relationship between Mortgagee in its capacity as collateral agent to the Lenders is and shall be that of agent and principal only, and nothing contained in this Mortgage or any of the other Lender Agreements shall be construed to constitute a trust for or to establish any confidential or fiduciary relationship with respect to any Lender or Mortgagor. 23. Waivers. No delay or omission of Mortgagee or of any holder of the Note to exercise any right, power or remedy accruing upon any Event of Default shall exhaust or impair any such right, power or remedy or shall be construed to be a waiver of any such default, or acquiescence therein; and every right, power and remedy given by this Mortgage to Mortgagee may be exercised from time to time and as often as may be deemed expedient by Mortgagee. No consent or waiver, expressed or implied, by Mortgagee to or of any Event of Default shall be deemed or construed to be a consent or waiver to or of any other Event of Default. Failure on the part of Mortgagee to complain of any act or failure to act 18 which constitutes an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by Mortgagee of Mortgagee's rights hereunder or impair any rights, powers or remedies consequent on any Event of Default. No act or omission of Mortgagee shall preclude Mortgagee from exercising any right, power or privilege herein granted or intended to be granted in the event of any Event of Default then made or of any subsequent Event of Default; nor, except as otherwise expressly provided in an instrument or instruments executed by Mortgagee, shall the lien of this Mortgage be altered thereby. No acceptance of partial payment or performance shall waive, affect or diminish any right of Mortgagee or Mortgagor's duty of compliance and performance therewith. Any Secured Obligation which this Mortgage secures is a separate instrument and may be negotiated, extended or renewed by Mortgagee without releasing Mortgagor or any Borrower. In the event of the sale or transfer by operation of law or otherwise of all or any part of the Property, Mortgagee, without notice, is hereby authorized and empowered to deal with any such vendee or transferee with reference to the Property or the Secured Obligations or with reference to any of the terms, covenants, conditions or agreements hereof, as fully and to the same extent as it might deal with the original parties hereto and without in any way releasing or discharging any liabilities, obligations or undertakings. 24. Time of the Essence. Time is of the essence with respect to each and every covenant, agreement and obligation of Mortgagor under this Mortgage, the Note, the Credit Agreement and any and all other Lender Agreements. 25. Indemnification; Subrogation; Waiver of Offset. (a) Mortgagor shall indemnify, defend and hold Mortgagee harmless against: (i) any and all claims for brokerage, leasing, finders or similar fees which may be made relating to the Property or the Secured Obligations, and (ii) any and all liability, obligations, losses, damages, penalties, claims, actions, suits, costs and expenses (including Mortgagee's reasonable attorneys' fees, together with reasonable appellate counsel fees, if any) of whatever kind or nature which may be asserted against, imposed on or incurred by Mortgagee in connection with this Mortgage, the Property, or any part thereof, or the exercise by Mortgagee of any rights or remedies granted to it under this Mortgage; provided, however, that nothing herein shall be construed to obligate Mortgagor to indemnify, defend and hold harmless Mortgagee from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs and expenses enacted against, imposed on or incurred by Mortgagee by reason of Mortgagee's willful misconduct or gross negligence. (b) If Mortgagee is made a party defendant to any litigation or any claim is threatened or brought against Mortgagee concerning the Secured Obligations, this Mortgage, the Property, or any part thereof, or any interest therein, or the maintenance, operation or occupancy or use thereof, then Mortgagor shall indemnify, 19 defend and hold Mortgagee harmless from and against all liability by reason of said litigation or claims, including reasonable attorneys' fees (together with reasonable appellate counsel fees, if any) and expenses incurred by Mortgagee in any such litigation or claim, whether or not any such litigation or claim is prosecuted to judgment excepting claims arising from the willful misconduct or gross negligence of Mortgagee. If Mortgagee commences an action against Mortgagor to enforce any of the terms hereof or to prosecute any breach by Mortgagor of any of the terms hereof or to recover any sum secured hereby, Mortgagor shall pay to Mortgagee its reasonable attorneys' fees (together with reasonable appellate counsel, fees, if any) and expenses. The right to such attorneys' fees (together with reasonable appellate counsel fees, if any) and expenses shall be deemed to have accrued on the commencement of such action, and shall be enforceable whether or not such action is prosecuted to judgment. If Mortgagor breaches any term of this Mortgage, Mortgagee may engage the services of an attorney or attorneys to protect its rights hereunder, and in the event of such engagement following any breach by Mortgagor, Mortgagor shall pay Mortgagee reasonable attorneys' fees (together with reasonable appellate counsel fees, if any) and expenses incurred by Mortgagee, whether or not an action is actually commenced against Mortgagor by reason of such breach. All references to "attorneys" in this Subsection and elsewhere in this Mortgage shall include without limitation any attorney or law firm engaged by Mortgagee and Mortgagee's in-house counsel, and all references to "fees and expenses" in this Subsection and elsewhere in this Mortgage shall include without limitation any fees of such attorney or law firm and any allocation charges and allocation costs of Mortgagee's in-house counsel. (c) All sums payable by Mortgagor hereunder shall be paid without notice (except as may otherwise be provided herein or in the Credit Agreement), demand, counterclaim, setoff, deduction or defense and without abatement, suspension, deferment, diminution or reduction, and the obligations and liabilities of Mortgagor hereunder shall in no way be released, discharged or otherwise affected by reason of: (i) any damage to or destruction of or any condemnation or similar taking of the Property or any part thereof; (ii) any restriction or prevention of or interference with any use of the Property or any part thereof; (iii) any title defect or encumbrance or any eviction from the Land or the Improvements on the Land or any part thereof by title paramount or otherwise; (iv) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation, or other like proceeding relating to Mortgagee, or any action taken with respect to this Mortgage by any trustee or receiver of Mortgagee, or by any court, in such proceeding; (v) any claim which Mortgagor has, or might have, against Mortgagee; (vi) any default or failure on the part of Mortgagee to perform or comply with any of the terms hereof or of any other agreement with Mortgagor; or (vii) any other occurrence whatsoever, whether similar or dissimilar to the foregoing, whether or not Mortgagor shall have notice or 20 knowledge of any of the foregoing. Mortgagor waives all rights now or hereafter conferred by statute or otherwise to any abatement, suspension, deferment, diminution, or reduction of any sum secured hereby and payable by Mortgagor. 26. Future Advances by Mortgagee. Mortgagee may from time to time, at its sole option, make further advances to Mortgagor and/or any other Borrower, or any one or more of them to be secured hereby; provided, however, that the total principal secured hereby and remaining unpaid, including any such advances, shall not at any time exceed the sum of ONE HUNDRED MILLION DOLLARS ($100,000,000.00). Mortgagor and/or such other Borrower shall execute and deliver to Mortgagee a note or other agreement evidencing each and every such further advance which Mortgagee may make, which note or agreement shall contain such terms and conditions as Mortgagee may require. Mortgagor and/or such other Borrower shall pay when due all such further advances with interest and other charges thereon, as applicable, and the same, and each note and agreement evidencing the same, shall be fully secured hereby. All provisions of this Mortgage shall apply to each such further advance as well as to any other indebtedness secured hereby. Nothing herein contained, however, shall limit the amount secured by this Mortgage if such amount is increased by advances make by Mortgagee to protect or preserve the Property as provided elsewhere herein. Any future advances made hereunder may be made to Mortgagor or to any successor to Mortgagor in ownership of the Property and/or to any other Borrower. 21 IN WITNESS WHEREOF, the said authorized officer of Sugarloaf Mountain Corporation has signed this Mortgage as of the date first set forth above. SIGNED, SEALED & DELIVERED in the presence of: SUGARLOAF MOUNTAIN CORPORATION /s/ [Illegible] By: /s/ Thomas M. Richardson - ---------------------------- ------------------------------- Witness Name: Thomas M. Richardson Title: STATE OF MAINE Cumberland, ss August 27, 1996 Then personally appeared the within named Thomas M. Richardson, as Treasurer of Sugarloaf Mountain Corporation, and acknowledged the above instrument to be his free act and deed and the free act and deed of said corporation. Before me, /s/ Foster A. Stewart, Jr. ------------------------------- Maine Attorney Print Name Foster A. Stewart, Jr. 22 EX-10.86 36 COLLATERAL ASSIGNMENT EXHIBIT 10.86 COLLATERAL ASSIGNMENT OF LEASES AND RENTS THIS ASSIGNMENT OF LEASES AND RENTS (hereinafter referred to as this "Assignment"), is made and entered into by Sugarloaf Mountain Corporation, a Maine corporation with a mailing address of c/o American Skiing Company, P.O. Box 450, Bethel, Maine 04217 (hereinafter referred to as "Borrower"), to Fleet National Bank, as Agent for itself and the other Lenders party to the Credit Agreement (as defined herein) with a mailing address of One Federal Street, Boston, MA 02211 (hereinafter referred to as "Assignee"). WITNESSETH: THAT FOR AND IN CONSIDERATION of the sum of Ten and No/100 Dollars ($10.00) and other good and valuable considerations, the receipt and sufficiency whereof are hereby acknowledged, and in order to secure the Obligations as hereinafter set forth, Borrower does hereby grant, transfer and assign to Assignee, its successors, successors-in-title and assigns, all of Borrower's right, title and interest in, to and under any and A. All leases, tenancies, agreements or licenses, written or oral, now existing or hereafter entered into by Borrower as "landlord", "lessor" or "licensor", for the use or occupancy of all or any portion of the Borrower's property (hereinafter referred to as the "Property") located on or about Franklin County, Maine, including, without limitation, the premises more particularly described in Exhibit A attached hereto and by this reference made a part hereof, including any and all extensions, renewals and modifications thereof and guaranties of the performance or obligations of any tenants, lessees or licensees thereunder (said leases, tenancies, agreements and licenses are hereinafter referred to collectively as the "Leases," and said tenants, lessees and licensees are hereinafter referred to collectively as "Tenants" or individually as a "Tenant" as the context requires), which Leases include those certain leases more particularly described in Exhibit B attached hereto and by this reference made a part hereof, together with all of Borrower's right, title and interest in and to all payments, rents, issues and profits from the Leases and from the Property, and all fees, charges, accounts or other payments for the use or occupancy of rooms and other public facilities in hotels, motels or other lodging properties located on the Property, including without limitation, all income, fees, charges, revenues, receipts, fees, payments, rentals, rights, contracts, leases, tenancies, rents, agreements, licenses, general intangibles, cash collateral, accounts and accounts receivable, or other payments, whether written or oral, now existing or hereafter arising or entered into by Borrower as "operator", "landlord", "lessor" or "licensor" or otherwise, arising out of or relating in any way to Borrower's hotel, motel, lodging, restaurant, and/or conference center business or otherwise arising out of or relating to the operation, use, lease, and/or occupancy of all or any portion of the Property, and all room, restaurant, banquet, recreational, parking and other facilities located on the Property. B. All rights, privileges and benefits now existing or hereafter arising under the Leases, including, without limitation, all rights to exercise options to extend or renew the Leases or to purchase the Property and appurtenances thereto, and all rights to insurance proceeds, eminent domain awards or payments in lieu thereof; and C. All rights of the Borrower in and to the fixtures, improvements, alterations, or additions now or hereafter erected on the Property; and D. All subleases of the Property or any portion thereof, and all monies, rents, incomes, cash collateral as that term is defined in the U.S. Bankruptcy Code (Title 11 of United States Code) and profits from the Property or subleases thereof and rights derived therefrom all whether now existing or hereafter arising, provided that the Borrower shall not sublease the Premises or any portion thereof without Assignee's prior written consent except in the ordinary course of business. TO HAVE AND TO HOLD unto Assignee, its successors and assigns forever, subject to and upon the terms and conditions set forth herein. This Assignment is made for the purpose of securing: (a) The full and prompt payment and performance when due, whether by acceleration or otherwise, with such interest, commitment fees, prepayment fees and other charges may accrue thereon, either before or after maturity thereof, by Borrower, its successors or assigns, and/or American Skiing Company and the other Borrowers named in the Credit Agreement and their respective successors or assigns (together with the Borrower, are collectively referred to herein as the "Borrowers") of that certain Credit Agreement dated as of June 28, 1996, together with any and all renewals, amendments, modifications, consolidations and extensions thereof (the "Credit Agreement"), TOGETHER WITH accompanying Revolving Credit Notes and Swing Line Notes dated as of June 28, 1996 in the principal face amount of up to SIXTY FIVE MILLION DOLLARS ($65,000,000.00), all together with any amendments renewals, modifications, consolidations and extensions of the foregoing (all collectively the "Notes"); (b) Any and all future advances made by Assignee to or for the benefit of the Borrower, Borrowers or any one or more of them, whether jointly or severally liable, direct or indirect, up to a maximum principal amount outstanding from time to time (exclusive of costs and amounts advanced to protect the security) of up to ONE HUNDRED MILLION DOLLARS ($100,000,000.00) together with interest, fees, costs, prepayment fees, and other amounts now existing or hereafter arising: (c) The full and prompt payment and performance of all of the provisions, agreements, covenants and obligations set forth in this Assignment (the "Assignment") the mortgage granted to the Assignee encumbering the Property (the "Mortgage") or in any other Lender Agreement (as defined in the Credit Agreement); 2 (d) Any and all additional advances made to preserve, enforce and protect the Property, the Leases, the security interest created hereby on the Property, or this Agreement and the Lender Agreements, including, without limitation, taxes, assessments or insurance premiums or for performance of any of the Borrowers obligations under the Lender Agreements or for any other purpose (whether or not the original Borrower remains the owner of the Property at the time of such advances); and (e) Any and all other indebtedness, however incurred, which may now or hereafter be due and owing from Borrowers or any one or more of them, whether joint or several, to Lenders, now existing or hereafter coming into existence, however and whenever incurred or evidenced, whether expressed or implied, direct or indirect, absolute or contingent, or due or to become due, and all renewals, modifications, consolidations and extensions thereof. (all collectively the "Obligations") As further security for the Obligations and the full and prompt payment and performance of any and all obligations of Borrower to Assignee under the Lender Agreements, Borrower hereby assigns to Assignee any awards or payments which may be made in respect of Borrower's interest in any of the Leases in any bankruptcy, insolvency or reorganization proceedings in any state or federal court. Borrower hereby appoints Assignee as its attorney-in-fact to appear in any such proceeding and/or to collect any such award or payment. ARTICLE I - WARRANTIES AND COVENANTS 1.01 Representations and Warranties of Borrower. Borrower hereby represents and warrants as follows: (a) Borrower is the sole and absolute owner of the entire landlord's or lessor's interest in the leases and said rents, issues and profits; (b) Borrower has made no prior assignment of any of the Leases or with respect to any of said rents, issues or profits which has not been terminated; (c) Borrower has neither done any act nor omitted to do any act which might prevent Assignee from, or limit Assignee in, acting under any of the provisions of this Assignment; (d) Neither the execution and delivery of this Assignment or any of the Leases, the performance of each and every covenant of Borrower under this Assignment and the Leases, nor the meeting of each and every condition contained in this Assignment, conflicts with, or constitutes a breach or default under, any agreement, indenture or other 3 instrument to which Borrower is a party, or any law, ordinance, administrative regulation or court decree which is applicable to Borrower; (e) No action has been brought or, so far as is known to Borrower, is threatened, which would interfere in any way with the right of Borrower to execute this Assignment and perform all of Borrower's obligations contained in this Assignment and in the Leases; (f) Correct and complete copies of all material Leases and all material amendments, exhibits, addenda and schedules thereto have been heretofore delivered by Borrower to Assignee; (g) The Leases existing as of the date of this Assignment were duly executed and delivered, pursuant to authority legally adequate therefor, are now in full force and effect, and are the legal, valid and binding obligations of the parties thereto, enforceable in accordance with their terms; and (h) No material default exists on the part of Borrower in the fulfillment, performance or observance of any of the terms, conditions or covenants of landlord or lessor contained in any of the Leases, and, to the best of Borrower's knowledge, no material default exists on the part of any Tenant in the fulfillment, performance or observance of any of the terms, conditions or covenants of tenant or lessee contained in any of the Leases. 1.02 Covenants of Borrower. Borrower hereby covenants and agrees as follows: (a) Borrower shall (i) fulfill, perform and observe each and every material term, condition and covenant of landlord or lessor contained in each of the Leases; (ii) give prompt notice to Assignee of any claim of default under any of the Leases, whether given by the Tenant to Borrower, or given by Borrower to the Tenant, together with a complete copy of any such notice; (iii) at no cost or expense to Assignee, enforce, short of termination, the performance and observance of each and every material term, condition and covenant of each of the Leases to be performed or observed by the Tenant thereunder; and (iv) appear in and defend any action arising out of, or in any manner connected with, any of the Leases, or the obligations or liabilities of Borrower as the landlord or lessor thereunder, or of the Tenant or any guarantor thereunder; (b) Borrower shall not, without the prior written consent of Assignee, (i) permit the prepayment of any rents under any of the Leases for more than one (1) month prior to the accrual thereof; or (ii) assign its interest in, to or under any of the Leases or the rents, issues and profits from any of the Leases or from the Property to any person or entity other than Assignee; 4 (c) Borrower shall not, without the prior written consent of Assignee, except where doing so would not result in a Material Adverse Effect (as defined in the Credit Agreement) (i) enter into any new Lease of all or any part of the Property; (ii) materially modify any of the Leases; (iii) terminate the term or accept the surrender of any of the Leases; (iv) waive or release the Tenant from the performance or observation by the Tenant of any obligation or condition of any of the Leases; (v) give any consent to any assignment or sublease by the Tenant under any of the Leases; (vi) agree to subordinate any of the Leases to any mortgage or other encumbrance; or (viii) modify the terms of any guaranty of any of the Leases, or terminate any such guaranty; (d) Borrower does hereby authorize and empower Assignee to collect all rents, issues and profits arising or accruing under the Leases or from the Property as they become due, and does hereby irrevocably authorize and direct, each and every present and future Tenant of the whole or any part of the Property, upon receipt of written notice from Assignee, to pay all rents, issues and profits thereafter arising or accruing under the Leases or from the Property to Assignee and to continue to do so until otherwise notified by Assignee, and Borrower agrees that each and every Tenant shall have the right to rely upon such notice by Assignee without any obligation or right to inquire as to whether any Event of Default exists and notwithstanding any notice or claim of Borrower to the contrary, and that Borrower shall have no right or claim against any Tenant for any rents paid by such Tenant to Assignee following receipt of such notice. (e) Borrower does hereby agree that Assignee shall have the right to the appointment of a receiver to collect all rents, issues and profits and to carry out any other actions which Assignee has the right to carry out under the terms of this Assignment. 1.03 Covenants of Assignee. Assignee hereby covenants and agrees with Borrower as follows: (a) Although this Assignment constitutes a present, current and absolute assignment of all Leases and all rents, issues and profits from the Property, so long as no Event of Default has occurred which has not been waived in writing by the Assignee and the Required Lenders (as defined in the Credit Agreement), Assignee shall not demand that such rents, issues and profits be paid directly to Assignee, and Borrower shall have the right to collect, but not more than one (1) month prior to accrual, all such rents, issues and profits from the Property (including, but not by way of limitation, all rents payable under the Leases), provided, however, that Borrower shall collect and receive all such rents, issues and profits from the Property as trustee for the benefit of Assignee, and shall apply such rents, issues and profits so collected to the Obligations, to the extent then due, with the balance, so long as no Event of Default has occurred which has not been waived in writing by the Assignee and the Required Lenders, to the account of Borrower; and 5 (b) Upon the payment in full of the Obligations, as evidenced by the recording or filing of an instrument of satisfaction or full release of the Mortgage without the recording of another mortgage in favor of Assignee affecting the Property, this Assignment shall be terminated and released of record by Assignee and shall thereupon be of no further force or effect. ARTICLE II - DEFAULT 2.01 Event of Default. The term "Event of Default," wherever used in this Assignment, shall mean any one or more of the following conditions or events: (a) An Event of Default under the Credit Agreement; or (b) Failure by Borrower to observe, perform or discharge any obligation, covenant, condition or agreement contained in paragraph 1.02(b) or (c) of this Assignment; or (c) Failure by Borrower to observe, perform or discharge any obligation, covenant, condition or agreement of this Assignment and the continuance of such failure for a period of fifteen (15) days after written notice thereof from Assignee; or (d) Any representation or warranty of Borrower in this Assignment shall prove to have been false or incorrect in any material respect upon the date when made. 2.02 Remedies. Upon the occurrence of any Event of Default which has not been waived in writing by the Assignee and the Required Lenders, Assignee may at its option, with or without notice or demand of any kind (except as may be provided herein or in any of the Lender Agreements), and without waiving such Event of Default, exercise any or all of the following rights and remedies: (a) Either with or without entry or taking possession of the Property, give or require Borrower to give notice to any or all Tenants under the Leases authorizing and directing such Tenants to pay all rents, issues and profits and any other sums due under their Leases directly to Assignee, and collect and receive all rents, issues and profits and other sums due under the Leases with respect to which such notice is given; (b) Either with or without entry or taking possession of the Property, perform any and all obligations of Borrower under any or all of the Leases or this Assignment and exercise any and all rights of Borrower herein or therein as fully as Borrower itself could do, including, without limiting the generality of the foregoing, enforcing, modifying, extending or terminating any or all of the Leases, collecting, modifying, compromising, waiving or increasing any or all of the rents payable thereunder, and obtaining new Tenants and entering into new Leases on the Property on any terms and 6 conditions deemed desirable by Assignee, and, to the extent Assignee shall incur any costs in connection with the performance of any such obligations of Borrower, including costs of litigation, then all such costs shall become a part of the Obligations, shall bear interest from the incurring thereof at the default interest rate specified in the Notes, and shall be due and payable on demand; (c) Either with or without entry or taking possession of the Property, in Borrower's or Assignee's name, institute any legal or equitable action which Assignee in its sole discretion deems desirable to collect and receive any or all of the rents, issues and profits assigned herein or to evict or remove any Tenants; (d) Enter upon, take possession of, and use and operate all or any portion of the Property which Assignee in its sole discretion deems desirable to effectuate any or all of the foregoing remedies, with full power to make alterations, renovations, repairs or replacements thereto. Assignee shall have full right to exercise any or all of the foregoing remedies and rights without regard to the adequacy of security for any or all of the Obligations, and with or without the commencement of any legal or equitable action or the appointment of any receiver or trustee. 