-----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, Cjb/NbKtrOdpf3ZuJeJjN6m7F8jLx8j3zJTfAqDM8GxJs2b0zIRRAnBezBb+onNH 2Ab0TsVuoEGZm0Fu9t4koQ== 0001043432-04-000007.txt : 20040310 0001043432-04-000007.hdr.sgml : 20040310 20040310135335 ACCESSION NUMBER: 0001043432-04-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20040125 FILED AS OF DATE: 20040310 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN SKIING CO /ME CENTRAL INDEX KEY: 0001043432 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 043373730 STATE OF INCORPORATION: DE FISCAL YEAR END: 0730 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13507 FILM NUMBER: 04659697 BUSINESS ADDRESS: STREET 1: P O BOX 450 STREET 2: SUNDAY RIVER ACCESS RD CITY: BETHEL STATE: ME ZIP: 04217 BUSINESS PHONE: 2078248100 MAIL ADDRESS: STREET 1: P O BOX 450 STREET 2: SUNDAY RIVER ACCESS RD CITY: BETHEL STATE: ME ZIP: 04217 FORMER COMPANY: FORMER CONFORMED NAME: ASC HOLDINGS INC DATE OF NAME CHANGE: 19970805 10-Q 1 form10q2q012504.txt 10Q2Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended January 25, 2004 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from____________ to ____________. -------------------------------- Commission File Number 1-13507 -------------------------------- American Skiing Company (Exact name of registrant as specified in its charter) Delaware 04-3373730 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 136 Heber Avenue, #303 P.O. Box 4552 Park City, Utah 84060 (Address of principal executive offices) (Zip Code) (435) 615-0340 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report.) Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act). Yes [ ] No [X] The number of shares outstanding of each of the issuer's classes of common stock were 14,760,530 shares of Class A common stock, $.01 par value, and 16,977,653 shares of common stock, $.01 par value, as of February 22, 2004. 1 Table of Contents Part I - Financial Information Item 1. Financial Statements Condensed Consolidated Statements of Operations for the 13 weeks ended January 26, 2003 and January 25, 2004 (unaudited)..........3 Condensed Consolidated Statements of Operations for the 26 weeks ended January 26, 2003 and January 25, 2004 (unaudited)..........4 Condensed Consolidated Balance Sheets as of July 27, 2003 and January 25, 2004 (unaudited).................................5 Condensed Consolidated Statements of Cash Flows for the 26 weeks ended January 26, 2003 and January 25, 2004 (unaudited)..........8 Notes to Condensed Consolidated Financial Statements (unaudited)......9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Executive Summary....................................................18 General..............................................................19 Real Estate Credit Agreement Defaults................................19 Liquidity and Capital Resources......................................19 Results of Operations................................................25 Item 3. Quantitative and Qualitative Disclosures About Market Risk...............................................29 Item 4. Controls and Procedures..............................................29 Part II - Other Information Item 1. Legal Proceedings....................................................29 Item 2. Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity Securities...........................30 Item 3. Defaults Upon Senior Securities......................................30 Item 4. Submission of Matters to a Vote of Security Holders..................30 Item 5. Other Information....................................................31 Item 6. Exhibits and Reports on Form 8-K.....................................32 2 Part I - Financial Information Item 1 Financial Statements Condensed Consolidated Statements of Operations (In thousands, except share and per share amounts) 13 weeks ended 13 weeks ended January 26, 2003 January 25, 2004 (unaudited) (unaudited) Net revenues: Resort $ 98,961 $ 92,904 Real estate 1,325 10,056 ----------------- ---------------- Total net revenues 100,286 102,960 ----------------- ---------------- Operating expenses: Resort 65,794 62,410 Real estate 1,898 8,538 Marketing, general and administrative 16,552 20,490 Depreciation and amortization 11,449 10,631 ----------------- ---------------- Total operating expenses 95,693 102,069 ----------------- ---------------- Income from operations 4,593 891 Interest expense, net 12,042 22,580 ----------------- ---------------- Net loss (7,449) (21,689) Accretion of discount and dividends on mandatorily redeemable preferred stock (9,243) - ----------------- ---------------- Net loss available to common shareholders $ (16,692) $ (21,689) ================= ================ Accumulated deficit, beginning of period $ (472,150) $ (556,321) Net loss available to common shareholders (16,692) (21,689) ----------------- ---------------- Accumulated deficit, end of period $ (488,842) $ (578,010) ================= ================ Basic and diluted net loss per common share: Net loss available to common shareholders $ (0.53) $ (0.68) ================= ================ Weighted average common shares outstanding - basic and diluted 31,724,141 31,738,183 See accompanying notes to Condensed Consolidated Financial Statements. 3 Condensed Consolidated Statements of Operations (In thousands, except share and per share amounts) 26 weeks ended 26 weeks ended January 26, 2003 January 25, 2004 (unaudited) (unaudited) Net revenues: Resort $ 115,872 $ 109,032 Real estate 5,039 12,401 ----------------- ---------------- Total net revenues 120,911 121,433 ----------------- ---------------- Operating expenses: Resort 88,294 84,935 Real estate 5,474 10,196 Marketing, general and administrative 26,585 30,770 Restructuring charges - 137 Depreciation and amortization 13,865 12,934 ----------------- ---------------- Total operating expenses 134,218 138,972 ----------------- ---------------- Loss from operations (13,307) (17,539) Interest expense, net 24,316 45,408 ----------------- ---------------- Net loss (37,623) (62,947) Accretion of discount and dividends on mandatorily redeemable preferred stock (18,174) - ----------------- ---------------- Net loss available to common shareholders $ (55,797) $ (62,947) ================= ================ Accumulated deficit, beginning of period $ (433,045) $ (515,063) Net loss available to common shareholders (55,797) (62,947) ----------------- ---------------- Accumulated deficit, end of period $ (488,842) $ (578,010) ================= ================ Basic and diluted net loss per common share: Net loss available to common shareholders $ (1.76) $ (1.98) ================= ================ Weighted average common shares outstanding - basic and diluted 31,724,141 31,738,183 See accompanying notes to Condensed Consolidated Financial Statements. 4 Condensed Consolidated Balance Sheets (In thousands, except share and per share amounts) July 27, 2003 January 25, 2004 (unaudited) (unaudited) Assets Current assets Cash and cash equivalents $ 6,596 $ 14,636 Restricted cash 3,829 4,496 Accounts receivable, net 5,862 9,974 Inventory 3,653 7,240 Prepaid expenses 3,326 6,840 Deferred income taxes 7,300 7,300 Other current assets 978 928 ----------------- ---------------- Total current assets 31,544 51,414 Property and equipment, net 372,926 366,757 Real estate developed for sale 48,234 40,478 Intangible assets, net 7,058 6,893 Deferred financing costs, net 6,705 5,344 Other assets 8,838 8,559 ----------------- ---------------- Total assets $ 475,305 $ 479,445 ================= ================ (continued on next page) 5 See accompanying notes to Condensed Consolidated Financial Statements. Condensed Consolidated Balance Sheets (continued) (In thousands, except share and per share amounts) July 27, 2003 January 25, 2004 (unaudited) (unaudited) Liabilities, Mandatorily Redeemable Preferred Stock, and Shareholders' Deficit Current liabilities Current portion of long-term debt $ 138,610 $ 97,114 Current portion of subordinated notes and debentures 1,466 1,466 Accounts payable and other current liabilities 53,058 83,500 Deposits and deferred revenue 9,723 42,571 Mandatorily Redeemable Convertible 10 1/2% Series A Preferred Stock, par value of $0.01 per share; 40,000 shares authorized; 36,626 shares issued and outstanding, including cumulative dividends (redemption value of $70,212) - 70,212 ----------------- ---------------- Total current liabilities 202,857 294,863 Long-term debt, excluding current portion 60,178 83,557 Subordinated notes and debentures, excluding current portion 140,095 141,157 Other long-term liabilities 3,471 3,503 Deferred income taxes 7,300 7,300 Mandatorily Redeemable 8 1/2% Series B Preferred Stock; 150,000 shares authorized, issued and outstanding (redemption value of $0) - - Mandatorily Redeemable Convertible Participating 12% Series C-1 Preferred Stock, par value of $0.01 per share; 40,000 shares authorized, issued and outstanding, including cumulative dividends (redemption value of $53,148) - 52,605 Mandatorily Redeemable 15% Nonvoting Series C-2 Preferred Stock, par value of $0.01 per share; 139,453 shares authorized, issued and outstanding, including cumulative dividends (redemption value of $198,687) - 196,702 Mandatorily Redeemable Nonvoting Series D Participating Preferred Stock, par value of $0.01 per share; 5,000 shares authorized; no shares issued or outstanding - - ----------------- ---------------- Total liabilities 413,901 779,687 ----------------- ---------------- 6 Mandatorily Redeemable Convertible 10 1/2% Series A Preferred Stock, par value of $0.01 per share; 40,000 shares authorized; 36,626 shares issued and outstanding, including cumulative dividends (redemption value of $66,663) 66,663 - Mandatorily Redeemable 8 1/2% Series B Preferred Stock; 150,000 shares authorized, issued and outstanding (redemption value of $0) - - Mandatorily Redeemable Convertible Participating 12% Series C-1 Preferred Stock, par value of $0.01 per share; 40,000 shares authorized, issued and outstanding, including cumulative dividends (redemption value of $50,105) 49,520 - Mandatorily Redeemable 15% Nonvoting Series C-2 Preferred Stock, par value of $0.01 per share; 139,453 shares authorized, issued and outstanding, including cumulative dividends (redemption value of $184,621) 182,516 - Mandatorily Redeemable Nonvoting Series D Participating Preferred Stock, par value of $0.01 per share; 5,000 shares authorized; no shares issued or outstanding - - Shareholders' Deficit Common stock, Class A, par value of $0.01 per share; 15,000,000 shares authorized; 14,760,530 shares issued and outstanding 148 148 Common stock, par value of $0.01 per share; 100,000,000 shares authorized; 16,977,653 shares issued and outstanding 170 170 Additional paid-in capital 277,450 277,450 Accumulated deficit (515,063) (578,010) ----------------- ---------------- Total shareholders' deficit (237,295) (300,242) ----------------- ---------------- Total liabilities, mandatorily redeemable preferred stock, and shareholders' deficit $ 475,305 $ 479,445 ================= ================ See accompanying notes to Condensed Consolidated Financial Statements. 7 Condensed Consolidated Statements of Cash Flows (In thousands) 26 weeks ended 26 weeks ended January 26, 2003 January, 25, 2004 (unaudited) (unaudited) Cash flows from operating activities Net loss $ (37,623) $ (62,947) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 15,549 12,934 Amortization of deferred financing costs, amortization of original issue discount, and accretion of discount and dividends on mandatorily redeemable preferred stock 189 22,918 Non-cash interest on junior subordinated notes 764 848 Gain from sale of assets (486) (302) Decrease (increase) in assets: Restricted cash 246 (667) Accounts receivable, net (177) (4,112) Inventory (3,305) (3,587) Prepaid expenses (2,304) (3,514) Real estate developed for sale 2,661 7,756 Other assets (5,418) 206 Increase in liabilities: Accounts payable and other current liabilities 20,116 30,440 Deposits and deferred revenue 30,388 32,848 Other long-term liabilities 2,234 32 ----------------- ---------------- Net cash provided by operating activities 22,834 32,853 ----------------- ---------------- Cash flows from investing activities Capital expenditures (5,833) (6,623) Proceeds from sale of assets 705 451 ----------------- ---------------- Net cash used in investing activities (5,128) (6,172) ----------------- ---------------- Cash flows from financing activities Proceeds from resort senior credit facilities 53,434 31,301 Repayment of resort senior credit facilities (65,449) (45,443) Repayment of long-term debt (944) (1,172) Proceeds from real estate debt 6,353 3,667 Repayment of real estate debt (3,088) (6,994) Payment of deferred financing costs (490) - ----------------- ---------------- Net cash used in financing activities (10,184) (18,641) ----------------- ---------------- Net increase in cash and cash equivalents 7,522 8,040 Cash and cash equivalents, beginning of period 6,924 6,596 ----------------- ---------------- Cash and cash equivalents, end of period $ 14,446 $ 14,636 ================= ================ Supplemental disclosure of cash flow information: Accretion of discount and dividends on mandatorily redeemable preferred stock $ 18,174 $ - Cash paid for interest 22,036 22,820 See accompanying notes to Condensed Consolidated Financial Statements. 8 Notes to Condensed Consolidated Financial Statements (Unaudited) 1. General American Skiing Company (ASC) is organized as a holding company and operates through various subsidiaries (collectively, the Company). The Company operates in two business segments, resort operations and real estate development. The Company performs its real estate development principally through its wholly owned subsidiary, American Skiing Company Resort Properties, Inc. (Resort Properties), and Resort Properties' subsidiaries, including Grand Summit Resort Properties, Inc. (Grand Summit). The Company's fiscal year is a fifty-two week or fifty-three week period ending on the last Sunday of July. Fiscal 2004 and Fiscal 2003 are fifty-two week reporting periods, with each quarter consisting of 13 weeks. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Results for interim periods are not indicative of the results expected for the year due to the seasonal nature of the Company's business. Due to the seasonality of the ski industry, the Company typically incurs losses related to resort operations during its first and fourth fiscal quarters. The unaudited condensed consolidated financial statements should be read in conjunction with the following notes and the Company's consolidated financial statements included in its Form 10-K for the fiscal year ended July 27, 2003 (Fiscal 2003) filed with the Securities and Exchange Commission on October 27, 2003. The accompanying condensed consolidated financial statements reflect adjustments and reclassifications made to the unaudited quarterly financial information presented in Note 20 of the Company's Fiscal 2003 Form 10-K. 2. Significant Accounting Policies The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting periods. Areas where significant judgments are made include, but are not limited to: allowance for doubtful accounts, long-lived asset valuation, realizability and useful lives, and realizability of deferred income tax assets. Actual results could differ materially from these estimates. The following are the Company's significant accounting policies: Property and Equipment Property and equipment are carried at cost, net of accumulated depreciation and impairment charges. Depreciation is calculated using the straight-line method over the assets' estimated useful lives which range from 9 to 40 years for buildings, 3 to 12 years for machinery and equipment, 10 to 50 years for leasehold improvements, and 5 to 30 years for lifts, lift lines and trails. Assets held under capital lease obligations are amortized over the shorter of their useful lives or their respective lease lives. Due to the seasonality of the Company's business, the Company records a full year of depreciation relating to its resort operating assets during the second and third quarters of the Company's fiscal year. Goodwill and Other Intangible Assets As prescribed in Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142), certain indefinite-lived intangible assets, including trademarks, are no longer amortized but are subject to annual impairment assessments. An impairment loss is recognized to the extent that the carrying amount exceeds the asset's fair value. Definite-lived intangible assets continue to be amortized on a straight-line basis over their estimated useful lives of 16 to 20 years, and assessed for impairment utilizing guidance provided by SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144). 9 As of July 27, 2003 and January 25, 2004, other intangible assets consist of the following (in thousands): ------------------------------------------------------------------ July 27, 2003 January 25, 2004 ------------------------------------------------------------------ Definite-lived Intangible Assets: Lease agreements $ 1,853 $ 1,853 Less accumulated amortization (288) (318) ---------------- ------------------- 1,565 1,535 Indefinite-lived Intangible Assets: Trade names 170 170 Water rights 5,323 5,188 ---------------- ------------------- Intangible Assets, net $ 7,058 6,893 ================ =================== ------------------------------------------------------------------ Amortization expense related to intangible assets was approximately $14,000 for both the 13 weeks ended January 26, 2003 and the 13 weeks ended January 25, 2004 and approximately $29,000 for both the 26 weeks ended January 26, 2003 and the 26 weeks ended January 25, 2004. Future amortization expense related to definite-lived intangible assets is estimated to be approximately $58,000 for each of the next five fiscal years. Long-Lived Assets In accordance with SFAS No. 144, long-lived assets, such as property and equipment, and definite-lived intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell, and depreciation ceases. Revenue Recognition Resort revenues include sales of lift tickets, tuition from ski schools, golf course and other recreational activities fees, sales from restaurants, bars and retail and rental shops, and lodging and property management fees (real estate rentals). Daily lift ticket revenue is recognized on the day of purchase. Lift ticket season pass revenue is recognized on a straight-line basis over the ski season, which is the Company's second and third quarters of its fiscal year. The Company's remaining resort revenues are generally recognized as the services are performed. Real estate revenues are recognized under the full accrual method when title has been transferred, adequate initial and continuing investments are adequate to demonstrate a commitment to pay for the property and no continuing involvement exists. Amounts received from pre-sales of real estate are recorded as restricted cash and deposits and deferred revenue in the accompanying consolidated balance sheets until the earnings process is complete. Seasonality The Company's revenues are highly seasonal in nature. For Fiscal 2003, the Company realized approximately 87% of resort segment revenues and over 100% of resort segment operating income during the period from November through April. In addition, a significant portion of resort segment revenue and approximately 21% of annual skier visits were generated during the Christmas and Presidents' Day vacation weeks in Fiscal 2003. The Company's resorts typically experience operating losses and negative cash flows for the period from May through November. A high degree of seasonality in the Company's revenues increases the impact of certain events on its operating results. Adverse weather conditions, access route closures, equipment failures, and other developments of even moderate or limited duration occurring during peak business periods could reduce revenues. Adverse weather conditions can also increase power and other operating costs associated with snowmaking or could render snowmaking wholly or partially ineffective in maintaining quality skiing conditions. Furthermore, unfavorable weather conditions, regardless of actual skiing conditions, can result in decreased skier visits. Stock Option Plan Effective August 1, 1997, the Company established a fixed stock option plan, the American Skiing Company Stock Option Plan (the Plan), to provide for the grant of incentive and non-qualified stock options for the purchase of up to 8,688,699 shares of the Company's common stock by officers, management employees, members of the board of directors of the Company and its subsidiaries, and other key persons (eligible for nonqualified stock options 10 only) as designated by the Compensation Committee. The Compensation Committee, which is appointed by the Board of Directors, is responsible for the Plan's administration. The Compensation Committee determines the term of each option, option exercise price, number of shares for which each option is granted and the rate at which each option is exercisable. Options granted under the Plan generally expire ten years from the date of grant and vest either immediately or over a five-year term. Incentive stock options may not have an exercise price less than the fair market value of the common stock at the date of grant. Nonqualified stock options may be granted at an exercise price as determined by the Compensation Committee. At January 25, 2004, the Company has outstanding options to purchase 3,821,187 shares at a weighted average exercise price of $4.25 under the Plan, which has not changed since July 27, 2003. During Fiscal 1998, the Company granted nonqualified options under the Plan to certain key members of management to purchase 672,010 shares of common stock with an exercise price of $2.00 per share when the fair market value of the stock was estimated to be $18.00 per share. The majority of these options (511,530 shares) were granted to members of senior management and were 100% vested on the date of grant. Accordingly, the Company recognized stock compensation expense of $8.1 million in Fiscal 1998 relating to the grants based on the intrinsic value of $16.00 per share. Under these senior management grant agreements, the Company also agreed to pay the optionees a fixed tax "bonus" in the aggregate of $5.8 million to provide for certain fixed tax liabilities that the optionees will incur upon exercise. The liability for this fixed tax bonus has been reduced to reflect $5.3 million in tax bonus payments made through January 25, 2004 in connection with options exercised. The remaining $0.5 million tax bonus liability is reflected in accounts payable and other current liabilities in the accompanying consolidated balance sheet as of January 25, 2004. The remainder of these original $2.00 options (160,480 shares) were granted under the Plan to certain members of management and were vested 20% on the date of grant and vest ratably to 100% over the following four years. For the 13 weeks ended January 26, 2003 and January 25, 2004 and the 26 weeks ended January 26, 2003 and January 25, 2004, the Company recognized no stock compensation expense relating to these options. The following table summarizes information about the stock options outstanding under the Plan as of January 25, 2004:
--------------------------------------------------------------------------------------------- Weighted Average Range of Remaining Weighted Weighted Exercise Contractual Average Average Prices Outstanding Life (in years) Exercise Price Exercisable Exercise Price --------------------------------------------------------------------------------------------- $0.72 25,000 7.4 $ 0.72 25,000 $ 0.72 1.75 - 2.50 1,420,337 6.1 2.11 1,371,003 2.11 3.00 - 4.00 1,449,250 6.1 3.17 1,321,750 3.19 7.00 - 8.75 735,750 4.7 7.19 733,050 7.19 14.19 - 18.00 190,850 3.7 17.55 190,850 17.55 ----------- ----------- 3,821,187 5.7 $ 4.25 3,641,653 $ 4.33 =========== =========== ---------------------------------------------------------------------------------------------
The Company continues to account for stock-based compensation using the method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", under which no compensation expense for stock options is recognized for stock option awards granted to employees at or above fair market value. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation -Transition and Disclosure - an amendment of FAS 123" (SFAS No. 148). This statement amends SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123), to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation, and amends the disclosure requirements to SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company has adopted the disclosure-only provisions of SFAS No. 148. Had stock compensation expense been determined based on the fair value at the grant dates for awards granted under the Company's Plan, consistent with the provisions of SFAS No. 148, the Company's net loss and loss per share would have been changed to the pro forma amounts indicated below (dollar amounts in thousands): 11
------------------------------------------------------------------------------------------------------- 13 weeks ended 13 weeks ended 26 weeks ended 26 weeks ended January26, January 25, January 26, January 25, 2003 2004 2003 2004 ------------------------------------------------------------------------------------------------------- Net loss available to common shareholders As reported $ (16,692) $ (21,689) $ (55,797) $ (62,947) Stock-based employee compensation determined under fair-value method for all awards, net of tax (158) (55) (202) (174) ------------- ------------- ------------- -------------- Pro forma $ (16,850) $ (21,744) $ (55,999) $ (63,121) ============= ============= ============= ============== Basic and diluted net loss per common share As reported $ (0.53) $ (0.68) $ (1.76) $ (1.98) Pro forma (0.53) (0.69) (1.77) (1.99)
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. There were no option grants during the 13 and 26 weeks ended January 26, 2003 or the 13 and 26 weeks ended January 25, 2004. Recently Issued Accounting Standards In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" (SFAS No. 150). SFAS No. 150 establishes standards for how financial instruments with characteristics of both liabilities and equity should be measured and classified and requires that an issuer classify a financial instrument that is within its scope as a liability. SFAS No. 150 is implemented prospectively and restatement is not permitted. The Company adopted SFAS No. 150 effective July 28, 2003. As a result of adopting SFAS No. 150, approximately $298.7 million of mezzanine-level securities were reclassified to liabilities in the consolidated balance sheet in the first quarter of Fiscal 2004. This represents the carrying value of all classes of mandatorily redeemable preferred stock. In addition, approximately $43.1 million of accretion of discount and dividends on the preferred stock in Fiscal 2004 will be included in interest expense, whereas previously it was reported as accretion of discount and dividends on mandatorily redeemable preferred stock. For the 13 and 26 weeks ended January 25, 2004, $10.6 million and $20.8 million, respectively, of accretion of discount and dividends on the preferred stock was included in interest expense. For the 13 and 26 weeks ended January 26, 2003, approximately $9.2 million and $18.2 million of accretion of discount and dividends on the preferred stock was included in accretion of discount and dividends on mandatorily redeemable preferred stock. Reclassifications Certain amounts in the prior periods' financial statements and related notes have been reclassified to conform to the current periods' presentation. 3. Net Income (Loss) per Common Share Net income (loss) per common share for the 13 and 26 weeks ended January 26, 2003 and January 25, 2004, respectively, was determined based on the following data (in thousands):
------------------------------------------------------------------------------------------------------------------------- 13 weeks ended 13 weeks ended 26 weeks ended 26 weeks ended January 26, 2003 January 25, 2004 January 26, 2003 January 25, 2004 ------------------------------------------------------------------------------------------------------------------------- Loss Income (loss) from operations before accretion of discount and dividends on mandatorily redeemable preferred stock $ (7,449) $ (21,689) $ (37,623) $ (62,947) Accretion of discount and dividends on mandatorily redeemable preferred stock (9,243) - (18,174) - ---------------- ---------------- ---------------- ---------------- Income (loss) from operations $ (16,692) $ (21,689) $ (55,797) $ (62,947) ================ ================ ================ ================ Shares Weighted average common shares outstanding - basic and diluted 31,724 31,738 31,724 31,738 ================ ================ ================ ================
