-----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, QB8rEJ4WzmzBEpO44XIx7eyzAdDY2eob7nGLO5AKd2kMM5hTQdoBNq2keOOacAoM o3MkNJdIbqCzNQh4nZaUJQ== 0001043432-04-000048.txt : 20041215 0001043432-04-000048.hdr.sgml : 20041215 20041215164236 ACCESSION NUMBER: 0001043432-04-000048 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041215 DATE AS OF CHANGE: 20041215 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/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-13507 FILM NUMBER: 041205291 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/A 1 q1form10qa121504.txt Q1 FORM 10Q/A AMENDMENT NO 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q/A Amendment No. 1 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended October 24, 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 November 28, 2004. American Skiing Company and Subsidiaries EXPLANATORY NOTE This Amendment No. 1 to the Quarterly Report on Form 10-Q/A for American Skiing Company (the Company) for the quarterly period ended October 24, 2004, is being filed to correct the item described below contained in the Company's Quarterly Report on Form 10-Q originally filed with the Securities and Exchange Commission on December 8, 2004. The sole purpose of this amendment is to correct a typographical error in the Condensed Consolidated Statement of Operations for the 13 weeks ended October 24, 2004. The correct amount (in thousands) for the line item "Net loss available to common shareholders" should be $(37,720). All other numbers in this Condensed Consolidated Statement of Operations are correct as originally stated. No other changes have been made to the Form 10-Q as originally filed. 2 American Skiing Company and Subsidiaries Table of Contents Part I - Financial Information Item 1. Financial Statements Condensed Consolidated Statements of Operations and Changes in Accumulated Deficit for the 13 weeks ended October 26, 2003 and October 24, 2004 (unaudited)...................................4 Condensed Consolidated Balance Sheets as of July 25, 2004 and October 24, 2004 (unaudited).................................5 Condensed Consolidated Statements of Cash Flows for the 13 weeks ended October 26, 2003 and October 24, 2004 (unaudited)..........7 Notes to Condensed Consolidated Financial Statements (unaudited)......8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General..............................................................19 Resort Senior Credit Facility Restructuring..........................20 Liquidity and Capital Resources......................................20 Results of Operations................................................24 Item 3. Quantitative and Qualitative Disclosures About Market Risk...............................................25 Item 4. Controls and Procedures..............................................25 Part II - Other Information Item 1. Legal Proceedings....................................................26 Item 3. Defaults Upon Senior Securities......................................26 Item 6. Exhibits............................................................26 3 American Skiing Company and Subsidiaries Part I - Financial Information Item 1 Financial Statements
Condensed Consolidated Statements of Operations and Changes in Accumulated Deficit (In thousands, except share and per share amounts) 13 weeks ended 13 weeks ended October 26, 2003 October 24, 2004 (unaudited) (unaudited) Net revenues: Resort $ 16,128 $17,820 Real estate 2,345 1,726 ------------------- ------------------- Total net revenues 18,473 19,546 ------------------- ------------------- Operating expenses: Resort 22,525 23,609 Real estate 1,658 1,108 Marketing, general and administrative 10,280 10,817 Restructuring and asset impairment 137 - Depreciation and amortization 2,303 2,279 ------------------- ------------------- Total operating expenses 36,903 37,813 ------------------- ------------------- Loss from operations (18,430) (18,267) Interest expense, net 22,828 19,453 ------------------- ------------------- Net loss available to common shareholders $(41,258) $(37,720) =================== =================== Accumulated deficit, beginning of period $(515,063) $(543,565) Net loss available to common shareholders (41,258) (37,720) ------------------- ------------------- Accumulated deficit, end of period $(556,321) $(581,285) =================== =================== Basic and diluted net loss per common share: Net loss available to common shareholders $ (1.30) $ (1.19) =================== =================== Weighted average common shares outstanding - basic and diluted 31,738,183 31,738,183
See accompanying notes to Condensed Consolidated Financial Statements. 4 American Skiing Company and Subsidiaries
Condensed Consolidated Balance Sheets (In thousands, except share and per share amounts) July 25, 2004 October 24, 2004 (unaudited) (unaudited) Assets Current assets Cash and cash equivalents $ 7,024 $ 7,771 Restricted cash 4,846 3,001 Accounts receivable, net 5,628 7,515 Inventory 3,628 6,239 Prepaid expenses 3,132 5,665 Deferred income taxes 6,354 6,354 Other current assets 599 500 ----------------- ------------------ Total current assets 31,211 37,045 Property and equipment, net 353,509 358,967 Real estate developed for sale 25,024 24,767 Intangible assets, net 6,365 6,350 Deferred financing costs, net 3,933 3,461 Other assets 10,758 10,023 ----------------- ------------------ Total assets $430,800 $440,613 ================= ==================
(continued on next page) See accompanying notes to Condensed Consolidated Financial Statements. 5 American Skiing Company and Subsidiaries
Condensed Consolidated Balance Sheets (continued) (In thousands, except share and per share amounts) July 25, 2004 October 24, 2004 (unaudited) (unaudited) Liabilities, Mandatorily Redeemable Preferred Stock, and Shareholders' Deficit Current liabilities Current portion of long-term debt $ 45,191 $ 48,309 Current portion of subordinated notes and debentures - - Accounts payable and other current liabilities 44,604 46,818 Deposits and deferred revenue 13,144 41,157 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 $73,947 and $0, respectively) 73,947 - ----------------- ------------------ Total current liabilities 176,886 136,284 Long-term debt, net of current portion 74,384 75,747 Subordinated notes and debentures, net of current portion and discount 142,260 142,842 Other long-term liabilities 4,007 4,532 Deferred income taxes 6,354 6,354 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 $0 and $75,867, respectively) - 75,867 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 $56,376 and $58,063, respectively) 55,880 57,594 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 $213,826 and $221,822, respectively) 211,991 220,075 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 671,762 719,295 ----------------- ------------------ 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 302,285 302,285 Accumulated deficit (543,565) (581,285) ----------------- ------------------ Total shareholders' deficit (240,962) (278,682) ----------------- ------------------ Total liabilities, mandatorily redeemable preferred stock, and shareholders' $ 430,800 $ 440,613 deficit ================= ==================
See accompanying notes to Condensed Consolidated Financial Statements. 6 American Skiing Company and Subsidiaries
Condensed Consolidated Statements of Cash Flows (In thousands) 13 weeks ended 13 weeks ended October 26, 2003 October 24, 2004 (unaudited) (unaudited) Cash flows from operating activities Net loss $ (41,258) $ (37,720) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 2,303 2,279 Amortization of deferred financing costs, amortization of original issue discount, and accretion of discount and dividends on mandatorily redeemable preferred stock 11,303 12,384 Non-cash interest on junior subordinated notes 416 463 Non-cash compensation expense 70 76 Gain from sale of assets (392) (295) Decrease (increase) in assets: Restricted cash (586) 1,845 Accounts receivable, net 332 (1,887) Inventory (3,080) (2,611) Prepaid expenses (1,718) (2,533) Real estate developed for sale 725 257 Other assets (38) 834 Increase (decrease) in liabilities: Accounts payable and other current liabilities 8,667 2,214 Deposits and deferred revenue 20,603 28,013 Other long-term liabilities (24) 449 ------------------- ------------------ Net cash (used in) provided by operating activities (2,677) 3,768 ------------------- ------------------ Cash flows from investing activities Capital expenditures (3,407) (7,897) Proceeds from sale of assets 404 470 ------------------- ------------------ Net cash used in investing activities (3,003) (7,427) ------------------- ------------------ Cash flows from financing activities Proceeds from resort senior credit facilities 14,832 13,604 Repayment of resort senior credit facilities (9,911) (10,527) Proceeds from long-term debt - 2,550 Repayment of long-term debt (241) (279) Proceeds from real estate debt 1,877 - Repayment of real estate debt (1,369) (867) Deferred financing costs - (75) ------------------- ------------------ Net cash provided by financing activities 5,188 4,406 ------------------- ------------------ Net (decrease) increase in cash and cash equivalents (492) 747 Cash and cash equivalents, beginning of period 6,596 7,024 ------------------- ------------------ Cash and cash equivalents, end of period $ 6,104 $ 7,771 =================== ================== Supplemental disclosure of cash flow information: Cash paid for interest 8,032 2,756
See accompanying notes to Condensed Consolidated Financial Statements. 7 American Skiing Company and Subsidiaries 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 reports its results of operations in two business segments, resort operations and real estate operations. The Company's fiscal year is a fifty-two week or fifty-three week period ending on the last Sunday of July. Fiscal 2005 is a fifty-three week reporting period and fiscal 2004 was a fifty-two week reporting period, with each quarter consisting of 13 weeks, with the exception of the second quarter of fiscal 2005, which consists of 14 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 U.S. generally accepted accounting principles 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 significant operating losses in its resort operating segment 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 25, 2004 (fiscal 2004) filed with the Securities and Exchange Commission on November 9, 2004. 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, litigation reserves, insurance reserves, 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, unless a bargain purchase option exists at the end of the lease in which case the assets are depreciated over their estimated useful lives. Due to the seasonality of the Company's business, the Company records a full year of depreciation relating to its resort ski 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," 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 31 years, and assessed for impairment utilizing guidance provided by SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." 8 American Skiing Company and Subsidiaries As of July 25, 2004 and October 24, 2004, other intangible assets consist of the following (in thousands): ------------------------------------------------------------------
July 25, 2004 October 24, 2004 ------------------------------------------------------------------ Definite-lived Intangible Assets: Lease agreements $ 1,853 $ 1,853 Less accumulated amortization (346) (361) ---------------- ---------------- 1,507 1,492 Indefinite-lived Intangible Assets: Trade names 170 170 Water rights 4,688 4,688 ---------------- ---------------- Intangible Assets, net $ 6,365 $ 6,350 ------------------------------------------------------------------
Amortization expense related to intangible assets was approximately $14,000 for both the 13 weeks ended October 26, 2003 and the 13 weeks ended October 24, 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, skier development, 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 occurs during the Company's second and third fiscal quarters. 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, initial and continuing investments are adequate to demonstrate a commitment to pay for the property and no substantial 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. 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 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 October 24, 2004, options to purchase 3,821,187 shares were outstanding at a weighted average exercise price of $4.25 under the Plan. No options have been granted, exercised, or forfeited since July 25, 2004. 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 October 24, 2004 in connection with options exercised. The remaining $0.5 9 American Skiing Company and Subsidiaries million tax bonus liability is reflected in accounts payable and other current liabilities in the accompanying consolidated balance sheet as of October 24, 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 October 26, 2003 and October 24, 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 October 24, 2004:
- -------------------------------------------------------------------------------- Weighted Average Remaining Weighted Range of Contractual Average Weighted Exercise Life (in Exercise Average Prices Outstanding years) Price Exercisable Exercise Price - -------------------------------------------------------------------------------- $0.72 25,000 6.7 $ 0.72 25,000 $ 0.72 1.75 - 2.50 1,420,337 5.4 2.11 1,385,003 2.11 3.00 - 4.00 1,449,250 5.4 3.17 1,430,750 3.18 7.00 - 8.75 735,750 4.0 7.19 733,050 7.19 14.19 - 18.00 190,850 3.0 17.55 190,850 17.55 ------------ ------------ 3,821,187 5.0 $ 4.25 3,764,653 $ 4.28 ============ ============ - --------------------------------------------------------------------------------
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." This statement amends SFAS No. 123, "Accounting for Stock-Based Compensation," 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 Plan, consistent with the provisions of SFAS No. 148, the Company's net loss and loss per common share would have been changed to the pro forma amounts indicated below (in thousands, except per share amounts): --------------------------------------------------------------------------
13 weeks ended 13 weeks ended October 26, 2003 October 24, 2004 -------------------------------------------------------------------------- Net loss available to common shareholders As reported $(41,258) $(37,720) Stock-based employee compensation determined under fair-value method for all awards, net of tax (119) (34) --------------- ----------------- Pro forma $(41,377) $(37,754) =============== ================= Basic and diluted net loss per common share As reported $ (1.30) $ (1.19) Pro forma $ (1.30) $ (1.19) --------------------------------------------------------------------------
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. There were no options granted during the 13 weeks ended October 26, 2003 and October 24, 2004. Accounting for Variable Interest Entities In December 2003, the FASB issued a revision to FASB Interpretation (FIN) No. 46R, "Consolidation of Variable Interest Entities". FIN No. 46R clarifies the application of ARB No. 51, Consolidated Financial Statements to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity risk for the entity to finance its activities without additional subordinated financial support. FIN No. 46R requires the consolidation of these entities, known as variable interest entities, by the primary beneficiary of the entity. The primary beneficiary is the entity, if any, that will absorb a majority of the entities expected losses, receive a majority of the entity's expected residual returns, or both. 10 American Skiing Company and Subsidiaries Among other changes, the revisions of FIN No. 46R (a) clarified some requirements of the original FIN No. 46, which had been issued in January 2003, (b) eased some implementation problems, and (c) added new scope exceptions. The Company, through one of its subsidiaries, acquired a 49% interest in SS Associates, LLC (SS Associates) in October 2004. In accordance with FIN No. 46R and APB No. 18, the Company consolidates SS Associates as SS Associates meets the requirements of a variable interest entity for which it is the primary beneficiary. SS Associates purchased a building in October 2004 for approximately $3.5 million (including costs to close) through cash and long-term debt of approximately $2.6 million. The loan is secured by the building and has 59 monthly payments of approximately $29,000 and a final payment in October 2009 of approximately $1.5 million and bears interest at 6.5%. SS Associates is obligated on the loan, but none of the Company's remaining subsidiaries are obligated. SS Associates leases the building to the Company for approximately $0.5 million per year. The non-ASC interest of approximately $0.4 million in SS Associates (owned in part by certain members of mid-level management at the Company's Killington resort) is included in other long-term liabilities in the accompanying condensed consolidated balance sheet as of October 24, 2004. Reclassifications Certain amounts in the prior periods' financial statements and related notes have been reclassified to conform to the current periods' presentation. 3. Net Loss per Common Share Net loss per common share for the 13 weeks ended October 26, 2003 and October 24, 2004, respectively, was determined based on the following data (in thousands): - --------------------------------------------------------------------------------
13 weeks ended 13 weeks ended October 26, 2003 October 24, 2004 - -------------------------------------------------------------------------------- Loss Net loss $ (41,258) $ (37,720) ================= =============== Shares Weighted average common shares outstanding - basic and diluted 31,738 31,738 ================= =============== - --------------------------------------------------------------------------------
As of October 26, 2003 and October 24, 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 October 26, 2003 and October 24, 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 October 26, 2003 and October 24, 2004, these convertible preferred shares would convert into approximately 45,285,000 and 50,887,000 shares of common stock, respectively. For the 13 weeks ended October 26, 2003 and October 24, 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 3,821,187 options outstanding to purchase shares of its common stock under the Plan as of October 26, 2003 and October 24, 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, 11 American Skiing Company and Subsidiaries 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 October 26, 2003 October 24, 2004 ----------------------------------------------------------------------- Revenues: Resort $ 16,128 $ 17,820 Real estate 2,345 1,726 ----------------- ----------------- Total $ 18,473 $ 19,546 ================= ================= Net Loss: Resort $(35,872) $(37,122) Real estate (5,386) (598) ----------------- ----------------- Total $(41,258) $(37,720) ================= ================= ------------------------------------------------------------------------
Identifiable assets for the two business segments and a reconciliation of the totals reported for the operating segments to the totals reported in the condensed consolidated financial statements is as follows (in thousands): ------------------------------------------------------------------------ July 25, 2004 October 24, 2004 ------------------------------------------------------------------------ Identifiable Assets: Resort $ 340,965 $ 352,928 Real Estate 81,804 79,669 ---------------- --------------- $ 422,769 $ 432,597 ================ =============== Assets: Identifiable assets for segments $ 422,769 432,597 Intangible and deferred income tax assets not allocated to segments 8,031 8,016 ---------------- --------------- Total consolidated assets $ 430,800 $ 440,613 ================ =============== ------------------------------------------------------------------------
5. Long-Term Debt Resort Senior Credit Facility ASC and its resort operating subsidiaries 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 assets of Grand Summit) and the assets of its resort operating subsidiaries. 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. 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 12 American Skiing Company and Subsidiaries and bear interest at JPMorgan Chase Bank's prime rate plus 3.25% payable monthly (8.00% as of October 24, 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 October 24, 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 October 24, 2004, the Company had $33.0 million, $25.0 million, $4.1 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 October 24, 2004, the Company had $6.7 million available for future borrowings under the Revolving Credit Facility. As of October 24, 2004, the Company had $0.3 million of L/C's issued under the Resort Senior Credit Facility. The Company met the zero balance requirement under the Revolving Credit Facility on April 1, 2004 and was in compliance with all financial covenants of the Resort Senior Credit Facility through October 24, 2004. See Note 11 for a description of the recently completed refinancing of the Resort Senior Credit Facility. Construction Loan Facility The Company has historically conducted substantially all of its real estate development through subsidiaries, each of which is a wholly owned subsidiary of American Skiing Company Resort Properties (a subsidiary of ASC) (Resort Properties). Grand Summit, a subsidiary of Resort Properties, owns the existing Grand Summit Hotel projects, which are primarily financed through a $110.0 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 $10.0 million subordinated loan tranche with Textron (Subordinated Construction Loan) on July 25, 2000, which was increased to $10.6 million in December 2003. Grand Summit 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 Construction Loan Facility is without recourse to ASC and its resort operating subsidiaries and is collateralized by significant real estate assets of Grand Summit. 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 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. 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 subsidiaries, other than Grand Summit. Grand Summit has assets with a total book value of $67.0 million as of October 24, 2004, which collateralizes the Senior Construction Loan. 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 $17.9 million as of October 24, 2004 and had an interest rate on funds advanced of prime plus 3.5%, with a floor of 9.0% (9.0% as of October 24, 2004). The principal balance outstanding under the Subordinated Construction Loan was approximately $10.6 million as of October 24, 2004 and is due on November 30, 2007. The interest rate on the funds advanced under the Subordinated Construction Loan is 20% per annum, 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. Accrued interest on the Subordinated Construction Loan as of October 24, 2004 was approximately $3.4 million. 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 13 American Skiing Company and Subsidiaries 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: 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 - Other Long-Term Debt The Company has approximately $13.4 million of other long-term debt as of October 24, 2004. This is comprised of approximately $5.0 million of debt held under capital leases and $8.4 million under other notes payable with various lenders. 6. Subordinated Notes and Debentures 12% Senior Subordinated Notes The Company has issued $120.0 million of Senior Subordinated Notes. The Senior Subordinated Notes are general unsecured obligations of the Company, subordinated in right of payment to all existing and future senior debt of the Company, including all borrowings of the Company under its Resort Senior Credit Facility (see Note 5). The Senior Subordinated Notes are fully and unconditionally guaranteed by ASC and all of its majority owned or wholly owned subsidiaries, with the exception of Ski Insurance, Killington West, Ltd., Community Water Company, Uplands Water Company and Walton Pond Apartments, Inc. The above listed subsidiaries that are not guarantors are individually and collectively immaterial to the Company's balance sheet and results of operations. The guarantor subsidiaries are wholly owned subsidiaries of ASC and the guarantees are full, unconditional, and joint and several. ASC is a holding company with no significant independent assets or operations other than its interests in the subsidiaries. Some of the guarantor subsidiaries are restricted in their ability to declare dividends or advance funds to ASC. The Senior Subordinated Notes mature July 15, 2006, and are currently redeemable at the option of ASC, in whole or in part. The Senior Subordinated Notes were issued with an original issue discount of $3.4 million. As of October 24, 2004, the unamortized original issue discount was approximately $0.9 million. Interest on the Senior Subordinated Notes is payable semi-annually on January 15 and July 15 of each year. Interest expense on the Senior Subordinated Notes (excluding the amortization of the original issue discount) amounts to $14.4 million in each fiscal year. The Company has the option to redeem the Senior Subordinated Notes at the following prices on the dates noted (expressed as a percentage of face value): Through July 14, 2005 101.563% Thereafter 100.000% The Senior Subordinated Notes are not subject to a cross-default resulting from a default by the Company's real estate subsidiaries under certain debt which is non-recourse to the remainder of the Company, including the Real Estate Term Facility and the Construction Loan Facility. Furthermore, neither a bankruptcy nor a judgment against any of the Company's real estate development subsidiaries will constitute a default under the indenture. As described in Note 11, the Company repurchased $118.5 million in principal amount of the Senior Subordinated Notes and called the remaining $1.5 million in principal amount of the Senior Subordinated Notes, each on November 24, 2004. 11.3025% Junior Subordinated Notes On July 15, 2001, the Company entered into a securities purchase agreement with Oak Hill Capital Partners to assist the Company in meeting its current financing needs. Pursuant to the terms of the securities purchase agreement, which closed on August 31, 2001, the Company issued, and Oak Hill Capital Partners purchased, $12.5 million aggregate principal amount of junior subordinated notes (Junior Subordinated Notes), which are convertible into shares of the Company's Series D Participating Preferred Stock (Series D 14 American Skiing Company and Subsidiaries Preferred Stock). These Junior Subordinated Notes are unsecured and bear interest at a rate of 11.3025%, which compounds annually and is due and payable at the maturity of the Junior Subordinated Notes in August 2007. The proceeds of the Junior Subordinated Notes were used to fund short-term liquidity needs of Resort Properties by way of the purchase of certain real estate assets by ASC from Resort Properties. As of October 24, 2004, the outstanding balance on the Junior Subordinated Notes was approximately $17.5 million. As described in Note 11, on November 24, 2004 an amendment to the indenture extended the maturity of the Junior Subordinated Notes to May 2012. Other Subordinated Debentures Other subordinated debentures owed by the Company to institutions and individuals as of October 24, 2004 are unsecured and are due as follows (in thousands):
------------------------------ Interest Principal Year Rate Amount ------------------------------ 2010 8% $ 1,292 2012 6% 1,155 2013 6% 1,065 2015 6% 1,500 2016 6% 1,196 ------------ $ 6,208 ============ ------------------------------
7. Mandatorily Redeemable Securities Series A Preferred Stock Pursuant to a Securities Purchase Agreement (the Series A Agreement) dated July 2, 1997 (as amended July 16, 1997), the Company issued 17,500 shares of its Series A 14% Exchangeable Preferred Stock in a private offering to an institutional investor. Pursuant to the Series A Agreement, the Company issued $17.5 million aggregate principal amount of its 14% Senior Exchangeable Notes Due 2002 (the Exchangeable Notes) on July 28, 1997 in a private offering to an institutional investor. On November 15, 1997, subsequent to the completion of the offering, each share of Series A 14% Exchangeable Preferred Stock and the Exchangeable Notes were converted into shares of Mandatorily Redeemable Convertible 10 1/2% Series A Preferred Stock (Series A Preferred Stock). The total number of Series A Preferred Stock shares issued in the exchange was 36,626 and each share has a face value of $1,000 per share. As of October 24, 2004, cumulative dividends in arrears totaled approximately $39.2 million. Under the Series A Agreement, the Series A Preferred Stock shares are exchangeable at the option of the holder into shares of the Company's common stock at a conversion price of $17.10 for each common share. The Series A Preferred Stock was redeemable on November 12, 2002 at an aggregate redemption price of approximately $61.9 million, which includes the face value of $36.6 million plus approximately $25.3 million of cumulative dividends in arrears, to the extent that the Company 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, the Company must redeem that number of shares of Series A Preferred Stock which it can lawfully redeem, and from time to time thereafter, as soon as funds are legally available, the Company must redeem shares of the Series A Preferred Stock until it has done so in full. Prior to the November 12, 2002 redemption date, based upon all relevant factors, the Company's Board of Directors determined not to redeem any shares of stock on the redemption date. The Series A Preferred Stock ranks senior in liquidation preference to all common stock and Class A common stock outstanding as of October 24, 2004 as well as any common stock and Class A common stock issued in the future. As part of the refinancing of the Resort Senior Credit Facility on November 24, 2004 as discussed in Note 11, all outstanding shares of the Series A Preferred Stock were exchanged for new junior subordinated notes in the principal amount of $76.7 million. As of October 24, 2004, in accordance with SFAS No. 6, "Classification of Short-Term Obligations Expected to Be Refinanced," the carrying amount of the Series A Preferred Stock of $75.9 million has been classified as long-term, based on the Company's intent and ability to refinance as evidenced by the refinancing discussed above. Series B Preferred Stock Pursuant to a Preferred Stock Subscription Agreement (the Series B Agreement) dated July 9, 1999, the Company sold 150,000 shares of its 8.5% 15 American Skiing Company and Subsidiaries Series B Convertible Participating Preferred Stock (Series B Preferred Stock) on August 9, 1999 to Oak Hill for $150 million. On August 31, 2001, in connection with a recapitalization transaction, the Series B Preferred Stock was stripped of all of its economic and governance rights and preferences, with the exception of its right to elect up to six directors. The Company issued the Series C-1 Preferred Stock and the mandatorily redeemable 15% non-voting Series C-2 preferred stock (Series C-2 Preferred Stock) with an aggregate initial face value of $179.5 million which was equal to the accrued liquidation preference of the Series B Preferred Stock immediately before being stripped of its right to such accrued liquidation preference. The Series B Preferred Stock will lose its remaining rights upon redemption of the Series C-1 and C-2 Preferred Stock in July 2007. Series C-1 and C-2 Preferred Stock On July 15, 2001, the Company entered into a securities purchase agreement with Oak Hill to assist the Company in meeting its financing needs. Pursuant to the terms of the securities purchase agreement, which closed on August 31, 2001, the Company issued to Oak Hill two new series of Preferred Stock: (i) $40.0 million face value of Series C-1 Preferred Stock; and (ii) $139.5 million face value of Series C-2 Preferred Stock. The initial face values of the Series C-1 Preferred Stock and Series C-2 Preferred Stock correspond to the accrued liquidation preference of the Series B Preferred Stock immediately before being stripped of its right to such accrued liquidation preference. The Series C-1 Preferred Stock and Series C-2 Preferred Stock are entitled to annual preferred dividends of 12% and 15%, respectively. At the Company's option, dividends can either be paid in cash or in additional shares of preferred stock. The Series C-1 Preferred Stock is convertible into common stock at a price of $1.25 per share, subject to adjustments. The Series C-2 Preferred Stock is not convertible. Both of the Series C-1 Preferred Stock and Series C-2 Preferred Stock are mandatorily redeemable and mature in July 2007 to the extent that the Company has legally available funds to effect such redemption. As of October 24, 2004, cumulative dividends in arrears totaled approximately $18.1 million and $82.4 million for the Series C-1 Preferred Stock and Series C-2 Preferred Stock, respectively. The Series C-1 Preferred Stock and Series C-2 Preferred Stock have certain voting rights as defined in the securities certificates of designation relating thereto and rank senior in liquidation preference to all common stock and Class A common stock outstanding as of October 24, 2004, common stock and Class A common stock issued in the future, rank pari passu with each other and the Series B Preferred Stock, and rank senior to the non-voting Series D Participating Preferred Stock. Series D Preferred Stock The Company has authorized the issuance of 5,000 shares of $0.01 par value, non-voting Series D Participating Preferred Stock (Series D Preferred Stock). As of October 24, 2004, no shares of Series D Preferred Stock have been issued. The Series D Preferred Stock is junior in right of preference to the Series A, Series C-1 and Series C-2 Preferred Stock, is not entitled to preferred dividends, and is redeemable at the option of the shareholder. 8. 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. Grand Summit, the borrower under the Construction Loan Facility, is restricted from declaring dividends or advancing funds to ASC by any other method, unless specifically approved by the Construction Loan Facility lenders. Under the indentures governing its Senior Subordinated Notes and Junior Subordinated Notes, ASC is restricted from paying cash dividends or making other distributions to its shareholders. As described in Note 11, new junior subordinated notes also restrict the Company from paying cash dividends or making other distributions to its shareholders. 9. Phantom Equity Plan ASC 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 the LTIP. Participants are entitled to a cash payment on awards granted under the LTIP, upon a valuation event, as defined. The amount of any awards are based ultimately on the Equity Value, as defined, obtained through a valuation event and generally vest over a three to five-year term as determined by the Compensation Committee. A valuation event is any of the following: (i) a sale or disposition of substantially all of the Company's assets; (ii) a merger, consolidation or similar event of ASC other than one (A) in which the Company is the surviving entity or (B) where no change in control, as defined, has occurred; (iii) a public offering of equity 16 American Skiing Company and Subsidiaries securities by ASC that yields net proceeds to the Company in excess of $50 million; or (iv) a change in control, as defined. Compensation expense relating to the LTIP will be estimated and recorded based on the probability of the Company achieving a valuation event. During the 13 weeks ended October 26, 2003 and October 24, 2004, the Company recorded a charge relating to the LTIP of approximately $0.1 million and $0.1 million, respectively, which is included in marketing, general and administrative expenses in the accompanying condensed consolidated statements of operations. The total liability for the LTIP of $0.8 million is included in other long-term liabilities in the October 24, 2004 condensed consolidated balance sheet. 10. Commitments and Contingencies Certain claims, suits and complaints in the ordinary course of business are pending or may arise against the Company, including all of its direct and indirect subsidiaries. In the opinion of management, all matters are adequately covered by insurance or, if not covered, are without merit or are of such kind, or involve such amounts as are not likely to have a material effect on the financial position, results of operations or liquidity of the Company if disposed of unfavorably. 11. Subsequent Events The Company entered into an agreement dated November 24, 2004 with GE Capital and other lenders whereby the lenders have provided a new $230.0 million senior secured loan facility (New Resort Credit Facility) consisting of a revolving credit facility and two term loan facilities. The proceeds of the New Resort Credit Facility were used to refinance the Company's Resort Senior Credit Facility and the Company's Senior Subordinated Notes as well as to pay fees and expenses related to the transaction. The New Resort Credit Facility consists of the following: o Revolving Facility - $40.0 million, including letter of credit (L/C) availability of up to $6.0 million of which approximately $1.1 million was outstanding on the funding date. The amount of availability under this facility will be correspondingly reduced by the amount of each L/C issued. The amount of availability is also reduced for a reserve to payoff the remaining Senior Subordinated Notes of $1.5 million (see below) and a reserve for a remaining obligation of $2.14 million in connection with a legal settlement. As those two obligations are paid, those reserves will be eliminated. o First Lien Term Loan - $85.0 million borrowed on the funding date of November 24, 2004. o Second Lien Term Loan - $105.0 million borrowed on the funding date of November 24, 2004. The Revolving Facility and First Lien Term Loan (collectively the "First Lien Credit Agreement") mature in November 2010 and bear interest, at the option of the Company, either the prime rate as publicly quoted in the Wall Street Journal plus 3.5% or at a rate of LIBOR (as defined) plus 4.5%, payable quarterly (8.5%% as of November 24, 2004). The First Lien Term Loan requires twenty-three quarterly principal payments of $212,500 beginning on January 15, 2005 and a final payment of approximately $80.1 million in November 2010. The Second Lien Term Loan matures in November 2011 and bears interest at the prime rate as publicly quoted in the Wall Street Journal plus 7.0% or at a rate of LIBOR (as defined) plus 8.0% payable quarterly (12% as of November 24, 2004). The Revolving Facility is comprised of two sub-facilities, each in the amount of $20.0 million and each with separate fees for the unused portion of the facilities (in the amounts of 1.0% and 4.5% per annum, respectively). The Revolving Facility and the First Lien Term Loan obligations under the First Lien Credit Agreement and the related guarantees are secured by a first-priority security interest in substantially all of the Company's assets, other than assets held by Grand Summit, and the Company's obligations under the Second Lien Credit Agreement and its subsidiaries' obligations under the related guarantees are secured by a second-priority security interest in the same assets. Collateral matters between the lenders under the First Lien Credit Agreement and the lenders under the Second Lien Credit Agreement are governed by an intercreditor agreement. The New Resort 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 the Company's capital expenditures, and requires the Company to have a zero balance on the Revolving Credit Facility on April 1 of each year prior to maturity. The New Resort Credit Facility also contains events of default customary for such financings, including but not limited to nonpayment of amounts when due; violation of covenants; cross default and cross acceleration; change of control; dissolution; insolvency; bankruptcy events; and material judgments. Some of these events of default allow for grace periods or are qualified by materiality concepts. The New Resort Senior Credit Facility also restricts the Company's ability to pay cash dividends on or redeem its common or preferred stock and requires the Company to enter into interest rate swap agreements for at least 50% of the First Lien Term Loan and the Second Lien Term Loan within 180 days of the closing of the New Resort Credit Facility. 17 American Skiing Company and Subsidiaries In conjunction with a New Resort Credit Facility, the Company closed a tender offer and repurchased $118.5 million of the $120.0 million principal amount of outstanding Senior Subordinated Notes. The total consideration payable in connection with the offer was approximately $120.4 million ($118.5 million in principal and approximately $1.9 million in a redemption premium) plus accrued interest of approximately $5.1 million for the tendered Senior Subordinated Notes. In connection with the tender offer, the Company also solicited consents from the holders of the Senior Subordinated Notes. On October 22, 2004, Company entered into a supplemental indenture reflecting those amendments to eliminate substantially all of the restrictive covenants and certain events which would cause default under the indenture for the Senior Subordinated Notes. Such amendments became operative on November 24, 2004. The Company also called for redemption on November 24, 2004 all the remaining $1.5 million in principal amount of outstanding Senior Subordinated Notes. In addition, as part of the refinancing, the Company entered into an Exchange Agreement with the holder of the Company's Series A Preferred Stock and issued approximately $76.7 million of new junior subordinated notes due 2012 to the holder of our Series A Preferred Stock in exchange for all outstanding shares of Series A Preferred Stock. The new junior subordinated notes accrue non-cash interest at a rate of 11.25% upon issuance, gradually increasing to a rate of 13.0% in 2012. No principal or interest payments are required to be made on the new junior subordinated notes until maturity. The new junior subordinated notes are subordinated to all of the Company's other debt obligations and all trade payables incurred in the ordinary course of our business. None of the Company's subsidiaries are obligated on the new junior subordinated notes, and none of the Company's assets serve as collateral for repayment of the new junior subordinated notes. The indenture governing the new junior subordinated notes also restricts the Company from paying cash dividends or making other distributions to its shareholders subject to certain limited exceptions. As part of the refinancing, the indenture to the Junior Subordinated Notes was amended to extend the maturity of the Junior Subordinated Notes to May 2012. 18 American Skiing Company and Subsidiaries 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); failure to maintain improvements to resort operating performance at the covenant levels required by our New Resort Senior Credit Facility; 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; changes in weather patterns resulting from global warming; seasonal business activity; increased gas and energy prices; 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 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. General 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 report our results of operations in two business segments, resort operations and real estate operations. Our operating strategies include taking advantage of our multi-resort network, increasing our revenue per skier, continuing to build brand awareness and customer loyalty, expanding our sales and marketing efforts, continuing to focus on cost management, expanding our golf and convention business, improving our hotel occupancy and operating margins, and capitalizing on real estate growth opportunities through joint ventures. Our revenues are highly seasonal in nature. In fiscal 2004, we realized approximately 88% of resort operating segment revenues and over 100% of resort operating segment operating income during the period from November through April. In addition, a significant portion of resort operating segment revenue and approximately 22% of annual skier visits were generated during the Christmas and Presidents' Day vacation weeks in fiscal 2004, respectively. Our resorts typically experience operating losses and negative cash flows for the period from May through November. A high degree of seasonality in our 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. 19 American Skiing Company and Subsidiaries 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. As discussed below, on November 24, 2004 we entered into a new resort senior credit facility and paid off our existing resort senior credit facility and a substantial portion of our senior subordinated notes. In addition, our Series A Preferred Stock was exchanged for new junior subordinated notes. This refinancing extends the maturity date of these obligations. The following is our discussion and analysis of financial condition and results of operations for the 13 weeks ended October 24, 2004. As you read the material below, we urge you to carefully consider our fiscal 2004 Annual Report on Form 10-K filed on November 9, 2004 and our unaudited condensed consolidated financial statements and related notes contained elsewhere in this report. Resort Senior Credit Facility Restructuring As described below, the Company refinanced its resort senior credit facility (Resort Senior Credit Facility) and its 12% senior subordinated notes (Senior Subordinated Notes) with a new $230 million senior secured resort credit facility (New Resort Senior Credit Facility). Liquidity and Capital Resources Short-Term Liquidity Needs Our primary short-term liquidity needs involve funding seasonal working capital requirements, marketing and selling real estate development projects, funding our fiscal 2005 capital improvement program, and servicing our debt. Our cash requirements for ski-related and real estate sales activities are provided from separate sources. As described below, we entered into a $230.0 million New Resort Senior Credit Facility on November 24, 2004 and used initial borrowings thereunder to refinance our Resort Senior Credit Facility and our Senior Subordinated Notes. Our primary source of liquidity for ski-related working capital and ski-related capital improvements are cash flows from operations of our resort operating subsidiaries and borrowings under our New Resort Senior Credit Facility. The total debt outstanding on our New Resort Senior Credit Facility as of November 28, 2004 was approximately $219.7 million. 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 senior construction loan (Senior Construction Loan) and the subordinated construction loan (Subordinated Construction Loan) (collectively, the Construction Loan Facility) funded such working capital. The Construction Loan Facility is without recourse to ASC and its subsidiaries other than Grand Summit and is collateralized by significant real estate assets of Grand Summit. As of October 24, 2004, the carrying value of the total assets that collateralized the Construction Loan Facility was approximately $67.0 million. The total debt outstanding on the Construction Loan Facility as of October 24, 2004 was approximately $28.5 million. See "Real Estate Liquidity - Construction Loan Facility" below. Resort Liquidity We entered into an agreement dated November 24, 2004 with GE Capital and other lenders whereby the lenders have provided a new $230.0 million senior secured loan facility (New Resort Senior Credit Facility) consisting of a revolving credit facility and two term loan facilities. The proceeds of the New Resort Senior Credit Facility were used to refinance our Resort Senior Credit Facility and our Senior Subordinated Notes as well as to pay fees and expenses related to the transaction. The New Resort Senior Credit Facility consists of the following: o Revolving Facility - $40.0 million, including letter of credit (L/C) availability of up to $6.0 million of which approximately $1.1 million was outstanding on the funding date. The amount of availability under this facility will be correspondingly reduced by the amount of each L/C issued. The amount of availability is also reduced for a reserve to payoff the remaining Senior Subordinated Notes of $1.5 million (see below) and a reserve for a remaining obligation of $2.14 million in connection with a legal settlement. As those two obligations are paid, those reserves will be eliminated. o First Lien Term Loan - $85.0 million borrowed on the funding date of November 24, 2004. 20 American Skiing Company and Subsidiaries o Second Lien Term Loan - $105.0 million borrowed on the funding date of November 24, 2004. The Revolving Facility and First Lien Term Loan (collectively the "First Lien Credit Agreement") mature in November 2010 and bear interest, at our option, at either the prime rate as publicly quoted in the Wall Street Journal plus 3.5% or at a rate of LIBOR (as defined) plus 4.5%, payable quarterly (8.5% as of November 24, 2004). The First Lien Term Loan requires twenty-three quarterly principal payments of $212,500 beginning on January 15, 2005 and a final payment of approximately $80.1 million in November 2010. The Second Lien Term Loan matures in November 2011 and bears interest at the prime rate as publicly quoted in the Wall Street Journal plus 7.0% or at a rate of LIBOR (as defined) plus 8.0% payable quarterly (12.0% as of November 24, 2004). The Revolving Facility is comprised of two sub-facilities, each in the amount of $20.0 million and each with separate fees for the unused portion of the facilities (in the amounts of 1.0% and 4.5% per annum, respectively). The Revolving Facility and the First Lien Term Loan obligations under the First Lien Credit Agreement and the related guarantees are secured by a first-priority security interest in substantially all of the our assets, other than assets held by Grand Summit, and our obligations under the Second Lien Credit Agreement and its subsidiaries' obligations under the related guarantees are secured by a second-priority security interest in the same assets. Collateral matters between the lenders under the First Lien Credit Agreement and the lenders under the Second Lien Credit Agreement are governed by an intercreditor agreement. The New 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 capital expenditures, and requires us to have a zero balance on the Revolving Credit Facility on April 1 of each year prior to maturity. The New Resort Credit Facility also contains events of default customary for such financings, including but not limited to nonpayment of amounts when due; violation of covenants; cross default and cross acceleration; change of control; dissolution; insolvency; bankruptcy events; and material judgments. Some of these events of default allow for grace periods or are qualified by materiality concepts. The New Resort Senior Credit Facility also restricts our ability to pay cash dividends on or redeem our common or preferred stock and requires the Company to enter into interest rate swap agreements for at least 50% of the First Lien Term Loan and the Second Lien Term Loan within 180 days of the closing of the New Resort Credit Facility. In conjunction with a New Resort Senior Credit Facility, we closed a tender offer and repurchased $118.5 million of the $120.0 million principal amount of outstanding Senior Subordinated Notes. The total consideration payable in connection with the offer was approximately $120.4 million ($118.5 million in principal and approximately $1.9 million in a redemption premium) plus accrued interest of approximately $5.1 million for the tendered Senior Subordinated Notes. In connection with the tender offer, we also solicited consents from the holders of the Senior Subordinated Notes. On October 22, 2004, we entered into a supplemental indenture reflecting those amendments to eliminate substantially all of the restrictive covenants and certain events which would cause default under the indenture for the Senior Subordinated Notes. Such amendments became operative on November 24, 2004. We also called for redemption on November 24, 2004 all the remaining $1.5 million in principal amount of outstanding Senior Subordinated Notes. In addition, as part of the refinancing, we entered into an Exchange Agreement with the holder of the our Series A Preferred Stock and issued approximately $76.7 million of new junior subordinated notes due 2012 to the holder of our Series A Preferred Stock in exchange for all outstanding shares of Series A Preferred Stock. The new junior subordinated notes accrue non-cash interest at a rate of 11.25% upon issuance, gradually increasing to a rate of 13.0% in 2012. No principal or interest payments are required to be made on the new junior subordinated notes until maturity. The new junior subordinated notes are subordinated to all of our other debt obligations and all trade payables incurred in the ordinary course of our business. None of our subsidiaries are obligated on the new junior subordinated notes, and none of our assets serve as collateral for repayment of the new junior subordinated notes. The indenture governing the new junior subordinated notes also restricts us from paying cash dividends or making other distributions to its shareholders subject to certain limited exceptions. As part of the refinancing, the indenture to the Junior Subordinated Notes was amended to extend the maturity of the Junior Subordinated Notes to May 2012. As of November 28, 2004, we had $29.7 million, $85.0 million, and $105.0 million of principal outstanding under the Revolving Credit Facility, First Lien Term Loan, and Second Lien Term Loan portions of the New Resort Senior Credit Facility, respectively. Furthermore, as of November 28, 2004, we had approximately $1.1 million in outstanding L/Cs with approximately $5.6 million available for future borrowings under the Revolving Facility. We currently anticipate that the remaining borrowing capacity under the New Resort Senior Credit Facility will be sufficient to meet our working capital needs through the end of our first quarter of fiscal 2006. 21 American Skiing Company and Subsidiaries We closely monitor our operating results that impact our ability to meet the financial covenants under our New 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 New 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 New Resort Senior Credit Facility, we have limited access to alternate sources of funding. 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 New Resort Senior Credit Facility. Furthermore, our New Resort Senior Credit Facility 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 sales plan, Grand Summit relies primarily on unit inventory sales, short-term rental of remaining unit inventory, as well as lease payments from long-term commercial tenants. Construction Loan Facility: We have historically conducted our real estate interval-ownership product development through Grand Summit, which is a wholly owned subsidiary of American Skiing Company Resort Properties (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 $110.0 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 $10.0 million Subordinated Construction Loan, which was subsequently increased to $10.6 million. Together they comprise the Construction Loan Facility. We used the Construction Loan Facility primarily for the purpose of funding the completion of the Steamboat Grand Hotel. 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 subsidiaries other than Grand Summit. Grand Summit has assets with a total book value of $67.0 million as of October 24, 2004, which collateralizes the Senior Construction Loan. 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 $17.9 million as of October 24, 2004 and had an interest rate on funds advanced of prime plus 3.5%, with a floor of 9.0% (9.0% as of October 24, 2004) and there were no borrowings available under this facility. 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 Subordinated Construction Loan was amended in December 2003 to provide additional borrowing availability of approximately $0.6 million for a maximum borrowing capacity under that loan of $10.6 million. The Subordinated Construction Loan, as amended, matures on November 30, 2007. All $10.6 million had been borrowed under the Subordinated Construction Loan as of October 24, 2004 and no further borrowings are available under this facility. Accrued interest on the Subordinated Construction Loan as of October 24, 2004 was approximately $3.4 million. The Subordinated Construction Loan is secured by the same collateral which secures the Senior Construction Loan. 22 American Skiing Company and Subsidiaries The Senior Construction Loan, as amended, must have the following maximum outstanding principal balances as of the following dates: 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 November 28, 2004, the amount outstanding under the Senior Construction Loan was approximately $17.8 million and there were no borrowings available under this facility. As of November 28, 2004, the amounts outstanding under the Subordinated Construction Loan were approximately $10.6 million plus accrued interest of approximately $3.5 million and there were no borrowings available under this facility. Long-Term Liquidity Needs Our primary long-term liquidity needs are to fund skiing-related capital improvements at certain of our resorts. For fiscal 2005, we anticipate our annual maintenance capital needs to be approximately $8.5 million. In addition, we have tentatively identified an additional $4.0 million of discretionary capital needs which will likely be pursued in fiscal 2005. 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 New 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 New Resort Senior Credit Facility. The New Resort Senior Credit Facility places a maximum level of non-real estate capital expenditures for fiscal 2005 at $15.5 million, including assets purchased under capital leases, with the ability to increase this amount if certain conditions are met. We expect that going forward, certain types of lease agreements that we have historically entered into as operating leases will be entered into with terms that will qualify them to be treated as capital leases. We also expect that certain leases that we have already entered into previously as operating leases will be converted into capital leases. We believe that these capital expenditure amounts will be sufficient to meet our non-real estate capital improvement needs for fiscal 2005. As described above, the Revolving Facility and First Lien Term Loan of the New Resort Credit Facility mature in November 2010. The First Lien Term Loan requires quarterly principal payments of $212,500 and a final payment of approximately $80.1 million in November 2010. The Second Lien Term Loan matures in November 2011. The Senior Construction Loan has required principal payments as described above and matures in June 2006. The Subordinated Construction Loan matures in November 2007. We also have mandatorily redeemable convertible participating 12% preferred stock (Series C-1 Preferred Stock) with an accreted value of $58.1 million as of October 24, 2004 and mandatorily redeemable 15% non voting preferred stock (Series C-2 Preferred Stock) with an accreted value of $221.8 million as of October 24, 2004 which are mandatorily redeemable and mature in July 2007 to the extent that the Company has legally available funds to effect such redemption. We do not expect to redeem the Series C-1 Preferred Stock and the Series C-2 Preferred Stock prior to its final maturity. We can give no assurance that the necessary liquidity will be available to effect the redemption on a timely basis. We closely monitor our operating results that impact our ability to meet the financial covenants under our New 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 New 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 New Resort Senior Credit Facility, we have limited access to alternate sources of funding. 23 American Skiing Company and Subsidiaries Results of Operations For the 13 weeks ended October 26, 2003 compared to the 13 weeks ended October 24, 2004 Resort Operations: The components of resort operations for the 13 weeks ended October 26, 2003 and October 24, 2004 are as follows (in thousands): - -------------------------------------------------------------------------------- 13 Weeks ended ------------------------------- ------------ October 26, 2003 October 24, 2004 Variance --------------- --------------- ------------ Total resort revenues $ 16,128 $ 17,820 $ 1,692 --------------- --------------- ------------ Cost of resort operations 22,525 23,609 1,084 Marketing, general and administrative 10,280 10,817 537 Restructuring charges 137 - (137) Depreciation and amortization 1,870 1,872 2 Interest expense 17,188 18,644 1,456 --------------- --------------- ------------ Total resort expenses 52,000 54,942 2,942 --------------- --------------- ------------ Loss from resort operations $ (35,872) $ (37,122) $(1,250) =============== =============== ============ - --------------------------------------------------------------------------------