2.03 Application of Rents. All rents, issues and profits and any other sums due under the Leases and with respect to the Property which are collected by Assignee shall be applied by Assignee in such order as Assignee in its sole discretion may elect against: (i) all actual costs and expenses, including reasonable attorneys' fees, incurred in connection with the operation of the Property, the performance of Borrower's obligations under the Leases or the collection of the rents thereunder; (ii) all actual costs and expenses, including reasonable attorneys' fees, incurred in the collection of any of all of the Obligations, including all costs, expenses and attorneys' fees incurred in seeking to realize on or to protect or preserve Assignees interest in any other collateral securing any or all of the Obligations; (iii) any or all unpaid principal of and interest on the Obligations; and (iv) upon payment in full of the Obligations, the balance, if any, shall be paid to the Assignor. 2.04 No Liability of Assignee. Assignee shall not be obligated to perform or discharge, nor does Assignee hereby undertake to perform or discharge, any obligation, duty or liability of Borrower under any of the Leases or under or by reason of this Assignment, except those arising from and after Assignee takes possession of the Property after an Event of Default. Prior to Assignee taking possession of the Property after an Event of Default, this Assignment shall not operate to place upon Assignee responsibility for the control, care, management or repair of the Property, nor for the carrying out of any of the terms and conditions of any of the Leases, nor shall it operate to make Assignee responsible or liable for any waste committed on the Property, for any dangerous or defective condition of the Property, or for any negligence in the management, upkeep, repair or control of the Property 7 resulting in loss or injury or death to any person. Assignee shall not be liable for any loss sustained by Borrower resulting from Assignee's failure to let the Property after taking possession of the Property after an Event of Default, unless such loss is caused by the willful misconduct or gross negligence of Assignee. 2.05 Indemnification. Borrower shall and does hereby agree to indemnify and to hold Lenders harmless of and from any and all claims, demands, liability, loss or damage (including all costs, expenses, and reasonable attorneys' fees incurred in the defense thereof) asserted against, imposed on or incurred by Lenders in connection with or as a result of this Assignment or the exercise of any rights or remedies under this Assignment or under any of the Leases or by reason of any alleged obligations or undertakings of Lenders to perform or discharge any of the terms, covenants or agreements contained in any of the Leases; provided, however, that nothing herein shall be construed to obligate Borrower to indemnify and hold Lenders harmless from and against any and all claims, demands, liability, loss or damage enacted against, imposed on or incurred by Lenders by reason of Lender's willful misconduct or gross negligence. Should Lenders incur any such liability, loss or damage, or in the defense of any such claims or demands, for which it is to be indemnified by Borrower as aforesaid, the amount thereof shall be added to the Obligations, shall bear interest at the default rate specified in the Note from the date incurred until paid, shall be secured by this Assignment, the Mortgage and the other Lender Agreements, and shall be payable immediately upon demand. ARTICLE III - GENERAL PROVISIONS 3.01 Successors and Assigns. This Assignment shall inure to the benefit of and be binding upon Borrower and Assignee and their respective heirs, executors, legal representatives, successors and assigns (but in the case of assigns of Borrower, only if and to the extent that Assignee has consented in writing to Borrower's assignment of its rights or obligations hereunder to such assigns). Whenever a reference is made in this Assignment to "Borrower" or "Assignee", such reference shall be deemed to include a reference to the heirs, executors, legal representatives, successors and assigns of Borrower or Assignee. 3.02 Assignee's Rights of Assignment; Rights of Assignees. Assignee may assign to any subsequent holder of the Note or the Mortgage, or to any person acquiring title to the Property, all of Assignee's right, title and interest in any of the Leases and rents, issues and profits from the Property. No such assignee shall have any liability for any obligation which accrued under any of the Leases prior to the assignment to such assignee nor shall such assignee have any obligation to account to Borrower for any rental payments which accrued prior to such assignment. After Borrower's right, title and interest in the Property has been foreclosed or otherwise terminated, no assignee of Borrower's interest in the Leases shall be liable to account to Borrower for any rents, issues or profits thereafter accruing. 8 3.03 Terminology. All personal pronouns used in this Assignment, whether used in the masculine, feminine or neuter gender, shall include all other genders, and the singular shall include the plural, and vice versa. Titles of Articles are for convenience only and neither limit nor amplify the provisions of this Assignment. 3.04 Severability. If any provision of this Assignment or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Assignment and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. 3.05 Applicable Law. This Assignment shall be interpreted, construed and enforced according to the laws of the State of Maine. 3.06 No Third Party Beneficiaries. This Assignment is made solely for the benefit of Assignee and its assigns. No Tenant under any of the Leases nor any other person shall have standing to bring any action against Assignee as the result of this Assignment, or to assume that Assignee will exercise any remedies provided herein, and no person other than Assignee shall under any circumstances be deemed to be a beneficiary of any provision of this Assignment. 3.07 No Oral Modifications. Neither this Assignment nor any provisions hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought. 3.08 Cumulative Remedies. The remedies herein provided shall be in addition to and not in substitution for the rights and remedies vested in Assignee in any of the Lender Agreements or in law or equity, all of which rights and remedies are specifically reserved by Assignee. The remedies herein provided or otherwise available to Assignee shall be cumulative and may be exercised concurrently. The failure to exercise any of the remedies herein provided shall not constitute a waiver thereof, nor shall use of any of the remedies herein provided prevent the subsequent or concurrent resort to any other remedy or remedies. It is intended that this clause shall be broadly construed so that all remedies herein provided or otherwise available to Assignee shall continue and be each and all available to Assignee until the Obligations shall have been paid in full. 3.09 Counterparts. This Assignment may be executed in any number of counterparts all of which taken together shall constitute one and the same instrument, and any of the parties or signatories hereto may execute this Assignment by signing any such counterpart. 3.10 Further Assurance. At any time and from time to time, upon request by Assignee, Borrower will make, execute and deliver, or cause to be made, executed and 9 delivered, to Assignee and, where appropriate, cause to be recorded and/or filed and from time to time thereafter to be re-recorded and/or refiled at such time and in such offices and places as shall be deemed desirable by Assignee, any and all such other and further assignments, deeds to secure debt, mortgages, deeds of trust, security agreements, financing statements, continuation statements, instruments of further assurance, certificates and other documents as may, in the opinion of Assignee, be necessary or desirable in order to effectuate, complete, or perfect, or to continue and preserve (a) the obligations of Borrower under this Assignment and (b) the security interest created by this Assignment as a first and prior security interest upon the Leases and the rents, issues and profits from the Property. Upon any failure by Borrower so to do, Assignee may make, execute, record, file, re-record and/or refile any and all such assignments, deeds to secure debt, mortgages, deeds of trust, security agreements, instruments, certificates, and documents for and in the name of Borrower, and Borrower hereby irrevocably appoints Assignee the agent and attorney-in-fact of Borrower so to do. 3.11 Notices. Any and all notices, elections, demands or requests provided for or permitted to be given pursuant to this Assignment (hereinafter in this paragraph 3.12 referred to as "Notice") shall be given in accordance with the provisions of the Credit Agreement. 3.12 Modifications, Etc. Borrower hereby consents and agrees that Assignee may at any time and from time to time, without notice to or further consent from Borrower, either with or without consideration, surrender any property or other security of any kind or nature whatsoever held by it or by any person, firm or corporation on its behalf or for its account, securing the Obligations; substitute for any collateral so held by it, other collateral of like kind, or of any kind; agree to modification of the terms of the Notes or the Lender Agreements; extend or renew the Notes or any of the Lender Agreements for any period; grant releases, compromises and indulgences with respect to the Notes or the Lender Agreements to any persons or entities now or hereafter liable thereunder or hereunder; release any guarantor or endorser of the Notes, the Mortgage, the Credit Agreement, or any other Lender Agreements; or take or fail to take any action of any type whatsoever; and no such action which Assignee shall take or fail to take in connection with the Lender Agreements, or any of them, or any security for the payment of the Obligations or for the performance of any obligations or undertakings of Borrower, nor any course of dealing with Borrower or any other person, shall release Borrower's obligations hereunder, affect this Assignment in any way or afford Borrower any recourse against Assignee. The provisions of this Assignment shall extend and be applicable to all renewals, amendments, extensions, consolidations and modifications of the Lender Agreements and the Leases, and any and all references herein to the Lender Agreements or the Leases shall be deemed to include any such renewals, amendments, extensions, consolidations or modifications thereof. 3.13 Collateral Agent/Administration. The Lenders have authorized Assignee to act as Agent as attorney in fact for the Lenders in order to represent and act on behalf of the Lenders in the administration, enforcement, collection, and foreclosure of this Assignment 10 and the Lender Agreements, with the specific right and authority to execute releases, discharges, partial releases, joinders, and consents hereunder in the name of and on behalf of the Lender. This power of attorney and the authority conferred thereby shall remain in effect until written notice to the contrary is recorded in the Registry in which this Assignment is recorded. No person dealing with Assignee shall be required to inquire further as to the scope of said authority until and unless such notice is recorded. The relationship between Assignee in its capacity as collateral agent to the Lenders is and shall be that of agent and principal only, and nothing contained in this Assignment or any of the other Lender Agreements shall be construed to constitute a trust for or to establish any confidential or fiduciary relationship with respect to any Lender or Borrower. [Remainder of Page Intentionally Left Blank] 11 IN WITNESS WHEREOF, Borrower has executed this Collateral Assignment under seal, as of August 27, 1996. SUGARLOAF MOUNTAIN CORPORATION /s/ [Illegible] By: /s/ Thomas M. Richardson - ---------------------------- ------------------------------- Witness Name: Thomas M. Richardson Title: Treasurer STATE OF MAINE Cumberland, ss August 27, 1996 Personally appeared the within named Thomas M. Richardson, as Treasurer of Sugarloaf Mountain Corporation, and acknowledged the above instrument to be his free act and deed and the free act and deed of said Corporation. Before me, /s/ Foster A. Stewart, Jr. ------------------------------- Maine Attorney Print Name: Foster A. Stewart, Jr. 12 EX-10.87 37 HAZARDOUS MATERIALS EXHIBIT 10.87 HAZARDOUS MATERIALS INDEMNIFICATION AGREEMENT This INDEMNIFICATION AGREEMENT is entered into as of August 30, 1996 by and among AMERICAN SKIING COMPANY, a Maine corporation ("American Ski"), SUNDAY RIVER SKIWAY CORPORATION, a Maine corporation ("SRSC"), SUNDAY RIVER LTD., a Maine corporation ("SRL"), PERFECT TURN, INC., a Maine corporation ("PTI"), SUNDAY RIVER TRANSPORTATION INC., a Maine corporation ("SRT"), LBO HOLDING, INC., a Maine corporation ("LBOH"), CRANMORE, INC., a Maine corporation ("Cranmore"), SUGARBUSH RESORT HOLDINGS INC., a Vermont corporation ("Sugarbush"), SUGARBUSH LEASING COMPANY, a Vermont corporation ("SLC"), SUGARBUSH RESTAURANTS, INC., a Vermont corporation ("SRI"), S-K-I LTD., a Delaware corporation ("S-K-I"), KILLINGTON, LTD., a Vermont corporation, MOUNT SNOW LTD., a Vermont corporation, WATERVILLE VALLEY SKI AREA LTD., a New Hampshire corporation ("Waterville Valley"), PICO SKI AREA MANAGEMENT COMPANY, a Vermont corporation, RESORT SOFTWARE SERVICES, INC., a Vermont corporation, KILLINGTON RESTAURANTS, INC., a Vermont corporation, RESORTS TECHNOLOGIES, INC., a Vermont corporation, DOVER RESTAURANTS, INC., a Vermont corporation, and DEERFIELD OPERATING COMPANY, a Vermont corporation, SUGARLOAF MOUNTAIN CORPORATION, a Maine corporation, SUGARTECH, a Maine corporation, MOUNTAINSIDE, a Maine corporation and MOUNTAIN WASTEWATER TREATMENT, INC., a Vermont corporation (each a "Borrower" and collectively, the "Borrowers"), and FLEET NATIONAL BANK, a national banking association, as Agent for the lenders from time to time party to the Credit Agreement referred to below (the "Agent"). Recitals Pursuant to that certain Credit Agreement dated as of June 28, 1996 (as amended, modified or supplemented, the "Credit Agreement") among the Borrowers, the Lenders from time to time party thereto (the "Lenders") and the Agent, the Borrowers, jointly and severally, have arranged for a $65,000,000 reducing revolving credit facility (the "Credit Facility") financed by the Lenders. As a material inducement to Lenders' financing the Credit Facility, the Borrowers have covenanted to provide the indemnities described herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE 1. DEFINITIONS For the purposes of this Agreement, the following words and phrases shall have the following meanings: "Environment" means soil, surface waters, groundwaters, land, stream sediments, surface or subsurface strata, ambient air, and any environmental medium. "Environmental Law" means any judgment, decree, order, common law rule, statute, act, law, code, ordinance, permit, license, rule or regulation pertaining to environmental matters, or any federal, state, county or local statute, regulation, code, ordinance, order or decree relating to public health, welfare, the environment, or to the storage, handling, treatment, transportation, use or generation of hazardous materials in or at the workplace, or to worker health or safety, whether now existing or hereafter enacted. "Hazardous Material" means any pollutant, contaminant, toxic substance, chemical substance or mixture, hazardous waste, hazardous material, or hazardous substance, or any oil, petroleum, or petroleum product, as defined in or pursuant to the Resource Conservation and Recovery Act, as amended, the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, the Superfund Amendment and Reauthorization Act, as amended, the Federal Clean Water Act, as amended, the Hazardous Materials Transportation Act, as amended, the Toxic Substances Control Act, as amended, any regulations promulgated under these Acts, or any other Environmental Law. "Indemnitees" means Lenders, Agent, and Lenders' and Agent's respective parents, subsidiaries, affiliates, shareholders, directors, officers, employees and agents, and the successors and assigns of any of them. "Permit" means any permit, license, approval, consent, or authorization issued by a federal, state, or local governmental entity under any Environmental Law. "Release" means any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing, or dumping of any Hazardous Material into the Environment, or the uncontained presence of any Hazardous Material in the Environment. "Threat of Release" means a substantial likelihood of a Release which requires action to prevent or mitigate damage to the Environment which may result from such Release. ARTICLE 2. BORROWERS' INDEMNITIES Section 2.1. The Borrowers, jointly and severally, agree to indemnify and hold harmless Indemnitees against and in respect of any and all damages, losses, liabilities, expenses, costs, claims, actions, suits, proceedings, assessments, orders, judgments, fines, and penalties (including, without limitation, reasonable legal, accounting, consulting, engineering, and other expenses), which may be incurred by any of the Indemnitees, or imposed upon or asserted against any of the Indemnitees by any other party or parties (including, without limitation, a governmental entity), arising out of, in connection with, or 2 relating to the subject matter of: (a) conditions, circumstances, or occurrences which constitute or result in a breach of any of the representations, warranties, and obligations set forth in Section 5.17 of the Credit Agreement or relating to any matter or thing covered by any such representation, warranty, or obligation; (b) any actual or alleged violation of an Environmental Law occurring at any time with respect to any property owned or operated by any Borrower, formerly owned or operated by any Borrower or subsequently owned or operated by any Borrower (collectively the "Sites") or any facility or improvement or any operation or activity thereon or any other property owned or operated by any Borrower; (c) the actual or alleged presence of any Hazardous Material on, in, under, adjacent to, emanating from, or affecting the Sites or any other property now, subsequently or formerly owned or operated by any Borrower; or (d) any liability that may be incurred as a result of any Borrower's, or of a predecessor of any Borrower's, generation of Hazardous Materials. Any such damage, loss, liability, expense, cost, claim, action, suit, proceeding, assessment, order, judgment, fine, or penalty is hereinafter referred to as an "Environmental Liability"; provided, however, that the Borrowers shall not be obligated to indemnify or hold harmless any Indemnitee for any matter to the extent that the Indemnitee's liability for the same is due to the Indemnitee's gross negligence or willful misconduct. Section 2.2. The Borrowers shall be given prompt written notice after any Environmental Liability, with respect to which indemnification is to be claimed hereunder, comes to the attention of Lender. Notwithstanding the prior sentence, the Borrowers shall not be relieved of their obligations under this agreement if the Agent's or a Lender's failure to notify Borrowers of an Environmental Liability does not prejudice the Borrowers' rights or materially increase their liabilities and obligations hereunder. ARTICLE 3. MISCELLANEOUS Section 3.1.Notices. All notices and other communications made or required to be given pursuant to this Agreement shall be in writing and shall be mailed by United States mail, postage prepaid, or sent by hand, by telecopy or by nationally-recognized overnight carrier service, addressed as follows: (a) If to the Agent, at One Federal Street, Boston, MA, 02211 Telecopier No. (617) 346-0595, Attention: Mr. David B. Henderson, Vice President, with a copy to: Goodwin, Procter & Hoar LLP, Exchange Place, Boston, MA 02109, Telecopier No. 617-523-1231, Attention: Edward Matson Sibble, Jr., P.C. or at such other address(es) or to the attention of such other Person(s) as the Agent shall from time to time designate in writing to the Borrowers and the Lenders. (b) If to the Borrowers, c/o American Skiing Company, P.O. Box 450, Bethel, ME 04217, or for overnight delivery service, Sunday River Road, Newry, ME, Telecopier No. 207-824-0192, Attention: Leslie B. Otten/Thomas M. Richardson/Jolan Ippolito, or at such other address(es) or to the attention of such other Person(s) as the 3 Borrowers shall from time to time designate in writing to the Agent and the Lenders. (c) If to any Lender, at the address(es) and to the attention of the Person(s) specified in the Credit Agreement or in an Assignment and Acceptance Agreement executed by a Successor Lender, or at such other address(es) and to the attention of such other Person(s) as any Lender shall from time to time designate in writing to the Agent and the Borrowers. Any notice so addressed and mailed by registered or certified mail shall be deemed to have been given when mailed. Any notice so addressed and sent by hand, by telecopy or by overnight carrier service shall be deemed to have been given when received. A notice from the Agent stating that it has been given on behalf of the Lenders shall be relied upon by the Borrowers as having been given by the Lenders. Section 3.2.Entire Agreement. This Agreement, the Credit Agreement and the other Lender Agreements and documents contemplated by the Credit Agreement contain the entire understanding between the parties and supersede any prior understanding and agreements between them with respect to the subject matter hereof. Section 3.3.Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and construed and enforced under the laws of The Commonwealth of Massachusetts. Each Borrower hereby irrevocably submits itself to the non-exclusive jurisdiction of the courts of The Commonwealth of Massachusetts and to the non-exclusive jurisdiction of any Federal court of the United States located in the District of Massachusetts for the purpose of any suit, action or other proceeding arising out of this Agreement or any other Lender Agreement or any of the transactions contemplated hereby or thereby. Section 3.4.Counterparts. This Agreement and all amendments to this Agreement may be executed in several counterparts, each of which shall be an original. The several counterparts shall constitute a single Agreement. Section 3.5.Expenses. The Borrowers agree, jointly and severally, to pay, on demand, all of the Agent's reasonable expenses in preparing, executing, delivering and administering this Agreement, all related instruments and documents and any requested amendment, waiver or consent relating hereto or thereto, including, without limitation, the reasonable fees and out-of-pocket expenses of the Agent's third-party consultants, special counsel, Goodwin, Procter & Hoar LLP, and local counsel in each jurisdiction in which any Borrower has assets and the Agent's and Lenders' expenses in connection with periodic audits of any Borrower. The Borrowers also agree, jointly and severally, to pay, on demand, all reasonable out-of-pocket expenses incurred by the Agent and the Lenders, including, without limitation, reasonable legal, accounting and third-party consultant fees, in connection with the collection of amounts due hereunder upon the occurrence of a Default under the Credit Agreement, the revision, protection or enforcement of any of the Agent's or 4 the Lenders' rights against the Borrowers under this Agreement, and the administration of special problems that may arise under this Agreement. The Borrowers also agree to pay all stamp and other taxes in connection with the execution and delivery of this Agreement and related instruments and documents. Section 3.6. Confidentiality. The Agent agrees to keep all information obtained pursuant to this Agreement confidential in a manner consistent with the provisions of the Credit Agreement. IN WITNESS WHEREOF, the Borrowers and the Agent have caused this Hazardous Materials Indemnification Agreement to be executed by their duly authorized officer as of the date set forth above. AMERICAN SKIING COMPANY SUNDAY RIVER SKIWAY CORPORATION SUNDAY RIVER LTD. PERFECT TURN, INC. SUNDAY RIVER TRANSPORTATION INC. LBO HOLDING, INC. CRANMORE, INC. SUGARBUSH RESORT HOLDINGS INC. SUGARBUSH LEASING COMPANY SUGARBUSH RESTAURANTS, INC. S-K-I LTD. KILLINGTON, LTD. MOUNT SNOW LTD. WATERVILLE VALLEY SKI AREA LTD. PICO SKI AREA MANAGEMENT COMPANY RESORT SOFTWARE SERVICES, INC. KILLINGTON RESTAURANTS, INC. RESORTS TECHNOLOGIES, INC. DOVER RESTAURANTS, INC. DEERFIELD OPERATING COMPANY SUGARLOAF MOUNTAIN COPRORATION SUGARTECH MOUNTAINSIDE MOUNTAIN WASTEWATER TREATMENT, INC. By: /s/ Thomas M. Richardson ------------------------------- Name: Thomas M. Richardson Title: Treasurer 5 FLEET NATIONAL BANK, as Agent By: /s/ David B. Henderson -------------------------------- Name: Title: 6 EX-10.88 38 ASSIGNMENT OF AGREEMENTS EXHIBIT 10.88 ASSIGNMENT OF AGREEMENTS, PERMITS AND CONTRACTS THIS ASSIGNMENT OF AGREEMENTS, PERMITS AND CONTRACTS (hereinafter referred to as this "Assignment"), is made and entered into as of this 30 day of August, 1996 by Sugarloaf Mountain Corporation (hereinafter referred to as "Borrower"), to Fleet National Bank, as Agent for itself and the other Lender's party to the Credit Agreement (as defined herein) with a mailing address of One Federal Street, Boston, Massachusetts, 02210 (hereinafter referred to as "Lender"). W I T N E S S E T H : WHEREAS Borrower is the owner of the fee/leasehold estate in the premises described in Exhibit A attached hereto (hereinafter referred to as the "Premises"); WHEREAS, the Lender has made a loan in the principal amount of up to $65,000,000.00 to Borrower (the "Loan"), pursuant to that certain Credit Agreement dated as of June 28, 1996, together with any and all renewals, amendments, modifications, consolidations and extensions thereof (the "Credit Agreement"); WHEREAS the Lender was unwilling to make the Loan to the Borrower unless the Borrower in the manner hereinafter set forth assigned to Lender as additional security for the payment of the Loan and the observance and performance by the Borrower of the terms, covenants and conditions of the Lender Agreements (as defined in the Credit Agreement) on the part of the Borrower to be observed and performed, all of the Borrower's right, title and interest in and to all permits, license agreements, operating contracts, licenses (to the extent assignable by Borrower), franchise agreements and all management, service, supply and maintenance contracts and agreements, and any other agreements, permits or contracts of any nature whatsoever now or hereafter obtained or entered into by the Borrower with respect to the operation of the Premises, including without limitations those documents and agreements described in Exhibit B attached hereto and made a part hereof (collectively, the "Agreements"); NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10) and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Borrower hereby assigns to Lender as additional security for the payment of the Loan and the observance and performance by the Borrower of the terms, covenants and conditions of the Lender Agreements on the part of the Borrower to be observed or performed, all of the Borrower's right, title and interest in and to the Agreements. Subject to the provisions of the Credit Agreement, the Borrower covenants and agrees that the Borrower will (a) fulfill and perform each and every term, covenant and provision of the Agreements to be fulfilled or performed by the Borrower thereunder, if any, except where the failure to so act would not have a material adverse effect on the business, assets or 2 financial condition of the Borrower (b) give prompt notice to the Lender of any material notice received by the Borrower under any of the Agreements, together with a complete copy of any such notice, (c) enforce, short of termination thereof, the performance and observance of each and every term, covenant and provision of the Agreements to be performed or observed, if any except where the failure to so act would not have a material adverse effect on the business, assets or financial condition of the Borrower and (d) not terminate any of the Agreements without the prior written consent of the Lender, except where such termination would not have a material adverse effect on the business, assets or financial condition of the Borrower. This Assignment is given as collateral security for the obligations of the Borrower to the Lender pursuant to the Lender Agreements. IN WITNESS WHEREOF, the Borrower has duly executed this instrument as of the day and year first above written. SUGARLOAF MOUNTAIN CORPORATION By: /s/ Thomas M. Richardson ---------------------------------- Name: Thomas M. Richardson Title: Treasurer STATE OF Maine) Cumberland ) SS: August 27, 1996 Personally appeared the within named Thomas M. Richardson, as Vice President of Sugarloaf Mountain Corporation, and acknowledged the above instrument to be his free act and deed and the free act and deed of said Corporation. Before me, /s/ Foster A. Stewart, Jr. ------------------------------- Maine Attorney-at-Law Print Name Foster A. Stewart, Jr. My Commission Expires: ---------------- EXHIBIT A (Description of the Premises) (to be attached) EXHIBIT B Description of Certain Agreements, Permits and Contracts EX-10.89 39 STOCK OPTION PLAN Exhibit 10.89 ASC HOLDINGS, INC. AMERICAN SKIING COMPANY STOCK OPTION PLAN Effective August 1, 1997 1. PURPOSE This Stock Option Plan, effective August 1, 1997 (the "Option Plan"), is established by ASC Holdings, Inc., a Maine corporation (the "Company"), to provide a performance incentive program for, and to encourage stock ownership in the Company by, officers and management employees of the Company and its subsidiaries (as defined below), as well as other key persons whose efforts contribute to the success of the Company and its subsidiaries. The Company intends that the persons to whom options are granted (the "Optionee") will acquire a proprietary interest in the success of the Company (or increase such an existing interest). The Company also wishes to encourage Optionees to remain in the employ or service of the Company and its subsidiaries. Options granted under this Option Plan to officers and other employees of the Company and its subsidiaries are intended to qualify as incentive stock options (the "Incentive Options"), within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), unless otherwise specifically designated in the grant of the options or unless otherwise required under the Code. However, options other than Incentive Options ("Non-Qualified Options") may also be granted hereunder, and any options, regardless of designation, that shall not qualify as Incentive Options shall be deemed Non-Qualified Options. Incentive Options and Non-Qualified Options are sometimes together referred to as "options." 