12 As of January 26, 2003 and January 25, 2004, the Company had 14,760,530 shares of its Class A common stock outstanding, which are convertible into shares of the Company's common stock. The shares of the Company's common stock issuable upon conversion of the shares of the Company's Class A common stock have been included in the calculation of the weighted average common shares outstanding. As of January 26, 2003 and January 25, 2004, the Company had 36,626 shares of its mandatorily redeemable convertible 10 1/2% preferred stock (Series A Preferred Stock) and 40,000 shares of its mandatorily redeemable convertible participating 12% preferred stock (Series C-1 Preferred Stock) outstanding, both of which are convertible into shares of the Company's common stock. If converted at their liquidation preferences as of January 26, 2003 and January 25, 2004, these convertible preferred shares would convert into approximately 41,489,000 and 46,624,000 shares of common stock, respectively. For the 13 and 26 weeks ended January 26, 2003 and January 25, 2004, the common shares into which these preferred securities are convertible have not been included in the dilutive share calculation as the impact of their inclusion would be anti-dilutive. The Company also had 3,891,179 and 3,821,187 options outstanding to purchase shares of its common stock under the Plan as of January 26, 2003 and January 25, 2004, respectively. These stock options are excluded from the dilutive share calculation as the impact of their inclusion would be anti-dilutive. 4. Segment Information In accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS No. 131), the Company has classified its operations into two business segments, resorts and real estate. Revenues at each of the resorts are derived from the same lines of business which include 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. The performance of the resorts is evaluated on the same basis of profit or loss from operations. Additionally, each of the resorts has historically produced similar operating margins and attracts the same class of customer. Based on the similarities of the operations at each of the resorts, the Company has concluded that the resorts satisfy the aggregation criteria set forth in SFAS No. 131. The Company's real estate revenues are derived from the sale, resale, and leasing of interests in real estate development projects undertaken by the Company at its resorts and the sale of other real property interests. Revenues and operating losses for the two business segments are as follows (in thousands):
13 weeks ended 13 weeks ended 26 weeks ended 26 weeks ended January 26, 2003 January 25, 2004 January 26, 2003 January 25, 2004 ------------------------------------------------------------------------------------------------------------------- Revenues: Resort $ 98,961 $ 92,904 $ 115,872 $ 109,032 Real estate 1,325 10,056 5,039 12,401 ---------------- ---------------- ---------------- ---------------- Total $ 100,286 $ 102,960 $ 120,911 $ 121,433 ================ ================ ================ ================ Income (loss) from operations: Resort $ (1,282) $ (17,701) $ (26,140) $ (53,573) Real estate (6,167) (3,988) (11,483) (9,374) ----------------- ---------------- ---------------- ---------------- Total $ (7,449) $ (21,689) $ (37,623) $ (62,947) ================= ================ ================ ================
5. Long-Term Debt Resort Properties On March 30, 2002, Resort Properties failed to make a mandatory principal payment of $3.75 million under its real estate term facility (Real Estate Term Facility). Resort Properties obtained a temporary waiver of this default on April 2, 2002. Effective May 20, 2002, the temporary waiver was revoked and Resort Properties was in default on the facility. The Real Estate Term Facility is comprised of three tranches, each with separate interest rates and maturity dates as follows: o Tranche A is a revolving facility with a current maximum principal amount of $17.0 million and bears interest at a default interest rate equal to the Fleet National Bank Base Rate plus 6.0% (10.0% as of January 25, 2004). o Tranche B is a term loan facility with a maximum principal amount of $25.0 million and bears interest at a default interest rate equal to 29% per annum. 13 o Tranche C is a term loan facility with a maximum principal amount of $12.0 million and bears interest at a default interest rate equal to 29% per annum. Interest accrued is added to the principal balance of Tranche C and is compounded semi-annually. On May 31, 2002, the lenders accelerated the due date of the entire remaining principal and accrued interest under the facility. On November 22, 2002, Resort Properties entered into a forbearance agreement with the lenders whereby the lenders agreed to not pursue additional foreclosure remedies and to cease publication of foreclosure notices for a 30-day period. Although this 30-day period expired, management continues discussions with Fleet National Bank (Fleet) and the other lenders regarding a restructuring of this facility, and Fleet and the other lenders have not exercised any further foreclosure remedies since the expiration of the forbearance agreement. Management's ongoing restructuring efforts with the lenders are aimed towards a restructuring of the Real Estate Term Facility, with the establishment of a new entity to hold the assets of Resort Properties which are pledged as collateral under the Real Estate Term Facility and certain other assets. The equity in the new entity is expected to be held by a combination of the lenders under the facility and Resort Properties. The Real Estate Term Facility remains in default pending completion of these negotiations. As of January 25, 2004, the principal balance outstanding, including accrued and unpaid interest, under the Real Estate Term Facility was $78.2 million, which is presented as a current liability in the accompanying condensed consolidated balance sheet. There is no assurance that negotiations with the lenders will be successfully completed. Furthermore, regardless of the outcome of this proposed restructuring, the Company may lose control of assets pledged as collateral under the facility and future access to value creation from these real estate assets. A substantial portion of the Company's developable real estate, including substantially all of the developable residential real estate at The Canyons along with certain core village real estate at Killington, and the stock of the Company's real estate development subsidiaries (including Grand Summit) is pledged to Fleet and the lenders under the facility. The commercial core units at the Sundial Lodge at The Canyons and the Mount Snow Grand Summit Hotel in Vermont are also pledged to Fleet and the lenders. The Grand Summit unit inventory does not secure the Real Estate Term Facility, although the pledge of the stock of Grand Summit to secure the Real Estate Term Facility means that the Company may lose control of the Grand Summit unit inventory to the lenders under the Real Estate Term Facility. Other remedies available to the lenders include, but are not limited to, setoff of cash collateral amounts in Resort Properties' name held at Fleet in the amount of approximately $1.5 million, foreclosure of real and personal property owned by Resort Properties and pledged to the lenders (including all of the capital stock of the Company's hotel development subsidiary, Grand Summit), and other customary secured creditor remedies. As of January 25, 2004, the carrying value of the total assets that collateralized the $78.2 million Real Estate Term Facility and the Company's $40.8 million real estate construction loan facilities described below was approximately $108.0 million. This collateral includes $77.7 million of Grand Summit assets pledged under the Company's $40.8 million real estate construction loan facilities. Grand Summit The Company conducts substantially all of its real estate development through subsidiaries, each of which is a wholly owned subsidiary of Resort Properties. Grand Summit owns the existing Grand Summit Hotel projects, which are primarily financed through a $110 million construction loan facility (Senior Construction Loan) between Grand Summit and various lenders, including Textron Financial Corporation (Textron), the syndication and administrative agent. Due to construction delays and cost increases at the Steamboat Grand Hotel project, Grand Summit entered into a $10 million subordinated loan tranche with Textron (Subordinated Construction Loan) on July 25, 2000. The Company used this facility solely for the purpose of funding the completion of the Steamboat Grand Hotel. The Senior Construction Loan and the Subordinated Construction Loan are referred to collectively as the "Construction Loan Facility". The Senior Construction Loan has an outstanding principal balance of $30.6 million as of January 25, 2004 and was in default as of June 29, 2003 due to the failure by Grand Summit to reduce the principal balance outstanding to a maximum of $30.0 million as required under the terms of the agreement. In addition, the Senior Construction Loan further required that the loan be reduced to a maximum of $25.0 million by June 30, 2003 and to $20.0 million by September 30, 2003. As a result, the Subordinated Construction Loan also was in default. Effective December 31, 2003, Grand Summit and Textron entered into amendments to the Senior Construction Loan and the Subordinated Construction Loan. The terms of the revised agreements waive the above referenced defaults, relax the timing of mandatory principal amortization requirements, provide additional liquidity to support ongoing sales and marketing activities of the remaining units at The Canyons Grand Summit and Steamboat Grand hotels, and allow an auction to be held for the remaining units at The Canyons Grand Summit Hotel. The amendments also require that Grand Summit pay the lenders a $175,000 default waiver fee from the proceeds of the auction to satisfy the previous default of not reducing the Senior Construction Loan balance to $30.0 million by June 29, 2003. 14 The Senior Construction Loan principal is payable incrementally as quarter and eighth share unit sales are closed based on a predetermined per unit amount, which approximates between 70% and 80% of the net proceeds of each closing. Mortgages against the commercial core units and unsold inventory at the Grand Summit Hotels at The Canyons and Steamboat, a promissory note from the Steamboat Homeowners Association secured by the Steamboat Grand Summit Hotel parking garage, and the commercial core unit of the Attitash Bear Peak Grand Summit Hotel collateralize the Senior Construction Loan. The Senior Construction Loan is subject to covenants, representations and warranties customary for this type of construction facility. The Senior Construction Loan is non-recourse to the Company and its resort operating subsidiaries (although it is collateralized by substantial assets of Grand Summit, having a total book value of $77.7 million as of January 25, 2004, which in turn comprise substantial assets of the Company's business). The maturity date for funds advanced under the Senior Construction Loan is June 30, 2006. The principal balance outstanding under the Senior Construction Loan was approximately $30.6 million as of January 25, 2004 and had an interest rate on funds advanced of prime plus 3.5%, with a floor of 9.0% (9.0% as of January 25, 2004). The principal balance outstanding under the Subordinated Construction Loan was approximately $10.2 million as of January 25, 2004 and is due on November 30, 2007. The interest rate on the funds advanced is 20%. Upon the repayment of all indebtedness under the Senior Construction Loan, the Subordinated Construction Loan and all other fees, Textron will receive a fee equal to 25% of all gross proceeds of sales of the remaining unsold quarter and eighth share units and commercial units occurring subsequent to repayment. Grand Summit and the lenders also agreed to use their best efforts to enter into an escrow agreement pursuant to which the appropriate deed-in-lieu documentation in respect to the Senior Construction Loan and the Subordinated Construction Loan shall be placed in escrow. Finally, under the Senior Construction Loan, as amended, the following maximum principal balances must be outstanding as of the following dates: June 30, 2004 $19,000,000 September 30, 2004 $18,000,000 December 31, 2004 $17,000,000 March 31, 2005 $14,000,000 June 30, 2005 $12,000,000 September 30, 2005 $11,000,000 December 31, 2005 $10,000,000 March 31, 2006 $ 5,000,000 June 30, 2006 $ - In addition, the amendments to the Subordinated Construction Loan provided additional borrowing availability of approximately $0.6 million for a maximum borrowing capacity of $10.6 million. The Subordinated Construction Loan will continue to bear interest at 20%, payable monthly in arrears, provided that 50% of the interest shall be due and payable in cash and the other 50% of such interest shall, if no events of default exist under the Subordinated Construction Loan or the Senior Construction Loan, automatically be deferred until the final payment date of November 30, 2007. In late February 2004, an auction was held to sell substantially all of the remaining units at The Canyons Grand Summit hotel. Closings are still in process and are expected to close in March 2004. Grand Summit expects to receive proceeds from auction presales, the auction, and post auction sales of approximately $15.6 million, of which $10.0 million will be used to pay down the Senior Construction Loan, $4.5 million will be used for Grand Summit's future working capital needs, and $1.1 million will be used to pay commissions and closing costs. American Skiing Company The Company entered into an agreement dated February 14, 2003 with General Electric Capital Corporation (GE Capital) and CapitalSource Finance LLC (CapitalSource) whereby GE Capital and CapitalSource provided a $91.5 million senior secured loan facility (the Resort Senior Credit Facility) including a revolving credit facility (Revolving Credit Facility), tranche A term loan (Tranche A Term Loan), supplemental term loan (Supplemental Term Loan), and tranche B term loan (Tranche B Term Loan). The Resort Senior Credit Facility is secured by substantially all the assets of the Company (except for the stock of Resort Properties and other real estate subsidiaries) and the assets of its resort operating subsidiaries. Resort Properties and its subsidiaries are not guarantors of the Resort Senior Credit Facility nor are their assets pledged as collateral under the Resort Senior Credit Facility. The Resort Senior Credit Facility consists of the following: 15 o Revolving Credit Facility - $40.0 million, including letter of credit (L/C) availability of up to $5.0. The amount of availability under the Revolving Credit Facility will be correspondingly reduced by the amount of each L/C issued. o Tranche A Term Loan - $25.0 million borrowed on the funding date of February 18, 2003. o Supplemental Term Loan - $6.5 million borrowed on the funding date of February 18, 2003. o Tranche B Term Loan - $20.0 million borrowed on the funding date of February 18, 2003. The Revolving Credit Facility, Tranche A Term Loan and Supplemental Term Loan portions of the Resort Senior Credit Facility mature on April 15, 2006 and bear interest at JPMorgan Chase Bank's prime rate plus 3.25% payable monthly (7.25% as of January 25, 2004). The Supplemental Term Loan requires payments of approximately $1.0 million on January 15 and July 15 of each year, and a final payment of approximately $1.0 million on April 15, 2006. The Tranche B Term Loan matures on June 15, 2006 and bears interest at JPMorgan Chase Bank's prime rate plus 5.0% payable monthly (12.25% as of January 25, 2004) with an interest rate floor of 12.25%. The Resort Senior Credit Facility contains affirmative, negative and financial covenants customary for this type of credit facility, which includes maintaining a minimum level of EBITDA, as defined, places an annual limit on the Company's capital expenditures, requires the Company to have a zero balance on the Revolving Credit Facility on April 1 of each year prior to maturity and contains an asset monetization covenant which requires the Company to refinance the facility or sell assets sufficient to retire the facility on or prior to December 31, 2005. The Resort Senior Credit Facility also restricts the Company's ability to pay cash dividends on or redeem its common and preferred stock. As of January 25, 2004, the Company had $13.5 million, $25.0 million, $5.1 million, and $20.0 million of principal outstanding under the Revolving Credit Facility, Tranche A Term Loan, Supplemental Term Loan, and Tranche B Term Loan portions of the Resort Senior Credit Facility, respectively. As of January 25, 2004, the Company had $26.2 million available for future borrowings under the Revolving Credit Facility. As of January 25, 2004, the Company had $0.3 million of L/C's issued under the Resort Senior Credit Facility. 6. Dividend Restrictions Borrowers under the Company's Resort Senior Credit Facility, which include ASC, are restricted from paying cash dividends on any of their preferred or common stock other than payments to other borrowers or restricted subsidiaries. Borrowers under the Real Estate Term Facility, which include Resort Properties and Resort Properties' subsidiaries, including Grand Summit, are restricted from declaring dividends or advancing funds to ASC by any other method, unless specifically approved by these lenders. Under the indenture governing our 12% senior subordinated notes (the Senior Subordinated Notes), ASC is prohibited from paying cash dividends or making other distributions to its shareholders. 7. Phantom Equity Plan The Company has established the American Skiing Company Phantom Equity Plan (the "LTIP"), which was ratified by the Board of Directors on March 6, 2003. Certain of ASC's officers participate in this plan. Participants are entitled to a cash payment on awards granted under the LTIP, upon a Valuation Event, as defined, or in certain cases to the extent vested upon termination of employment. The amount of any awards are based ultimately on the Equity Value, as defined, obtained through a Valuation Event and generally vest over a four or five-year term as determined by the Compensation Committee. A Valuation Event is any of the following: (i) a sale or disposition of a significant Company operation or property as determined by the Board; (ii) a merger, consolidation or similar event of the Company other than one (A) in which the Company is the surviving entity or (B) where no Change in Control has occurred; (iii) a public offering of equity securities by the Company that yields net proceeds to the Company in excess of $50 million; or (iv) a Change in Control, as defined. Compensation expense will be estimated and recorded based on the probability of the Company achieving a Valuation Event. During the 13 and 26 weeks ended January 25, 2004, the Company recorded a charge of approximately $0.1 million and $0.2 million, respectively, which is included in marketing, general and administrative expenses in the accompanying condensed consolidated statements of 16 operations. The total liability for the LTIP of $0.7 million is included in other long-term liabilities in the January 25, 2004 condensed consolidated balance sheet. 8. Commitments and Contingencies As previously reported in the Company's Form 10-K filed on October 27, 2003 with the Securities and Exchange Commission, the Company entered into an agreement on January 22, 2002 with Triple Peaks, LLC for the sale of the Steamboat resort. The Company later determined that the sale of its Heavenly resort more closely achieved the Company's restructuring objectives and concluded that it would not proceed with the sale of the Steamboat resort. On April 5, 2002, Triple Peaks, LLC filed a lawsuit against ASC in federal district court in Denver, alleging breach of contract resulting from the Company's refusal to close on the proposed sale of the Steamboat resort. The suit seeks both monetary damages resulting from the breach and specific performance of the contract. On April 16, 2002, before an answer to its complaint was filed, Triple Peaks voluntarily dismissed its suit and re-filed a substantially identical complaint in Colorado State District Court in Steamboat, also naming Steamboat Ski & Resort Corporation, Resort Properties and Walton Pond Apartments, Inc. (each direct or indirect subsidiaries of ASC) as additional defendants. On December 31, 2002, the Colorado State District Court issued summary judgment in the Company's favor and against Triple Peaks, confirming that the damages the Company owes Triple Peaks under the contract are limited to $500,000. On January 26, 2003, Triple Peaks appealed the decision of the Colorado State District Court. On January 22, 2004, the Colorado Court of Appeals reversed the judgment of the Colorado State District Court in the Company's favor, finding that the agreement between the Company and Triple Peaks did not, under the circumstances of the Company's refusal to close, limit damages to $500,000. The Court of Appeals remanded the case to the Colorado State District Court with instructions to determine whether damages or specific performance of the agreement was the proper remedy for the Company's refusal to close. The Company has filed a Request for Rehearing with the Colorado Court of Appeals, which request is currently pending. If the Company's request is denied, the Company plans to appeal the judgment of the Court of Appeals to the Colorado Supreme Court and will continue to assert that damages under the agreement are limited to $500,000. The Company has accrued an amount in the accompanying consolidated balance sheet that it deems appropriate. It is possible that the estimated accrual could change significantly due to the inherent uncertainty of litigation and the wide range of possible outcomes. If the decision of the Court of Appeals is upheld and leads to a verdict in favor of Triple Peaks granting either summary judgment or significant monetary damages, or both, the result could have a material adverse impact on the financial position, results of operations, and liquidity of the Company. 17 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements Certain statements contained in this report constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These forward-looking statements are not based on historical facts, but rather reflect our current expectations concerning future results and events. Similarly, statements that describe our objectives, plans or goals are or may be forward-looking statements. We have tried, wherever possible, to identify such statements by using words such as "anticipate", "assume", "believe", "expect", "intend", "plan", and words and terms of similar substance in connection with any discussion of operating or financial performance. Such forward-looking statements involve a number of risks and uncertainties. In addition to factors discussed above, other factors that could cause actual results, performances or achievements to differ materially from those projected include, but are not limited to, the following: changes in regional and national business and economic conditions affecting both our resort operating and real estate segments; competition and pricing pressures; negative impact on demand for our products resulting from terrorism and availability of air travel (including the effect of airline bankruptcies); the payment default under our Real Estate Term Facility and its effects on the results and operations of our real estate segment; any redemption of or legal requirement to redeem our Series A Preferred Stock; failure to maintain improvements to resort operating performance at the covenant levels required by our Resort Senior Credit Facility; a final determination against the Company in the Steamboat litigation which leads to material monetary damages or an order for specific performance for sale of the Steamboat resort; the possibility of domestic terrorist activities and their respective effects on the ski, golf, resort, leisure and travel industries; failure of on-mountain improvements and other capital expenditures to generate incremental revenue; adverse weather conditions regionally and nationally; seasonality of the business; changes to federal, state and local regulations affecting both our resort operating and real estate segments; failure to renew land leases and forest service permits; disruptions in water supply that would impact snowmaking operations; the impact of global warming on long and short-term weather patterns and on ski conditions at our resorts; the loss of any of our executive officers or key operating personnel; and other factors listed from time to time in our documents we have filed with the Securities and Exchange Commission. We caution the reader that this list is not exhaustive. We operate in a changing business environment and new risks arise from time to time. The forward-looking statements included in this document are made only as of the date of this document and under Section 27A of the Securities Act and Section 21E of the Exchange Act, we do not have or undertake any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances. Executive Summary We are organized as a holding company and operate through various subsidiaries. We are one of the largest operators of alpine ski and snowboard resorts in the United States. We develop, own and operate a range of hospitality-related businesses, including skier development programs, hotels, golf courses, restaurants and retail locations. We also develop, market and operate ski-in/ski-out alpine villages, townhouses, condominiums, and quarter and eighth share ownership hotels. We manage our operations in two business segments, ski resort operations and mountainside real estate development. Our resort operating strategies include taking advantage of multi-resort network, increasing our revenue per skier, increasing brand awareness and customer loyalty, expanding our sales and marketing efforts by selecting a single advertising agency to provide services nationwide, continuing to focus on cost management, and improving our hotel occupancy and operating margins. Our current year results have been affected by challenging weather conditions in the eastern resorts. This has been partially offset by favorable snow conditions at our western resorts and a company-wide increase in our season pass revenues. We continue to have discussions with our lenders to restructure our Real Estate Term Facility aimed towards establishing a new entity to hold our real estate development assets. During the thirteen weeks ended January 25, 2004, we have been successful in amending our real estate construction loan facilities. Subsequent to January 25, 2004, an auction was held to sell the remaining units at The Canyons Grand Summit hotel. 