Resort revenues were approximately $17.8 million, or 10.5%, higher in the 13 weeks ended October 24, 2004 when compared to the 13 weeks ended October 26, 2003. This is a result of an increase of our lodging related revenues at our Steamboat and The Canyons resorts, primarily as a result of improved group and conference business. Resort expenses for the 13 weeks ended October 24, 2004 were approximately $2.9 million higher than the same period of fiscal 2004, primarily as a result of the following: (i) $1.5 million increase in interest expense due primarily to the compounding effect of interest expense associated with the accretion of discount and dividends on mandatorily redeemable preferred stock; (ii) $1.1 million increase in cost of resort operations due to higher lodging expenses associated with the higher volume at the hotels of our Steamboat and The Canyons resorts and an increase in repairs and maintenance at all resorts over the prior period offset primarily by a reduction in accruals of certain property taxes; and.; (iii)$0.5 million increase in marketing, general and administrative expenses due primarily to the marketing of the new "All For One" season pass at our eastern resorts. Recent Trends: Through December 5, 2004, our eastern season pass sales for the 2004-05 ski season are approximately 48% greater than at the same time last year due to the introduction of the "All-for-One" eastern resort season pass. Based on our experience with the Sunday River/Attitash season pass offered in fiscal 2004, we anticipate a reduction in paid day ticket sales at our eastern resorts this year due to the "All-for-One" all eastern resort season pass. Nonetheless, we expect that overall net resort revenues for the eastern resorts will increase for the year as the result of increases in total ticket revenue and increased ancillary revenue from increased visitation. However, actual results could differ from that experience. The western season pass sales for the 2004-05 ski season are approximately 13% greater than at the same time last year. Although most of this increase is due to timing differences in purchase deadlines, we expect to see a modest increase in season pass revenues in the west in total for fiscal 2005. Lodging reservation pace and leading indicators for the ski season at lodging properties reflect increases for both our western and eastern resorts on a year over year basis. Eastern resorts are experiencing an increase in reservations for midweek visitation which we believe are as a result of specific initiatives targeting non-peak periods. Western resort lodging reservations continue to improve from the prior year as a result of strong conference business at The Canyons and growth at Steamboat. Although we expect to be near lodging capacity for the Christmas/New Year holiday period, lodging revenues for such period are expected to be slightly down as a result of the timing of the holidays. 24 American Skiing Company and Subsidiaries Real Estate Operations: The components of real estate operations are as follows (in thousands): - -------------------------------------------------------------------------------- 13 weeks ended -------------------------------- ------------ October 26, 2003 October 24, 2004 Variance --------------- ------------------------------ Total real estate revenues $ 2,345 $ 1,726 $ (619) --------------- ---------------- ------------ Cost of real estate operations 1,658 1,108 (550) Depreciation and amortization 433 407 (26) Interest expense 5,640 809 (4,831) --------------- ---------------- ------------ Total real estate expenses 7,731 2,324 (5,407) --------------- ---------------- ------------ Loss from real estate operations $ (5,386) $ (598) $ 4,788 =============== ================ ============ - -------------------------------------------------------------------------------
Real estate revenues decreased by $0.6 million in the 13 weeks ended October 24, 2004 when compared to the 13 weeks ended October 25, 2003, from $2.3 million to $1.7 million. The decrease was primarily due to a $1.0 million decrease in unit sales at The Canyons and at Steamboat due to no remaining units to sale after the auction at The Canyons and a slowdown in sales at Steamboat. This was offset by an increase in land sales. Real estate operations loss decreased by $4.8 million, from $5.4 million in the 13 weeks ended October 26, 2003 to $0.6 million in the 13 weeks ended October 24, 2004. This was primarily a result of the following: (i) $0.6 million decrease in revenues recognized as discussed above, (ii) $0.6 million decrease in cost of real estate operations resulting from the decrease in revenues, and (iii)$4.8 million decrease in interest expense due to the restructuring if the real estate credit facility in May 2004. Recent Trends: Sales volumes at our Grand Summit Hotel at Steamboat continue to decrease and are slightly behind pace of the prior year. We believe that this is primarily related to weak economic conditions and the demand for interval type units. We have recently increased the number of sales personnel at Steamboat in an effort to increase sales. Benefit from income taxes: We recorded no benefit from income taxes for either the 13 weeks ended October 26, 2003 or the 13 weeks ended October 24, 2004. We believe it is more likely than not that we will not realize income tax benefits from operating losses in the foreseeable future. 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 25, 2004, as filed with the Securities and Exchange Commission on November 9, 2004. The New Resort Credit Facility requires the Company to enter into interest rate swap agreements for at least 50% of the First Lien Term Loan and the Second Lien Term Loan within 180 days of the closing of the facility. 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 are (1) 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 25 American Skiing Company and Subsidiaries the time periods specified in the Securities and Exchange Commission's rules and forms, and (2) designed to ensure that information to be disclosed by the Company in such reports is accumulated, organized, and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. (b) Changes in internal control over financial reporting. No change occurred in the Company's internal control over financial reporting (as defined in the Securities Exchange Act of 1934 Rules 13a-15(f) and 15d-15(f)) during the quarter ended October 24, 2004 that has materially affected, or is reasonably likely to materially affect, the Company's internal control 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 Certain claims, suits and complaints in the ordinary course of business are pending or may arise against the Company, including all of its direct and indirect subsidiaries. In the opinion of management, all matters are adequately covered by insurance or, if not covered, are without merit or are of such kind, or involve such amounts as are not likely to have a material effect on the financial position, results of operations or liquidity of the Company if disposed of unfavorably. Item 3 Defaults upon Senior Securities None. Item 6 Exhibits Included herewith are the following exhibits: Exhibit No. Description 10.1 First Lien Credit Agreement, dated as of November 24, 2004, among the Company, certain of its domestic subsidiaries, certain lenders, General Electric Capital Corporation, as administrative agent and collateral agent, and Credit Suisse First Boston, as syndication agent. 10.2 Second Lien Credit Agreement, dated as of November 24, 2004, among the Company, certain of its domestic subsidiaries, certain lenders, General Electric Capital Corporation, as administrative agent and collateral agent, and Credit Suisse First Boston, as syndication agent. 10.3 Indenture, dated as of November 24, 2004, between the Company and Madeleine LLC as trustee. 10.4 Sixth Supplemental Indenture, dated as of October 22, 2004, among the Company, the Guarantors party thereto, and The Bank of New York, as trustee (incorporated by reference from exhibit to Form 8-K filed October 26, 2004). 10.5 Supplemental Indenture, dated as of November 24, 2004, between the Company and Oak Hill Capital Partners, L.P. as trustee (incorporated by reference from exhibit to Form 8-K filed December 1, 2004). 10.6 Exchange Agreement, dated as of October 12, 2004, between the Company and Madeline LLC. 26 American Skiing Company and Subsidiaries 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. 27 American Skiing Company and Subsidiaries 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: December 15, 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) 28 EX-32 2 form10qaexh32-1.txt CEO CERTIFICATION SOA SEC 906 EXHIBIT 32.1 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 24, 2004 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: December 15, 2004 By: /s/ William J. Fair -------------------------------- William J. Fair President and Chief Executive Officer (Principal Executive Officer) EX-32 3 form10qaexh32-2.txt CFO CERTIFICATION SOA SEC 906 EXHIBIT 32.2 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 24, 2004 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: December 15, 2004 By: /s/ Helen E. Wallace -------------------------------- Helen E. Wallace Senior Vice President, Chief Financial Officer (Principal Financial Officer) EX-31 4 form10qaexh31-1.txt CEO CERTIFICATION SOA SEC 302 EXHIBIT 31.1 CERTIFICATION I, William J. Fair, certify that: 1. I have reviewed this quarterly report on Form 10-Q of American Skiing 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 periods 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 officer(s) 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 first fiscal quarter 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: December 15, 2004 By: /s/ William J. Fair --------------------------- William J. Fair President and Chief Executive Officer (Principal Executive Officer) EX-10 5 form10qaexh10-1.txt FIRST LIEN CREDIT AGREEMENT $125,000,000 FIRST LIEN CREDIT AGREEMENT among AMERICAN SKIING COMPANY, The Subsidiary Borrowers from Time to Time Parties Hereto, The Several Lenders from Time to Time Parties Hereto, CREDIT SUISSE FIRST BOSTON, as Syndication Agent, and GENERAL ELECTRIC CAPITAL CORPORATION, as Administrative Agent and Collateral Agent Dated as of November 24, 2004 GECC CAPITAL MARKETS GROUP, INC. and CREDIT SUISSE FIRST BOSTON, as Co-Lead Arrangers and Joint Bookrunners TABLE OF CONTENTS Page SECTION I. DEFINITIONS........................................................1 1.1. Defined Terms................................................1 1.2. Other Definitional Provisions...............................22 SECTION II. AMOUNT AND TERMS OF COMMITMENTS..................................22 2.1. Term Commitments............................................22 2.2. Procedure for Term Loan Borrowing...........................22 2.3. Repayment of Term Loans.....................................23 2.4. Revolving Commitments.......................................23 2.5. Procedure for Revolving Loan Borrowing......................24 2.6. Commitment Fees, etc........................................24 2.7. Termination or Reduction of Revolving Commitments...........25 2.8. Optional Prepayments........................................25 2.9. Mandatory Prepayments.......................................25 2.10. Conversion and Continuation Options.........................27 2.11. Limitations on Eurodollar Tranches..........................27 2.12. Interest Rates and Payment Dates............................27 2.13. Computation of Interest and Fees............................28 2.14. Inability to Determine Interest Rate........................28 2.15. Pro Rata Treatment and Payments.............................28 2.16. Requirements of Law.........................................30 2.17. Taxes.......................................................31 2.18. Indemnity...................................................32 2.19. Change of Lending Office....................................33 2.20. Replacement of Lenders......................................33 SECTION III. LETTERS OF CREDIT...............................................33 3.1. L/C Commitment..............................................33 3.2. Procedure for Issuance of Letter of Credit..................34 3.3. Fees and Other Charges......................................34 3.4. L/C Participations..........................................34 3.5. Reimbursement Obligation of the Borrowers...................35 3.6. Obligations Absolute........................................36 3.7. Letter of Credit Payments...................................36 3.8. Applications................................................36 SECTION IV. REPRESENTATIONS AND WARRANTIES...................................36 4.1. Financial Condition.........................................36 4.2. No Change...................................................37 4.3. Existence; Compliance with Law..............................37 4.4. Power; Authorization; Enforceable Obligations...............37 4.5. No Legal Bar................................................37 4.6. Litigation..................................................37 4.7. No Default..................................................37 4.8. Ownership of Property; Liens................................38 4.9. Intellectual Property.......................................38 4.10. Taxes.......................................................38 4.11. Federal Regulations.........................................38 4.12. Labor Matters...............................................38 4.13. ERISA.......................................................38 4.14. Investment Company Act; Other Regulations...................39 4.15. Subsidiaries................................................39 4.16. Use of Proceeds.............................................39 4.17. Environmental Matters.......................................39 4.18. Accuracy of Information, etc................................40 4.19. Security Documents..........................................40 4.20. Solvency....................................................41 4.21. Senior Indebtedness.........................................41 4.22. Regulation H................................................41 4.23. Certain Documents...........................................41 4.24. Forest Service Term Special Use Permits.....................41 4.25. Location....................................................41 4.26. Water Rights................................................42 4.27. Grand Summit Resort Properties, Inc.........................42 SECTION V. CONDITIONS PRECEDENT..............................................42 5.1. Conditions to Initial Extensions of Credit..................42 5.2. Conditions to Each Extension of Credit......................45 SECTION VI. AFFIRMATIVE COVENANTS............................................46 6.1. Financial Statements........................................46 6.2. Certificates; Other Information.............................47 6.3. Payment of Obligations......................................48 6.4. Maintenance of Existence; Compliance........................48 6.5. Maintenance of Property Insurance...........................48 6.6. Inspection of Property; Books and Records; Discussions; Surveys.....................................................48 6.7. Notices.....................................................48 6.8. Environmental Matters.......................................49 6.9. Additional Collateral, New Subsidiary Borrowers, etc........50 6.10. Forest Service Permits......................................52 6.11. Agreements with Respect to Excluded Subsidiaries............52 6.12. Interest Rate Protection....................................52 6.13. Post-Closing Obligations....................................52 SECTION VII. NEGATIVE COVENANTS..............................................52 7.1. Financial Condition Covenants...............................53 7.2. Indebtedness................................................55 7.3. Liens.......................................................56 7.4. Fundamental Changes.........................................57 7.5. Disposition of Property.....................................57 7.6. Restricted Payments.........................................59 7.7. Capital Expenditures........................................59 7.8. Investments.................................................60 7.9. Optional Payments and Modifications of Certain Debt Instruments.................................................60 7.10. Transactions with Affiliates................................61 7.11. Sales and Leasebacks........................................61 7.12. Swap Agreements.............................................61 7.13. Changes in Fiscal Periods...................................61 7.14. Restrictive Agreements......................................61 7.15. Lines of Business...........................................62 7.16. Maintenance Capital Expenditures Variance...................62 SECTION VIII. EVENTS OF DEFAULT..............................................62 SECTION IX. THE AGENTS.......................................................65 9.1. Appointment.................................................65 9.2. Delegation of Duties........................................65 9.3. Exculpatory Provisions......................................65 9.4. Reliance by Agents..........................................66 9.5. Notice of Default...........................................66 9.6. Non-Reliance on Agents and Other Lenders....................66 9.7. Indemnification.............................................67 9.8. Agents in Their Individual Capacities.......................67 9.9. Successor Agents............................................67 9.10. Syndication Agent...........................................68 SECTION X. MISCELLANEOUS.....................................................68 10.1. Amendments and Waivers......................................68 10.2. Notices.....................................................69 10.3. No Waiver; Cumulative Remedies..............................69 10.4. Survival of Representations and Warranties..................70 10.5. Payment of Expenses and Taxes...............................70 10.6. Successors and Assigns; Participations and Assignments......71 10.7. Adjustments; Set-off........................................73 10.8. Counterparts................................................74 10.9. Severability................................................74 10.10. Integration.................................................74 10.11. Governing Law...............................................74 10.12. Submission To Jurisdiction; Waivers.........................74 10.13. Acknowledgments.............................................75 10.14. Releases of Guarantees and Liens............................75 10.15. Confidentiality.............................................75 10.16. Joint and Several Liability of Borrowers....................76 10.17. Appointment of ASC as Borrowers' Agent......................77 10.18. Killington Indenture........................................77 10.19. WAIVERS OF JURY TRIAL.......................................77 SCHEDULES: 1.1A Commitments 1.1B Owned and Leased Real Property 1.1C Excluded Immaterial Subsidiaries 1.1D [Intentionally Omitted] 1.1E New Junior Subordinated Note Terms 1.1F Existing Letters of Credit 1.1G Certain Non-Operating Assets 4.1 Certain Dispositions 4.4 Consents, Authorizations, Filings and Notices 4.6 Certain Litigation 4.15 Subsidiaries 4.19(a) UCC Filings 4.19(b) Mortgage Filings 4.22 Certain Real Property 4.24 Forest Service Permits 5.1(k)(vi) Post-Closing Landlord Certificates 6.5(b) Insurance Requirements 6.11 Certain Excluded Subsidiaries 6.13(b) Certain Real Property Leases 7.2(b) Existing Indebtedness 7.3(e) Existing Liens 7.8(d) Existing Investments 7.8(j) Contemplated Sunday River Investment 7.14 Existing Restrictive Agreements 9.9 Approved Successor Agents EXHIBITS: A Form of Guarantee and Collateral Agreement B Form of Compliance Certificate C Form of Closing Certificate D Form of Mortgage E Form of Assignment and Assumption F Form of Exemption Certificate G Form of Subsidiary Borrower Agreement H Form of Intercreditor Agreement I Form of Prepayment Option Notice FIRST LIEN CREDIT AGREEMENT (this "Agreement"), dated as of November 24, 2004, among AMERICAN SKIING COMPANY ("ASC"), the Subsidiary Borrowers (as hereinafter defined) from time to time party to this Agreement, the several banks and other financial institutions from time to time parties to this Agreement (the "Lenders"), CREDIT SUISSE FIRST BOSTON ("CSFB"), as syndication agent for the Lenders hereunder (in such capacity, "Syndication Agent"), and GENERAL ELECTRIC CAPITAL CORPORATION ("GECC"), as administrative agent for the Lenders hereunder (in such capacity, the "Administrative Agent") and as Collateral Agent under the Security Documents (as defined below) (the "Collateral Agent"). The parties hereto hereby agree as follows: SECTION I. DEFINITIONS 1.1. Defined Terms. As used in this Agreement, the terms listed in this Section 1.1 shall have the respective meanings set forth in this Section 1.1. "ABR": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the ABR due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "ABR Loans": Loans the rate of interest applicable to which is based upon the ABR. "Additional Non-Operating Asset Sale Amount": (a) for the fiscal year of ASC ending July 2005, $3,000,000; (b) for the fiscal year of ASC ending July 2006, $5,000,000; and (c) for each fiscal year of ASC thereafter, $11,000,000. "Administrative Agent": GECC, as the administrative agent for the Lenders under this Agreement and the other Loan Documents, together with any of its successors. "Affiliate": as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agents": the collective reference to the Syndication Agent, the Administrative Agent and the Collateral Agent. "Aggregate Exposure": with respect to any Lender at any time, an amount equal to (a) until the Closing Date, the aggregate amount of such Lender's Commitments at such time and (b) thereafter, the sum of (i) the aggregate then unpaid principal amount of such Lender's Term Loans and (ii) the amount of such Lender's Revolving Commitment then in effect or, if the Revolving Commitments have been terminated, the amount of such Lender's Revolving Extensions of Credit then outstanding. "Aggregate Exposure Percentage": with respect to any Lender at any time, the ratio (expressed as a percentage) of such Lender's Aggregate Exposure at such time to the Aggregate Exposures of all Lenders at such time. 2 "Aggregate Facilities Amount": at any time, the aggregate Aggregate Exposure of all Lenders at such time. "Agreement": as defined in the preamble hereto. "Applicable Margin": for each Type of Loan, the rate per annum set forth under the relevant column heading below: ABR Loans Eurodollar Loans Revolving Loans 3.50% 4.50% Term Loans 3.50% 4.50% "Application": an application, in such form as the Issuing Lender may specify from time to time, requesting the Issuing Lender to open a Letter of Credit. "Appraisal": an appraisal of the fair market value of property and business performed by ResortNorth Valuation or another Independent Appraiser (i) delivered pursuant to Section 5.1(q) and accepted and approved by the Administrative Agent or (ii) commissioned by ASC pursuant to Section 7.1(b)(ii) or by the Required Lenders pursuant to Section 9.1(b)(iii). "Appraised Value": the fair market value of the subject property determined by the most recent Appraisal or Desktop Appraisal conducted in accordance with Section 7.1(b). The fair market value of any Ski Resort Property shall be determined based on the assumption that such Ski Resort Property will be sold individually as a going concern to an unrelated third party on an arms'-length basis within a twelve-month period. For the purposes of the Desktop Appraisals, fair market value shall be determined based on the most recently available financial information of the Borrowers using the same methodology as the September 2004 desktop appraisal based on EBITDA after deduction for appropriate maintenance Capital Expenditures, as determined by the appraiser, for the Ski Resort Properties and appropriate capitalization rates as determined by the appraiser, or other normally used conventions, such as a discounted cash-flow analysis, where appropriate. "Approved Fund": as defined in Section 10.6(b). "ASCRP": American Skiing Company Resort Properties, Inc., a Maine corporation. "Assignee": as defined in Section 10.6(b). "Assignment and Assumption": an Assignment and Assumption, substantially in the form of Exhibit E. "Available Revolving Commitment": as to any Revolving Lender at any time, an amount equal to the excess, if any, of (a) such Lender's Revolving Commitment then in effect over (b) such Lender's Revolving Extensions of Credit then outstanding. "Benefitted Lender": as defined in Section 10.7(a). "Board": the Board of Governors of the Federal Reserve System of the United States (or any successor). 3 "Borrower": as applicable, ASC or the relevant Subsidiary Borrower and "Borrowers" mean, collectively, ASC and each Subsidiary Borrower. "Borrowing Date": any Business Day specified by a Borrower as a date on which a Borrower requests the relevant Lenders to make Loans hereunder "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City or Salt Lake City, Utah, are authorized or required by law to close; provided, that with respect to notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, such day is also a day for trading by and between banks in Dollar deposits in the interbank eurodollar market. "Capital Expenditures": for any period, with respect to any Person, the aggregate of all expenditures by such Person for the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) that should be capitalized under GAAP on the balance sheet of such Person. For the avoidance of doubt, "Capital Expenditures" does not include capitalized interest on Indebtedness. "Capital Lease Obligations": as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing. "Cash Equivalents": (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank deposits having maturities of one year or less from the date of acquisition issued by any Lender or by any commercial bank organized under the laws of the United States or any state thereof having combined capital and surplus of not less than $500,000,000; (c) commercial paper of an issuer rated at least A-1 by Standard & Poor's Ratings Services ("S&P") or P-1 by Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within one year from the date of acquisition; (d) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days, with respect to securities issued or fully guaranteed or insured by the United States government; (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's; (f) securities with maturities of one year or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition; (g) money market mutual or similar funds that invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition; or (h) money market funds that (i) comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, as amended, (ii) are rated AAA by S&P and Aaa by Moody's and (iii) have portfolio assets of at least $5,000,000,000. 4 "Change of Control": (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of Exchange Act), excluding the Permitted Holders, shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than the greater of (x) 25% of the voting power of the outstanding Capital Stock of ASC or (y) the combined voting power of such Capital Stock of the Permitted Holders; or (ii) Continuing Directors shall cease to constitute a majority of the members of the board of directors of ASC. "Closing Date": November 24, 2004. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Collateral": all property of the Borrowers, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document. "Collateral Agent": as defined in the preamble hereto. "Commitment": as to any Lender, the sum of the Term Commitment and the Revolving Commitment of such Lender. "Commitment Fee Rate": (a) in the case of the Revolving A Commitments, a rate per annum equal to the Applicable Margin for Term Loans that are Eurodollar Loans and (b) in the case of the Revolving B Commitments, 1.0% per annum. "Commonly Controlled Entity": an entity, whether or not incorporated, that is under common control with any Borrower within the meaning of Section 4001 of ERISA or is part of a group that includes the Borrower and that is treated as a single employer under Section 414 of the Code. "Compliance Certificate": a certificate duly executed by a Responsible Officer substantially in the form of Exhibit B. "Conduit Lender": any special purpose corporation organized and administered by any Lender for the purpose of making Loans otherwise required to be made by such Lender and designated by such Lender in a written instrument; provided that the designation by any Lender of a Conduit Lender shall not relieve the designating Lender of any of its obligations to fund a Loan under this Agreement if, for any reason, its Conduit Lender fails to fund any such Loan, and the designating Lender (and not the Conduit Lender) shall have the sole right and responsibility to deliver all consents and waivers required or requested under this Agreement with respect to its Conduit Lender, and provided, further, that no Conduit Lender shall (a) be entitled to receive any greater amount pursuant to Section 2.16, 2.17 or 10.5 than the designating Lender would have been entitled to receive in respect of the extensions of credit made by such Conduit Lender or (b) be deemed to have any Commitment. "Confidential Information Memorandum": the Confidential Information Memorandum dated September 2004 and furnished to certain Lenders. 5 "Consolidated Current Assets": at any date, all amounts (other than cash and Cash Equivalents) that would, in conformity with GAAP, be set forth opposite the caption "total current assets" (or any like caption) on a consolidated balance sheet of ASC and its Restricted Subsidiaries at such date. "Consolidated Current Liabilities": at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption "total current liabilities" (or any like caption) on a consolidated balance sheet of ASC and its Restricted Subsidiaries at such date, but excluding (a) the current portion of any Funded Debt of ASC and its Restricted Subsidiaries and (b) without duplication of clause (a) above, all Indebtedness consisting of Revolving Loans to the extent otherwise included therein. "Consolidated EBITDA": for any period (a) net income or (loss) of ASC and its Restricted Subsidiaries on a consolidated basis for such period determined in accordance with GAAP without giving effect to extraordinary gains and losses from sales, exchanges and other dispositions of property not in the ordinary course of business, and nonrecurring items and excluding from the calculation of net income all revenues from any Excluded Subsidiary except to the extent received by ASC or any Restricted Subsidiary in cash as a loan repayment, dividend or other distribution, plus, to the extent deducted in calculating net income for such period, (b) the sum of, without duplication, (i) depreciation expense of ASC and its Restricted Subsidiaries, (ii) amortization expense of ASC and its Restricted Subsidiaries, (iii) Consolidated Interest Expense plus the non-cash portion of consolidated interest expense on Consolidated Funded Debt, (iv) income tax expense of ASC and its Restricted Subsidiaries, (v) non-cash expenses associated with the Phantom Stock Plan, (vi) other non-cash items of ASC and its Restricted Subsidiaries, and (vii) non-recurring expenses incurred in connection with the consummation of the transactions contemplated by the Loan Documents, the repayment of obligations outstanding under, and the termination of, the Existing Credit Agreement, the tender offer and consent solicitation with respect to, and the redemption of, the Senior Subordinated Notes and the exchange of the Series A Preferred Stock for, and the issuance of, the New Junior Subordinated Notes; provided that, for the fiscal quarters of ASC ended January 2004, April 2004 and July 2004, "Consolidated EBITDA" shall be deemed to be $16,204,000, $54,969,000 and $(14,335,000), respectively. "Consolidated Funded Debt" means, as of each date of determination, without duplication (a) all Indebtedness for borrowed money of ASC and its Restricted Subsidiaries on that date (including all Capital Lease Obligations), (b) the aggregate amount available for drawing under all letters of credit outstanding on that date (including the Letters of Credit) for which ASC or any Restricted Subsidiary is the account party (excluding, however, the aggregate amount available for drawing under letters of credit issued to lenders and lessors of Indebtedness of the type described in clause (a) in support of such Indebtedness), and (c) the aggregate amount drawn under all letters of credit (including the Letters of Credit) for which ASC or any Restricted Subsidiary is the account party and for which the issuer of such letters of credit has not been reimbursed on that date. "Consolidated Interest Expense" shall mean the cash portion of consolidated interest expense (including commitment and letter of credit fees) on Consolidated Funded Debt, as determined in accordance with GAAP. "Consolidated Net Income": for any period, the consolidated net income (or loss) of ASC and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of ASC or is merged into or consolidated with ASC or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary of ASC) in which ASC or any of its Restricted Subsidiaries has an ownership interest, except to the extent that any such income is actually received by ASC or such Restricted Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of ASC to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary. 6 "Consolidated Working Capital": at any date, the excess of Consolidated Current Assets on such date over Consolidated Current Liabilities on such date. "Continuing Directors" means, as of any date of determination, any member of the board of directors of ASC who (i) was a member of the board of directors on the date of this Agreement or (ii) was nominated for election to the board of directors by the Permitted Holders or with the approval of at least two-thirds of the Continuing Directors who were members of the board of directors at the time of such nomination or election. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Control Investment Affiliate": as to any Person, any other Person that (a) directly or indirectly, is in control of, is controlled by, or is under common control with, such Person and (b) is organized by such Person primarily for the purpose of making equity or debt investments in one or more companies. For purposes of this definition, "control" of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "CSFB": as defined in the preamble hereto. "Default": any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied. "Desktop Appraisal": an appraisal of the fair market value of property and business, performed by an Independent Appraiser without conducting a site visit to such property or business, using the evaluation methodology outlined in the definition of "Appraised Value". "Disposition": with respect to any property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof. The terms "Dispose" and "Disposed of" shall have correlative meanings. "Dollars" and "$": dollars in lawful currency of the United States. "Domestic Subsidiary": any Subsidiary of ASC organized under the laws of any jurisdiction within the United States. "Environmental Laws": any and all laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating or imposing liability or standards of conduct concerning protection of human health, natural resources or the environment, as have been, are now or at any time hereafter are in effect. "Environmental Permits": any and all permits, licenses, approvals, registrations, notifications, exemptions and any other authorization required under any Environmental Law, including for the avoidance of doubt the Forest Service Permits. 7 "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurocurrency Reserve Requirements": for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves) under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board) maintained by a member bank of the Federal Reserve System. "Eurodollar Base Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate screen (or otherwise on such screen), the "Eurodollar Base Rate" shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be reasonably selected by the Administrative Agent. "Eurodollar Loans": Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "Eurodollar Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): Eurodollar Base Rate -------------------------------------------------------- 1.00 - Eurocurrency Reserve Requirements "Eurodollar Tranche": the collective reference to Eurodollar Loans under a particular Facility the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day). "Event of Default": any of the events specified in Section 8, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied. "Excess Cash Flow": for any fiscal year of ASC, the excess, if any, of (a) the sum, without duplication, of (i) Consolidated Net Income for such fiscal year, (ii) the amount of all non-cash charges (including depreciation and amortization) deducted in arriving at such Consolidated Net Income (in each case, determined in accordance with GAAP), (iii) decreases in Consolidated Working Capital for such fiscal year, and (iv) the aggregate net amount of non-cash loss on the Disposition of property by ASC and its Restricted Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business), to the extent deducted in arriving at such Consolidated Net Income over (b) the sum, without duplication, of (i) the amount of all non-cash credits included in arriving at such Consolidated Net Income (determined in accordance with GAAP), (ii) the aggregate amount actually paid by ASC and its Restricted Subsidiaries (in cash during such fiscal year on account of Capital Expenditures (excluding the principal amount of Indebtedness incurred in connection with such expenditures and any such expenditures financed with the proceeds of any Reinvestment Deferred Amount), (iii) the aggregate amount of all prepayments of Revolving Loans during such fiscal year to the extent accompanying permanent optional reductions of the Revolving Commitments and all 8 optional prepayments of the Term Loans and the Second Lien Term Loans during such fiscal year, (iv) the aggregate amount of all regularly scheduled principal payments of Funded Debt (including the Term Loans and the Second Lien Term Loans) of ASC and its Restricted Subsidiaries made during such fiscal year (other than in respect of any revolving credit facility to the extent there is not an equivalent permanent reduction in commitments thereunder), (v) increases in Consolidated Working Capital for such fiscal year, (vi) the aggregate net amount of non-cash gain on the Disposition of property by ASC and its Restricted Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business), to the extent included in arriving at such Consolidated Net Income and (vii) non-recurring expenses incurred in connection with the consummation of the transactions contemplated by the Loan Documents and the Second Lien Loan Documents, the repayment of obligations outstanding under the Existing Credit Agreement, the tender offer and consent solicitation with respect to, and the redemption of, the Senior Subordinated Notes and the exchange of the Series A Preferred Stock for, and the issuance of, the New Junior Subordinated Notes, to the extent deducted in arriving at such Consolidated Net Income. "Excluded Subsidiaries": (i) GSRP, Community Water Company, Ski Insurance Company, Uplands Water Company, Walton Pond Apartments, Inc. and their Subsidiaries, (ii) any Subsidiary formed for the purpose of receiving Investments as described in clause (j) of Section 7.8 and (iii) the Subsidiaries of ASC designated as Excluded Immaterial Subsidiaries on Schedule 1.1C or designated by ASC and approved in writing by the Administrative Agent after the date hereof as Excluded Immaterial Subsidiaries (the Subsidiaries described in this clause (iii), the "Excluded Immaterial Subsidiaries"), provided that any such Subsidiary shall cease to be an Excluded Immaterial Subsidiary if it at any time holds assets with a fair market value of greater than $1,000,000. "Existing Credit Agreement": the Credit Agreement, dated as of February 14, 2003, among ASC and the other borrowers party thereto, the lenders party thereto, and GECC, as administrative agent, as amended, supplemented or otherwise modified to the date hereof, together with all instruments and other agreements entered into by ASC or its Subsidiaries in connection therewith. "Existing Issuing Lender": GECC, as issuer of the Existing Letters of Credit. "Existing Junior Subordinated Note Indenture": the Indenture, dated as of August 31, 2001, between ASC and Oak Hill Capital Partners, L.P., as Trustee, as amended, supplemented or otherwise modified to the date hereof, together with all instruments and other agreements entered into by ASC or its Subsidiaries in connection therewith. "Existing Junior Subordinated Notes": the subordinated notes of ASC issued pursuant to the Junior Subordinated Note Indenture. "Existing Letters of Credit": the letters of credit issued by GECC under the Existing Credit Agreement which are outstanding as of the date hereof and listed on Schedule 1.1F. "Facility": each of (a) the Term Commitments and the Term Loans made thereunder (the "Term Facility"), (b) the Revolving A Commitments and the extensions of credit made thereunder (the "Revolving A Facility") and (c) the Revolving B Commitments and the extensions of credit made thereunder (the "Revolving B Facility"). "Federal Funds Effective Rate": for any day, the rate equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. 9 "Fee Letter": as defined in Section 10.5. "Fee Payment Date": (a) the 15th day of each April, July, October and January and (b) the last day of the Revolving Commitment Period. "Foreign Subsidiary": any Subsidiary of ASC that is not a Domestic Subsidiary. "Forest Service Permits": any and all permits, licenses, approvals, registrations, notifications, exemptions and any other authorization, including for the avoidance of doubt Forest Service Term Special Use Permits, that are issued by, filed with, or granted, as the case may be, by the Forest Service of the United States Department of Agriculture or by any similar state agency, with respect to any use of or conduct concerning any land or resources owned, managed, or under the jurisdiction of such agency. "Forest Service Term Special Use Permits": the Term Special Use Permits issued by the Forest Service of the United States Department of Agriculture and listed on Schedule 4.24. "Fully Satisfied" shall mean, with respect to the Obligations as of any date, that, on or before such date, (a) the principal of and interest accrued to such date on such Obligations (other than the aggregate undrawn amount of Letters of Credit then outstanding) shall have been paid in full in cash, (b) all fees, expenses and other amounts then due and payable which constituted Obligations (other than the aggregate undrawn amount of Letters of Credit then outstanding) shall have been paid in full in cash, (c) the Commitments shall have expired or irrevocably been terminated and (d) the aggregate undrawn amount of Letters of Credit then outstanding shall have been Fully Secured. "Fully Secured" shall mean, with respect to the aggregate undrawn amount of Letters of Credit outstanding as of any date, that, on or before such date, such amount shall have been secured by the grant to the Issuing Lender by the Borrowers of a first priority, perfected security interest in, and Lien on, (a) cash or Cash Equivalents in an amount at least equal to the aggregate undrawn amount of the Letters of Credit being secured on such date or (b) other collateral security which is acceptable to such Issuing Lender and the Administrative Agent. "Funded Debt": as to any Person, all Indebtedness of such Person that matures more than one year from the date of its creation or matures within one year from such date but is renewable or extendible, at the option of such Person, to a date more than one year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year from such date, including all current maturities and current sinking fund payments in respect of such Indebtedness whether or not required to be paid within one year from the date of its creation and, in the case of the Borrowers, Indebtedness in respect of the Loans. "Funding Office": the office of the Administrative Agent specified in Section 10.2 or such other office as may be specified from time to time by the Administrative Agent as its funding office by written notice to the Borrower and the Lenders. "GAAP": generally accepted accounting principles in the United States as in effect from time to time, except that for purposes of Section 7.1, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements referred to in Section 4.1. In the event that any "Accounting Change" (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then ASC and the Administrative Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to reflect equitably such Accounting Changes with the desired result that the criteria for evaluating ASC's financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made. Until such 10 time as such an amendment shall have been executed and delivered by the Borrowers, the Administrative Agent and the Required Lenders, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Changes had not occurred. "Accounting Changes" refers to changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC. "GECC": as defined in the preamble hereto. "Governmental Authority": any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization (including the National Association of Insurance Commissioners). "Group Members": the collective reference to ASC and its Subsidiaries. "GSRP": Grand Summit Resort Properties, Inc., a Maine corporation. "Guarantee and Collateral Agreement": the Guarantee and Collateral Agreement to be executed and delivered by ASC and each Subsidiary Borrower, substantially in the form of Exhibit A. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation, including a reimbursement, counterindemnity or similar obligation, of the guaranteeing person that guarantees or in effect guarantees, or which is given to induce the creation of a separate obligation by another Person (including any bank under any letter of credit) that guarantees or in effect guarantees, any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by ASC in good faith. 11 "Indebtedness": of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than current trade payables incurred in the ordinary course of such Person's business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under or in respect of acceptances, letters of credit, surety bonds or similar arrangements, (g) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any Capital Stock of such Person, (h) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above, (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation, and (j) for the purposes of Section 8(e) only, all obligations of such Person in respect of Swap Agreements. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor. "Independent Appraiser": an independent appraiser with appraisal experience in the ski resort business who is not employed by ASC, the Administrative Agent or any Lender or any of their respective Affiliates and who has been approved by the Administrative Agent; provided, however, that no independent appraiser shall be prevented from acting as an "Independent Appraiser" or be prevented from rendering services to ASC unrelated to those arising under this Agreement solely because such independent appraiser was used or will be used by ASC in the future for services unrelated to those arising under this Agreement, so long as ASC has given the Administrative Agent notice of such unrelated services performed or to be performed by such Independent Appraiser. "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. "Intellectual Property": the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom. "Intercreditor Agreement": the Intercreditor Agreement to be executed and delivered by the Borrowers, the Collateral Agent and the Second Lien Collateral Agent (as defined in such Agreement), substantially in the form of Exhibit I. "Interest Payment Date": (a) as to any ABR Loan, the 15th day of each April, July, October and January to occur while such Loan is outstanding and the final maturity date of such Loan, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day that is three months, or a whole multiple thereof, after the first day of such Interest Period, and the last day of such Interest Period and (d) as to any Loan, the date of any repayment or prepayment made in respect thereof. 12 "Interest Period": as to any Eurodollar Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six (or, if agreed to by all Lenders under the relevant Facility, nine or twelve) months thereafter, as selected by ASC in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the then current Interest Period applicable to such Eurodollar Loan and ending one, two, three or six (or, if agreed to by all Lenders under the relevant Facility, nine or twelve) months thereafter, as selected by ASC by irrevocable notice to the Administrative Agent not later than 11:00 A.M., New York City time, on the date that is three Business Days prior to the last day of the then current Interest Period applicable thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (ii) ASC may not select an Interest Period under a particular Facility that would extend beyond the Revolving Termination Date or beyond the date final payment is due on the Term Loans; (iii)any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; (iv) ASC shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Loan; and (v) the first Interest Period selected for any Loan shall be required to end on the last Business Day of a calendar month and ASC shall be permitted to select an initial Interest Period of less than one month's duration in order to satisfy this requirement. "Investments": as defined in Section 7.8. "Issuing Lender": GECC or any agent acting on its behalf, or any other Revolving B Lender willing to act as such which is designated by the Administrative Agent after the date hereof with, so long as no Event of Default is continuing, the consent of the Borrower (such consent not to be unreasonably withheld), in each case in its capacity as issuer of any Letter of Credit. "Junior Subordinated Notes": the Existing Junior Subordinated Notes and the New Junior Subordinated Notes. "Junior Subordinated Note Indentures": the Existing Junior Subordinated Note Indenture and the New Junior Subordinated Note Indenture. "L/C Commitment": $6,000,000. 13 "L/C Obligations": at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit that have not then been reimbursed pursuant to Section 3.5. "L/C Participants": the collective reference to all the Revolving B Lenders other than the Issuing Lender. "Landlord Certificate": as defined in Section 5.1(k)(vi). "Lenders": as defined in the preamble hereto; provided that unless the context otherwise requires, each reference herein to the Lenders shall be deemed to include any Conduit Lender. "Letters of Credit": as defined in Section 3.1(a). "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing). "Loan": any loan made by any Lender pursuant to this Agreement "Loan Documents": this Agreement, the Security Documents, the Notes, the Intercreditor Agreement and any amendment, waiver, supplement or other modification to any of the foregoing. "LTM EBITDA": as defined in Section 7.1(a). "Major Casualty Event": a Recovery Event yielding gross proceeds to ASC or any of its Restricted Subsidiaries in excess of $15,000,000. "Majority Facility Lenders": with respect to any Facility, the holders of more than 50% of the aggregate unpaid principal amount of the Term Loans or the Total Revolving Extensions of Credit, as the case may be, outstanding under such Facility (or, in the case of either Revolving Facility, prior to any termination of the Revolving Commitments under such Revolving Facility, the holders of more than 50% of the Total Revolving Commitments under such Revolving Facility). "Material Adverse Effect": a material adverse effect on (a) the business, property, operations, condition (financial or otherwise) or prospects of the Borrowers taken as a whole, (b) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder or (c) the value of the Collateral. "Material Asset Sale": any Disposition of property or series of related Dispositions of property (excluding any such Disposition permitted by clause (a), (b), (c), (d), (f) or (h) of Section 7.5) that yields gross proceeds to ASC or any of its Restricted Subsidiaries in excess of $500,000, provided that a disposition of Non-Operating Assets permitted by clause (e) of Section 7.5 shall constitute a Material Asset Sale solely to the extent that permission to make such Disposition is granted pursuant to the proviso to such clause (e). "Materials of Environmental Concern": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products, polychlorinated biphenyls, urea formaldehyde insulation, asbestos, molds, pollutants, contaminants, radioactivity, and any substances of any kind, in each case to the extent regulated pursuant to or that could give rise to liability under any Environmental Law. 14 "Mortgaged Properties": the real properties listed on Part A of Schedule 1.1B, as to which (or as to interests in which) the Collateral Agent for the benefit of the Administrative Agent and the Lenders shall be granted a Lien pursuant to the Mortgages as required by Section 4.19(b). "Mortgages": each of the mortgages and deeds of trust made by any Borrower in favor of, or for the benefit of, the Collateral Agent for the benefit of the Administrative Agent and the Lenders, substantially in the form of Exhibit D (with such changes thereto as shall be advisable under the law of the jurisdiction in which such mortgage or deed of trust is to be recorded). "Multiemployer Plan": a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds": (a) in connection with any Material Asset Sale (including a Material Asset Sale made in compliance with the proviso to clause (e) of Section 7.5) or other Disposition or any Recovery Event, the proceeds thereof in the form of cash (including any such proceeds received by way of a permitted deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but only as and when received) of such Disposition or Recovery Event (including any cash received upon the Disposition of any permitted non-cash consideration received upon such Disposition), net of reasonable attorneys' fees, accountants' fees, investment banking fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset that is the subject of such Disposition or Recovery Event (other than any Lien pursuant to a Security Document) and other reasonable and customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (b) in connection with any issuance or sale of Capital Stock or any incurrence of Indebtedness, the cash proceeds received from such issuance or incurrence, net of reasonable attorneys' fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other reasonable and customary fees and expenses actually incurred in connection therewith. "New Junior Subordinated Notes": junior subordinated notes of ASC having terms consistent with those set forth on Schedule 1.1E and otherwise containing terms reasonably satisfactory to the Agents. "New Junior Subordinated Note Indenture": the indenture entered into by ASC in connection with the New Junior Subordinated Notes. "Non-Excluded Taxes": as defined in Section 2.17(a). "Non-Operating Assets": (a) unused or obsolete inventory and equipment, (b) real property specified on Part I of Schedule 1.1G which is not currently used or contemplated to be used in ski resort operations of a Borrower (or, to the extent so used, for which a Borrower retains a perpetual easement for such use), (c) the assets comprising the Haystack ski area, (d) any asset consisting of commercial or base lodge space generally used for administrative, retail, or skier service purposes (but not consisting of Ski Terrain) and specified on Part II of Schedule 1.1G which ASC certifies to the Administrative Agent at the time of sale (i) will be replaced within twelve (12) months from the sale date (x) by ASC with the applicable Non-Operating Asset Sale Proceeds, or (y) by the purchaser as a contractual obligation under the applicable sale documents, and (ii) may be temporarily unavailable during the period from the sale date to the time of completion of the replacement thereof pursuant to clause (i) above, or temporarily replaced during such period, without materially affecting ASC's operations or access to any portion of the Ski Terrain and (e) other assets of the Borrowers not listed on Schedule 1.1G which otherwise meet the requirements of clause (b) or (d) of this definition, provided that the sales price of such assets does not exceed $100,000 for any such asset individually or $500,000 in the aggregate in any fiscal year. It is agreed that Schedule 1.1G shall not be effective (and thus sales of Non-Operating Assets specified on such Schedule shall not be permitted) until the date such schedule is approved by the Required Lenders in the form in which originally delivered or 15 as subsequently revised as requested by the Required Lenders (and the Required Lenders shall use commercially reasonable efforts to approve such schedule on or prior to the 30th day after the Closing Date). "Non-Operating Asset Sale Proceeds": as defined in Section 7.1(a). "Non-U.S. Lender": as defined in Section 2.17(d). "Notes": the collective reference to any promissory note evidencing Loans. "Oak Hill": Oak Hill Capital Partners, L.P., a Delaware limited partnership, Oak Hill Securities Fund, L.P., a Delaware limited partnership, and their respective Control Investment Affiliates. "Obligations": with respect to any Borrower, the unpaid principal of and interest on (including interest accruing after the maturity of the Loans and Reimbursement Obligations and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to such Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of such Borrower to the Administrative Agent or to any Lender (or, in the case of Specified Swap Agreements, any affiliate of any Lender), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document, the Letters of Credit, any Specified Swap Agreement or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by such Borrower pursuant hereto) or otherwise. Unless otherwise specified, "Obligations" shall refer to the Obligations of all Borrowers. "Operating Assets": assets of ASC and its Restricted Subsidiaries other than Non-Operating Assets. "Other Taxes": any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document. "Participant": as defined in Section 10.6(c). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "Permitted Holders" means Oak Hill. 16 "Person": an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Phantom Stock Plan": the American Skiing Company Phantom Equity Plan dated as of December 1, 2001, as amended, supplemented or otherwise modified from time to time. "Plan": at a particular time, any employee benefit plan that is subject to ERISA and in respect of which any Borrower or Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Preferred Stock": ASC's 8.5% Series B Convertible Participating Preferred Stock, ASC's 12% Series C-1 Convertible Participating Preferred Stock, ASC's 15% Series C-2 Preferred Stock and ASC's Series D Participating Preferred Stock, collectively. "Prepayment Amount": as defined in Section 2.9(d). "Prime Rate": for any day, a floating rate equal to the rate publicly quoted from time to time by The Wall Street Journal as the "base rate on corporate loans posted by at least 75% of the nation's 30 largest banks" (or, if The Wall Street Journal ceases quoting a base rate of the type described, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled "Selected Interest Rates" as the Bank prime loan rate or its equivalent). "Projections": as defined in Section 6.2(b). "Purchase Money Indebtedness": as defined in Section 7.2(c). "Recovery Event": any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of ASC or any Restricted Subsidiary. "Register": as defined in Section 10.6(b). "Regulation U": Regulation U of the Board as in effect from time to time. "Reimbursement Obligation": the obligation of each Borrower to reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of Credit. "Reinvestment Deferred Amount": with respect to any Reinvestment Event, the aggregate Net Cash Proceeds received by any Borrower in connection therewith that are not applied to prepay Loans pursuant to Section 2.9(b) as a result of the delivery of a Reinvestment Notice. "Reinvestment Event": any Recovery Event in respect of which ASC has delivered a Reinvestment Notice. "Reinvestment Notice": a written notice executed by a Responsible Officer stating that no Event of Default has occurred and is continuing and that ASC (directly or indirectly through a Subsidiary) intends and expects to use all or a specified portion of the Net Cash Proceeds of a Recovery Event to acquire or repair assets useful in its business (such business as permitted pursuant to Section 7.15). 17 "Reinvestment Prepayment Amount": with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended prior to the relevant Reinvestment Prepayment Date (in accordance with Section 7.7, as applicable) to acquire or repair assets useful in the Borrowers' business (such business as permitted pursuant to Section 7.15). "Reinvestment Prepayment Date": with respect to any Reinvestment Event, the earlier of (a) the date occurring one year after such Reinvestment Event and (b) the date on which ASC shall have determined not to, or shall have otherwise ceased to, acquire or repair assets useful in ASC's business (such business as permitted pursuant to Section 7.15) with all or any portion of the relevant Reinvestment Deferred Amount. "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. ss. 4043. "Required Lenders": at any time, the holders of more than 50% of (a) until the Closing Date, the Commitments then in effect and (b) thereafter, the sum of (i) the aggregate unpaid principal amount of the Term Loans then outstanding and (ii) the Total Revolving Commitments then in effect or, if the Revolving Commitments have been terminated, the Total Revolving Extensions of Credit then outstanding. "Required Value": at any time, the product of (A) the Aggregate Facilities Amount at such time and (B) 2.0. "Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer": the chief executive officer, president or chief financial officer of ASC, but in any event, with respect to financial matters, the chief financial officer of ASC. "Restricted Payments": as defined in Section 7.6. "Restricted Subsidiary": each Subsidiary of ASC other than any Excluded Subsidiary. "Revolving A Commitment": as to any Lender, the obligation of such Lender, if any, to make Revolving A Loans in an aggregate principal amount not to exceed the amount set forth under the heading "Revolving A Commitment" opposite such Lender's name on Schedule 1.1A or in the Assignment and Assumption pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The original amount of the Total Revolving A Commitments is $20,000,000. "Revolving A Facility": as defined in the definition of "Facility" in this Section 1.1. "Revolving A Lender": each Lender that has a Revolving A Commitment or that holds Revolving A Loans. 18 "Revolving A Loans": as defined in Section 2.4(a). "Revolving A Percentage": as to any Revolving A Lender at any time, the percentage which such Lender's Revolving A Commitment then constitutes of the Total Revolving A Commitments. If the Revolving A Commitments have expired or terminated, the Revolving A Percentages shall be determined based upon the Revolving A Commitments most recently in effect, giving effect to any assignments. "Revolving B Commitment": as to any Lender, the obligation of such Lender, if any, to make Revolving B Loans and participate in Letters of Credit in an aggregate principal and/or face amount not to exceed the amount set forth under the heading "Revolving B Commitment" opposite such Lender's name on Schedule 1.1A or in the Assignment and Assumption pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The original amount of the Total Revolving B Commitments is $20,000,000. "Revolving B Facility": as defined in the definition of "Facility" in this Section 1.1. "Revolving B Lender": each Lender that has a Revolving B Commitment or that holds Revolving B Loans. "Revolving B Loans": as defined in Section 2.4(b). "Revolving B Percentage": as to any Revolving B Lender at any time, the percentage which such Lender's Revolving B Commitment then constitutes of the Total Revolving B Commitments. If the Revolving B Commitments have expired or terminated, the Revolving B Percentages shall be determined based upon the Revolving B Commitments most recently in effect, giving effect to any assignments. "Revolving Commitment": as to any Revolving Lender, its Revolving A Commitment or its Revolving B Commitment. "Revolving Commitment Period": the period from and including the Closing Date to the Revolving Termination Date. "Revolving Extensions of Credit": as to any Revolving Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Loans held by such Lender then outstanding and (b) in the case of any Revolving Lender which is a Revolving B Lender, such Revolving B Lender's Revolving B Percentage of the L/C Obligations then outstanding. "Revolving Facilities": the Revolving A Facility and the Revolving B Facility, collectively. "Revolving Lenders": Revolving A Lenders and Revolving B Lenders. "Revolving Loans": the Revolving A Loans and the Revolving B Loans. "Revolving Percentage": as to any Revolving Lender at any time, the percentage which such Lender's Revolving Commitment then constitutes of the Total Revolving Commitments. If the Revolving Commitments have expired or terminated, the Revolving Percentages shall be determined based upon the Revolving Commitments most recently in effect, giving effect to any assignments. 19 "Revolving Termination Date": November 24, 2010. "SEC": the Securities and Exchange Commission, any successor thereto and any analogous Governmental Authority. "Second Lien Collateral Agent": as defined in the Intercreditor Agreement. "Second Lien Credit Agreement": the Second Lien Credit Agreement, dated as of the date hereof, among ASC, the lenders party thereto, GECC, as administrative agent and collateral agent, and the other agents party thereto, as such agreement may be refinanced, extended, renewed, restructured or replaced in accordance with the terms hereof and of the Intercreditor Agreement. "Second Lien Debt": (a) the term loans made pursuant to the Second Lien Credit Agreement (the "Second Lien Term Loans") and (b) Guarantee Obligations of the Borrowers in respect thereof. "Second Lien Loan Documents": any agreement or instrument (including any credit agreement, guarantee, security agreement or mortgage) entered into by Borrower or any of its Subsidiaries in connection with the Second Lien Debt. "Second Lien Term Loans": as defined in the definition of the term "Second Lien Debt" in this Section 1.1. "Security Documents": the collective reference to the Guarantee and Collateral Agreement, the Mortgages, the Intercreditor Agreement and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any property of any Person to secure the obligations and liabilities of any Borrower under any Loan Document. "Senior Subordinated Note Indenture": the Indenture, dated as of June 28, 1996, between ASC and U.S. Trust Company of New York, as Trustee, as amended, supplemented or otherwise modified to the date hereof, together with all instruments and other agreements entered into by ASC or its Subsidiaries in connection therewith. "Senior Subordinated Notes": the subordinated notes of ASC issued pursuant to the Senior Subordinated Note Indenture. "Senior Subordinated Notes Reserve": an amount which shall be initially equal to $1,500,000 on the Closing Date and which shall be reduced from time to time (but in no event to an amount less than zero) upon receipt by the Administrative Agent of a certificate from a Responsible Officer of ASC stating that ASC has made a payment in the amount specified therein to purchase or redeem Senior Subordinated Notes when required by the redemption provisions of the Senior Subordinated Note Indenture (which reduction shall be in the amount so specified) and which shall be reduced to zero upon receipt by the Administrative Agent of a certificate from a Responsible Officer of ASC stating that all obligations of ASC and its Subsidiaries in respect of the Senior Subordinated Notes have been paid in full. "Series A Preferred Stock": the 10.5% Repriced Convertible Exchangeable Preferred Stock of ASC. "Single Employer Plan": any Plan that is subject to Title IV of ERISA, but that is not a Multiemployer Plan. 20 "Ski Resort Properties": the ski resort properties of the Borrowers constituting part of the Collateral, known as Attitash Bear Peak, The Canyons, Killington/Pico, Mount Snow, Steamboat, Sugarloaf/USA and Sunday River, in each case excluding any Non-Operating Assets. "Ski Terrain": property used (or which is to be developed to be used) to conduct snow skiing operations, including terrain used for skiing and terrain used for supporting ski lift operations. "Solvent": when used with respect to any Person, means that, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person, as of such date, exceeds the amount of all "liabilities of such Person, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person, as of such date, is greater than the amount that will be required to pay the probable liability of such Person on its debts as such debts become absolute and matured, (c) such Person does not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person is able to pay its debts as they mature. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) 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, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "Specified Swap Agreement": any Swap Agreement entered into by any Borrower and any Lender or affiliate thereof in respect of interest rates. "Subsidiary": as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person, but with respect to any Borrower, excluding non-profit homeowners associations and resort village management associations controlled directly or indirectly by such Borrower. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of ASC. "Subsidiary Borrower": collectively, (i) the Restricted Subsidiaries of ASC as of the date hereof and (ii) each new Restricted Subsidiary of ASC that becomes a party to this Agreement in accordance with Section 6.9(c). "Supermajority Lenders": at any time, the holders of more than 67% of (a) until the Closing Date, the Commitments then in effect and (b) thereafter, the sum of (i) the aggregate unpaid principal amount of the Term Loans then outstanding and (ii) the Total Revolving Commitments then in effect or, if the Revolving Commitments have been terminated, the Total Revolving Extensions of Credit then outstanding. "Swap Agreement": any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or any of its Subsidiaries shall be a "Swap Agreement". 21 "Syndication Agent": as defined in the preamble hereto. "Term Commitment": as to any Lender, the obligation of such Lender, if any, to make a Term Loan to ASC in a principal amount not to exceed the amount set forth under the heading "Term Commitment" opposite such Lender's name on Schedule 1.1A. The original aggregate amount of the Term Commitments is $85,000,000. "Term Facility": as defined in the definition of "Facility" in this Section 1.1. "Term Lender": each Lender that has a Term Commitment or that holds a Term Loan. "Term Loan": as defined in Section 2.1. "Term Loan Final Maturity Date": November 24, 2010. "Term Percentage": as to any Term Lender at any time, the percentage which such Lender's Term Commitment then constitutes of the aggregate Term Commitments (or, at any time after the Closing Date, the percentage which the aggregate principal amount of such Lender's Term Loans then outstanding constitutes of the aggregate principal amount of the Term Loans then outstanding). "Total Revolving A Commitments": at any time, the aggregate amount of the Revolving A Commitments then in effect. "Total Revolving A Extensions of Credit": at any time, the aggregate amount of the Revolving Extensions of Credit of the Revolving A Lenders outstanding at such time. "Total Revolving B Commitments": at any time, the aggregate amount of the Revolving B Commitments then in effect. "Total Revolving B Extensions of Credit": at any time, the aggregate amount of the Revolving Extensions of Credit of the Revolving B Lenders outstanding at such time. "Total Revolving Commitments": at any time, the Total Revolving A Commitments and the Total Revolving B Commitments. "Total Revolving Extensions of Credit": at any time, the Total Revolving A Extensions of Credit and the Total Revolving B Extensions of Credit. "Transferee": any Assignee or Participant. "Triple Peaks Reserve": an amount which shall be initially equal to $2,140,000 on the Closing Date and which shall be reduced from time to time (but in no event to an amount less than zero) upon receipt by the Administrative Agent of a certificate from a Responsible Officer of ASC stating that ASC has made a payment in the amount specified therein to Triple Peaks LLC in accordance with the Full Release and Settlement Agreement, dated as of July 8, 2004, among Triple Peaks LLC, Steamboat LLC, ASC, Steamboat Ski and Resort Corporation, Walton Pond Apartments, Inc., and ASCRP (which reduction shall be in the amount so specified) and which shall be reduced to zero upon receipt by the Administrative Agent of a certificate from a Responsible Officer of ASC stating that all obligations of ASC and its Subsidiaries under such Settlement Agreement have been paid in full. 22 "Type": as to any Loan, its nature as an ABR Loan or a Eurodollar Loan. "United States": the United States of America. "Water Rights": rights to use water from surface sources, groundwater, or other water sources, whether such rights are conferred by statute, contract, common law or otherwise. "Wholly Owned Subsidiary": as to any Person, any other Person all of the Capital Stock of which (other than directors' qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries. 1.2. Other Definitional Provisions. (a)Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto. (b) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, (i) accounting terms relating to any Borrower not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP, (ii) the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation", (iii) the word "incur" shall be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words "incurred" and "incurrence" shall have correlative meanings), (iv) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, Capital Stock, securities, revenues, accounts, leasehold interests and contract rights, and (v) references to agreements or other Contractual Obligations shall, unless otherwise specified, be deemed to refer to such agreements or Contractual Obligations as amended, supplemented, restated or otherwise modified from time to time. (c) The words "hereof", "herein" and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION II. AMOUNT AND TERMS OF COMMITMENTS 2.1. Term Commitments. Subject to the terms and conditions hereof, each Term Lender severally agrees to make a term loan (a "Term Loan") to ASC on the Closing Date in an amount equal to the amount of the Term Commitment of such Lender. The Term Loans may from time to time be Eurodollar Loans or ABR Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 2.10. 2.2. Procedure for Term Loan Borrowing. ASC shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, one Business Day prior to the anticipated Closing Date) requesting that the Term Lenders make the Term Loans on the Closing Date. The Term Loans made on the Closing Date shall initially be ABR Loans and, unless otherwise agreed by the Administrative Agent in its sole discretion, no Term Loan may be converted into or continued as a Eurodollar Loan having an Interest Period in excess of one month prior to the date that is 60 days after the Closing Date. Upon receipt of such notice the Administrative Agent shall promptly notify each Term Lender thereof. Not later than 12:00 Noon, New York City time, on the Closing Date each Term Lender shall make available to the Administrative Agent at the Funding Office an amount in immediately 23 available funds equal to the Term Loan to be made by such Lender. The Administrative Agent shall credit the account of ASC on the books of such office of the Administrative Agent with the aggregate of the amounts made available to the Administrative Agent by the Term Lenders in immediately available funds. 2.3. Repayment of Term Loans. The Term Loan of each Lender shall mature in twenty-four consecutive quarterly installments, the first 23 of which shall be paid on the 15th day of each January, April, July and October, commencing on January 15, 2005, and the last of which shall be paid on the Term Loan Final Maturity Date, each of which shall be in an amount equal to such Lender's Term Percentage multiplied by the amount set forth below opposite such installment: Installment Principal Amount 1 - 23 $ 212,500 Term Loan Final Maturity Date $80,112,500 2.4. Revolving Commitments. (a) Subject to the terms and conditions hereof, each Revolving A Lender severally agrees to make revolving credit loans ("Revolving A Loans") to ASC and the Subsidiary Borrowers from time to time during the Revolving Commitment Period in an aggregate principal amount at any one time outstanding which does not exceed such Lender's Revolving A Commitment. During the Revolving Commitment Period each Borrower may use the Revolving A Commitments by borrowing and prepaying the Revolving A Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. The Revolving A Loans may from time to time be Eurodollar Loans or ABR Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.5 and 2.10. (b) Subject to the terms and conditions hereof, each Revolving B Lender severally agrees to make revolving credit loans ("Revolving B Loans") to ASC and the Subsidiary Borrowers from time to time during the Revolving Commitment Period in an aggregate principal amount at any one time outstanding which, when added to such Lender's Revolving B Percentage of the L/C Obligations then outstanding, does not exceed an amount equal to the excess, if any, of such Lender's Revolving B Commitment over the sum of (i) such Lender's Revolving B Percentage of the Triple Peaks Reserve then in effect (after giving effect to any concurrent reductions thereto resulting from the concurrent use of proceeds of the Revolving B Loans being borrowed at such time to make a payment to Triple Peaks LLC pursuant to the Triple Peaks Settlement Agreement) and (ii) the Senior Subordinated Notes Reserve then in effect (after giving effect to any concurrent reductions thereto resulting from the concurrent use of proceeds of the Revolving B Loans being borrowed at such time to make a payment to the holders of the Senior Subordinated Notes to repurchase or redeem such Senior Subordinated Notes when required by the redemption provisions of the Senior Subordinated Note Indenture). During the Revolving Commitment Period each Borrower may use the Revolving B Commitments by borrowing, prepaying the Revolving B Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. The Revolving B Loans may from time to time be Eurodollar Loans or ABR Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.5 and 2.10. 24 (c) Borrowings under the Revolving Facilities shall be limited to the extent necessary to comply with the provisions of Section 7.1(c). (d) Each Borrower shall repay all outstanding Revolving Loans on the Revolving Termination Date. 2.5. Procedure for Revolving Loan Borrowing. ASC and the Subsidiary Borrowers may borrow under the Revolving Commitments during the Revolving Commitment Period on any Business Day, provided that ASC shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 11:00 A.M., New York City time, (a) three Business Days prior to the requested Borrowing Date, in the case of Eurodollar Loans, or (b) on the requested Borrowing Date, in the case of ABR loans) (provided that any such notice of a borrowing of Loans under the Revolving Facility to finance payments required by Section 3.5 may be given not later than 10:00 A.M., New York City time, on the date of the proposed borrowing), specifying (i) whether such borrowing is to be made under the Revolving A Commitments or the Revolving B Commitments or both (and if to be made under both the respective amounts to be borrowed under each), (ii) the amount and Type of Revolving Loans to be borrowed by each applicable Borrower, (ii) the requested Borrowing Date, (iii) in the case of Eurodollar Loans, the respective amounts of each such Type of Loan and the respective lengths of the initial Interest Periods therefor, (iv) if all or any portion of the proceeds of the requested borrowing will be used by ASC to make a payment to Triple Peaks LLC under the Triple Peaks Settlement Agreement, the amount to be so used (which request shall constitute a covenant by ASC that it will so use such amount for such purpose) and (v) if all or any portion of the proceeds of the requested borrowing will be used by ASC to make a payment to purchase or redeem Senior Subordinated Notes when required by the redemption provisions of the Senior Subordinated Note Indenture, the amount to be so used (which request shall constitute a covenant by ASC that it will so use such amount for such purpose). Any Revolving Loans made on the Closing Date shall initially be ABR Loans, and, unless otherwise agreed by the Administrative Agent in its sole discretion, no Revolving Loan may be made as, converted into or continued as a Eurodollar Loan having an Interest Period in excess of one month prior to the date that is 60 days after the Closing Date; and provided further that borrowings under the Revolving Commitments (other than borrowings to finance payments required by Section 3.5) may be made not more frequently than once per day. Each borrowing of Eurodollar Loans under the Revolving Commitments shall be in an amount equal to $2,500,000 or a whole multiple of $500,000 in excess thereof. Upon receipt of any such notice from ASC, the Administrative Agent shall promptly notify each applicable Revolving Lender thereof. Each applicable Revolving Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the relevant Borrower(s) at the Funding Office prior to 12:00 Noon, New York City time, on the Borrowing Date requested by ASC in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the relevant Borrower(s) the aggregate of the amounts made available to the Administrative Agent by such Revolving Lenders and in like funds as received by the Administrative Agent. 2.6. Commitment Fees, etc. (a) The Borrowers agree to pay to the Administrative Agent for the account of each Revolving Lender a commitment fee for the period from and including the date hereof to the last day of the Revolving Commitment Period, computed at the Commitment Fee Rate on the average daily amount of the Available Revolving Commitment of such Lender during the period for which payment is made, payable quarterly in arrears on each Fee Payment Date, commencing on the first such date to occur after the date hereof. (b) The Borrowers agree to pay to the Agents the fees in the amounts and on the dates as set forth in any fee agreements among the Borrowers and the Agents and to perform any other obligations contained therein. 25 2.7. Termination or Reduction of Revolving Commitments. ASC shall have the right, upon not less than three Business Days' notice to the Administrative Agent, to terminate the Revolving Commitments or, from time to time, to reduce permanently the amount of the Revolving Commitments; provided that no such termination or permanent reduction of Revolving Commitments shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Loans made on the effective date thereof, the Total Revolving A Extensions of Credit would exceed the Total Revolving A Commitments or the Total Revolving B Extensions of Credit would exceed the Total Revolving B Commitments. Any such permanent reduction shall be in an amount equal to $500,000, or a multiple of $100,000 in excess thereof, shall be made pro rata to the Revolving Commitments of all Revolving Lenders (unless the Majority Facility Lenders with respect to the Revolving A Facility or the Revolving B Facility agree, at the request of the Borrower, that such reduction need not be applied to such Revolving Facility, in which case such reduction may be made pro rata to the Revolving Commitments of all Revolving Lenders in the other Revolving Facility) and shall reduce permanently the Revolving Commitments then in effect. 2.8. Optional Prepayments. The Borrowers may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty, upon irrevocable notice delivered by ASC to the Administrative Agent no later than 11:00 A.M., New York City time, three Business Days prior thereto, in the case of Eurodollar Loans, and no later than 11:00 A.M., New York City time, one Business Day prior thereto, in the case of ABR Loans, which notice shall specify the date and amount of prepayment and whether the prepayment is of Eurodollar Loans or ABR Loans; provided, that if a Eurodollar Loan is prepaid on any day other than the last day of the Interest Period applicable thereto, the Borrowers shall also pay any amounts owing pursuant to Section 2.18. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid. Partial prepayments of Term Loans shall be in an aggregate principal amount of $500,000 or a whole multiple of $100,000 in excess thereof. 2.9. Mandatory Prepayments. (a) If any Capital Stock or Indebtedness shall be issued or incurred by any Borrower (excluding any Indebtedness incurred in accordance with Section 7.2), an amount equal to 50% (in the case of Capital Stock) or 100% (in the case of Indebtedness) of the Net Cash Proceeds thereof shall be offered on the date of such issuance or incurrence to the Term Lenders as a prepayment of the Term Loans in accordance with Section 2.9(d) and (e). (b) If on any date ASC or any Restricted Subsidiary shall receive Net Cash Proceeds from any Material Asset Sale or any Recovery Event then, unless a Reinvestment Notice shall be delivered in respect thereof (provided that no Reinvestment Notice may be delivered in respect of the Net Cash Proceeds of a Material Asset Sale described in the proviso to clause (e) of Section 7.5), such Net Cash Proceeds shall be applied as a prepayment of the Term Loans and, if required, a reduction of the Revolving Commitments as set forth in Section 2.9(e); provided, that, notwithstanding the foregoing, on each Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event shall be applied as a prepayment of the Term Loans and, if required, a reduction of the Revolving Commitments in accordance with Section 2.9(e). (c) If, for any fiscal year of ASC, commencing with the fiscal year ending July 31, 2005, there shall be Excess Cash Flow, ASC shall, on the relevant Excess Cash Flow Application Date, offer to the Term Lenders an amount equal to 50% of such Excess Cash Flow as a prepayment of the Term Loans as set forth in Section 2.9(d) and (e). Such prepayment shall be made on a date (an "Excess Cash Flow Application Date") no later than December 31 of the subsequent fiscal year. 26 (d) With respect to the amount of any mandatory prepayment offer required pursuant to paragraph (a) or (c) of this Section 2.9 (such amount, the "Prepayment Amount"), ASC will, on or prior to the date specified in this Section 2.9 for such offer, give the Administrative Agent telephonic notice (promptly confirmed in writing) requesting that the Administrative Agent prepare and provide to each Term Lender a notice (each, a "Prepayment Option Notice") in accordance with the following sentence. As promptly as practicable after receiving such notice from ASC, the Administrative Agent will send to each Term Lender a Prepayment Option Notice, which shall be in the form of Exhibit I and shall include (i) an offer (the "Offer") by ASC to prepay on the date (each, a "Mandatory Prepayment Date") that is 10 Business Days after the date of the Prepayment Option Notice, the Term Loans of such Term Lender by an amount equal to the portion of the Prepayment Amount indicated in such Term Lender's Prepayment Option Notice as being allocable to such Term Lender's Term Loans (with such portion allocable to such Term Lender being equal to its Term Percentage of the Prepayment Amount) and (ii) an additional offer (the "Additional Offer") to prepay on the Mandatory Prepayment Date, from the portion, if any, of the Prepayment Amount allocable to Term Lenders which do not accept the Offer, the Term Loans of such Term Lender by an amount equal to the lesser of (x) such Term Lender's then outstanding Term Loan (after deducting therefrom the amount allocable to the prepayment thereof as a result of such Term Lender's acceptance of the Offer) and (y) a maximum amount specified by such Term Lender in its acceptance of the Additional Offer. Each Term Lender shall accept or reject such Offer and such Additional Offer in accordance with the terms of the Prepayment Option Notice received by it (and a failure to respond to such Prepayment Option Notice within the required timeframe shall be deemed to be a rejection of such Offer and Additional Offer), it being understood that no Term Lender may accept the Additional Offer made to it unless it accepts the Offer made to it. On the Mandatory Prepayment Date, ASC shall pay to the Administrative Agent, for the benefit of each Term Lender which has accepted the Offer, (i) the prepayment amount specified in the Offer made to it and (ii) if such Term Lender has also accepted the Additional Offer, such Term Lender's ratable share (based upon the respective amounts accepted by each Term Lender accepting the Additional Offer made to it) of the amounts specified in the Offers made to Term Lenders, if any which reject the Offers made to them. Any portion of the Prepayment Amount that is not accepted for prepayment as described in clause (ii) of the immediately preceding sentence will be offered to prepay the Second Lien Term Loans to the extent required by, and in accordance with the terms of, the Second Lien Loan Documents. (e) Amounts to be applied in connection with prepayments and Commitment reductions made pursuant to paragraph (b) of this Section 2.9 shall be applied, first, to the prepayment of the Term Loans and, second, to reduce permanently the Revolving Commitments. Amounts to be applied to prepayments pursuant to paragraphs (a) and (c) of this Section 2.9 shall not be applied to reduce the Revolving Commitments; provided that outstanding Revolving Loans shall be repaid without any reduction of the Revolving Commitments to the extent of any portion of any Prepayment Amount which is not used to prepay the Term Loans in accordance with Section 2.9(d) or the Second Lien Term Loans in accordance with the mandatory prepayment provisions of the Second Lien Loan Documents. Any such reduction of the Revolving Commitments as described in the first sentence of this paragraph (e) shall be accompanied by prepayment of the Revolving Loans to the extent, if any, that the Total Revolving Extensions of Credit exceed the amount of the Total Revolving Commitments as so reduced, provided that if the aggregate principal amount of Revolving Loans then outstanding is less than the amount of such excess (because L/C Obligations constitute a portion thereof), the Borrowers shall, to the extent of the balance of such excess, return outstanding Letters of Credit and/or deposit an amount in cash in a cash collateral account established with the Collateral Agent for the benefit of the Administrative Agent and the Lenders on terms and conditions satisfactory to the Collateral Agent. The application of any prepayment pursuant to this Section 2.9 shall be made, first to ABR Loans and, second, to Eurodollar Loans, in each case in accordance with Section 2.15(b). Each prepayment of the Loans under this Section 2.9 shall be accompanied by accrued interest to the date of such prepayment on the principal amount prepaid. 27 (f) In addition, prepayments of Revolving Loans shall be required on April 1 of each year to the extent necessary to comply with the provisions of Section 7.1(c). 2.10. Conversion and Continuation Options. (a) The Borrowers may elect from time to time to convert Eurodollar Loans to ABR Loans by ASC giving the Administrative Agent prior irrevocable notice of such election no later than 11:00 A.M., New York City time, on the Business Day preceding the proposed conversion date. The Borrowers may elect from time to time to convert ABR Loans to Eurodollar Loans by ASC giving the Administrative Agent prior irrevocable notice of such election no later than 11:00 A.M., New York City time, on the third Business Day preceding the proposed conversion date (which notice shall specify the length of the initial Interest Period therefor), provided that no ABR Loan under a particular Facility may be converted into a Eurodollar Loan when any Event of Default has occurred and is continuing and the Administrative Agent or the Majority Facility Lenders in respect of such Facility have determined in its or their sole discretion not to permit such conversion. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. (b) Any Eurodollar Loan may be continued as such upon the expiration of the then current Interest Period with respect thereto by ASC giving irrevocable notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in Section 1.1, of the length of the next Interest Period to be applicable to such Loan, provided that no Eurodollar Loan under a particular Facility may be continued as such when any Event of Default has occurred and is continuing and the Administrative Agent has or the Majority Facility Lenders in respect of such Facility have determined in its or their sole discretion not to permit such continuations, and provided, further, that if ASC shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso such Loans shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. 2.11. Limitations on Eurodollar Tranches. Notwithstanding anything to the contrary in this Agreement, all borrowings, conversions and continuations of Eurodollar Loans and all selections of Interest Periods shall be in such amounts and be made pursuant to such elections so that, (a) after giving effect thereto, the aggregate principal amount of the Eurodollar Loans comprising each Eurodollar Tranche shall be equal to $2,500,000 or a whole multiple of $500,000 in excess thereof and (b) no more than ten Eurodollar Tranches shall be outstanding at any one time. 2.12. Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin. (b) Each ABR Loan shall bear interest at a rate per annum equal to the ABR plus the Applicable Margin. (c) At the option of, with respect to either Revolving Facility, the Majority Facility Lenders with respect to such Revolving Facility or, with respect to the Term Facility, the Majority Facility Lenders with respect to the Term Facility (which option shall be deemed exercised automatically if an Event of Default specified in clause (i) or (ii) of paragraph (f) of Section VIII has occurred with respect to any Borrower), if any Event of Default shall occur and be continuing, all outstanding Loans and Reimbursement Obligations (whether or not overdue) under the relevant Facility or Facilities shall bear interest during such continuance at a rate per annum equal to (x) in the case of the Loans, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section plus 2% or (y) in the case of Reimbursement Obligations, the rate applicable to ABR Loans under the Revolving B Facility plus 2%. 28 (d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable from time to time on demand. 2.13. Computation of Interest and Fees. (a) Interest and fees payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to ABR Loans the rate of interest on which is calculated on the basis of the Prime Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify ASC and the relevant Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the ABR or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify ASC and the relevant Lenders of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on each Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of ASC, deliver to ASC a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.12(a). 2.14. Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (i) the Administrative Agent shall have determined (which determination, in the absence of manifest error, shall be conclusive and binding upon the Borrowers) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (ii) the Administrative Agent shall have received notice from the Majority Facility Lenders in respect of the relevant Facility that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to ASC and the relevant Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans under the relevant Facility requested to be made on the first day of such Interest Period shall be made as ABR Loans, (y) any Loans under the relevant Facility that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans under the relevant Facility shall be converted, on the last day of the then-current Interest Period, to ABR Loans. Until such notice has been withdrawn by the Administrative Agent (and the Administrative Agent hereby agrees that it shall promptly withdraw such notice when the circumstances giving rise to such notice are no longer continuing), no further Eurodollar Loans under the relevant Facility shall be made or continued as such, nor shall any Borrower have the right to convert Loans under the relevant Facility to Eurodollar Loans. 2.15. Pro Rata Treatment and Payments. (a) Each borrowing by any Borrower from the applicable Lenders hereunder, each payment by any Borrower on account of any commitment fee and any reduction of the Commitments of the Lenders shall be made pro rata according to the respective Term Percentages, Revolving A Percentages or Revolving B Percentages, as the case may be, of the relevant Lenders. 29 (b) Each payment (including each prepayment) by any Borrower on account of principal of and interest on the Term Loans shall be made pro rata according to the respective Term Percentages of the Term Lenders (except as otherwise provided in Section 2.9(d)). The amount of each principal prepayment of the Term Loans shall be applied to reduce the then remaining installments of the Term Loans, pro rata based upon the respective then remaining principal amounts thereof. Amounts prepaid on account of the Term Loans may not be reborrowed. (c) Each payment (including each prepayment) by any Borrower on account of principal of and interest on the Revolving Loans shall be made pro rata according to the respective Revolving Percentages of the Revolving Lenders (subject to the parenthetical clause included in the last sentence of Section 2.7). (d) All payments (including prepayments) to be made by any Borrower hereunder, whether on account of principal, interest, fees or otherwise, are absolute and unconditional, shall be made without setoff or counterclaim or rescission or defense for any reason and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders, at the Funding Office, in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the applicable Lenders promptly upon receipt in like funds as received. If any payment hereunder (other than in respect of Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate during such extension. (e) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the applicable Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon, at a rate equal to the Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this paragraph shall be conclusive in the absence of manifest error. If such Lender's share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days after such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to ABR Loans under the relevant Facility, on demand, from the relevant Borrower. If such amounts are received by the Administrative Agent from the Borrower, the applicable Lender shall have no obligations to make payment to the Administrative Agent under this clause (e), provided that this sentence shall not relieve such Lender from any liability of such Lender to the Borrower resulting from any breach by such Lender of its obligations to the Borrower under this Agreement. (f) Unless the Administrative Agent shall have been notified in writing by ASC prior to the date of any payment due to be made by a Borrower hereunder that such Borrower will not make such payment to the Administrative Agent, the Administrative Agent may assume that such Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such assumption, make available to the Lenders their respective pro rata shares of a corresponding amount. If such payment is not made to the Administrative 30 Agent by the relevant Borrower within three Business Days after such due date, the Administrative Agent shall be entitled to recover, on demand, from each Lender to which any amount which was made available pursuant to the preceding sentence, such amount with interest thereon at the rate per annum equal to the daily average Federal Funds Effective Rate. Nothing herein shall be deemed to limit the rights of the Administrative Agent or any Lender against any Borrower. 2.16. Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any Application or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by Section 2.17 and changes in the rate of tax on the overall net income of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender that is not otherwise included in the determination of the Eurodollar Rate; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount that such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrowers shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable as reasonably determined by such Lender. If any Lender becomes entitled to claim any additional amounts pursuant to this paragraph, it shall promptly notify ASC (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount reasonably deemed by such Lender to be material, then from time to time, after submission by such Lender to ASC (with a copy to the Administrative Agent) of a written request therefor, the Borrowers shall pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction. (c) Any such claim made under Section 2.16(a) or (b) shall be accompanied by a certificate setting forth the basis of such claim in reasonable detail. A certificate as to any additional amounts payable pursuant to this Section submitted by any Lender to ASC (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. Notwithstanding anything to the contrary in this Section, the Borrowers shall not be required to compensate a Lender pursuant to this Section for any amounts incurred more than nine months prior to the date that such Lender notifies ASC of such Lender's intention to claim compensation therefor; provided that, if the circumstances giving rise to such claim have a retroactive effect, then such nine-month period shall be extended to include the period of such retroactive effect. The obligations of the Borrowers pursuant to this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 31 2.17. Taxes. (a) All payments made by the Borrowers under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding (i) net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document) and (ii) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (i) above. If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") or Other Taxes are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder, the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that no Borrower shall be required to increase any such amounts payable to any Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Lender's failure to comply with the requirements of paragraph (d) or (e) of this Section or (ii) that are United States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement, except to the extent that such Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrowers with respect to such Non-Excluded Taxes pursuant to this paragraph. (b) In addition, the Borrowers shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Whenever any Non-Excluded Taxes or Other Taxes are payable by any Borrower, as promptly as possible thereafter such Borrower shall send to the Administrative Agent for its own account or for the account of the relevant Lender, as the case may be, a certified copy of an original official receipt received by such Borrower showing payment thereof. If any Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrowers shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. (d) Each Lender (or Transferee) that is not a "U.S. Person" as defined in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to ASC and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under 32 Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a statement substantially in the form of Exhibit F and a Form W-8BEN, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrowers under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify ASC at any time it determines that it is no longer in a position to provide any previously delivered certificate to ASC (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant to this paragraph that such Non-U.S. Lender is not legally able to deliver. (e) A Lender (or Transferee) that is entitled to an exemption from or reduction of non-U.S. withholding tax under the law of the jurisdiction in which any Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to such Borrower (with a copy to the Administrative Agent) (or, in the case of a Participant, to the Lender from which the related participant shall have been purchased), at the time or times prescribed by applicable law or reasonably requested by ASC, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate, provided that such Lender is legally entitled to complete, execute and deliver such documentation and in such Lender's judgment such completion, execution or submission would not materially prejudice the legal position of such Lender. (f) If the Administrative Agent or a Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by any Borrower or with respect to which any Borrower has paid additional amounts pursuant to this Section 2.17, it shall pay over such refund to such Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by such Borrower under this Section 2.17 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that such Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to such Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This Section shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to any Borrower or any other Person. (g) The agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.18. Indemnity. The Borrowers agree to indemnify each Lender for, and to hold each Lender harmless from, any loss or expense that such Lender may sustain or incur as a consequence of (a) default by any Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after ASC has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by any Borrower in making any prepayment of or conversion from Eurodollar Loans after ASC has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurodollar Loans or a conversion of Eurodollar Loans into ABR Loans on a day that is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amount so prepaid or converted, or not so borrowed, converted or continued, for the period from the date of such 33 prepayment or conversion or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. A certificate as to any amounts payable pursuant to this Section submitted to ASC by any Lender shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.19. Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 2.16 or 2.17(a) with respect to such Lender, it will, if requested by ASC, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal or regulatory disadvantage, and provided, further, that nothing in this Section shall affect or postpone any of the obligations of the Borrowers or the rights of any Lender pursuant to Section 2.16 or 2.17(a). 2.20. Replacement of Lenders. ASC shall be permitted to replace any Lender that (a) requests reimbursement for amounts owing pursuant to Section 2.16 or 2.17(a), (b) defaults in its obligation to make Loans hereunder and does not cure such default within five Business Days or (c) that has refused to consent to any waiver or amendment with respect to any Loan Document that has been consented to by the Required Lenders, with a replacement financial institution; provided that (i) such replacement does not conflict with any Requirement of Law, (ii) no Event of Default shall have occurred and be continuing at the time of such replacement, (iii) prior to any such replacement pursuant to clause (a) above, such Lender shall not have used reasonable efforts in accordance with Section 2.19 so as to eliminate the continued need for payment of amounts owing pursuant to Section 2.16 or 2.17(a) and shall not have waived its right to the payment of such amounts, (iv) the replacement financial institution shall purchase, at par, all Loans and other amounts owing to such replaced Lender on or prior to the date of replacement (and, if such replacement is pursuant to clause (c) above, all Second Lien Term Loans and other amounts owing to such Lender on or prior to such date under the Second Lien Loan Documents), (v) the Borrowers shall be liable to such replaced Lender under Section 2.18 if any Eurodollar Loan owing to such replaced Lender shall be purchased other than on the last day of the Interest Period relating thereto, (vi) the replacement financial institution, if not a Lender, an affiliate of a Lender or an Approved Fund, shall be reasonably satisfactory to the Administrative Agent, (vii) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of Section 10.6 (provided that (x) the Borrowers shall be obligated to pay the registration and processing fee referred to therein and (y) the Administrative Agent shall have the right for such purpose to execute and deliver the relevant Assignment and Assumption on behalf of the replaced Lender), (viii) until such time as such replacement shall be consummated, the Borrowers shall pay all additional amounts (if any) required pursuant to Section 2.16 or 2.17(a), as the case may be, and (ix) any such replacement shall not be deemed to be a waiver of any rights that the Borrowers, the Administrative Agent or any other Lender shall have against the replaced Lender. SECTION III. LETTERS OF CREDIT 3.1. L/C Commitment. (a) Prior to the Closing Date, the Existing Issuing Lender has issued the Existing Letters of Credit which, from and after the Closing Date, shall constitute Letters of Credit hereunder. Subject to the terms 34 and conditions hereof, the Issuing Lender, in reliance on the agreements of the other Revolving B Lenders set forth in Section 3.4(a), agrees to issue letters of credit (the letters of credit issued on and after the Closing Date pursuant to this Section III, together with the Existing Letters of Credit, collectively, the "Letters of Credit") for the account of ASC or any Subsidiary Borrower on any Business Day during the Revolving Commitment Period in such form as may be approved from time to time by the Issuing Lender; provided that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the aggregate amount of the Available Revolving Commitments of the Revolving B Lenders (after subtracting therefrom the sum of (i) the amount of the Triple Peaks Reserve then in effect and (ii) the amount of the Senior Subordinated Notes Reserve then in effect) would be less than zero. Each Letter of Credit shall (i) be denominated in Dollars and (ii) expire no later than the earlier of (x) the first anniversary of its date of issuance and (y) the date that is five Business Days prior to the Revolving Termination Date, provided that any Letter of Credit with a one-year term may provide for the renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (y) above). (b) The Issuing Lender shall not at any time be obligated to issue any Letter of Credit if such issuance would conflict with, or cause the Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law. 3.2. Procedure for Issuance of Letter of Credit. Any Borrower may from time to time request that the Issuing Lender issue a Letter of Credit by ASC delivering to the Issuing Lender at its address for notices specified herein an Application therefor, completed to the satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may request. Upon receipt of any Application, the Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by the Issuing Lender and the relevant Borrower. The Issuing Lender shall furnish a copy of such Letter of Credit to such Borrower promptly following the issuance thereof. The Issuing Lender shall promptly furnish to the Administrative Agent, which shall in turn promptly furnish to the Lenders, notice of the issuance of each Letter of Credit (including the amount thereof). 3.3. Fees and Other Charges. (a) The Borrowers shall pay a fee on all outstanding Letters of Credit at a per annum rate equal to the Applicable Margin then in effect with respect to Eurodollar Loans under the Revolving B Facility, shared ratably among the Revolving B Lenders and payable quarterly in arrears on each Fee Payment Date after the issuance date. In addition, the Borrowers shall pay to the Issuing Lender for its own account a fronting fee of 0.25% per annum on the undrawn and unexpired amount of each Letter of Credit, payable monthly in arrears on each Fee Payment Date after the issuance date. (b) In addition to the foregoing fees, the Borrowers shall pay or reimburse the Issuing Lender for such normal and customary costs and expenses as are incurred or charged by the Issuing Lender in issuing, negotiating, effecting payment under, amending or otherwise administering any Letter of Credit. 3.4. L/C Participations. (a) The Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions set forth below, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Revolving B Percentage in the Issuing Lender's obligations and rights under and in respect of each Letter 35 of Credit and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the Borrowers in accordance with the terms of this Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at the Issuing Lender's address for notices specified herein an amount equal to such L/C Participant's Revolving B Percentage of the amount of such draft, or any part thereof, that is not so reimbursed. Each L/C Participant's obligation to pay such amount shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any setoff, counterclaim, recoupment, defense or other right that such L/C Participant may have against the Issuing Lender, any Borrower or any other Person for any reason whatsoever, (ii) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 5, (iii) any adverse change in the condition (financial or otherwise) of any Borrower, (iv) any breach of this Agreement or any other Loan Document by any Borrower or any other L/C Participant or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. (b) If any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion of any payment made by the Issuing Lender under any Letter of Credit is paid to the Issuing Lender within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Effective Rate during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to Section 3.4(a) is not made available to the Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, the Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to the Loans under the Revolving B Facility. A certificate of the Issuing Lender submitted to any L/C Participant with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with Section 3.4(a), the Issuing Lender receives any payment related to such Letter of Credit (whether directly from any Borrower or otherwise, including proceeds of collateral applied thereto by the Issuing Lender), or any payment of interest on account thereof, the Issuing Lender will distribute to such L/C Participant its pro rata share thereof; provided, however, that in the event that any such payment received by the Issuing Lender shall be required to be returned by the Issuing Lender, such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it. 3.5. Reimbursement Obligation of the Borrowers. If any draft is paid under any Letter of Credit, the relevant Borrower shall reimburse the Issuing Lender for the amount of (a) the draft so paid and (b) any taxes, fees, charges or other costs or expenses incurred by the Issuing Lender in connection with such payment, not later than 12:00 Noon, New York City time, on (i) the Business Day that such Borrower receives notice of such draft, if such notice is received on such day prior to 10:00 A.M., New York City time, or (ii) if clause (i) above does not apply, the Business Day immediately following the day that such Borrower receives such notice. Each such payment shall be made to the Issuing Lender at its address for notices referred to herein in Dollars and in immediately available funds. Interest shall be payable on any such amounts from the date on which the relevant draft is paid until payment in full at the rate set forth in (x) Section 2.12(b) until the Business Day next succeeding the date of the relevant notice and (y) Section 2.12(c) thereafter. 36 3.6. Obligations Absolute. Each Borrower's obligations under this Section 3 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment that any Borrower may have or have had against the Issuing Lender, any beneficiary of a Letter of Credit or any other Person. Each Borrower also agrees with the Issuing Lender that the Issuing Lender shall not be responsible for, and such Borrower's Reimbursement Obligations under Section 3.5 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among any Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of any Borrower against any beneficiary of such Letter of Credit or any such transferee. The Issuing Lender shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Issuing Lender. Each Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on such Borrower and shall not result in any liability of the Issuing Lender to such Borrower. 3.7. Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the Issuing Lender shall promptly notify the relevant Borrower of the date and amount thereof. The responsibility of the Issuing Lender to the relevant Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are substantially in conformity with such Letter of Credit. 3.8. Applications. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall apply. SECTION IV. REPRESENTATIONS AND WARRANTIES To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, ASC and each Subsidiary Borrower hereby jointly and severally represent and warrant to the Administrative Agent and each Lender that: 4.1. Financial Condition. The audited consolidated balance sheets of ASC as at July 27, 2003 and July 25, 2004, and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from KPMG LLP, present fairly the consolidated financial condition of ASC as at such dates, and the consolidated results of its operations and its consolidated and consolidating cash flows for the respective fiscal years then ended. All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein). No Borrower has any material Guarantee Obligations, contingent liabilities and liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in this paragraph. Except as set forth on Schedule 4.1, during the period from July 26, 2004 to and including the date hereof there has been no Disposition by ASC or any Restricted Subsidiary of any material part of its business or property. 37 4.2. No Change. Since July 25, 2004, there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect. 4.3. Existence; Compliance with Law. Each Borrower (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except for any failure to be so qualified that could not reasonably be expected to have a Material Adverse Effect, and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 4.4. Power; Authorization; Enforceable Obligations. Each Borrower has the power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party, to obtain extensions of credit hereunder and grant the Liens under the Security Documents. Each Borrower has taken all necessary organizational action to authorize the execution, delivery and performance of the Loan Documents to which it is a party, to authorize the extensions of credit on the terms and conditions of this Agreement and to grant the Liens under the Security Documents. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the extensions of credit hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Loan Documents, except (i) consents, authorizations, filings and notices described in Schedule 4.4, which consents, authorizations, filings and notices have been obtained or made and are in full force and effect and (ii) the filings and acts referred to in Section 4.19. Each Loan Document has been duly executed and delivered on behalf of each Borrower party thereto. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of each Borrower party thereto, enforceable against each such Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 4.5. No Legal Bar. The execution, delivery and performance of this Agreement and the other Loan Documents, the issuance of Letters of Credit, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of any Borrower and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security Documents). Except as described on Schedule 4.5, no Requirement of Law or Contractual Obligation applicable to any Borrower could reasonably be expected to have a Material Adverse Effect. 4.6. Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of any Borrower, threatened by or against any Borrower or against any of their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) except as described on Schedule 4.6, that could reasonably be expected to have a Material Adverse Effect. 4.7. No Default. Except as described on Schedule 4.7, no Borrower is in default under or with respect to (a) the Junior Subordinated Notes or the Senior Subordinated Notes or (b) any of its other Contractual Obligations in any respect that, in the case of this clause (b), could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 38 4.8. Ownership of Property; Liens. Each Borrower has title in fee simple to, or a valid leasehold interest in, all its real property, other than real property with respect to which a valid Forest Service Permit is in effect, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by Section 7.3. 4.9. Intellectual Property. Each Borrower owns, or is licensed to use, all Intellectual Property necessary for the conduct of its business as currently conducted. No material claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property, nor does any Borrower know of any valid basis for any such claim, except, in either case, to the extent that such claim could not reasonably be expected to have a Material Adverse Effect. The use of Intellectual Property by each Borrower does not infringe on the rights of any Person in any material respect. 4.10. Taxes. Each Borrower has filed or caused to be filed all Federal, state and other material tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the relevant Borrower); no tax Lien has been filed that is not permitted by Section 7.3(a), and, to the knowledge of any Borrower, as of the Closing Date, no claim is being asserted, with respect to any such tax, fee or other charge. 4.11. Federal Regulations. No part of the proceeds of any Loans, and no other extensions of credit hereunder, will be used for "buying" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of the Regulations of the Board. If requested by any Lender or the Administrative Agent, each Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable, referred to in Regulation U. 4.12. Labor Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against any Borrower pending or, to the knowledge of any Borrower, threatened; (b) hours worked by and payment made to employees of any Borrower have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters; and (c) all payments due from any Borrower on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant Borrower. 4.13. ERISA. Neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by a material amount. Neither any Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan that has resulted or could reasonably be expected to result in a material liability under ERISA, and neither any Borrower nor any Commonly Controlled Entity would become subject to any material liability under ERISA if any Borrower or any Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. To the Borrowers' knowledge, no Multiemployer Plan is in Reorganization or Insolvent. 39 4.14. Investment Company Act; Other Regulations. No Borrower is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. No Borrower is subject to regulation under any Requirement of Law (other than Regulation X of the Board) that limits its ability to incur Indebtedness. 4.15. Subsidiaries. Except as disclosed to the Administrative Agent by ASC in writing from time to time after the Closing Date, (a) Schedule 4.15 sets forth the name and jurisdiction of incorporation of each Subsidiary and, as to each such Subsidiary, the percentage of each class of Capital Stock owned by any Borrower and (b) there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to employees or directors and directors' qualifying shares) of any nature relating to any Capital Stock of any Borrower, except as created by the Loan Documents or as described on Schedule 4.15. 4.16. Use of Proceeds. The proceeds of the Term Loans shall be used to repay amounts outstanding under the Existing Credit Agreement and to purchase or redeem all of the Senior Subordinated Notes and to pay related fees and expenses. The proceeds of the Revolving Loans shall be used to repay amounts outstanding under the Existing Credit Agreement and for general corporate purposes. 4.17. Environmental Matters. Except as set forth on Schedule 4.17 or as, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) each Borrower: (i) is in compliance with all, and has not violated any, applicable Environmental Laws; (ii) holds all Environmental Permits (each of which is in full force and effect) and possesses all Water Rights required for any of its current or intended operations or for any property owned, leased, or otherwise operated by it; (iii) is in compliance with all, and has not violated any, of its Environmental Permits, and has not acted or failed to act in any way that could reasonably be expected to result in a diminution of its Water Rights; and (iv) reasonably believes that: each of its Environmental Permits will be timely renewed and complied with, and that its Water Rights and its ability to use its Water Rights as needed will be maintained, without its annual aggregate expenses for same exceeding its expenses for such renewal, compliance and maintenance during the fiscal year ended immediately prior to entering into this Agreement; any additional Environmental Permits that may be required of it will be timely obtained and complied with, without its annual aggregate expenses for same exceeding its expenses for such obtaining and complying during the fiscal year ended immediately prior to entering into this Agreement; and compliance with any Environmental Law that is or is expected to become applicable to it will be timely attained and maintained, without its annual aggregate expenses for same exceeding its expenses for such compliance during the fiscal year ended immediately prior to entering into this Agreement; (b) Materials of Environmental Concern are not present at, on, under, in, or about any real property now or formerly owned, leased or operated by any Borrower or at any other location (including any location to which Materials of Environmental Concern have been sent for re-use or recycling or for treatment, storage, or disposal) which could reasonably be expected to (i) give rise to liability of any Borrower under any applicable Environmental Law or otherwise result in costs to any Borrower, or (ii) interfere with any Borrower's continued operations, or (iii) impair the fair saleable value of any of the Mortgaged Properties for continued use as it has been used during the fiscal year ended immediately prior to entering into this Agreement, and as planned; 40 (c) there is no judicial, administrative, or arbitral proceeding (including any notice of violation or alleged violation) under or relating to any Environmental Law, Environmental Permits, or Water Rights: (i) to which any Borrower is, or to the knowledge of any Borrower will become, a party that is pending or, to the knowledge of the Borrower, threatened, or (ii) to the knowledge of any Borrower, affecting or that could reasonably be expected to affect any Borrower; (d) no Borrower has received any written request for information, or been notified that it is a potentially responsible party under or relating to the federal Comprehensive Environmental Response, Compensation, and Liability Act or any similar Environmental Law, or with respect to any Materials of Environmental Concern; (e) no Borrower has entered into or agreed to any consent decree, order, or settlement or other agreement, nor is subject to any judgment, decree, or order or other agreement, in any judicial, administrative, arbitral, or other forum, relating to compliance with or liability under any Environmental Law or Environmental Permits, or with respect to any Water Rights; and (f) no Borrower has assumed or retained, by contract or operation of law, any liabilities of any kind, fixed or contingent, known or unknown, under any Environmental Law or with respect to any Materials of Environmental Concern. 4.18. Accuracy of Information, etc. No statement or information contained in this Agreement, any other Loan Document, the Confidential Information Memorandum or any other document, certificate or statement furnished by or on behalf of any Borrower to the Administrative Agent or the Lenders, or any of them, for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contained as of the date such statement, information, document or certificate was so furnished (or, in the case of the Confidential Information Memorandum, as of the date of this Agreement), any untrue statement of a material fact or omitted to state a material fact necessary to make the statements contained herein or therein not misleading, in either case which has not been in the case of such statement, information, document or certificate delivered or made prior to the Closing Date corrected, supplemented or remedied by any subsequent statement, information, document or certificate made or delivered prior to the Closing Date to the same parties receiving such statement, information, document or certificate. The projections and pro forma financial information contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Borrowers to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount. As of the Closing Date, there is no fact known to any Borrower that could reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents, in the Confidential Information Memorandum or in any other documents, certificates and statements furnished to the Administrative Agent and the Lenders for use in connection with the transactions contemplated hereby and by the other Loan Documents. 4.19. Security Documents. (a) The Guarantee and Collateral Agreement is effective to create in favor of the Collateral Agent, for the benefit of the Administrative Agent and the Lenders, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Stock described in the Guarantee and Collateral Agreement, when stock certificates representing such Pledged Stock are delivered to the Collateral Agent, together with related stock powers executed in blank, and in the case of the other Collateral described in the Guarantee and Collateral Agreement, when financing statements and other filings specified on Schedule 4.19(a) in appropriate form are filed in the offices specified on Schedule 4.19(a) (and, after the Closing Date, any additional filings required to be made by the Loan Documents are made and the other actions specified on Schedule 4.19(a) are taken), the Lien created by the Guarantee and Collateral Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Borrowers in such Collateral and the proceeds thereof, as security for the Obligations (as defined in the Guarantee and Collateral Agreement), in each case prior and superior in right to any other Person (except, in the case of Collateral other than Pledged Stock, Liens permitted by Section 7.3). 41 (b) Each of the Mortgages is effective to create in favor of the Collateral Agent, for the benefit of the Administrative Agent and the Lenders, a legal, valid and enforceable Lien on the Mortgaged Properties described therein and proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 4.19(b) (and, after the Closing Date, any additional filings required to be made by the Loan Documents are made), each such Mortgage shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Borrowers in the Mortgaged Properties and the proceeds thereof, as security for the Obligations (as defined in the relevant Mortgage), in each case prior and superior in right to any other Person (except Liens permitted by Section 7.3). Parts A and B of Schedule 1.1B list, as of the Closing Date, each parcel of owned real property and each leasehold interest in real property located in the United States and held by any Borrower. 4.20. Solvency. Each Borrower, both before and after giving effect to the incurrence of all Indebtedness and obligations being incurred under this Agreement, is Solvent. 4.21. Senior Indebtedness. The Obligations of each Borrower constitute "Designated Senior Debt" of such Borrower under and as defined in each Junior Subordinated Note Indenture and the Senior Subordinated Note Indenture, except to the extent such Obligations are held by an "Affiliate" (as defined in the applicable indenture) of ASC. The obligations of each Borrower under the Guarantee and Collateral Agreement constitute "Senior Debt" of such Borrower under and as defined in each Junior Subordinated Note Indenture and the Senior Subordinated Note Indenture, except to the extent such Obligations are held by an "Affiliate" (as defined in the applicable indenture) of ASC. 4.22. Regulation H. Except as set forth on Schedule 4.22, no Mortgage encumbers improved real property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968. 4.23. Certain Documents. The Borrowers have delivered to the Administrative Agent a complete and correct copy of the Senior Subordinated Note Indenture, each Junior Subordinated Note Indenture and the Existing Credit Agreement, including any amendments, supplements or modifications with respect to any of the foregoing. 4.24. Forest Service Term Special Use Permits. The Forest Service Term Special Use Permits are listed on Schedule 4.24 are each held by at least one of the Borrowers and constitute all the term special use permits issued by the Forest Service of the United States Department of Agriculture that are necessary or useful for the operations of any Borrower as conducted during the fiscal year ended immediately prior to entering into this Agreement and as planned to be operated. 4.25. Location. All material buildings, structures, fixtures, improvements, and other assets that constitute each of the respective Ski Resort Properties (including the lodge buildings, ski shelters, ski lifts, ski trails, snow making equipment, golf courses, parking lots, and maintenance buildings) are located entirely on land either (i) that is owned in fee simple by the applicable Borrower, (ii) leased by the applicable Borrower pursuant to a lease listed on Part B of Schedule 1.1B, (iii) subject to a recorded easement in favor of the applicable Borrower, or (iv) with respect to which a Forest Service Term Special Use Permit is in effect. 42 4.26. Water Rights. The Water Rights of the Borrowers are sufficient for the ongoing ski operations of the Borrowers. 4.27. Grand Summit Resort Properties, Inc. No Borrower is liable for any Indebtedness or other obligations of GSRP, nor has any Borrower provided any material support for any Indebtedness or other obligation of GSRP during the past four years other than indirectly through the making of lease payments with respect to commercial units of GSRP leased to such Borrower. SECTION V. CONDITIONS PRECEDENT 5.1. Conditions to Initial Extensions of Credit. The agreement of each Lender to make the initial extension of credit requested to be made by it is subject to the satisfaction, prior to or concurrently with the making of such extension of credit on the Closing Date, of the following conditions precedent: (a) Credit Agreement; Guarantee and Collateral Agreement. The Administrative Agent shall have received (i) this Agreement, executed and delivered by the Administrative Agent, ASC, each Subsidiary Borrower listed on Schedule 1.1D and each initial Lender, (ii) the Guarantee and Collateral Agreement, executed and delivered by ASC and each Subsidiary Borrower and (iii) an Acknowledgement and Consent in the form attached to the Guarantee and Collateral Agreement, executed and delivered by each Issuer (as defined therein), if any, that is an Excluded Subsidiary. (b) Intercreditor Agreement. The Administrative Agent shall have received the Intercreditor Agreement, executed and delivered by each Borrower and the Second Lien Collateral Agent. (c) Financial Statements. The Lenders shall have received the financial statements and audit report described in the first sentence of Section 4.1, and such financial statements shall not, in the reasonable judgment of the Lenders, reflect any material adverse change in the consolidated financial condition of ASC, as reflected in the financial statements or projections contained in the Confidential Information Memorandum. (d) Approvals. All governmental and third party approvals (other than those covered by Section 5.1(k)(vi)) necessary in connection with the transactions contemplated hereby shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent or otherwise impose adverse conditions on the financing contemplated hereby. (e) Lien Searches. The Administrative Agent shall have received the results of a recent lien search in each of the jurisdictions where assets of the Borrowers are located, and such search shall reveal no liens on any of the assets of the Borrowers except for Liens permitted by Section 7.3 or discharged on or prior to the Closing Date pursuant to documentation satisfactory to the Administrative Agent. (f) Environmental and Health and Safety Assessments. The Administrative Agent shall have received an environmental assessment and a health and safety assessment by Environ with respect to ASC and its Subsidiaries, and a memorandum from Vermont counsel with respect to water supply issues at Mount Snow, in each case in scope, form and substance reasonably satisfactory to the Administrative Agent. 43 (g) Closing Certificate; Certified Certificate of Incorporation; Good Standing Certificates. The Administrative Agent shall have received (i) a certificate of each Borrower, dated the Closing Date, substantially in the form of Exhibit C, with appropriate insertions and attachments, including the certificate of incorporation of each Borrower that is a corporation certified by the relevant authority of the jurisdiction of organization of such Borrower, and (ii) a long form (or short form, if such jurisdiction does not issue long form) good standing certificate for each Borrower from its jurisdiction of organization. (h) Legal Opinions. The Administrative Agent shall have received the following executed legal opinions addressed to the Administrative Agent and the Lenders, in form and substance satisfactory to the Administrative Agent: (i) the legal opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP, special counsel to the Borrowers; and (ii) the legal opinion of local counsel to the Borrowers in each of Colorado, Utah, Vermont, New Hampshire and Maine, and each other special and local counsel as may be required by the Administrative Agent. Each such legal opinion shall cover such matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require. (i) Pledged Stock; Stock Powers; Pledged Notes. The Collateral Agent shall have received (i) the certificates representing the shares of Capital Stock pledged pursuant to the Guarantee and Collateral Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and (ii) each promissory note (if any) pledged to the Collateral Agent pursuant to the Guarantee and Collateral Agreement endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank) by the pledgor thereof. (j) Filings, Registrations and Recordings. Each document (including any Uniform Commercial Code financing statement) required by the Security Documents or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Lenders, a perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than with respect to Liens expressly permitted by Section 7.3), shall be in proper form for filing, registration or recordation and shall have been delivered to the Administrative Agent. (k) Mortgages, etc. (i) The Administrative Agent shall have received a Mortgage with respect to each Mortgaged Property, executed and delivered by a duly authorized officer of each party thereto. (ii) The Administrative Agent shall have received, for each Mortgaged Property, (a) a surveyor's report and statement which certifies that the buildings, improvements and other assets of the respective Ski Resort Properties, in each case which are referred to in Section 4.25, are located entirely on land that constitutes the Mortgaged Property or land with respect to which a Forest Service Term Special Use Permit is in effect (including land subject to an easement in favor of a Borrower Subsidiary), and (b) all compilation plans on which the foregoing surveyors reports and statements are based. 44 (iii) The Administrative Agent shall have received in respect of each Mortgaged Property a mortgagee's title insurance policy (or policies) or marked up unconditional binder for such insurance. Each such policy shall (A) be in an amount satisfactory to the Administrative Agent; (B) be issued at ordinary rates; (C) insure that the Mortgage insured thereby creates a valid first Lien on such Mortgaged Property free and clear of all defects and encumbrances, except as disclosed therein; (D) name the Administrative Agent for the benefit of the Lenders as the insured thereunder; (E) be in the form of ALTA Loan Policy - 1970 (Amended 10/17/70 and 10/17/84) (or equivalent policies); (F) contain such endorsements and affirmative coverage as the Administrative Agent may reasonably request and (G) be issued by title companies satisfactory to the Administrative Agent (including any such title companies acting as co-insurers or reinsurers, at the option of the Administrative Agent). The Administrative Agent shall have received evidence satisfactory to it that all premiums in respect of each such policy, all charges for mortgage recording tax, and all related expenses, if any, have been paid. (iv) If requested by the Administrative Agent, the Administrative Agent shall have received (A) a policy of flood insurance that (1) covers any parcel of improved real property that is encumbered by any Mortgage (2) is written in an amount not less than the outstanding principal amount of the indebtedness secured by such Mortgage that is reasonably allocable to such real property or the maximum limit of coverage made available with respect to the particular type of property under the National Flood Insurance Act of 1968, whichever is less, and (3) has a term ending not later than the maturity of the Indebtedness secured by such Mortgage and (B) confirmation that ASC has received the notice required pursuant to Section 208(e)(3) of Regulation H of the Board. (v) The Administrative Agent shall have received a copy of all recorded documents referred to, or listed as exceptions to title in, the title policy or policies referred to in clause (iii) above and a copy of all other material documents affecting the Mortgaged Properties. (vi) The Administrative Agent shall have received, with respect to each material leasehold for which a Borrower is the lessee other than the leaseholds listed on Schedule 5.1(k)(vi), a certificate executed by the landlord of such leasehold that includes leasehold mortgagee protection and estoppel provisions reasonably satisfactory to the Administrative Agent (a "Landlord Certificate"). (l) Material Agreements; Permits and Water Rights. The Administrative Agent shall have received, and be satisfied with its review of, copies of (a) each agreement, instrument or other undertaking, including all leases, to which each Borrower is a party and the failure to comply therewith could reasonably be expected to have a Material Adverse Effect, (b) each governmental permit to which any Borrower is a party, and (c) evidence of all Water Rights required for any Borrower's current or intended operations or for any property owned, leased, or otherwise operated by any Borrower. (m) Forest Service Permits. The Administrative Agent shall have received tripartite agreements from the United States Forest Service with respect to the Forest Service Term Special Use Permits, in accordance with the United States Forest Service's standard form for such documents. (n) Second Lien Term Loans. ASC shall have received $105,000,000 in gross proceeds from the borrowing of Second Lien Term Loans. 45 (o) Termination of Existing Credit Agreement. The Administrative Agent shall have received evidence satisfactory to the Administrative Agent that the Existing Credit Agreement shall be simultaneously terminated, all amounts thereunder shall be simultaneously paid in full and arrangements satisfactory to the Administrative Agent shall have been made for the termination of Liens and security interests granted in connection therewith. (p) Tender of Senior Subordinated Notes. The Administrative Agent shall have received evidence reasonably satisfactory to it that (i) at least $118,500,000 aggregate principal amount of outstanding Senior Subordinated Notes shall have been repurchased, repaid or redeemed in full pursuant to a tender offer therefor made by ASC prior to the Closing Date and (ii) if any of the Senior Subordinated Notes shall not have been so repurchased, repaid or redeemed pursuant to such tender offer, ASC shall have initiated the procedures specified in the Senior Subordinated Note Indenture for the mandatory redemption of such remaining Senior Subordinated Notes. (q) Appraisals. The Administrative Agent shall have received Appraisals of Ski Resort Properties, satisfactory in form and substance to the Administrative Agent, demonstrating an aggregate Appraised Value of such properties of at least the Required Value. (r) Fees. The Lenders and the Administrative Agent shall have received all fees required to be paid, and all expenses required to be paid for which invoices have been presented (including the reasonable fees and expenses of legal counsel), on or before the Closing Date, including pursuant to any fee letter. All such amounts will be paid with proceeds of Loans made on the Closing Date and will be reflected in the funding instructions given by ASC to the Administrative Agent on or before the Closing Date. (s) Solvency Analysis. The Lenders shall have received a reasonably satisfactory solvency analysis certified by the chief financial officer of ASC which shall document the solvency of the Borrowers considered as a whole after giving effect to the transactions contemplated hereby but disregarding any assets or liabilities of any Excluded Subsidiary. (t) Extension of Existing Junior Subordinated Notes. The maturity of the Existing Junior Subordinated Notes shall have been extended to a date at least six months after the final maturity of the Second Lien Term Loans, and the Administrative Agent shall have received reasonably satisfactory evidence thereof. (u) Exchange of Series A Preferred Stock. The holder(s) of the Series A Preferred Stock of ASC shall have exchanged such Capital Stock on a dollar-for-dollar basis for New Junior Subordinated Notes. (v) PATRIOT Act. The Lenders shall have received, at least five Business Days prior to the Closing Date, all documentation and other information required by bank regulatory authorities under applicable "know your customer" and anti-money laundering rules and regulations, including the United States PATRIOT Act. 5.2. Conditions to Each Extension of Credit. The agreement of each Lender to make any extension of credit requested to be made by it on any date (including its initial extension of credit) is subject to the satisfaction of the following conditions precedent: 46 (a) Representations and Warranties. Each of the representations and warranties made by any Borrower in or pursuant to the Loan Documents shall be true and correct on and as of such date as if made on and as of such date. (b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date. Each borrowing by and issuance of a Letter of Credit on behalf of any Borrower hereunder shall constitute a representation and warranty by the relevant Borrower as of the date of such extension of credit that the conditions contained in this Section 5.2 have been satisfied. SECTION VI. AFFIRMATIVE COVENANTS The Borrowers hereby jointly and severally agree that, until the Obligations have been Fully Satisfied, each Borrower shall: 6.1. Financial Statements. Furnish to the Administrative Agent for distribution to each Lender: (a) as soon as available, but in any event within 90 days after the end of each fiscal year of ASC (i) a copy of the audited consolidated balance sheets of ASC and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, with an unqualified opinion thereon, by KPMG LLP or other independent certified public accountants of nationally recognized standing and (ii) the unaudited consolidated and consolidating balance sheets of ASC and its consolidated Subsidiaries as at the end of such year and the related unaudited consolidated and consolidating statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects; (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of ASC, the unaudited consolidated balance sheets of ASC and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); and (c) as soon as available, but in any event not later than 45 days after the end of each fiscal month occurring during each fiscal year of the Borrower (or 90 days thereafter in the case of July and 60 days thereafter in the case of August of each such fiscal year), copies of the unaudited consolidated balance sheets of the Subsidiary Borrowers as at the end of such fiscal month and the related unaudited consolidated statements of income and of cash flows for such Persons for such fiscal month and the portion of the fiscal year through the end of such fiscal month, in each case as ASC prepares internally with respect to the Subsidiary Borrowers and setting forth in comparative form the figures for the previous year. All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied (except as approved by such accountants or officer, as the case may be, and disclosed in reasonable detail therein) consistently throughout the periods reflected therein and with prior periods. 47 6.2. Certificates; Other Information. Furnish to the Administrative Agent for distribution to each Lender (or, in the case of clause (g), to the relevant Lender): (a) concurrently with the delivery of any financial statements pursuant to Section 6.1(a) or (b), (i) a certificate of a Responsible Officer of ASC stating that, to the best of such Responsible Officer's knowledge, each Borrower during such period has observed or performed all of its covenants and other agreements, and satisfied every required condition contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate, (ii) a Compliance Certificate containing all information and calculations necessary for determining compliance by each Borrower with the provisions of this Agreement referred to therein as of the last day of the fiscal quarter or fiscal year of ASC, as the case may be, (iii) a certificate of a Responsible Officer of ASC certifying Consolidated EBITDA for the four fiscal quarter period ended as of the last day of the fiscal quarter or fiscal year of ASC, as the case may be, and (iv) to the extent not previously disclosed to the Administrative Agent, a description of any change in the jurisdiction of organization or legal name of any Borrower and a list of any Intellectual Property acquired by any Borrower since the date of the most recent report delivered pursuant to this clause (iv) (or, in the case of the first such report so delivered, since the Closing Date); (b) as soon as available, and in any event no later than 45 days after the end of each fiscal year of ASC, a detailed consolidated budget for the following fiscal year (including a projected consolidated balance sheet of the Borrowers as of the end of the following fiscal year, the related consolidated statements of projected cash flow, projected changes in financial position and projected income and a description of the underlying assumptions applicable thereto), and, as soon as available, significant revisions, if any, of such budget and projections with respect to such fiscal year (collectively, the "Projections"), which Projections shall in each case be accompanied by a certificate of a Responsible Officer of ASC stating that such Projections are based on reasonable estimates, information and assumptions and that such Responsible Officer has no reason to believe that such Projections are incorrect or misleading in any material respect; (c) within 45 days after the end of each fiscal quarter of ASC, a narrative discussion and analysis of the financial condition and results of operations of the Borrowers for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, as compared to the portion of the Projections covering such periods and to the comparable periods of the previous year; (d) no later than three Business Days prior to the effectiveness thereof, copies of substantially final drafts of any proposed amendment, supplement, waiver or other modification with respect to either Junior Subordinated Note Indenture; (e) within five days after the same are sent, copies of all financial statements and reports that ASC sends to all the holders of any class of its debt securities or public equity securities in their capacity as such, or to any trustee for such holders, and, within five days after the same are filed, copies of all financial statements and reports that ASC may make to, or file with, the SEC; 48 (f) promptly, copies of any agreements of the kind described in clause (a) of Section 5.1(l) not previously delivered hereunder; and (g) promptly, such additional financial and other information as any Lender may from time to time reasonably request. 6.3. Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material payment obligations of whatever nature (other than obligations in respect of the principal of and interest on Indebtedness, which are covered by Section 8(e)), except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the relevant Borrower. 6.4. Maintenance of Existence; Compliance. (a) (i) Preserve, renew and keep in full force and effect its organizational existence and (ii) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business (including all applicable Forest Service Permits), except, in each case, as otherwise permitted by Section 7.4 and except, in the case of clause (ii) above, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (b) comply with all Contractual Obligations (other than obligations in respect of Indebtedness, which are covered by Section VIII(e)) and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 6.5. Maintenance of Property Insurance. (a) Keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted (it being understood that such property may be temporarily out of good working order and condition in connection with the repair or maintenance thereof or improvements thereto provided that that such property is restored to such condition as soon as commercially practicable subject to negative weather conditions and ski season requirements), and (b) comply with the provisions of Schedule 6.5(b). 6.6. Inspection of Property; Books and Records; Discussions; Surveys. (a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities, (b) permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Borrowers with officers and employees of the Borrowers and with their independent certified public accountants and (c) permit the Administrative Agent to cause to be conducted surveys of the Mortgaged Properties as the Administrative Agent may reasonably request, at the Lender's expense. 