2. ADMINISTRATION (a) Options Committee. This Option Plan shall be administered by a committee appointed by the board of directors of the Company (the "Options Committee" or "Committee"). Initially, the Options Committee may consist of one or more directors of the Company. On and after the Company becomes subject to the Securities Exchange Act of 1934 (the "Exchange Act"), the Committee shall be constituted so as to comply with the requirements of Code Section 162(m) and Rule 16b-3 promulgated under the Exchange Act. All determinations and rulings of the Committee shall be binding and conclusive on the Company, all affected Optionees, and all other interested persons. (b) Authority of the Committee. In addition to (and in furtherance of) any other powers and authority granted under the Option Plan, the Committee shall have responsibility and authority, subject to the express limitations of the Option Plan: (i) To grant options, in its sole discretion, to eligible persons hereunder from time to time, to determine the number of shares of Common Stock (as defined below) as to which such options shall be exercisable, to determine the time or times when an option or options shall be exercisable by Optionees, and to determine whether options granted shall be Incentive Options or Non-Qualified Options (subject to the limitations of Section 5 below); (ii) To prescribe the other terms (which need not be identical) of each option granted under the Option Plan to eligible persons and terms of the associated option agreement, including, without limitation, any vesting or special exercise requirements that it may impose; (iii) To construe and interpret all of the terms of this Option Plan (including eligibility to participate) and options granted under it, and to establish, amend and revoke rules and regulations for administration. The Committee, in the exercise of this power, may correct any defect or supply any omission, or reconcile any inconsistency in the Option Plan, or in any option agreement, in the manner and to the extent it shall deem necessary or expedient to make the Option Plan fully effective; (iv) To determine whether leaves of absence which may be granted to an Optionee shall constitute a termination of his or her employment or service for purposes of the Option Plan; (v) To determine the fair market value of the Common Stock subject to options on the date of the grant of any such option (subject to the limitations of Section 6(d) hereof); and (vi) Generally, to exercise such powers and to perform such acts as are deemed necessary or expedient to promote the best interests of the Company with respect to the Option Plan. Notwithstanding the foregoing, the Option Committee shall: (1) be under no obligation to grant options to any eligible person; and (2) not have the authority to grant new options in exchange for the cancellation of options previously granted under this Option Plan or any other stock option plan of the Company. No member of the Board or of the Committee shall be liable for any good faith determination, act or failure to act in connection with the Option Plan or any option granted hereunder. 3. STOCK SUBJECT TO OPTION PLAN (a) The stock subject to the options granted hereunder shall be shares of the Company's Common Stock, par value $.01 per share (the "Common Stock"). The maximum aggregate number of shares of Common Stock for which options may be granted hereunder, excluding the shares involved in the unexercised portion of any cancelled, terminated or expired options, shall not exceed 4,000,000 shares of the Common Stock. Such number shall be subject to adjustment as provided in Section 9 hereof. (b) Whenever any outstanding option under the Option Plan expires, is cancelled or is otherwise terminated, the shares of Common Stock allocable to the unexercised portion of such option may again become subject to options under the Option Plan. 4. ELIGIBILITY All officers and full-time management employees (i.e., persons performing 1,000 or more hours of service per year in a management capacity) of the Company or its subsidiaries, as identified by the Committee from time to time, shall be eligible to receive grants of options under this Option Plan. Such officers and management employees may receive grants of Incentive Options and/or Non-Qualified Options. Key persons (including directors) selected by the Committee, in its sole discretion, shall be eligible to receive grants of Non-Qualified Options only. Members of the Committee shall not be eligible to receive options hereunder. The Committee may, in its sole discretion, from time to time grant options to one or more eligible persons. An Optionee may hold more than one option. 5. CERTAIN LIMITATIONS ON GRANTS (a) No person shall be granted an Incentive Option if, at the time of the grant, such person owns, directly or indirectly, stock possessing more than ten percent (10%) of the total combined voting power of the Company, unless the option price is at least one hundred and ten percent (110%) of the fair market value of the Common Stock and the exercise period of such Incentive Option is by its terms limited to five (5) years. (b) To the extent that the aggregate fair market value of the Common Stock with respect to which options under this Option Plan and all other such option plans of the Company (or a "parent corporation" or "subsidiary corporation" as defined in Section 424 of the Code) are exercisable for the first time by an Optionee in any calendar year exceeds $100,000, such options shall not be treated as Incentive Options and shall instead be considered Non-Qualified Options. Nothing contained herein shall prohibit a grant of a Non-Qualified Option regardless of whether Incentive Options are granted to such person in such year. (c) No employee shall, during any one-year period, be granted options to acquire more than 500,000 shares of Common Stock. 6. TERMS OF OPTIONS AND OPTION AGREEMENTS Options issued hereunder shall contain the applicable terms set forth below (in addition to such other terms as may be required by other provisions of this Option Plan), and each Optionee shall be required to execute an option agreement as a condition to the grant of his or her options hereunder. The option agreement shall contain such provisions as the Committee shall from time to time deem necessary or appropriate to give effect to the purposes and terms of the Option Plan. Option agreements need not be identical, but each option agreement by appropriate language shall include the substance of all of the following provisions: (a) Any option shall expire on the date specified in the option agreement, which date shall not be later than the tenth (10th) anniversary of the date on which the option was granted (or not later than the 5th anniversary of the date of the grant for options granted to persons who at the time of the grant own, directly or indirectly, stock possessing more than 10% of the total combined voting power of the Company). All options must be granted by the tenth (10th) anniversary of the effective date of the Option Plan as specified in Section 15 hereof. (b) The total number of shares with respect to which an option may be exercised shall be as specified by the Committee; provided, however, that the minimum number of shares with respect to which an option may be exercised at any one time shall be five (5) shares, and all exercises shall be in integral multiples thereof, unless the number purchased is the total number at the time available for purchase under the option. (c) Each option shall be exercisable in such installments (which need not be equal) and at such times as designated by the Committee. To the extent not exercised, installments shall accumulate and be exercisable, in whole or in part, at any time after becoming exercisable, but not later than the date the option expires. No Incentive Option shall be exercisable within two (2) years of the date on which such option was granted, and no Non-Qualified Option shall be exercisable within six (6) months of the date on which the option was granted, except in the event of a change in control of the Company (as defined in Section 6(g) hereof). In such event, all options granted prior to such change in control shall become immediately exercisable. (d) The purchase price per share of Common Stock under each Incentive Option shall not be less than the fair market value of the Common Stock subject to the option on the date the option is granted. For this purpose, the fair market value of the Common Stock shall be determined by the Committee; provided, however, that if, at the time of the grant, the Optionee owns, directly or indirectly, stock possessing more than ten percent (10%) of the total combined voting power of the Company, the option price shall be at least one hundred and ten percent (110%) of the fair market value of the Common Stock. Notwithstanding the foregoing, (i) if the Common Stock is admitted to quotation on the National Association of Securities Dealers Automated Quotation System on the date the option is granted, fair market value of Incentive Options shall not be less than the average of the highest bid and lowest asked prices of the Common Stock on such System on such date or the last date preceding such date on which a sale was reported, or (ii) if the Common Stock is admitted to trading on a national securities exchange on the date the option is granted, fair market value shall not be less than the last sale price reported for the Common Stock on such exchange on such date or, if there was no sale on such date, the last date preceding such date on which a sale was reported. (e) Except as provided in Section 10 hereof: (i) No option granted pursuant to the Option Plan shall be transferable except by will or the laws of descent and distribution, and options granted hereunder shall be exercisable during the Optionee's lifetime only by the Optionee; and (ii) No assignment or transfer of any option, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise, shall vest in the assignee or transferee any interest or right in the option whatsoever, but immediately upon any attempt to assign or transfer any option the same shall terminate and be of no force or effect. (f) The option shall be subject to any provision necessary to assure compliance with federal and state securities laws. (g) For purposes of the Option Plan, a "change in control" shall be deemed to have taken place in the event of (i) a merger or other reorganization after which the shareholders of the Company prior to such transaction own less than a majority of the outstanding stock of the surviving entity following the consummation of the transaction, (ii) a sale of all or substantially all of the assets of the Company, or (iii) a sale, transfer or other disposition of more than 50% of the Common Stock of the Company, other than in connection with any public offering of the Common Stock. 7. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE (a) An Optionee may exercise an option by delivering to the Committee on any business day a written notice specifying the number of shares of Common Stock the Optionee then desires to purchase (the "Notice"). (b) Payment for the shares of Common Stock purchased pursuant to the exercise of an option shall be made in full either in cash in an amount equal to the option price for the number of shares specified in the Notice or in shares of Common Stock having an aggregate fair market value equal to such option price. 8. USE OF PROCEEDS FROM SALE OF STOCK Proceeds from the sale of Common Stock pursuant to options granted under the Option Plan shall constitute general funds of the Company to be used primarily for its general business activities. 9. ADJUSTMENT UPON CHANGES IN CAPITALIZATION (a) If the outstanding shares of the Company's Common Stock as a whole are increased, decreased or changed into, or exchanged for, a different number or kind of shares or securities of the Company, whether through merger, consolidation, reorganization, recapitalization, reclassification, stock dividend, stock split, combination of shares, exchange of shares, change in corporate structure or the like, an appropriate and proportionate adjustment shall be made in the number and kinds of shares subject to the Option Plan, and in the number, kinds, and per share exercise price of shares subject to unexercised options or portions thereof granted prior to any such change. Any such adjustment in an outstanding option, however, shall be made without a change in the total price applicable to the unexercised portion of the option, but with an adjustment in the price for each share of Common Stock covered by the option. (b) Upon a change in control (as defined in Section 6(g) above), the Option Plan and the options issued thereunder shall terminate, unless provision is made in connection with such transaction for the assumption of options theretofore granted, or the substitution for such options of new options of the successor employer corporation or a parent or subsidiary thereof, with appropriate adjustments as to the number and kinds of shares and the per share exercise prices. In the event of such termination, all outstanding options shall be exercisable in full for at least thirty (30) days prior to the termination date whether or not otherwise exercisable during such period. (c) Adjustments under this Section shall be made by the Committee, whose determination as to what adjustment shall be made shall be conclusive. The Committee shall have the discretion and power in any such event to determine and to make effective provision for the acceleration of the time during which an option may be exercised, notwithstanding the provisions of the option setting forth the date or dates of which all or any part of it may be exercised. No fractional shares of Common Stock shall be issued under the Option Plan on account of any adjustment specified above. 10. EFFECT OF TERMINATION OF EMPLOYMENT OR SERVICE (a) In the event of the death of an Optionee while in the employ or service of the Company, the option, whether or not exercisable at the time of the death of the Optionee, may be exercised, as provided in Section 6 hereof, by the estate of the Optionee or by a person who acquired the right to exercise such option by bequest or inheritance from such Optionee, in the case of an Incentive Option, within one (1) year after the date of such death but not later than the date on which the option would otherwise expire, and, in the case of a Non-Qualified Option, for the remaining term of the option. (b) If the employment or service of an Optionee is terminated by reason of disability as defined in Code Section 22(e)(3), the options held by such Optionee may be exercised, whether or not exercisable at the time of such termination, in the case of an Incentive Option, within one (1) year after such termination but not later than the date on which the option would otherwise expire, and, in the case of a Non-Qualified Option, at any time during the remaining term of the option. (c) If the employment or service of an Optionee is terminated for any reason other than such death or disability, options held by such Optionee shall, to the extent not vested under the terms of the applicable Option Agreement, be cancelled upon such termination and shall not thereafter be exercisable, except as provided in paragraph (d) of this section. (d) An Optionee whose employment or service is involuntarily terminated in connection with or within one (1) year after a change in control of the Company (as defined in Section 6(g) hereof) shall be permitted to exercise his options, whether or not exercisable at the date of such termination as follows: (i) in the case of an Incentive Option, within three (3) months after the date of such termination, but not later than the date on which the option would otherwise expire, and (ii) in the case of a Non-Qualified Option, at any time during the remaining term of the option. (e) An Optionee who is not a director of the Company and whose employment is voluntarily terminated due to early retirement may request a waiver from the Committee in order to exercise all unexercised and outstanding options. The Committee will determine whether such waiver will be granted or not and, if granted, the period of time in which such options may be exercised. (f) Notwithstanding the foregoing, an option be terminated by mutual agreement of the Company and the Optionee. 11. AMENDMENT OF OPTION PLAN At any time, and from time to time, the Board of Directors of the Company may amend the Option Plan, subject to any required regulatory approval and to the limitation that, except as provided in Section 9 hereof, no amendment shall be effective unless approved by the affirmative vote of the holders of a majority of the outstanding shares of the Company at an annual or special meeting held within twelve (12) months before or after the date of such amendment's adoption, where such amendment will: (a) Increase the number of shares of Common Stock as to which options may be granted under the Option Plan; (b) Change in substance Section 4 hereof relating to eligibility to participate in the Option Plan; (c) Change the minimum option price limitations; or (d) Increase the maximum term of any option granted herein. Except as provided in Section 9 hereof, rights and obligations under any option granted before amendment of the Option Plan shall not be altered or impaired by amendment of the Option Plan, except with the consent of the person to whom the option was granted. 12. TERMINATION OR SUSPENSION OF THE OPTION PLAN The Board of Directors of the Company at any time may terminate or suspend the Option Plan in its sole discretion. Unless sooner terminated, the Option Plan shall terminate on the tenth anniversary of the effective date specified in Section 15 hereof, but such termination shall not affect any option theretofore granted. An option may not be granted while the Option Plan is suspended or after it is terminated. Rights and obligations under any option granted while the Option Plan is in effect shall not be altered nor impaired by suspension or termination of the Option Plan except with the consent of the Optionee. An option may be terminated by agreement between an Optionee and the Company and, in lieu of the terminated option, a new option may be granted with an exercise price which may be higher or lower than the exercise price of the terminated option. 13. SECURITIES LAW MATTERS; ISSUANCE OF SHARES The obligation of the Company to sell and deliver shares of Common Stock under options granted under the Option Plan shall be subject to all applicable federal and state securities laws, rules and regulations and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee. The issuance of shares of Common Stock on the exercise of an option shall be conditioned on obtaining such appropriate representations, warranties, restrictions and agreements of the Optionee as the Committee may require. Additionally, the shares, when issued upon the exercise of an option, shall be subject to other transfer restrictions, rights of first refusal and rights of repurchase (as set forth in the Articles of Incorporation or Bylaws of the Company, or as incorporated by reference into any applicable stock purchase agreement). Notwithstanding the foregoing, all shares of Common Stock issued by the Company to an optionee upon the exercise of his options shall be registered under the Securities Act of 1933, as amended (the "Securities Act"). 14. MISCELLANEOUS (a) The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such option unless and until the option shall have been exercised pursuant to the terms thereof, the Company shall have issued and delivered the shares to the Optionee, and the Optionee's name shall have been entered as a stockholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Common Stock. (b) Neither the adoption of the Option Plan by the Board of Directors nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board (or any person or committee to which it may delegate authority) to adopt such other incentive arrangements as may be either applicable generally or only in specific cases. (c) Upon the grant of options hereunder and the issuance of shares of Common Stock pursuant to the exercise thereof, the Company (or applicable subsidiary) shall withhold from any compensation or other amounts payable to the Optionee, any taxes required to be withheld under federal, state or local law as a result of the grant or exercise of such option or the sale of the shares issued upon exercise thereof. To the extent that compensation or other amounts, if any, payable to the Optionee is insufficient to pay any taxes required to be so withheld, the Company (or subsidiary) may, in its sole discretion, require the Optionee (or such other person entitled herein to exercise the option), as a condition of the exercise of an option, to pay in cash to the Company (or subsidiary) an amount sufficient to cover such tax liability or otherwise to make adequate provision for the Company's satisfaction of its withholding obligations under federal, state and local law. (d) This Option Plan is purely voluntary on the part of the Company, and the continuance of the Plan shall not be deemed to constitute a contract between the Company (or subsidiary) and any employee or other eligible person, or to be consideration for or a condition of the employment or service of any employee. Nothing contained in this Plan shall be deemed to give any employee the right to be retained in the employ or service of the Company (or subsidiary) or a successor corporation, or to interfere with the right of the Company (or subsidiary) or any such corporation to discharge or retire any employee thereof at any time. No employee shall have any right to or interest in options authorized hereunder prior to the grant thereof to such employee, and upon such grant he shall have only such rights and interests as are expressly provided herein. (e) In the event that any provision of this Plan is found to be invalid or otherwise unenforceable under any applicable law, such invalidity or unenforceability shall not be construed as rendering any other provisions contained herein as invalid or unenforceable, and all such other provisions shall be given full force and effect to the same extent as though the invalid or unenforceable provision was not contained herein. (f) This Plan shall be governed by and construed in accordance with the laws of the State of Maine. 15. EFFECTIVE DATE The Option Plan shall become effective on August 1, 1997, having been approved by the sole shareholder and the sole director on July 31, 1997. ASC Stock Option Plan EX-10.90 40 FORM OF STOCK OPTION AGREEMENT-5YR. VESTING SCHED. Exhibit 10.90 NON-QUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT is made as of the 1st day of August, 1997 by and between ASC HOLDINGS, INC., a Maine corporation ("Company"), and ___________________ of __________________ ("Optionee"). W I T N E S S E T H : WHEREAS, the Company has established the American Skiing Company Stock Option Plan, effective August 1, 1997 (the "Plan"), for the benefit of eligible officers, full-time management employees, and other key persons identified under the Plan; WHEREAS, the Company's Options Committee has authority under the Plan to award options to eligible employees, to designate the type of options to be granted, and any terms and conditions relating to the award or exercise or options by an Optionee (subject to the limitations set forth in the Option Plan); and WHEREAS, the Optionee has been determined to be eligible to receive a grant of non-qualified stock options under the Plan and the Committee as determined that options shall be granted to Optionee. NOW, THEREFORE, it is agreed between Company and Optionee as follows: 1. Grant of Non-Qualified Stock Options (a) Subject to the terms and conditions herein and to the provisions of the Plan, the provisions of which are incorporated herein by reference, Company hereby grants to Optionee the right and option to purchase from Company up to _____ shares of the Company's Common Stock ("Stock"), par value $.01 per share, at a price of $______ per share. (b) The option granted hereunder is intended to constitute a non-qualified stock option, which shall not qualify as an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). --- (c) This option is not exercisable after the tenth (10th ) anniversary of the date on which this option was granted to Optionee, which was August 1, 1997 (the "Grant Date"). (d) The options granted hereunder shall vest, and become exercisable, in accordance with the following schedule: Percentage Vested Period After Grant Date ----------------- ----------------------- 20% Immediately 40% After 1 year 60% After 2 years 80% After 3 years 100% After 4 years For purposes of applying the foregoing vesting schedule, the percentages shall be applied to the total number of shares with respect to which this Option has been granted, as set forth in subsection (a) above. (e) Optionee, from time to time during the period when the option may be exercised hereunder, may so exercise the option in whole or in part, in accordance with the terms and conditions hereof, by delivering to Company, Attention: Options Committee. (i) a written notice signed by Optionee stating the number of shares of Stock that Optionee has elected to purchase at any time, which number must be an integral multiple of five (5), unless the number equals the total number of shares then available to be purchased hereunder; and (ii) Optionee's certified or cashier's check in an amount equal to the option price of the shares of Stock then to be purchased. 