18 General The following is our discussion and analysis of financial condition and results of operations for the 13 and 26 weeks ended January 25, 2004. As you read the material below, we urge you to carefully consider our Fiscal 2003 Annual Report on Form 10-K filed on October 27, 2003 and our unaudited condensed consolidated financial statements and related notes contained elsewhere in this report. Real Estate Credit Agreement Defaults On March 30, 2002, our real estate development subsidiary, American Skiing Company Resort Properties, Inc. (Resort Properties), failed to make a mandatory principal payment of $3.75 million under its Real Estate Term Facility with Fleet National Bank (Fleet) and certain other lenders. See "Liquidity and Capital Resources - Real Estate Liquidity - Real Estate Term Facility" below for a discussion of the status of our efforts to restructure the Real Estate Term Facility. The Senior Construction Loan of Grand Summit was also in payment default as of June 29, 2003 due to the failure by Grand Summit to reduce the principal balance outstanding to a maximum of $30.0 million as required under the terms of the agreement. In addition, the Senior Construction Loan further required that the loan be reduced to a maximum of $25.0 million by June 30, 2003 and to $20 million by September 30, 2003. As a result, Grand Summit was also in default under its $10.0 million Subordinated Construction Loan with Textron and various lenders. Effective December 31, 2003, Grand Summit and Textron entered into amendments to the Senior Construction Loan and the Subordinated Construction Loan. The terms of the revised agreements waive the above referenced defaults, relax mandatory principal amortization requirements, provide additional liquidity to support ongoing sales and marketing activities of the remaining units at The Canyons Grand Summit and Steamboat Grand hotels, and allow an auction to be held for the remaining units at The Canyons Grand Summit hotel. The amendments also require that Grand Summit pay the lenders a $175,000 default waiver fee from the proceeds of the auction to satisfy the previous default of not reducing the Senior Construction Loan balance to $30 million by June 29, 2003. See "Liquidity and Capital Resources - Real Estate Liquidity - Construction Loan Facility" below for further discussion of the terms of the amendments to the Construction Loan Facility. Liquidity and Capital Resources Short-Term Our primary short-term liquidity needs involve funding seasonal working capital requirements, marketing and selling real estate development projects, funding our Fiscal 2004 capital improvement program, and servicing our debt. Our cash requirements for ski-related and real estate development/sales activities are provided from separate sources. As described below, we entered into a new $91.5 million senior secured loan facility (the Resort Senior Credit Facility) on February 14, 2003 and used our initial borrowings to refinance the prior resort senior credit facility. Our primary source of liquidity for ski-related working capital and ski-related capital improvements are cash flows from operations of our non-real estate subsidiaries and borrowings under our Resort Senior Credit Facility. The total debt outstanding on our Resort Senior Credit Facility as of January 25, 2004 was approximately $63.6 million. Real estate development and real estate working capital is funded primarily through unit inventory sales, short-term rental of remaining unit inventory, as well as lease payments from long-term commercial tenants. Historically, the Construction Loan Facility funded such working capital. The Construction Loan Facility is without recourse to ASC and the resort operating subsidiaries and is collateralized by significant real estate assets of Resort Properties and its subsidiaries, including the assets and stock of Grand Summit. As of January 25, 2004, the carrying value of the total assets that collateralized the Construction Loan Facility and which are included in the accompanying condensed consolidated balance sheet was approximately $77.7 million. The total debt outstanding on the Construction Loan Facility as of January 25, 2004 was approximately $40.8 million. See "Real Estate Liquidity - Real Estate Term Facility" and "Real Estate Liquidity - Construction Loan Facility" below. In late February 2004, an auction was held to sell substantially all of the remaining units at The Canyons Grand Summit hotel. Closings are still in process and are expected to close in March 2004. Grand Summit expects to receive proceeds from auction presales, the auction, and post auction sales of approximately $15.6 million, of which $10.0 million will be used to pay down the 19 Senior Construction Loan, $4.5 million will be used for Grand Summit's future working capital needs, and $1.1 million will be used to pay commissions and closing costs. Resort Liquidity We entered into an agreement dated February 14, 2003 with General Electric Capital Corporation (GE Capital) and CapitalSource Finance LLC (CapitalSource) whereby GE Capital and CapitalSource provided a new $91.5 million senior secured loan facility (Resort Senior Credit Facility). The Resort Senior Credit Facility is secured by substantially all of our holding company assets, excluding the stock of Resort Properties and other real estate subsidiaries, and the assets of our resort operating subsidiaries. Resort Properties and its subsidiaries are not guarantors of the Resort Senior Credit Facility nor are their assets pledged as collateral under the Resort Senior Credit Facility. The Resort Senior Credit Facility consists of the following: o Revolving Credit Facility - $40.0 million, including letter of credit (L/C) availability of up to $5.0 million. The amount of availability under the Revolving Credit Facility will be correspondingly reduced by the amount of each L/C issued. As of January 25, 2004, we had approximately $13.5 million borrowed on this facility and approximately $0.3 million of outstanding L/Cs, leaving us $26.2 million in availability. o Tranche A Term Loan - $25.0 million borrowed as of January 25, 2004, $0 availability; o Supplemental Term Loan - $5.1 million borrowed as of January 25, 2004, $0 availability; and o Tranche B Term Loan - $20.0 million borrowed as of January 25, 2004, $0 availability. The Revolving Credit Facility, Tranche A Term Loan, and Supplemental Term Loan portions of the Resort Senior Credit Facility mature on April 15, 2006 and bear interest at JPMorgan Chase Bank's prime rate plus 3.25%, payable monthly (7.25% as of January 25, 2004). The Supplemental Term Loan requires principal payments of approximately $1.0 million on January 15 and July 15 of each year, with a final payment of approximately $1.0 million on April 15, 2006. The Tranche B Term Loan matures on June 15, 2006 and bears interest at JPMorgan Chase Bank's prime rate plus 5.0%, payable monthly (12.25% as of January 25, 2004) with an interest rate floor of 12.25%. The Resort Senior Credit Facility contains affirmative, negative and financial covenants customary for this type of credit facility, which includes maintaining a minimum level of EBITDA, as defined, places a limit on our annual capital expenditures, requires the Company to have a zero balance on the Revolving Credit Facility on April 1 of each year prior to maturity, and contains an asset monetization covenant which requires us to refinance the facility or sell assets sufficient to retire the facility on or prior to December 31, 2005. The financial covenants of the Resort Senior Credit Facility also restrict our ability to pay cash dividends on or redeem our common and preferred stock. As of February 22, 2004, we had $0, $25.0 million, $5.1 million, and $20.0 million of principal outstanding under the Revolving Credit Facility, Tranche A Term Loan, Supplemental Term Loan, and Tranche B Term Loan portions of the Resort Senior Credit Facility, respectively. Furthermore, as of February 22, 2004, we had approximately $0.3 million in outstanding L/Cs with approximately $39.7 million available for future borrowings under the Revolving Credit Facility. We currently anticipate that the remaining borrowing capacity under the Resort Senior Credit Facility will be sufficient to meet our working capital needs through the end of Fiscal 2004. We closely monitor our operating results that impact our ability to meet the financial covenants under our Resort Senior Credit Facility. We take various actions to maintain compliance with our financial covenants, including selling non-core assets to increase revenues, and reducing our cost structure during the off-season and seasonal low-visitation at our resorts. In the event of a violation of the financial covenants under our Resort Senior Credit Facility, we would engage in a discussion with our lenders for a waiver of those covenants for the period in question. Due to the restrictions under our Resort Senior Credit Facility and the indenture governing our Senior Subordinated Notes, we have limited access to alternate sources of funding. The Company was in compliance with all financial covenants of the Resort Senior Credit Facility through the end of its second fiscal quarter on January 25, 2004. However, weather conditions at our eastern resorts in the second and third fiscal quarters of 2004 have not been favorable, and our results of 20 operations at those resorts for such periods have been below management's expectations. Accordingly, the Company's ability to meet the financial covenants of the Resort Senior Credit Facility for its third fiscal quarter will be dependent upon the return of operating revenues to historical levels and there can be no assurance that the Company will continue to meet all of its financial covenants under the Resort Senior Credit Facility. The length of the ski operating season at the Company's eastern resorts will also impact the Company's operating results for the third fiscal quarter. Our significant debt levels affect our liquidity. As a result of our highly leveraged position, we have significant cash requirements to service interest and principal payments on our debt. Consequently, cash availability for working capital needs, capital expenditures, and acquisitions is significantly limited, outside of any availability under the Resort Senior Credit Facility. Furthermore, our Resort Senior Credit Facility and the indenture governing our Senior Subordinated Notes contain significant restrictions on our ability to obtain additional sources of capital and may affect our liquidity. These restrictions include restrictions on the sale of assets, restrictions on the incurrence of additional indebtedness, and restrictions on the issuance of preferred stock. Real Estate Liquidity To fund working capital and fund its real estate development plan, Resort Properties relies primarily on unit inventory sales, short-term rental of remaining unit inventory, as well as lease payments from long-term commercial tenants. Resort Properties historically relied on the net proceeds from the sale of real estate developed for sale, the Real Estate Term Facility, and the Construction Loan Facility. A substantial portion of our developable real estate and the commercial core units at the Sundial Lodge at The Canyons and the Mount Snow Grand Summit Hotel in Vermont are pledged to the lenders under the Real Estate Term Facility. Real Estate Term Facility: Effective May 20, 2002, Resort Properties was in default on its Real Estate Term Facility due to its failure to make a mandatory principal payment of $3.75 million and the indebtedness was accelerated on May 31, 2002. As a result, all indebtedness under the facility is currently due and payable. The Real Estate Term Facility is comprised of three tranches, each with separate interest rates and maturity dates as follows: o Tranche A is a revolving facility with a current maximum principal amount of $17.0 million which bears interest at a variable rate equal to the Fleet National Bank Base Rate plus 2.0% (payable monthly in arrears). As a result of the default, the default interest rate on Tranche A is the Fleet National Bank Base Rate plus 6.0% (10.0% as of January 25, 2004). Prior to the default, mandatory principal reductions were required in certain prescribed percentages ranging from 50% to 75% of net proceeds from any future sales of undeveloped parcels. Prior to the default, the remaining principal amount outstanding under Tranche A was scheduled to be paid in full on June 30, 2003. o Tranche B is a term loan facility that has a maximum principal amount of $25.0 million, bears interest at a fixed rate of 18% per annum (10% per annum is payable monthly in arrears and the remaining 8% per annum accrues, is added to the principal balance of Tranche B, and bears interest at 18% per annum, compounded annually). As a result of the default, the default interest rate on Tranche B is 29% per annum. Mandatory principal payments on Tranche B of $10.0 million were due on each of December 31, 2003 and June 30, 2004. Prior to the default, the remaining $5.0 million of principal and all accrued and unpaid interest on Tranche B was scheduled to be paid in full on December 31, 2004. o Tranche C is a term loan facility that has a maximum principal amount of $12.0 million, bears interest at an effective rate of 29% per annum and, prior to the default, was scheduled to mature on December 31, 2005. As a result of the default, the default interest rate on Tranche C is 29% per annum. Accrued interest is added to the principal balance of Tranche C and is compounded semi-annually. On November 22, 2002, Resort Properties entered into a forbearance agreement with the lenders whereby the lenders agreed to not pursue additional foreclosure remedies and to cease publication of foreclosure notices for a 30-day period. Although this 30-day period expired, management continues discussions with Fleet and the other lenders regarding a restructuring of this facility, and Fleet and the other lenders have not exercised any further foreclosure remedies since the expiration of the forbearance agreement. Management's ongoing efforts with the lenders are aimed towards a restructuring of the facility with the establishment of a new entity to hold the assets of Resort Properties' which are pledged as collateral under the facility. The 21 equity in the new entity is expected to be held by a combination of the lenders under the facility and Resort Properties. The facility remains in default pending completion of these negotiations. There is no assurance that negotiations with the lenders will be successfully completed. Furthermore, regardless of the outcome of this proposed restructuring, we may lose control of assets pledged as collateral under the facility and future access to value creation from these real estate assets. A substantial portion of our developable real estate, including substantially all of the developable residential real estate at The Canyons along with certain core village real estate at Killington, and the stock of our real estate development subsidiaries (including Grand Summit) is pledged to Fleet and the lenders under the facility. The commercial core units at the Sundial Lodge at The Canyons and the Mount Snow Grand Summit Hotel in Vermont are also pledged to Fleet and the lenders. The Grand Summit unit inventory does not secure the Real Estate Term Facility, although the pledge of the stock of Grand Summit to secure the Real Estate Term Facility means that we may lose control of the Grand Summit unit inventory to the lenders under the Real Estate Term Facility. Other remedies available to the lenders include, but are not limited to, setoff of cash collateral amounts in Resort Properties' name held at Fleet in the amount of approximately $1.5 million, foreclosure of real and personal property owned by Resort Properties and pledged to the lenders (including all of the capital stock of Grand Summit), and other customary secured creditor remedies. As of January 25, 2004, the carrying value of the total assets that collateralized the $78.2 million Real Estate Term Facility and the Company's $40.8 million real estate construction loan facilities was approximately $108.0 million. This collateral includes $77.7 million of Grand Summit assets pledged under the Company's $40.8 million real estate construction loan facilities. As of January 25, 2004, the principal balances outstanding, including accrued and unpaid interest, under Tranches A, B and C of the Real Estate Term Facility were $11.8 million, $41.8 million, and $24.6 million, respectively. As of February 22, 2004, the principal balances outstanding, including accrued and unpaid interest, under Tranches A, B and C of the Real Estate Term Facility were $11.8 million, $42.4 million, and $25.2 million, respectively. Construction Loan Facility: We conduct substantially all of our real estate development through subsidiaries, each of which is a wholly owned subsidiary of Resort Properties. Grand Summit owns our existing Grand Summit Hotel projects at Steamboat, The Canyons, and Attitash Bear Peak, which are primarily financed through the $110 million Senior Construction Loan. Due to construction delays and cost increases at the Steamboat Grand Hotel project, on July 25, 2000, Grand Summit entered into the $10 million Subordinated Construction Loan. Together they comprise the Construction Loan Facility. We used the Construction Loan Facility solely for the purpose of funding the completion of the Steamboat Grand Hotel. The Senior Construction Loan of Grand Summit was also in payment default as of June 29, 2003 due to the failure by Grand Summit to reduce the principal balance outstanding to a maximum of $30.0 million as required under the terms of the agreement. In addition, the Senior Construction Loan further required that the loan be reduced to a maximum of $25.0 million by June 30, 2003 and to $20.0 million by September 30, 2003. As a result, the Subordinated Construction Loan also was in default. Effective December 31, 2003, Grand Summit and Textron entered into amendments to the Senior Construction Loan and the Subordinated Construction Loan. The terms of the revised agreements waive the above referenced defaults, relax mandatory principal amortization requirements, provide additional liquidity to support ongoing sales and marketing activities of the remaining units at The Canyons Grand Summit and Steamboat Grand hotels, and allow an auction to be held for the remaining units at The Canyons Grand Summit hotel. The amendments also require that Grand Summit pays the lenders a $175,000 default waiver fee from the proceeds of the auction to satisfy the previous default of not reducing the Senior Construction Loan balance to $30 million by June 29, 2003. As of January 25, 2004, the amount outstanding under the Senior Construction Loan was $30.6 million and there were no borrowings available under this facility. The principal is payable incrementally as quarter and eighth share unit sales are closed based on a predetermined per unit amount, which approximates between 70% and 80% of the net proceeds of each closing. Mortgages against the commercial core units and unsold unit inventory at the Grand Summit Hotels at The Canyons and Steamboat, a promissory note from the Steamboat Homeowners Association secured by the Steamboat Grand Summit hotel parking garage, and the commercial core unit of the Attitash Bear Peak Grand Summit Hotel collateralize the Senior Construction Loan. This facility is subject to covenants, representations and warranties customary for this type of construction facility. The Senior Construction Loan is non-recourse to us and our resort operating subsidiaries (although it is collateralized by substantial assets of Grand Summit, having a total book value of $77.7 million as of January 25, 2004, which in turn comprise substantial assets of our real estate business). The maturity date for funds advanced under the Steamboat portion of the Senior Construction Loan is June 30, 2006. The principal balance outstanding under the Steamboat portion of the Senior Construction Loan was approximately $30.6 million as of January 25, 2004 and had an interest rate on funds advanced 22 of prime plus 3.5%, with a floor of 9.0% (9.0% as of January 25, 2004). The Canyons portion of the Senior Construction Loan was repaid during March 2003 from proceeds from quartershare unit sales. The Subordinated Construction Loan bears interest at a fixed rate of 20% per annum, payable monthly in arrears, provided that only 50% of the amount of this interest is due and payable in cash and the other 50% of such interest will, if no events of default exist under the Subordinated Construction Loan or the Senior Construction Loan, automatically be deferred until the final payment date. The amendments to the Subordinated Construction Loan provided additional borrowing availability of approximately $0.6 million for a maximum borrowing capacity of $10.6 million. The maturity date for funds advanced under the Subordinated Construction Loan, as amended, is November 30, 2007. The principal balance outstanding under the Subordinated Construction Loan was approximately $10.2 million as of January 25, 2004 and $0.4 million was available under this facility. The Subordinated Construction Loan is secured by the same collateral which secures the Senior Construction Loan. The Senior Construction Loan, as amended, must have the following maximum outstanding principal balances as of the following dates: June 30, 2004 $19,000,000 September 30, 2004 $18,000,000 December 31, 2004 $17,000,000 March 31, 2005 $14,000,000 June 30, 2005 $12,000,000 September 30, 2005 $11,000,000 December 31, 2005 $10,000,000 March 31, 2006 $ 5,000,000 June 30, 2006 $ - As of February 22, 2004, the amount outstanding under the Senior Construction Loan was $29.8 million and there were no borrowings available under this facility. As of February 22, 2004, the amount outstanding under the Subordinated Construction Loan was $10.6 million and there were no borrowings available under this facility. In addition, in late February 2004, an auction was held to sell substantially all of the remaining units at The Canyons Grand Summit hotel. Closings are still in process and are expected to close in March 2004. Grand Summit expects to receive proceeds from auction presales, the auction, and post auction sales of approximately $15.6 million, of which $10.0 million will be used to pay down the Senior Construction Loan, $4.5 million will be used for Grand Summit's future working capital needs, and $1.1 million will be used to pay commissions and closing costs. Series A Preferred Stock Redemption We have 36,626 shares of Series A Preferred Stock outstanding, with an accreted value of approximately $70.2 million as of January 25, 2004. The Series A Preferred Stock was redeemable on November 12, 2002 at an aggregate redemption price of approximately $62 million, to the extent that we had funds legally available for that redemption. If the Series A Preferred Stock is not permitted to be redeemed because there are not legally available funds, we must redeem that number of shares of Series A Preferred Stock which we can lawfully redeem, and from time to time thereafter, as soon as funds are legally available, we must redeem shares of our Series A Preferred Stock until we have done so in full. Prior to the November 12, 2002 redemption date, based on all relevant factors, our Board of Directors determined not to redeem any shares of stock on the redemption date. On January 27, 2003, the holders of the Series A Preferred Stock demanded that we redeem all of the Series A Preferred Stock immediately and on April 8, 2003, the Series A Preferred Stockholders demanded pursuant to Delaware law to review certain of our records. We will continue to assess our obligations with respect to the requirements of the redemption provisions of our Series A Preferred Stock. Because the Series A Preferred Stock was not redeemed on November 12, 2002, the certificate of designation for the Series A Preferred Stock provides that the holders are entitled to elect two new members of our board of directors. We have not yet been advised by the holders of the Series A Preferred Stock whether they intend to exercise their right to elect two directors at or prior to our next annual shareholders meeting or whether they intend to take any other action, including legal action, to seek to compel our redemption of the Series A Preferred Stock. If the holders of the Series A Preferred Stock were to commence any litigation to compel us to redeem the Series A Preferred Stock, based on present facts and circumstances, we would vigorously contest that litigation. If we are required to redeem all or any portion of the Series A Preferred Stock, it could have a material adverse effect on our business, results of operations, and financial condition. 23 We are not permitted to redeem our Series A Preferred Stock under the terms of our Resort Senior Credit Facility and the terms of the indenture governing our Senior Subordinated Notes. If any redemption occurs or the holders of our Series A Preferred Stock obtain and seek to enforce a final judgment against us that is not paid, discharged or stayed, this could result in an event of default under those debt instruments, and the lenders and holders of that debt could declare all amounts outstanding to be due and payable immediately. If we are required to redeem all or any portion of our Series A Preferred Stock, either as a result of a court judgment or otherwise, we would have to consider seeking an amendment or waiver of the terms of the Resort Senior Credit Facility and the indenture governing the Senior Subordinated Notes, selling material assets or operations, refinancing our indebtedness and our Series A Preferred Stock, seeking to raise additional debt or equity capital, delaying capital expenditures and other investments in our business and/or restructuring our indebtedness and preferred stock. No assurance can be given that we would be successful in taking any of these steps or that we would have the necessary liquidity or assets to effect any redemption of our Series A Preferred Stock and any indebtedness required to be repaid. As a result, any redemption of, or legal requirement to redeem, our Series A Preferred Stock could have a material adverse effect on us. Long-Term Our primary long-term liquidity needs are to fund skiing-related capital improvements at certain of our resorts. For Fiscal 2004, we anticipate our annual maintenance capital needs to be approximately $8.5 million (through January 25, 2004, the Company has expended approximately $6.6 million). There is a considerable degree of flexibility in the timing and, to a lesser degree, scope of our growth capital program. Although we can defer specific capital expenditures for extended periods, continued growth of skier visits, revenues and profitability will require continued capital investment in on-mountain improvements. We finance on-mountain capital improvements through resort cash flows, capital leases, and our Resort Senior Credit Facility. The size and scope of the capital improvement program will generally be determined annually depending upon the strategic importance and expected financial return of certain projects, future availability of cash flows from each season's resort operations, and future borrowing availability and covenant restrictions under the Resort Senior Credit Facility. The Resort Senior Credit Facility places a maximum level of non-real estate capital expenditures for Fiscal 2004 at $8.5 million, with the ability to increase this amount in the future if certain conditions are met. We believe that these capital expenditure amounts will be sufficient to meet our non-real estate capital improvement needs for Fiscal 2004. We closely monitor our operating results that impact our ability to meet the financial covenants under our Resort Senior Credit Facility. We take various actions to maintain compliance with our financial covenants, including selling non-core assets to increase revenues, and reducing our cost structure during the off-season and seasonal low-visitation at our resorts. In the event of a violation of the financial covenants under our Resort Senior Credit Facilty, we would engage in a discussion with our lenders for a waiver of those covenants for the period in question. Due to the restrictions under our Resort Senior Credit Facility and the indenture governing our Senior Subordinated Notes, we have limited access to alternate sources of funding. 