6.7. Notices. Promptly after obtaining knowledge of the same, give notice to the Administrative Agent for distribution to each Lender of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of any Borrower or (ii) litigation, investigation or proceeding that may exist at any time between any Borrower and any Governmental Authority, that in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect; 49 (c) any litigation or proceeding affecting any Borrower (i) in which the amount involved is $500,000 or more and not covered by insurance, (ii) in which injunctive or similar relief is sought or (iii) which relates to any Loan Document; (d) the following events, as soon as possible and in any event within 30 days after any Borrower knows or has reason to know thereof: (i) the occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or ASC or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan; and (e) any development or event that has had or, in the reasonable opinion of ASC's management, could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this Section 6.7 shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the relevant Borrower proposes to take with respect thereto. 6.8. Environmental Matters. (a) Comply in all material respects with, and ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws; obtain and comply in all material respects with and maintain, and ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all Environmental Permits; and obtain and maintain all Water Rights necessary for it in any material respect; (b) Conduct and complete in all material respects all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all orders and directives of all Governmental Authorities regarding Environmental Laws other than such orders or directives that have been timely and properly challenged in good faith and diligently pursued, provided that the pendency of any and all such challenges could not reasonably be expected to give rise to a Material Adverse Effect and does not materially and adversely affect the value or marketability of any Mortgaged Properties; (c) Generate, use, treat, store, release, dispose of, and otherwise manage Materials of Environmental Concern in a manner that would not reasonably be expected to result in a material liability to any Borrower or any of its Subsidiaries or to affect materially and adversely the value or marketability of any Mortgaged Properties; and take reasonable efforts to prevent any other person from generating, using, treating, storing, releasing, disposing of, or otherwise managing Hazardous Materials in a manner that could reasonably be expected to result in a material liability to any Borrower or any of its Subsidiaries or to affect materially and adversely the value or marketability of any Mortgaged Properties; and (d) Maintain a program to facilitate that its and its Subsidiaries' properties and operations comply with, and are prudently operated to minimize liabilities under, all applicable Environmental Laws and Environmental Permits (other than Forest Service Term Special Use Permits), and are prudently operated to manage impacts on natural resources and the environment ("EH&S Program"). The 50 EH&S Program shall include maintenance of a system to share information with respect to best management practices at each Ski Resort Property with respect to attaining the compliance of its properties and operations with, and minimizing the potential liability of its properties and operations under, applicable Environmental Laws and Environmental Permits (other than Forest Service Term Special Use Permits), and managing the impacts of its properties and operations on natural resources and the environment (including a meeting at least once each calendar quarter, either in person or by telephone, of at least the person at each Ski Resort Property with overall operational responsibility for such matters). (e) At the request of the Administrative Agent (not more frequently than once in any 12-month period, unless a Default shall have occurred and be continuing), provide the Administrative Agent with a briefing regarding the EH&S Program; and, within thirty days of the end of each fiscal year, deliver a report certified by an officer of ASC with responsibility therefor and ASC's chief financial officer summarizing material developments involving matters concerning the EH&S Program (the "Annual EH&S Report") together with, where appropriate, a copy of the relevant documents. At a minimum, the Annual EH&S Report shall include: (1) a summary of any material investigation or remediation undertaken during the prior year to address environmental contamination (including a description of the contamination, the proposed action, the expected time line for completion, and a cost estimate); (2) a summary of any material inspections by Governmental Authorities regulating matters concerning the EH&S Program during the fiscal year just ended and any notices of violation issued to Borrower or any of its Subsidiaries by such Governmental Authorities during such fiscal year (including the authority issuing the notice, the subject matter thereof, the relief sought, and whether the Borrower believes that such notice could reasonably result in a fine or penalty in excess of $50,000); (3) a summary of any administrative and judicial proceedings brought against the Borrower or any of its Subsidiaries regarding matters concerning the EH&S Program pending at any time during the fiscal year ended (including the entity bringing the proceeding, the subject thereof, the relief sought, and whether the Borrower believes that such proceeding could reasonably result in a fine or penalty in excess of $50,000); (4) a summary of any material violations of Environmental Laws or Environmental Permits identified by the Borrower or any of its Subsidiaries and reported to a Governmental Authority during the past fiscal year, and a brief description of the violations and whether the Borrower believes that such notice or combination thereof, could reasonably be expected to result in a fine or penalty in excess of $50,000; (5) a description of any material modifications or enhancements made to the EH&S Program during the fiscal year just ended; (6) a copy of any compliance audit and corrective action documentation prepared pursuant to or with respect to any matter concerning the EH&S Program during the fiscal year just ended; and (7) a description of any legislative, regulatory, or enforcement initiatives of which a Borrower is aware regarding matters concerning the EH&S Program that could reasonably be expected to materially affect Borrower's costs, revenues, or business plans in the current fiscal year or the remaining term of the Facilities (or, if a Default has occurred and is continuing, the four succeeding fiscal years). 6.9. Additional Collateral, New Subsidiary Borrowers, etc. (a) With respect to any property acquired after the Closing Date by any Borrower (other than (x) any property described in paragraph (b), (c) or (d) below and (y) any property subject to a Lien expressly permitted by Section 7.3(f) as to which the Collateral Agent, for the benefit of the Lenders, does not have a perfected Lien), promptly (i) execute and deliver to the Collateral Agent such amendments to the Guarantee and Collateral Agreement or such other documents as the Collateral Agent reasonably deems necessary or advisable to grant to the Collateral Agent, for the benefit of the Administrative Agent and the Lenders, a security interest in such property and (ii) take all actions necessary or advisable to grant to the Collateral Agent, for the benefit of the Administrative Agent and the Lenders, a perfected first priority security interest in such property (subject to Liens permitted by Section 7.3), including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Collateral Agent. (b) With respect to any fee interest in any real property comprising Ski Terrain or having a value (together with improvements thereof) of at least $100,000 (including the projected value of any improvements being constructed) or any leasehold interest in any real property comprising Ski Terrain or having improvements thereon with a value of at least $100,000 (or with improvements to be constructed thereon with a projected value of at least $100,000) in each case 51 acquired after the Closing Date by any Borrower (other than any such real property subject to a Lien expressly permitted by Section 7.3(f)), promptly (i) execute and deliver a first priority Mortgage (subject to Liens permitted by Section 7.3), in favor of the Collateral Agent, for the benefit of the Administrative Agent and the Lenders, covering such real property, (ii) if requested by the Collateral Agent, provide the Lenders with (x) title insurance covering such real property in an amount at least equal to the purchase price of such real property (or such other greater amount as shall be reasonably specified by the Collateral Agent) as well as a surveyor's report and statement which certifies that the buildings, improvements and other assets pertaining to such real property are located entirely on land that constitutes such real property and (y) any consents or estoppels reasonably deemed necessary or advisable by the Collateral Agent in connection with such Mortgage, each of the foregoing in form and substance reasonably satisfactory to the Collateral Agent and (iii) if requested by the Collateral Agent, deliver to the Collateral Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Collateral Agent. (c) With respect to any new Restricted Subsidiary created or acquired after the Closing Date by any Borrower (which, for the purposes of this paragraph (c), shall include any existing Subsidiary that ceases to be an Excluded Subsidiary), promptly (i) execute and deliver to the Collateral Agent such amendments to the Guarantee and Collateral Agreement as the Collateral Agent deems necessary or advisable to grant to the Collateral Agent, for the benefit of the Administrative Agent and the Lenders, a perfected first priority security interest in the Capital Stock of such new Restricted Subsidiary that is owned by any Borrower (subject to Liens permitted by Section 7.3), (ii) deliver to the Collateral Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant Borrower, (iii) cause such new Restricted Subsidiary (A) to become a party to the Guarantee and Collateral Agreement, by executing and delivering to the Collateral Agent an Assumption Agreement in the form attached as Annex 1 to the Guarantee and Collateral Agreement, and to become a party to this Agreement as a Borrower, by executing and delivering to the Administrative Agent a Subsidiary Borrower Agreement substantially in the form of Exhibit G, (B) to take such actions necessary or advisable to grant to the Collateral Agent for the benefit of the Administrative Agent and the Lenders a perfected first priority security interest (subject to Liens permitted by Section 7.3) in the Collateral described in the Guarantee and Collateral Agreement with respect to such new Subsidiary, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be reasonably requested by the Collateral Agent and (C) to deliver to the Collateral Agent a certificate of such Subsidiary, substantially in the form of Exhibit C, with appropriate insertions and attachments, and (iv) deliver to the Administrative Agent and the Collateral Agent legal opinions relating to such new Subsidiary and the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent and the Collateral Agent (it being agreed that opinions of substantially the same scope, and from the same counsel, as the opinions delivered pursuant to Section 5.1(h) shall be satisfactory). (d) With respect to any new Excluded Subsidiary created or acquired after the Closing Date that is a direct Subsidiary of any Borrower, promptly (i) execute and deliver to the Collateral Agent such amendments to the Guarantee and Collateral Agreement as the Collateral Agent deems necessary or advisable to grant to the Collateral Agent, for the benefit of the Administrative Agent and the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by any Borrower (subject to Liens permitted by Section 7.3), (ii) deliver to the Collateral Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, 52 executed and delivered by a duly authorized officer of the relevant Borrower, and take such other action as may be necessary or, in the opinion of the Collateral Agent, desirable to perfect the Collateral Agent's security interest therein, and (iii) if requested by the Collateral Agent, deliver to the Collateral Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Collateral Agent (it being agreed that opinions of substantially the same scope, and from the same counsel, as the opinions delivered pursuant to Section 5.1(h) shall be satisfactory). 6.10. Forest Service Permits. Comply with all of its material obligations and agreements under the Forest Service Permits and under any renewals or extensions thereof and not do or suffer anything which will impair any Forest Service Term Special Use Permit. Make no changes, alterations or amendments to any Forest Service Permit except with the prior written consent of the Administrative Agent or as would not have or reasonably be expected to have a material impact on the operations of any Borrower; provided, however, that changes or alterations in any master plan provided under or incorporated by reference in any Forest Service Term Special Use Permit will not constitute changes, alterations or amendments under this Section 6.10. 6.11. Agreements with Respect to Excluded Subsidiaries. (a) Conduct its business and operations separately from that of the Excluded Subsidiaries and cause the Excluded Subsidiaries to conduct their business and operations separately from that of each Borrower, by (i) not commingling funds or other assets, (ii) maintaining separate corporate and financial records and observing all corporate formalities, (iii) paying their respective liabilities from their respective assets, except pursuant to any guarantees extended by the Borrowers of obligations of Excluded Subsidiaries and permitted hereunder, (iv) except in the case of GSRP, maintaining capitalization adequate to meet their respective business needs and (v) conducting contractual dealings with third parties in their respective names and as separate and independent entities. (b) Cause each Excluded Subsidiary not to conduct any business other than the business indicated for such Excluded Subsidiary on Schedule 6.11 and matters incidental thereto. (c) Not permit any Excluded Immaterial Subsidiary to Dispose of any material assets, except Dispositions for fair market value consideration which is dividended or distributed to the Borrower that owns such Excluded Immaterial Subsidiary. 6.12. Interest Rate Protection. In the case of ASC, within 180 days after the Closing Date, enter into, and thereafter maintain for a period of not less than three years, Swap Agreements to the extent necessary to provide that 50% of the aggregate outstanding principal amount of the Term Loans and the Second Lien Term Loans is subject to interest rate protection for a period of not less than three years, which Swap Agreements shall have terms and conditions reasonably satisfactory to the Agents. 6.13. Post-Closing Obligations. (a) Use commercially reasonable efforts promptly to obtain Landlord Certificates for the leases listed on Schedule 5.1(k)(v). (b) Within 60 days after the Closing Date, cause the operating leases of the Borrowers listed on Schedule 6.13 to be converted into capital leases. SECTION VII. NEGATIVE COVENANTS The Borrowers hereby jointly and severally agree that, until the Obligations are Fully Satisfied, each Borrower shall not, directly or indirectly: 53 7.1. Financial Condition Covenants. (a) Minimum Consolidated EBITDA. Permit Consolidated EBITDA for any period of four fiscal quarters of ASC ending with any fiscal quarter set forth below ("LTM EBITDA") to be less than the amount set forth below opposite such fiscal quarter: Fiscal Quarter Minimum LTM EBITDA FY2005 Quarter 2 $38,900,000 FY2005 Quarter 3 $38,900,000 FY2005 Quarter 4 $38,900,000 FY2006 Quarter 1 $38,900,000 FY2006 Quarter 2 $38,900,000 FY2006 Quarter 3 and thereafter $42,500,000 provided that, to the extent LTM EBITDA measured at the end of any fiscal quarter is less than the minimum amount specified above for such period of four fiscal quarters, amounts received by the Borrowers during such period consisting of the Net Cash Proceeds of Dispositions of Non-Operating Assets in accordance with Section 7.5(e) ("Non-Operating Asset Sale Proceeds") shall be deemed to be added to LTM EBITDA (in an aggregate amount of up to $2,000,000 in any such period of four fiscal quarters) for the purpose of determining the Borrowers' compliance with this covenant; and, provided, further, that for the purpose of calculating EBITDA for the first and second fiscal quarters of ASC's fiscal year 2005, EBITDA shall be determined as if all operating leases set forth on Schedule 6.13 has been converted into capital leases during all relevant time periods in such fiscal quarter. (b) Minimum Asset Value. Permit the aggregate Appraised Value of the Ski Resort Properties at any time to be less than the Required Value (such requirement, the "Minimum Asset Value Test"), determined pursuant to Appraisals conducted in accordance with the following procedures: (i) Appraisals. The Appraised Value of the Ski Resort Properties for the purposes of determining compliance with the Minimum Asset Value Test shall be (A) based initially upon the Appraisals obtained by the Administrative Agent in connection with the Closing Date and delivered pursuant to Section 5.1(q) and (B) based thereafter (subject to Sections 7.1(b)(ii), (iii) and (iv)) on the most recent Desktop Appraisals conducted with respect to the Ski Resort Properties at the request of the Administrative Agent by an Independent Appraiser selected by the Administrative Agent, which Desktop Appraisals shall be obtained annually on or about (but in no event more than 30 days following) each anniversary of the Closing Date (each Appraisal made pursuant to this clause (B), an "Annual Appraisal"). Each Annual Appraisal shall be conducted with respect to Ski Resort Properties in such order as the Administrative Agent may determine, and the Administrative Agent shall provide ASC with preliminary and final results of such Annual Appraisal and preliminary and final indications of variances from ski resort industry multiples employed by such Independent Appraiser promptly as such results or variances become available. A change in the Appraised Value of the Ski Resort Properties reflected in any Annual Appraisal shall become effective on the fifteenth day following the date when the Administrative Agent delivers to ASC a final copy of such Annual Appraisal unless a notice of reappraisal is delivered to the Administrative Agent on or before such day pursuant to Section 7.1(b)(ii) (in which case the procedures specified in such Section shall become applicable). 54 (ii) Borrower Reappraisal Right. If the Appraised Value of the Ski Resort Properties determined pursuant to any Annual Appraisal is less than the Required Value at the time of delivery thereof, ASC may, by written notice to the Administrative Agent (delivered not more than 15 days following the date of ASC's receipt of such Annual Appraisal), elect to have the Appraised Value of the Ski Resort Properties determined by Appraisals conducted by an Independent Appraiser selected by ASC and reasonably acceptable to the Administrative Agent, which Appraisals shall be conducted using a methodology similar to that described in Section 7.1(b)(i) and in the definition of "Appraised Value" in Section 1.1 and completed within 45 days after ASC's receipt of such Annual Appraisal, in which case the Appraised Value of the Ski Resort Properties for the purposes of determining compliance with the Minimum Asset Value Test shall (subject to the provisions of Sections 7.1(b)(iii) and (iv)) be the average of the Appraised Values of the Ski Resort Properties determined by such Annual Appraisal and the Appraisals conducted pursuant to this sentence. A change in the Appraised Value of the Ski Resort Properties as a result of a reappraisal under this Section 7.1(b)(ii) shall become effective on the fifteenth day following the date on which the applicable Appraisals are delivered to the Administrative Agent and each Lender under this Section 7.1(b)(ii) unless a notice of dissatisfaction is delivered by any Lender to the Administrative Agent on or before such day pursuant to Section 7.1(b)(iii) (in which case the procedures specified in such Section shall become applicable). If a reappraisal notice is given pursuant to this Section 7.1(b)(ii) but the Appraisals are not delivered pursuant to this Section 7.1(b)(ii) within the time period required hereby, the Appraised Value of the Ski Resort Properties shall be determined on the basis of the Annual Appraisal to which such reappraisal notice related, and the change therein shall become effective on the date when the Appraisals were required to be delivered pursuant to this Section 7.1(b)(ii). (iii) Lender Reappraisal Right. If Appraisals are delivered pursuant to Section 7.1(b)(ii) and any Lender is not satisfied with the Appraised Value of the Ski Resort Properties as determined pursuant thereto or is otherwise not satisfied with such Appraisals, such Lender may, by written notice sent to the Administrative Agent (delivered not more than 15 days following the date of the receipt by the requesting Lender of such Appraisals), request to have the Appraised Value of the Ski Resort Properties determined by another Independent Appraiser selected by the Required Lenders. Within ten days of the delivery of the first such notice by any Lender, the Required Lenders shall (x) determine whether to have the Appraised Value of the Ski Resort Properties re-determined, and (y) if they determine to require such a re-determination, provide the Administrative Agent written notice thereof. If the Required Lenders do not provide the written notice described in the immediately preceding sentence within the time period required, the Appraised Value of the Ski Resort Properties shall not be re-determined, and the change in the Appraised Value of the Ski Resort Properties shall be effective on the date when such notice from the Required Lenders was required to be delivered. If the Required Lenders do deliver such notice to the Administrative Agent within the time period required, the Appraised Value of the Ski Resort Properties shall be re-determined by another Independent Appraiser selected by the Required Lenders pursuant to Appraisals conducted by such Independent Appraiser using a methodology similar to that described in Section 7.1(b)(i) and the definition of "Appraised Value" in Section 1.1 and completed within 45 days after the receipt of the applicable notice given by the Required Lenders pursuant to this Section 7.1(b)(iii). On the date of the delivery to the Administrative Agent of such Appraisals pursuant to this Section 7.1(b)(iii), the Appraised Value of the Ski Resort Properties for the purposes of determining compliance with the Minimum Asset Value Test shall be the average of the Appraised Values of the Ski Resort Properties determined by the related Appraisals delivered pursuant to Sections 7.1(b)(i), (ii) and (iii) and the change therein shall become effective as of the date of such delivery. If a re-determination notice is given pursuant to this Section 7.1(b)(iii) but the requested Appraisals are not delivered 55 within the time period required hereby, the Appraised Value of the Ski Resort Properties for the purposes of determining compliance with the Minimum Asset Value Test shall be the average of the related Appraisals delivered pursuant to Sections 7.1(b)(i) and 7.1(b)(ii), and the change therein shall become effective on the date when the Appraisals were required to be delivered pursuant to this Section 7.1(b)(iii). (iv) Event of Default or Major Casualty Event. The Administrative Agent may obtain new Appraisals at any time when an Event of Default has occurred and is continuing or after the occurrence of a Major Casualty Event (and in the latter case (x) the Required Value shall be measured after giving effect to any concurrent prepayment of Term Loans or reduction of Revolving Commitments, whether mandatory or voluntary, in connection therewith and (y) if a Reinvestment Notice shall have been delivered in connection with the Recovery Event resulting from such Major Casualty Event, the Appraised Value shall be determined assuming that the Net Cash Proceeds thereof have been reinvested as specified in such Reinvestment Notice). (c) Annual Liquidity Test. On April 1 of any year prior to the Revolving Termination Date, permit any Revolving Loans to be outstanding other than Revolving Loans borrowed on such date to repay Reimbursement Obligations due on such date. 7.2. Indebtedness. Create, issue, incur, assume, become liable in respect of or suffer to exist any Indebtedness, except: (a) Indebtedness of any Borrower pursuant to any Loan Document; (b) Indebtedness (including Purchase Money Indebtedness (as defined below)) outstanding on the date hereof and listed on Schedule 7.2(b) and any refinancings, refundings, renewals or extensions thereof (without increasing, or shortening the maturity of, the principal amount thereof (after giving effect to any repayments) except for increases to the extent of any premium and reasonable costs and expenses or capitalized interest); (c) (i) Indebtedness (including Capital Lease Obligations) secured by Liens permitted by Section 7.3(f) ("Purchase Money Indebtedness") in an aggregate principal amount at any one time outstanding, which when added to the aggregate then outstanding principal amount of any secured Indebtedness specified on Schedule 7.2(b) and any refinancings, refundings, renewals or extensions thereof, is not greater than $30,000,000 during ASC's 2005 and 2006 fiscal years, $27,500,000 during ASC's 2007 and 2008 fiscal years, and $25,000,000 thereafter; (d) Indebtedness in respect of the Senior Subordinated Notes (so long as all Senior Subordinated Notes remaining outstanding after the Closing Date are repurchased, redeemed or defeased in full within 60 days after the Closing Date and the requirements of Section 5.1(p) have been met) and the Existing Junior Subordinated Notes; (e) Indebtedness of any Borrower to any other Borrower; (f) Payment and performance bonds entered into in the ordinary course of business in support of the activities of any Borrower in conjunction with Capital Expenditures permitted hereunder; provided, that the aggregate amount of such payment and performance bonds outstanding at any time shall not exceed $1,000,000; 56 (g) Indebtedness constituting Second Lien Debt and any refinancing, refunding, renewal or extension thereof (without increasing, or shortening the maturity of, the principal amount thereof (after giving effect to any repayments) except for increases to the extent of any premium and reasonable costs and expenses or capitalized interest), subject to the Intercreditor Agreement; (h) Indebtedness in respect of the New Junior Subordinated Notes issued in exchange for or as a conversion of the Series A Preferred Stock on a dollar-for-dollar basis; and (i) Indebtedness incurred in connection with the financing of insurance premiums for insurance policies obtained in the ordinary course of business. 7.3. Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, whether now owned or hereafter acquired, except: (a) Liens for taxes not yet due or that are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the applicable Borrower in conformity with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which secure payment of obligations (other than Indebtedness) that are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the applicable Borrower in conformity with GAAP; (c) pledges or deposits in connection with workers' compensation, unemployment insurance (other than ERISA) and other social security legislation; (d) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not substantial in amount and that do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of any Borrower; (e) Liens in existence on the date hereof listed on Schedule 7.3(e), provided that no such Lien is spread to cover any additional property after the Closing Date (except for additional property in the nature of improvements to property already subject to any such Lien or additions to accounts receivable or inventory, as the case may be, already subject to such Lien) and that, if securing Indebtedness, the principal amount of Indebtedness secured thereby is not increased; (f) Liens securing Indebtedness of ASC or any other Subsidiary incurred pursuant to Section 7.2(c) to finance the acquisition of fixed or capital assets, provided that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness (except for additional property in the nature of improvements to property already subject to any such Lien or additions to accounts receivable or inventory, as the case may be, already subject to such Lien) and (iii) the amount of Indebtedness secured thereby is not increased; 57 (g) Liens created pursuant to the Security Documents; (h) any interest or title of a lessor under any lease entered into by any Borrower in the ordinary course of its business and covering only the assets so leased; (i) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (j) Liens (other than judgments and awards) created by or resulting from any litigation or legal proceeding which has not yet resulted in an Event of Default, provided that the execution or other enforcement thereof is effectively stayed and the claims secured thereby are being actively contested in good faith by appropriate proceedings satisfactory to the Administrative Agent and adequate reserves with respect thereto are maintained on the books of the applicable Borrower in conformity with GAAP; (k) possessory Liens in favor of securities intermediaries, commodity intermediaries, brokers and dealers arising in connection with the acquisition or disposition of Investments of the type permitted by Section 7.8(b), provided that such Liens (i) attach only to such Investments and (ii) secure only obligations incurred in the ordinary course of business of the relevant Borrower and arising in connection with the acquisition or disposition of such Investments and not any obligation in connection with margin financing; (l) leases permitted by Section 7.5; (m) Liens on Collateral securing Indebtedness incurred pursuant to Section 7.2(g), subject to the Intercreditor Agreement; and (n) Liens on insurance policies and the proceeds thereof securing the financing of the insurance premiums with respect thereto. 7.4. Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of all or substantially all of its property or business, except that: (a) any Borrower may be merged or consolidated with or into any other Borrower (provided that, in the case of any such merger or consolidation involving ASC, ASC shall be the continuing or surviving corporation); (b) any Borrower may Dispose of any or all of its assets (i) to any other Borrower (upon voluntary liquidation or otherwise) in a Disposition permitted by Section 7.5(c) or (ii) pursuant to any other Disposition permitted by Section 7.5; and (c) any Investment expressly permitted by Section 7.8 may be structured as a merger, consolidation or amalgamation. 7.5. Disposition of Property. Dispose of any of its property, whether now owned or hereafter acquired, or, in the case of any Subsidiary Borrower, issue or sell any shares of such Subsidiary Borrower's Capital Stock to any Person, except: 58 (a) the Disposition in the ordinary course of business of obsolete or worn out property with an aggregate book value or fair market value, whichever is less, not in excess of $500,000 in any fiscal year; (b) the sale, lease or other disposition of inventory in the ordinary course of business; (c) Dispositions to any other Borrower (upon voluntary liquidation or otherwise); provided that any Disposition of Collateral included therein shall be made subject to the Liens of the Collateral Agent thereon and, prior to any such Disposition, the applicable Borrowers shall have taken all action required by the Collateral Agent to create, perfect and protect such Liens and the priority thereof; (d) the sale or issuance of any Restricted Subsidiary's Capital Stock to any Borrower; (e) the Disposition of Non-Operating Assets for fair market value (measured in the case of Dispositions of Non-Operating Assets for consideration in excess of $5,000,000 based on the appraised value of such Non-Operating Assets) cash consideration not to exceed in the aggregate for any fiscal year of ASC, $4,000,000; provided that in any fiscal year of ASC, the amount in this clause (e) may be increased by the Additional Non-Operating Asset Sale Amount for such fiscal year if: (i) LTM EBITDA for the period ending on the last day of the third fiscal quarter of the preceding fiscal year was not less than the LTM EBITDA required for such period pursuant to Section 7.1(a) without giving effect to the addition of any Non-Operating Asset Sale Proceeds permitted by the proviso to such Section, and (ii) an amount equal to at least 50% (or, if at the time of any Disposition pursuant to this clause (e) the aggregate amount of cash proceeds of Dispositions of Non-Operating Assets by the Borrowers since the Closing Date exceeds $45,000,000, 75%) of the excess, if any, of (x) the aggregate amount of Non-Operating Asset Sale Proceeds received by the Borrowers in any fiscal year of ASC from Dispositions pursuant to this clause (e) over (y) $4,000,000 is applied in accordance with Section 2.9(b) (and such amount will be deemed to constitute Net Cash Proceeds of a Material Asset Sale for purposes of Section 2.9(b)); (f) the license of intellectual property in the ordinary course of business; (g) dispositions of Capital Stock of Grand Summit Resort Properties, Inc. and Community Water Company; (h) Leases that have a lease term of three years or less (or no more than five years with a five-year renewal term in the case of subclause (i) below) that are (i) retail space leases to third-party retailers, (ii) other leases covering spaces of 10,000 square feet or less, or (iii) ground leases of real property other than (x) Skiable Terrain, (y) improved real property (except in the case of a replacement or renewal of any lease on such property existing as of the Closing Date) or (z) any other property necessary for the operation of any Ski Resort Properties in the ordinary course of business; (i) Dispositions of Non-Operating Assets consisting of capital contributions permitted by Section 7.8(j); 59 (j) transfers to Wolf Mountain Resorts, LC ("Wolf") of (i) 100 hotel/lodging unit undeveloped lots in Red Pine Village at The Canyons, together with associated water rights and utilities, in accordance with Section 12 of the Second Amendment to Ground Lease between ASC Utah and Wolf and (ii) ASC Utah's interest in the land underlying the Willow Draw subdivision, consisting of 35 undeveloped residential lots, in accordance with Section 9 of the Second Amendment to Ground Lease between ASC Utah and Wolf, together with associated water rights and utilities; and (k) modifications of the "Premises" under the Ground Lease between Wolf and ASC Utah to facilitate property re-alignment and base area development at The Canyons, on terms disclosed to and approved by the Administrative Agent. 7.6. Restricted Payments. Declare or pay any dividend (other than dividends payable solely in common stock of the Person making such dividend) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any Capital Stock of any Borrower, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of any Borrower (collectively, "Restricted Payments"), except that (a) any Borrower may make Restricted Payments to any other Borrower and (b) ASC shall be permitted make Restricted Payments of up to $5,000,000 in the aggregate since the Closing Date, whether in a single transaction or a series of related transactions, to purchase or acquire common stock of ASC not held by Oak Hill so long as (i) the ratio of (x) the sum of the aggregate outstanding amounts of the Term Loans, the Revolving Extensions of Credit and the Second Lien Term Loans on the date of any such Restricted Payment to (y) Consolidated EBITDA for the period of four consecutive fiscal quarters most recently ended as of such date for which financial statements have been delivered in accordance with Section 6.1(a) or (b) shall not be greater than 4.20:1.00, (ii) no Default or Event of Default shall have occurred and be continuing and (iii) after the consummation of such single transaction, ASC will no longer be subject to the reporting requirements of the Securities Exchange Act of 1934 (or such obligations shall be suspended) or, in any case where such purchases or acquisitions are being effected pursuant to a series of related transactions, it is reasonable to conclude that, after completion of all transactions in such series (and the termination of any applicable suspension period), ASC will no longer be subject to such reporting requirements and, after completion of the final transaction in such series, ASC is, in fact, no longer subject to such reporting requirement. 7.7. Capital Expenditures. Make or commit to make any Capital Expenditure, except Capital Expenditures of the Borrowers in the ordinary course of business made while no Event of Default has occurred and is continuing not exceeding in any fiscal year of ASC the sum of (i) $15,500,000, (ii) an amount equal to 50% of the aggregate excess of LTM EBITDA for the prior fiscal year over the minimum LTM EBITDA required by Section 7.1(a) for such fiscal year (without adding in any Non-Operating Asset Sale Proceeds as permitted by the proviso to such Section), (iii) an amount equal to Non-Operating Asset Sale Proceeds received during such fiscal year in excess of the aggregate amount of such proceeds applied to satisfy the minimum LTM EBITDA requirements of Section 7.1(a) for such fiscal year, up to a maximum of $4,000,000 for this clause (iii), and (iv) an amount equal to 50% of the Non-Operating Asset Sale Proceeds received during such fiscal year from any additional Disposition of Non-Operating Assets permitted pursuant to the proviso to Section 7.5(e); provided, that any such amount referred to above, if not so expended in the fiscal year for which it is permitted, may be carried over for expenditure in the next succeeding fiscal year; and provided, further, that the Borrowers shall be permitted to make additional Capital Expenditures (A) as described on Schedule 7.7 so long as (x) such Capital Expenditures do not exceed in any such fiscal year the amount set forth for such fiscal year on Schedule 7.7 (provided that if the amount set forth on such Schedule to be expended for any such item in any fiscal year is not expended in such fiscal year for such item, the amount for such item not so expended in such fiscal year may be expended for such item in any subsequent fiscal year) and are for the items described on such Schedule 7.7 and (y) for each such described item, the amount expended on such item does not exceed the amount set forth on such Schedule for such item; (B) in respect of the conversion of operating leases existing on the Closing Date and listed on 60 Schedule 6.13 into Capital Leases within 60 days after the Closing Date and (C) with the Net Cash Proceeds of any Recovery Event with respect to which a Reinvestment Notice has been delivered in accordance with Section 2.9(b). 7.8. Investments. Make any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other debt securities of, or any assets constituting a business unit of, or make any other investment in, any Person (all of the foregoing, "Investments"), or have outstanding any Investment, except: (a) extensions of trade credit in the ordinary course of business; (b) Investments in Cash Equivalents; (c) Guarantee Obligations permitted by Section 7.2; (d) (i) existing Investments in the Capital Stock of Subsidiaries that are not Borrowers, as described on Schedule 4.15, (ii) outstanding intercompany loans and advances, as listed as Indebtedness on Schedule 7.2(b) and permitted by Section 7.2, and (iii) other existing Investments described on Schedule 7.8(d); (e) Capital Expenditures permitted by Section 7.7 that are structured as Investments; (f) Restricted Payments permitted under Section 7.6; (g) intercompany Investments by any Borrower in any other Borrower; (h) Investments acquired in connection with the bankruptcy or workout of account debtors; (i) Investments in respect of Swap Agreements permitted under Section 7.12; (j) the Investments described on Schedule 7.8(j); and (k) Investments in SS Associates, LLC in connection with the call by Killington, Ltd., or the put by TMG Associates, LLC to Killington, Ltd., of TMG Associates, LLC's membership interest in SS Associates, LLC in accordance with the terms of the Limited Liability Company Operating Agreement of SS Associates, LLC dated October 15, 2004, as such agreement is in effect on the date hereof. 7.9. Optional Payments and Modifications of Certain Debt Instruments. (a) Make or offer to make any optional or voluntary payment, prepayment, repurchase or redemption of or otherwise optionally or voluntarily defease or segregate funds with respect to any Junior Subordinated Notes or (except in the case of voluntary prepayments with amounts not accepted for prepayment by any Term Lender in accordance with Section 2.9(d)) Second Lien Debt; (b) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of any Junior Subordinated Notes (other than any such amendment, modification, waiver or other change that (i) would extend the maturity or reduce the amount of any payment of principal thereof or reduce the rate or extend any date for payment of interest thereon or waive any default or make any covenant less restrictive and (ii) does not involve the payment of a consent fee); (c) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of any Preferred Stock (other than any such amendment, modification, waiver or other change that (x) would extend the scheduled redemption date or reduce the amount of any scheduled redemption 61 payment or reduce the rate or extend any date for payment of dividends thereon and (y) does not involve the payment of a consent fee); or (d) designate any Indebtedness (other than obligations of the Borrowers pursuant to the Loan Documents and the Second Lien Loan Documents) as "Designated Senior Debt" (or any other defined term having a similar purpose) for the purposes of the Junior Subordinated Note Indentures. 7.10. Transactions with Affiliates. Enter into any transaction, including any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate (other than any other Borrower) except that a Borrower (a) may pay reasonable salaries, fees and bonuses (including the reimbursement of expenses and the granting of stock options and phantom stock awards) to its directors, officers and employees in accordance with prudent and customary business practices, (b) may enter into transactions with an Affiliate on terms that are not materially less favorable to such Borrower taken as a whole than those which could be obtained at the time from Persons who are not Affiliates and which transactions (x) to the extent in excess of $250,000 for each transaction or a series of related transactions are disclosed to the Administrative Agent in writing and (y) to the extent in excess of $5,000,000 for each transaction or a series of related transactions are approved by the Supermajority Lenders, in each case prior to the consummation of such transactions, (c) may amend, modify, waive or otherwise change the terms of (i) any Junior Subordinated Notes or Preferred Stock to the extent permitted by Section 7.9, (ii) the Loan Documents as permitted by the terms thereof, and (iii) the Second Lien Loan Documents to the extent permitted by the Intercreditor Agreement, (d) may enter into and perform their obligations under the Loan Documents and (e) enter into such other transactions with Affiliates that have been approved in advance in writing by the Administrative Agent. Notwithstanding the foregoing, so long as no Event of Default is continuing, the Borrowers may pay management fees to Affiliates in an aggregate amount for all such Affiliates not to exceed $100,000 in any fiscal year of ASC. 7.11. Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by any Borrower of real or personal property that has been or is to be sold or transferred by such Borrower to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of such Borrower, except in connection with a Disposition of Non-Operating Assets which otherwise complies with this Agreement. 7.12. Swap Agreements. Enter into any Swap Agreement, except (a) Swap Agreements entered into to hedge or mitigate risks to which ASC or any Restricted Subsidiary has actual exposure (other than those in respect of Capital Stock) and (b) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of ASC or any Restricted Subsidiary. 7.13. Changes in Fiscal Periods. Permit the fiscal year of ASC to end on a day other than the last Sunday in July or change ASC's method of determining fiscal quarters. 7.14. Restrictive Agreements. Enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of any Borrower to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Subsidiary Borrower to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to any other Borrower or to guarantee Indebtedness of any other Borrower; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law or by the Loan Documents or the Second Lien Loan Documents, (ii) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 7.14 (but shall apply to any extension or renewal of any such restriction, or any amendment or modification of any such restriction or condition making such restriction or condition more restrictive), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary or assets or stock pending such 62 sale, provided such restrictions and conditions apply only to the Subsidiary or assets or stock that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (v) clause (a) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof. 7.15. Lines of Business. Enter into any business, either directly or through any Subsidiary, except for those businesses in which ASC and its Subsidiaries are engaged on the date of this Agreement or that are reasonably related thereto. 7.16. Maintenance Capital Expenditures Variance. Permit the actual amount of maintenance Capital Expenditures of the Borrowers in any fiscal year of ASC to be less than the maintenance Capital Expenditures of the Borrowers budgeted for such fiscal year in the budget delivered for such fiscal year pursuant to Section 6.2(b) by more than 10%. SECTION VIII. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) (i) any Borrower shall fail to pay any principal of any Loan or Reimbursement Obligation when due in accordance with the terms hereof; or (ii) any Borrower shall fail to pay any interest on any Loan or Reimbursement Obligation, or any other amount payable hereunder or under any other Loan Document, within, in the case of subclause (ii) only, five days after any such interest or other amount becomes due in accordance with the terms hereof; or (b) any representation or warranty made or deemed made by any Borrower herein or in any other Loan Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made; or (c) (i) any Borrower shall default in the observance or performance of any agreement contained in Section 6.4, Section 6.5(b), Section 6.7(a), Section 6.10, Section 6.11 or Section 6.12 or Section 7 (other than Section 7.1(b)) of this Agreement or Section 5.4 or 5.6(b) of the Guarantee and Collateral Agreement or (ii) an "Event of Default" under and as defined in any Mortgage shall have occurred and be continuing; or (d) any Borrower shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of (i) in the case of Section 7.1(b), five Business Days or (ii) in any other case, 30 days after notice to ASC from the Administrative Agent or the Required Lenders; or 63 (e) any Borrower shall (i) default in making any payment of any principal of any Indebtedness (including any Guarantee Obligation with respect to Indebtedness, but excluding the Loans) on the scheduled or original due date with respect thereto; or (ii) default in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (iii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable; provided, that a default, event or condition described in clause (i), (ii) or (iii) of this paragraph (e) shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds, individually, $2,000,000, or in the aggregate, $5,000,000 (or with respect to any Junior Subordinated Notes regardless of whether the outstanding principal amount of such Indebtedness at such time exceeds any such threshold); or (f) (i) any Borrower shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or any Borrower shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against any Borrower any case, proceeding or other action of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against any Borrower any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) any Borrower shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) any Borrower shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) (i) any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of any Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) any Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event 64 or condition, together with all other such events or conditions, if any, could, in the sole judgment of the Required Lenders, reasonably be expected to have a Material Adverse Effect; or (h) one or more judgments or decrees shall be entered against one or more Borrowers involving in the aggregate a liability (to the extent not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of $2,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or (i) any of the Security Documents shall cease, for any reason, to be in full force and effect, or any Borrower or any Affiliate of any Borrower, shall so assert, or any Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or (j) the guarantee contained in Section 2 of the Guarantee and Collateral Agreement shall cease, for any reason, to be in full force and effect or any Borrower or any Affiliate of any Borrower shall so assert; or (k) a Change of Control shall occur; or (l) any Junior Subordinated Notes shall cease, for any reason, to be validly subordinated to the Obligations, as provided in the relevant Junior Subordinated Note Indenture, or any Borrower, any Affiliate of any Borrower, the trustee in respect of the Junior Subordinated Notes or the holders of a majority in aggregate principal amount of the Junior Subordinated Notes shall so assert; (m) any license, approval or permit held by any Borrower is terminated, withdrawn or not renewed, or suspended for more than ten Business Days and such termination, withdrawal, non-renewal or suspension could, in the judgment of the Required Lenders, reasonably be expected to have a Material Adverse Effect; (n) any material term of the Intercreditor Agreement shall cease, for any reason, to be in full force and effect, or any Borrower, any Affiliate of any Borrower, the Second Lien Collateral Agent or the Second Lien Required Lenders (as each such term is defined in the Intercreditor Agreement) shall so assert. then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to any Borrower, automatically the Commitments shall immediately terminate and the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to ASC, declare the Revolving Commitments to be terminated forthwith, whereupon the Revolving Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to ASC, declare the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the 65 documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to this paragraph, the Borrowers shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrowers hereunder and under the other Loan Documents. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other Obligations shall have been fully satisfied, the balance, if any, in such cash collateral account shall be returned to the relevant Borrower (or such other Person as may be lawfully entitled thereto). Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Borrowers. SECTION IX. THE AGENTS 9.1. Appointment. Each Lender hereby irrevocably designates and appoints each Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes each Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, no Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against any Agent. Each Lender (a) acknowledges that it has received a copy of the Intercreditor Agreement, (b) consents to the terms thereof, (c) agrees that it will be bound by the Intercreditor Agreement (including the provisions of Section 7.05 thereof) and will take no actions contrary to the provisions of the Intercreditor Agreement and (d) authorizes and instructs the Collateral Agent to enter into the Intercreditor Agreement as Collateral Agent and on behalf of such Lender. The foregoing provisions are intended as an inducement to the lenders under the Second Lien Loan Documents to extend credit to ASC, and such lenders are intended third party beneficiaries of these provisions. 9.2. Delegation of Duties. Each Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. 9.3. Exculpatory Provisions. Neither any Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Borrower or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by such Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Borrower a party thereto to perform its obligations hereunder or thereunder. No Agent shall 66 be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Borrower. 9.4. Reliance by Agents. Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including counsel to the Borrowers), independent accountants and other experts selected by such Agent. Each Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. Each Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders, the Supermajority Lenders or the applicable Majority Facility Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all Lenders, the Supermajority Lenders or the applicable Majority Facility Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 9.5. Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless such Agent has received notice from a Lender or any Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. Each Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders, the Supermajority Lenders or the applicable Majority Facility Lenders); provided that unless and until such Agent shall have received such directions, such Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 9.6. Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither any Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs of a Borrower or any affiliate of a Borrower, shall be deemed to constitute any representation or warranty by such Agent to any Lender. Each Lender represents to each Agent that it has, independently and without reliance upon such Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrowers and their affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and 67 the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrowers and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, no Agent shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Borrower or any affiliate of a Borrower that may come into the possession of such Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 9.7. Indemnification. The Lenders agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by the Borrowers and without limiting the obligation of the Borrowers to do so), ratably according to their respective Aggregate Exposure Percentages in effect on the date on which indemnification is sought under this Section (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with such Aggregate Exposure Percentages immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder. 9.8. Agents in Their Individual Capacities. Each Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Borrower as though it were not an Agent. With respect to its Loans made or renewed by it and with respect to any Letter of Credit issued or participated in by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include each Agent in its individual capacity. 9.9. Successor Agents. Each of the Administrative Agent and the Collateral Agent may resign in such capacity upon 10 days' notice to the Lenders and ASC. If the Administrative Agent or the Collateral Agent fails to perform its obligations under the Loan Documents, such Agent may be removed by the Required Lenders upon 10 days' notice to such Agent and ASC. If such Agent shall resign or be removed in such capacity under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall, unless an Event of Default shall have occurred and be continuing, be subject to approval by ASC (which approval shall not be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent or Collateral Agent, as the case may be, and the term "Administrative Agent" or "Collateral Agent", as applicable, shall mean such successor agent effective upon such appointment and approval, and the former Agent's rights, powers and duties as such Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as the applicable Agent by the date that is 10 days following the applicable retiring Agent's notice of resignation or removal, the applicable retiring Agent's resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of such Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. After any retiring Agent's resignation as such Agent or its removal pursuant to this Section 9, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent under this Agreement and the other Loan Documents. 68 9.10. Syndication Agent. Notwithstanding the foregoing provisions of this Section IX, the Syndication Agent shall not have any duties or responsibilities hereunder in its capacity as such. SECTION X. MISCELLANEOUS 10.1. Amendments and Waivers. Neither this Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 10.1. The Required Lenders and each Borrower party to the relevant Loan Document may, or, with the written consent of the Required Lenders, the Administrative Agent and each Borrower party to the relevant Loan Document may, from time to time, (a) enter into written amendments, supplements or modifications hereto and to the other Loan Documents or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent (with the consent of the Required Lenders), as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) forgive the principal amount or extend the final scheduled date of maturity of any Loan, extend the scheduled date of any payment of principal in respect of any Term Loan, reduce the stated rate of any interest or fee payable hereunder (except in connection with the waiver of applicability of any post-default increase in interest rates (which waiver shall be effective with the consent of the Majority Facility Lenders of each adversely affected Facility) or extend the date of any payment thereof, or increase the amount or extend the expiration date of any Lender's Revolving Commitment, in each case without the written consent of each Lender directly affected thereby; (ii) eliminate or reduce the voting rights of any Lender under this Section 10.1 or under any other Loan Document without the written consent of such Lender; (iii) change the definition of Required Lenders or Supermajority Lenders, consent to the assignment or transfer by any Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, release all or substantially all of the Collateral or release any Guarantor from its obligations under the Guarantee and Collateral Agreement (except in accordance with Section 10.14), or change the application of any prepayment of the Loans or reduction of the Revolving Commitments required pursuant to Section 2.9(b), in each case without the written consent of all Lenders; (iv) amend, modify or waive any provision of Section 2.15 without the written consent of the Majority Facility Lenders in respect of each Facility adversely affected thereby; (v) reduce the percentage specified in the definition of Majority Facility Lenders with respect to any Facility without the written consent of all Lenders under such Facility; (vi) amend, modify or waive any provision of Section IX without the written consent of each Agent directly affected thereby; (vii) amend, modify or waive any provision of Section 3 without the written consent of the Issuing Lender; or (viii) change the definition of the terms "Obligations", "Excess Cash Flow" or "Net Cash Proceeds", expand the obligations secured by any of the Security Documents to include those other than the Obligations, amend, modify or waive any provision of Section 2.9, Section 7.1(b), Section 7.2, Section 7.3, Section 7.5, Section 7.8, the last two sentences of Section 9.1, any provision of the Intercreditor Agreement or Section 6.5 of the Guarantee and Collateral Agreement, in each case described in this clause (viii) without the consent of the Supermajority Lenders. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrowers, the Lenders, the Administrative Agent and all future holders of the Loans. In the case of any waiver, the Borrowers, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. 69 10.2. Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows in the case of any Borrower and the Administrative Agent, and as set forth in an administrative questionnaire delivered to the Administrative Agent and ASC in the case of the Lenders, or to such other address as may be hereafter notified by the respective parties hereto: The Borrowers: c/o American Skiing Company 136 Heber Avenue, #303 Park City, UT 84060 Attention: Betsy Wallace Telecopy: (435) 615-4780 Telephone: (435) 615-0360 With a copy to: American Skiing Company One Monument Way Portland, ME 04101 Attention: Foster A. Stewart, Esq. Telecopy: (207) 791-2607 Telephone: (207) 773-7934 Administrative Agent: General Electric Capital Corporation 401 Merritt Seven, Second Floor Norwalk, CT 06851 Attention: Jennifer Lane Telecopy: (203) 229-1992 Telephone: (203) 229-1428 provided that any notice, request or demand to or upon the Administrative Agent or the Lenders shall not be effective until received. Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Section 2 unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or ASC may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications. 10.3. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 70 10.4. Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans and other extensions of credit hereunder. 10.5. Payment of Expenses and Taxes. The Borrowers jointly and severally agree (a) to pay or reimburse the Administrative Agent and the Syndication Agent for all their respective reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including reasonable appraisal fees and expenses, the reasonable fees and disbursements of counsel to the Administrative Agent and filing and recording fees and expenses (but excluding costs and expenses of surveys conducted pursuant to Section 6.6(c)), with statements with respect to the foregoing to be submitted to ASC prior to the Closing Date (in the case of amounts to be paid on the Closing Date) and from time to time thereafter on a quarterly basis or such other periodic basis as the Administrative Agent shall deem appropriate (provided that the agreement by the Borrowers to reimburse any such costs and expenses incurred by the Administrative Agent in connection with the development, preparation and execution of the Loan Documents and any other documents prepared in connection therewith shall be subject to the limitations and further agreements contained in the fee letter with the Co-Lead Arrangers and Joint Bookrunners (the "Fee Letter")), (b) to pay or reimburse each Lender and the Administrative Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including the fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to each Lender and of counsel to the Administrative Agent, (c) to pay, indemnify, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, that may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and the Administrative Agent and their respective officers, directors, employees, affiliates, agents and controlling persons (each, an "Indemnitee") harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents, including any of the foregoing relating to the use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of any Borrower or any of the properties it owns, operates or leases and the reasonable fees and expenses of legal counsel in connection with claims, actions or proceedings by any Indemnitee against any Borrower under any Loan Document (all the foregoing in this clause (d), collectively, the "Indemnified Liabilities"), provided, that the Borrowers shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such Indemnified Liabilities are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee. Without limiting the foregoing, and to the extent permitted by applicable law, the Borrowers agree not to assert and to cause their respective Subsidiaries not to assert, and hereby waive and agree to cause their respective Subsidiaries to waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them may have by statute or otherwise against any Indemnitee, except to the extent resulting from the gross negligence or willful misconduct of such Indemnitee. All amounts due under this Section 10.5 shall be payable not later than 10 days after receipt of written demand therefor. Statements payable by the Borrowers pursuant to this Section 10.5 shall be submitted to Betsy 71 Wallace (Telephone No. (435) 615-0360) (Telecopy No. (435) 615-4780), at the address of the Borrowers set forth in Section 10.2, or to such other Person or address as may be hereafter designated by ASC in a written notice to the Administrative Agent. The agreements in this Section 10.5 shall survive repayment of the Loans and all other amounts payable hereunder. 10.6. Successors and Assigns; Participations and Assignments. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any affiliate of the Issuing Lender that issues any Letter of Credit), except that (i) no Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by any Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. (b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees (each, an "Assignee") all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans at the time owing to it) with the prior written consent of: (A) the Borrowers (such consent not to be unreasonably withheld), provided that no consent of the Borrowers shall be required for an assignment to a Lender, an affiliate of a Lender, an Approved Fund (as defined below) or, if a Default has occurred and is continuing, any other Person; (B) the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment of all of or any portion of a Loan to a Lender, an Affiliate of a Lender or an Approved Fund; and (C) the Issuing Lender, provided that no consent of the Issuing Lender shall be required for an assignment of all or any portion of a Term Loan or a Revolving A Commitment. (ii) Assignments shall be subject to the following additional conditions: (A) except in the case of an assignment to a Lender, an affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender's Commitments or Loans under any Facility, the amount of the Commitments or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $1,000,000 unless each of the Borrowers and the Administrative Agent otherwise consent, provided that (1) no such consent of the Borrowers shall be required if an Event of Default has occurred and is continuing and (2) such amounts shall be aggregated in respect of each Lender and its affiliates or Approved Funds, if any; (B) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; and (C) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an administrative questionnaire. For the purposes of this Section 10.6, "Approved Fund" means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. 72 (iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) below, from and after the effective date specified in each Assignment and Assumption the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.16, 2.17, 2.18 and 10.5). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 10.6 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section. (iv) The Administrative Agent, acting for this purpose as an agent of the Borrowers, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrowers, the Administrative Agent, the Issuing Lender and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. (v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an Assignee, the Assignee's completed administrative questionnaire (unless the Assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (c) (i) Any Lender may, without the consent of the Borrowers or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans owing to it); provided that (A) such Lender's obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrowers, the Administrative Agent, the Issuing Lender and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to the proviso to the second sentence of Section 10.1 and (2) directly affects such Participant. Subject to paragraph (c)(ii) of this Section, the Borrowers agree that each Participant shall be entitled to the benefits of Sections 2.16, 2.17 and 2.19 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.7(b) as though it were a Lender, provided such Participant shall be subject to Section 10.7(a) as though it were a Lender. 73 (ii) A Participant shall not be entitled to receive any greater payment under Section 2.16 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrowers' prior written consent. Any Participant that is a Non-U.S. Lender shall not be entitled to the benefits of Section 2.17 unless such Participant complies with Section 2.17(d). (d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or the Federal Home Loan Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or Assignee for such Lender as a party hereto. (e) Each Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph (d) above. (f) Notwithstanding the foregoing, any Conduit Lender may assign any or all of the Loans it may have funded hereunder to its designating Lender without the consent of the Borrowers or the Administrative Agent and without regard to the limitations set forth in Section 10.6(b). Each Borrower, each Lender and the Administrative Agent hereby confirms that it will not institute against a Conduit Lender or join any other Person in instituting against a Conduit Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Conduit Lender; provided, however, that each Lender designating any Conduit Lender hereby agrees to indemnify, save and hold harmless each other party hereto for any loss, cost, damage or expense arising out of its inability to institute such a proceeding against such Conduit Lender during such period of forbearance. 10.7. Adjustments; Set-off. (a) Except to the extent that this Agreement expressly provides for payments to be allocated to a particular Lender or to the Lenders under a particular Facility, if any Lender (a "Benefitted Lender") shall, at any time after the Loans and other amounts payable hereunder shall have become immediately due and payable pursuant to Section 8, receive any payment of all or part of the Obligations owing to it, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 8(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of the Obligations owing to such other Lender, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of the Obligations owing to each such other Lender, or shall provide such other Lenders with the benefits of any such collateral, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to any Borrower, any such notice being expressly waived by each Borrower to the extent permitted by applicable law, while any Event of Default is continuing, to set off and appropriate and apply against any amount then due and payable any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of such Borrower. Each Lender agrees promptly to notify the relevant Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application. 74 10.8. Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. 10.9. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.10. Integration. This Agreement and the other Loan Documents represent the entire agreement of the Borrowers, the Administrative Agent and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. 10.11. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 10.12. Submission To Jurisdiction; Waivers. Each Borrower hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Borrower at its address set forth in Section 10.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and 75 (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. 10.13. Acknowledgments. Each Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to any Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between Administrative Agent and Lenders, on one hand, and the Borrowers, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrowers and the Lenders. 10.14. Releases of Guarantees and Liens. (a) Notwithstanding anything to the contrary contained herein or in any other Loan Document, the Administrative Agent is hereby irrevocably authorized by each Lender (without requirement of notice to or consent of any Lender except as expressly required by Section 10.1) to take any action requested by any Borrower having the effect of releasing any Collateral or guarantee obligations (i) to the extent necessary to permit consummation of any transaction not prohibited by any Loan Document or that has been consented to in accordance with Section 10.1 or (ii) under the circumstances described in paragraph (b) below. (b) At such time as the Obligations shall have been Fully Satisfied, the Collateral shall be released from the Liens created by the Security Documents, and the Security Documents and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent and each Borrower under the Security Documents shall terminate, all without delivery of any instrument or performance of any act by any Person. The Administrative Agent agrees to execute such further agreements, instruments and other documents as may be reasonably requested by the Borrowers, at the expense of the Borrowers, to evidence and effect such termination. 10.15. Confidentiality. Each of the Administrative Agent and each Lender agrees to keep confidential all non-public information provided to it by any Borrower, the Administrative Agent or any Lender pursuant to or in connection with this Agreement that is designated by the provider thereof as confidential; provided that nothing herein shall prevent the Administrative Agent or any Lender from disclosing any such information (a) to the Administrative Agent, any other Lender or any affiliate thereof, (b) subject to an agreement to comply with the provisions of this Section, to any actual or prospective Transferee or any direct or indirect counterparty to any Swap Agreement (or any professional advisor to such counterparty), (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its affiliates, (d) upon the request or demand of any Governmental Authority (including any Governmental Authority having regulatory oversight of any Lender, including the FDIC and the Federal Home Loan Bank), (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (f) if requested or required to do so in connection with any litigation or similar proceeding, (g) that has been publicly disclosed, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender or to any Lender's funding source or lender, or (i) in connection with the exercise of any remedy hereunder or under any other Loan Document. 76 10.16. Joint and Several Liability of Borrowers. Each Borrower hereby irrevocably and unconditionally agrees that it is jointly and severally liable for all of the liabilities, obligations, covenants and agreements of the Borrowers hereunder and under the other Loan Documents, whether now or hereafter existing or due or to become due. The obligations of the Borrowers under the Loan Documents may be enforced by the Administrative Agent and the Lenders against any one or more Borrowers or all of them in any manner or order selected by the Administrative Agent or the requisite Lenders in their sole discretion. Each Borrower hereby irrevocably waives (i) any rights of subrogation and (ii) any rights of contribution, indemnity or reimbursement, in each case, that it may acquire or that may arise against any other Borrower due to any payment or performance made under this Agreement, in each case until all Obligations shall have been Fully Satisfied. Without limiting the foregoing provisions of this Section 10.16, each Borrower acknowledges and agrees that: (a) its obligations under this Agreement shall remain enforceable against it even though such obligations may be unenforceable or not allowable against any other Borrower due to the existence of an insolvency proceeding involving any other Borrower; (b) its obligations under this Agreement are independent of the obligations of each other Borrower, and a separate action or actions may be brought and prosecuted against it in respect of such obligations irrespective of whether any action is brought against any other Borrower or any other Borrower is joined in any such action or actions; (c) it hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following: (i) any lack of validity or enforceability of this Agreement or any agreement or instrument relating thereto in respect of any other Borrower; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of any other Borrower under or in respect of this Agreement, or any other amendment or waiver of or any consent to departure from this Agreement, in respect of any other Borrower; (iii) any change, restructuring or termination of the structure or existence of any other Borrower; (iv) the failure of any other Person to execute or deliver any other agreement or the release or reduction of liability of any other Person with respect to any obligations of the Borrower under this Agreement; or (v) any other circumstance (including any statute of limitations but other than the Obligations having been Fully Satisfied) or any existence of or reliance on any representation by any other Person that might otherwise constitute a defense available to, or a discharge of, any other Borrower; (d) its obligations under this Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any such obligations is rescinded or must otherwise be returned by any Person upon the insolvency, bankruptcy or reorganization of any other Borrower, all as though such payment had not been made; and 77 (e) it hereby unconditionally and irrevocably waives any right to revoke its joint and several liability under the Loan Documents and acknowledges that such liability is continuing in nature and applies to all obligations of the Borrowers under the Loan Documents, whether existing now or in the future. (f) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Borrower under this Section and under the other Loan Documents for the obligations of the other Borrowers (in its capacity as a joint and several obligor and a guarantor) shall in no event exceed the amount which can be guaranteed by such Borrower under applicable federal and state laws relating to fraudulent conveyances or transfers or the insolvency of debtors (after giving effect to any applicable right of contribution established in Section 2.2 of the Guarantee and Collateral Agreement). 10.17. Appointment of ASC as Borrowers' Agent. ASC is hereby appointed as the Borrowers' agent hereunder by each Borrower (in such capacity, the "Borrowers' Agent"). Each Borrower hereby authorizes, directs and empowers ASC to act for and in the name of such Borrower and as its agent hereunder and under the Loan Documents and other instruments and agreements referred to herein. ASC hereby accepts each such appointment. Each Borrower hereby irrevocably authorizes ASC to take such action on such Borrower's behalf and to exercise such powers hereunder, under the other Loan Documents, and under the other agreements and instruments referred to herein or therein as may be contemplated being taken or exercises by such Borrower by the terms hereof and thereof, together with such powers as may be incidental thereto, including to borrow hereunder and deliver notices of borrowing, Letter of Credit requests and Compliance Certificates hereunder, to repay or prepay Loans made hereunder, to reduce the Commitments, to pay interests, fees, costs and expenses incurred in connection with the Loans, this Agreement, the other Loan Documents, and the other agreements and instruments referred to herein, to receive from or deliver to the Administrative Agent any notices, statements, reports, certificates or other documents or instruments contemplated herein, in the other Loan Documents or in any other agreement or instrument referred to herein and to receive from or transmit to the Administrative Agent any Loan proceeds or payments. The Administrative Agent and each Lender shall be entitled to rely on the appointment and authorization of ASC with respect to all matters related to this Agreement, the other Loan Documents and any other agreements or instruments referred to herein whether or not any particular provision hereof or thereof specifies that such matters may or shall be undertaken by Borrowers' Agent. In reliance hereon, the Administrative Agent and each Lender may deal only with ASC with the same effect as if the Administrative Agent or such Lenders had dealt with each Borrower separately and individually. 10.18. Killington Indenture. The Lenders and Agents acknowledge that the Obligations of Killington, Ltd. are not superior in right of payment to the unsecured Indebtedness of Killington, Ltd. issued pursuant to the Indentures dated December 21, 1984, September 25, 1986, November 5, 1987, October 13, 1989 and October 24, 1990 between Killington, Ltd. and The Howard Bank, as trustee. 10.19. WAIVERS OF JURY TRIAL. EACH BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 78 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. AMERICAN SKIING COMPANY By: /s/ Foster A Stewart, Jr ----------------------------------- Name: Foster A Stewart, Jr Title: Senior Vice President AMERICAN SKIING COMPANY RESORT PROPERTIES, INC. ASC LEASING, INC. ASC UTAH BLUNDER BAY DEVELOPMENT, INC. DOVER RESTAURANTS, INC. KILLINGTON, LTD. KILLINGTON RESTAURANTS, INC. L.B.O. HOLDING, INC. MOUNT SNOW LTD. MOUNTAINSIDE PERFECT TURN, INC. PICO SKI AREA MANAGEMENT COMPANY S-K-I LTD. STEAMBOAT SKI & RESORT CORPORATION SUGARLOAF MOUNTAIN CORPORATION SUNDAY RIVER LTD. SUNDAY RIVER SKIWAY CORPORATION By: /s/ Helen E Wallace --------------------------------- Name: Helen E Wallace Title: Authorized Officer of each of the foregoing Borrowers GENERAL ELECTRIC CAPITAL CORPORATION, as Administrative Agent, as Collateral Agent and as a Lender By: /s/ Julia R Meade --------------------------------- Name: Julia R Meade Title: Duly Authorized Signatory CREDIT SUISSE FIRST BOSTON, as Syndication Agent and as a Lender By: /s/ Robert Hetu --------------------------------- Name: Robert Hetu Title: Director By: /s/ Vanessa Gomez --------------------------------- Name: Vanessa Gomez Title: Associate NATEXIS BANQUES POPULARIES, as a Lender By: /s/ Harold Birk --------------------------------- Name: Harold Birk Title: Vice President By: /s/ Tefta Ghilaga ---------------------------------- Name: Tefta Ghilaga Title: Vice President WELLS FARGO BANK, NA, as a Lender By: /s/ [Illegible] ---------------------------------- Name: [Illegible] Title: Sr Vice President EX-10 6 form10qaexh10-2.txt SECOND LIEN CREDIT AGREEMENT $105,000,000 SECOND LIEN CREDIT AGREEMENT among AMERICAN SKIING COMPANY, The Several Lenders from Time to Time Parties Hereto, CREDIT SUISSE FIRST BOSTON, as Syndication Agent, and GENERAL ELECTRIC CAPITAL CORPORATION, as Administrative Agent and Collateral Agent Dated as of November 24, 2004 GECC CAPITAL MARKETS GROUP, INC. and CREDIT SUISSE FIRST BOSTON, as Co-Lead Arrangers and Joint Bookrunners TABLE OF CONTENTS Page SECTION I. DEFINITIONS........................................................1 1.1. Defined Terms................................................1 1.2. Other Definitional Provisions...............................18 SECTION II. AMOUNT AND TERMS OF COMMITMENTS..................................18 2.1. Commitments.................................................18 2.2. Procedure for Borrowing.....................................18 2.3. Repayment of Term Loans.....................................19 2.4. Fees, etc...................................................19 2.5. Optional Prepayments........................................19 2.6. Mandatory Prepayments.......................................19 2.7. Conversion and Continuation Options.........................20 2.8. Limitations on Eurodollar Tranches..........................21 2.9. Interest Rates and Payment Dates............................21 2.10. Computation of Interest and Fees............................21 2.11. Inability to Determine Interest Rate........................22 2.12. Pro Rata Treatment and Payments.............................22 2.13. Requirements of Law.........................................23 2.14. Taxes.......................................................24 2.15. Indemnity...................................................26 2.16. Change of Lending Office....................................26 2.17. Replacement of Lenders......................................26 SECTION III. REPRESENTATIONS AND WARRANTIES..................................27 3.1. Financial Condition.........................................27 3.2. No Change...................................................27 3.3. Existence; Compliance with Law..............................27 3.4. Power; Authorization; Enforceable Obligations...............28 3.5. No Legal Bar................................................28 3.6. Litigation..................................................28 3.7. No Default..................................................28 3.8. Ownership of Property; Liens................................28 3.9. Intellectual Property.......................................28 3.10. Taxes.......................................................29 3.11. Federal Regulations.........................................29 3.12. Labor Matters...............................................29 3.13. ERISA.......................................................29 3.14. Investment Company Act; Other Regulations...................29 3.15. Subsidiaries................................................30 3.16. Use of Proceeds.............................................30 3.17. Environmental Matters.......................................30 3.18. Accuracy of Information, etc................................31 3.19. Security Documents..........................................31 3.20. Solvency....................................................32 3.21. Senior Indebtedness.........................................32 3.22. Regulation H................................................32 3.23. Certain Documents...........................................32 3.24. Forest Service Term Special Use Permits.....................32 3.25. Location....................................................32 3.26. Water Rights................................................33 3.27. Grand Summit Resort Properties, Inc.........................33 i SECTION IV. CONDITIONS PRECEDENT.............................................33 4.1. Conditions to Loans.........................................33 SECTION V. AFFIRMATIVE COVENANTS.............................................37 5.1. Financial Statements........................................37 5.2. Certificates; Other Information.............................38 5.3. Payment of Obligations......................................39 5.4. Maintenance of Existence; Compliance........................39 5.5. Maintenance of Property Insurance...........................39 5.6. Inspection of Property; Books and Records; Discussions; Surveys...................................................39 5.7. Notices.....................................................39 5.8. Environmental Matters.......................................40 5.9. Additional Collateral, etc..................................41 5.10. Forest Service Permits......................................43 5.11. Agreements with Respect to Excluded Subsidiaries............43 5.12. Interest Rate Protection....................................43 5.13. Post-Closing Obligations....................................43 SECTION VI. NEGATIVE COVENANTS...............................................44 6.1. Minimum Consolidated EBITDA.................................44 6.2. Indebtedness................................................44 6.3. Liens.......................................................45 6.4. Fundamental Changes.........................................46 6.5. Disposition of Property.....................................46 6.6. Restricted Payments.........................................48 6.7. Capital Expenditures........................................48 6.8. Investments.................................................49 6.9. Optional Payments and Modifications of Certain Debt Instruments...............................................49 6.10. Transactions with Affiliates................................50 6.11. Sales and Leasebacks........................................50 6.12. Swap Agreements.............................................50 6.13. Changes in Fiscal Periods...................................50 6.14. Restrictive Agreements......................................50 6.15. Lines of Business...........................................51 6.16. Maintenance Capital Expenditures Variance...................51 SECTION VII. EVENTS OF DEFAULT...............................................51 SECTION VIII. THE AGENTS.....................................................54 8.1. Appointment.................................................54 8.2. Delegation of Duties........................................54 8.3. Exculpatory Provisions......................................54 8.4. Reliance by Agents..........................................54 8.5. Notice of Default...........................................55 8.6. Non-Reliance on Agents and Other Lenders....................55 8.7. Indemnification.............................................55 8.8. Agents in Their Individual Capacities.......................56 8.9. Successor Agents............................................56 8.10. Syndication Agent...........................................56 ii SECTION IX. MISCELLANEOUS....................................................56 9.1. Amendments and Waivers......................................56 9.2. Notices.....................................................57 9.3. No Waiver; Cumulative Remedies..............................58 9.4. Survival of Representations and Warranties..................58 9.5. Payment of Expenses and Taxes...............................58 9.6. Successors and Assigns; Participations and Assignments......59 9.7. Adjustments; Set-off........................................62 9.8. Counterparts................................................62 9.9. Severability................................................62 9.10. Integration.................................................63 9.11. GOVERNING LAW...............................................63 9.12. Submission To Jurisdiction; Waivers.........................63 9.13. Acknowledgments.............................................63 9.14. Releases of Guarantees and Liens............................64 9.15. Confidentiality.............................................64 9.16. WAIVERS OF JURY TRIAL.......................................64 iii SCHEDULES: 1.1A Commitments 1.1B Owned and Leased Real Property 1.1C Excluded Immaterial Subsidiaries 1.1D [Intercreditor Agreement] 1.1E New Junior Subordinated Note Terms 1.1G Certain Non-Operating Assets 3.1 Certain Dispositions 3.4 Consents, Authorizations, Filings and Notices 3.6 Certain Litigation 3.15 Subsidiaries 3.19(a) UCC Filings 3.19(b) Mortgage Filings 3.22 Certain Real Property 3.24 Forest Service Permits 3.5(b) Insurance Requirements 3.11 Certain Excluded Subsidiaries 4.1(k)(vi) Post-Closing Landlord Certificates 5.13(b) Certain Real Property Leases 5.2(b) Existing Indebtedness 5.3(e) Existing Liens 6.8(d) Existing Investments 6.8(j) Contemplated Sunday River Investment 6.14 Existing Restrictive Agreements 9.9 Approved Successor Agents EXHIBITS: A Form of Guarantee and Collateral Agreement B Form of Compliance Certificate C Form of Closing Certificate D Form of Mortgage E Form of Assignment and Assumption F Form of Exemption Certificate G [Intentionally Omitted] H Form of Intercreditor Agreement I Form of Prepayment Option Notice iv SECOND LIEN CREDIT AGREEMENT (this "Agreement"), dated as of November 24, 2004, among AMERICAN SKIING COMPANY (the "Borrower"), the several banks and other financial institutions from time to time parties to this Agreement (the "Lenders"), CREDIT SUISSE FIRST BOSTON ("CSFB"), as syndication agent for the Lenders hereunder (in such capacity, "Syndication Agent"), and GENERAL ELECTRIC CAPITAL CORPORATION ("GECC"), as administrative agent for the Lenders hereunder (in such capacity, the "Administrative Agent") and as Collateral Agent under the Security Documents (as defined below) (the "Collateral Agent"). The parties hereto hereby agree as follows: SECTION I.DEFINITIONS 1.1. Defined Terms. As used in this Agreement, the terms listed in this Section 1.1 shall have the respective meanings set forth in this Section 1.1. "ABR": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the ABR due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "ABR Loans": Loans the rate of interest applicable to which is based upon the ABR. "Additional Non-Operating Asset Sale Amount": (a) for the fiscal year of the Borrower ending July 2005, $3,000,000; (b) for the fiscal year of the Borrower ending July 2006, $5,000,000; and (c) for each fiscal year of the Borrower thereafter, $11,000,000. "Administrative Agent": GECC, as the administrative agent for the Lenders under this Agreement and the other Loan Documents, together with any of its successors. "Affiliate": as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agents": the collective reference to the Syndication Agent, the Administrative Agent and the Collateral Agent. "Agreement": as defined in the preamble hereto. "Applicable Margin": for ABR Loans, 7.00% and for Eurodollar Loans, 8.00%. "Appraisal": an appraisal of the fair market value of property and business, performed by ResortNorth Valuation or another Independent Appraiser, delivered pursuant to Section 4.1(q) and accepted and approved by the Administrative Agent. 2 "Appraised Value": the fair market value of the subject property determined by the Appraisal delivered pursuant to Section 4.1(q) or a subsequent Appraisal or Desktop Appraisal. The fair market value of any Ski Resort Property shall be determined based on the assumption that such Ski Resort Property will be sold individually as a going concern to an unrelated third party on an arms'-length basis within a twelve-month period. For the purposes of the Desktop Appraisals, fair market value shall be determined based on the most recently available financial information of the Restricted Group Members using the same methodology as the September 2004 desktop appraisal based on EBITDA after deduction for appropriate maintenance Capital Expenditures, as determined by the appraiser, for the Ski Resort Properties and appropriate capitalization rates as determined by the appraiser, or other normally used conventions, such as a discounted cash-flow analysis, where appropriate. "Approved Fund": as defined in Section 9.6(b). "ASCRP": American Skiing Company Resort Properties, Inc., a Maine corporation. "Assignee": as defined in Section 9.6(b). "Assignment and Assumption": an Assignment and Assumption, substantially in the form of Exhibit E. "Benefitted Lender": as defined in Section 9.7(a). "Board": the Board of Governors of the Federal Reserve System of the United States (or any successor). "Borrower": as defined in the preamble hereto. "Borrowing Date": any Business Day specified by the Borrower as a date on which the Borrower requests the Lenders to make Loans hereunder. "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City or Salt Lake City, Utah, are authorized or required by law to close; provided, that with respect to notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, such day is also a day for trading by and between banks in Dollar deposits in the interbank eurodollar market. "Capital Expenditures": for any period, with respect to any Person, the aggregate of all expenditures by such Person for the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) that should be capitalized under GAAP on the balance sheet of such Person. For the avoidance of doubt, "Capital Expenditures" does not include capitalized interest on Indebtedness. "Capital Lease Obligations": as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing. 3 "Cash Equivalents": (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank deposits having maturities of one year or less from the date of acquisition issued by any Lender or by any commercial bank organized under the laws of the United States or any state thereof having combined capital and surplus of not less than $500,000,000; (c) commercial paper of an issuer rated at least A-1 by Standard & Poor's Ratings Services ("S&P") or P-1 by Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within one year from the date of acquisition; (d) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days, with respect to securities issued or fully guaranteed or insured by the United States government; (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's; (f) securities with maturities of one year or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition; (g) money market mutual or similar funds that invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition; or (h) money market funds that (i) comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, as amended, (ii) are rated AAA by S&P and Aaa by Moody's and (iii) have portfolio assets of at least $5,000,000,000. "Change of Control": (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of Exchange Act), excluding the Permitted Holders, shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than the greater of (x) 25% of the voting power of the outstanding Capital Stock of the Borrower or (y) the combined voting power of such Capital Stock of the Permitted Holders; or (ii) Continuing Directors shall cease to constitute a majority of the members of the board of directors of the Borrower. "Closing Date": November 24, 2004. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Collateral": all property of the Loan Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document. "Collateral Agent": as defined in the preamble hereto. "Commitment": as to any Lender, the obligation of such Lender to make a Loan to the Borrower in a principal amount equal to the amount set forth under the heading "Commitment" opposite such Lender's name on Schedule 1.1A. The original aggregate amount of the Commitments is $105,000,000. "Commonly Controlled Entity": an entity, whether or not incorporated, that is under common control with any Restricted Group Member within the meaning of Section 4001 of ERISA or is part of a group that includes a Restricted Group Member and that is treated as a single employer under Section 414 of the Code. 4 "Compliance Certificate": a certificate duly executed by a Responsible Officer substantially in the form of Exhibit B. "Conduit Lender": any special purpose corporation organized and administered by any Lender for the purpose of making Loans otherwise required to be made by such Lender and designated by such Lender in a written instrument; provided that the designation by any Lender of a Conduit Lender shall not relieve the designating Lender of any of its obligations to fund a Loan under this Agreement if, for any reason, its Conduit Lender fails to fund any such Loan, and the designating Lender (and not the Conduit Lender) shall have the sole right and responsibility to deliver all consents and waivers required or requested under this Agreement with respect to its Conduit Lender, and provided, further, that no Conduit Lender shall (a) be entitled to receive any greater amount pursuant to Section 2.13, 2.14 or 9.5 than the designating Lender would have been entitled to receive in respect of the extensions of credit made by such Conduit Lender or (b) be deemed to have any Commitment. "Confidential Information Memorandum": the Confidential Information Memorandum dated September 2004 and furnished to certain Lenders. "Consolidated Current Assets": at any date, all amounts (other than cash and Cash Equivalents) that would, in conformity with GAAP, be set forth opposite the caption "total current assets" (or any like caption) on a consolidated balance sheet of the Borrower and its Restricted Subsidiaries at such date. "Consolidated Current Liabilities": at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption "total current liabilities" (or any like caption) on a consolidated balance sheet of the Borrower and its Restricted Subsidiaries at such date, but excluding (a) the current portion of any Funded Debt of the Borrower and its Restricted Subsidiaries and (b) without duplication of clause (a) above, all Indebtedness consisting of revolving loans under the First Lien Loan Documents to the extent otherwise included therein. "Consolidated EBITDA": for any period (a) net income or (loss) of the Borrower and its Restricted Subsidiaries on a consolidated basis for such period determined in accordance with GAAP without giving effect to extraordinary gains and losses from sales, exchanges and other dispositions of property not in the ordinary course of business, and nonrecurring items and excluding from the calculation of net income all revenues from any Excluded Subsidiary except to the extent received by the Borrower or any Restricted Subsidiary in cash as a loan repayment, dividend or other distribution, plus, to the extent deducted in calculating net income for such period, (b) the sum of, without duplication, (i) depreciation expense of the Borrower and its Restricted Subsidiaries, (ii) amortization expense of the Borrower and its Restricted Subsidiaries, (iii) Consolidated Interest Expense plus the non-cash portion of consolidated interest expense on Consolidated Funded Debt, (iv) income tax expense of the Borrower and its Restricted Subsidiaries, (v) non-cash expenses associated with the Phantom Stock Plan, (vi) other non-cash items of the Borrower and its Restricted Subsidiaries, and (vii) non-recurring expenses incurred in connection with the consummation of the transactions contemplated by the Loan Documents, the repayment of obligations outstanding under, and the termination of, the Existing Credit Agreement, the tender offer and consent solicitation with respect to, and the redemption of, the Senior Subordinated Notes and the exchange of the Series A Preferred Stock for, and the issuance of, the New Junior Subordinated Notes; provided that, for the fiscal quarters of the Borrower ended January 2004, April 2004 and July 2004, "Consolidated EBITDA" shall be deemed to be $16,204,000, $54,969,000 and $(14,335,000), respectively. 5 "Consolidated Funded Debt" means, as of each date of determination, without duplication (a) all Indebtedness for borrowed money of the Borrower and its Restricted Subsidiaries on that date (including all Capital Lease Obligations), (b) the aggregate amount available for drawing under all letters of credit outstanding on that date for which the Borrower or any Restricted Subsidiary is the account party (excluding, however, the aggregate amount available for drawing under letters of credit issued to lenders and lessors of Indebtedness of the type described in clause (a) in support of such Indebtedness), and (c) the aggregate amount drawn under all letters of credit for which the Borrower or any Restricted Subsidiary is the account party and for which the issuer of such letters of credit has not been reimbursed on that date. "Consolidated Interest Expense" shall mean the cash portion of consolidated interest expense (including commitment and letter of credit fees) on Consolidated Funded Debt, as determined in accordance with GAAP. "Consolidated Net Income": for any period, the consolidated net income (or loss) of the Borrower and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary of the Borrower) in which the Borrower or any of its Restricted Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Restricted Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary. "Consolidated Working Capital": at any date, the excess of Consolidated Current Assets on such date over Consolidated Current Liabilities on such date. "Continuing Directors" means, as of any date of determination, any member of the board of directors of the Borrower who (i) was a member of the board of directors on the date of this Agreement or (ii) was nominated for election to the board of directors by the Permitted Holders or with the approval of at least two-thirds of the Continuing Directors who were members of the board of directors at the time of such nomination or election. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Control Investment Affiliate": as to any Person, any other Person that (a) directly or indirectly, is in control of, is controlled by, or is under common control with, such Person and (b) is organized by such Person primarily for the purpose of making equity or debt investments in one or more companies. For purposes of this definition, "control" of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "CSFB": as defined in the preamble hereto. "Default": any of the events specified in Section 7, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied. 6 "Desktop Appraisal": an appraisal of the fair market value of property and business, performed by an Independent Appraiser without conducting a site visit to such property or business, using the evaluation methodology outlined in the definition of "Appraised Value". "Disposition": with respect to any property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof. The terms "Dispose" and "Disposed of" shall have correlative meanings. "Dollars" and "$": dollars in lawful currency of the United States. "Domestic Subsidiary": any Subsidiary of the Borrower organized under the laws of any jurisdiction within the United States. "Environmental Laws": any and all laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating or imposing liability or standards of conduct concerning protection of human health, natural resources or the environment, as have been, are now or at any time hereafter are in effect. "Environmental Permits": any and all permits, licenses, approvals, registrations, notifications, exemptions and any other authorization required under any Environmental Law, including for the avoidance of doubt the Forest Service Permits. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurocurrency Reserve Requirements": for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves) under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board) maintained by a member bank of the Federal Reserve System. "Eurodollar Base Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate screen (or otherwise on such screen), the "Eurodollar Base Rate" shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be reasonably selected by the Administrative Agent. "Eurodollar Loans": Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "Eurodollar Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): Eurodollar Base Rate -------------------------------------------------------- 1.00 - Eurocurrency Reserve Requirements 7 "Eurodollar Tranche": the collective reference to Eurodollar Loans under a particular Facility the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day). "Event of Default": any of the events specified in Section 7, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied. "Excess Cash Flow": for any fiscal year of the Borrower, the excess, if any, of (a) the sum, without duplication, of (i) Consolidated Net Income for such fiscal year, (ii) the amount of all non-cash charges (including depreciation and amortization) deducted in arriving at such Consolidated Net Income (in each case, determined in accordance with GAAP), (iii) decreases in Consolidated Working Capital for such fiscal year, and (iv) the aggregate net amount of non-cash loss on the Disposition of property by the Borrower and its Restricted Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business), to the extent deducted in arriving at such Consolidated Net Income over (b) the sum, without duplication, of (i) the amount of all non-cash credits included in arriving at such Consolidated Net Income (in each case, determined in accordance with GAAP), (ii) the aggregate amount actually paid by the Borrower and its Restricted Subsidiaries (in cash during such fiscal year on account of Capital Expenditures (excluding the principal amount of Indebtedness incurred in connection with such expenditures and any such expenditures financed with the proceeds of any Reinvestment Deferred Amount), (iii) the aggregate amount of all prepayments of revolving loans under the First Lien Loan Documents during such fiscal year to the extent accompanying permanent optional reductions of the revolving commitments thereunder and all optional prepayments of the Loans and the First Lien Term Loans during such fiscal year, (iv) the aggregate amount of all regularly scheduled principal payments of Funded Debt (including the Loans and the First Lien Term Loans) of the Borrower and its Restricted Subsidiaries made during such fiscal year (other than in respect of any revolving credit facility to the extent there is not an equivalent permanent reduction in commitments thereunder), (v) increases in Consolidated Working Capital for such fiscal year, (vi) the aggregate net amount of non-cash gain on the Disposition of property by the Borrower and its Restricted Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business), to the extent included in arriving at such Consolidated Net Income and (vii) non-recurring expenses incurred in connection with the consummation of the transactions contemplated by the Loan Documents and the First Lien Loan Documents, the repayment of obligations outstanding under the Existing Credit Agreement, the tender offer and consent solicitation with respect to, and the redemption of, the Senior Subordinated Notes and the exchange of the Series A Preferred Stock for, and the issuance of, the New Junior Subordinated Notes, to the extent deducted in arriving at such Consolidated Net Income. "Excluded Subsidiaries": (i) GSRP, Community Water Company, Ski Insurance Company, Uplands Water Company, Walton Pond Apartments, Inc. and their Subsidiaries, (ii) any Subsidiary formed for the purpose of receiving Investments as described in clause (j) of Section 6.8 and (iii) the Subsidiaries of the Borrower designated as Excluded Immaterial Subsidiaries on Schedule 1.1C or designated by the Borrower and approved in writing by the Administrative Agent after the date hereof as Excluded Immaterial Subsidiaries (the Subsidiaries described in this clause (iii), the "Excluded Immaterial Subsidiaries"), provided that any such Subsidiary shall cease to be an Excluded Immaterial Subsidiary if it at any time holds assets with a fair market value of greater than $1,000,000. "Existing Credit Agreement": the Credit Agreement, dated as of February 14, 2003, among the Borrower and the other borrowers party thereto, the lenders party thereto, and GECC, as administrative agent, as amended, supplemented or otherwise modified to the date hereof, together with all instruments and other agreements entered into by the Borrower or its Subsidiaries in connection therewith. 