2. Restrictions on Transferability. This Option may not be sold, pledged, assigned, hypothecated, gifted, transferred or disposed of in any manner either voluntarily or involuntarily by operation of law, other than by will or by the laws of descent or distribution, and may be exercised during the lifetime of the Optionee only by such Optionee. Subject to the foregoing and the terms of the Plan, the terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 3. Adjustment in Number of Shares and Option Prices; Reserved Option Shares. Subject to the applicable terms of the Plan, in the event that there are any changes in the outstanding Common Stock of Company by reason of stock dividends, splits, combinations of shares, recapitalizations, reorganizations, mergers, consolidations, combinations, or exchanges of shares or the like, the number of shares subject to the option and the option price shall be appropriately adjusted by the Options Committee, if necessary, to reflect equitably such change or changes. The determination of such committee in this regard shall be conclusive. The Company shall at all times during the term of this Agreement reserve and keep available such number of shares of Stock as will be sufficient to satisfy the requirements of this Agreement. 4. Investment Representations. The Optionee represents and warrants as follows: (a) The Optionee is acquiring this option for investment for his own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof. (b) The Optionee has a preexisting business or personal relationship with the Company or one of its directors officers or controlling persons and by reason of his business financial experience, has, and could be reasonably assumed to have, the capacity to protect his interests in connection with the acquisition of this option. 5. No Guarantee of Continued Employment. Neither the Plan nor this option shall confer upon any Optionee any right to continue in the employment of the Company or any subsidiary or limit in any respect the right of the Company or subsidiary to discharge the Optionee at any time, with or without cause and with or without notice. 6. General. Words used in this Agreement shall have the same meaning as the same words used in the Plan. In the event of any inconsistency between this Agreement and the Plan, the terms of the Plan shall govern. This Agreement, together with the Plan, constitute the parties' entire agreement with respect to the subject matter hereof, and supersede any and all prior and or written agreements or understandings with respect thereto. This Agreement may be modified only by a writing executed by both parties. IN WITNESS WHEREOF, Company and Optionee have executed this Agreement as of the date first above written. By executing this Agreement, Optionee hereby acknowledges that he has received a copy of the Plan document and agrees to be bound by the terms thereof. ASC HOLDINGS, INC. By: ------------------------------- Its: ---------------------------------- Optionee: THIS OPTION HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE, TRANSFER OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR A SATISFACTORY OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. THE SHARES WHICH MAY BE PURCHASED UPON EXERCISE OF THIS OPTION MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF THE BYLAWS OF THE COMPANY AND ANY STOCK PURCHASE AGREEMENT TO BE ENTERED INTO BETWEEN THE HOLDER OF THIS OPTION AND THE COMPANY UPON EXERCISE OF THIS OPTION, A COPY OF WHICH AGREEMENT IS ON FILE WITH THE CLERK OF THE COMPANY. 5 Year Vesting EX-10.91 41 FORM OF NON QUALIFIED STOCK OPTION AGREEMENT Exhibit 10.91 NON-QUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT is made as of the 1st day of August, 1997 by and between ASC HOLDINGS, INC., a Maine corporation ("Company"), and ______________________ of ___________________ ("Optionee"). W I T N E S S E T H : WHEREAS, the Company has established the American Skiing Company Stock Option Plan, effective August 1, 1997 (the "Plan"), for the benefit of eligible officers, full-time management employees, and other key persons identified under the Plan; WHEREAS, the Company's Options Committee has authority under the Plan to award options to eligible employees, to designate the type of options to be granted, and any terms and conditions relating to the award or exercise or options by an Optionee (subject to the limitations set forth in the Option Plan); and WHEREAS, the Optionee has been determined to be eligible to receive a grant of non-qualified stock options under the Plan and the Committee as determined that options shall be granted to Optionee. NOW, THEREFORE, it is agreed between Company and Optionee as follows: 1. Grant of Non-Qualified Stock Options (a) Subject to the terms and conditions herein and to the provisions of the Plan, the provisions of which are incorporated herein by reference, Company hereby grants to Optionee the right and option to purchase from Company up to _____ shares of the Company's Common Stock ("Stock"), par value $.01 per share, at a price of $______ per share. (b) The option granted hereunder is intended to constitute a non-qualified stock option, which shall not qualify as an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). --- (c) This option is not exercisable after the tenth (10th ) anniversary of the date on which this option was granted to Optionee, which was August 1, 1997 (the "Grant Date"). (d) Except as expressly limited under the Plan, the option granted hereunder may be exercised immediately. (e) Optionee, from time to time during the period when the option may be exercised hereunder, may so exercise the option in whole or in part, in accordance with the terms and conditions hereof, by delivering to Company, Attention: Options Committee. (i) a written notice signed by Optionee stating the number of shares of Stock that Optionee has elected to purchase at any time, which number must be an integral multiple of five (5), unless the number equals the total number of shares then available to be purchased hereunder; and (ii) Optionee's certified or cashier's check in an amount equal to the option price of the shares of Stock then to be purchased. 2. Restrictions on Transferability. This Option may not be sold, pledged, assigned, hypothecated, gifted, transferred or disposed of in any manner either voluntarily or involuntarily by operation of law, other than by will or by the laws of descent or distribution, and may be exercised during the lifetime of the Optionee only by such Optionee. Subject to the foregoing and the terms of the Plan, the terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 3. Adjustment in Number of Shares and Option Prices; Reserved Option Shares. Subject to the applicable terms of the Plan, in the event that there are any changes in the outstanding Common Stock of Company by reason of stock dividends, splits, combinations of shares, recapitalizations, reorganizations, mergers, consolidations, combinations, or exchanges of shares or the like, the number of shares subject to the option and the option price shall be appropriately adjusted by the Options Committee, if necessary, to reflect equitably such change or changes. The determination of such committee in this regard shall be conclusive. The Company shall at all times during the term of this Agreement reserve and keep available such number of shares of Stock as will be sufficient to satisfy the requirements of this Agreement. 4. Investment Representations. The Optionee represents and warrants as follows: (a) The Optionee is acquiring this option for investment for his own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof. (b) The Optionee has a preexisting business or personal relationship with the Company or one of its directors officers or controlling persons and by reason of his business financial experience, has, and could be reasonably assumed to have, the capacity to protect his interests in connection with the acquisition of this option. 5. No Guarantee of Continued Employment. Neither the Plan nor this option shall confer upon any Optionee any right to continue in the employment of the Company or any subsidiary or limit in any respect the right of the Company or subsidiary to discharge the Optionee at any time, with or without cause and with or without notice. 6. Distribution of Cash to Pay Taxes. If the exercise of the option granted hereunder (or any portion thereof) is expected to result in the recognition of taxable income by Optionee, the Company shall distribute to Optionee (on or before the end of the calendar year in which the exercise occurs): (a) an amount of cash sufficient to pay the federal and state income taxes payable by Optionee in respect of such income plus (b) an amount of cash sufficient to pay any federal and state income taxes payable by Optionee in respect of the amount payable under the foregoing clause (a) and this clause (b). The amount of the distributions to be made under this Section 6 shall be determined by applying the Optionee's combined (federal and state) marginal rate of tax for such calendar year. 7. General. Words used in this Agreement shall have the same meaning as the same words used in the Plan. In the event of any inconsistency between this Agreement and the Plan, the terms of the Plan shall govern. This Agreement, together with the Plan, constitute the parties' entire agreement with respect to the subject matter hereof, and supersede any and all prior and or written agreements or understandings with respect thereto. This Agreement may be modified only by a writing executed by both parties. IN WITNESS WHEREOF, Company and Optionee have executed this Agreement as of the date first above written. By executing this Agreement, Optionee hereby acknowledges that he has received a copy of the Plan document and agrees to be bound by the terms thereof. ASC HOLDINGS, INC. By: ------------------------------- Its: ---------------------------------- Optionee: THIS OPTION HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE, TRANSFER OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR A SATISFACTORY OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. THE SHARES WHICH MAY BE PURCHASED UPON EXERCISE OF THIS OPTION MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF THE BYLAWS OF THE COMPANY AND ANY STOCK PURCHASE AGREEMENT TO BE ENTERED INTO BETWEEN THE HOLDER OF THIS OPTION AND THE COMPANY UPON EXERCISE OF THIS OPTION, A COPY OF WHICH AGREEMENT IS ON FILE WITH THE CLERK OF THE COMPANY. Vested+Gross Up EX-10.92 42 FORM OF INCENTIVE STOCK OPTION AGREEMENT Exhibit 10.92 INCENTIVE STOCK OPTION AGREEMENT THIS AGREEMENT is made as of the 1st day of August, 1997 by and between ASC Holdings, Inc., a Maine corporation ("Company"), and __________________________ of ___________________ ("Optionee"). W I T N E S S E T H : WHEREAS, the Company has established the American Skiing Company Stock Option Plan, effective August 1, 1997 (the "Plan"), for the benefit of eligible officers, full-time management employees, and other key persons; and WHEREAS, the Optionee has been determined to be eligible to receive a grant of incentive stock options under the Plan; and WHEREAS, Company desires to provide a financial incentive to Optionee to remain in its employ, to encourage stock ownership by Optionee, and thereby to increase such Optionee's proprietary interest in Company's success; NOW, THEREFORE, it Company and Optionee hereby agree as follows: 1. Grant of Incentive Stock Option (a) Subject to the terms and conditions herein and to the provisions of the Plan, the provisions of which are incorporated herein by reference, Company hereby grants to Optionee the right and option to purchase from Company up to _____ shares of the Company's Common Stock ("Stock"), par value $.01 per share, at a price of $______ per share. (b) The option granted hereunder is intended to qualify as an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). (c) This option is not exercisable after the tenth (10th) anniversary of the date on which this option was granted to Optionee, which was August 1, 1997 (the "Grant Date"). (d) Except as expressly provided in the Plan, no portion of the option may be exercised until after the second (2nd) anniversary of the Grant Date. (e) Optionee, from time to time during the period when the option may be exercised hereunder, may so exercise the option in whole or in part, in accordance with the terms and conditions hereof, by delivering to Company, Attention: Options Committee. (i) a written notice signed by Optionee stating the number of shares of Stock that Optionee has elected to purchase at any time, which number must be an integral multiple of five (5), unless the number equals the total number of shares then available to be purchased hereunder; and (ii) Optionee's certified or cashier's check in an amount equal to the option price of the shares of Stock then to be purchased. 2. Restrictions on Transferability. This Option may not be sold, pledged, assigned, hypothecated, gifted, transferred or disposed of in any manner either voluntarily or involuntarily by operation of law, other than by will or by the laws of descent or distribution, and may be exercised during the lifetime of the Optionee only by such Optionee. Subject to the foregoing and the terms of the Plan, the terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 3. Adjustment in Number of Shares and Option Prices; Reserved Option Shares. Subject to the provisions of Section 9 of the Plan, in the event that there are any changes in the outstanding Common Stock of Company by reason of stock dividends, splits, combinations of shares, recapitalizations, reorganizations, mergers, consolidations, combinations, or exchanges of shares or the like, the number of shares subject to the option and the option price shall be appropriately adjusted by the Options Committee, if necessary, to reflect equitably such change or changes. The determination of such committee in this regard shall be conclusive. The Company shall at all times during the term of this Agreement reserve and keep available such number of shares of Stock as will be sufficient to satisfy the requirements of this Agreement. 4. Investment Representations. The Optionee represents and warrants as follows: (a) The Optionee is acquiring this option for investment for his own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof. (b) The Optionee has a preexisting business or personal relationship with the Company or one of its directors officers or controlling persons and by reason of his business financial experience, has, and could be reasonably assumed to have, the capacity to protect his interests in connection with the acquisition of this option. 5. No Guarantee of Continued Employment. Neither the Plan nor this option shall confer upon any Optionee any right to continue in the employment of the Company or any subsidiary or limit in any respect the right of the Company or subsidiary to discharge the Optionee at any time, with or without cause and with or without notice. 6. Conversion to Non-Qualified Option. Notwithstanding anything to the contrary set forth herein, this option is being granted subject to the condition that in the event the Plan is not approved by the stockholders of the Company within one (1) year of the date that the Plan was adopted by the Board of Directors of the Company, this option shall automatically be converted into a non-qualified stock option. 7. Early Disposition of Stock. Subject to the fulfillment by Optionee of any conditions upon the disposition of Stock received under this option, Optionee hereby agrees that if he disposes of any Stock received under this option within one (1) year after such Stock was transferred to him, he will notify the Company in writing within thirty (30) days after the date of such disposition. Optionee acknowledges that disposition by him within such one (1) year period would disqualify him from capital gain treatment for any gain realized upon such disposition. 8. General. Words used in this Agreement shall have the same meaning as the same words used in the Plan. In the event of any inconsistency between this Agreement and the Plan, the terms of the Plan shall govern. This Agreement, together with the Plan, constitute the parties' entire agreement with respect to the subject matter hereof, and supersede any and all prior and or written agreements or understandings with respect thereto. This Agreement may be modified only by a writing executed by both parties. IN WITNESS WHEREOF, Company and Optionee have executed this Agreement as of the date first above written. By executing this Agreement, Optionee hereby acknowledges that he has received a copy of the Plan document and agrees to be bound by the terms thereof. ASC HOLDINGS, INC. By: ------------------------------- Its: ---------------------------------- Optionee: THIS OPTION HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE, TRANSFER OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR A SATISFACTORY OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. THE SHARES WHICH MAY BE PURCHASED UPON EXERCISE OF THIS OPTION MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF THE BYLAWS OF THE COMPANY AND ANY STOCK PURCHASE AGREEMENT TO BE ENTERED INTO BETWEEN THE HOLDER OF THIS OPTION AND THE COMPANY UPON EXERCISE OF THIS OPTION, A COPY OF WHICH AGREEMENT IS ON FILE WITH THE CLERK OF THE COMPANY. EX-10.93 43 ASSIGNMENT OF RENT & LEASE GRAND SUMMIT & TEXTRON Exhibit 10.93 RECEIVED CARROLL COUNTY REGISTRY 009969 1997 AUG 21 PM 3:51 /s/ Lillian O. Brookes REGISTER OF DEEDS ASSIGNMENT OF RENTS AND LEASES (Attitash Project) This ASSIGNMENT OF RENTS AND LEASES (this "Assignment") is made as of August 1, 1997, by GRAND SUMMIT RESORT PROPERTIES, INC., a Maine corporation ("Assignor"), having a mailing address of P.O. Box 450, Sunday River Road, Bethel, ME 04217 in favor of TEXTRON FINANCIAL CORPORATION, a Delaware corporation, as administrative agent for the Lenders (as hereinafter defined) (in such capacity herein referred to as the "Assignee"), having a mailing address of 40 Westminster Street, Providence, Rhode Island 02903. R E C I T A L S: A. Assignor has entered into a certain Loan and Security Agreement (as amended from time to time, the "LSA"), dated as of August 1, 1997, with Assignee and the Lenders identified therein (the "Lenders"), pursuant to which, among other things, the Lenders have agreed, subject to the terms and conditions therein stated, to make one or more loan advances (collectively, the "Loan") to the Assignor in the aggregate maximum principal amount of FIFTY-FIVE MILLION DOLLARS ($55,000,000), as evidenced by Assignor's promissory notes dated August 15, 1997 in said aggregate principal amount (as amended, restated, extended, renewed or otherwise modified from time to time, collectively, the "Note"), which Note is due and payable not later than December 1, 2000 ("Maturity Date"). All capitalized terms that are not otherwise defined herein shall have the meanings ascribed to such terms in the LSA. B. In order to secure the Loan, Assignor has executed and delivered, among other things, the following: (i) a Mortgage, Assignment of Rents and Security Agreement (as amended from time to time, the "Mortgage"), dated as of August 1, 1997, encumbering the real property located in the Town of Bartlett, in Carroll County, New Hampshire, more particularly described in Exhibit A attached hereto and made a part hereof, and certain other property therein described, relating to the property commonly known as The Grand Summit Hotel and Crown Club at Attitash (collectively, the "Mortgaged Property"), and (ii) certain other Security Documents. All amounts owing or to be owed from time to time under the Note, the LSA, the Mortgage or any of the other Security Documents, together with all other obligations of Assignor in respect thereof are hereinafter collectively referred to as the "Indebtedness". C. The Lenders as a condition to making the Loan, have required the execution and delivery of this Assignment. ACCORDINGLY, in consideration of the foregoing premises and in further consideration of the sum of One Dollar paid to Assignor, the receipt of which is hereby acknowledged, and to secure the payment and performance of the Indebtedness and all other amounts and obligations secured by the LSA, the Mortgage or the other Security Documents, Assignor does hereby grant, transfer and assign to Assignee, as administrative agent for the Lenders, all of the right, title and interest of Assignor in and to (i) all leases, subleases, use or occupancy agreements or other agreements affecting the Mortgaged Property, heretofore or hereafter made and entered into by Assignor (collectively, the "Leases"), and (ii) all rents, profits and other income, revenues or payments of any kind due or payable or to become due or payable to Assignor as the result of any use, possession or occupancy of all or any portion of the Mortgaged Property or as the result of the use of or lease of any personal property constituting a part of the Mortgaged Property (all of which are hereinafter collectively referred to as "Rents"), whether the Rents accrue before or after foreclosure of the Mortgage or during the period of redemption thereof. This Assignment is a present and absolute assignment of the Rents and Leases with all such Rents and Leases being pledged primarily and on a parity with the real estate and not secondarily), provided, however, that prior to the existence of an Event of Default and subject to the Assignor's undertakings and the rights and remedies of the Assignee in the LSA, Assignor is authorized to collect Rents and other things of value payable under the Leases. ASSIGNOR WARRANTS AND COVENANTS that it is and will remain the absolute owner of the Rents and Leases free and clear of all liens and encumbrances other than the rights assigned hereby, that it has not heretofore assigned or otherwise encumbered its interest in any of the Rents or Leases to any person; that it has the right under applicable law, under the Leases, under its articles of incorporation and by-laws, and otherwise to execute and deliver this Assignment and keep and perform all of its obligations hereunder; and that it will warrant and defend the Leases and Rents against all adverse claims, whether now existing or hereafter arising. Assignor further covenants and agrees with Assignee and each of the Lenders as follows: 1. Affirmative Covenants. Assignor hereby covenants and agrees that it will: (a) Perform Obligations. Observe, perform, and discharge, duly and punctually, all and each obligation of any and all Leases on the part of Assignor to be kept, observed, and performed; (b) Enforce Leases. Enforce the performance of each and every material obligation, term, covenant, condition, and agreement in each material Lease by any tenant to be performed; (c) Defend Actions. Appear in and defend any action or proceeding arising under, occurring out of, or in any manner connected with, any Lease or the obligations, duties, or liabilities of Assignor or any tenant thereunder, or under this Assignment; (d) Execute Further Instruments. At the request of Assignee, execute and deliver to Assignee, such further instruments and do and perform, such other acts and things as Assignee may reasonably deem necessary or appropriate, from time to time, to confirm, evidence or make effective this Assignment and the various covenants of Assignor herein contained and to more effectively vest in and secure to Assignee the sums due or hereafter to become due under the Leases, including, without limitation, the execution of such additional assignments as shall be deemed advisable by Assignee to effectively vest in and secure to Assignee all Rents and all Leases; and Assignor shall pay all costs and expenses (including attorneys' fees) incurred in 2 connection with the preparation of such instruments (including additional assignments) and the recording of the same. 2. Negative Covenants. Assignor hereby covenants and agrees that it will not: (a) New Leases. Except as permitted under the LSA, enter into any lease for space in the Mortgaged Property; (b) Accept Prepayment. Accept, or permit acceptance of, payment of any rents or any other payment under any Lease more than one month in advance of the due date thereof; (c) Assign Lease. Assign, pledge, encumber, or otherwise transfer, or permit to be assigned, pledged, encumbered or otherwise transferred, any Lease or any right or interest of Assignor thereunder or in any rents or other payments thereunder; or (d) Amend or Terminate Lease. Except as permitted in the LSA, amend any Lease, or terminate any Lease, whether by voluntary agreement, for default by tenant or otherwise, or accept a surrender of any Lease. 3. Protecting Assignee's Rights Under This Assignment. Should Assignor fail to perform or observe any covenant or agreement contained in this Assignment, then Assignee or any Lender, but without obligation to do so and without releasing Assignor from any obligation hereunder or under the Mortgage or LSA, may make or do the same in such manner and to such extent as Assignee or such Lender may deem appropriate, including, specifically, without limiting their general powers, the right to appear in and defend any action or proceeding purporting to affect the right to perform and discharge each and every obligation, covenant and agreement of Assignor contained in the Leases, or purporting to affect the right of Assignor to enforce each and every obligation, covenant and agreement in the Leases, and in exercising any such powers to pay necessary costs and expenses, employ counsel and pay attorneys' fees. Assignor will pay immediately upon demand all sums expended by Assignee or any such Lender under the authority of this Assignment, together with interest thereon at the Default Rate, and the same shall be added to said indebtedness and shall be secured hereby and by the Mortgage and the LSA. 4. Election of Remedies. All rights, remedies and powers conferred or granted hereby may be exercised whether or not proceedings to foreclose the Mortgage are pending or have been concluded and whether or not Assignee or any Lender has exercised or enforced any other right, remedy or power available to them under or with respect to the Mortgage or the LSA. Neither Assignee nor the Lenders shall be required to resort first to their rights under this Assignment or under the Mortgage or the LSA before resorting to one of the other, or any other security, and Assignee may exercise their right hereunder and under the Mortgage and the LSA, and any other security concurrently or independently and in such order or preference as they desires. 