24 Results of Operations For the 13 weeks ended January 26, 2003 compared to the 13 weeks ended January 25, 2004 Resort Operations: The components of resort operations for the 13 weeks ended January 26, 2003 and January 25, 2004 are as follows (in thousands): ------------------------------------------------------------------------------ 13 Weeks ended ------------------------------- ------------ 1/26/03 1/25/04 Variance --------------- --------------- ------------ Total resort revenues $ 98,961 $ 92,904 $ (6,057) --------------- --------------- ------------ Cost of resort operations 65,794 62,410 (3,384) Marketing, general and administrative 16,552 20,490 3,938 Depreciation and amortization 10,981 10,197 (784) Interest expense 6,916 17,508 10,592 --------------- --------------- ------------ Total resort expenses 100,243 110,605 10,362 --------------- --------------- ------------ Loss from resort operations $ (1,282) $ (17,701) $ (16,419) =============== =============== ============ ------------------------------------------------------------------------------ Resort revenues were approximately $6.1 million, or 6.1%, lower in the 13 weeks ended January 25, 2004 when compared to the 13 weeks ended January 26, 2003. This is a result of a decrease of approximately 16% in skier visits at our eastern resorts due to extremely challenging weather conditions. This included warmer than normal weather conditions in November which required us to delay planned opening dates, followed by alternating record snowfalls and record rains in early December, rain over the Christmas - New Year's holiday period, and unrelenting sub-zero temperatures and wind on weekends in January. We are unable to predict future weather patterns or the impact that weather patterns may have on our results of operations or visitation. The decrease in revenues in the east were partially offset by an increase of approximately 2% in skier visits at our western resorts due to good early season snowfall, near record snowfall in December, and a company-wide increase of approximately $1.8 million in season pass revenues for the 13 weeks ended January 25, 2004. Despite the overall decrease in skier visits in the east, we have implemented certain initiatives at all of our resorts that have increased ticket yield per skier visit and increased other on-mountain revenue per skier visit over the comparable period in Fiscal 2003. Resort operating expenses (including marketing, general and administrative) for the 13 weeks ended January 25, 2004 were approximately $5.9 million higher than the same period of Fiscal 2003, primarily as a result of the following: (i) $10.6 million increase in interest expense due primarily to $10.6 million of accretion of discount and dividends on mandatorily redeemable preferred stock for the 13 weeks ended January 25, 2004 that is now classified as interest expense due to the adoption of SFAS No. 150, whereas these amounts were classified as accretion of discount and dividends on mandatorily redeemable preferred stock for the 13 weeks ended January 26, 2003; (ii) $3.4 million decrease in cost of resort operations due to lower volume of skier visits and implemented cost savings, which resulted in payroll savings of approximately $2.1 million; (iii) $4.0 million increase in marketing, general and administrative costs due to increased costs associated with compliance with the Sarbanes-Oxley Act, continuation of building a corporate human resource group, and an increase due to accruals associated with our Phantom Equity Plan and other legal matters, offset by a decrease in marketing costs; and (iv) $0.8 million decrease in depreciation. Recent Trends: For the four weeks ended February 22, 2004, our revenues are approximately $2.0 million ahead of the same period in Fiscal 2003. Our resorts experienced increased skier visits during the Presidents' Day holiday weekend due to moderating weather conditions in the east. As of February 22, 2004, our hotel booking pace for the remainder of the ski season is approximately $0.3 million behind the pace of our bookings at the same time last year. As discussed above, our season pass revenue for the remainder of the season will continue to significantly pace ahead of the comparable period of Fiscal 2003. 25 The Company was in compliance with all financial covenants of the Resort Senior Credit Facility through the end of its second fiscal quarter on January 25, 2004. However, weather conditions at our eastern resorts in the second and third fiscal quarters of 2004 have not been favorable, and our results of operations at those resorts for such periods have been below management's expectations. Accordingly, the Company's ability to meet the financial covenants of the Resort Senior Credit Facility for its third fiscal quarter will be dependent upon the return of operating revenues to historical levels, and there can be no assurance that the Company will be able to meet all of the financial covenants under the Resort Senior Credit Facility. The length of the ski operating season at the Company's eastern resorts will also impact the Company's operating results for the third fiscal quarter. Real Estate Operations: The components of real estate operations are as follows: ------------------------------------------------------------------------------ 13 weeks ended -------------------------------- ------------ 1/26/03 1/25/04 Variance --------------- ---------------- ------------ Total real estate revenues $ 1,325 $ 10,056 $ 8,731 --------------- ---------------- ------------ Cost of real estate operations 1,898 8,538 6,640 Depreciation and amortization 468 434 (34) Interest expense 5,126 5,072 (54) --------------- ---------------- ------------ Total real estate expenses 7,492 14,044 6,552 --------------- ---------------- ------------ Loss from real estate operations $ (6,167) $ (3,988) $ 2,179 =============== ================ ============ ------------------------------------------------------------------------------ Real estate revenues increased by $8.7 million in the 13 weeks ended January 25, 2004 when compared to the same period in Fiscal 2003, from $1.3 million to $10.1 million. This was primarily due to the sale of three parcels at our Steamboat resort for $8.9 million and an increase of approximately $0.3 million of Steamboat unit sales, offset by a decrease of approximately $0.7 million in revenues recognized on the closings of quartershare units at The Canyons due to the announcement of the auction for the remaining units at The Canyons Grand Summit Hotel described below and the expectation that lower prices would be available at the auction. Our loss from real estate operations decreased by $2.2 million, from $6.2 million in the 13 weeks ended January 26, 2003 to $4.0 million in the 13 weeks ended January 25, 2004. This was a result primarily of the following: (i) $8.7 million increase in revenues recognized as discussed above, (ii) $6.6 million increase in cost of real estate operations resulting from the sale of the three parcels at Steamboat, and (iii) $0.1 million decrease in interest expense and depreciation and amortization. Recent Trends: In late February 2004, an auction was held to sell substantially all of the remaining units at The Canyons Grand Summit hotel. Grand Summit expects to receive proceeds from auction presales, the auction, and post auction sales of approximately $15.6 million, which will result in a gain of approximately $6.8 million. These sales are expected to close in March 2004. Sales volumes at our Grand Summit property at Steamboat continue to decrease. We believe that this is primarily related to the continuing disruptions related to our real estate restructuring efforts and a continuing decline of the real estate market for these types of units. Benefit from income taxes: We recorded no benefit from income taxes for either the 13 weeks ended January 26, 2003 or the 13 weeks ended January 25, 2004. We believe it is more likely than not that we will not realize income tax benefits from operating losses in the foreseeable future. 26 Accretion of discount and dividends on mandatorily redeemable preferred stock: The dividends on mandatorily redeemable preferred stock for the 13 weeks ended January 26, 2003 were $9.2 million. For the 13 weeks ended January 25, 2004, accretion of discount and dividends on mandatorily redeemable preferred stock of $10.6 million is not recorded as accretion of discount and dividends on mandatorily redeemable preferred stock but has been included in interest expense in resort operations due to the adoption of SFAS No. 150. This increase of the accretion is primarily attributable to the compounding effect of accruing dividends on the value of the preferred shares. Results of Operations For the 26 weeks ended January 26, 2003 compared to the 26 weeks ended January 25, 2004 Resort Operations: The components of resort operations for the 26 weeks ended January 26, 2003 and January 25, 2004 are as follows (in thousands): ------------------------------------------------------------------------------ 26 Weeks ended ------------------------------- ------------ 1/26/03 1/25/04 Variance --------------- --------------- ------------ Total resort revenues $ 115,872 $ 109,032 $ (6,840) --------------- --------------- ------------ Cost of resort operations 88,294 84,935 (3,359) Marketing, general and administrative 26,585 30,770 4,185 Restructuring charges - 137 137 Depreciation and amortization 13,005 12,067 (938) Interest expense 14,128 34,696 20,568 --------------- --------------- ------------ Total resort expenses 142,012 162,605 20,593 --------------- --------------- ------------ Loss from resort operations $ (26,140) $ (53,573) (27,433) =============== =============== ============ ------------------------------------------------------------------------------ Resort revenues were approximately $6.8 million, or 5.9%, lower in the 26 weeks ended January 25, 2004 when compared to the 26 weeks ended January 26, 2003. As mentioned previously, this is a result of a decrease in skier visits at our eastern resorts due to extremely challenging weather conditions. Revenues also decreased due to lower summer visits caused by poor weather and a soft economy. These decreases were partially offset by an increase in skier visits at our western resorts due to good early season snowfall, near record snowfall in December, and a company-wide increase of approximately $1.8 million in season pass revenues. Resort operating expenses (including marketing, general and administrative) for the 26 weeks ended January 25, 2004 were approximately $16.1 million higher than the same period of Fiscal 2003, primarily as a result of the following: (i) $20.6 million increase in interest expense due primarily to $20.8 million of accretion of discount and dividends on mandatorily redeemable preferred stock for the 26 weeks ended January 25, 2004 that is now classified as interest expense due to the adoption of SFAS No. 150, whereas these amounts were classified as accretion of discount and dividends on mandatorily redeemable preferred stock for the 26 weeks ended January 26, 2003; (ii) $3.4 million decrease in cost of resort operations due to lower volumes of revenues and due to implemented cost savings, which resulted in payroll savings of approximately $2.2 million; (iii) $4.2 million increase in marketing, general and administrative costs due to increased costs associated with compliance with the Sarbanes-Oxley Act, continuation of building a corporate human resource group, and an increase due to accruals associated with our Phantom Equity Plan and other legal matters, offset by a decrease in marketing costs; (iv) $0.1 million increase in restructuring charges; and (v) $0.9 million decrease in depreciation. 27 Real Estate Operations: The components of real estate operations are as follows: ------------------------------------------------------------------------------ 26 weeks ended -------------------------------- ------------ 1/26/03 1/25/04 Variance --------------- ---------------- ------------ Total real estate revenues $ 5,039 $ 12,401 $ 7,362 --------------- ---------------- ------------ Cost of real estate operations 5,474 10,196 4,722 Depreciation and amortization 860 867 7 Interest expense 10,188 10,712 524 --------------- ---------------- ------------ Total real estate expenses 16,522 21,775 5,253 --------------- ---------------- ------------ Loss from real estate operations $ (11,483) $ (9,374) $ 2,109 =============== ================ ============ ------------------------------------------------------------------------------ Real estate revenues increased by $7.4 million in the 26 weeks ended January 25, 2004 when compared to the same period in Fiscal 2003, from $5.0 million to $12.4 million. This was primarily due to the sale of three parcels at our Steamboat resort for $8.9 million and an increase of $1.2 million in closing of unit sales at Steamboat, offset by a decrease of $3.1 in revenues recognized on the closings of quartershare units at The Canyons due to the announcement of the auction for the remaining units at The Canyons Grand Summit Hotel in February 2004, continuing disruptions related to our real estate restructuring efforts, and weakening economic conditions. Our loss from real estate operations decreased by $2.1 million, from $11.5 million in the 26 weeks ended January 26, 2003 to $9.4 million in the 26 weeks ended January 25, 2004. This was a result primarily of the following: (i) $7.4 million increase in revenues recognized as discussed above, (ii) $4.7 million increase in cost of real estate operations resulting from the sale of the three parcels at Steamboat, and (iii) $0.5 million increase in interest expense resulting from an increase in debt balances. Benefit from income taxes: We recorded no benefit from income taxes for either the 26 weeks ended January 26, 2003 or the 26 weeks ended January 25, 2004. We believe it is more likely than not that we will not realize income tax benefits from operating losses in the foreseeable future. Accretion of discount and dividends on mandatorily redeemable preferred stock: The dividends on mandatorily redeemable preferred stock for the 26 weeks ended January 26, 2003 were $18.2 million. For the 26 weeks ended January 25, 2004, accretion of discount and dividends on mandatorily redeemable preferred stock of $20.8 million is not recorded as accretion of discount and dividends on mandatorily redeemable preferred stock but has been included in interest expense due to the adoption of SFAS No. 150. This increase of the accretion is primarily attributable to the compounding effect of accruing dividends on the value of the preferred shares. Recently Issued Accounting Standards: In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" (SFAS No. 150). SFAS No. 150 establishes standards for how financial instruments with characteristics of both liabilities and equity should be measured and classified and requires that an issuer classify a financial instrument that is within its scope as a liability. SFAS No. 150 is implemented prospectively and restatement is not permitted. The Company adopted SFAS No. 150 effective July 28, 2003. As a result of adopting SFAS No. 150, approximately $298.7 million of mezzanine-level securities were reclassified to liabilities in the consolidated balance sheet in the first quarter of Fiscal 2004. This represents the carrying value of all of the classes of mandatorily redeemable preferred stock. In addition, approximately $43.1 million of accretion of discount and dividends on the preferred stock in Fiscal 2004 will be included in interest expense, whereas previously it was reported as accretion 28 of discount and dividends on mandatorily redeemable preferred stock. For the 13 weeks and 26 weeks ended January 25, 2004, $10.6 million and $20.8 million, respectively, of accretion of discount and dividends on the preferred stock was included in interest expense. For the 13 weeks and 26 weeks ended January 26, 2003 approximately $9.2 million and $18.2 million, respectively, of accretion of discount and dividends on the preferred stock was included in accretion of discount and dividends on mandatorily redeemable preferred stock. Item 3 Quantitative and Qualitative Disclosures about Market Risk There have been no material changes in information relating to market risk since our disclosure included in Item 7A of Form 10-K for the fiscal year ended July 27, 2003, as filed with the Securities and Exchange Commission on October 27, 2003. Item 4 Controls and Procedures (a) Evaluation of disclosure controls and procedures. Our Chief Executive Officer and our Chief Financial Officer carried out an evaluation of the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)). Based on that evaluation, these officers have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) Changes in internal controls over financial reporting. No change occurred in the Company's internal controls over financial reporting during the quarter ended January 25, 2004 that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting. It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only reasonable assurance that our controls will succeed in achieving their stated goals under all potential future conditions. Part II - Other Information Item 1 Legal Proceedings As previously reported in the Company's Form 10-K filed on October 27, 2003 with the Securities and Exchange Commission, the Company entered into an agreement on January 22, 2002 with Triple Peaks, LLC for the sale of the Steamboat resort. The Company later determined that the sale of its Heavenly resort more closely achieved the Company's restructuring objectives and concluded that it would not proceed with the sale of the Steamboat resort. On April 5, 2002, Triple Peaks, LLC filed a lawsuit against ASC in federal district court in Denver, alleging breach of contract resulting from the Company's refusal to close on the proposed sale of the Steamboat resort. The suit seeks both monetary damages resulting from the breach and specific performance of the contract. On April 16, 2002, before an answer to its complaint was filed, Triple Peaks voluntarily dismissed its suit and re-filed a substantially identical complaint in Colorado State District Court in Steamboat, also naming Steamboat Ski & Resort Corporation, Resort Properties and Walton Pond Apartments, Inc. (each direct or indirect subsidiaries of ASC) as additional defendants. On December 31, 2002, the Colorado State District Court issued summary judgment in the Company's favor and against Triple Peaks, confirming that the damages the Company owes Triple Peaks under the contract are limited to $500,000. On January 26, 2003, Triple Peaks appealed the decision of the Colorado State District Court. On January 22, 2004, the Colorado Court of Appeals reversed the judgment of the Colorado State District Court in the Company's favor, finding that the agreement between the Company and Triple Peaks did not, under the circumstances of the Company's refusal to close, limit damages to $500,000. The Court of Appeals remanded the case to the Colorado State District Court with instructions to determine whether damages or specific performance of the agreement was the proper remedy for the Company's refusal to close. 29 The Company has filed a Request for Rehearing with the Colorado Court of Appeals, which request is currently pending. If the Company's request is denied, the Company plans to appeal the judgment of the Court of Appeals to the Colorado Supreme Court and will continue to assert that damages under the agreement are limited to $500,000. The Company has accrued an amount in the accompanying consolidated balance sheet that it deems appropriate. It is possible that the estimated accrual could change significantly due to the inherent uncertainty of litigation and the wide range of possible outcomes. If the decision of the Court of Appeals is upheld and leads to a verdict in favor of Triple Peaks granting either summary judgment or significant monetary damages, or both, the result could have a material adverse impact on the financial position, results of operations, and liquidity of the Company. Item 2 Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity Securities None. Item 3 Defaults upon Senior Securities On March 30, 2002, our real estate development subsidiary, Resort Properties, failed to make a mandatory principal payment of $3.75 million under its Real Estate Term Facility. Resort Properties obtained a temporary waiver of this default on April 2, 2002. Effective May 20, 2002, the temporary waiver was revoked and Resort Properties was in default on the facility. On May 31, 2002, the lenders accelerated the due date of the entire remaining principal and accrued interest under the facility. On November 22, 2002, Resort Properties entered into a forbearance agreement with the lenders whereby the lenders agreed to not pursue additional foreclosure remedies and to cease publication of foreclosure notices for a 30-day period. Although this 30-day period has expired, management continues discussions with Fleet and the other lenders regarding a restructuring of this facility, and Fleet and the other lenders have not exercised any further foreclosure remedies since the expiration of the forbearance agreement. Management's ongoing restructuring efforts with the lenders are aimed towards a restructuring of the facility with the establishment of a new entity to hold the assets of Resort Properties which are pledged as collateral under the facility. The equity in the new entity is expected to be held by a combination of the lenders under the facility and Resort Properties. The facility remains in default pending completion of these negotiations. Item 4 Submission of Matters to a Vote of Security Holders On January 14, 2004, the Company held its 2003 Annual Meeting of its shareholders to approve: o The election of the Company's Board of Directors; and o The ratification of KPMG LLP as the Company's independent auditors for the 2004 fiscal year. The Company did solicit proxies with respect to the Annual Meeting, and the Board of Directors listed in the Company's proxy statement with respect to the Annual Meeting was re-elected in its entirety. The results of the Annual Meeting were as follows: 30 Board Election: Voting For Voting Against or Abstaining Broker Non-Votes Withheld William J. Fair 15,443,966(1) 478,012 0 0 David Hawkes 15,442,029(1) 479,949 0 0 Paul Wachter 15,433,316(1) 488,662 0 0 Leslie B. Otten 14,760,530(2) 0 0 0 ------------------------------------------------------------- Gordon Gillies 14,760,530(2) 0 0 0 Alexandra Hess 14,760,530(2) 0 0 0 Robert Branson 14,760,530(2) 0 0 0 Edward Dardani 150,000(3) 0 0 0 Steven Gruber 150,000(3) 0 0 0 Jay Crandall 150,000(3) 0 0 0 William Janes 150,000(3) 0 0 0 (1) Messrs. Fair, Hawkes and Wachter were elected by the holders of the Company's common stock. (2) Messrs. Otten, Gillies and Branson and Ms. Hess were elected by the holders of the Company's Class A common stock. (3) Messrs. Dardani, Gruber, Crandall and Janes were elected by the holders of the Company's Series B preferred stock. Ratification of KPMG LLP: Voting For Voting Against Abstaining Broker Non-Votes Common Stock 15,712,180 169,223 40,575 0 Class A Common Stock 14,760,530 0 0 0 Series C-1 Preferred Stock 36,586(1) 0 0 0 --------------------------------------------------------- 10 1/2% Series A Preferred Stock 0(2) 0 0 0 --------------------------------------------------------- Total All Classes 68,293,121(1)(2) 169,223 40,575 0 (1) The Series C-1 preferred stock votes together with common stock on an "as-if-converted" basis. The 36,586 shares of Series C-1 preferred stock, which were voted at the meeting, together with accrued and unpaid dividends, had a voting right equal to 37,820,411 shares of common stock as of the date of the Annual Meeting. The results set forth in the "Total All Classes" row is calculated using this as-if-converted number. (2) The 10 1/2% Series A preferred stock votes together with common stock on an "as-if-converted" basis. The 36,626 shares of 10 1/2% Series A preferred stock, together with accrued and unpaid dividends, had a voting right equal to 4,008,715 shares of common stock as of the date of the Annual Meeting. The results set forth in the "Total All Classes" row is calculated using this as-if-converted number. Item 5 Other Information There have been no material changes in the procedures by which security holders may recommend nominees to the Company's board of directors. 31 Item 6 Exhibits and Reports on Form 8-K a) Exhibits Included herewith are the following exhibits: Exhibit No. Description 4.1 Seventh Amendment Agreement Re: Loan and Security Agreement Among Grand Summit Resort Properties, Inc., as Borrower and Textron Financial Corporation, as Administrative Agent dated as of December 31, 2003. 4.2 Third Amendment Agreement to the Statement of Intention and Special Additional Financing Agreement between Grand Summit Resort Properties, Inc. and Textron Financial Corporation dated as of December 31, 2003. 10.1 Executive Employment Agreement between the Registrant and Foster A. Stewart, Jr. dated as of September 1, 2003. 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. b) Reports on Form 8-K The Company filed a report on Form 8-K on November 3, 2003 announcing its Fiscal 2003 Year End Results. The Company filed a report on Form 8-K on December 10, 2003 announcing its Fiscal 2004 First Quarter Results. 32 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. American Skiing Company Date: March 10, 2004 By: /s/ William J. Fair -------------------------------- William J. Fair President and Chief Executive Officer (Principal Executive Officer) By: /s/ Helen E. Wallace -------------------------------- Helen E. Wallace Senior Vice President, Chief Financial Officer (Principal Financial Officer) 33 EX-99 3 thirdamendment.txt THIRD AMENDMENT FINAL THIRD AMENDMENT AGREEMENT THIS THIRD AMENDMENT AGREEMENT (as amended from time to time, this "Third Amendment Agreement"), dated as of December 31, 2003 among GRAND SUMMIT RESORT PROPERTIES, INC., a Maine corporation, (herein referred to as "GSRP") and TEXTRON FINANCIAL CORPORATION, a Delaware corporation (herein referred to as "TFC"). W I T N E S S E T H: A. WHEREAS, GSRP and TFC entered into that certain Statement of Intention and Special Additional Financing Agreement dated July 25, 2000 (as amended to but excluding the date hereof, the "Existing SOI" and, as amended hereunder, "Amended SOI"), pursuant to which TFC agreed to make subordinated loans to GSRP in accordance with the terms of the Existing SOI; B. WHEREAS, capitalized terms used herein shall have the meanings ascribed to the same in the Existing SOI and in Section 1 of that certain Seventh Amendment Agreement (the "Seventh Amendment Agreement"), dated as of December 31, 2003, among GSRP, TFC, as lender and Administrative Agent, and the other lenders that are parties to that certain Loan and Security Agreement, dated as of September 28, 1998, among GSRP, TFC, as lender and administrative agent, and said other lenders (as amended to the date here of, the "Existing LSA" and, after giving effect to the Seventh Amendment Agreement, the "Amended LSA"); and C. WHEREAS, the parties to the Existing SOI have agreed to certain amendments to the Existing SOI, as described and set forth below, which amendments are intended to be coordinated with the Seventh Amendment Agreement and to also provide additional funding for GSRP under the Amended SOI (in accordance with the terms and conditions hereinafter set forth); NOW, THEREFORE, in consideration of TFC's and GSRP's agreements hereunder, and in consideration of other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, TFC and GSRP hereby agree as follows: 1. Seventh Amendment Agreement. TFC hereby consents to and approves the Seventh Amendment Agreement and to all actions provided to be taken therein (subject to the terms and conditions thereof) with respect to GSRP, the Administrative Agent and the lenders that are parties thereto. 2. Definition of Existing LSA. The "Existing LSA," as such term is defined in Section 1(a) of the Existing SOI shall be deemed to mean and include the "Amended LSA," as defined herein. 3. Release Prices. The release prices referred to in Section 1(c) of the Existing SOI in respect of the Canyons Project are as set forth in the Amended LSA. Release prices in respect of the Steamboat Project are as set forth in the Amended LSA. 4. Steamboat Project. TFC and GSRP acknowledge and agree, with respect to Section 1(e), (f) and (g) of the Existing SOI, that all construction in respect of the Steamboat Project is completed and that all Commitments under the Existing LSA and the Existing SOI have been ended or expired or otherwise terminated and that the outstanding principal amount of the Loan (other than the Subordinated Loan Tranche Obligations) as of the date hereof is $30,621,260.03. 1 5. Section 1(i) of the Existing SOI. Section 1(i) of the Existing SOI is hereby amended and restated in its entirety as follows: (i) Special Financing being provided by this Statement of Intention and Agreement. TFC, in its individual capacity as a Steamboat Construction Project Advance Lender and not as Administrative Agent (TFC, as the advancing lender of the facility hereinafter described in this paragraph 1(i) is referred to herein as the "Special Subordinated Lender"), is prepared to make, subject to the terms and conditions hereinafter set forth, available to GSRP in conjunction with the Amended LSA a special subordinated loan facility up to a maximum principal amount of $10,600,000 (the "Subordinated Loan Tranche") for the sole purpose, prior to the Third Amendment Effective Date, of financing the Construction Costs necessary to complete all construction of the Steamboat Project in accordance with the supplemented Plans for such Project (the "Supplemented Plans"), which shall reflect the originally approved Plans for the Steamboat Project and such modifications thereto as are described on Attachment 2 hereto (the "Steamboat Plan Modifications"), and financing certain Nonconstruction Costs as provided for in the Second Amendment Agreement prior to the Third Amendment Effective Date and, on and after the Third Amendment Effective Date and prior to April 30, 2004, of providing certain working capital financing to GSRP up to an aggregate of an additional $635,251. All Construction Costs for the Steamboat Project and in respect of the Mt. Werner Circle have been paid for prior to the Third Amendment Agreement Effective Date and this facility shall be exclusively used to fund, on and after the Third Amendment Effective Date, working capital costs as set forth above. 