8 "Existing Junior Subordinated Note Indenture": the Indenture, dated as of August 31, 2001, between the Borrower and Oak Hill Capital Partners, L.P., as Trustee, as amended, supplemented or otherwise modified to the date hereof, together with all instruments and other agreements entered into by the Borrower or its Subsidiaries in connection therewith. "Existing Junior Subordinated Notes": the subordinated notes of the Borrower issued pursuant to the Junior Subordinated Note Indenture. "Federal Funds Effective Rate": for any day, the rate equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. "Fee Letter": as defined in Section 9.5. "First Lien Collateral Agent": as defined in the Intercreditor Agreement. "First Lien Credit Agreement": the First Lien Credit Agreement, dated as of the date hereof, among the Restricted Group Members, the lenders party thereto, GECC, as administrative agent and collateral agent, and the other agents party thereto, as such agreement may be refinanced, extended, renewed, restructured or replaced in accordance with the terms hereof and of the Intercreditor Agreement. "First Lien Debt": (a) the extensions of credit to the Restricted Group Members pursuant to the First Lien Credit Agreement and (b) Guarantee Obligations of the Guarantors in respect thereof. "First Lien Facilities Event of Default": an "Event of Default" under the First Lien Loan Documents. "First Lien Loan Documents": any agreement or instrument (including any credit agreement, guarantee, security agreement or mortgage) entered into by Borrower or any of its Subsidiaries in connection with the First Lien Debt. "First Lien Loans": the term loans made under the First Lien Credit Agreement. "Foreign Subsidiary": any Subsidiary of the Borrower that is not a Domestic Subsidiary. "Forest Service Permits": any and all permits, licenses, approvals, registrations, notifications, exemptions and any other authorization, including for the avoidance of doubt Forest Service Term Special Use Permits, that are issued by, filed with, or granted, as the case may be, by the Forest Service of the United States Department of Agriculture or by any similar state agency, with respect to any use of or conduct concerning any land or resources owned, managed, or under the jurisdiction of such agency. "Forest Service Term Special Use Permits": the Term Special Use Permits issued by the Forest Service of the United States Department of Agriculture and listed on Schedule 3.24. "Fully Satisfied" shall mean, with respect to the Obligations as of any date, that, on or before such date, (a) the principal of and interest accrued to such date on such Obligations shall have been paid in full in cash and (b) all fees, expenses and other amounts then due and payable which constituted Obligations shall have been paid in full in cash. 9 "Funded Debt": as to any Person, all Indebtedness of such Person that matures more than one year from the date of its creation or matures within one year from such date but is renewable or extendible, at the option of such Person, to a date more than one year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year from such date, including all current maturities and current sinking fund payments in respect of such Indebtedness whether or not required to be paid within one year from the date of its creation and, in the case of the Borrower, Indebtedness in respect of the Loans. "Funding Office": the office of the Administrative Agent specified in Section 9.2 or such other office as may be specified from time to time by the Administrative Agent as its funding office by written notice to the Borrower and the Lenders. "GAAP": generally accepted accounting principles in the United States as in effect from time to time, except that for purposes of Section 6.1, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements referred to in Section 3.1. In the event that any "Accounting Change" (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then the Borrower and the Administrative Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to reflect equitably such Accounting Changes with the desired result that the criteria for evaluating the Borrower's financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made. Until such time as such an amendment shall have been executed and delivered by the Borrower, the Administrative Agent and the Required Lenders, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Changes had not occurred. "Accounting Changes" refers to changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC. "GECC": as defined in the preamble hereto. "Governmental Authority": any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization (including the National Association of Insurance Commissioners). "Group Members": the collective reference to the Borrower and its Subsidiaries. "GSRP": Grand Summit Resort Properties, Inc., a Maine corporation. "Guarantee and Collateral Agreement": the Guarantee and Collateral Agreement to be executed and delivered by the Borrower and each Guarantor, substantially in the form of Exhibit A. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation, including a reimbursement, counterindemnity or similar obligation, of the guaranteeing person that guarantees or in effect guarantees, or which is given to induce the creation of a separate obligation by another Person (including any bank under any letter of credit) that guarantees or in effect guarantees, any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, 10 (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "Guarantor": each Restricted Subsidiary of the Borrower. "Indebtedness": of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than current trade payables incurred in the ordinary course of such Person's business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under or in respect of acceptances, letters of credit, surety bonds or similar arrangements, (g) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any Capital Stock of such Person, (h) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above, (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation, and (j) for the purposes of Section 7(e) only, all obligations of such Person in respect of Swap Agreements. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor. "Independent Appraiser": an independent appraiser with appraisal experience in the ski resort business who is not employed by the Borrower, the Administrative Agent or any Lender or any of their respective Affiliates and who has been approved by the Administrative Agent; provided, however, that no independent appraiser shall be prevented from acting as an "Independent Appraiser" or be prevented from rendering services to ASC unrelated to those arising under this Agreement solely because such independent appraiser was used or will be used by the Borrower in the future for services unrelated to those arising under this Agreement, so long as the Borrower has given the Administrative Agent notice of such unrelated services performed or to be performed by such Independent Appraiser. 11 "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. "Intellectual Property": the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom. "Intercreditor Agreement": the Intercreditor Agreement to be executed and delivered by the Restricted Group Members, the Collateral Agent and the First Lien Collateral Agent (as defined in such Agreement), substantially in the form of Exhibit I. "Interest Payment Date": (a) as to any ABR Loan, the 15th day of each April, July, October and January to occur while such Loan is outstanding and the final maturity date of such Loan, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day that is three months, or a whole multiple thereof, after the first day of such Interest Period, and the last day of such Interest Period and (d) as to any Loan, the date of any repayment or prepayment made in respect thereof. "Interest Period": as to any Eurodollar Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six (or, if agreed to by all Lenders, nine or twelve) months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the then current Interest Period applicable to such Eurodollar Loan and ending one, two, three or six (or, if agreed to by all Lenders, nine or twelve) months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not later than 11:00 A.M., New York City time, on the date that is three Business Days prior to the last day of the then current Interest Period applicable thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (ii) the Borrower may not select an Interest Period that would extend beyond the date final payment is due on the Loans; (iii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; and (iv) the first Interest Period selected for any Loan shall be required to end on the last Business Day of a calendar month and the Borrower shall be permitted to select an initial Interest Period of less than one month's duration in order to satisfy this requirement. 12 "Investments": as defined in Section 6.8. "Junior Subordinated Notes": the Existing Junior Subordinated Notes and the New Junior Subordinated Notes. "Junior Subordinated Note Indentures": the Existing Junior Subordinated Note Indenture and the New Junior Subordinated Note Indenture. "Landlord Certificate": as defined in Section 4.1(k)(vi). "Lenders": as defined in the preamble hereto; provided that unless the context otherwise requires, each reference herein to the Lenders shall be deemed to include any Conduit Lender. "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing). "Loan":any loan made by any Lender pursuant to this Agreement. "Loan Documents": this Agreement, the Security Documents, the Notes, the Intercreditor Agreement and any amendment, waiver, supplement or other modification to any of the foregoing. "Loan Parties": each Group Member that is a party to a Loan Document. "LTM EBITDA": as defined in Section 6.1. "Material Adverse Effect": a material adverse effect on (a) the business, property, operations, condition (financial or otherwise) or prospects of the Restricted Group Members taken as a whole, (b) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder or (c) the value of the Collateral. "Material Asset Sale": any Disposition of property or series of related Dispositions of property (excluding any such Disposition permitted by clause (a), (b), (c), (d), (f) or (h) of Section 6.5) that yields gross proceeds to the Borrower or any of its Restricted Subsidiaries in excess of $500,000, provided that a disposition of Non-Operating Assets permitted by clause (e) of Section 6.5, shall constitute a Material Asset Sale solely to the extent that permission to make such Disposition is granted pursuant to the proviso to such clause (e). "Materials of Environmental Concern": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products, polychlorinated biphenyls, urea formaldehyde insulation, asbestos, molds, pollutants, contaminants, radioactivity, and any substances of any kind, in each case to the extent regulated pursuant to or that could give rise to liability under any Environmental Law. "Mortgaged Properties": the real properties listed on Part A of Schedule 1.1B, as to which (or as to interests in which) the Collateral Agent for the benefit of the Administrative Agent and the Lenders shall be granted a Lien pursuant to the Mortgages as required by Section 3.19(b). 13 "Mortgages": each of the mortgages and deeds of trust made by any Loan Party in favor of, or for the benefit of, the Collateral Agent for the benefit of the Administrative Agent and the Lenders, substantially in the form of Exhibit D (with such changes thereto as shall be advisable under the law of the jurisdiction in which such mortgage or deed of trust is to be recorded). "Multiemployer Plan": a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds": (a) in connection with any Material Asset Sale (including a Material Asset Sale made in compliance with the proviso to clause (e) of Section 6.5) or other Disposition or any Recovery Event, the proceeds thereof in the form of cash (including any such proceeds received by way of a permitted deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but only as and when received) of such Disposition or Recovery Event (including any cash received upon the Disposition of any a permitted non-cash consideration received upon such Disposition), net of reasonable attorneys' fees, accountants' fees, investment banking fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset that is the subject of such Disposition or Recovery Event (other than any Lien pursuant to a Security Document) and other reasonable and customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (b) in connection with any issuance or sale of Capital Stock or any incurrence of Indebtedness, the cash proceeds received from such issuance or incurrence, net of reasonable attorneys' fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other reasonable and customary fees and expenses actually incurred in connection therewith. "New Junior Subordinated Notes": junior subordinated notes of the Borrower having terms consistent with those set forth on Schedule 1.1E and otherwise containing terms reasonably satisfactory to the Agents. "New Junior Subordinated Note Indenture": the indenture entered into by the Borrower in connection with the New Junior Subordinated Notes. "Non-Excluded Taxes": as defined in Section 2.14(a). "Non-Operating Assets": (a) unused or obsolete inventory and equipment, (b) real property specified on Part I of Schedule 1.1G which is not currently used or contemplated to be used in ski resort operations of the Borrower (or, to the extent so used, for which the Borrower retains a perpetual easement for such use), (c) the assets comprising the Haystack ski area, (d) any asset consisting of commercial or base lodge space generally used for administrative, retail, or skier service purposes (but not consisting of Ski Terrain) and specified on Part II of Schedule 1.1G which the Borrower certifies to the Administrative Agent at the time of sale (i) will be replaced within twelve (12) months from the sale date (x) by the Borrower with the applicable Non-Operating Asset Sale Proceeds, or (y) by the purchaser as a contractual obligation under the applicable sale documents, and (ii) may be temporarily unavailable during the period from the sale date to the time of completion of the replacement thereof pursuant to clause (i) above, or temporarily replaced during such period, without materially affecting the Borrower's operations or access to any portion of the Ski Terrain and (e) other assets of the Restricted Group Members not listed on Schedule 1.1G which otherwise meet the requirements of clause (b) or (d) of this definition, provided that the sales price of such assets does not exceed $100,000 for any such asset individually or $500,000 in the aggregate in any fiscal year. It is agreed that Schedule 1.1G shall not be effective (and thus sales of Non-Operating Assets specified on such Schedule shall not be permitted) until the date such schedule is approved by the Required Lenders in the form in which originally delivered or as subsequently revised as requested by the Required Lenders (and the Required Lenders shall use commercially reasonable efforts to approve such schedule on or prior to the 30th day after the Closing Date). 14 "Non-Operating Asset Sale Proceeds": as defined in Section 6.1(a). "Non-U.S. Lender": as defined in Section 2.14(d). "Notes": the collective reference to any promissory note evidencing Loans. "Oak Hill": Oak Hill Capital Partners, L.P., a Delaware limited partnership, Oak Hill Securities Fund, L.P., a Delaware limited partnership, and their respective Control Investment Affiliates. "Obligations": the unpaid principal of and interest on (including interest accruing after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of the Borrower to the Administrative Agent or to any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise. "Operating Assets": assets of the Borrower and its Restricted Subsidiaries other than Non-Operating Assets. "Other Taxes": any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document. "Participant": as defined in Section 9.6(c). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "Percentage": as to any Lender at any time, the percentage which such Lender's Commitment then constitutes of the aggregate Commitments (or, at any time after the Closing Date, the percentage which the aggregate principal amount of such Lender's Loans then outstanding constitutes of the aggregate principal amount of the Loans then outstanding). "Permitted Holder": Oak Hill. "Person": an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Phantom Stock Plan": the American Skiing Company Phantom Equity Plan dated as of December 1, 2001, as amended, supplemented or otherwise modified from time to time. 15 "Plan": at a particular time, any employee benefit plan that is subject to ERISA and in respect of which the Borrower or any Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Preferred Stock": the Borrower's 8.5% Series B Convertible Participating Preferred Stock, the Borrower's 12% Series C-1 Convertible Participating Preferred Stock, the Borrower's 15% Series C-2 Preferred Stock and the Borrower's Series D Participating Preferred Stock, collectively. "Prime Rate": for any day, a floating rate equal to the rate publicly quoted from time to time by The Wall Street Journal as the "base rate on corporate loans posted by at least 75% of the nation's 30 largest banks" (or, if The Wall Street Journal ceases quoting a base rate of the type described, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled "Selected Interest Rates" as the Bank prime loan rate or its equivalent). "Projections": as defined in Section 5.2(b). "Purchase Money Indebtedness": as defined in Section 6.2(c). "Recovery Event": any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of the Borrower or any Restricted Subsidiary. "Register": as defined in Section 9.6(b). "Regulation U": Regulation U of the Board as in effect from time to time. "Reinvestment Deferred Amount": with respect to any Reinvestment Event, the aggregate Net Cash Proceeds received by any Restricted Group Member in connection therewith that are not applied to prepay Loans pursuant to Section 2.6(a) as a result of the delivery of a Reinvestment Notice. "Reinvestment Event": any Recovery Event in respect of which the Borrower has delivered a Reinvestment Notice. "Reinvestment Notice": a written notice executed by a Responsible Officer stating that no Event of Default has occurred and is continuing and that the Borrower (directly or indirectly through a Subsidiary) intends and expects to use all or a specified portion of the Net Cash Proceeds of a Recovery Event to acquire or repair assets useful in the business of a Restricted Group Member (such business as permitted pursuant to Section 6.15). "Reinvestment Prepayment Amount": with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended prior to the relevant Reinvestment Prepayment Date (in accordance with Section 6.7, as applicable) to acquire or repair assets useful in the business of a Restricted Group Member (such business as permitted pursuant to Section 6.15). "Reinvestment Prepayment Date": with respect to any Reinvestment Event, the earlier of (a) the date occurring one year after such Reinvestment Event and (b) the date on which the Borrower shall have determined not to, or shall have otherwise ceased to, acquire or repair assets useful in the Borrower's business (such business as permitted pursuant to Section 6.15) with all or any portion of the relevant Reinvestment Deferred Amount. 16 "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. ss. 4043. "Required Lenders": at any time, the holders of more than 50% of (a) until the Closing Date, the Commitments then in effect and (b) thereafter, the aggregate unpaid principal amount of the Loans then outstanding. "Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer": the chief executive officer, president or chief financial officer of the Borrower, but in any event, with respect to financial matters, the chief financial officer of the Borrower. "Restricted Group Members": the collective reference to the Borrower and its Restricted Subsidiaries. "Restricted Payments": as defined in Section 6.6. "Restricted Subsidiary": each Subsidiary of the Borrower other than any Excluded Subsidiary. "SEC": the Securities and Exchange Commission, any successor thereto and any analogous Governmental Authority. "Security Documents": the collective reference to the Guarantee and Collateral Agreement, the Mortgages, the Intercreditor Agreement and all other security documents hereafter delivered to the Collateral Agent granting a Lien on any property of any Person to secure the obligations and liabilities of any Loan Party under any Loan Document. "Senior Subordinated Note Indenture": the Indenture, dated as of June 28, 1996, between the Borrower and U.S. Trust Company of New York, as Trustee, as amended, supplemented or otherwise modified to the date hereof, together with all instruments and other agreements entered into by the Borrower or its Subsidiaries in connection therewith. "Senior Subordinated Notes": the subordinated notes of the Borrower issued pursuant to the Senior Subordinated Note Indenture. "Series A Preferred Stock": the 10.5% Repriced Convertible Exchangeable Preferred Stock of the Borrower. 17 "Single Employer Plan": any Plan that is subject to Title IV of ERISA, but that is not a Multiemployer Plan. "Ski Resort Properties": the ski resort properties of the Restricted Subsidiaries constituting part of the Collateral, known as Attitash Bear Peak, The Canyons, Killington/Pico, Mount Snow, Steamboat, Sugarloaf/USA and Sunday River, in each case excluding any Non-Operating Assets. "Ski Terrain": property used (or which is to be developed to be used) to conduct snow skiing operations, including terrain used for skiing and terrain used for supporting ski lift operations. "Solvent": when used with respect to any Person, means that, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person, as of such date, exceeds the amount of all "liabilities of such Person, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person, as of such date, is greater than the amount that will be required to pay the probable liability of such Person on its debts as such debts become absolute and matured, (c) such Person does not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person is able to pay its debts as they mature. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) 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, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "Specified Swap Agreement": any Swap Agreement entered into by any Restricted Group Member and any "Lender" under the First Lien Loan Documents or affiliate thereof in respect of interest rates. "Subsidiary": as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person, but with respect to any Restricted Group Member, excluding non-profit homeowners associations and resort village management associations controlled directly or indirectly by such Restricted Group Member. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Supermajority Lenders": at any time, the holders of more than 66 2/3% of (a) until the Closing Date, the Commitments then in effect and (b) thereafter, the aggregate unpaid principal amount of the Loans then outstanding. "Swap Agreement": any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or any of its Subsidiaries shall be a "Swap Agreement". 18 "Syndication Agent": as defined in the preamble hereto. "Transferee": any Assignee or Participant. "Type": as to any Loan, its nature as an ABR Loan or a Eurodollar Loan. "United States": the United States of America. "Water Rights": rights to use water from surface sources, groundwater, or other water sources, whether such rights are conferred by statute, contract, common law or otherwise. "Wholly Owned Subsidiary": as to any Person, any other Person all of the Capital Stock of which (other than directors' qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries. 1.2. Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto. (b) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, (i) accounting terms relating to any Restricted Group Member not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP, (ii) the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation", (iii) the word "incur" shall be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words "incurred" and "incurrence" shall have correlative meanings), (iv) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, Capital Stock, securities, revenues, accounts, leasehold interests and contract rights, and (v) references to agreements or other Contractual Obligations shall, unless otherwise specified, be deemed to refer to such agreements or Contractual Obligations as amended, supplemented, restated or otherwise modified from time to time. (c) The words "hereof", "herein" and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION II.AMOUNT AND TERMS OF COMMITMENTS 2.1. Commitments. Subject to the terms and conditions hereof, each Lender severally agrees to make a term loan (a "Loan") to the Borrower on the Closing Date in an amount equal to the amount of the Commitment of such Lender. The Loans may from time to time be Eurodollar Loans or ABR Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 2.7. 2.2. Procedure for Borrowing. The Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, one Business Day prior to the 19 anticipated Closing Date) requesting that the Lenders make the Loans on the Closing Date. The Loans made on the Closing Date shall initially be ABR Loans and, unless otherwise agreed by the Administrative Agent in its sole discretion, no Loan may be converted into or continued as a Eurodollar Loan having an Interest Period in excess of one month prior to the date that is 60 days after the Closing Date. Upon receipt of such notice the Administrative Agent shall promptly notify each Lender thereof. Not later than 12:00 Noon, New York City time, on the Closing Date each Lender shall make available to the Administrative Agent at the Funding Office an amount in immediately available funds equal to the Loan to be made by such Lender. The Administrative Agent shall credit the account of the Borrower on the books of such office of the Administrative Agent with the aggregate of the amounts made available to the Administrative Agent by the Lenders in immediately available funds. 2.3. Repayment of Term Loans. The Borrower shall repay all outstanding Loans on November 24, 2011. 2.4. Fees, etc. The Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the dates as set forth in any fee agreements with the Administrative Agent and to perform any other obligations contained therein. 2.5. Optional Prepayments. The Borrower may at any time and from time to time prepay the Loans, in whole or in part, without premium (except as specified below) or penalty, upon irrevocable notice delivered by the Borrower to the Administrative Agent no later than 11:00 A.M., New York City time, three Business Days prior thereto, in the case of Eurodollar Loans, and no later than 11:00 A.M., New York City time, one Business Day prior thereto, in the case of ABR Loans, which notice shall specify the date and amount of prepayment and whether the prepayment is of Eurodollar Loans or ABR Loans; provided, that if a Eurodollar Loan is prepaid on any day other than the last day of the Interest Period applicable thereto, the Borrower shall also pay any amounts owing pursuant to Section 2.15; and, provided, further, that each optional prepayment made on or prior to the first anniversary of the Closing Date shall be accompanied by payment of a fee in an amount equal to 3% of the principal amount prepaid, each optional prepayment made subsequent to the first anniversary of the Closing Date and on or prior to the second anniversary of the Closing Date shall be accompanied by payment of a fee in an amount equal to 2% of the principal amount prepaid and each optional prepayment made subsequent to the second anniversary of the Closing Date and on or prior to the third anniversary of the Closing Date shall be accompanied by prepayment of a fee in an amount equal to 1% of the principal amount prepaid. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid. Partial prepayments shall be in an aggregate principal amount of $500,000 or a whole multiple of $100,000 in excess thereof. 2.6. Mandatory Prepayments. (a) If any Capital Stock or Indebtedness shall be issued or incurred by any Restricted Group Member (excluding any Indebtedness incurred in accordance with Section 6.2), then, except to the extent such amounts have been applied to prepay the First Lien Term Loans, an amount equal to 50% (in the case of Capital Stock) or 100% (in the case of Indebtedness) of the Net Cash Proceeds thereof shall be offered on the date of such issuance or incurrence to the Lenders as a prepayment of the Loans in accordance with paragraphs (d) and (e) of Section 2.6. (b) If on any date the Borrower or any Restricted Subsidiary shall receive Net Cash Proceeds from any Material Asset Sale or any Recovery Event then, if no First Lien Term Loans or revolving commitments under the First Lien Loan Documents remain outstanding, and unless a Reinvestment Notice shall be delivered in respect thereof (provided that no Reinvestment Notice may be delivered in respect of the Net Cash Proceeds of a Material Asset Sale described in the proviso to clause (e) of Section 6.5), such Net Cash Proceeds shall be offered on such date to the Lenders as a prepayment of the Loans as set forth in paragraphs (d) and (e) of Section 2.6; provided, that, notwithstanding the foregoing, on each Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event shall be offered to the Lenders as a prepayment of the Loans in accordance with paragraphs (d) and (e) of Section 2.6. 20 (c) If, for any fiscal year of the Borrower, commencing with the fiscal year ending July 31, 2005, there shall be Excess Cash Flow, then, except to the extent such amount shall have been applied to prepay the First Lien Term Loans in accordance with the mandatory prepayment provisions of the First Lien Credit Agreement, the Borrower shall, on the relevant Excess Cash Flow Application Date, offer to the Lenders an amount equal to 50% of such Excess Cash Flow as a prepayment of the Loans as set forth in Section 2.6(d) and (e). Such prepayment shall be made on a date (an "Excess Cash Flow Application Date") no later than December 31 of the subsequent fiscal year. (d) With respect to the amount of any mandatory prepayment offer required pursuant to paragraph (a), (b) or (c) of this Section (such amount, the "Prepayment Amount"), the Borrower will, on or prior to the date specified in this Section 2.6 for such offer, give the Administrative Agent telephonic notice (promptly confirmed in writing) requesting that the Administrative Agent prepare and provide to each Lender a notice (each, a "Prepayment Option Notice") in accordance with the following sentence. As promptly as practicable after receiving such notice from the Borrower, the Administrative Agent will send to each Lender a Prepayment Option Notice, which shall be in the form of Exhibit I and shall include (i) an offer (the "Offer") by the Borrower to prepay on the date (each, a "Mandatory Prepayment Date") that is 10 Business Days after the date of the Prepayment Option Notice, the Loans of such Lender by an amount equal to the portion of the Prepayment Amount indicated in such Lender's Prepayment Option Notice as being allocable to such Lender's Loans (with such portion allocable to such Lender being equal to its Percentage of the Prepayment Amount) and (ii) an additional offer (the "Additional Offer") to prepay on the Mandatory Prepayment Date, from the portion, if any, of the Prepayment Amount allocable to Lenders which do not accept the Offer, the Loans of such Lender by an amount equal to the lesser of (x) such Lender's then outstanding Loan (after deducting therefrom the amount allocable to the prepayment thereof as a result of such Lender's acceptance of the Offer) and (y) a maximum amount specified by such Lender in its acceptance of the Additional Offer. Each Lender shall accept or reject such Offer and such Additional Offer in accordance with the terms of the Prepayment Option Notice received by it (and a failure to respond to such Prepayment Option Notice within the required timeframe shall be deemed to be an acceptance of such Offer and Additional Offer), it being understood that no Lender may accept the Additional Offer made to it unless it accepts the Offer made to it. On the Mandatory Prepayment Date, the Borrower shall pay to the Administrative Agent, for the benefit of each Lender which has accepted the Offer, (i) the prepayment amount specified in the Offer made to it and (ii) if such Lender has also accepted the Additional Offer, such Lender's ratable share (based upon the respective amounts accepted by each Lender accepting the Additional Offer made to it) of the amounts specified in the Offers made to Lenders, if any which reject the Offers made to them. (e) The application of any prepayment pursuant to this Section 2.6 shall be made, first to ABR Loans and, second, to Eurodollar Loans, in each case in accordance with Section 2.12(b). Each prepayment of the Loans under this Section shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid. 2.7. Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurodollar Loans to ABR Loans by the Borrower giving the Administrative Agent prior irrevocable notice of such election no later than 11:00 A.M., New York City time, on the Business Day preceding the proposed conversion date. The Borrower may elect from time to time to convert ABR Loans to Eurodollar Loans by the Borrower giving the Administrative Agent prior irrevocable notice of such election no later than 11:00 A.M., New York City time, on the third Business Day preceding the proposed conversion date (which notice shall specify the length of the initial Interest Period therefor), provided that no ABR Loan may be converted into a Eurodollar Loan when any Event 21 of Default has occurred and is continuing and the Administrative Agent or the Required Lenders have determined in its or their sole discretion not to permit such conversion. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. (b) Any Eurodollar Loan may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving irrevocable notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in Section 1.1, of the length of the next Interest Period to be applicable to such Loan, provided that no Eurodollar Loan may be continued as such when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Lenders have determined in its or their sole discretion not to permit such continuations, and provided, further, that if the Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso such Loans shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. 2.8. Limitations on Eurodollar Tranches. Notwithstanding anything to the contrary in this Agreement, all borrowings, conversions and continuations of Eurodollar Loans and all selections of Interest Periods shall be in such amounts and be made pursuant to such elections so that, (a) after giving effect thereto, the aggregate principal amount of the Eurodollar Loans comprising each Eurodollar Tranche shall be equal to $2,500,000 or a whole multiple of $500,000 in excess thereof and (b) no more than ten Eurodollar Tranches shall be outstanding at any one time. 2.9. Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin. (b) Each ABR Loan shall bear interest at a rate per annum equal to the ABR plus the Applicable Margin. (c) At the option of the Required Lenders (which option shall be deemed exercised automatically if an Event of Default specified in clause (i) or (ii) of paragraph (f) of Section VII has occurred with respect to the Borrower, if any Event of Default shall occur and be continuing, all outstanding Loans (whether or not overdue) shall bear interest during such continuance at a rate per annum equal to the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section plus 2%. (d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable from time to time on demand. 2.10. Computation of Interest and Fees. (a) Interest and fees payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to ABR Loans the rate of interest on which is calculated on the basis of the Prime Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the ABR or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change in interest rate. 22 (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.9(a). 2.11. Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (i) the Administrative Agent shall have determined (which determination, in the absence of manifest error, shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (ii) the Administrative Agent shall have received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as ABR Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be converted, on the last day of the then-current Interest Period, to ABR Loans. Until such notice has been withdrawn by the Administrative Agent (and the Administrative Agent hereby agrees that it shall promptly withdraw such notice when the circumstances giving rise to such notice are no longer continuing), no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Loans to Eurodollar Loans. 2.12. Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Lenders hereunder and each payment by the Borrower on account of any fee shall be made pro rata according to the respective Percentages of the Lenders. (b) Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Loans shall be made pro rata according to the respective Percentages of the Loans then held by the Lenders (except as otherwise provided in Section 2.6(b)). (c) All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, are absolute and unconditional, shall be made without setoff or counterclaim or rescission or defense for any reason and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders, at the Funding Office, in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the Lenders promptly upon receipt in like funds as received. If any payment hereunder (other than in respect of Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate during such extension. 23 (d) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon, at a rate equal to the Federal Funds Effective Rate, for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this paragraph shall be conclusive in the absence of manifest error. If such Lender's share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days after such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to ABR Loans under the relevant Facility, on demand, from the Borrower. If such amounts are received by the Administrative Agent from the Borrower, the applicable Lender shall have no obligations to make payment to the Administrative Agent under this clause (e); provided that this sentence shall not relieve such Lender from any liability of such Lender to the Borrower resulting from any breach by such Lender of its obligations to the Borrower under this Agreement. (e) Unless the Administrative Agent shall have been notified in writing by the Borrower prior to the date of any payment due to be made by the Borrower hereunder that the Borrower will not make such payment to the Administrative Agent, the Administrative Agent may assume that the Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such assumption, make available to the Lenders their respective pro rata shares of a corresponding amount. If such payment is not made to the Administrative Agent by the Borrower within three Business Days after such due date, the Administrative Agent shall be entitled to recover, on demand, from each Lender to which any amount which was made available pursuant to the preceding sentence, such amount with interest thereon at the rate per annum equal to the daily average Federal Funds Effective Rate. Nothing herein shall be deemed to limit the rights of the Administrative Agent or any Lender against the Borrower. 2.13. Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by Section 2.14 and changes in the rate of tax on the overall net income of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender that is not otherwise included in the determination of the Eurodollar Rate; or (iii) shall impose on such Lender any other condition; 24 and the result of any of the foregoing is to increase the cost to such Lender, by an amount that such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable as reasonably determined by such Lender. If any Lender becomes entitled to claim any additional amounts pursuant to this paragraph, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount reasonably deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a written request therefor, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction. (c) Any such claim made under Section 2.13(a) or (b) shall be accompanied by a certificate setting forth the basis of such claim in reasonable detail. A certificate as to any additional amounts payable pursuant to this Section submitted by any Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. Notwithstanding anything to the contrary in this Section, the Borrower shall not be required to compensate a Lender pursuant to this Section for any amounts incurred more than nine months prior to the date that such Lender notifies the Borrower of such Lender's intention to claim compensation therefor; provided that, if the circumstances giving rise to such claim have a retroactive effect, then such nine-month period shall be extended to include the period of such retroactive effect. The obligations of the Borrower pursuant to this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.14. Taxes. (a) All payments made by the Borrower under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding (i) net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document) and (ii) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (i) above. If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") or Other Taxes are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder, the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Lender's failure to comply with the requirements of paragraph (d) or (e) of this Section or (ii) that are United 25 States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement, except to the extent that such Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph. (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of the relevant Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. (d) Each Lender (or Transferee) that is not a "U.S. Person" as defined in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a statement substantially in the form of Exhibit F and a Form W-8BEN, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant to this paragraph that such Non-U.S. Lender is not legally able to deliver. (e) A Lender (or Transferee) that is entitled to an exemption from or reduction of non-U.S. withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent) (or, in the case of a Participant, to the Lender from which the related participant shall have been purchased), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate, provided that such Lender is legally entitled to complete, execute and deliver such documentation and in such Lender's judgment such completion, execution or submission would not materially prejudice the legal position of such Lender. (f) If the Administrative Agent or a Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay 26 over such refund to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that the Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This Section shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to the Borrower or any other Person. (g) The agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.15. Indemnity. The Borrower agrees to indemnify each Lender for, and to hold each Lender harmless from, any loss or expense that such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment of or conversion from Eurodollar Loans after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurodollar Loans or a conversion of Eurodollar Loans into ABR Loans on a day that is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amount so prepaid or converted, or not so borrowed, converted or continued, for the period from the date of such prepayment or conversion or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. A certificate as to any amounts payable pursuant to this Section submitted to the Borrower by any Lender shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.16. Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 2.13 or 2.14(a) with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal or regulatory disadvantage, and provided, further, that nothing in this Section shall affect or postpone any of the obligations of the Borrower or the rights of any Lender pursuant to Section 2.13 or 2.14(a). 2.17. Replacement of Lenders. The Borrower shall be permitted to replace any Lender that (a) requests reimbursement for amounts owing pursuant to Section 2.13 or 2.14(a), (b) defaults in its obligation to make Loans hereunder and does not cure such default within five Business Days or (c) that has refused to consent to any waiver or amendment with respect to any Loan Document that has been consented to by the Required Lenders, with a replacement financial institution; provided that (i) such replacement does not conflict with any Requirement of Law, (ii) no Event of Default shall have occurred and be 27 continuing at the time of such replacement, (iii) prior to any such replacement pursuant to clause (a) above, such Lender shall not have used reasonable efforts in accordance with Section 2.16 so as to eliminate the continued need for payment of amounts owing pursuant to Section 2.13 or 2.14(a) and shall not have waived its rights to the payment of such amounts, (iv) the replacement financial institution shall purchase, at par, all Loans and other amounts owing to such replaced Lender on or prior to the date of replacement (and, if such replacement is pursuant to clause (c) above, all First Lien Term Loans and other amounts owing to such Lender on or prior to such date under the First Lien Loan Documents), (v) the Borrower shall be liable to such replaced Lender under Section 2.15 if any Eurodollar Loan owing to such replaced Lender shall be purchased other than on the last day of the Interest Period relating thereto, (vi) the replacement financial institution, if not a Lender, an affiliate of a Lender or an Approved Fund, shall be reasonably satisfactory to the Administrative Agent, (vii) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of Section 9.6 (provided that (x) the Borrower shall be obligated to pay the registration and processing fee referred to therein and (y) the Administrative Agent shall have the right for such purpose to execute and deliver the relevant Assignment and Assumption on behalf of the replaced Lender), (viii) until such time as such replacement shall be consummated, the Borrower shall pay all additional amounts (if any) required pursuant to Section 2.13 or 2.14(a), as the case may be, and (ix) any such replacement shall not be deemed to be a waiver of any rights that the Borrower, the Administrative Agent or any other Lender shall have against the replaced Lender. SECTION III. REPRESENTATIONS AND WARRANTIES To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans, the Borrower hereby represents and warrants to the Administrative Agent and each Lender that: 3.1. Financial Condition. The audited consolidated balance sheets of the Borrower as at July 27, 2003 and July 25, 2004, and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from KPMG LLP, present fairly the consolidated financial condition of the Borrower as at such dates, and the consolidated results of its operations and its consolidated and consolidating cash flows for the respective fiscal years then ended. All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein). No Restricted Group Member has any material Guarantee Obligations, contingent liabilities and liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in this paragraph. Except as set forth on Schedule 3.1, during the period from July 26, 2004 to and including the date hereof there has been no Disposition by the Borrower or any Restricted Subsidiary of any material part of its business or property. 3.2. No Change. Since July 25, 2004, there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect. 3.3. Existence; Compliance with Law. Each Restricted Group Member (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except for any failure to be so qualified that could not reasonably be expected to have a Material Adverse Effect, and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 28 3.4. Power; Authorization; Enforceable Obligations. Each Restricted Group Member has the power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party, to obtain extensions of credit hereunder and grant the Liens under the Security Documents. Each Restricted Group Member has taken all necessary organizational action to authorize the execution, delivery and performance of the Loan Documents to which it is a party, to authorize the extensions of credit on the terms and conditions of this Agreement and to grant the Liens under the Security Documents. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the extensions of credit hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Loan Documents, except (i) consents, authorizations, filings and notices described in Schedule 3.4, which consents, authorizations, filings and notices have been obtained or made and are in full force and effect and (ii) the filings and acts referred to in Section 3.19. Each Loan Document has been duly executed and delivered on behalf of each Restricted Group Member party thereto. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of each Restricted Group Member party thereto, enforceable against each such Restricted Group Member in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 3.5. No Legal Bar. The execution, delivery and performance of this Agreement and the other Loan Documents, the issuance of Letters of Credit, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of any Restricted Group Member and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security Documents). Except as described on Schedule 3.5, no Requirement of Law or Contractual Obligation applicable to any Restricted Group Member could reasonably be expected to have a Material Adverse Effect. 3.6. Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of any Restricted Group Member, threatened by or against the Borrower or against any of their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) except as described on Schedule 4.6, that could reasonably be expected to have a Material Adverse Effect. 3.7. No Default. Except as described on Schedule 3.7, no Restricted Group Member is in default under or with respect to (a) the Junior Subordinated Notes or the Senior Subordinated Notes or (b) any of its other Contractual Obligations in any respect that, in the case of this clause (b), could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 3.8. Ownership of Property; Liens. Each Restricted Group Member has title in fee simple to, or a valid leasehold interest in, all its real property, other than real property with respect to which a valid Forest Service Permit is in effect, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by Section 6.3. 3.9. Intellectual Property. Each Restricted Group Member owns, or is licensed to use, all Intellectual Property necessary for the conduct of its business as currently conducted. No material claim has been asserted and is 29 pending by any Person challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property, nor does any Restricted Group Member know of any valid basis for any such claim, except, in either case, to the extent that such claim could not reasonably be expected to have a Material Adverse Effect. The use of Intellectual Property by any Restricted Group Member does not infringe on the rights of any Person in any material respect. 3.10. Taxes. Each Restricted Group Member has filed or caused to be filed all Federal, state and other material tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the relevant Restricted Group Member); no tax Lien has been filed that is not permitted by Section 6.3(a), and, to the knowledge of any Restricted Group Member, as of the Closing Date, no claim is being asserted, with respect to any such tax, fee or other charge. 3.11. Federal Regulations. No part of the proceeds of any Loans, and no other extensions of credit hereunder, will be used for "buying" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of the Regulations of the Board. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable, referred to in Regulation U. 3.12. Labor Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against any Restricted Group Member pending or, to the knowledge of any Restricted Group Member, threatened; (b) hours worked by and payment made to employees of any Restricted Group Member have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters; and (c) all payments due from any Restricted Group Member on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant Restricted Group Member. 