3 5. Survival of Obligation to Comply with Mortgage and This Assignment. All of Assignor's obligations under this Assignment shall survive foreclosure of the Mortgage and Assignor covenants and agrees to observe and comply with all terms and conditions of this Assignment throughout any period of redemption after foreclosure of the Mortgage. 6. Appointment of Receiver. To the fullest extent permitted by law, and without regard to whether an action or proceeding has been commenced to foreclose the Mortgage; whether the security is adequate; whether the premises are in danger of being materially injured or reduced in value as security by removal, destruction, deterioration, accumulation of prior liens, or otherwise, so as to render the security inadequate; or whether Assignor has committed waste or there is a danger of waste; Assignee or any Lender may request (upon the occurrence of an Event of Default), and Assignor agrees that Assignee or any such Lender shall as a matter of right be entitled to, the ex parte appointment of a receiver or receivers for all or any part of the Mortgaged Property, whether such receivership be incident to a proposed sale of the Mortgaged Property or otherwise. Assignor agrees that the appointment of such receiver by virtue of any court order, statute or regulation shall not impair or in any manner prejudice the rights of Assignee to receive payment of the rents and income. 7. Assignment of Specific Leases. If Assignee or any Lender at any time shall request in writing, Assignor will at its own cost and expense execute, deliver and record an instrument of further assurance assigning, or confirming the assignment of, one or more specific Leases, Rents or other interests transferred hereby. The failure of Assignee or any Lender to request or procure or record such an instrument of further assurance shall not affect or impair the validity or efficacy of this Assignment as it applies to any such interest. 8. Application of Rents, Profits and Income. All Rents and other amounts payable under the Leases and collected by Assignee or the receiver each month shall be applied first to pay the costs and expenses of Assignee or the receiver, as the case may be, of management and operation of the Mortgaged Property and of collection of the Rents (including, without limitation, the fees and expenses of a managing agent, the expenses incident to taking and retaining possession of the Mortgaged Property, the cost of all alterations, renovations, repairs, and replacements, and all attorneys' fees) and then to pay the Indebtedness and any and all other indebtedness of Assignor secured by the Mortgage or the LSA then due and payable (as provided in the LSA). Any Rents actually collected by Assignee in excess of such amount shall be remitted by Assignee to Assignor, as provided in the LSA. The receipt by Assignee or the Lenders of Rents pursuant hereto shall not act as a payment or discharge of any indebtedness of Assignor, including, without limitation, the Indebtedness or any other indebtedness secured by the Mortgage or the LSA, except to the extent of Rents actually received by Assignee or the Lenders hereunder and applied to payment of such indebtedness. 9. No Liability for Assignee. Neither Assignee nor the Lenders shall be obligated to perform or discharge, nor do they hereby undertake to perform or discharge, any obligation, duty or liability of Assignor under the Leases; and this Assignment and the exercise of any rights hereunder shall not operate to place upon Assignee or the Lenders responsibility for the control, care, management or repair of the Mortgaged Property or for the 4 carrying out of any of the terms and conditions of the Leases. Neither Assignee nor the Lenders shall be responsible or liable for any waste committed on the Mortgaged Property, for any negligence in the management, upkeep, repair or control of said Mortgaged Property or for failure to collect the Rents. The sole obligation of Assignee and the Lenders hereunder shall be to account for Rents actually received by Assignee and the Lenders hereunder. 10. No Liability. Neither Assignee nor the Lenders shall have any liability to Assignor in connection with or as a result of this Assignment or the exercise of any rights or remedies under this Assignment or under the Leases or by reason of any alleged obligations or undertakings of Assignee or the Lenders to perform or discharge any of the terms, covenants or agreements contained in the Leases. 11. Authority to Tenant. Upon notice from Assignee, the tenants under the Leases and any other party liable to pay Rents are hereby irrevocably authorized and directed by Assignor to pay to Assignee (for the benefit of the Lenders) all sums due under the Leases or other agreements upon the written request of Assignee, and Assignor hereby consents and directs that said sums shall be paid to Assignee without the necessity of a determination or inquiry by the tenant that an Event of Default has occurred or that Assignee is entitled to exercise its rights hereunder, and to the extent such sums are paid to Assignee, Assignor agrees that the tenant shall have no further liability to Assignor for the same. The signature of Assignee alone shall be sufficient for the exercise of any rights under this Assignment and the receipt of Assignee alone for any sums received shall be a full discharge and release therefor to any such tenant or occupant of the Mortgaged Property. Checks for all or any part of the Rents collected under this Assignment shall upon notice from Assignee be drawn to the exclusive order of Assignee. Assignee may not give notice to tenants requiring payment of Rents and other sums to Assignee unless an Event of Default exists. 12. Satisfaction. Upon the payment in full of all Indebtedness secured hereby as evidenced by a recorded release of the Mortgage, this Assignment shall, without the need for any further satisfaction or release, become null and void and be of no further effect. If requested by Assignor, upon the payment in full of all Indebtedness secured hereby, Assignee will execute and deliver to Assignor a release of this Assignment. 13. Assignee as Attorney-In-Fact. Assignor hereby irrevocably appoints Assignee, and its successors and assigns, as its agent and attorney-in-fact, which appointment is coupled with an interest, with the right but not the duty to exercise any rights or remedies hereunder and to execute and deliver during the term of this Assignment such instruments as Assignee or the Lenders may deem appropriate to make this Assignment and any further assignment effective, including without limiting the generality of the foregoing, the right, upon an Event of Default to endorse on behalf and in the name of Assignor all checks from tenants in payment of Rents that are made payable to Assignor. 14. Assignee Not a Mortgagee in Possession. Nothing herein contained and no actions taken pursuant to this Assignment shall be construed as constituting Assignee or the Lenders a mortgagee in possession. 15. Unenforceable Provisions Severable. All rights, powers and remedies provided herein may be exercised only to the extent that the exercise thereof does not violate 5 any applicable law, and are intended to be limited to the extent necessary so that they will not render this Assignment invalid, unenforceable or not entitled to be recorded, registered or filed under any applicable law. In the event that any provision or clause of this Assignment conflicts with applicable law, or the application thereof under any particular circumstance to any particular person or entity conflicts with applicable law, such conflict shall not affect other provisions of this Assignment which can be given effect without the conflicting provisions or the applicability of such provisions to other persons or entities or to such persons or entities under other circumstances and to this end the provisions of this Assignment are declared to be severable. 16. Successors and Assigns. The covenants and agreements herein contained shall bind, and the rights hereunder shall inure to the benefit of, the legal representatives, successors and assigns of Assignor, Assignee and the Lenders. All references to Assignee, the Lenders and/or Assignor contained in this Assignment are deemed to include any such representatives, successors and assigns. 17. Captions; Amendments; Notices; Governing Law. The captions and headings of the paragraphs of this Assignment are for convenience only and shall not be used to interpret or define the provisions of this Assignment. This Assignment may be amended only in writing signed by Assignor and Assignee. Any notice under this Assignment shall be deemed to have been given when given in accordance with the requirements for notice under the LSA. The substantive laws of the State of New Hampshire shall govern the validity, construction, enforcement and interpretation of this Assignment to the extent required by principles of conflicts of laws recognized in such State; otherwise, the laws of the State of Maine shall govern. 18. Reproduction as Financing Statement. A carbon, photographic or other reproduction of this Assignment or any financing statement relating to this Assignment shall be sufficient to be effective as a financing statement. 19. Counterparts. This Assignment may be executed in any number of counterparts, each of which shall be an original but all of which shall constitute one instrument. [Remainder of page intentionally blank; next page is signature page] 6 IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly executed and delivered as a sealed instrument as of the date first above written. Signed and Acknowledged GRAND SUMMIT RESORT PROPERTIES, INC. in the Presence of: /s/ Deirdre M. O'Callaghan By /s/ Mark P. Girard - ---------------------------- ---------------------------- Name: Deirdre M. O'Callaghan Name: Mark P. Girard Its: Vice President [Sign in black ink] STATE OF CONNECTICUT ) ) ss. COUNTY OF HARTFORD ) The foregoing instrument was acknowledged before me this 14th day of August, 1997, by Mark P. Girard, the Vice President of GRAND SUMMIT RESORT PROPERTIES, INC., a Maine corporation, on behalf of said corporation. /s/ Lori L. Bridwell --------------------------------------- Notary Public My Commission Expires: Nov. 30, 2000 LORI L BRIDWELL NOTARY PUBLIC MY COMMISSION EXPIRES NOV. 30, 2000 [Seal of Notary Public] 7 EXHIBIT A LEGAL DESCRIPTION Certain condominium quarter-share units in Grand Summit Hotel and Crown Club at Attitash/Bear Peak, A Condominium, Bartlett, Carroll County, New Hampshire, as established by a Declaration of Condominium, Grand Summit Hotel and Crown Club at Attitash/Bear Peak, A Condominium, dated March 26, 1997, recorded at Book 1692, Page 989, being more particularly described in said Declaration, and as more particularly shown on As-Built Site Plans prepared by Thaddeus Thorne-Surveys, Inc., and As Built Floor Plans, prepared by JSA, Inc., all dated March 27, 1997, recorded March 28, 1997, at Plan Book 159, Pages 53 through 65, as Units: Unit 1 (Commercial Unit) Unit Number Quarter-share Intervals 102 1, 2 & 3 103/105 2, 3 & 4 104 1, 2, 3 & 4 107 1, 2, 3 & 4 109/111 1, 2, 3 & 4 110 1, 2, 3 & 4 114/116 1, 2, 3 & 4 118 1, 2, 3 & 4 120 1, 2, 3 & 4 122/124 1, 2, 3 & 4 125/127 1,3 & 4 126 1, 2, 3 & 4 128 1, 2, 3 & 4 129 1, 2, 3 & 4 130 1 & 2 131 1, 2, 3 & 4 132 3 134/136 1 & 3 137 1, 2, 3 & 4 138 3 139 1, 2, 3 & 4 140/142 1, 2, 3 & 4 EXHIBIT A-1 Unit Number Quarter-share Intervals 141/143 1, 2, 3 & 4 144 1, 2, 3 & 4 145/147 1, 2, 3 & 4 149 1, 2, 3 & 4 150 2 152 1, 2, 3 & 4 201/203 2 202 1, 2, 3 & 4 204 1, 2, 3 & 4 205 3 & 4 206/208 1, 2, 3 & 4 207 1, 2, 3 & 4 209/211 1, 3 & 4 210/212 1 & 4 213 1, 2, 3 & 4 214 1, 2, & 3 216 1, 2, 3 & 4 219 1, 2, 3 & 4 220 3 & 4 221 1, 2, 3 & 4 222 1, 2, 3 & 4 223/225 1 & 2 224/226 1, 2, & 3 228/230 1, 2, 3 & 4 232/234 1, 2, 3 & 4 235/237 1, 2, 3 & 4 236 1, 3 & 4 238 1, 2, 3 & 4 239 1 240 1, 2, 3 & 4 241 1, 2, 3 & 4 243 1 & 2 244 1, 2, 3 & 4 245 1, 2, 3 & 4 246/248 1, 2, 3 & 4 247/249 1, 2, 3 & 4 EXHIBIT A-2 Unit Number Quarter-share Intervals 250 1, 2, 3 & 4 251 1, 2, 3 & 4 252/254 4 253/255 1, 2, 3 & 4 256/258 1, 2 & 4 260 3 & 4 301 1, 2 & 3 302 2, 3 & 4 304/306 1, 2, 3 & 4 305/307 1, 2, 3 & 4 308 1, 2, 3 & 4 309 1, 2, 3 & 4 310/312 3 & 4 311 1, 2, 3 & 4 314/316 1, 2, 3 & 4 315 1, 2, 3 & 4 317 1 318/320 1, 2, 3 & 4 322/324 1, 2, & 3 326 1 & 2 328 1 & 3 330/332 2 331 2 & 4 333 1, 2, 3 & 4 335 1, 2 & 4 337 1, 2, 3 & 4 333/340 1, 2, 3 & 4 339 1, 3 & 4 341 1, 2, 3 & 4 342/344 1, 2, 3 & 4 343 1, 2 & 3 345 1 & 3 346 1, 2, 3 & 4 348 1, 2, 3 & 4 350/352 1 354 1, 2, 3 & 4 EXHIBIT A-3 EX-10.94 44 SUBORDINATION AGREEMENT Exhibit 10.94 SUBORDINATION AGREEMENT SUBORDINATION AGREEMENT (as amended from time to time, "this Agreement"), made as of the 1st day of August, 1997, among GRAND SUMMIT RESORT PROPERTIES, INC., a Maine corporation (the "Borrower") and L.B.O. HOLDING, INC. (the "Subordinated Lender"), and TEXTRON FINANCIAL CORPORATION, a Delaware corporation, not in its individual capacity but as Administrative Agent (the "Administrative Agent") for those certain lenders (the "Lenders") under that certain Loan and Security Agreement, dated as of August 1, 1997, among Borrower, Lenders and Textron Financial Corporation (as amended from time to time, the "LSA"), W I T N E S S E T H : WHEREAS, pursuant to the LSA and subject to the terms and conditions thereof, the Lenders have agreed to make a revolving credit facility available to the Borrower in an aggregate principal amount of up to $55,000,000 (the "Loan"); WHEREAS, all of the Borrower's indebtedness, liabilities and obligations to the Lenders, whether now existing or hereafter arising, under the LSA, the Notes (as defined in the LSA), and all other instruments and documents executed and delivered in connection therewith are hereinafter referred to collectively as the "Senior Debt"; WHEREAS, to the extent provided in the LSA, the Senior Debt is or shall be secured by first security interests and liens on the Borrower's Property now owned or hereafter acquired, which are and will be evidenced by collateral assignments and security agreements, all in favor of the Administrative Agent on behalf of the Lenders (such documents are hereinafter referred to collectively, together with all other documents now or hereafter creating or granting to the Lender collateral security for payment of the Senior Debt, as the "Senior Security Documents"); WHEREAS, all of the indebtedness, liabilities and obligations of the Borrower to the Subordinated Lender, whether now existing or hereafter arising, resulting from loans or credit extended to the Borrower from the Subordinated Lender or otherwise are hereinafter referred to collectively as the "Subordinated Debt"; and WHEREAS, these recitals are, and shall be deemed to be, a part of this Agreement; NOW THEREFORE, in consideration of the foregoing and of the mutual undertakings herein contained, the parties hereto hereby agree as follows: 1. Subordination (a) The payment of any and all of the Subordinated Debt is hereby expressly made subordinate and junior in right of payment to the payment of the principal amount of, and all interest and premium on, and all other amounts in respect of, the Senior Debt, to the extent and in the manner set forth herein. (b) In the event of (1) any insolvency, bankruptcy, receivership, liquidation, reorganization, arrangement, assignment for the benefit of creditors, or other similar proceeding relative to the Borrower, its creditors or its Property, or (2) any proceeding for the voluntary or involuntary liquidation, dissolution or other winding up of the Borrower whether or not involving insolvency or bankruptcy proceedings, then and in any such event: (i) the principal amount of, and all interest and premium on, and all other amounts in respect of, the Senior Debt (including interest thereon accruing after the commencement of any such proceeding) shall be paid in full before any payment or distribution of any character, whether in cash, securities or other Property, shall be made in respect of the Subordinated Debt; (ii) any payment or distribution of any character, whether in cash, securities or other Property, which would otherwise (but for the terms hereof) be payable or deliverable in respect of the Subordinated Debt (including any payment or distribution in respect of the Subordinated Debt by reason of any other indebtedness of the Borrower being subordinated to the Subordinated Debt), shall be paid or delivered directly to the Administrative Agent on behalf of the Lenders, or its representatives, until the principal amount of, and all interest and premium on, and all other amounts in respect of, the Senior Debt shall have been paid in full and the Subordinated Lender or any other holder of the Subordinated Debt irrevocably authorizes, empowers and directs all receivers, trustees, liquidators, conservators and others having authority in the premises to effect all such payments and deliveries; (iii) the Subordinated Lender or any other holder of the Subordinated Debt shall (1) execute and deliver to the Administrative Agent on behalf of the Lenders or its representative or agent all such further instruments confirming the authorization referred to in the foregoing clause (ii) above, (2) execute and deliver to the Administrative Agent on behalf of the Lenders or its representative or agent any powers of attorney specifically confirming the rights of the Administrative Agent (or such representative or agent) arising hereunder, (3) execute and deliver to the Administrative Agent on behalf of the Lenders or its representative or agent all proofs of claim, assignments of claim and other instruments as may be requested by the Administrative Agent or any Lender to enforce all claims upon or in respect of the Subordinated Debt, and (4) shall take all other actions as may be requested by the Administrative Agent or any Lender to enforce all claims upon or in respect of the Subordinated Debt. (c) Until and unless the principal amount of, and all interest and premium on, and all other amounts in respect of, the Senior Debt shall have been paid in full, the Borrower shall not make, and the Subordinated Lender shall not receive, accept or retain, any payments of principal or interest or other amount on account of the Subordinated Debt; provided, however, that the Borrower may make and the Subordinated Lender may receive, accept and retain such payments so long as no Default or Event of Default under, and as defined, in the LSA shall have occurred and be continuing and so long as the Borrower would not be rendered insolvent, made unable to pay its debts as they come due or be left without adequate capital to pursue its business after giving effect to such payment. 2 (d) The Borrower agrees that, in the event that any note or other obligation of the Borrower not evidencing Senior Debt, or any portion thereof, shall become due and payable before its expressed maturity for any reason, the Borrower will give prompt notice, in writing, of such happening to the Administrative Agent. (e) So long as any of the Senior Debt shall remain unpaid, the Administrative Agent and the Lenders may at all times exercise any and all powers and rights which they now have or may hereafter acquire under, or with respect to any of the collateral subject to, the Senior Security Documents without having to obtain any consent or approval of the Subordinated Lender and without any accountability to the Subordinated Lender, nor shall it have any liability to the Subordinated Lender for any action taken or failure to act with respect to any of such powers, rights or collateral. (f) Until the entire principal amount of, and all interest and premium on, and all other amounts in respect of, the Senior Debt shall have been finally and indefeasibly paid in full, the Subordinated Lender shall not enforce any right or remedy (other than requiring payments in the absence of an Event of Default) or cause the Subordinated Debt to be accelerated or otherwise to become due prior to its expressed maturity, which it now has or may hereafter have against the Borrower or its Property, including without limitation, rights and remedies under any mortgage, deed of trust or security agreement. (g) If, notwithstanding the provisions of this Agreement, any payment or distribution of any character (whether in cash, securities or other Property) or any security shall be received by the Subordinated Lender in contravention of the terms of this Agreement, and before the entire principal amount of, and all interest and premium on, and all other amounts in respect of, the Senior Debt shall have been finally and indefeasibly paid in full, such payment, distribution or security shall not be commingled with any asset of the Subordinated Lender, but shall be held in trust for the benefit of, and shall be paid over or delivered and transferred to, the Administrative Agent, or its representatives or agents, for application to the payment of all Senior Debt remaining unpaid, until the principal amount of, and all interest and premium (including interest thereon accruing after the commencement of any proceedings described in Section 1(b) hereof) on, and all other amounts in respect of, the Senior Debt shall have been finally and indefeasibly paid in full. (h) Until the principal amount of, and all interest and premium on, and all other amounts in respect of, the Senior Debt shall have been finally and indefeasibly paid in full, the Subordinated Lender shall have no right of subrogation, reimbursement or indemnity whatsoever and no right of recourse to or with respect to any assets or Property of the Borrower or to any collateral for the Senior Debt. (i) This Agreement, without further reference, shall pass to and may be relied on and enforced by any transferee or subsequent holder of the Senior Debt. In the event of any sale, assignment, disposition or other transfer of the Subordinated Debt, the Subordinated Lender shall cause the transferee thereof to execute and deliver to the Administrative Agent a written instrument signed by the transferee, in form and substance satisfactory to the Administrative Agent, providing for the continued subordination of the Subordinated Debt to the Senior Debt as provided for herein and for the continued effectiveness of all of the rights of the Administrative Agent and the Lenders arising under this Agreement. 3 2. Continued Effectiveness of This Agreement. The terms of this Agreement, the subordination effected hereby, and the rights of the Administrative Agent and the Lenders and the obligations of the Subordinated Lender arising hereunder, shall not be affected, modified or impaired in any manner or to any extent by: (i) any amendment or modification of or supplement to the LSA, the Notes, the other Senior Security Documents or any instrument or document executed or delivered pursuant thereto, including, without limitation, the extension of the term of the Senior Debt and/or the increase in the amount of the Senior Debt; (ii) the lack of validity, legality or enforceability of any of such documents; (iii) any exercise or non-exercise of any right, power or remedy under or in respect of the Senior Debt or any of such instruments or documents referred to in clause (i) above or arising at law; or (iv) any waiver, consent, release, indulgence, extension, renewal, modification, delay or other action, inaction or omission in respect of the Senior Debt or any of the instruments or documents referred to in clause (i) above or in respect of any of the properties or assets now or hereafter affected by any of the Senior Security Documents, whether or not the Subordinated Lender shall have had notice or knowledge of any of the foregoing and whether or not it shall have consented thereto. 3. Delivery of Promissory Note. In order to more fully implement the subordination effected hereby, the Subordinated Lender shall deliver to the Administrative Agent or its agent all promissory notes of the Borrower payable to the order of Subordinated Lender. The Subordinated Lender agrees to take such other action as may be reasonably necessary or appropriate to effectuate, as between the Administrative Agent and the Lenders, on the one side, and the Subordinated Lender, on the other side, the subordination provided for herein. 4. Miscellaneous. (a) The Subordinated Lender shall join with the Administrative Agent in executing one or more financing statements pursuant to the Uniform Commercial Code or other notices appropriate under applicable law, in form satisfactory to the Lender, for filing in all public offices where such filings are deemed by the Administrative Agent to be necessary or desirable. (b) All communications under this Agreement shall be in writing, shall be deemed given (1) when personally delivered at the following address, (2) one (1) Business Day after being deposited with a nationally recognized overnight courier, all delivery fees prepaid, and addressed as follows, (3) or five (5) Business Days after being deposited in the United States mail (first class, registered or certified mail), postage prepaid, and addressed as follows: 4 (1) if to the Lenders, to: Textron Financial Corporation Resort Receivables Finance Division 333 East River Drive, Suite 305 East Hartford, CT 06108 Attention: Mr. Richard Mitterling with a copy to: Textron Financial Corporation P.O. Box 6687 Providence, Rhode Island 02940-6687 Attn: Vice President - Law Green Tree Financial Servicing Corporation 100 North Point Center, East Suite 200 Alpharette, GA 30202 Attn: Christopher Gouskos Vice President (2) if to the Borrower, to: Grand Summit Resort Properties, Inc. P.O. Box 450 Sunday Rover Road Bethel, Maine 04217 (3) if to the Subordinated Lender, to: L.B.O. Holding, Inc. P.O. Box 450 Sunday Rover Road Bethel, Maine 04217 or to such other address as any of the parties shall have furnished in writing to the other parties. Any notice so addressed and otherwise delivered shall be deemed to be given when actually received by the addressee. (c) This Agreement may not be amended or modified orally but may be amended or modified only in a writing, signed by all parties hereto. No waiver of any term or provision of this Agreement shall be effective unless it is in writing, making specific reference to this Agreement and signed by the party against whom such waiver is sought to be enforced. This 5 Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. This Agreement shall be binding upon the parties hereto and their respective heirs, legal representatives, successors and assigns. This Agreement shall be governed by and construed in accordance with the laws of the State of Maine. (d) Terms used in this Agreement and not defined herein shall have the respective meanings ascribed to them in the LSA. (e) This Agreement shall terminate upon the final and indefeasible payment in full of the principal amount of, and all interest and premium on, and all other amounts in respect of, the Senior Debt. (f) Two or more duplicate originals of this Agreement may be signed by the parties hereto, each of which shall be an original, but all of which together shall constitute one and the same agreement. (g) All right, powers and remedies hereunder of the Administrative Agent and the Lenders are cumulative and in addition to any rights, power or remedies that it may have in respect of any subordination agreement executed and delivered by the Subordinated Lender in respect of the LSA. 