6. Section 1(j) of the Existing SOI. Section 1(j) of the Existing SOI is hereby amended and restated in its entirety as follows: (j) Attachments. The Subordinated Loan Tranche is to be evidenced by one or more amendment attachments (each an "Amendment Attachment"), substantially in the form of Attachment 4 hereto (as the same may be further amended), to be executed by GSRP and attached to the Steamboat Construction Project Note of TFC. Advances in respect of the Subordinated Loan Tranche ("Subordinated Loan Tranche Advances") would be deemed by GSRP and TFC to be Steamboat Construction Project Advances under the Existing LSA and would be secured by all of the Collateral (including, without limitation, the Steamboat Assignment of Architect's Contract, the Steamboat Assignment of Contracts, the Steamboat Assignment of Construction Contract, the Steamboat Assignment of Rents, the Steamboat Assignment of Declarant's Rights, the Steamboat Assignment of Property-Related Contracts, the Steamboat Assignment of Rents, the Steamboat Blanket Mortgage, the Canyons Assignment of Architect's Contract, the Canyons Assignment of Contracts, the Canyons Assignment of Construction Contract, the Canyons Assignment of Rents, the Canyons Assignment of Declarant's Rights, the Canyons Assignment of Property-Related Contracts, the Canyons Assignment of Rents, and the Canyons Blanket Mortgage), provided that: (i) the Subordinated Loan Tranche and all Subordinated Loan Tranche Advances made thereunder by TFC, as the Special Subordinated Lender, would not count as, or be construed as being a part of, Steamboat Construction Project Advance Commitments or any other Commitments (the undertaking of TFC, as the Special Subordinated Lender, to make Subordinated Loan Tranche Advances to GSRP being evidenced solely by this Statement of Intention and Agreement on the terms and conditions hereinafter set forth), 2 (ii) the Subordinated Loan Tranche would not be counted as, or be a part of, Steamboat Loan Exposure or other Loan Exposure under the Existing LSA, (iii) TFC, as the Special Subordinated Lender, would not be counted as, or be a part of, the Steamboat Construction Project Required Lenders or any other Project Required Lenders and would not otherwise be counted as or vote as a Lender under the Amended LSA solely in its capacity as the Special Subordinated Lender hereunder, provided, however, the Special Subordinated Lender shall have the right and power to direct the Administrative Agent as the Special Subordinated Lender after the Senior Obligations (as such term is hereinafter defined) are paid in full and for so long as the Subordinated Loan Tranche Obligations are outstanding, (iv) Except as set forth in Section 8 of the Seventh Amendment Agreement with respect to cash payment of interest hereunder (which shall rank pari passu with the payment of interest in respect of the Steamboat Loan), the Subordinated Loan Tranche and all Collateral securing the same is and shall be junior and subordinate to (A) the payment of all Loans and other Obligations under the Existing LSA (excluding therefrom the Subordinated Loan Tranche Obligations and the Percentage Sales Fees; such Loans and Obligations subject to such exclusions are referred to herein, collectively, as the "Senior Obligations") and (B) the Liens securing the same in the Collateral; it is the intention of GSRP and TFC, as the Special Subordinated Lender, that the rights of the Lenders under the Existing LSA shall not be impaired or prejudiced in any way by this Statement of Intention and Agreement and it is further the view of GSRP and TFC, as the Special Subordinated Lender, that the availability of the Subordinated Loan Tranche is essential to the completion of the construction of the Steamboat Project, the repayment of the Steamboat Loan and the continued performance by GSRP of all of its other undertakings and agreements in the Amended LSA and, accordingly, directly benefits the Lenders under the Amended LSA, and (v) GSRP will collaterally assign to the Special Subordinated Lender (pursuant to an assignment substantially in the form of Attachment 5 hereto as the same may be amended from time to time) all of its right, title and interest in and to the "Free and Clear Proceeds" described in Paragraph 2(b)(iii)(6) below and GSRP shall authorizes the Administrative Agent to pay such amounts to the Special Subordinated Lender as provided for in said Paragraph. Until all Senior Obligations under the Existing LSA have been paid in full, no proceeds of the Collateral shall be used to repay outstanding principal or deferred interest in respect of the Subordinated Loan Tranche Advances as provided for in paragraph 1(k) hereof; however, to the extent provided for in Section 8 of the Seventh Amendment Agreement, proceeds of Collateral otherwise payable to the Lenders in respect of the Steamboat Project under the Amended LSA shall also be used to pay the "cash interest" due and payable to TFC under Paragraph 1(k) hereof (said cash portion being 10% per annum of the therein stated, fixed rate of interest of 20% per annum), with such cash being paid to TFC hereunder, as the Special Subordinated Lender, at the same time as interest is being paid to TFC, as a Lender to the Steamboat Project under the Amended LSA (with respect to any monthly interest payment due hereunder, the "Cash Interest Payment"). GSRP shall execute and deliver to TFC in exchange for the existing Amendment Attachment, as amended, the following Amendment Attachments: (1) a $5,000,000 Amendment Attachment dated as of July 25, 2000, (2) a $3,000,000 3 Amendment Attachment dated as of July 25, 2000, and (3) a $2,600,000 Amendment Attachment dated as of July 25, 2000. The existing outstanding Subordinated Loan Tranche Advances and related Subordinated Loan Tranche Obligations as evidenced by the existing Amendment Attachment, as amended, shall be allocated ratably over the Amendment Attachments listed in clauses (1), (2) and (3) above and all additional Subordinated Loan Tranche Advances made on and after December 31, 2003 shall be evidenced by the Amendment Attachment referred to in clause (3) above. The existing Amendment Attachment, as amended, after giving effect to the foregoing, will be cancelled. 6. Section 1(k) of the Existing SOI. Section 1(k) of the Existing SOI is hereby amended and restated in its entirety as follows: (k) Term Summary. In consideration of TFC's (i) making the Subordinated Loan Tranche available to the GSRP, (ii) not requiring the application of the Steamboat Construction Project Advances Maturity Date to the Subordinated Loan Tranche but rather establishing a separate maturity date with respect thereto of November 30, 2007 (the "Subordinated Loan Tranche Maturity Date"); it being the intention of the parties hereto that the outstanding principal balance of the Subordinated Loan Tranche shall be payable (other than on said maturity date or in the instance of an acceleration of the Subordinated Loan Tranche Obligations, as hereinafter defined) only in connection with the receipt by GSRP of "Free and Clear Proceeds" referred to below in Paragraph 2(b)(iii)(6), (iii) making such Subordinated Loan Tranche junior and subordinate to the Loans under the Existing LSA, as provided in Paragraph 2(b)(i) hereof, (iv) not requiring the application of the Default Rate to the Subordinated Loan Tranche, (v) providing for the deferral of interest payments and (vi) allowing the voluntary prepayment of the Subordinated Loan Tranche Advances, in whole (but not in part) at any time, at the sole election of GSRP, and without prepayment or premium of any kind other than the Final Payment Fee and the Sixth Amendment Fees owing to the Special Subordinated Lender and its affiliates together with all other Subordinated Loan Tranche Obligations (upon the prepayment in full of the Subordinated Loan Tranche Advances, no further Subordinated Loan Tranche Advances shall be obtainable hereunder), GSRP agrees, as more particularly set forth below, (A) to pay interest on the principal balance of the Subordinated Loan Tranche from time to time outstanding at a rate of interest of twenty percent (20%) per annum, payable monthly in arrears on the 10th day of the month following the month for which such interest accrued (or, if such day is not a Business Day, on the first Business Day thereafter), provided that only 50% of the amount of such interest accrued in respect of any month shall be due and payable in cash on such 10th day and the other 50% of such amount of such interest shall automatically be deferred (without the accrual of any further interest thereon) until the Final Payment Date (as defined in subclause (B) immediately below), if no Default or Event of Default 4 under the Existing LSA or default or event of default hereunder shall exist, except that such deferral shall nonetheless still occur notwithstanding the existence of such a Default or Event of Default or such default hereunder if the Senior Obligations shall have not been paid in full; on the Final Payment Date such deferred amount (together with all other deferred amounts of interest hereunder) and all other accrued and unpaid interest shall become due and payable and, (B) to pay the Special Subordinated Lender (1) in installments as provided in Paragraph 2(b)(iii) (3) hereof, a fee of $1,000,000 or such lesser amount as may be required by Paragraph 6(a) hereof (the "Syndication Fee") and (2) in one lump sum a final payment fee (the "Final Fee"), which shall be payable on the earlier of the Subordinated Loan Tranche Maturity Date or the date on which all principal of the Subordinated Loan Tranche is fully paid (such date is referred to herein as the "Final Payment Date"), equal to the sum of the Final Fee Component Amounts for each of the Subordinated Loan Tranche Advances, where a "Final Fee Component Amount" for a Subordinated Loan Tranche Advance shall equal the difference between the original outstanding principal amount of such Subordinated Loan Tranche Advance minus the discounted net present value of each payment of interest and principal in respect of such Subordinated Loan Tranche Advance determined in accordance with customary financial practice by using a discount period of one month and a monthly interest rate equal to 2.083333% (or such lesser rate as may be required by Paragraph 6(a) hereof) and by discounting each such payment of principal and interest from the date on which such payment was made to the date when such Subordinated Loan Tranche Advance was originally extended by the Special Subordinated Lender (for purposes of determining interest to be discounted in respect of any Subordinated Loan Tranche Advance, only the interest payments accruing at 20% per annum thereon shall be included therein and such interest payments shall be deemed paid on the dates on which they are actually paid in cash and any of such interest payments that are deferred, in accordance with the terms hereof, to the Final Payment Date shall be deemed, for purposes of this determination, to have been paid in cash on the First Amendment Effective Date; any other cash payments made in respect of the principal amount of any outstanding Subordinated Loan Tranche Advance made after the First Amendment Effective Date shall be deemed to have been made on the First Amendment Effective Date for purposes of calculating the Final Fee Component Amount in respect of such Subordinated Loan Tranche Advance); no interest shall accrue on the unpaid portion of the Final Fee; (C) Pursuant to the Second Amendment Agreement, the Subordinated Lender eliminated the "Participation/Syndication Costs" and "Steamboat/Canyons Construction Loan Participation/Syndication Costs," under, and as defined in, the First Amendment Agreement. 5 7. Section 1(l) of the Existing SOI. Section 1(l) of the Existing SOI is hereby amended and restated in its entirety as follows: (l) Conditions for Subordinated Loan Tranche Advances; Waiver of Reserve. The Subordinated Loan Tranche shall be available, subject to the satisfaction of the conditions precedent applicable to a withdrawal request in respect of Excess Projects' Cash Proceeds under the Sixth Amendment Agreement and the other conditions precedent set forth below in this Statement of Intention and Amendment, in multiple Subordinated Loan Tranche Advances. The proceeds of such Advances shall be used to pay for working capital expenses in the applicable Schedule of Expenses; any repayment of principal of any Subordinated Loan Tranche Advance shall not be available to be reborrowed hereunder. The Special Subordinated Lender hereby waives any requirement of a Reserve as otherwise originally required under the Existing SOI. 8. Section 2(a) of the Existing SOI. Section 2(a) of the Existing SOI is amended and restated in its entirety as follows: Subject to the satisfaction of all conditions precedent to any withdrawal request by GSRP under Section 6 of the Sixth Amendment Agreement and subject to the other conditions precedent set forth in Paragraph 3 hereof, the Special Subordinated Lender agrees to make Subordinated Loan Tranche Advances to GSRP from the date hereof to and including April 30, 2004 (x) in an aggregate principal amount at any one time outstanding not to exceed $10,600,000 (with only $635,251 of such amount being available to be advanced on and after the Third Amendment Effective Date), and (y) in an aggregate principal amount that, when aggregated with the outstanding principal amount of the Senior Obligations owing to the Special Subordinated Lender, does not exceed $41, 221,260.03 at any time. Each Subordinated Loan Tranche Advance shall be a part of the Subordinated Loan Tranche and the Subordinated Loan Tranche shall be deemed to be a part of the credit extended to GSRP under the Steamboat Loan by the Special Subordinated Lender (as a Steamboat Construction Project Advance Lender) pursuant to the Existing LSA, and GSRP shall execute and deliver to the Special Subordinated Lender an amendment attachment or amendment attachments (substantially in the form of Attachment 4 hereto, as amended from time to time) to its Steamboat Note (to be affixed thereto by the Special Subordinated Lender) to evidence such Subordinated Loan Tranche (or portion or portions thereof) and each Subordinated Loan Tranche Advance to be made thereunder, provided that (a) Limitations of Subordinated Loan Tranche Advances -- no principal advanced by the Special Subordinated Lender in respect of the Subordinated Loan Tranche shall (i) qualify as Steamboat Loan Exposure, (ii) count as Steamboat Construction Project Advance Commitments, (iii) be included in any determination as to whether the Steamboat Loan or the Steamboat Project Construction Advances have, in the aggregate, exceeded the Steamboat Construction Project Borrowing Base, 6 (iv) entitle the Special Subordinated Lender to vote any principal amount or other amounts outstanding in respect of the Subordinated Loan Tranche for any purpose under the Existing LSA (unless all of the Senior Obligations under the Existing LSA have been fully and finally paid), (v) enable the Special Subordinated Lender, as such, to claim the status as being one of the Steamboat Required Lenders, one of the Required Parties or the right to vote on any issue requiring unanimous consent of all Lenders or Steamboat Construction Project Lenders under the Existing LSA (unless all of the Senior Obligations under the Existing LSA have fully and finally been paid), (vi) claim any fees or rights to be reimbursed for any costs and expenses as a Steamboat Lender or a Lender under the Existing LSA (unless all of the Senior Obligations under the Existing LSA have fully and finally been paid), (vii) enable the Special Subordinated Lender to be able to claim a share of the Collateral or any proceeds in respect thereof except as it otherwise would be entitled to claim as a Lender or the Administrative Agent under the Existing LSA or as set forth in Paragraph 2(b)(ii), Paragraph 2(b)(iii)(6) or Paragraph 2(b)(iii)(8) below or as otherwise allowed under Section 8 of the Seventh Amendment Agreement, or (viii) cause the outstanding principal balance of the Loans (including the outstanding principal balance of the Subordinated Loan Tranche) to exceed the Maximum Outstanding Loan Limit under the Amended LSA. 9. Section 2(b) of the Existing SOI. Section 2(b) of the Existing SOI is amended and restated in its entirety as follows: (b) Certain Terms Applicable to Subordinated Loan Tranche Advances --subject to the limitations and restrictions set forth in subclause (a) above and in this subclause (b), (i) the principal, interest, fees (including the Syndication Fee) and other costs and expenses incurred in connection with the Subordinated Loan Tranche (collectively, the "Subordinated Loan Tranche Obligations") are intended to be and qualify as Steamboat Obligations, to be secured by all of the Collateral (including, without limitation, the Steamboat Assignment of Architect's 7 Contract, the Steamboat Assignment of Contracts, the Steamboat Assignment of Construction Contract, the Steamboat Assignment of Rents, the Steamboat Assignment of Declarant's Rights, the Steamboat Assignment of Property-Related Contracts, the Steamboat Assignment of Rents, the Steamboat Blanket Mortgage, the Canyons Assignment of Architect's Contract, the Canyons Assignment of Contracts, the Canyons Assignment of Construction Contract, the Canyons Assignment of Rents, the Canyons Assignment of Declarant's Rights, the Canyons Assignment of Property-Related Contracts, the Canyons Assignment of Rents, and the Canyons Blanket Mortgage), to be evidenced by the Steamboat Note of the Special Subordinated Lender pursuant to an amendment attachment or attachments to be affixed thereto (in the form of Attachment 4 attached hereto) and to be junior and subordinate in payment to the Senior Obligations (except as provided for in Section 8 of the Seventh Amendment Agreement regarding Cash Interest Payments) and in Lien to the Liens in and to the Collateral securing such Senior Obligations, as more particularly provided for in Attachment 6 hereto; (ii) the Administrative Agent shall act on behalf of the Special Subordinated Lender, to the same extent as it would act under the Existing LSA as Administrative Agent, for purposes of securing, perfecting, asserting, and/or enforcing Liens and security interests in and to the Collateral as security for the Subordinated Loan Tranche Obligations (except that the Special Subordinated Lender shall have no right to instruct the Administrative Agent or to participate in any instructions being given to the Administrative Agent unless and until all of the Senior Obligations under the Existing LSA have fully and finally been paid; for the avoidance of doubt and subject to the terms and provisions of Paragraph 2(b)(i) hereof, GSRP hereby grants to the Administrative Agent on behalf of the Special Subordinated Lender a security interest and Lien in and to the Collateral to secure the payment and/or performance of all of the Subordinated Loan Tranche Obligations; (iii) the Subordinated Loan Tranche Obligations shall be, and be deemed to be, part of the, Steamboat Obligations, except that (1) the rate of interest payable in respect thereof, the amount of fees payable thereon (including, without limitation, the Syndication Fee and the Final Payment Fee) and all other Subordinated Loan Tranche Obligations shall be payable only to the Special Subordinated Lender in accordance with the terms hereof and out of Free and Clear Proceeds, (2) the Subordinated Loan Tranche Advances and the Subordinated Loan Tranche Obligations shall mature on the Subordinated Loan Tranche Maturity Date, provided that, in any case, the Subordinated Loan Tranche Obligations shall be subject to acceleration as set forth in the last paragraph of Paragraph 2(b)(iii)(7) hereof, (3) subject to Paragraph 2(b)(i) hereof, (aa) GSRP shall pay to the Special Subordinated Lender the Syndication Fee in installments, each such installment being payable whenever after October 1, 2000 Free and Clear Proceeds (as 8 defined in the Existing SOI without giving effect to the Second Amendment Agreement or Third Amendment Agreement are available, with each such installment being in an amount equal to 30% of the amount of such Free and Clear Proceeds; if the full Syndication Fee shall have not been paid on or prior to December 31, 2000, it shall become due and payable in full on such date; the Special Subordinated Lender and GSRP acknowledge that the Syndication Fee has been paid in full, and (bb) GSRP shall pay to the Special Subordinated Lender on the Final Payment Date the Final Payment Fee, as determined in respect of such Final Payment Date as calculated pursuant to Paragraph 1(k)(B) hereof, (4) Intentionally Omitted; (5) as additional consideration for the fees and rate of interest set forth above, the Special Subordinated Lender agrees that no Default Rate of interest shall be applicable to the Subordinated Loan Tranche Obligations; (6) the following proceeds of Collateral or payments from GSRP shall be designated as "Free and Clear Proceeds" and shall be applied to the payment of the Subordinated Loan Tranche Obligations: (aa) while the Senior Obligations are still outstanding, any payments of the Cash Interest Payment provided for hereunder and as otherwise permitted to be paid to Special Subordinated Lender under Section 8 of the Seventh Amendment Agreement, (bb) after the Senior Obligations have been paid in full and for so long as no Default or Event of Default exists, all Obligation-Servicing Projects' Cash Proceeds, all payments under Section 2.5(c)(iii) of the Existing LSA, all payments under Section 3.5 of the Existing LSA and all payments under Section 3.6 of the Existing LSA and (cc) after the Senior Obligations shall have been paid in full and for so long as a Default or Event of Default exists, all Projects' Cash Proceeds. Sections 4, 5, and 6 of the Sixth Amendment Agreement shall remain in effect and shall function hereunder after the Senior Obligations have been paid in full and for so long as any of the Subordinated Loan Tranche Obligations shall have not been fully and finally paid. Free and Clear Proceeds shall be applied to the Subordinated Loan Tranche Obligations as follows: first, for so long as Senior Obligations are outstanding and with respect to any Cash Interest Payment provided for hereunder and as otherwise permitted to be paid to the Special Subordinated Lender under Section 8 of the Seventh Amendment Agreement, the portion of such Free and Clear Proceeds consisting of such Cash Interest Payment shall be used to pay such Cash Interest Payment; 9 second, after the Senior Obligations have been paid in full, in the following order: -- first, towards the costs and expenses incurred by the Special Subordinated Lender under this Statement of Intention and Agreement, including, without limitation, any Loan Costs in respect of the Subordinated Loan Tranche and all other fees, costs and expenses set forth in Paragraph 6(c) hereof; -- second, towards the accrued and unpaid interest on the Subordinated Loan Tranche Advances (other than the portion thereof that shall have been deferred to the Final Payment Date); -- third, towards the then-outstanding principal amount of the Subordinated Loan Tranche Advances, and -- fourth, any other Subordinated Loan Tranche Obligations. 10 For the avoidance of doubt and for so long as the Subordinated Loan Tranche Obligations are outstanding, GSRP's only right to obtain cash in respect of the Collateral shall be in respect of Excess Projects' Cash Proceeds under, and pursuant to, Section 6 of the Sixth Amendment Agreement. At such time as the Subordinated Loan Tranche Obligations have been fully and finally paid, the Special Subordinated Lender shall have no further rights in and to the Free and Clear Proceeds. For the further avoidance of doubt, after the full and final payment of the Subordinated Loan Tranche Obligations, GSRP shall still be obligated to Textron Financial Corporation, as a Lender under the Amended LSA, to pay the Percentage Sales Fee under the Amended LSA. (7) Intentionally Omitted. (8) after the full and final repayment of all Senior Obligations, the Special Subordinated Lender shall have the full right, in accordance with the terms hereof and of the Amended LSA, to instruct the Administrative Agent to foreclose on all or any of the Collateral and to apply all proceeds from all Collateral to the Subordinated Loan Tranche Obligations as follows: first, towards the costs and expenses incurred by the Special Subordinated Lender under this Statement of Intention and Agreement, including, without limitation, any Loan Costs in respect of the Subordinated Loan Tranche and all other fees, costs and expenses set forth in Paragraph 6(c) hereof; second, towards the accrued and unpaid interest on the Subordinated Loan Tranche Advances; third, towards the then-outstanding principal amount of the Subordinated Loan Tranche Advances, fourth, to the payment of the Final Payment Fee and the Syndication Fee, and sixth, to any other Subordinated Loan Tranche Obligations. The aforesaid right shall not be prejudiced or impaired by any Percentage Sales Fee that remains unpaid. 10. Section 3 of the Existing SOI. Section 3 of the Existing SOI is amended and restated in its entirety as follows: 3. CONDITIONS TO MAKING OF SUBORDINATED LOAN TRANCHE ADVANCES. The conditions precedent set forth in Section 6 of the Sixth Amendment Agreement shall apply to the making of Subordinated Loan Tranche Advances except that references therein to a "withdrawal request" or similar language shall be deemed references to a request for a Subordinated Loan Tranche Advance; to the extent that such conditions are inconsistent with 11 any one or more of the conditions set forth below, the conditions set forth below shall govern; and each of the conditions set forth below shall also be applicable to the making of Subordinated Loan Tranche Advances: (a) Title Insurance Endorsement. GSRP shall have delivered to the Administrative Agent title insurance endorsements to the Title Insurance Policy {Blanket} in respect of such Subordinated Loan Tranche Advance and each of the Canyons Project (if there shall remain any unsold Canyons Quartershare Interests) and the Steamboat Project in form and substance reasonably satisfactory to the Administrative Agent. (b) Sufficiency -- no Subordinated Loan Tranche Advance shall be made if the proceeds thereof together with the proceeds of any Excess Projects' Cash Proceeds to be released under Section 6 of the Sixth Amendment Agreement at the same time as the making of such Subordinated Loan Tranche Advance are insufficient to fully pay the expenses set forth on the applicable Schedule of Expenses; GSRP shall coordinate its requests for Subordinated Loan Tranche Advances and its withdrawal requests for Excess Projects' Cash Proceeds to the reasonable satisfaction of the Special Subordinated Lender; (c) Defaults -- no Subordinated Loan Tranche Advance shall be made if a Default or Event of Default exists under the Existing LSA or a default or event of default exists under this Statement of Intention and Agreement or, unless waived by the Special Subordinated Lender, the sixty (60) day period referred to in Section 12 of the Second Amendment Agreement shall have commenced and not have expired; (d) Limits-- no Subordinated Loan Tranche Advance shall be made if the dollar limits under Paragraph 2 hereof would be exceeded after giving effect to such Advance; (e) Representations - the warranties and representations contained in this Statement of Intention and Agreement and in the Amended LSA shall be true in all material respects as of date of the making of such Subordinated Loan Tranche Advance; (f) Other Actions - All actions taken in connection with such Subordinated Loan Tranche Advance shall be reasonably satisfactory to the Special Subordinated Lender and its counsel and no event or circumstance shall have occurred which, in the reasonable opinion of the Special Subordinated Lender, is reasonably likely to have a material adverse effect on GSRP, any of the Projects or the ability of GSRP to pay in full the Subordinated Loan Tranche Obligations; and 11. Attachment 6. Attachment 6 of the Existing SOI is hereby amended and restated in its entirety as follows: (a) If a Default or Event of Default under the Amended LSA shall exist, no payment of any Subordinated Loan Tranche Obligation (other than Cash Interest Payments) shall be made for so long as any Obligation under the Amended LSA (other than Subordinated Loan Tranche Obligations and the Payment Sales Fees; such Obligations other than the Subordinated Loan Tranche Obligations and Payment Sales fee are referred to in this Attachment as the "Senior Obligations") shall be outstanding. (b) Intentionally Omitted. 