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. GRAND SUMMIT RESORT PROPERTIES, INC. By /s/ Mark P. Girard -------------------------------------- Name: Mark P. Girard Title: Vice President TEXTRON FINANCIAL CORPORATION, as Administrative Agent By -------------------------------------- Name: Title: L.B.O. HOLDING, INC. By /s/ Christopher E. Howard -------------------------------------- Name: Christopher E. Howard Title: Chief Administrative Officer IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. GRAND SUMMIT RESORT PROPERTIES, INC. By -------------------------------------- Name: Title: TEXTRON FINANCIAL CORPORATION, as Administrative Agent By David F. Brede -------------------------------------- Name: David F. Brede Title: Assistant Vice President L.B.O. HOLDING, INC. By -------------------------------------- Name: Title: AGREED AND CONSENTED TO: TEXTRON FINANCIAL CORPORATION, as a Lender By /s/ David F. Brede --------------------------------------------- Name: David F. Brede Title: Assistant Vice President GREEN TREE FINANCIAL SERVICING CORPORATION, as a Lender By --------------------------------------------- Name: Title: AGREED AND CONSENTED TO: TEXTRON FINANCIAL CORPORATION, as a Lender By --------------------------------------------- Name: Title: GREEN TREE FINANCIAL SERVICING CORPORATION, as a Lender By /s/ Christopher A. Gouskos --------------------------------------------- Name: Christopher A. Gouskos Title: V.P., GENERAL MANAGER EX-10.95 45 SUBORDINATION AGMT (8/1 GD SUMMIT, ASC, TEXTRON) Exhibit 10.95 SUBORDINATION AGREEMENT SUBORDINATION AGREEMENT (as amended from time to time, "this Agreement"), made as of the 1st day of August, 1997, among GRAND SUMMIT RESORT PROPERTIES, INC., a Maine corporation (the "Borrower") and AMERICAN SKIING COMPANY (the "Subordinated Lender"), and TEXTRON FINANCIAL CORPORATION, a Delaware corporation, not in its individual capacity but as Administrative Agent (the "Administrative Agent") for those certain lenders (the "Lenders") under that certain Loan and Security Agreement, dated as of August 1, 1997, among Borrower, Lenders and Textron Financial Corporation (as amended from time to time, the "LSA"), W I T N E S S E T H : WHEREAS, pursuant to the LSA and subject to the terms and conditions thereof, the Lenders have agreed to make a revolving credit facility available to the Borrower in an aggregate principal amount of up to $55,000,000 (the "Loan"); WHEREAS, all of the Borrower's indebtedness, liabilities and obligations to the Lenders, whether now existing or hereafter arising, under the LSA, the Notes (as defined in the LSA), and all other instruments and documents executed and delivered in connection therewith are hereinafter referred to collectively as the "Senior Debt"; WHEREAS, to the extent provided in the LSA, the Senior Debt is or shall be secured by first security interests and liens on the Borrower's Property now owned or hereafter acquired, which are and will be evidenced by collateral assignments and security agreements, all in favor of the Administrative Agent on behalf of the Lenders (such documents are hereinafter referred to collectively, together with all other documents now or hereafter creating or granting to the Lender collateral security for payment of the Senior Debt, as the "Senior Security Documents"); WHEREAS, all of the indebtedness, liabilities and obligations of the Borrower to the Subordinated Lender, whether now existing or hereafter arising, resulting from loans or credit extended to the Borrower from the Subordinated Lender or otherwise are hereinafter referred to collectively as the "Subordinated Debt"; and WHEREAS, these recitals are, and shall be deemed to be, a part of this Agreement; NOW THEREFORE, in consideration of the foregoing and of the mutual undertakings herein contained, the parties hereto hereby agree as follows: 1. Subordination (a) The payment of any and all of the Subordinated Debt is hereby expressly made subordinate and junior in right of payment to the payment of the principal amount of, and all interest and premium on, and all other amounts in respect of, the Senior Debt, to the extent and in the manner set forth herein. (b) In the event of (1) any insolvency, bankruptcy, receivership, liquidation, reorganization, arrangement, assignment for the benefit of creditors, or other similar proceeding relative to the Borrower, its creditors or its Property, or (2) any proceeding for the voluntary or involuntary liquidation, dissolution or other winding up of the Borrower whether or not involving insolvency or bankruptcy proceedings, then and in any such event: (i) the principal amount of, and all interest and premium on, and all other amounts in respect of, the Senior Debt (including interest thereon accruing after the commencement of any such proceeding) shall be paid in full before any payment or distribution of any character, whether in cash, securities or other Property, shall be made in respect of the Subordinated Debt; (ii) any payment or distribution of any character, whether in cash, securities or other Property, which would otherwise (but for the terms hereof) be payable or deliverable in respect of the Subordinated Debt (including any payment or distribution in respect of the Subordinated Debt by reason of any other indebtedness of the Borrower being subordinated to the Subordinated Debt), shall be paid or delivered directly to the Administrative Agent on behalf of the Lenders, or its representatives, until the principal amount of, and all interest and premium on, and all other amounts in respect of, the Senior Debt shall have been paid in full and the Subordinated Lender or any other holder of the Subordinated Debt irrevocably authorizes, empowers and directs all receivers, trustees, liquidators, conservators and others having authority in the premises to effect all such payments and deliveries; (iii) the Subordinated Lender or any other holder of the Subordinated Debt shall (1) execute and deliver to the Administrative Agent on behalf of the Lenders or its representative or agent all such further instruments confirming the authorization referred to in the foregoing clause (ii) above, (2) execute and deliver to the Administrative Agent on behalf of the Lenders or its representative or agent any powers of attorney specifically confirming the rights of the Administrative Agent (or such representative or agent) arising hereunder, (3) execute and deliver to the Administrative Agent on behalf of the Lenders or its representative or agent all proofs of claim, assignments of claim and other instruments as may be requested by the Administrative Agent or any Lender to enforce all claims upon or in respect of the Subordinated Debt, and (4) shall take all other actions as may be requested by the Administrative Agent or any Lender to enforce all claims upon or in respect of the Subordinated Debt. (c) Until and unless the principal amount of, and all interest and premium on, and all other amounts in respect of, the Senior Debt shall have been paid in full, the Borrower shall not make, and the Subordinated Lender shall not receive, accept or retain, any payments of principal or interest or other amount on account of the Subordinated Debt; provided, however, that the Borrower may make and the Subordinated Lender may receive, accept and retain such payments so long as no Default or Event of Default under, and as defined, in the LSA shall have occurred and be continuing and so long as the Borrower would not be rendered insolvent, made unable to pay its debts as they come due or be left without adequate capital to pursue its business after giving effect to such payment. 2 (d) The Borrower agrees that, in the event that any note or other obligation of the Borrower not evidencing Senior Debt, or any portion thereof, shall become due and payable before its expressed maturity for any reason, the Borrower will give prompt notice, in writing, of such happening to the Administrative Agent. (e) So long as any of the Senior Debt shall remain unpaid, the Administrative Agent and the Lenders may at all times exercise any and all powers and rights which they now have or may hereafter acquire under, or with respect to any of the collateral subject to, the Senior Security Documents without having to obtain any consent or approval of the Subordinated Lender and without any accountability to the Subordinated Lender, nor shall it have any liability to the Subordinated Lender for any action taken or failure to act with respect to any of such powers, rights or collateral. (f) Until the entire principal amount of, and all interest and premium on, and all other amounts in respect of, the Senior Debt shall have been finally and indefeasibly paid in full, the Subordinated Lender shall not enforce any right or remedy (other than requiring payments in the absence of an Event of Default) or cause the Subordinated Debt to be accelerated or otherwise to become due prior to its expressed maturity, which it now has or may hereafter have against the Borrower or its Property, including without limitation, rights and remedies under any mortgage, deed of trust or security agreement. (g) If, notwithstanding the provisions of this Agreement, any payment or distribution of any character (whether in cash, securities or other Property) or any security shall be received by the Subordinated Lender in contravention of the terms of this Agreement, and before the entire principal amount of, and all interest and premium on, and all other amounts in respect of, the Senior Debt shall have been finally and indefeasibly paid in full, such payment, distribution or security shall not be commingled with any asset of the Subordinated Lender, but shall be held in trust for the benefit of, and shall be paid over or delivered and transferred to, the Administrative Agent, or its representatives or agents, for application to the payment of all Senior Debt remaining unpaid, until the principal amount of, and all interest and premium (including interest thereon accruing after the commencement of any proceedings described in Section 1(b) hereof) on, and all other amounts in respect of, the Senior Debt shall have been finally and indefeasibly paid in full. (h) Until the principal amount of, and all interest and premium on, and all other amounts in respect of, the Senior Debt shall have been finally and indefeasibly paid in full, the Subordinated Lender shall have no right of subrogation, reimbursement or indemnity whatsoever and no right of recourse to or with respect to any assets or Property of the Borrower or to any collateral for the Senior Debt. (i) This Agreement, without further reference, shall pass to and may be relied on and enforced by any transferee or subsequent holder of the Senior Debt. In the event of any sale, assignment, disposition or other transfer of the Subordinated Debt, the Subordinated Lender shall cause the transferee thereof to execute and deliver to the Administrative Agent a written instrument signed by the transferee, in form and substance satisfactory to the Administrative Agent, providing for the continued subordination of the Subordinated Debt to the Senior Debt as provided for herein and for the continued effectiveness of all of the rights of the Administrative Agent and the Lenders arising under this Agreement. 3 2. Continued Effectiveness of This Agreement. The terms of this Agreement, the subordination effected hereby, and the rights of the Administrative Agent and the Lenders and the obligations of the Subordinated Lender arising hereunder, shall not be affected, modified or impaired in any manner or to any extent by: (i) any amendment or modification of or supplement to the LSA, the Notes, the other Senior Security Documents or any instrument or document executed or delivered pursuant thereto, including, without limitation, the extension of the term of the Senior Debt and/or the increase in the amount of the Senior Debt; (ii) the lack of validity, legality or enforceability of any of such documents; (iii) any exercise or non-exercise of any right, power or remedy under or in respect of the Senior Debt or any of such instruments or documents referred to in clause (i) above or arising at law; or (iv) any waiver, consent, release, indulgence, extension, renewal, modification, delay or other action, inaction or omission in respect of the Senior Debt or any of the instruments or documents referred to in clause (i) above or in respect of any of the properties or assets now or hereafter affected by any of the Senior Security Documents, whether or not the Subordinated Lender shall have had notice or knowledge of any of the foregoing and whether or not it shall have consented thereto. 3. Delivery of Promissory Note. In order to more fully implement the subordination effected hereby, the Subordinated Lender shall deliver to the Administrative Agent or its agent all promissory notes of the Borrower payable to the order of Subordinated Lender. The Subordinated Lender agrees to take such other action as may be reasonably necessary or appropriate to effectuate, as between the Administrative Agent and the Lenders, on the one side, and the Subordinated Lender, on the other side, the subordination provided for herein. 4. Miscellaneous. (a) The Subordinated Lender shall join with the Administrative Agent in executing one or more financing statements pursuant to the Uniform Commercial Code or other notices appropriate under applicable law, in form satisfactory to the Lender, for filing in all public offices where such filings are deemed by the Administrative Agent to be necessary or desirable. (b) All communications under this Agreement shall be in writing, shall be deemed given (1) when personally delivered at the following address, (2) one (1) Business Day after being deposited with a nationally recognized overnight courier, all delivery fees prepaid, and addressed as follows, (3) or five (5) Business Days after being deposited in the United States mail (first class, registered or certified mail), postage prepaid, and addressed as follows: 4 (1) if to the Lenders, to: Textron Financial Corporation Resort Receivables Finance Division 333 East River Drive, Suite 305 East Hartford, CT 06108 Attention: Mr. Richard Mitterling with a copy to: Textron Financial Corporation P.O. Box 6687 Providence, Rhode Island 02940-6687 Attn: Vice President - Law Green Tree Financial Servicing Corporation 100 North Point Center, East Suite 200 Alpharette, GA 30202 Attn: Christopher Gouskos Vice President (2) if to the Borrower, to: Grand Summit Resort Properties, Inc. P.O. Box 450 Sunday Rover Road Bethel, Maine 04217 (3) if to the Subordinated Lender, to: American Skiing Company P.O. Box 450 Sunday Rover Road Bethel, Maine 04217 or to such other address as any of the parties shall have furnished in writing to the other parties. Any notice so addressed and otherwise delivered shall be deemed to be given when actually received by the addressee. (c) This Agreement may not be amended or modified orally but may be amended or modified only in a writing, signed by all parties hereto. No waiver of any term or provision of this Agreement shall be effective unless it is in writing, making specific reference to this Agreement and signed by the party against whom such waiver is sought to be enforced. This 5 Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. This Agreement shall be binding upon the parties hereto and their respective heirs, legal representatives, successors and assigns. This Agreement shall be governed by and construed in accordance with the laws of the State of Maine. (d) Terms used in this Agreement and not defined herein shall have the respective meanings ascribed to them in the LSA. (e) This Agreement shall terminate upon the final and indefeasible payment in full of the principal amount of, and all interest and premium on, and all other amounts in respect of, the Senior Debt. (f) Two or more duplicate originals of this Agreement may be signed by the parties hereto, each of which shall be an original, but all of which together shall constitute one and the same agreement. (g) All right, powers and remedies hereunder of the Administrative Agent and the Lenders are cumulative and in addition to any rights, power or remedies that it may have in respect of any subordination agreement executed and delivered by the Subordinated Lender in respect of the LSA. 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. GRAND SUMMIT RESORT PROPERTIES, INC. By /s/ Mark P. Girard -------------------------------------- Name: Mark P. Girard Title: Vice President TEXTRON FINANCIAL CORPORATION, as Administrative Agent By -------------------------------------- Name: Title: AMERICAN SKIING COMPANY By /s/ Christopher E. Howard -------------------------------------- Name: Christopher E. Howard Title: Chief Administrative Officer IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. GRAND SUMMIT RESORT PROPERTIES, INC. By -------------------------------------- Name: Title: TEXTRON FINANCIAL CORPORATION, as Administrative Agent By /s/ David F. Brede -------------------------------------- Name: David F. Brede Title: Assistant Vice President AMERICAN SKIING COMPANY By -------------------------------------- Name: Title: AGREED AND CONSENTED TO: TEXTRON FINANCIAL CORPORATION, as a Lender By /s/ David F. Brede --------------------------------------------- Name: David F. Brede Title: Assistant Vice President GREEN TREE FINANCIAL SERVICING CORPORATION, as a Lender By --------------------------------------------- Name: Title: AGREED AND CONSENTED TO: TEXTRON FINANCIAL CORPORATION, as a Lender By --------------------------------------------- Name: Title: GREEN TREE FINANCIAL SERVICING CORPORATION, as a Lender By /s/ Christopher A. Gouskos --------------------------------------------- Name: Christopher A. Gouskos Title: V.P., GENERAL MANAGER EX-10.97 46 COLL. ASSIGNMENT OF DECLARANT'S RIGHTS EXHIBIT 10.97 COLLATERAL ASSIGNMENT OF DECLARANT'S RIGHTS This COLLATERAL ASSIGNMENT OF DECLARANT'S RIGHTS (this "AGREEMENT") is made as of the 1st day of August, 1997. 1. BACKGROUND. Textron Financial Corporation, a Delaware corporation having a principal place of business at 333 East River Drive, Suite 305, East Hartford, Connecticut 06108 ("ADMINISTRATIVE AGENT"), in its capacity as Administrative Agent under that certain Loan and Security Agreement (as amended, the "LSA"), dated as of August 1, 1997 among Grand Summit Resort Properties, Inc., a Maine corporation having a principal place of business at P.O. Box 450, Sunday River Road, Bethel, ME 04217 (the "BORROWER"), and the lenders that are parties thereto, is the holder (on behalf of the aforesaid lenders) of a certain Mortgage, Assignment of Rents and Security Agreement given by the Borrower, dated as of August 1, 1997, and recorded in Carroll County, New Hampshire (the "LAND RECORDS") in Book 1711, Page 590 (the "MORTGAGE"). The Borrower is the declarant (the "DECLARANT") under that certain Declaration of Condominium for Grand Summit Hotel and Crown Club at Attitash Bear Peak, a condominium more particularly described on Schedule 1 attached hereto, as amended from time to time in accordance with the terms and provisions thereof and hereof (the "DECLARATION"), relating to the Attitash Project, as defined in the LSA and more particularly described on Exhibit A hereto (the "PROJECT"). Except as otherwise specifically stated herein, capitalized terms used herein without definition shall have the meaning given to such terms in the Declaration. In consideration of the foregoing, and of the mutual promises and covenants herein contained and contained in the LSA, the Administrative Agent and the Declarant have entered into this Agreement. 2. CONFIRMATION OF THE MORTGAGE. The Declarant hereby acknowledges and confirms that in granting the Mortgage to the Administrative Agent and entering into the LSA with the Administrative Agent and the lenders that are parties thereto, Declarant granted to the Administrative Agent a security interest in all of Declarant's rights and interests with respect to the property described in the Mortgage and the LSA. Declarant does hereby unconditionally and irrevocably grant to Administrative Agent a security interest in and a lien upon Declarant's rights as a declarant under the Declaration and all other rights which are reserved to the Declarant in the Declaration, including, but not limited to, any and all rights in and to the Convertible Land and any and all development rights or special declarant's rights, whether relating to the Convertible Land or otherwise (collectively, the "DECLARANT'S RIGHTS"). The aforesaid grant is hereby made subject to the Mortgage and shall be deemed to have been made in accordance with all of the terms and conditions thereof and for the purpose of securing the payment and performance of the obligations of Declarant under the Mortgage and the LSA, and the terms and provisions of the Mortgage and the LSA are incorporated herein by reference, as if set forth at length herein. Such grant is in addition to and not in substitution for any rights which the Administrative Agent and/or the lenders that are parties to the LSA may now have or hereafter acquire under the law of the State in which the Project is situated. 3. ADDITIONAL COVENANTS OF DECLARANT. The Declarant hereby further covenants and agrees with Administrative Agent as follows: 3.1 That the Declarant will not, without the prior written consent of Administrative Agent: (a) exercise any of the Declarant's Rights in any manner that materially and adversely affects the operation of Mortgaged Property (as defined in the Mortgage) or the Project situated thereon, (b) take any action, or omit any action, the result of which taking or omission would be the loss, abridgment or termination of any of such Declarant's Rights or (c) amend or modify, or approve any amendment or modification of, the Declaration that would (in the opinion of Administrative Agent) adversely affect the operation and prospects of the Mortgaged Property, the aforesaid Project or the security interests of Administrative Agent therein. 3.2 That the Declarant shall fully perform all obligations, duties, agreements and conditions to be performed by the Declarant under the terms and provisions of the Declaration and under the laws of the State in which the Project is situated, and that the Declarant shall provide Administrative Agent with such evidence of such performance as Administrative Agent may reasonably request from time to time. 3.3 The Declarant acknowledges and agrees that Administrative Agent is not responsible for any of the obligations or liabilities of the Declarant under the Declaration and the applicable laws of the State in which the Project is situated, including without limitation, any obligation or liability of any kind to any purchaser of quartershare interests, residential units or commercial units at the Mortgaged Property, and Declarant specifically acknowledges and agrees that in executing this Agreement Administrative Agent makes no warranties or covenants to any person or party as to title, merchantability, fitness for any particular purpose, physical condition, or otherwise, as to the Mortgaged Property, or any portion thereof, whether such be express or implied. The Declarant further acknowledges and agrees that neither the execution of this Agreement by Administrative Agent nor the execution of the Mortgage, the LSA or any other agreement or instrument in connection therewith shall relieve the Declarant from any of its obligations or duties under the Declaration or the applicable laws of the State in which the Project is situated, and that Administrative Agent shall have no duties or obligations under the Declaration or under the applicable laws of the State in which the Project is situated until such time as it should succeed to the status of Declarant in accordance with the Declaration or pursuant to a deed in lieu of foreclosure under the Mortgage. 3.4 The Declarant hereby warrants to Administrative Agent that as of the date hereof (a) it has not executed any prior conveyance or assignment of any Declarant's Rights or other rights reserved by it in the Declaration; (b) that it has not performed any acts nor executed any instruments which might prevent Administrative Agent from exercising the terms and provisions of the Mortgage, the LSA, this Agreement or any other document executed and delivered by Declarant to Administrative Agent or which would limit Administrative Agent in the exercise of its rights thereunder or hereunder; (c) that as of the date hereof, the Declarant is the sole owner of the Declarant's Rights; and (d) that 2 the Declarant's Rights have been validly created and reserved in accordance with all applicable requirements of the laws of the State in which the Project is situated. 4. MISCELLANEOUS. This Agreement, and the covenants, conditions, warranties, and representations herein contained, shall inure to and bind the successors and assigns of the Declarant and Administrative Agent. Wherever used, the singular number shall include the plural, and the use of any gender shall be applicable to all genders. If any obligation or portion of this Agreement is determined to be invalid or unenforceable under law, it shall not affect the validity or enforcement of the remaining obligations or portions hereof. This Agreement is to be construed under the laws of the State of in which the Project is situated. All covenants, conditions, provisions, warranties, and other undertakings of Declarant contained in this Agreement, or in the Mortgage, LSA or any other agreement executed and delivered by Declarant in connection therewith, heretofore, concurrently or hereafter entered into, shall be deemed cumulative to and not in derogation or substitution of any of the terms, covenants, conditions or agreements of Declarant herein contained. The failure or delay of Administrative Agent to exercise or enforce any rights, liens, powers or remedies hereunder or under any of the aforesaid agreements shall not operate as a waiver of such liens, rights, powers and remedies, but all such liens, rights, powers and remedies shall continue in full force and effect. All liens, rights, powers and remedies herein provided for are cumulative and none are exclusive. Declarant shall do any and all things necessary, or take any action requested by Administrative Agent, to carry out the intent of this Agreement. 