12 (c) To the extent that a Lien in and to the Collateral under the Amended LSA secures, in whole or part, a Subordinated Loan Tranche Obligation, such Lien (to the extent of such Subordinated Loan Tranche Obligation) shall be junior and subordinate to any Lien in such Collateral that secures a Senior Obligation, subject, in each case, to the cash proceeds of such Collateral being used to pay the Cash Interest Payments as provided for in Section 8 of the Seventh Amendment Agreement. (d) In the event of (i) any insolvency or bankruptcy case or proceeding under the Federal Bankruptcy Code or any state bankruptcy or similar law, or any receivership, liquidation, arrangement, relief, reorganization or other similar case or proceeding in connection therewith, relative to the Borrower or to its assets, or (ii) any liquidation, dissolution, reorganization, compromise, arrangement, adjustment, protection, composition, relief or other winding up of the Borrower or its debts, whether voluntary or involuntary and whether or not involving any insolvency or bankruptcy or any case or proceeding of any kind, or (iii) any assignment for the benefit of creditors or any other marshaling of assets and liabilities of the Borrower, then and after each such event the Senior Obligations shall be entitled to receive payment in full in cash of all amounts due or to become due thereon or in respect thereof before any payments are made in respect of the Subordinated Loan Tranche Obligations or any distribution of any kind or character (whether in cash, securities or other property) is made in respect of the Subordinated Loan Tranche Obligations (other than with respect to the Cash Interest Payments, which shall be pari passu with the rights of the Lenders in respect of the Steamboat Project to receive payments in respect of their Steamboat Obligations), and, to that end, it is hereby agreed that, after any such event, all payments or distributions (whether in cash, securities or other property) in respect of the Subordinated Loan Tranche Obligations (other than with respect to the Cash Interest Payments) shall be paid over or delivered for application to the Senior Obligations. The holders of the Subordinated Loan Tranche Obligations shall duly and promptly take such action as is reasonably necessary to file appropriate claims or proofs of claims in any such proceedings referred to in this clause and to execute and deliver such other instruments and take such other actions as may be reasonably necessary to prove or realize upon such claims and to have the proceeds of such claims paid as provided in this clause, and, in the event that the holders of Subordinated Loan Tranche Obligations shall not have made any such filing on or prior to the date 14 days before the expiration of the time for such filing or shall not have timely executed or delivered any such other instruments and taken such other actions, the holders of Senior Obligations are each hereby irrevocably authorized and empowered (but shall have no obligation) to, as the agent and attorney-in-fact for the holders of the Subordinated Loan Tranche Obligations for the specific and limited purpose set forth in this clause, file such proof of claim for or on behalf of such holders of Subordinated Loan Tranche Obligations, execute and deliver such other instruments for or on behalf of such holders and take such other action necessary under applicable law to collect any amounts due in respect of such claim in such proceeding. (e) In the event that, notwithstanding the provisions of this Attachment and in contravention thereof, the Borrower shall make, or the holders of Subordinated Loan Tranche Obligations shall receive or retain, any payment or distribution of the Borrower's assets of any kind or 13 character, whether in cash, securities or other property, then and in such event such payment or distribution shall be received and held by such holder in trust for the benefit of the holders of the Senior Obligations and shall be paid over or delivered to such holders of Senior Obligations for application to the payment to the Senior Obligations, provided that nothing in this clause (e) shall apply to the Cash Interest Payments. (f) No right of any holder of Subordinated Loan Tranche Obligations to enforce its rights in respect of the Subordinated Loan Tranche Obligations shall at any time or in any way be prejudiced or impaired by any act or failure to act on the part of such holder, or by any non-compliance by GSRP with the terms, provisions and covenants of this Attachment, regardless of any knowledge thereof that such holder may have or be otherwise charged with. Nothing herein shall prohibit or prevent any holder of Subordinated Loan Tranche Obligations from enforcing any right or remedy hereunder or at law or equity in respect of Subordinated Loan Tranche Obligations (subject to the obligations hereunder of such holder to turn over the net proceeds therefrom to the holders of the Senior Obligations). (g) Without in any way limiting the generality of the foregoing paragraph, the holders of the Senior Obligations may, at any time and from time to time (without the consent of or notice to any holder of Subordinated Loan Tranche Obligations, without incurring responsibility to the holders of Subordinated Loan Tranche Obligations, without impairing or releasing the subordination provided in this Attachment and without releasing the obligations hereunder of GSRP or any such holder of Subordinated Loan Tranche Obligations), (1) amend or modify in any way or manner any payment, provision, document or covenant relating to the Senior Obligations (whether or not such payment, provision, document or covenant also relates to the Subordinated Loan Tranche Obligations), (2) sell, exchange, release or otherwise deal with any Property pledged, assigned or mortgaged to secure, or otherwise securing, the Senior Obligations, or any guarantee of the Senior Obligations (whether or not such property also relates to the Subordinated Loan Tranche Obligations); and (3) exercise or refrain from exercising any rights against GSRP, the Collateral under the Existing LSA and any other Person (whether or not such rights also relate to the Subordinated Loan Tranche Obligations), provided that nothing in this sentence shall authorize such holders to modify any rights that the Special Subordinated Lenders may have under Section 8 of the Seventh Amendment Agreement without its prior written consent. The Borrower and each other holder of Subordinated Loan Tranche Obligations waive any right to require the holders of the Senior Obligations to marshal any assets in favor of the holders of Subordinated Loan Tranche Obligations or against or in payment of any or all of the Senior Obligations. (h) No holder of Subordinated Loan Tranche Obligations shall be subrogated to the rights of any holder of Senior Obligations to receive payments and distributions of cash, securities or other property applicable to the Senior Obligations until all amounts payable for or on account of the Senior Obligations shall have been indefeasibly paid in full. (i) The provisions of this Attachment shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any Senior Obligations is rescinded or must otherwise be returned by the holders thereof upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made. (j) Each holder of Subordinated Loan Tranche Obligations, by its acceptance thereof, agrees to take such action as may be reasonably necessary or appropriate to effectuate, as among the holders of Senior Obligations, the holders of Subordinated Loan Tranche Obligations and the 14 Borrower, the subordination provided in this Attachment. (k) The provisions of this Attachment may not be amended, modified or waived without the prior written consent of the holders of Senior Obligations. The provisions set forth in this Attachment constitute a continuing agreement and shall (A) be and remain in full force and effect at any time, and from time to time, during which any Senior Obligation shall remain outstanding, (B) be binding upon the Borrower and each holder of Subordinated Loan Tranche Obligations and their respective successors, transferees and assigns, and (C) inure to the benefit of, and be enforceable, in accordance with the terms hereof, directly by, the holders of Senior Obligations and their respective successors, transferees and assigns, against each holder of Subordinated Loan Tranche Obligations and the Borrower. 12. Waiver. Upon this Third Amendment Agreement becoming effective on the Third Amendment Effective Date and subject to the proviso to this sentence, each Default and/or Event of Default existing on the Third Amendment Effective Date and arising from or otherwise in respect of (a) the failure of GSRP to make principal payments under the Existing LSA such that the aggregate outstanding principal balance of the Advances under the Existing LSA would not exceed $30,000,000 by June 29, 2003, as provided for in Section 2.5(c)(iii) of the Existing LSA, (b) the failure of GSRP to make principal payments under the Existing LSA such that the aggregate outstanding principal balance of the Advances under the Existing LSA would not exceed $25,000,000 by June 30, 2003, as provided for in Section 2.5(c)(iii) of the Existing LSA, and (c) the failure of GSRP to make principal payments under the Existing LSA such that the aggregate outstanding principal balance of the Advances under the Existing LSA would not exceed $20,000,000 by June 30, 2003, as provided for in Section 2.5(c)(iii) of the Existing LSA are, in each case, hereby waived. No other Default or Event of Default (whether occurring prior to the date hereof or hereafter) shall be deemed waived, and the Special Subordinated Lender reserves all of its rights and remedies under the Amended LSA, the other Security Documents, the Amended SOI, at law and in equity with respect thereto. 13. Miscellaneous Amendments. Each reference to "$10,000,000" in the Existing SOI and the Collateral Assignment of Free and Clear Proceeds, dated as of July 25, 2000, as amended, is hereby amended to be "10,600,000." Attachment 4 to the Existing SOI is hereby amended and restated in its entirety as set forth on Schedule 1 attached hereto. 14. Representations and Warranties. GSRP hereby represents and warrants as of the date hereof as follows, which representations and warranties are hereby incorporated into and made part of the Amended SOI: 14.1 Except as set forth in Schedule 2 hereto, each of the representations and warranties contained in Section 4 of the Existing SOI is true and correct as of the date hereof. 14.2 Except with respect to the Permitted Exceptions, all Liens granted to TFC under the Existing SOI and the other Security Documents are duly granted, valid, perfected and prior in right to all other Liens that now or hereafter may be granted to or held by any other Person. 14.3 The execution and delivery of this Third Amendment Agreement, the Seventh Amendment Agreement, the Modification Documents and the other documents and instruments contemplated herein and in the Seventh Amendment Agreement, and compliance by GSRP with all of the provisions of this Third Amendment Agreement, the Existing SOI, as amended hereby, and each of the other documents set forth above are: 15 (i) within the corporate powers of GSRP; (ii) 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 upon any Property of GSRP under the provisions of, any agreement, charter instrument, bylaw or other instrument to which GSRP is a party or by which its Property may be bound. 14.4 Neither the nature of GSRP, nor of any of its businesses or Properties, nor any relationship between GSRP and any other Person, nor any circumstance in connection with the execution or delivery of this Third Amendment Agreement and the other documents contemplated in connection herewith, nor the operation of any Project and the sale, or offering for sale, of any Quartershare Interest of any of the Projects by GSRP, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of GSRP, as a condition of the execution, delivery or performance of this Third Amendment Agreement, the Seventh Amendment Agreement, and the other documents contemplated in connection herewith. 14.5 GSRP will not be, on or after the date hereof, a party to any contract or agreement which restricts its right or ability to incur indebtedness under, or prohibits the execution of, or compliance with, this Third Amendment Agreement by GSRP. GSRP 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 Permitted Exceptions and all Liens in favor of TFC in respect of such Collateral remain in full force and effect. 14.6 GSRP is not entering into this Third Amendment 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 Third Amendment Agreement and the making of the advances contemplated hereunder, (a) the assets of GSRP at a fair valuation thereof on a going concern basis will not be less than its debts, (b) GSRP 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) GSRP will be able to pay its respective debts as they become due. "Debt" for purposes of this Section 14.6 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. 14.7 After giving effect to this Third Amendment Agreement, no Default or Event of Default has occurred or is continuing, nor does any event or condition exist that would constitute a Default or an Event of Default. No material adverse change has occurred in or in respect of the Collateral or any one or more of the Projects that has not been disclosed to TFC. The Obligations continue to be Senior Debt under, and as defined in, the ASC Indenture and no default or event of default exists under such Indenture and no defaults or events of default exist under any other agreement for indebtedness for borrowed money, any financing lease or any guaranty of any 16 of the foregoing to which GSRP is a party. GSRP has not issued and is not otherwise obligated in respect of any obligation of the Parent, American Skiing Company or any subsidiary of American Skiing Company for borrowed-money indebtedness, other than its guaranty of the ASC Indenture, which by its own terms is junior and subordinated to the Obligations. 15. Conditions to Effectiveness. This Third Amendment Agreement shall become effective on the date (the "Third Amendment Effective Date") on which the parties hereto shall have executed this Third Amendment Agreement and each of the following conditions shall have been satisfied: 15.1 Warranties and Representations True as of First Amendment Effective Date. The warranties and representations contained or referred to in this Third Amendment Agreement shall be true in all material respects on the Third Amendment Effective Date with the same effect as though made on and as of that date. TFC shall have received a certificate, in form and substance satisfactory to TFC, dated as of the Third Amendment Effective Date, signed by an Executive Vice-President or Vice President of GSRP and certifying that the warranties and representations of GSRP contained in this Third Amendment Agreement are true in all material respects on the Third Amendment Effective Date. 15.2 Secretary's Certificates. TFC shall have received a certificate of the Secretary or any Assistant Secretary of GSRP, in form and substance reasonably satisfactory to TFC, dated as of the Third Amendment Effective Date, certifying (i) the adoption by the Board of Directors of GSRP of a resolution authorizing GSRP to enter into this Third Amendment Agreement, the Seventh Amendment Agreement, and the transactions and instruments contemplated hereby and thereby, and (ii) the incumbency and authority of, and verifying the specimen signatures of, the officers of GSRP authorized to execute and deliver this Third Amendment Agreement, the Seventh Amendment Agreement, the Modification Agreements (referred to below), and the other documents contemplated hereunder. 15.3 Certificate. GSRP shall have delivered to TFC a legal opinion from its General Counsel in form and substance reasonably satisfactory to TFC. 15.4 Expenses. GSRP shall have paid all fees and expenses required to be paid by it pursuant to Section 6(c) of Existing SOI pursuant to invoices or other bills submitted to GSRP. 15.5 Seventh Amendment Agreement. The Seventh Amendment Agreement shall be in full force and effect. 15.6 Proceedings. All actions taken in connection with the execution of this Third Amendment Agreement and all documents and papers relating thereto shall be satisfactory to TFC and its counsel. TFC and its counsel shall have received copies of such documents and papers as it or such counsel may reasonably request in connection therewith, all in form and substance satisfactory to TFC and its counsel. 17 15.7 Other Documents. (a) GSRP shall have executed and delivered to TFC (A) the modification agreement to the Canyons Blanket Mortgage and the Canyons Assignment of Rents, in form and substance satisfactory to TFC, and (B) the modification agreement to the Steamboat Blanket Mortgage and the Steamboat Assignment of Rents, in form and substance satisfactory to TFC and (b) GSRP shall have delivered to TFC title insurance endorsements to the Title Insurance Policy {Blanket} in respect of the Canyons and Steamboat Projects in form and substance satisfactory to TFC. 16. Miscellaneous. 16.1 This Third Amendment Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 16.2 This Third Amendment Agreement shall be governed by the internal laws of the State of Maine. To the extent any provision of this Third Amendment 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 Third Amendment Agreement. 16.3 The titles of the Sections appear as a matter of convenience only, do not constitute a part hereof and shall not affect the construction hereof. The words "herein," "hereof," "hereunder" and "hereto" refer to this Third Amendment Agreement as a whole and not to any particular Section or other subdivision. 16.4 All warranties, representations and covenants made by GSRP herein or in the Existing SOI or in any certificate or other instrument delivered by it or on its behalf under this Agreement or in the Existing SOI shall be considered to have been relied upon by TFC and shall survive the execution and delivery of this Third Amendment Agreement. 16.5 Except as explicitly amended by, or otherwise provided for in, this Third Amendment Agreement , the Existing SOI, the Notes and the other Security Documents remain in full force and effect under their respective terms as in effect immediately prior to the effectiveness of this Third Amendment Agreement, and GSRP hereby affirms all of its obligations thereunder. 16.6 This Third Amendment Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. This Third Amendment Agreement may be executed in counterpart by facsimile signature, which signatures shall be treated as, and shall have the effect of original and manually executed signatures. 18 16.7 GSRP hereby releases, remises, acquits and forever discharges the Administrative Agent and TFC and their respective employees, agents, representatives, consultants, attorneys, fiduciaries, servants, officers, directors, partners, predecessors, successors and assigns, subsidiary corporations, parent corporations, and related corporate divisions (all of the foregoing hereinafter called the "Released Parties"), from any and all actions and causes of action, judgments, executions, suits, debts, claims, demands, liabilities, obligations, damages and expenses of any and every character, whether known or unknown, fixed or contingent, asserted or unasserted, direct or indirect, at law or in equity, of whatsoever kind or nature, whether heretofore or hereafter arising for or because of any matter or things done, omitted or suffered to be done by any of the Released Parties prior to and including the date of execution hereof, arising out of or in any way connected with (a) the SOI, the Amended LSA, the Steamboat Note of TFC or the other Notes or Security Documents, as amended from time to time (including, without limitation, this Third Amendment Agreement and the Seventh Amendment Agreement) and (b) the Subordinated Loan Tranche (all of the foregoing hereinafter called the "Released Matters"). GSRP hereby acknowledges that the agreements set forth in this Third Amendment Agreement are intended to be in full satisfaction of all or any alleged injuries or damages arising in connection with the Released Matters. GSRP hereby represents and warrants to Administrative Agent and TFC that GSRP has not purported to transfer, assign or otherwise convey any of its right, title or interest in any Released Matter to any other person and that the foregoing constitutes a full and complete release of all Released Matters. 16.8 The parties hereto agree that the Existing SOI, as amended hereby, and the Amended LSA, as amended by the Seventh Amendment Agreement, are intended to be one instrument and agreement, subject to the terms and conditions hereof and thereof. 16.9 The Administrative Agent agrees, contemporaneously with the Third Amendment Effective Date, to send to the "Bank Depository" and the "Bank Agent" (as such terms are defined in the Steamboat Cash Pledge Agreement) a certificate certifying that the Steamboat Cash Pledge Agreement has terminated. [Remainder of page intentionally left blank. Next page is signature page.] 19 IN WITNESS WHEREOF, the parties have executed this Third Amendment Agreement as of the day and year first above written. GSRP: TFC: GRAND SUMMIT RESORT TEXTRON FINANCIAL PROPERTIES, INC. CORPORATION By: /s/Helen E. Wallace By: /s/Alicia-Ann J. Duncanson - ----------------------- ------------------------------ Name: Helen E. Wallace Name: Alicia-Ann J. Duncanson Title: CFO/Sr.VP Title: AVP-Loan Manager The undersigned confirms that all indebtedness of GSRP owing to the undersigned is junior and subordinate to all indebtedness of GSRP owing to TFC under the Amended SOI pursuant to that certain Subordination Agreement dated as of September 1, 1998, as amended. All of such indebtedness of GSRP owing to TFC under the Amended SOI shall qualify as "Senior Debt" under the Amended SOI. AMERICAN SKIING COMPANY RESORT PROPERTIES, INC. By: /s/Helen E. Wallace - ----------------------- Name: Helen E. Wallace Title: CFO/Sr.VP 20 EX-99 4 seventhamendment.txt SEVENTH AMENDMENT FINAL SEVENTH AMENDMENT AGREEMENT THIS SEVENTH AMENDMENT AGREEMENT (this "Seventh Amendment Agreement"), dated as of December 31, 2003 among GRAND SUMMIT RESORT PROPERTIES, INC., a Maine corporation, (herein referred to as "GSRP"), the lenders listed on the signature pages hereof (each individually referred to herein as a "Lender" and, collectively, as the "Lenders"), TEXTRON FINANCIAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity herein referred to as the "Administrative Agent"). W I T N E S S E T H: A. WHEREAS, GSRP entered into that certain Loan and Security Agreement with Textron Financial Corporation, Green Tree Financial Services Corporation and the Administrative Agent dated as of September 1, 1998 (as amended to but excluding the date hereof, the "Existing LSA"), pursuant to which the Lenders agreed to make loans to GSRP in accordance with the terms of the Existing LSA; B. WHEREAS, capitalized terms used herein shall have the meanings ascribed to the same in the Existing LSA and in Section 1 of this Seventh Amendment Agreement; and C. WHEREAS, the parties to the Existing LSA have agreed to certain amendments to the Existing LSA as described and set forth below; NOW, THEREFORE, in consideration of the Administrative Agent's, the Lenders,' and GSRP's agreements hereunder, and in consideration of other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Administrative Agent, the Lenders and GSRP hereby agree as follows: 1. Amendments to Definitions. The parties hereto agree that Section 1.1 of the Existing LSA is, and shall be deemed to be, amended and modified as follows: 1.1 The following new definitions are hereby added to Section 1.1 of the Existing LSA: Canyons Auction Sale - as defined in Section 4 of the Seventh Amendment Agreement. Canyons Absolute Auctioned Quartershare Interests/Units -- as defined in Section 4 of the Seventh Amendment Agreement. Canyons With Reserve Auctioned Quartershare Interests/Units -- as defined in Section 4 of the Seventh Amendment Agreement. March, 2003 Waiver Fee -- as defined in Section 4 of the Seventh Amendment Agreement. Net Auction Sales Proceeds -- as defined in Section 4 of the Seventh Amendment Agreement. 1 Seventh Amendment Agreement -- means that certain Seventh Amendment Agreement dated as of December 31, 2003 among the GSRP, the Administrative Agent and the Lenders. Seventh Amendment Effective Date -- as defined in the Seventh Amendment Agreement. 1.2 The following existing definitions in the Existing LSA are hereby amended and restated in their entirety as follows: Release Price -- means, (a) in the case of any Steamboat Quartershare Interests as follows: (i) in the case of any Steamboat Non-Penthouse Quartershare Interest, the greater of (x) 100% of the minimum release dollar amount set forth on Schedule 3 hereto that corresponds to the particular type of Quartershare Interest listed thereon that is being sold and (y) 80% of the gross sales proceeds in respect of the Steamboat Quartershare Interest that is being sold ; and (ii) in the case of any Steamboat Penthouse Quartershare Interest, the greater of (x) 100% of the minimum release dollar amount set forth on Schedule 3 hereto that corresponds to the particular type of Quartershare Interest listed thereon that is being sold and (y) 80% of the gross sales proceeds in respect of the Steamboat Penthouse Quartershare Interest that is being sold; and (iii) "Release Prices" based on Schedule 3 hereto shall be based on a sale of 50% of a Steamboat Quartershare Interest (a so-called "1/8th Steamboat Quartershare Interest") and such "Release Prices" shall be multipled by 200% to obtain the minimum "Release Price" for a Steamboat Quartershare Interest for purposes of this definition. Anything contained in this clause (a) to the contrary notwithstanding, if unsold Steamboat Quartershare Interests shall be sold by GSRP other than in the ordinary course of its business (including, without limitation, any bulk sales of such Steamboat Quartershare Interests), the "minimum release dollar amounts" then in effect in respect of such sold Steamboat Quartershare Interests shall be supplemented by adding thereto (x) in the case in which all of the remaining unsold Steamboat Quartershare Interests shall have been sold, all of the remaining unpaid Steamboat Obligations and (y) in any other case, an amount equal to the remainder (if positive) of (x) the amount of the Steamboat Obligations outstanding after applying such "minimum release dollar amounts" as provided in Section 2.5(d)(i) hereof less (y) 2 the product of the remaining unsold Steamboat Quartershare Interests (after giving effect to such sale) times the then current "minimum release dollar amounts." (b) in the case of any Canyons Quartershare Interest, 100% of the minimum release dollar amount set forth on Schedule 3 hereto that corresponds to the particular type of Quartershare Interest listed thereon, provided that the "Release Price" with respect to any Canyons Quartershare Interest or Canyons Residential Unit sold at the Canyons Auction Sale shall be as set forth in Section 4 of the Seventh Amendment Agreement; (c) intentionally omitted, (d) intentionally omitted, (e) intentionally omitted, and (f) intentionally omitted. With respect to the sale of any Commercial Unit, the release price shall be such amount as shall have been agreed between GSRP and the Administrative Agent and approved by the Steamboat Required Lenders. Anything contained to the contrary in this definition of "Release Price," at such time as all of the Colorado First/PCL Obligations, the Canyons Obligations, the Steamboat Obligations (other than the Percentage Sales Fee), the Subordinated Loan Tranche Obligations and all other Obligations (other than the Percentage Sales Fee) shall have been paid in full, (aaa) "Release Price" for a Quartershare Interest or Commercial Unit shall be equal to the Percentage Sales Fee due in respect thereof and (bbb) to the extent that any Quartershare Interest or Commercial Unit suffers a casualty for which there is insurance proceeds or is condemned for which there is condemnation proceeds distributable, in each case, to GSRP (without giving effect to Section 3.5 and 3.6 of the Existing LSA, as amended hereby), such insurance or condemnation proceeds shall be deemed sales proceeds and the Percentage Sales Fee shall be payable in respect thereof (after which such remaining insurance or condemnation proceeds shall be payable to, and retained by, GSRP free and clear of any Liens, security interests or claims hereunder or under any other Security Document). Steamboat Construction Project Advances Maturity Date - means June 30, 2006. Steamboat Obligations -- means all sums now or hereafter loaned or advanced by any one or more of the Steamboat Construction Project Advance Lenders, the Steamboat Inventory Advance Lenders and/or the Administrative Agent to, or otherwise incurred by, GSRP under this Agreement in respect of the Steamboat Project, the Steamboat Notes and/or any of the other Steamboat Security Documents (including, without limitation, accrued and unpaid interest in respect of the Steamboat Notes and the Loan Costs attributable to the Steamboat Project and/or the Steamboat Security Documents and also including the Subordinated Loan Tranche Obligations), and the full, prompt and complete performance of all obligations owed by, or undertakings or 3 indemnities of, GSRP in respect of the Steamboat Project and/or the Steamboat Security Documents arising hereunder or thereunder. For the avoidance of doubt, "Steamboat Obligations" shall also include the Steamboat Waiver, Extension and Restructuring Fee, the Sixth Amendment Fees, the March, 2003 Waiver Fee and the Percentage Sales Fee. 2. Termination of Commitments; Payment of Colorado First/PCL Obligations; Payment of Canyons Obligations; Amending of Schedule 3 to Existing LSA. For the avoidance of doubt, to the extent that any Commitment shall have not been terminated prior to the Seventh Amendment Effective Date, all Commitments are terminated as of the Seventh Amendment Effective Date. For the avoidance of doubt, GSRP confirms that all Colorado First/PCL Obligations have been paid in full. For the avoidance of doubt, GSRP confirms that all Canyons Obligations have been paid in full. Schedule 3 to the Existing LSA is hereby amended and restated by substituting in the place thereof Schedule A and Schedule B attached hereto. 3. Waiver. Upon this Seventh Amendment Agreement becoming effective on the Seventh Amendment Effective Date, each Default and/or Event of Default existing on the Seventh Amendment Effective Date and arising from or otherwise in respect of (a) the failure of GSRP to make principal payments under the Existing LSA such that the aggregate outstanding principal balance of the Advances under the Existing LSA would not exceed $30,000,000 by June 29, 2003, as provided for in Section 2.5(c)(iii) of the Existing LSA, (b) the failure of GSRP to make principal payments under the Existing LSA such that the aggregate outstanding principal balance of the Advances under the Existing LSA would not exceed $25,000,000 by June 30, 2003, as provided for in Section 2.5(c)(iii) of the Existing LSA, and (c) the failure of GSRP to make principal payments under the Existing LSA such that the aggregate outstanding principal balance of the Advances under the Existing LSA would not exceed $20,000,000 by September 30, 2003, as provided for in Section 2.5(c)(iii) of the Existing LSA are, in each case, hereby waived. No other Default or Event of Default (whether occurring prior to the date hereof or hereafter) shall be deemed waived, and the Administrative Agent on behalf of itself and the Lenders hereby reserves all of its and their respective rights and remedies under the Existing LSA, as amended hereby, the other Security Documents, at law and in equity with respect thereto. 4. Public Action Sale of Canyons Quartershare Interests; March, 2003 Waiver Fee. The Lenders hereby consent to GSRP's holding a public auction sale on or about February 21, 2004 in respect of the remaining unsold Canyons Quartershare Interests and/or Canyons Residential Units on the terms and conditions set forth on Schedule C attached hereto ("Canyons Auction Sale"), provided that, except for a limited number of sales of Canyons Quartershare Interests on an absolute basis as set forth on said Schedule C, all other sales of Canyons Quartershare Interests and/or Canyons Residential Units at the Canyons Auction Sale shall be on a "with reserve" basis and will be sold at a price or prices sufficient to achieve the "Release Price" in respect thereof set forth below. The Canyons Quartershare Interests and/or Canyons Residential Units to be so auctioned at the Canyons Auction Sale on an absolute basis are referred to herein as "Canyons Absolute Auctioned Quartershare Interests/Units" and the Canyons Quartershare Interests or Canyons Residential Units to be so auctioned at the Canyons Auction Sale on a reserve basis are referred to herein as the "Canyons With Reserve Auctioned Quartershare Interests/Units." With respect to any sales of Canyons Absolute Auctioned Quartershare Interests/Units, the "Release Price" therefor shall be 70% of the Net Auction Sales Proceeds in respect thereof. "Net Auction Sales Proceeds" with respect to any sale of Canyons Quartershare Interests or Canyons Residential Units at the Canyons Auction Sale shall be the gross proceeds received in respect thereof (inclusive of any buyer's premium paid in respect thereof) less (a) the auctioneer's commission in respect of such sale, (b) any auctioneer expenses to be reimbursed from such gross proceeds by GSRP to the auctioneer that have been allocated to such sale (the amounts of such expenses and the methodology of their allocation being reasonably acceptable to 4 the Administrative Agent) and (c) the March, 2003 Waiver Fee. With respect to any sales of Canyons With Reserve Auctioned Quartershare Interests/Units, the Release Price therefor shall be the greater of (i) 70% of the Net Auction Sales Proceeds in respect thereof and (ii) a "minimum release price" as set forth on Schedule D attached hereto, which "minimum release price" when aggregated with all other Release Prices received in respect of all other sales of Canyons Quartershare Interests and Canyons Residential Units at the Canyons Auction Sale shall not be less than $7,000,000; it being the intention of GSRP, the Lenders and the Administrative Agent that GSRP will pay to the Administrative Agent on behalf of the Lenders an aggregate amount of Release Prices from sales of Canyons Quartershare Interests and Canyons Residential Units at the Canyons Auction Sale of not less than $7,000,000. The foregoing notwithstanding, the Net Auction Sales Proceeds shall be treated as Projects' Cash Proceeds under the Existing LSA. GSRP agrees to pay the March, 2003 Waiver Fee to the Administrative Agent on behalf of the Lenders out of the gross proceeds of the Canyons Quartershare Interests sold at the Canyons Auction Sale after deducting from such gross proceeds the auctioneer's commission in respect thereof and any auctioneer expenses to be reimbursed to the auctioneer from such gross proceeds by GSRP (the amounts of such expenses being reasonably acceptable to the Administrative Agent) contemporaneously with its receipt of such proceeds, provided that, if the Canyons Auction Sale shall not be held, the March, 2003 Waiver Fee shall be paid by GSRP to the Administrative Agent on behalf of the Lenders on February 28, 2004 out of then available Excess Projects' Cash Proceeds and if such Excess Projects' Cash Proceeds are insufficient to pay such Fee, then the remainder thereof shall be paid from the next available amount or amounts of such Excess Projects' Cash Proceeds. "March, 2003 Waiver Fee" means the aggregate fees of $175,000 payable to the Lenders pursuant to that certain waiver letter dated as of March 31, 2003 in respect of GSRP's failure to comply with the requirements of Section 2.5(c)(iii) of the Existing LSA. No "1/8th Canyons Quartershare Interests" shall be sold at the Canyons Auction Sale or prior to or thereafter unless the Administrative Agent shall have consented thereto. 5. Schedule to the Existing LSA. Schedule 3 to the Existing LSA, to the extent it pertains to Steamboat Quartershare Interests, is hereby amended and restated in its entirety as set forth in Schedule A attached hereto. Schedule 3 to the Existing LSA, to the extent it pertains to Canyons Quartershare Interests, is hereby amended and restated in its entirety as set forth in Schedule B attached hereto. 6. Maximum Permitted Outstanding Principal Amount. GSRP, the Administrative Agent and the Lenders agree that, as of the date hereof, the aggregate outstanding principal amount of the Loan is $30,621,260.03. Section 2.5(c)(iii) of the Existing LSA is hereby amended and restated in its entirety as follows: (iii) If on each of the following test dates the aggregate outstanding principal amount of all Advances (for the avoidance of doubt, such Advances shall not include any Subordinated Loan Tranche Advances) exceeds the maximum outstanding principal amount of Advances set forth below, GSRP 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 ratably to all Advances: 5 ================================= ============================================== Maximum Outstanding Principal Amount of Test Date Advances - --------------------------------- ---------------------------------------------- - --------------------------------- ---------------------------------------------- June 30, 2004 $19,000,000 - --------------------------------- ---------------------------------------------- September 30, 2004 $18,000,000 - --------------------------------- ---------------------------------------------- December 31, 2004 $17,000,000 - --------------------------------- ---------------------------------------------- March 31, 2005 $14,000,000 - --------------------------------- ---------------------------------------------- June 30, 2005 $12,000,000 - --------------------------------- ---------------------------------------------- September 30, 2005 $11,000,000 - --------------------------------- ---------------------------------------------- December 31, 2005 $10,000,000 - --------------------------------- ---------------------------------------------- March 31, 2006 $5,000,000 - --------------------------------- ---------------------------------------------- June 30, 2006 $0 ================================= ============================================== 7. Miscellaneous; Events of Defaults. The covenants and undertakings of GSRP set forth in this Seventh Amendment Agreement shall be incorporated into and made a part of the Existing LSA. All of the other Security Documents are hereby automatically amended and modified to give effect to this Seventh Amendment Agreement. Each of the holders of Steamboat Construction Project Advance Notes shall attach a copy of this Seventh Amendment Agreement to each of said Notes. 8. SOI. This Section 8 of the Sixth Amendment Agreement is amended and replaced by the following: The Lenders agree that GSRP, in accordance with the SOI, shall pay to the Subordinated Lender, in cash, interest accruing from time to time on the outstanding principal balance of the Subordinated Loan Tranche at a fixed rate per annum of 10% (it being acknowledged that interest accrues under the SOI at a per annum rate of 20% and that the remaining unpaid portion of said rate of interest would not be paid until all Canyons Obligations, all Steamboat Obligations and all other Obligations (other than the Percentage Sales Fee and the Subordinated Loan Tranche Obligations) shall have been fully and finally paid). Such "cash interest" shall be payable, and shall be paid, by GSRP irrespective of whether a Default or Event of Default shall exist and shall rank pari passu with the obligation of GSRP to pay interest to the Lenders in respect of the Steamboat Obligations. The Lenders acknowledge that the Subordinated Lender shall be entitled to receive such "cash interest payment" at the same time as the Lenders for the Steamboat Project receive interest payments from the Obligation-Servicing Projects' Cash Proceeds as provided for herein or otherwise from other Projects' Cash Proceeds payable to such Lenders for the Steamboat Project and the Canyons Project, and, if such Obligation-Servicing Projects' Cash Proceeds or other Projects' Cash Proceeds paid or payable to the Lenders for the Steamboat Project and Canyons Project are insufficient to pay in full all of such "cash interest" and the other interest payable to the Lenders for the Steamboat Project, then such Obligation-Servicing Projects' Cash Proceeds or other Projects' Cash Proceeds shall be shared ratably among the Lenders for the Steamboat Project and the Subordinated Lender based on the amount of accrued and unpaid interest owing to them. Unless and until all Obligations (other than the Subordinated Loan Tranche Obligations and the Percentage Sales Fee) shall have been paid in full, no other payments shall be made by GSRP to the Subordinated Lender under the SOI. The Lenders acknowledge that the Subordinated Lender's security interest and Lien under, and as defined in, 6 the SOI will continue to exist in and to the Excess Projects' Cash Proceeds held as Collateral hereunder (subject to being used and released as provided in Section 6 hereof), in and to the Obligation-Servicing Projects' Cash Proceeds (together with payments under Section 2.5(c)(ii), Section 3.5 and Section 3.6 of the Existing LSA, as amended hereby)(subject to being used and released as provided for in Section 5 hereof) and in and to all other Projects' Cash Proceeds, provided that such security interest and Lien in and to such Collateral is and shall be and remain junior and subordinate in priority to the security interests and Liens therein under the Existing LSA, as amended hereby, and other Security Documents. The Lenders acknowledge that GSRP and the Subordinated Lender are agreeing to extend the period during which Subordinated Loan Tranche Advances may be obtained by GSRP under the SOI until the earlier of the date of the Canyons Auction Sale or March 31, 2004 and are agreeing that up to an aggregate of $635,251 of additional Subordinated Loan Tranche Advances will be available under the SOI for working capital purposes subject to the satisfaction of the conditions precedent set forth therein with respect thereto and subject to the aggregate outstanding principal amount of all Subordinated Loan Tranche Advances outstanding at any one time never exceeding $10,600,000. The Lenders acknowledge that the Subordinated Lender may elect not to make Subordinated Loan Tranche Advances to GSRP under the SOI if there is no resolution of the Fleet/ASCRP Loan Defaults/Acceleration under the Fleet/ASCRP Loan Documents that is reasonably satisfactory to the Subordinated Lender. The Lenders acknowledge the benefits GSRP is deriving from the SOI and the Subordinated Loan Tranche Advances thereunder and consent to the same. The Lenders agree and consent to the amending of the SOI as provided for in that certain "Third Amendment Agreement" of even date herewith, copies of which have been delivered to each of the Lenders by GSRP. 9. Representations and Warranties. GSRP hereby represents and warrants as of the date hereof as follows, which representations and warranties are hereby incorporated into and made part of the Amended LSA: 9.1 Except as otherwise disclosed on Schedule 1 attached hereto, each of the representations and warranties contained in Section 3 of the Existing LSA (other than Section 4.4 thereof, and other than with respect to matters set forth on the schedules to the Existing LSA which GSRP warrants were true and correct as of the date of such schedules) is true and correct as of the date hereof. 9.2 Except with respect to the Permitted Exceptions (as defined in the Existing LSA), all Liens granted to the Administrative Agent under the Existing LSA and the other Security Documents are duly granted, valid, perfected and prior in right to all other Liens that now or hereafter may be granted to or held by any other Person. 9.3 The execution and delivery of this Seventh Amendment Agreement, the Modification Documents (as such term is hereinafter defined) and the other documents and instruments contemplated herein, and compliance by GSRP with all of the provisions of this Seventh Amendment Agreement, the Existing LSA, as amended hereby, and each of the other documents set forth above are: (i) within the corporate powers of GSRP; and (ii) 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 upon any Property of GSRP 7 under the provisions of, any agreement, charter instrument, bylaw or other instrument to which GSRP is a party or by which its Property may be bound. 9.4 Neither the nature of GSRP, nor of any of its businesses or Properties, nor any relationship between GSRP and any other Person, nor any circumstance in connection with the execution or delivery of this Seventh Amendment Agreement and the other documents contemplated in connection herewith, nor the operation of any Project and the sale, or offering for sale, of any Quartershare Interest of any of the Projects by GSRP, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of GSRP, as a condition of the execution, delivery or performance of this Seventh Amendment Agreement and the other documents contemplated in connection herewith. 9.5 GSRP will not be, on or after the date hereof, a party to any contract or agreement which restricts its right or ability to incur indebtedness under, or prohibits the execution of, or compliance with, this Seventh Amendment Agreement by GSRP. GSRP 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 Permitted Exceptions and all Liens in favor of the Administrative Agent in respect of such Collateral remain in full force and effect. 9.6 GSRP is not entering into this Seventh Amendment 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 Seventh Amendment Agreement, the Third Amendment Agreement and the full availability of the advances contemplated thereunder, (a) the assets of GSRP at a fair valuation thereof on a going concern basis will not be less than its debts, (b) GSRP 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) GSRP will be able to pay its respective debts as they become due. "Debt" for purposes of this Section 9.6 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. 9.7 After giving effect to this Seventh Amendment Agreement, no Default or Event of Default has occurred or is continuing, nor does any event or condition exist that would constitute a Default or an Event of Default. No material adverse change has occurred in or in respect of the Collateral or any one or more of the Projects that has not been disclosed to the Administrative Agent and Lenders in writing. The Obligations continue to be Senior Debt under, and as defined in, the ASC Indenture and no default or event of default exists under such Indenture and, no defaults or events of default exist under any other agreement for indebtedness for borrowed money, any financing lease or any guaranty of any of the foregoing to which GSRP is a party. GSRP has not issued and is not otherwise obligated in respect of any obligation of the Parent, American Skiing Company, or any subsidiary of American Skiing Company for borrowed-money indebtedness, any financing lease, any guaranty or any other obligation, 8 other than its guaranty of the Indenture, which by its own terms is junior and subordinated to the Obligations. 9.8 Permanent certificates of occupancy have been issued for each of the Steamboat Residential Units in the penthouse at the Steamboat Project and all construction in respect and in respect of the Mount Werner Circle improvements have been completed. 10. This Seventh Amendment Agreement shall become effective on the date (the "Seventh Amendment Effective Date") on which the parties hereto shall have executed this Seventh Amendment Agreement and each of the following conditions shall have been satisfied: 10.1 Warranties and Representations True as of Sixth Amendment Effective Date. The warranties and representations contained or referred to in this Seventh Amendment Agreement shall be true in all material respects on the Seventh Amendment Effective Date with the same effect as though made on and as of that date. The Administrative Agent shall have received a certificate, in form and substance satisfactory to the Administrative Agent, dated as of the Seventh Amendment Effective Date, signed by an Executive Vice-President or Vice President of GSRP and certifying that the warranties and representations of GSRP contained in this Seventh Amendment Agreement are true in all material respects on the Seventh Amendment Effective Date. 10.2 Secretary's Certificates. The Administrative Agent shall have received a certificate of the Secretary or any Assistant Secretary of GSRP, in form and substance reasonably satisfactory to the Administrative Agent, dated as of the Sixth Amendment Effective Date, certifying (i) the adoption by the Board of Directors of GSRP of a resolution authorizing GSRP to enter into this Seventh Amendment Agreement and the transactions and instruments contemplated hereby, and (ii) the incumbency and authority of, and verifying the specimen signatures of, the officers of GSRP authorized to execute and deliver this Seventh Amendment Agreement, the Modification Agreements (referred to below) and the other documents contemplated hereunder. 10.3 Legal Opinion. GSRP shall have delivered to Administrative Agent and the Lenders a legal opinion from its General Counsel in form and substance reasonably satisfactory to the Lenders and Administrative Agent. 10.4 Expenses. GSRP shall have paid all fees and expenses required to be paid by it pursuant to Section 11.2 of Existing LSA pursuant to invoices or other bills submitted to GSRP. 10.5 Consent. Each Lender shall have consented to this Seventh Amendment Agreement. Textron Financial Corporation, in its individual lending capacity, shall have executed and delivered to GSRP an amendment to the SOI that, among other things, provides for Textron Financial Corporation, in its individual subordinated lending capacity, to extend up to an additional $635,251 in advances to GSRP and a copy of such amendment shall have been delivered to each of the Lenders. 9 10.6 Other Documents. (a) GSRP shall have executed a modification agreement (individually, a "Modification Agreement" and, collectively, the "Modification Agreements") to each of the Blanket Mortgages, each in form and substance satisfactory to the Administrative Agent, and shall have delivered the same to the Administrative Agent and shall have delivered to the Administrative Agent title insurance endorsements to the Title Insurance Policy {Blanket} in respect of the Canyons and Steamboat Projects in form and substance satisfactory to the Administrative Agent. 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. (b) Each of the other Persons that shall have delivered subordination agreements to the Administrative Agent in connection with the original closing of the Existing LSA shall have executed this Seventh Amendment Agreement to show its consent to the same. (c) That certain "Third Amendment Agreement" to the SOI shall have been executed and delivered by the parties thereto and the same shall be in full force and effect except for any condition therein requiring this Sixth Amendment Agreement to be in full force and effect. 10.7 Proceedings. All actions taken in connection with the execution of this Sixth Amendment Agreement and all documents and papers relating thereto shall be satisfactory to the Administrative Agent and its counsel. The Administrative Agent and its counsel shall have received copies of such documents and papers as it or such counsel may reasonably request in connection therewith, all in form and substance satisfactory to the Administrative Agent and its counsel. 11. Miscellaneous. 11.1 This Seventh Amendment Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 11.2 This Seventh Amendment Agreement shall be governed by the internal laws of the State of Maine. To the extent any provision of this Seventh Amendment 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. 11.3 The titles of the Sections appear as a matter of convenience only, do not constitute a part hereof and shall not affect the construction hereof. The words "herein," "hereof," "hereunder" and "hereto" refer to this Seventh Amendment Agreement as a whole and not to any particular Section or other subdivision. 11.4 All warranties, representations and covenants made by GSRP herein or in the Existing LSA or in any certificate or other instrument delivered by it or on its behalf under this Seventh Amendment Agreement or in the Existing LSA, as amended hereby, shall 10 be considered to have been relied upon by the Lenders and shall survive the execution and delivery of this Seventh Amendment Agreement. 11.5 Except as explicitly amended by, or otherwise provided for in, this Seventh Amendment Agreement , the Existing LSA, the Notes and the other Security Documents remain in full force and effect under their respective terms as in effect immediately prior to the effectiveness of this Agreement, and GSRP hereby affirms all of its obligations thereunder. 11.6 This Seventh Amendment Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. This Seventh Amendment Agreement may be executed in counterpart by facsimile signature, which signatures shall be treated as, and shall have the effect of original and manually executed signatures. 11.7. GSRP hereby releases, remises, acquits and forever discharges the Administrative Agent and each of the Lenders and their respective employees, agents, representatives, consultants, attorneys, fiduciaries, servants, officers, directors, partners, predecessors, successors and assigns, subsidiary corporations, parent corporations, and related corporate divisions (all of the foregoing hereinafter called the "Released Parties"), from any and all actions and causes of action, judgments, executions, suits, debts, claims, demands, liabilities, obligations, damages and expenses of any and every character, whether known or unknown, fixed or contingent, asserted or unasserted, direct or indirect, at law or in equity, of whatsoever kind or nature, whether heretofore or hereafter arising for or because of any matter or things done, omitted or suffered to be done by any of the Released Parties prior to and including the date of execution hereof, arising out of or in any way connected with (a) the LSA, the Notes or the Security Documents, as amended from time to time (including, without limitation, this Seventh Amendment Agreement) and (b) the Loan (all of the foregoing hereinafter called the "Released Matters"). GSRP hereby acknowledges that the agreements set forth in this Seventh Amendment Agreement are intended to be in full satisfaction of all or any alleged injuries or damages arising in connection with the Released Matters. GSRP hereby represents and warrants to Administrative Agent and the Lenders that GSRP has not purported to transfer, assign or otherwise convey any of its right, title or interest in any Released Matter to any other person and that the foregoing constitutes a full and complete release of all Released Matters. 11.10 The parties hereto agree that the Existing LSA, as amended hereby, and the SOI, as amended by the Third Amendment Agreement thereto of even date herewith, are intended to be one instrument and agreement, subject to the terms and conditions hereof and thereof. 