5. DUPLICATE ORIGINALS, EXECUTION IN COUNTERPART. Two or more duplicate originals hereof may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party hereto, and each set of counterparts which, collectively, show execution by each party hereto shall constitute one duplicate original. [REMAINDER OF PAGE INTENTIONALLY BLANK; NEXT PAGE IS SIGNATURE PAGE] 3 IN WITNESS WHEREOF, the undersigned have caused this instrument to be executed as of the date and year first above written. Signed and Acknowledged in the GRAND SUMMIT RESORT PROPERTIES, INC. Presence of: /s/ Deirdre M. O'Callaghan By /s/ Mark P. Girard - ------------------------------- ----------------------------- Name: Deirdre M. O'Callaghan Its: Vice President /s/ Ellen M. Grace - ------------------------------ Name: Ellen M. Grace STATE OF MAINE ) ) SS. COUNTY OF ) PERSONALLY APPEARED the above-named Mark P. Girard, Vice President of Grand Summit Resort Properties, Inc. and acknowledged the foregoing instrument to be his/her free act and deed in said capacity and the free act and deed of said corporation. Before me, /s/ Lori L. Bridwell ------------------------------------ Notary Public/Attorney at Law Print Name: Lori L. Bridwell My commission expires: November 30, 2000 4 Signed and Acknowledged TEXTRON FINANCIAL CORPORATION, as in the Presence of: Administrative Agent /s/ Joseph L. Labbodie By /s/ Nicholas L. Mecca - ------------------------------- -------------------------------- Name: Joseph L. Labbodie Its: V. P. /s/ Jennifer L. Sauer - ------------------------------- Name: Jennifer L. Sauer STATE OF CONNECTICUT ) ) SS. COUNTY OF HARTFORD ) The foregoing instrument was acknowledged before me this 12 day of August, 1996, by Nicholas L. Mecca, the V. P. of Textron Financial Corporation, a Delaware corporation, on behalf of said corporation. /s/ Christine M. Cordeira --------------------------------- Notary Public My Commission Expires: April 30, 2002 5 SCHEDULE 1 The condominium established pursuant to that certain Declaration of Condominium Grand Summit Hotel and Crown Club at Attitash Bear Peak, A Condominium, dated March 26, 1997, recorded on March 28, 1997, in Book 1692, at Page 989, of the Office of the Registry of Deeds of Carroll County, New Hampshire, and according to that certain map entitled "Condominium Plan Grand Summit Hotel and Crown Club at Attitash Bear Peak, A Condominium", dated March 27, 1997, and recorded as Plan Number 159 / 53-65 in the Office of the Registry of Deeds of Carroll County, New Hampshire. Schedule 1-1 EXHIBIT A PROPERTY DESCRIPTION Exhibit A-1 EX-10.99 47 SKI LEASE Exhibit 10.99 EXHIBIT D SKI LEASE This Ski Lease is entered into as of September __, 1997 between ASC Utah, a Maine corporation ("ASC") and Iron Mountain Associates, LLC. ("IMA") a Utah limited liability company, WPA, LTD. ("WPA"), a Utah limited partnership, Iron Mountain Holding Group, LC ("IMHG") a Utah limited liability company and Iron Mountain Alliance, Inc. ("IMAI") a Utah corporation (WPA, IMHG and IMAI being collectively referred to as "Members"), all collectively referred to as the Parties, and is intended to implement the provisions of the certain Development Agreement executed by the Parties on this same date (the "Development Agreement"). 1. DEFINITIONS, REFERENCES AND EXHIBITS. Capitalized terms used but not defined herein shall have the meaning ascribed to those terms in the Development Agreement among the parties dated as of the date hereof. References to Sections and Exhibits or Schedules shall be the same as those in the Development Agreement. 2. LEASE ESTABLISHED. This Lease Agreement is a lease to ASC by IMA and its Members (the "Lease") on those portions of the IMA Fee Property hereinafter described for the purposes of operating a commercial alpine ski resort (the "IMA Ski Lease Property"). The Parties shall execute and deliver, concurrently herewith, a short form "Notice of Lease" in recordable form, which conforms with the provisions set forth herein. At the expiration or termination of this Lease, ASC shall, promptly upon IMA's request, sign such documents and take such actions as are necessary to remove the recorded Notice of Lease as a matter of record against the Leased Premises. 3. TRUST LANDS SKI LEASE. IMA hereby agrees that Trust Lands and ASC shall have the right to establish a separate ski lease agreement between those two parties with respect to the IMA Lease Property and the BLM Lands, or other property which may be leased to IMA by Trust Lands in the future. Rather than including those leased properties in this Lease on a sublease basis, the Parties agree that ASC should establish a separate lease with Trust Lands for ski development on those properties, and IMA hereby consents to that arrangement. 4. LEASED PREMISES. IMA and its Members hereby lease and let to ASC, and ASC hereby takes and hires from IMA and its Members, upon and subject to the terms, conditions, covenants and provisions set forth herein, all of those tracts, pieces and parcels of land, situated in White Pine Canyon, Summit County, Utah (the "IMA Ski Lease Property"), more particularly identified using a procedure set forth in Section 7.01, together with any and all improvements, appurtenances, rights, privileges and easements benefiting, belonging or pertaining thereto (all of the foregoing hereinafter sometimes referred to as the "Leased Premises"). Each party's respective rights to use the Leased Premises shall be limited in the manner described in Section 5 hereof. 5. USE. Except as expressly set forth herein, all rights to the use of the Leased Premises are reserved by IMA, its successors and assigns, including without limitation extending or granting such rights to purchasers of lots in the IMA Project. The use of the Leased Premises by ASC shall be limited to the construction and operation of an alpine ski resort consisting essentially of the following uses: (a) Construction of ski lifts and related improvements of such size, type and with such attributes and amenities as are consistent with the Preliminary Development Plan, as amended or revised in a manner specified in Section 7.01. (b) Construction and maintenance of ski trails of a size, location and nature consistent with the provisions of the Preliminary Development Plan, as amended or revised in the manner set forth in Section 7.01 of the Development Agreement. (c) Construction and installation of snowmaking pipes, lines, nozzles and related infrastructure improvements required for the operation of such systems, which improvements shall include state-of-the-art technology reducing noise levels to the greatest extent possible. (d) Construction and operation of only the day skiing lodges described in Schedule B, warming huts and other buildings associated with the improvements described herein, provided that IMA and ASC must agree upon the location, type and design of any such buildings prior to their construction using the methodology set forth in Sections 1.01 and 7.01. With respect to day skiing lodges, ASC and IMA agree that the Preliminary Development Plan shall limit utilization of the Leased Premises for construction and operation of day skiing lodges to the greatest extent reasonably possible consistent with providing a premier, world-class, ski- resort experience. Day skiing lodges may contain any of the uses that are customary for such facilities at the finest ski resorts in the United States. (e) Any commercial real estate development other than the day skiing lodges specifically referred to in Schedule C, for which lease terms are set forth in Section 7(e) below, will be permitted only pursuant to a separate lease agreement specifically addressing those activities. 6. EXCLUDED USES. Notwithstanding the foregoing, without IMA's consent, the Leased Premises shall not be used for any of the following enumerated uses: (a) Ski lift operation for commercial purposes during any period when the resort is not open for alpine skiing. Lifts may be operated during this period for maintenance and improvement activities. (b) Mountain biking and other summer commercial recreation activities shall be limited exclusively to areas identified for such use on the Preliminary Development Plan, as amended or revised pursuant to Section 7.01. 2 (c) Disruptive conduct which constitutes a nuisance and which is sponsored by, or under the authority and control of, ASC. 7. TERM. The term of the Lease shall commence as of the date hereinabove first written ("Commencement Date") and shall continue until September 13, 2094 (the "Term"). 8. CONSIDERATION. As consideration for this Lease, ASC agrees to provide to IMA (1) full and complete performance of all of the terms and conditions of the Development Agreement; and (2) full and complete performance of all the terms and conditions of the Lease, the monetary portions of which collectively shall be referred to as rent ("Rent"), including specifically the following: (a) TAXES. ASC shall, during the term of the Lease, as additional Rent, pay and discharge punctually, as and when the same shall become due and payable, all taxes, special and general assessments, water rents, rates and charges, sewer rents and other governmental impositions and charges of every kind and nature whatsoever, extraordinary as well as ordinary, (hereinafter referred to as "Taxes"), and each and every installment thereof which shall or may during the Term of the Lease be charged, levied, laid, assessed imposed, become due and payable, or a lien upon, or for, or with respect to, the Leased Premises or any part thereof, or any buildings, appurtenances, equipment, or other personal property owned or operated by ASC thereon or therein or any part thereof, together with all interest and penalties thereon, under or by virtue of all present or future laws, ordinances, requirements, orders, directives, rules or regulations of the federal, state, county and municipal governments and of all other governmental authorities whatsoever (all of which shall also be included in the term "Taxes" as heretofore defined). (i) ASC or its designee shall have the right to contest or review all such Taxes by legal proceedings, or in such other manner as it may deem suitable (which, if instituted, ASC or its designees shall conduct promptly at its own cost and expense, and, if necessary, in the name of IMA with the cooperation of IMA and IMA shall execute all documents reasonable necessary to accomplish the foregoing). Notwithstanding the foregoing, ASC shall promptly pay all such Taxes if at any time the Leased Premises or any part thereof shall then be immediately subject to forfeiture, or if IMA shall be subject to any criminal liability arising out of the nonpayment. Such legal proceedings shall include appropriate certiorari proceedings, and appeals from orders therein and appeals from any judgments, decrees, or orders. In the event of any reduction, cancellation or discharge, ASC shall pay the amount finally levied or assessed against the Leased Premises or adjudicated to be due and payable on any such contested Taxes. (ii) IMA covenants and agrees that if there shall be any refunds or rebates on account of the Taxes paid by ASC under the provisions of the Lease, such 3 refund or rebate shall belong to ASC, except those taxes pro-rated as provided in Section 8(d)(ii) below. Any refunds received by IMA shall be deemed trust funds and as such are to be received by IMA in trust and paid to ASC forthwith. IMA will, upon the written request of ASC, sign any receipts which may be necessary to secure the payment of any such refund or rebate, and will pay over to ASC such refund or rebate as received by IMA. (iii) The Parties covenant and agree that either of them may, at any time, and from time to time, but without cost to IMA, make application individually (if legally required) or to join in the application of the other (if legally required) for separate tax assessments for such portions of the Leased Premises as either shall at any time, and from time to time, designate. The Parties hereby agree, upon reasonable request of the other, to execute such instruments and to give such assistance in connection with such applications as shall be required. (iv) Nothing herein, or in the Lease otherwise contained, shall require or be construed to require ASC to pay any sales, rent, inheritance, estate, succession, transfer, gift, franchise, income or profit taxes, by whatever name the same may be called, that are or may be imposed upon IMA, its successor or assigns. (v) Without limiting the foregoing, IMA shall exercise commercially reasonable efforts and cooperate fully with ASC in having the Leased Premises categorized in the most favorable fashion for property tax purposes consistent with the uses contemplated and their respective projects. (b) UTILITY EXPENSES. All sewer rents and charges for water, steam, gas, heat, hot water, electricity, light and power, and other services or services furnished to the Leased Premises or the occupants thereof during the Term of the Lease (hereinafter referred to as "Utility Expenses"). (c) ROLLBACK TAXES/TAX EXEMPTIONS. The term Taxes used in this Section 7 shall include any "rollback taxes" resulting from the Leased Premises or any portion of the IMA Property losing any agricultural status under the provisions of the Utah Farmland Assessment Act, or other favorable tax status (such as a conservation easement) due to ASC's actual or intended use of, or activities conducted upon the Leased Premises, provided that any taxes resulting from a termination of any beneficial tax status which occurs through the actions of IMA shall not be included in Taxes, and shall be the responsibility of IMA. The Parties acknowledge that commencement of ski resort activity on the IMA Ski Lease Property may not be consistent with the historical sheep grazing operation and may trigger a mandatory cessation of such grazing which in turn may result in an obligation to pay rollback taxes. To the extent that the same may be permitted by law, ASC or its designees shall have the right to apply for the conversion of any assessment for local improvements assessed during the term of the Lease in order to cause the same to be payable in annual installments, and upon such conversion, ASC shall pay and discharge punctually said installments as they shall become due and 4 payable during the Term of the Lease. IMA or its successors and assigns shall agree to permit the application for the foregoing conversion to be filed in its name, if necessary, and shall execute any and all documents requested by ASC to accomplish the foregoing result. (d) PAYMENTS. ASC shall be deemed to have complied with the covenants of this Section if: (i) Payment of all Taxes shall have been made either within any period allowed by law or by the governmental authority imposing the same during which payment is permitted without penalty or interest or before the same shall become a lien upon the Leased Premises, and ASC shall produce and exhibit to IMA satisfactory evidence of such payment, if IMA shall demand the same in writing. (ii) Payment of all Taxes shall have been made and the assessments which have been converted into installments as set forth in the preceding paragraph (a), which shall become payable during each of the calendar or fiscal tax years, as the case may be, in which the Term of the Lease commences or terminates, shall have been apportioned pro rata between IMA and ASC in accordance with the respective portions of each such year during which such Term shall be in effect. (iii) Payment of all Additional Consideration in (e) below shall have been made. (e) ADDITIONAL CONSIDERATION. As additional consideration of this Lease and its inclusion of day lodges as a permitted use, and if any additional use subsequently approved by IMA, ASC shall pay to IMA, an amount equal to three percent (3%) of gross sales revenues generated through all sales whether wholesale or retail, less sales tax and returned items, related to any commercial activity of any type whatsoever at the day lodges or on the IMA Property other than commercial activity which is permitted under Section 5 above, whether such activity is conducted by ASC or any of its sub-lessees, sub-tenants, licensees, concessionaires and the like (the "Additional Consideration"). The Additional Consideration shall be paid to IMA within thirty (30) days following the close of each quarter of ASC's fiscal year and shall be accompanied by an accounting using Generally Accepted Accounting Principles of all sales generated from the permitted commercial uses on the IMA Property. ASC shall provide IMA with monthly reports of all such sales and commercial activity. IMA shall have the right to verify the ASC calculations of the Additional Consideration through annual audit of the ASC books of account. (f) LINE OF CREDIT. As consideration for that certain "Ski Lift and Trail Lease Agreement" executed by the Parties on July 24, 1997, ASC agreed to provide and herewith agrees to provide as additional Rent a revolving line of credit (the "Line") with the following terms and conditions: 5 (i) Principal Amount: $1,000,000. (ii) Maturity: The Line shall mature upon delivery by ASC of the 100 Units as required in Article II, provided, however, that the Line shall not mature until all the terms and conditions precedent to the delivery of the 100 Units set forth in Article II and Article VII shall have been satisfied by ASC. (iii) Interest: IMA shall have the right to draw $100,000 per year from the Line without interest. Draws in excess of $100,000 per year shall bear interest at the most-favorable blended rate available to ASC and to its affiliates, ASC Holdings, Inc. and American Skiing Company, based on a direct pass through of the cost of funds. After 36 months from the date of this Lease and prior to maturity, ASC shall waive and/or shall assume full responsibility for the payment of all interest on the entire outstanding balance on the Line. Interest owed by IMA, but not by ASC, may be paid from advances on the Line. (iv) Availability: Funds may be drawn down from time to time by IMA as needed to fund IMA Project related expenses identified in a draw down schedule which shall be provided to ASC by IMA on a periodic basis. The draw down schedule shall not be binding on IMA, but shall be a good faith estimate of the need for funding. (v) Repayment: At maturity, the outstanding principal balance on the Line plus any interest owed by IMA shall become due and payable, provided, however, that an amount equal to Fifty-thousand Dollars ($50,000) per year, times the number of years pro-rated until ASC delivers the 100 Units, shall be forgiven. Payments on the Line shall be applied first to accrued and unpaid interest, then to principal outstanding. (vi) Security: As security for the amounts outstanding under the Line, IMA hereby pledges and grants a security interest in its rights to the 100 Units identified above under the Development Agreement. 9. ALTERATIONS TO SKI IMPROVEMENTS. ASC may, at its option and at its own cost and expense, at any time and from time to time, make such alterations, changes, replacements, improvements and additions in and to the Ski Improvements located on the Leased Premises, subject to the conditions specified in Section 5, including the removal or demolition of any Ski Improvement(s) that now or hereafter may be situated or erected on the Leased Premises. ASC agrees that it will maintain the Leased Premises in a good condition and upon removal or demolition of any of the Ski Improvements, and in any event upon the termination of this Lease, ASC shall restore the Leased Premises to a condition as near as reasonably possible to the pre-improved condition. 6 10. TITLE TO SKI IMPROVEMENTS. Until the expiration or termination of the Lease (subject, however, to the rights of the holder of any leasehold Mortgagee(s) to obtain a new lease as set forth in Section 22 hereof), title to any Ski Improvements situated or erected on the Leased Premises and the personal property located or installed thereon and any alterations, changes or additions thereto shall remain solely in ASC; and ASC alone shall be entitled to deduct all depreciation on ASC's income tax returns for any such Ski Improvements, additions, changes or alterations and any personal property associated therewith. 11. REMOVAL OF SKI IMPROVEMENTS. On the last day or upon termination of the term of the Lease, ASC shall quit and surrender to IMA the Leasehold Premises, and any Ski Improvements then located thereon, provided, however, that notwithstanding anything in the Lease to the contrary, ASC shall have the right, and the obligation if requested by IMA, at the end of the term, to remove any buildings or other Ski Improvements then located thereon, provided that such removal shall be accomplished within one hundred twenty (120) days following the end of the term or the termination. ASC agrees that it will maintain the Leased Premises in a good condition and upon removal or demolition of any of the Ski Improvements, and in any event upon the termination of this Lease, ASC shall restore the Leased Premises to a condition as near as reasonably possible to the pre-improved condition. 12. TIMING OF SKI IMPROVEMENTS. ASC agrees that it shall apply for, and exercise its best efforts to gain, all necessary permits and approvals from all applicable governmental authorities for development of the Ski Improvements on a basis consistent in all material aspects with the Preliminary Development Plan. ASC will exercise its best and most diligent efforts to construct the Ski Improvements as expeditiously as reasonably possible consistent with receipt of governmental approvals. With the exception of lift replacement, ASC will give priority to construction of those lifts and trail systems that service phases of the IMA Project as developed such that to the extent possible, lifts will be constructed prior to or contemporaneously with the phase serviced thereby. 13. REQUIREMENTS OF PUBLIC AUTHORITIES. During the term of the Lease, ASC shall, at its own cost and expense, promptly observe and comply with all present and future laws, ordinances, requirements, orders, directives, rules and regulations of the federal, state, county and municipal governments and of all other governmental authorities affecting the Leased Premises, the Ski Improvements or appurtenances thereto or any part thereof whether the same are in force at the commencement of the term of the Lease or may in the future be passed, enacted or directed. (a) ASC shall have the right to contest by appropriate legal proceedings diligently conducted in good faith, in the name of ASC, or IMA (if legally required), or both (if legally required), without cost or expense to IMA, the validity or application of any law, ordinance, rule, regulation or requirement of the nature referred to in paragraph (a) of this Section and, if by the terms of any such law, ordinance, order, rule, regulation or requirement, compliance therewith may legally be delayed pending the prosecution of any such proceeding, ASC may delay such compliance therewith until the final determination of such proceeding. 7 (b) IMA agrees to execute and deliver any appropriate papers or other instruments which may be necessary or proper to permit ASC so to contest the validity or application of any such law, ordinance, order, rule, regulation or requirement and to fully cooperate with ASC in such contest. 14. COVENANT AGAINST LIENS. If, because of any act or omission of ASC, any mechanic's or materialman's lien or other encumbrance shall be filed against IMA or any of its Members or against any portion of the Leased Premises, ASC shall (1) inform IMA immediately upon the filing of any such lien or encumbrance, (2) at its own cost and expense, cause the same to be discharged of record or bonded within one hundred twenty (120) days of the filing thereof, and (3) indemnify and save harmless IMA against and from all costs, liabilities, suits, penalties, claims and demands resulting therefrom. 15. ACCESS TO PREMISES. IMA and its Members and lot owners in the IMA Project shall have the right to enter upon the Leased Premises at all reasonable times to use, enjoy and examine the same provided such entry shall not interfere with the commercial alpine resort business then being conducted on the Leased Premises. IMA lot owners shall have the right to utilize Ski Improvements only on the same basis as the general public, provided, however, ASC shall, as additional Rent, provide to IMA a total of twelve (12) season lift passes for each year of the Lease which shall be used exclusively by those IMA affiliates identified in writing by IMA prior to the beginning of each ski season. Further, when requested by IMA for marketing purposes, ASC shall permit representatives of IMA and prospective purchasers of lots within the IMA Project and their agents to utilize the lift facilities for marketing purposes in order to show the properties within the IMA Project, at no cost to IMA, subject to ASC's approval of the terms of said use. 16. ASSIGNMENT AND SUBLETTING. ASC may assign or sublease (in whole or in part or parts), the Lease only upon obtaining IMA's prior written consent therefor, which consent shall not be unreasonably withheld or delayed. ASC agrees to furnish to IMA written notice via certified U.S. Mail, return receipt requested, of its intent to assign or sublease any interest in the Lease, together with the name and address of the proposed assignee or sublessees, and such further information as IMA may reasonably request regarding the proposed assignee or sublessee and shall enter into good faith discussions with ASC regarding its decision. Failure to respond within 30 days of receipt of written notice by IMA shall be deemed an approval. Upon any assignment made in accordance with the terms hereof, but not with respect to subleasing, ASC shall be relieved of all further obligations under the portion(s) of the Lease so assigned and shall have no further liabilities hereunder. The Members may, without approval from any other party, assign their rights and obligations under this Ski Lease to IMA at any time after receipt of all required development approvals for the IMA Project. 17. INDEMNITY. ASC shall indemnify and save harmless IMA from and against any and all liability, damage, penalties or judgments arising from injury to person or property sustained by anyone in and about the Leased Premises resulting from any act or omission or 8 omissions of ASC, or ASC's officers, agents, servants, employees or contractors. ASC shall, at its own cost and expense, defend any and all suits or actions which may be brought against IMA or in which IMA may be named with others upon any such above-mentioned matter, claim or claims, except as may result from the IMA's affirmative acts or negligence or the affirmative acts or negligence of its officers, agents, servants, employees or contractors. The foregoing indemnity shall include indemnification for any environmental damage or contamination resulting from ASC's use of, or activities on the Leased Premises. Excepting such acts, IMA shall not be responsible or liable for any damage or injury to any property, fixtures, buildings or other improvements, or to any person or persons, at any time on the Leased Premises, including any damage or injury to ASC or to any of ASC's officers, agents, servants, employees, contractors, customers or sublessees. 