11.11 Pursuant to Section 2.6(b) of the Amended LSA, GSRP hereby approves the acquisition by Textron Financial Corporation of the interests of Foothill Capital Corporation under the Amended LSA and Security Documents. [Remainder of page intentionally left blank. Next page is signature page.] 11 IN WITNESS WHEREOF, the parties have executed this Seventh Amendment Agreement as of the day and year first above written. GSRP: Steamboat and Special Subordinated Lender: GRAND SUMMIT RESORT TEXTRON FINANCIAL PROPERTIES, INC. CORPORATION By: /s/Helen E. Wallace By: /s/Alicia-Ann J. Duncanson - ----------------------- ----------------------------- Name: Helen E. Wallace Name: Alicia-Ann J. Duncanson Title: CFO/Sr. VP Title: AVP-Loan Manager Steamboat Lender: LITCHFIELD FINANCIAL CORPORATION By: /s/Alicia-Ann J. Duncanson ------------------------------ Name: Alicia-Ann J. Duncanson Title: AVP-Loan Manager 12 Administrative Agent: TEXTRON FINANCIAL CORPORATION By: /s/Alicia-Ann J. Duncanson - ------------------------------ Name: Alicia-Ann J. Duncanson Title: AVP-Loan Manager AGREED AND CONSENTED TO: MOUNT SNOW, LTD. By: /s/Helen E. Wallace - ----------------------- Name: Helen E. Wallace Title: CFO/Sr. VP KILLINGTON, LTD. By: /s/Helen E. Wallace - ----------------------- Name: Helen E. Wallace Title: CFO/Sr. VP SUNDAY RIVER SKIWAY CORPORATION By: /s/Helen E. Wallace - ----------------------- Name: Helen E. Wallace Title: CFO/Sr. VP L.B.O. HOLDING, INC. By: /s/Helen E. Wallace - ----------------------- Name: Helen E. Wallace Title: CFO/Sr. VP 13 ASC UTAH, INC. By: /s/Helen E. Wallace - ----------------------- Name: Helen E. Wallace Title: CFO/Sr. VP STEAMBOAT SKI & RESORT CORPORATION By: /s/Helen E. Wallace - ----------------------- Name: Helen E. Wallace Title: CFO/Sr. VP AMERICAN SKIING COMPANY RESORT PROPERTIES, INC. By: /s/Helen E. Wallace - ----------------------- Name: Helen E. Wallace Title: CFO/Sr. VP 14 EX-10 5 employmentagreement.txt EMPLOYMENT AGREEMENT EXECUTIVE EMPLOYMENT AGREEMENT EXECUTIVE EMPLOYMENT AGREEMENT, effective as of September 01, 2003 by and between AMERICAN SKIING COMPANY, a Delaware corporation (the "Company"), and Foster A. Stewart, Jr. (the "Executive"). WHEREAS, the Company desires to employ the Executive and the Executive desires to continue to be so employed, on the terms and subject to the conditions set forth in this agreement (the "Agreement"); NOW, THEREFORE, in consideration of the mutual covenants set forth herein and for other good and valuable consideration the parties hereto hereby agree as follows: 1. Employment: Term. The Company hereby agrees to continue to employ the Executive, and the Executive agrees to continue to be so employed by the Company, upon the terms and subject to the conditions set forth herein, commencing as of September 1, 2003 (the "Commencement Date") and ending on August 31, 2006 (the "Initial Period"); provided, however, that such term shall automatically be extended for an additional three (3) year period (the "Renewal Period") unless, not later than thirty (30) days prior to the expiration of the Initial Period, either party hereto shall provide written notice (a "Non-Renewal Notice") of its or his desire not to extend the term hereof to the other party hereto and provided, further, however, that such term shall be further automatically extended for additional consecutive one year periods beginning on the day following the last day of the Renewal Period and each subsequent anniversary thereafter (each such one-year period an "Extended Renewal Period") unless, not later than thirty (30) days prior to the expiration of each such Extended Renewal Period, either party hereto shall provide a Non-Renewal Notice to the other party (the Initial Period together with the Renewal Period and each Extended Renewal Period shall be hereinafter referred to as the "Term"). Notwithstanding the foregoing, the Term may terminated prior to the expiration of the applicable Initial Period, Renewal Period or Extended Renewal Period, in accordance with Section 4 of this Agreement 2. Position: Conduct. (a) During the Term, the Executive will hold the title and office of, and serve as a Senior Vice President of the Company and the Company's Secretary and General Counsel. The Executive shall be responsible for the management of the legal department of the Company and of American Skiing Company Resort Properties, Inc. ("ASCRP"). The Executive shall undertake the responsibilities and exercise the authority customarily performed, undertaken and exercised by persons situated in a similar executive capacity, and shall perform such other specific duties and services (including service as an officer, director or equivalent position of any direct or indirect subsidiary without additional compensation) as the Board of Directors of the Company (the "Board") or Chief Executive Officer of the Company (the "CEO") shall reasonably request. The Executive shall report directly to the CEO of the Company unless otherwise explicitly directed by the Board. During the Term, the Company shall provide the Executive with executive office space and administrative and secretarial assistance and other support services consistent with his position and past practice. The administrative and secretarial assistance may be provided in either the Company's offices in Portland, Maine, area or at the Company's headquarters. 1 (b) During the Term, the Executive agrees to devote his full business time and best efforts and attention to the business and affairs of the Company and to faithfully and diligently perform, to the best of his ability, all of his duties and responsibilities hereunder. Nothing in this Agreement shall preclude the Executive from devoting reasonable time and attention to (i) serving, with the approval of the Board or CEO, as a director, trustee or member of any committee of any organization, (ii) engaging in charitable and community activities and (iii) managing his personal investments and affairs; provided that such activities do not involve any material conflict of interest with the interests of the Company or, individually or collectively interfere materially with the performance by the Executive of his duties and responsibilities under this Agreement. Notwithstanding the foregoing and except as expressly provided herein, during the Term, the Executive may not accept employment with any other individual or entity, or engage in any other venture which is directly in conflict or competition with the business of the Company. (c) The Executive's office and primary place of rendering his services under this Agreement shall be the offices of the Company in Portland, Maine, area. Under no circumstances shall the Executive be required to relocate or provide services under this Agreement in any other location other than in connection with reasonable and customary business travel. 3. Salary: Additional Consideration: Perquisites and Benefits. (a) Salary. During the Term, the Company shall pay the Executive a base salary (the "Base Salary") at an annual rate of not less than $265,000.00. Subject to annual review, such Base Salary may be increased from time to time but in no event shall be decreased without the prior consent of the Executive. Base Salary shall be paid in periodic installments in accordance with the Company's standard practice, but not less frequently than semi-monthly. (b) Bonus. For each fiscal year (August 1st through July 31st) during the Term, the Executive shall be eligible to receive a bonus from the Company (the "Annual Bonus"). The award and amount of the Annual Bonus shall be contingent upon the Company's achievement of predefined operating or performance goals and other criteria established by the Compensation Committee of the Board consistent with the adopted annual incentive plan program of the Company, which shall give the Executive the opportunity to earn a maximum Annual Bonus equal to 75% of Base Salary, with a target Annual Bonus equal to 50% of Base Salary. (c) Employee Benefits. During the Term, the Executive shall participate in all plans now existing or hereafter adopted by the Company for its management employees or the general benefit of its employees, such as any pension, profit-sharing, bonuses, stock option or other incentive compensation plans, life and health insurance plans, or other insurance plans and benefits on the same basis and subject to the same qualifications as other senior executive officers. (d) Incentives. The Executive shall be eligible for participation in the Company's Phantom Equity Plan, as amended from time to time by the Compensation Committee of the Board (the "Equity Plan"). Subject to the approval of the Compensation Committee, the Executive shall receive a grant under the Equity Plan not later than December 31, 2003 at a participation percentage equal to six and one half percent (6.5%). Such additional grant shall be in addition to and not in lieu of any previous grant the Executive may have received under 2 the Equity Plan. The terms of such grant shall be governed by the Equity Plan and an award agreement entered into by and between the Executive and the Company. (e) Expenses. The Company shall reimburse the Executive, in accordance with its standard policies from time to time in effect, for all out-of-pocket business expenses as may be incurred by the Executive in the performance of his duties under this Agreement. Such reimbursement shall include, but not be limited to (i) Maine bar fees and state bar association dues (including dues for any committee or section memberships), (ii) American Bar Association dues, including any section or committee memberships, and (iii) continuing legal education credit courses required to maintain bar admission in Maine, including travel and lodging to and from the same. (f) Vacation. The Executive shall be entitled to vacation time to be credited and taken in accordance with the Company's policy from time to time in effect for senior executives, which in any event shall not be less than a total of four (4) weeks per calendar year. (g) Indemnification. To the fullest extent permitted by applicable law, the Executive shall be indemnified and held harmless by the Company against any and all judgments, penalties, fines, amounts paid in settlements, and other reasonable expenses (including, without limitation, reasonable attorney's fees and disbursements) actually incurred by the Executive in connection with any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative, investigative or other) relating to or in connection with any action or omission in his capacity as a director, officer, attorney or employee of the Company except any action which would otherwise constitute "Cause" (as such term is defined in Section 4(b)(ii) or 4(b)(iii) of this Agreement). The Company shall maintain Directors and Officers Insurance in accordance with past practices, which policies shall include coverage for any liability resulting from the Executive's rendering of legal opinions in the course of his duties under Section 2(a) hereof or as otherwise requested by the Company. Indemnification under this Section 3(g) shall be in addition to, and not in lieu of, any other indemnification by the Company of it's officers and directors. 4. Termination and Severance. (a) Death or Disability. The Term shall terminate immediately upon the Executive's death or, upon thirty (30) days prior written notice by the Company, in the case of a determination of the Executive's Disability. As used herein the term "Disability" means the Executive's inability to perform his duties and responsibilities under this Agreement for a period of more than 120 consecutive days, or for more than 180 days, whether or not continuous, during any 365-day period, due to physical or mental incapacity or impairment. A determination of Disability will be made by a physician reasonably satisfactory to both the Executive and the Company and paid for by the Company whose decision shall be final and binding on the Executive and the Company; provided that if the parties cannot agree as to a physician, then each shall select and pay for a physician and these two together shall select a third physician whose fee shall be borne equally by the Executive and the Company and whose determination of Disability shall be binding on the Executive and the Company. 3 If the Term is terminated upon the Executive's death or Disability, the Company shall pay to the Executive's estate or the Executive, as the case may be, a lump sum payment equal to one times the sum of (i) the Executive's annual Base Salary as in effect on the date of such termination, (ii) a pro rata portion of the Executive's Annual Bonus with respect to the fiscal year in which the termination occurred and (iii) any accrued but unpaid vacation through the date of such termination. The Company may, at its election, satisfy the payment requirement referenced in Section 4(a)(i), (ii) and (iii) through the issuance of life insurance on the Executive. (b) Termination for Cause. The Term may be terminated by the Company upon notice (as set forth in this Section 4(b)) to the Executive upon the occurrence of any event constituting "Cause" as defined below. If the Term is terminated by the Company for Cause, the Company will pay the Executive an aggregate amount equal to the Executive's accrued and unpaid Base Salary and vacation pay through the date of such termination. For purposes of this Agreement, "Cause" shall mean the Executive's (i) willful and intentional failure or refusal to perform or observe any of his material duties, responsibilities or obligations set forth in this Agreement; provided, however, that the Company shall not be deemed to have Cause pursuant to this clause (i) unless the Company gives the Executive written notice that the specified conduct has occurred and making specific reference to this Section 4(b)(i) and the Executive fails to cure the conduct within thirty (30) days after receipt of such notice; (ii) any willful and intentional act of the Executive involving malfeasance, fraud, theft, misappropriation of funds, embezzlement or dishonesty relating to the Company; or (iii) the Executive's conviction of, or a plea of guilty or nolo contendere to, an offense which is a felony in the jurisdiction involved or any felony or misdemeanor involving misappropriation of Company property. Termination of the Executive for Cause shall be communicated by a Notice of Termination. For purposes of this Agreement, a "Notice of Termination" shall mean delivery to the Executive of a copy of a resolution duly adopted by the affirmative vote of the majority of the Board that the Executive has engaged in conduct constituting Cause and with respect to any termination based upon conduct described in clause (i) above, that the Executive failed to cure such conduct during the thirty-day period following the date on which the Company gave written notice of the conduct referred to in such clause (i). For purposes of this Agreement, no such purported termination of the Executive's employment shall be effective without such Notice of Termination. (c) Termination by the Executive without Good Reason. If the Term is terminated by the Executive other than because of death, Disability or for Good Reason (as such term is defined in Section 4(e) hereof), the Company shall pay to the Executive an aggregate amount equal to the Executive's accrued and unpaid Base Salary and vacation through the date of such termination. (d) Termination By the Company without Cause other than on account of death or Disability or by the Executive for Good Reason. If the Term is terminated by the Company without Cause (other than by reason of death or Disability), or if the Executive terminates the Term for Good Reason (as defined below), the Company shall pay the Executive a lump sum equal to one times the sum of (i) the Executive's annual Base Salary as in effect on the date of such termination and (ii) the amount of the Executive's Annual Bonus for the fiscal year preceding such termination. In addition, the Company shall continue in effect the Executive's health benefits at the Company's expense until the 4 earlier of: (x) 180 days following such termination or (y) the date on which the Executive obtains comparable or superior health coverage from a subsequent employer. For purposes of this Agreement, "Good Reason" shall mean the occurrence of any of the following, without the prior written consent of the Executive: (A) assignment of the Executive of duties materially inconsistent with the Executive's position as described in Section 2(a) hereof, (B) any material diminution in the Executive's duties or responsibilities, other than in connection with the termination of the Executive's employment for Cause, Disability or as a result of the Executive's death or by the Executive other than for Good Reason, (C) a change in the Executive's principal place of employment to a location outside the Portland, Maine area which increases the Executive's commute by more than 50 miles, (D) the material breach by the Company of this Agreement or (E) the provision by the Company of a Non-Renewal Notice pursuant to Section 1 hereof; provided, however, that Good Reason shall not exist pursuant to clause D unless the Executive gives the Company written notice that the specified conduct or breach has occurred and the Company fails to cure the conduct or breach within thirty (30) days of receipt of such notice. (e) Mitigation. Under no circumstances shall the Executive, upon termination of his employment hereunder, be required to seek alternative employment and, in the event the Executive does secure other employment, no other compensation or other benefits (other than with respect to the continuation of health benefits described in Section 4(d)) received in respect of such employment shall be set-off or in any other way limit or reduce the obligations of the Company under this Section 4. (f) Taxes. Notwithstanding the previous provisions, if payments made pursuant to this Section 4 are considered "parachute payments" under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") then the sum of such parachute payments plus any other payments made by the Company to the Executive which are considered parachute payments shall be limited to the greatest amount which may be paid to the Executive under Section 280G without causing any loss of deduction to the Company under such section; but only if, by reason of such reduction, the net after tax benefit of the Executive shall exceed the net after tax benefit if such reduction were not made. "Net after tax benefit" for purposes of this Agreement shall mean the sum of (i) the total amounts payable to the Executive under Section 4, plus (ii) all other payments and benefits which the Executive receives or then is entitled to receive from the Company that would constitute a "parachute payment" within the meaning of Section 280G of the Code, less (iii) the amount of federal income taxes payable with respect to the foregoing calculated at the minimum marginal income tax rate for each year in which the foregoing shall be paid to the Executive (based upon the rate in effect for such year as set forth in the Code at the time of termination of the Executive's employment), less (iv) the amount of excise taxes imposed with respect to the payments and benefits described in (i) and (ii) above by Section 4999 of the Code. 5. Confidential Information. The Executive acknowledges that the Company and its subsidiaries or affiliated ventures ("Company Affiliates") own and have developed and compile, and will in the future own, develop and compile certain Confidential Information and that during the course of his rendering services hereunder Confidential Information will be disclosed to the Executive by the Company Affiliates. The Executive hereby agrees that, during the Term and thereafter, he will not use or 5 disclose, furnish or make accessible to anyone, directly or indirectly, any Confidential Information of Company Affiliates; provided, however, that the foregoing restriction shall not limit the Executive's ability to use his experience as a general counsel in subsequent employment. As used herein, the Term "Confidential Information" means any trade secrets, confidential or proprietary information, or other knowledge, know-how, information, documents or materials, owned developed or possessed by Company Affiliate pertaining to its businesses the confidentiality of which such company takes reasonable measures to protect, including, but not limited to, trade secrets, techniques, know-how (including designs, plans, procedures, processes and research records), software, computer programs, innovations, discoveries, improvements, research, developments, test results, reports, specifications, data, formats, marketing data and business plans and strategies, agreements and other forms of documents, expansion plans, budgets, projections, and salary, staffing and employment information. Notwithstanding the foregoing, Confidential Information shall not in any event include information which (i) was generally known or generally or generally available to the public prior to disclosure to the Executive, (ii) becomes generally known or generally available to the public subsequent to its disclosure to the Executive through no wrongful act of the Executive, (iii) is or becomes available to the Executive from sources other than the Company Affiliates which sources are not known to the Executive to be under any duty of confidentiality with respect thereto, (iv) the Executive is required to disclose by applicable law or regulation or by order of any court or federal, state or local regulatory or administrative body (provided that the Executive provides the Company with prior notice of the contemplated disclosure and reasonably cooperates with the Company, at the Company's sole expense, in seeking a protective order or other appropriate protection of such information) or (v) known to the Executive prior to his employment with the Company. 6. Nonsolicitation. (a) The Executive recognizes and acknowledges that the services to be performed by him hereunder are special, unique and extraordinary and the Executive further acknowledges and recognizes the highly competitive nature of the business of the Company. The Executive understands that the provisions of this Section 6 may limit the Executive's ability to earn a livelihood in a business similar to the business of the Company but nevertheless agrees and hereby acknowledges that (i) such provisions do not impose a greater restraint than is necessary to protect the goodwill or other business interests of the Company, (ii) such provisions contain reasonable limitations as to time and scope of activity to be restrained, (iii) such provisions are not harmful to the general public, (iv) such provisions are not unduly burdensome to the Executive, and (v) the consideration provided hereunder is sufficient to compensate the Executive for the restrictions contained in such provisions. In consideration thereof and in light of the Executive's education, skills and liabilities, the Executive agrees that the Executive will not assert in any forum that such provisions prevent the Executive from earning a living or otherwise are void or unenforceable or should be held or unenforceable. Accordingly, the Executive agrees that during the Employment Term and for a period of twelve (12) months following termination of employment (the "Restrictive Period"), the Executive will not (i) directly or indirectly solicit or encourage any employee of the Company to leave the employment of the Company, and (ii) directly or indirectly, solicit or encourage to cease to work with the Company any consultant then under contract with the Company. 6 (b) It is expressly understood and agreed that although the Executive and the Company consider the restrictions contained in this Section 6 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in the Agreement is an unenforceable restriction against The Executive, the provisions of the Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in the Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein. 7. Specific Performance. (a) The Executive acknowledges that the services to be rendered by him hereunder are of a special, unique, extraordinary and personal character and that the Company would sustain irreparable harm in the event of a violation by the Executive of Section 5 or 6 of this Agreement. Therefore, in addition to any other remedies available, the Company shall be entitled to specific enforcement and/or injunction from any court of competent jurisdiction restraining the Executive from committing or continuing any such violation of this Agreement without proving actual damages or posting a bond or other security. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages. (b) If any of the restrictions on activities of the Executive contained in Section 6 hereof shall for any reason be held by a court of competent jurisdiction to be excessively broad, such restrictions shall be construed so as thereafter to be limited or reduced to be enforceable to the maximum extent comparable with the applicable law as it shall then appear; it being understood that by the execution of this Agreement the parties hereto regard such restrictions as reasonable and compatible with their respective rights. 8. Withholding. The parties agree that all payments to be made to the Executive by the Company pursuant to the Agreement shall be subject to all applicable withholding obligations of the Company. 9. Notices. All notices required or permitted hereunder shall be in writing and shall be deemed given and received when delivered personally, four (4) days after being mailed if sent by registered or certified mail, postage pre-paid, or by one (1) day after delivery if sent by air courier (for next-day delivery) with evidence or receipt thereof or by facsimile with receipt confirmed by the addressee. Such notices shall be addressed as follows: (i) if to the Executive, to the address of the Executive on file with the personnel records of the Company; (ii) if to the Company, at the principal executive offices of the Company, to the attention of the Chief Executive Officer; or (iii) to any other address of which such party may have given notice to the other parties in the manner specified above. 10. Miscellaneous. (a) This Agreement is a personal contract calling for the provisions of unique services by the Executive, and the Executive's rights and obligations 7 hereunder may not be sold, transferred, assigned, pledged or hypothecated by the Executive. The rights and obligations of the Company hereunder will be binding upon and run in favor of its respective successors and assigns. (b) This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Maine, without regard to conflict of laws principles. (c) Any controversy arising out of or relating to this Agreement or any breach hereof shall be settled by arbitration in Portland, Maine by a single neutral arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Judgment upon any award rendered may be entered in any court having jurisdiction thereof, except in the event of a controversy relating to any alleged violation by the Executive of Section 6 or 7 hereof, in which case the Company shall be entitled to seek injunction relief from a court of competent jurisdiction without the requirement to seek arbitration. (d) The headings of the various sections of this Agreement are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. (e) The provisions of this Agreement which by their terms call for performance subsequent to the expiration or termination of the Term shall survive such expiration or termination. (f) This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof (other than any Stock Option Agreement entered into by and between the Executive and the Company or the Phantom Equity Award Agreement entered into by and between the Executive and the Company on or about December 21, 2001 or any subsequent Phantom Equity Award Agreement entered into in accordance with and pursuant to the Equity Plan) and supersedes all other prior agreements and undertakings, both written and oral, among the parties with respect to the subject matter hereof, all of which shall be terminated on the Commencement Date. In addition, that parties hereto hereby waive all rights such party may have under all other prior agreements and hereto hereby waive all rights such party may have under all other prior agreements and undertakings, both written and oral, among the parties hereto, or among the Executive, with respect to the subject matter hereof. EXECUTIVE /s/Foster A. Stewart, Jr. -------------------------------- By: Foster A. Stewart, Jr. AMERICAN SKIING COMPANY /s/William J. Fair --------------------------------- By: B.J. Fair, Chief Executive Officer 8 EX-31 6 exhibit31-1.txt EXHIBIT31-1 CERTIFICATION I, William J. Fair, certify that: 1. I have reviewed this quarterly report on Form 10-Q of American Skiing Company (Company). 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 10, 2004 By: /s/ William J. Fair ----------------------- William J. Fair President and Chief Executive Officer (Principal Executive Officer) EX-31 7 exhibit31-2.txt EXHIBIT31-2 CERTIFICATION I, Helen E. Wallace, certify that: 1. I have reviewed this quarterly report on Form 10-Q of American Skiing Company (Company). 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 10, 2004 By: /s/ Helen E. Wallace ------------------------ Helen E. Wallace Senior Vice President, Chief Financial Officer (Principal Financial Officer) EX-32 8 exhibit32-1.txt EXHIBIT32-1 AMERICAN SKIING COMPANY SARBANES-OXLEY ACT SECTION 906 CERTIFICATIONS In connection with the Quarterly Report of American Skiing Company (the "Company") on Form 10-Q for the period ended October 26, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William J. Fair, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 10, 2004 By: /s/ William J. Fair ------------------------- William J. Fair President and Chief Executive Officer (Principal Executive Officer) This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference. EX-32 9 exhibit32-2.txt EXHIBIT32-2 AMERICAN SKIING COMPANY SARBANES-OXLEY ACT SECTION 906 CERTIFICATIONS In connection with the Quarterly Report of American Skiing Company (the "Company") on Form 10-Q for the period ended October 26, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Helen E. Wallace, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 10, 2004 By: /s/ Helen E. Wallace ------------------------ Helen E. Wallace Senior Vice President, Chief Financial Officer (Principal Financial Officer) This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference. -----END PRIVACY-ENHANCED MESSAGE-----