9 18. INSURANCE. (a) ASC shall provide at its expense, and keep in force during the term of the Lease, general liability insurance in a good and solvent insurance company or companies licensed to do business in the State of Utah, selected by ASC, and reasonably satisfactory to IMA, or through a self insurance program approved by all necessary governmental authorities, in the amount of at least Fifty Million Dollars ($50,000,000) with respect to injury to or death of any one person, more than one person in any one accident or other occurrence, and damages to property. Such policy, policies or programs shall include IMA, and any Members which IMA from time-to-time may designate, as an additional insured. ASC agrees to deliver certificates of such insurance to IMA at the beginning of the term of the Lease and thereafter not less than ten (10) days prior to the expiration of any such policy. Such insurance shall not be canceled without ten (10) days' written notice to IMA. (b) During the term of the Lease, ASC shall keep all buildings and improvements presently at the Leased Premises or hereafter erected by ASC on the Leased Premises at any time insured for the benefit of IMA and ASC and the holder of any leasehold mortgage permitted pursuant to Section 22 hereof, as their respective interests may appear, against loss or damage by fire, and those casualties covered by the customary extended coverage endorsements, in a minimum amount equal to the greater of replacement value or the amount necessary to avoid the effect of coinsurance provisions of the applicable policies. All proceeds payable at any time and from time to time by any insurance company under such policies shall be payable to such leasehold mortgagee, if any, or, if none, to ASC. Any proceeds paid to ASC shall be retained by ASC and IMA shall not be entitled to, and shall have no interest in, such proceeds or any part thereof, except as IMA may be entitled due to loss or damage by fire sustained by IMA as a result of a fire occasioned by ASC or activities related to the commercial operations of the resort. IMA shall, at ASC's cost and expense, cooperate fully with ASC in order to obtain consents and other instruments and take all other actions necessary or desirable in order to effectuate the same and to cause such proceeds to be paid as herein before provided and IMA shall not carry any insurance concurrent in coverage and contributing in the event of loss with any insurance required to be furnished by ASC hereunder if the effect of such separate insurance would be to reduce the protection or the payment to be made under ASC's insurance. (c) Any insurance required to be provided by ASC pursuant to the Lease may be provided by a blanket insurance program covering the Leased Premises and other locations of ASC provided such blanket insurance complies with all of the other requirements of the Lease with respect to the insurance involved. (d) All insurance policies carried by either party covering the Leased Premises, including but not limited to contents, fire and casualty insurance, shall expressly waive any right on the part of the insurer against the other party. The parties 10 hereto agree that their policies will include such waiver clause or endorsement so long as the same shall be obtainable without extra cost, or if extra cost shall be charged therefor, so long as the other party pays such extra cost. If extra cost shall be chargeable therefor, each party shall advise the other thereof and of the amount of the extra cost, and the other party, as its election, may pay the same, but shall not be obligated to do so. (e) ASC shall obtain and maintain combined rental income and/or business interruption and extra expense insurance against loss of ASC's income from the Leased Premises for a period of 12 months due to the perils covered by the insurance described above, in an amount sufficient to cover the Rent payable under the terms of this Lease. If the Ski Improvements are destroyed or damaged resulting in any reduction of income received by ASC from the Leased Premises, the proceeds of such rental income and/or business interruption insurance shall be assigned, subject to the rights of any leasehold Mortgagee, to IMA, as its interest may appear, to be applied in payment of such Rent until such time as the Ski Improvements so damaged or destroyed have been fully restored and placed in full operation. (f) All policies of insurance provided for herein shall be written as primary policies with responsible and solvent insurance companies authorized to do business in Utah with a policyholder's rating of "A" (Excellent) or better and a financial rating of "A" or better in the most recent Bests' Key Rating Guide. 19. CASUALTY LOSS. (a) In the event that, at any time during the term of the Lease, any one or more of the Ski Improvements shall be destroyed or damaged in whole or in part by fire or other cause within the extended coverage of the Lease, then, ASC, at its own cost and expense, shall, subject to the provisions of paragraph (b) of this Section cause the same to be repaired, replaced or rebuilt within a period of time which, under all prevailing circumstances, shall be reasonable. (b) In the event that at any time during the term of the Lease any one or more of the Ski Improvements shall have been damaged or destroyed by fire or any other cause whatsoever, and such damage or destruction shall amount to fifteen percent (15%) or more of the sound insurable value of Ski Improvements, or if such damage or destruction shall occur during the last ten (10) years of the term, ASC shall have the right, but not the obligation, to elect not to repair, replace or rebuild such building or improvements. If ASC shall elect not to restore any damaged property, it shall, prior to, or immediately commence and diligently prosecute to completion, the demolition and removal of any damaged Ski Improvements which are upon the Leased Premises, and shall remove all rubble and revegetate the site(s). (c) ASC shall not be entitled to any suspension or abatement of Rent by reason of any destruction or damage to the Leased Premises. 11 20. EMINENT DOMAIN. If the whole or any part of the Leased Premises shall be taken for any public or quasi-public use under any statute or by right of eminent domain or by private purchase in lieu thereof, then the Lease shall continue and the taking shall be administered in the manner specified below. In the event of a condemnation or taking by any governmental authority, IMA shall be entitled to the full value of all condemnation parcels, including any bonus value, excepting only the value of any Ski Improvements taken. The Parties shall independently have the right to apply for and prosecute any claim for such taking as it relates to each of their respective interests in the Leased Premises. Each party shall bear its own costs and expenses associated with any such effort and shall be entitled to all (100%) of any award resulting from such efforts. 21. UTILITY LOCATION. ASC shall have the right to negotiate agreements with utility companies and/or public authorities which provide necessary utilities. Creating easements, subleases or other necessary property interests in favor of such companies and/or authorities as are required in order to service the occupants of the buildings and the improvements on the IMA Property or ASC Property shall be valid only after approval by IMA, which approval shall not be unreasonably withheld or delayed. IMA and its Members covenant and agree to execute any and all documents, agreements and instruments, to dedicate to any applicable governmental body, without compensation therefor, utility easements which are usual and ordinary for commercial alpine ski resort developments and which are otherwise reasonably acceptable to IMA, and to take all other actions in order to effectuate the same, all at ASC's cost and expense. All ASC's utility lines shall be located underground and the location of the same shall have been approved by IMA as provided in Section 7.01. The terms of each utility agreement, easement, dedication or other property interest shall provide that all rights conveyed are to be extinguished on the last day of the term or upon termination of the Lease. 22. LEASEHOLD MORTGAGES. ASC, and every successor and assign of ASC, is hereby given the right by IMA in addition to any other rights herein granted, subject to IMA's prior written consent which shall not be unreasonably withheld, to mortgage its interests in the Lease, or any part or parts thereof, under one or more leasehold Mortgage(s), and to assign the Lease, or any part or parts thereof, and any subleases, or parts thereof, as collateral security for such Mortgage(s), upon the condition that all rights acquired under such Mortgage(s) shall be subject to each and every one of the covenants, conditions and restrictions set forth in the Lease, and to all rights and interests of IMA herein, none of which covenants, conditions or restrictions is or shall be waived by IMA by reason of the right given so to mortgage such interest in the Lease, except as expressly provided herein. If ASC and/or ASC's successors and assigns shall mortgage this leasehold or any part or parts thereof, and if the holder(s) of such Mortgage(s) shall send to IMA written notice of such Mortgage(s) specifying the name and address of the Mortgagee(s) and the pertinent recording data with respect to such Mortgage(s), IMA agrees that so long as any such leasehold Mortgage(s) shall remain unsatisfied of record or until written notice of satisfaction is given by the holder(s) to IMA, the following provisions shall apply: (a) There shall be no cancellation, surrender or modification of the Lease by joint action of IMA and ASC without the prior consent in writing of the leasehold 12 Mortgagee(s); provided that termination upon default shall be governed by the following provisions of this Section 22. (b) IMA shall, upon serving ASC with any notice of default, simultaneously serve a copy of such notice upon the holder(s) of such leasehold Mortgagee(s), provided IMA shall be kept informed in writing by ASC of current addresses of all Mortgagees and no such notice of default to ASC shall be effective as to any person or entity unless and until a copy of such notice is served upon each such person or entity; however, the failure of ASC to provide IMA with the name of any Mortgagee(s) shall constitute a waiver of IMA's requirement to provide notice. The leasehold Mortgagee(s) shall thereupon have the same period as ASC, after service of such notice upon it, to remedy or cause to be remedied the defaults complained of, and IMA shall accept such performance by or at the instigation of such leasehold Mortgagee(s) as if the same had been done by ASC. (c) Anything herein contained notwithstanding, while such leasehold Mortgage(s) remains unsatisfied of record, or until written notice of satisfaction is given by the holder(s) to IMA, if any default shall occur which, pursuant to any provision of the Lease, entitles IMA to terminate the Lease, and if before the expiration of ten (10) days from the date of service of notice of termination upon such leasehold Mortgagee(s) such leasehold Mortgagee(s) shall have notified IMA of its desire to nullify such notice and shall have paid to IMA all Rent and additional Rent and other payments herein provided for, and then in default, and shall have complied or shall commence the work of complying with all of the other requirements of the Lease, if any are then in default, and shall prosecute the same to completion with reasonable diligence, then in such event IMA shall not be entitled to terminate the Lease and any notice of termination theretofore given shall be void and of no effect. (d) If IMA shall elect to terminate the Lease by reason of any default of ASC, the leasehold Mortgagee(s) shall not only have the right to nullify any notice of termination by curing such default, as aforesaid, but shall also have the right to postpone and extend the specified date for the termination of the Lease as fixed by IMA in its notice of termination, for a period of not more than six (6) months, provided that such leasehold Mortgagee(s) shall cure or cause to be cured any then existing monetary defaults and meanwhile pay the Rent, additional Rent and comply with and perform all of the other terms, conditions and provisions of the Lease on ASC's part to be complied with and performed, other than past non-monetary defaults, and provided further, that the leasehold Mortgagee(s) shall forthwith take steps to acquire or sell ASC's interest in the Lease by foreclosure of the Mortgage(s) or otherwise and shall prosecute the same to completion with all due diligence. If at the end of said six (6) month period the leasehold Mortgagee(s) shall be actively engaged in steps to acquire or sell ASC's interest herein, the time of said Mortgagee to comply with the provisions of this Section shall be extended for such period as shall be reasonably necessary to complete such steps with reasonable diligence and continuity, provided the quality of the commercial alpine ski resort operator shall not have been reduced or impaired. 13 (e) IMA agrees that in the event of termination of the Lease by reason of any default by ASC other than for nonpayment of Rent or additional Rent and other payments herein provided for, that IMA will enter into a new lease of the Leased Premises with the leasehold Mortgagee(s) or its nominee(s), provided reasonable assurances of the capability of the new operator are provided, for the remainder of the Term, effective as of the date of such termination, at the Rent and additional Rent and upon the terms, provisions, covenants and agreements as herein contained and subject only to the same conditions of title as the Lease is subject to on the date of the execution hereof, and to the rights, if any, of the parties then in possession of any part of the Leased Premises, provided: (i) Said Mortgagee(s) or its nominee(s) shall make written request upon IMA for such new lease within fifteen (15) days after the date of such termination and such written request shall be accompanied by payment to IMA of all sums then due to IMA under the Lease. (ii) Said Mortgagee(s) or its nominee(s) shall pay to IMA at the time of the execution and delivery of said new lease, any and all sums which would at the time of the execution and delivery thereof, be due pursuant to the Lease but for such termination, and in addition thereto, any expenses, including reasonable attorney's fees, to which IMA shall have been subjected by reason of such default. (iii) Said Mortgagee(s) or its nominee(s) shall perform and observe all covenants herein contained on ASC's part to be performed and shall further remedy any other conditions which ASC under the terminated lease was obligated to perform under the terms of the Lease. (iv) IMA shall not warrant possession of the Leased Premises to ASC under the new Lease. (v) Such new lease shall be expressly made subject to the rights, if any, of ASC under the terminated Lease. (vi) The Mortgagee, or its nominee, under such new lease shall have the same right, title and interest in and to the Ski Improvements on the Leased Premises as ASC had under the terminated Lease. (vii) Nothing herein contained shall require the leasehold Mortgagee(s) or its nominee(s) to cure any default of ASC, except as a condition of exercising its rights hereunder. (viii) IMA agrees promptly after submission to execute, acknowledge and deliver any agreements modifying the Lease requested by any leasehold Mortgagee(s), provided that such modification does not decrease ASC's obligations or decrease IMA's rights pursuant to the Lease. 14 (ix) The proceeds from any insurance policies or arising from a condemnation are to be held by any leasehold Mortgagee(s) and distributed pursuant to the provisions of the Lease, but the leasehold Mortgagee(s) may reserve its right to apply to the mortgage debt all, or any part, of ASC's share of such proceeds pursuant to such mortgage(s). (x) The leasehold Mortgagee(s) shall be given notice of any arbitration proceedings by the parties hereto and shall have the right to intervene therein and be made a party to such proceedings, and the parties hereto do hereby consent to such intervention. In the event that the leasehold Mortgagee(s) shall not elect to intervene or become a party to such proceedings, the leasehold Mortgagee(s) shall receive notice of, and a copy of any award or decision made in said arbitration proceedings. IMA, upon request, shall execute, acknowledge and deliver to each leasehold Mortgagee(s), an agreement prepared at the sole cost and expense of ASC in form satisfactory to such leasehold Mortgagee(s) between IMA, ASC and the leasehold Mortgagee(s), agreeing to (a) all of the provisions of this Section 22 and (b) such other provisions as are customary and acceptable to all parties in mortgaging long-term leaseholds in connection with large commercial development projects. 23. QUIET ENJOYMENT. ASC, upon paying the Rent and additional Rent and all other sums and charges to be paid by it as herein provided, and observing and keeping all covenants, warranties, agreements and conditions of the Lease on its part to be kept, shall quietly have and enjoy the Leased Premises during the times permitted by and during the Term of the Lease, without hindrance or molestation. The quiet enjoyment is subject to the rights of usage reserved by IMA in paragraph 5 above. 24. BANKRUPTCY, INSOLVENCY. If, during the Term of the Lease, (a) ASC shall be adjudicated a bankrupt or adjudged to be insolvent; (b) a receiver or trustee shall be appointed for ASC's property and affairs; (c) ASC shall make an assignment for the benefit of creditors or shall file a petition in bankruptcy or insolvency or for reorganization or shall make application for the appointment of a receiver; or (d) any execution or attachment shall be issued against ASC or any of ASC's property, whereby the Leased Premises or any Ski Improvements thereon shall be taken or occupied or attempted to be taken or occupied by someone other than ASC, except as may herein be permitted, and such adjudication, appointment, assignment, petition, execution or attachment shall not be set aside, vacated, discharged or bonded within one hundred eighty (180) days after the issuance of the same, then a default hereunder shall be deemed to have occurred so that the provisions of Section 13.01 of the Development Agreement shall become effective and IMA shall have the right and remedies provided for therein. Notwithstanding anything to the contrary hereinabove contained, upon the occurrence of a default pursuant to this Section 24, if the Rent or additional Rent due and payable hereunder shall continue to be paid and the other covenants, conditions and agreements of the Lease on ASC's part to be kept and performed shall continue to be kept and performed, the quality of the commercial alpine ski resort operation shall not have been reduced and no other event of default shall have occurred, then no event of default 15 shall have been deemed to have occurred and the provisions of Section 13.01 shall not become effective. 25. DEFAULT AND REMEDIES. Any default under the Development Agreement shall constitute a default hereunder for which the Parties shall have all of the rights and remedies specified in Section 13.05 of the Development Agreement. 26. IMA RIGHTS UPON TERMINATION. Upon any termination of the term of the Lease pursuant this Article, or at any time thereafter, IMA may, in addition to and without prejudice to any other rights and remedies IMA shall have at law or in equity, reenter the Leased Premises, and recover possession thereof and dispossess any or all occupants of the Leased Premises in the manner prescribed by the statute relating to summary proceedings, or similar statutes; but ASC in such case shall remain liable to IMA as hereinafter provided, and to recover any costs associated therewith. In case of any such default, reentry, expiration and/or dispossession by summary proceedings: (i) the Rent shall become due thereupon and be paid up to the time of such reentry, expiration and/or dispossession; (ii) IMA may relet the Leased Premises or any part or parts thereof, either in the name of IMA or otherwise, for a term or terms which may, at IMA's option, be less than or exceed the period which would otherwise have constituted the balance of the term of the Lease and may grant concessions of free rent; and (iii) ASC or the legal representatives of ASC shall also pay IMA as liquidated damages for failure of ASC to observe and perform ASC's covenants herein contained any deficiency between the Rent hereby required and/or covenanted to be paid and the net amount, if any, of the rents collected on account of the sub-lease or sub-leases of the Leased Premises or net revenues otherwise generated at or in connection with the Leased Premises for each month of the period which would otherwise have constituted the balance of the Term of the Lease. In computing such liquidated damages, there shall be added to the said deficiency such reasonable expenses as IMA may incur in connection with reletting. Any such liquidated damages shall be paid in monthly installments by ASC on the day specified in the Lease and any suit brought to collect the amount of the deficiency for any month shall not prejudice in any way the rights of IMA to collect the deficiency for any subsequent month by a similar proceeding. IMA, at IMA's option, may make such alteration, repairs, and/or replacements in the Leased Premises as IMA, in IMA's sole judgment, considers advisable and necessary for the purpose of reletting the Leased Premises; and the making of such alterations, repairs, replacements and/or decorations shall not operate or be construed to release ASC from liability hereunder as aforesaid. IMA agrees to use commercially reasonable efforts to mitigate all damages and to relet the Leased Premises in the event of any default specified herein. 27. MISCELLANEOUS. Each of the terms and provisions of Article XIV of the Development Agreement are incorporated herein by reference as though more specifically set forth herein. 16 IN WITNESS WHEREOF, the parties have executed and delivered this Ski Lease as of the day and year first above written. ASC UTAH By: /s/ Christopher E. Howard ------------------------------------ Christopher E. Howard Chief Administrative Officer IRON MOUNTAIN ASSOCIATES, LLC. By: WPA, LTD. Its Manager By: White Pine Associates, Inc. Its General Partner By: /s/ Keith R. Kelley --------------------------- Keith R. Kelley Vice-President/Secretary WPA, LTD. By: White Pine Associates, Inc. Its General Partner By: /s/ Keith R. Kelley ------------------------- Keith R. Kelley Vice-President/Secretary IRON MOUNTAIN HOLDING GROUP, LC. By: /s/ Alexandra C. Ockey ---------------------------------- Alexandra C. Ockey Chairman, Managing Committee IRON MOUNTAIN ALLIANCE, INC. By: /s/ Alexandra C. Ockey --------------------------------- Alexandra C. Ockey President 17 EX-11.1 48 COMPUTATION OF PRO FORMA EARNINGS PER SHARE EXHIBIT 11.1 AMERICAN SKIING COMPANY PRO FORMA EPS EXHIBIT JULY 27, 1997 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
JULY 27, 1997 PRIMARY CALCULATION Pro forma net loss (3,177) Accretion of mandatorily redeemable preferred stock discount (921) Accretion of mandatorily redeemable preferred stock issuance costs (1,123) ----------- Pro forma net loss available to common shareholders (5,221) ----------- Weighted average shares outstanding 1,000,000 Effect of stock split (note 16) 14.76053 ----------- 14,760,530 Leslie B. Otten stock options 1,853,197 - Management stock options 622,038 622,038 Minority interest shareholders 615,022 - Employee stock options 108,108 - Mandatorily redeemable preferred stock 2,110,518 - Offering shares 14,750,000 14,750,000 ----------- 30,132,568 ----------- Primary earnings per share (0.17) ----------- FULLY DILUTED CALCULATION Net loss (3,177) Accretion of preferred stock discount (921) Accretion of issuance costs (1,123) ----------- Net loss available to common shareholders (5,221) ----------- Weighted average shares outstanding 1,000,000 Effect of stock split (note 16) 14.76053 ----------- 14,760,530 Leslie B. Otten stock options 1,853,197 - Management stock options 622,038 622,038 Minority interest shareholders 615,022 615,022 Employee stock options 108,108 - Mandatorily redeemable preferred stock 2,110,518 2,110,518 Offering shares 14,750,000 14,750,000 ----------- 32,858,108 ----------- Fully diluted earnings per share (0.16) ------------
Page 1 EX-21.1 49 SUBSIDIARIES EXHIBIT 21.1 SUBSIDIARIES OF AMERICAN SKIING COMPANY, A MAINE CORPORATION: ASC Utah, a wholly-owned Maine corporation; ASC West, a wholly-owned Maine corporation; and ASC East, a 96%-owned Maine corporation. SUBSIDIARIES OF ASC EAST: Sunday River Skiway Corporation, a wholly-owned Maine corporation; Sunday River Transportation, Inc., a wholly-owned Maine corporation; Sunday River, Ltd., a wholly-owned Maine corporation; Perfect Turn, Inc., a wholly-owned Maine corporation; L.B.O. Holding, Inc., a wholly-owned Maine corporation; Sugarbush Resort Holdings, a wholly-owned Vermont corporation; Grand Summit Resort Properties, Inc., a wholly-owned Maine corporation; Sugarbush Leasing Company, a wholly-owned Vermont corporation; and S-K-I Ltd., a wholly-owned Delaware corporation. SUBSIDIARY OF L.B.O. HOLDING, INC.: Cranmore, Inc., a wholly-owned Maine corporation. SUBSIDIARIES OF SUGARBUSH RESORT HOLDINGS: Sugarbush Restaurants, Inc., a wholly-owned Vermont corporation; Club Sugarbush, a wholly-owned Vermont corporation; Mountain Water Company, a wholly-owned Vermont corporation; and Mountain Wastewater Treatment, Inc., a wholly-owned Vermont corporation. SUBSIDIARIES OF S-K-I LTD.: Killington, Ltd., a wholly-owned Vermont corporation; Sugarloaf Mountain Corporation, a wholly-owned Maine corporation; SKI Insurance Company, a wholly-owned Vermont corporation; Mount Snow, Ltd., a wholly-owned Vermont corporation; Pico Ski Area Management Company, a wholly-owned Vermont corporation; Waterville Valley Ski Area, Ltd., a wholly-owned New Hampshire corporation; Killington West, Ltd., a wholly-owned California corporation; and Resorts Software Services, Inc., a wholly-owned Vermont corporation. SUBSIDIARIES OF KILLINGTON, LTD.: Killington Restaurants, Inc., a wholly-owned Vermont corporation; and Resort Technologies, Inc., a wholly-owned Vermont corporation. SUBSIDIARIES OF SUGARLOAF MOUNTAIN CORPORATION: Mountainside, a wholly-owned Maine corporation; and Sugartech, a wholly-owned Maine corporation. SUBSIDIARIES OF MOUNT SNOW, LTD.: Dover Restaurants, Inc., a wholly-owned Vermont corporation; and Deerfield Operating Company, a wholly-owned Vermont corporation. EX-23.3 50 CONSENT OF INDEPENDENT ACCOUNTS EXHIBIT 23.3 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-1 of American Skiing Company of our report dated September 19, 1997 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" and "Selected Historical Financial Data of the Company" in such Prospectus. However, it should be noted that Price Waterhouse LLP has not prepared or certified such "Selected Historical Financial Data of the Company." We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-1 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" and "Selected Historical Financial Data of the Company" in such Prospectus. However, it should be noted that Price Waterhouse LLP and Pro Forma has not prepared or certified such "Selected Historical Financial Data of the Company." PRICE WATERHOUSE LLP Boston, Massachusetts October 1, 1997 EX-23.4 51 CONSENT OF INDEPENDENT PUBLIC ACCOUNTS EXHIBIT 23.4 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report and to all references to our Firm included in or made a part of this registration statement. ARTHUR ANDERSEN LLP Denver, Colorado October 1, 1997 EX-23.5 52 CONSENT OF INDEPENDENT ACCOUNTS EXHIBIT 23.5 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-1 of American Skiing Company of our report dated December 22, 1995 relating to the combined financial statements of American Skiing Company and affiliates, which appears in such Prospectus. We also consent to the references to us under the headings "Experts", "Summary Historical and Pro Forma 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 and Pro Forma Financial Data" or "Selected Historical Financial Data of the Company." BERRY, DUNN, MCNEIL & PARKER Portland, Maine October 1, 1997 -----END PRIVACY-ENHANCED MESSAGE-----