3.13. ERISA. Neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by a material amount. Neither any Restricted Group Member nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan that has resulted or could reasonably be expected to result in a material liability under ERISA, and neither any Restricted Group Member nor any Commonly Controlled Entity would become subject to any material liability under ERISA if any Restricted Group Member or any Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. To the Restricted Group Members' knowledge, no Multiemployer Plan is in Reorganization or Insolvent. 3.14. Investment Company Act; Other Regulations. No Restricted Group Member is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. No Restricted Group Member is subject to regulation under any Requirement of Law 30 (other than Regulation X of the Board) that limits its ability to incur Indebtedness. 3.15. Subsidiaries. Except as disclosed to the Administrative Agent by any Restricted Group Member in writing from time to time after the Closing Date, (a) Schedule 3.15 sets forth the name and jurisdiction of incorporation of each Subsidiary and, as to each such Subsidiary, the percentage of each class of Capital Stock owned by any Restricted Group Member and (b) there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to employees or directors and directors' qualifying shares) of any nature relating to any Capital Stock of any Restricted Group Member, except as created by the Loan Documents or as described on Schedule 3.15. 3.16. Use of Proceeds. The proceeds of the Loans shall be used to repay amounts outstanding under the Existing Credit Agreement and to purchase or redeem Senior Subordinated Notes and to pay related fees and expenses. 3.17. Environmental Matters. Except as set forth on Schedule 3.17 or as, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) each Restricted Group Member: (i) is in compliance with all, and has not violated any, applicable Environmental Laws; (ii) holds all Environmental Permits (each of which is in full force and effect) and possesses all Water Rights required for any of its current or intended operations or for any property owned, leased, or otherwise operated by it; (iii) is in compliance with all, and has not violated any, of its Environmental Permits, and has not acted or failed to act in any way that could reasonably be expected to result in a diminution of its Water Rights; and (iv) reasonably believes that: each of its Environmental Permits will be timely renewed and complied with, and that its Water Rights and its ability to use its Water Rights as needed will be maintained, without its annual aggregate expenses for same exceeding its expenses for such renewal, compliance and maintenance during the fiscal year ended immediately prior to entering into this Agreement; any additional Environmental Permits that may be required of it will be timely obtained and complied with, without its annual aggregate expenses for same exceeding its expenses for such obtaining and complying during the fiscal year ended immediately prior to entering into this Agreement; and compliance with any Environmental Law that is or is expected to become applicable to it will be timely attained and maintained, without its annual aggregate expenses for same exceeding its expenses for such compliance during the fiscal year ended immediately prior to entering into this Agreement; (b) Materials of Environmental Concern are not present at, on, under, in, or about any real property now or formerly owned, leased or operated by any Restricted Group Member or at any other location (including any location to which Materials of Environmental Concern have been sent for re-use or recycling or for treatment, storage, or disposal) which could reasonably be expected to (i) give rise to liability of any Restricted Group Member under any applicable Environmental Law or otherwise result in costs to any Restricted Group Member, or (ii) interfere with any Restricted Group Member's continued operations, or (iii) impair the fair saleable value of any of the Mortgaged Properties for continued use as it has been used during the fiscal year ended immediately prior to entering into this Agreement, and as planned; (c) there is no judicial, administrative, or arbitral proceeding (including any notice of violation or alleged violation) under or relating to any Environmental Law, Environmental Permits, or Water Rights: (i) to which any Restricted Group Member is, or to the knowledge of any Restricted Group Member will become, a party that is pending or, to the knowledge of 31 any Restricted Group Member, threatened, or (ii) to the knowledge of any Restricted Group Member, affecting or that could reasonably be expected to affect any Restricted Group Member; (d) no Restricted Group Member has received any written request for information, or been notified that it is a potentially responsible party under or relating to the federal Comprehensive Environmental Response, Compensation, and Liability Act or any similar Environmental Law, or with respect to any Materials of Environmental Concern; (e) no Restricted Group Member has entered into or agreed to any consent decree, order, or settlement or other agreement, nor is subject to any judgment, decree, or order or other agreement, in any judicial, administrative, arbitral, or other forum, relating to compliance with or liability under any Environmental Law or Environmental Permits, or with respect to any Water Rights; and (f) no Restricted Group Member has assumed or retained, by contract or operation of law, any liabilities of any kind, fixed or contingent, known or unknown, under any Environmental Law or with respect to any Materials of Environmental Concern. 3.18. Accuracy of Information, etc. No statement or information contained in this Agreement, any other Loan Document, the Confidential Information Memorandum or any other document, certificate or statement furnished by or on behalf of any Restricted Group Member to the Administrative Agent or the Lenders, or any of them, for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contained as of the date such statement, information, document or certificate was so furnished (or, in the case of the Confidential Information Memorandum, as of the date of this Agreement), any untrue statement of a material fact or omitted to state a material fact necessary to make the statements contained herein or therein not misleading, in either case which has not been in the case of such statement, information, document or certificate delivered or made prior to the Closing Date corrected, supplemented or remedied by any subsequent statement, information, document or certificate made or delivered prior to the Closing Date to the same parties receiving such statement, information, document or certificate. The projections and pro forma financial information contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Restricted Group Members to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount. As of the Closing Date, there is no fact known to any Restricted Group Member that could reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents, in the Confidential Information Memorandum or in any other documents, certificates and statements furnished to the Administrative Agent and the Lenders for use in connection with the transactions contemplated hereby and by the other Loan Documents. 3.19. Security Documents. (a) The Guarantee and Collateral Agreement is effective to create in favor of the Collateral Agent, for the benefit of the Administrative Agent and the Lenders, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Stock described in the Guarantee and Collateral Agreement, when stock certificates representing such Pledged Stock are delivered to the First Lien Collateral Agent, together with related stock powers executed in blank, and in the case of the other Collateral described in the Guarantee and Collateral Agreement, when financing statements and other filings specified on Schedule 3.19(a) in appropriate form are filed in the offices specified on Schedule 3.19(a) (and, after the Closing Date, any additional filings required to be made by the Loan Documents are made and the other actions specified on Schedule 3.19(a) are taken), the Lien created by the Guarantee and Collateral Agreement 32 shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of any Restricted Group Member in such Collateral and the proceeds thereof, as security for the Obligations (as defined in the Guarantee and Collateral Agreement), in each case prior and superior in right to any other Person (except as provided in the Intercreditor Agreement and except, in the case of Collateral other than Pledged Stock, Liens permitted by Section 6.3). (b) Each of the Mortgages is effective to create in favor of the Collateral Agent, for the benefit of the Administrative Agent and the Lenders, a legal, valid and enforceable Lien on the Mortgaged Properties described therein and proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 3.19(b) (and, after the Closing Date, any additional filings required to be made by the Loan Documents are made), each such Mortgage shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Restricted Group Members in the Mortgaged Properties and the proceeds thereof, as security for the Obligations (as defined in the relevant Mortgage), in each case prior and superior in right to any other Person (except as provided in the Intercreditor Agreement and except Liens permitted by Section 6.3). Parts A and B of Schedule 1.1B list, as of the Closing Date, each parcel of owned real property and each leasehold interest in real property located in the United States and held by any Restricted Group Member. 3.20. Solvency. Each Restricted Group Member, both before and after giving effect to the incurrence of all Indebtedness and obligations being incurred under this Agreement, is Solvent. 3.21. Senior Indebtedness. The Obligations of each Restricted Group Member constitute "Designated Senior Debt" of the Borrower under and as defined in each Junior Subordinated Note Indenture and the Senior Subordinated Note Indenture, except to the extent such Obligations are held by an "Affiliate" (as defined in the applicable indenture) of the Borrower. The obligations of each Restricted Group Member under the Guarantee and Collateral Agreement constitute "Senior Debt" of such Restricted Group Member under and as defined in each Junior Subordinated Note Indenture and the Senior Subordinated Note Indenture, except to the extent such Obligations are held by an "Affiliate" (as defined in the applicable indenture) of the Borrower. 3.22. Regulation H. Except as set forth on Schedule 3.22, no Mortgage encumbers improved real property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968. 3.23. Certain Documents. The Restricted Group Members have delivered to the Administrative Agent a complete and correct copy of the Senior Subordinated Note Indenture, each Junior Subordinated Note Indenture and the Existing Credit Agreement, including any amendments, supplements or modifications with respect to any of the foregoing. 3.24. Forest Service Term Special Use Permits. The Forest Service Term Special Use Permits are listed on Schedule 3.24 are each held by at least one of the Restricted Group Members and constitute all the term special use permits issued by the Forest Service of the United States Department of Agriculture that are necessary or useful for the operations of any Restricted Group Member as conducted during the fiscal year ended immediately prior to entering into this Agreement and as planned to be operated. 3.25. Location. All material buildings, structures, fixtures, improvements, and other assets that constitute each of the respective Ski Resort Properties (including the lodge buildings, ski shelters, ski lifts, ski trails, snow making equipment, golf courses, parking lots, and maintenance buildings) are located entirely on land either (i) that is owned in fee simple by the applicable Restricted Group Member, (ii) leased by the applicable Restricted Group Member pursuant to a lease listed on Part B of Schedule 1.1B, (iii) subject to a recorded easement in favor of the applicable Restricted Group Member, or (iv) with respect to which a Forest Service Term Special Use Permit is in effect. 33 3.26. Water Rights. The Water Rights of the Restricted Group Members are sufficient for the ongoing ski operations of the Restricted Group Members. 3.27. Grand Summit Resort Properties, Inc. No Restricted Group Member is liable for any Indebtedness or other obligations of GSRP, nor has any Restricted Group Member provided any material support for any Indebtedness or other obligation of GSRP during the past four years other than indirectly through the making of lease payments with respect to commercial units of GSRP leased to such Restricted Group Member. SECTION IV. CONDITIONS PRECEDENT 4.1. Conditions to Loans. The agreement of each Lender to make the Loan requested to be made by it is subject to the satisfaction, prior to or concurrently with the making of such Loan on the Closing Date, of the following conditions precedent: (a) Credit Agreement; Guarantee and Collateral Agreement. The Administrative Agent shall have received (i) this Agreement, executed and delivered by the Administrative Agent, the Borrower and each initial Lender, (ii) the Guarantee and Collateral Agreement, executed and delivered by the Borrower and each Guarantor and (iii) an Acknowledgement and Consent in the form attached to the Guarantee and Collateral Agreement, executed and delivered by each Issuer (as defined therein), if any, that is an Excluded Subsidiary. (b) Intercreditor Agreement. The Administrative Agent shall have received the Intercreditor Agreement, executed and delivered by each Restricted Group Member and the First Lien Collateral Agent. (c) Financial Statements. The Lenders shall have received the financial statements and audit report described in the first sentence of Section 3.1, and such financial statements shall not, in the reasonable judgment of the Lenders, reflect any material adverse change in the consolidated financial condition of the Borrower, as reflected in the financial statements or projections contained in the Confidential Information Memorandum. (d) Approvals. All governmental and third party approvals (other than those covered by Section 4.1(k)(v)) necessary in connection with the transactions contemplated hereby shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent or otherwise impose adverse conditions on the financing contemplated hereby. (e) Lien Searches. The Administrative Agent shall have received the results of a recent lien search in each of the jurisdictions where assets of the Restricted Group Members are located, and such search shall reveal no liens on any of the assets of the Restricted Group Members except for Liens permitted by Section 6.3 or discharged on or prior to the Closing Date pursuant to documentation satisfactory to the Administrative Agent. (f) Environmental and Health and Safety Assessments. The Administrative Agent shall have received an environmental assessment and a health and safety assessment by Environ with respect to the Borrower and its Subsidiaries, and a memorandum from Vermont counsel with respect to water supply issues at Mount Snow, in each case in scope, form and substance reasonably satisfactory to the Administrative Agent. 34 (g) Closing Certificate; Certified Certificate of Incorporation; Good Standing Certificates. The Administrative Agent shall have received (i) a certificate of each Restricted Group Member, dated the Closing Date, substantially in the form of Exhibit C, with appropriate insertions and attachments, including the certificate of incorporation of each Restricted Group Member that is a corporation certified by the relevant authority of the jurisdiction of organization of such Restricted Group Member, and (ii) a long form (or short form, if such jurisdiction does not issue long form) good standing certificate for each Restricted Group Member from its jurisdiction of organization. (h) Legal Opinions. The Administrative Agent shall have received the following executed legal opinions addressed to the Administrative Agent and the Lenders, in form and substance satisfactory to the Administrative Agent: (i) the legal opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP, special counsel to the Loan Parties; and (ii) the legal opinion of local counsel to the Loan Parties in each of Colorado, Utah, Vermont, New Hampshire and Maine, and each other special and local counsel as may be required by the Administrative Agent. Each such legal opinion shall cover such matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require. (i) Pledged Stock; Stock Powers; Pledged Notes. The First Lien Collateral Agent (as defined in the Intercreditor Agreement) shall have received (i) the certificates representing the shares of Capital Stock pledged pursuant to the Guarantee and Collateral Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and (ii) each promissory note (if any) pledged to the Collateral Agent pursuant to the Guarantee and Collateral Agreement endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank) by the pledgor thereof. (j) Filings, Registrations and Recordings. Each document (including any Uniform Commercial Code financing statement) required by the Security Documents or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Lenders, a perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than as provided in the Intercreditor Agreement or with respect to Liens expressly permitted by Section 6.3), shall be in proper form for filing, registration or recordation and shall have been delivered to the Administrative Agent. (k) Mortgages, etc. (i) The Administrative Agent shall have received a Mortgage with respect to each Mortgaged Property, executed and delivered by a duly authorized officer of each party thereto. (ii) The Administrative Agent shall have received, for each Mortgaged Property, (a) a surveyor's report and statement which certifies that the buildings, improvements and other assets of the respective Ski Resort Properties, in each case which are referred to in Section 3.25, are located entirely on land that constitutes the Mortgaged Property or land with respect to which a Forest Service Term Special Use Permit is in effect (including land subject to an easement in favor of a Restricted Group Member), and (b) all compilation plans on which the foregoing surveyors reports and statements are based. 35 (iii) The Administrative Agent shall have received in respect of each Mortgaged Property a mortgagee's title insurance policy (or policies) or marked up unconditional binder for such insurance. Each such policy shall (A) be in an amount satisfactory to the Administrative Agent; (B) be issued at ordinary rates; (C) insure that the Mortgage insured thereby creates a valid first Lien on such Mortgaged Property free and clear of all defects and encumbrances, except as disclosed therein; (D) name the Administrative Agent for the benefit of the Lenders as the insured thereunder; (E) be in the form of ALTA Loan Policy - 1970 (Amended 10/17/70 and 10/17/84) (or equivalent policies); (F) contain such endorsements and affirmative coverage as the Administrative Agent may reasonably request and (G) be issued by title companies satisfactory to the Administrative Agent (including any such title companies acting as co-insurers or reinsurers, at the option of the Administrative Agent). The Administrative Agent shall have received evidence satisfactory to it that all premiums in respect of each such policy, all charges for mortgage recording tax, and all related expenses, if any, have been paid. (iv) If requested by the Administrative Agent, the Administrative Agent shall have received (A) a policy of flood insurance that (1) covers any parcel of improved real property that is encumbered by any Mortgage (2) is written in an amount not less than the outstanding principal amount of the indebtedness secured by such Mortgage that is reasonably allocable to such real property or the maximum limit of coverage made available with respect to the particular type of property under the National Flood Insurance Act of 1968, whichever is less, and (3) has a term ending not later than the maturity of the Indebtedness secured by such Mortgage and (B) confirmation that the Borrower has received the notice required pursuant to Section 208(e)(3) of Regulation H of the Board. (v) The Administrative Agent shall have received a copy of all recorded documents referred to, or listed as exceptions to title in, the title policy or policies referred to in clause (iii) above and a copy of all other material documents affecting the Mortgaged Properties. (vi) The Administrative Agent shall have received, with respect to each material leasehold for which a Restricted Group Member is the lessee other than the leaseholds listed on Schedule 4.1(k)(vi), a certificate executed by the landlord of such leasehold that includes leasehold mortgagee protection and estoppel provisions reasonably satisfactory to the Administrative Agent (a "Landlord Certificate"). (l) Material Agreements; Permits and Water Rights. The Administrative Agent shall have received, and be satisfied with its review of, copies of (a) each agreement, instrument or other undertaking, including all leases, to which each Restricted Group Member is a party and the failure to comply therewith could reasonably be expected to have a Material Adverse Effect, (b) each governmental permit to which any Restricted Group Member is a party, and (c) evidence of all Water Rights required for any Restricted Group Member's current or intended operations or for any property owned, leased, or otherwise operated by any Restricted Group Member. (m) Forest Service Permits. The Administrative Agent shall have received tripartite agreements from the United States Forest Service with respect to the Forest Service Term Special Use Permits, in accordance with the United States Forest Service's standard form for such documents. 36 (n) First Lien Loans. The Borrower shall have received $85,000,000 in gross proceeds from the borrowing of First Lien Term Loans. (o) Termination of Existing Credit Agreement. The Administrative Agent shall have received evidence satisfactory to the Administrative Agent that the Existing Credit Agreement shall be simultaneously terminated, all amounts thereunder shall be simultaneously paid in full and arrangements satisfactory to the Administrative Agent shall have been made for the termination of Liens and security interests granted in connection therewith. (p) Tender of Senior Subordinated Notes. The Administrative Agent shall have received evidence reasonably satisfactory to it that (i) at least $118,500,000 aggregate principal amount of outstanding Senior Subordinated Notes shall have been repurchased, repaid or redeemed in full pursuant to a tender offer therefor made by the Borrower prior to the Closing Date and (ii) if any of the Senior Subordinated Notes shall not have been so repurchased, repaid or redeemed pursuant to such tender offer, the Borrower shall have initiated the procedures specified in the Senior Subordinated Note Indenture for the mandatory redemption of such remaining Senior Subordinated Notes. (q) Appraisals. The Administrative Agent shall have received Appraisals of Ski Resort Properties, satisfactory in form and substance to the Administrative Agent, demonstrating an aggregate Appraised Value of such properties of at least the Required Value (as defined in the First Lien Credit Agreement). (r) Fees. The Lenders and the Administrative Agent shall have received all fees required to be paid, and all expenses required to be paid for which invoices have been presented (including the reasonable fees and expenses of legal counsel), on or before the Closing Date, including pursuant to any Fee Letter. All such amounts will be paid with proceeds of Loans made on the Closing Date and will be reflected in the funding instructions given by the Borrower to the Administrative Agent on or before the Closing Date. (s) Solvency Analysis. The Lenders shall have received a reasonably satisfactory solvency analysis certified by the chief financial officer of the Borrower which shall document the solvency of the Borrower and its Subsidiaries considered as a whole after giving effect to the transactions contemplated hereby but disregarding any assets or liabilities of any Excluded Subsidiary. (t) Extension of Existing Junior Subordinated Notes. The maturity of the Existing Junior Subordinated Notes shall have been extended to a date at least six months after the final maturity of the Loans, and the Administrative Agent shall have received reasonably satisfactory evidence thereof. (u) Exchange of Series A Preferred Stock. The holder(s) of the Series A Preferred Stock of the Borrower shall have exchanged such Capital Stock on a dollar-for-dollar basis for New Junior Subordinated Notes of the Borrower. (v) PATRIOT Act. The Lenders shall have received, at least five Business Days prior to the Closing Date, all documentation and other information required by bank regulatory authorities under applicable "know your customer" and anti-money laundering rules and regulations, including the United States PATRIOT Act. 37 (w) Representations and Warranties. Each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct on and as of such date as if made on and as of such date. (x) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date. SECTION V. AFFIRMATIVE COVENANTS The Borrower hereby agrees that, until the Obligations have been Fully Satisfied, the Borrower shall, and shall cause each of its Restricted Subsidiaries to: 5.1. Financial Statements. Furnish to the Administrative Agent for distribution to each Lender: (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower (i) a copy of the audited consolidated balance sheets of the Borrower and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, with an unqualified opinion thereon, by KPMG LLP or other independent certified public accountants of nationally recognized standing and (ii) the unaudited consolidated and consolidating balance sheets of the Borrower and its consolidated Subsidiaries as at the end of such year and the related unaudited consolidated and consolidating statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects; (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheets of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); and (c) as soon as available, but in any event not later than 45 days after the end of each fiscal month occurring during each fiscal year of the Borrower (or 90 days thereafter in the case of July and 60 days thereafter in the case of August of each such fiscal year), copies of the unaudited consolidated balance sheets of the Restricted Subsidiaries as at the end of such fiscal month and the related unaudited consolidated statements of income and of cash flows for such Persons for such fiscal month and the portion of the fiscal year through the end of such fiscal month, in each case as the Borrower prepares internally with respect to the Restricted Subsidiaries and setting forth in comparative form the figures for the previous year. All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied (except as approved by such accountants or officer, as the case may be, and disclosed in reasonable detail therein) consistently throughout the periods reflected therein and with prior periods. 38 5.2. Certificates; Other Information. Furnish to the Administrative Agent for distribution to each Lender (or, in the case of clause (g), to the relevant Lender): (a) concurrently with the delivery of any financial statements pursuant to Section 5.1(a) or (b), (i) a certificate of a Responsible Officer of the Borrower stating that, to the best of such Responsible Officer's knowledge, each Loan Party during such period has observed or performed all of its covenants and other agreements, and satisfied every required condition contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate, (ii) a Compliance Certificate containing all information and calculations necessary for determining compliance by each Restricted Group Member with the provisions of this Agreement referred to therein as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be, (iii) a certificate of a Responsible Officer of the Borrower certifying Consolidated EBITDA for the four fiscal quarter period ended as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be, and (iv) to the extent not previously disclosed to the Administrative Agent, a description of any change in the jurisdiction of organization or legal name of any Restricted Group Member and a list of any Intellectual Property acquired by any Restricted Group Member since the date of the most recent report delivered pursuant to this clause (iv) (or, in the case of the first such report so delivered, since the Closing Date); (b) as soon as available, and in any event no later than 45 days after the end of each fiscal year of the Borrower, a detailed consolidated budget for the following fiscal year (including a projected consolidated balance sheet of the Restricted Group Members as of the end of the following fiscal year, the related consolidated statements of projected cash flow, projected changes in financial position and projected income and a description of the underlying assumptions applicable thereto), and, as soon as available, significant revisions, if any, of such budget and projections with respect to such fiscal year (collectively, the "Projections"), which Projections shall in each case be accompanied by a certificate of a Responsible Officer of the Borrower stating that such Projections are based on reasonable estimates, information and assumptions and that such Responsible Officer has no reason to believe that such Projections are incorrect or misleading in any material respect; (c) within 45 days after the end of each fiscal quarter of the Borrower, a narrative discussion and analysis of the financial condition and results of operations of the Restricted Group Members for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, as compared to the portion of the Projections covering such periods and to the comparable periods of the previous year; (d) no later than three Business Days prior to the effectiveness thereof, copies of substantially final drafts of any proposed amendment, supplement, waiver or other modification with respect to either Junior Subordinated Note Indenture; (e) within five days after the same are sent, copies of all financial statements and reports that the Borrower sends to all the holders of any class of its debt securities or public equity securities in their capacity as such, or to any trustee for such holders, and, within five days after the same are filed, copies of all financial statements and reports that the Borrower may make to, or file with, the SEC; (f) promptly, copies of any agreements of the kind described in clause (a) of Section 4.1(l) not previously delivered hereunder; and 39 (g) promptly, such additional financial and other information as any Lender may from time to time reasonably request. 5.3. Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material payment obligations of whatever nature (other than obligations in respect of the principal of and interest on Indebtedness, which are covered by Section 7(e)), except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the relevant Restricted Group Member. 5.4. Maintenance of Existence; Compliance. (a) (i) Preserve, renew and keep in full force and effect its organizational existence and (ii) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business (including all applicable Forest Service Permits), except, in each case, as otherwise permitted by Section 6.4 and except, in the case of clause (ii) above, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (b) comply with all Contractual Obligations (other than obligations in respect of Indebtedness, which are covered by Section VII(e)) and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.5. Maintenance of Property Insurance. (a) Keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted (it being understood that such property may be temporarily out of good working order and condition in connection with the repair or maintenance thereof or improvements thereto provided that that such property is restored to such condition as soon as commercially practicable subject to negative weather conditions and ski season requirements), and (b) comply with the provisions of Schedule 5.5(b). 5.6. Inspection of Property; Books and Records; Discussions; Surveys. (a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities, (b) permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Restricted Group Members with officers and employees of the Restricted Group Members and with their independent certified public accountants and (c) permit the Administrative Agent to cause to be conducted surveys of the Mortgaged Properties as the Administrative Agent may reasonably request, at the Lender's expense. 5.7. Notices. Promptly after obtaining knowledge of the same, give notice to the Administrative Agent for distribution to each Lender of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of any Restricted Group Member or (ii) litigation, investigation or proceeding that may exist at any time between any Restricted Group Member and any Governmental Authority, that in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect; 40 (c) any litigation or proceeding affecting any Restricted Group Member (i) in which the amount involved is $1,000,000 or more and not covered by insurance, (ii) in which injunctive or similar relief is sought or (iii) which relates to any Loan Document; (d) the following events, as soon as possible and in any event within 30 days after any Restricted Group Member knows or has reason to know thereof: (i) the occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan; and (e) any development or event that has had or, in the reasonable opinion of the Borrower's management, could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the relevant Restricted Group Member proposes to take with respect thereto. 5.8. Environmental Matters. (a) Comply in all material respects with, and ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws; obtain and comply in all material respects with and maintain, and ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all Environmental Permits; and obtain and maintain all Water Rights necessary for it in any material respect; (b) Conduct and complete in all material respects all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all orders and directives of all Governmental Authorities regarding Environmental Laws other than such orders or directives that have been timely and properly challenged in good faith and diligently pursued, provided that the pendency of any and all such challenges could not reasonably be expected to give rise to a Material Adverse Effect and does not materially and adversely affect the value or marketability of any Mortgaged Properties; (c) Generate, use, treat, store, release, dispose of, and otherwise manage Materials of Environmental Concern in a manner that would not reasonably be expected to result in a material liability to any Restricted Group Member or any of its Subsidiaries or to affect materially and adversely the value or marketability of any Mortgaged Properties; and take reasonable efforts to prevent any other person from generating, using, treating, storing, releasing, disposing of, or otherwise managing Hazardous Materials in a manner that could reasonably be expected to result in a material liability to any Restricted Group Member or any of its Subsidiaries or to affect materially and adversely the value or marketability of any Mortgaged Properties; and (d) Maintain a program to facilitate that its and its Subsidiaries' properties and operations comply with, and are prudently operated to minimize liabilities under, all applicable Environmental Laws and Environmental Permits (other than Forest Service Term Special Use Permits), and are prudently operated to manage impacts on natural resources and the environment ("EH&S Program"). The EH&S Program shall include maintenance of a system to share information with respect to best management practices at each Ski Resort Property with respect to attaining the compliance of its properties and operations with, and minimizing the potential liability of its properties and operations under, applicable Environmental Laws and Environmental Permits (other than Forest Service Term Special Use Permits), and managing the impacts of its properties and operations on natural resources and the environment (including a meeting at least once each calendar quarter, either in person or by telephone, of at least the person at each Ski Resort Property with overall operational responsibility for such matters). 41 (e) At the request of the Administrative Agent (not more frequently than once in any 12-month period, unless a Default shall have occurred and be continuing), provide the Administrative Agent with a briefing regarding the EH&S Program; and, within thirty days of the end of each fiscal year, deliver a report certified by an officer of the Borrower with responsibility therefor and the Borrower's chief financial officer summarizing material developments involving matters concerning the EH&S Program (the "Annual EH&S Report") together with, where appropriate, a copy of the relevant documents. At a minimum, the Annual EH&S Report shall include: (1) a summary of any material investigation or remediation undertaken during the prior year to address environmental contamination (including a description of the contamination, the proposed action, the expected time line for completion, and a cost estimate); (2) a summary of any material inspections by Governmental Authorities regulating matters concerning the EH&S Program during the fiscal year just ended and any notices of violation issued to a Restricted Group Member or any of its Subsidiaries by such Governmental Authorities during such fiscal year (including the authority issuing the notice, the subject matter thereof, the relief sought, and whether the Restricted Group Member believes that such notice could reasonably result in a fine or penalty in excess of $50,000); (3) a summary of any administrative and judicial proceedings brought against the Restricted Group Member or any of its Subsidiaries regarding matters concerning the EH&S Program pending at any time during the fiscal year ended (including the entity bringing the proceeding, the subject thereof, the relief sought, and whether the Restricted Group Member believes that such proceeding could reasonably result in a fine or penalty in excess of $50,000); (4) a summary of any material violations of Environmental Laws or Environmental Permits identified by the Borrower or any of its Subsidiaries and reported to a Governmental Authority during the past fiscal year, and a brief description of the violations and whether the Restricted Group Member believes that such notice or combination thereof, could reasonably be expected to result in a fine or penalty in excess of $50,000; (5) a description of any material modifications or enhancements made to the EH&S Program during the fiscal year just ended; (6) a copy of any compliance audit and corrective action documentation prepared pursuant to or with respect to any matter concerning the EH&S Program during the fiscal year just ended; and (7) a description of any legislative, regulatory, or enforcement initiatives of which a Restricted Group Member is aware regarding matters concerning the EH&S Program that could reasonably be expected to materially affect the Restricted Group Member's costs, revenues, or business plans in the current fiscal year or the remaining term of the Facilities (or, if a Default has occurred and is continuing, the four succeeding fiscal years). 5.9. Additional Collateral, etc. (a) With respect to any property acquired after the Closing Date by any Restricted Group Member (other than (x) any property described in paragraph (b), (c) or (d) below and (y) any property subject to a Lien expressly permitted by Section 6.3(f) as to which the Collateral Agent, for the benefit of the Lenders, does not have a perfected Lien) promptly (i) execute and deliver to the Collateral Agent such amendments to the Guarantee and Collateral Agreement or such other documents as the Collateral Agent reasonably deems necessary or advisable to grant to the Collateral Agent, for the benefit of the Administrative Agent and the Lenders, a security interest in such property and (ii) take all actions necessary or advisable to grant to the Collateral Agent, for the benefit of the Administrative Agent and the Lenders, a perfected first priority security interest in such property (subject to the provisions of the Intercreditor Agreement and to Liens permitted by Section 6.3), including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Collateral Agent. (b) With respect to any fee interest in any real property comprising ski terrain or having a value (together with improvements thereof) of at least $100,000 (including the projected value of any improvements being 42 constructed) or any leasehold interest in any real property comprising ski terrain or having improvements thereon with a value of at least $100,000 (or with improvements to be constructed thereon with a projected value of at least $100,000), in each case acquired after the Closing Date by any Restricted Group Member (other than any such real property subject to a Lien expressly permitted by Section 6.3(f)), promptly (i) execute and deliver a first priority Mortgage (subject to the provisions of the Intercreditor Agreement and to Liens permitted by Section 6.3), in favor of the Collateral Agent, for the benefit of the Administrative Agent and the Lenders, covering such real property, (ii) if requested by the Collateral Agent, provide the Lenders with (x) title insurance covering such real property in an amount at least equal to the purchase price of such real property (or such other greater amount as shall be reasonably specified by the Collateral Agent) as well as a surveyor's report and statement which certifies that the buildings, improvements and other assets pertaining to such real property are located entirely on land that constitutes such real property and (y) any consents or estoppels reasonably deemed necessary or advisable by the Collateral Agent in connection with such Mortgage, each of the foregoing in form and substance reasonably satisfactory to the Collateral Agent and (iii) if requested by the Collateral Agent, deliver to the Collateral Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Collateral Agent. (c) With respect to any new Restricted Subsidiary created or acquired after the Closing Date by any Restricted Group Member (which, for the purposes of this paragraph (c), shall include any existing Subsidiary that ceases to be an Excluded Subsidiary), promptly (i) execute and deliver to the Collateral Agent such amendments to the Guarantee and Collateral Agreement as the Collateral Agent deems necessary or advisable to grant to the Collateral Agent, for the benefit of the Administrative Agent and the Lenders, a perfected first priority security interest in the Capital Stock of such new Restricted Subsidiary that is owned by any Restricted Group Member (subject to the provisions of the Intercreditor Agreement and to Liens permitted by Section 6.3), (ii) deliver to the Collateral Agent (or, if the First Lien Loan Documents are then in effect, the First Lien Collateral Agent) the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant Restricted Group Member, (iii) cause such new Restricted Subsidiary (A) to become a party to the Guarantee and Collateral Agreement, by executing and delivering to the Collateral Agent an Assumption Agreement in the form attached as Annex 1 to the Guarantee and Collateral Agreement, (B) to take such actions necessary or advisable to grant to the Collateral Agent for the benefit of the Administrative Agent and the Lenders a perfected first priority security interest (subject to the provisions of the Intercreditor Agreement and to Liens permitted by Section 6.3) in the Collateral described in the Guarantee and Collateral Agreement with respect to such new Subsidiary, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be reasonably requested by the Collateral Agent and (C) to deliver to the Collateral Agent a certificate of such Subsidiary, substantially in the form of Exhibit C, with appropriate insertions and attachments, and (iv) deliver to the Administrative Agent and the Collateral Agent legal opinions relating to such new Subsidiary and the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent and the Collateral Agent (it being agreed that opinions of substantially the same scope, and from the same counsel, as the opinions delivered pursuant to Section 4.1(h) shall be satisfactory). (d) With respect to any new Excluded Subsidiary created or acquired after the Closing Date that is a direct Subsidiary of any Restricted Group Member, promptly (i) execute and deliver to the Collateral Agent such amendments to the Guarantee and Collateral Agreement as the Collateral Agent deems necessary or advisable to grant to the Collateral Agent, for the benefit of the Administrative Agent and the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by any Restricted Group Member (subject to the provisions of the Intercreditor Agreement and to Liens permitted by Section 6.3), (ii) deliver to the Collateral Agent (or, if the First Lien Loan Documents are 43 then in effect, the First Lien Collateral Agent) the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant Restricted Group Member, and take such other action as may be necessary or, in the opinion of the Collateral Agent, desirable to perfect the Collateral Agent's security interest therein, and (iii) if requested by the Collateral Agent, deliver to the Collateral Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Collateral Agent (it being agreed that opinions of substantially the same scope, and from the same counsel, as the opinions delivered pursuant to Section 4.1(h) shall be satisfactory). 5.10. Forest Service Permits. Comply with all of its material obligations and agreements under the Forest Service Permits and under any renewals or extensions thereof and not do or suffer anything which will impair any Forest Service Term Special Use Permit. Make no changes, alterations or amendments to any Forest Service Permit except with the prior written consent of the Administrative Agent or as would not have or reasonably be expected to have a material impact on the operations of any Restricted Group Member; provided, however, that changes or alterations in any master plan provided under or incorporated by reference in any Forest Service Term Special Use Permit will not constitute changes, alterations or amendments under this Section. 5.11. Agreements with Respect to Excluded Subsidiaries. (a) Conduct its business and operations separately from that of the Excluded Subsidiaries and cause the Excluded Subsidiaries to conduct their business and operations separately from that of any Restricted Group Member, by (i) not commingling funds or other assets, (ii) maintaining separate corporate and financial records and observing all corporate formalities, (iii) paying their respective liabilities from their respective assets, except pursuant to any guarantees extended by the Restricted Group Members of obligations of Excluded Subsidiaries and permitted hereunder, (iv) except in the case of GSRP, maintaining capitalization adequate to meet their respective business needs and (v) conducting contractual dealings with third parties in their respective names and as separate and independent entities. (b) Cause each Excluded Subsidiary not to conduct any business other than the business indicated for such Excluded Subsidiary on Schedule 5.11 and matters incidental thereto. (c) Not permit any Excluded Immaterial Subsidiary to Dispose of any material assets, except Dispositions for fair market value consideration which is dividended or distributed to the Restricted Group Member that owns such Excluded Immaterial Subsidiary. 5.12. Interest Rate Protection. In the case of the Borrower, within 180 days after the Closing Date, enter into, and thereafter maintain for a period of not less than three years, Swap Agreements to the extent necessary to provide that 50% of the aggregate outstanding principal amount of the Loans and the First Lien Term Loans is subject to interest rate protection for a period of not less than three years, which Swap Agreements shall have terms and conditions reasonably satisfactory to the Agents. 5.13. Post-Closing Obligations. (a) Use commercially reasonable efforts promptly to obtain Landlord Certificates for the leases listed on Schedule 5.1(k)(vi). (b) Within 60 days after the Closing Date, cause the operating leases of the Restricted Group Members listed on Schedule 5.13 to be converted into capital leases. 44 SECTION VI. NEGATIVE COVENANTS The Borrower hereby agrees that, until the Obligations are Fully Satisfied, the Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: 6.1. Minimum Consolidated EBITDA. Permit Consolidated EBITDA for any period of four fiscal quarters of the Borrower ending with any fiscal quarter set forth below ("LTM EBITDA") to be less than the amount set forth below opposite such fiscal quarter: Fiscal Quarter Minimum LTM EBITDA FY2005 Quarter 2 $35,000,000 FY2005 Quarter 3 $35,000,000 FY2005 Quarter 4 $35,000,000 FY2006 Quarter 1 $35,000,000 FY2006 Quarter 2 $35,000,000 FY2006 Quarter 3 and thereafter $38,250,000 provided that, for the purpose of calculating Consolidated EBITDA for the first and second fiscal quarters of the Borrower's fiscal year 2005, Consolidated EBITDA shall be determined as if all operating leases set forth on Schedule 5.13 has been converted into capital leases during all relevant time periods in such fiscal quarter. 6.2. Indebtedness. Create, issue, incur, assume, become liable in respect of or suffer to exist any Indebtedness, except: (a) Indebtedness of any Restricted Group Member pursuant to any Loan Document; (b) Indebtedness (including Purchase Money Indebtedness (as defined below)) outstanding on the date hereof and listed on Schedule 6.2(b) and any refinancings, refundings, renewals or extensions thereof (without increasing, or shortening the maturity of, the principal amount thereof (after giving effect to any repayments) except for increases to the extent of any premium and reasonable costs and expenses or capitalized interest); (c) (i) Indebtedness (including Capital Lease Obligations) secured by Liens permitted by Section 6.3(f) ("Purchase Money Indebtedness") in an aggregate principal amount at any one time outstanding, which when added to the aggregate then outstanding principal amount of any secured Indebtedness specified on Schedule 6.2(b) and any refinancings, refundings, renewals or extensions thereof, is not greater than $30,000,000 during the Borrower's 2005 and 2006 fiscal years, $27,500,000 during the Borrower's 2007 and 2008 fiscal years, and $25,000,000 thereafter; (d) Indebtedness in respect of the Senior Subordinated Notes (so long as all Senior Subordinated Notes remaining outstanding after the Closing Date are repurchased, redeemed or defeased in full within 60 days after the Closing Date and the requirements of Section 4.1(p) have been met) and the Existing Junior Subordinated Notes; (e) Indebtedness of any Loan Party to any other Loan Party; (f) Payment and performance bonds entered into in the ordinary course of business in support of the activities of any Restricted Group Member in conjunction with Capital Expenditures permitted hereunder; provided, that the aggregate amount of such payment and performance bonds outstanding at any time shall not exceed $2,000,000; 45 (g) Indebtedness constituting First Lien Debt and any refinancing, refunding, renewal or extension thereof (without increasing, or shortening the maturity of, the principal amount thereof (after giving effect to any repayments) except for increases to the extent of any premium and reasonable costs and expenses or capitalized interest), subject to the Intercreditor Agreement; (h) Indebtedness in respect of the New Junior Subordinated Notes issued in exchange for or as a conversion of the Series A Preferred Stock on a dollar-for-dollar basis; and (i) Indebtedness incurred in connection with the financing of insurance premiums for insurance policies obtained in the ordinary course of business. 6.3. Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, whether now owned or hereafter acquired, except: (a) Liens for taxes not yet due or that are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the applicable Restricted Group Member in conformity with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which secure payment of obligations (other than Indebtedness) that are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the applicable Restricted Group Member in conformity with GAAP; (c) pledges or deposits in connection with workers' compensation, unemployment insurance (other than ERISA) and other social security legislation; (d) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not substantial in amount and that do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of any Restricted Group Member; (e) Liens in existence on the date hereof listed on Schedule 6.3(e), provided that no such Lien is spread to cover any additional property after the Closing Date (except for additional property in the nature of improvements to property already subject to any such Lien or additions to accounts receivable or inventory, as the case may be, already subject to such Lien) and that, if securing Indebtedness, the principal amount of Indebtedness secured thereby is not increased; (f) Liens securing Indebtedness of the Borrower or any other Subsidiary incurred pursuant to Section 6.2(c) to finance the acquisition of fixed or capital assets, provided that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness (except for additional property in the nature of improvements to property already subject to any such Lien or additions to accounts receivable or inventory, as the case may be, already subject to such Lien) and (iii) the amount of Indebtedness secured thereby is not increased; 46 (g) Liens created pursuant to the Security Documents; (h) any interest or title of a lessor under any lease entered into by any Restricted Group Member in the ordinary course of its business and covering only the assets so leased; (i) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (j) Liens (other than judgments and awards) created by or resulting from any litigation or legal proceeding which has not yet resulted in an Event of Default, provided that the execution or other enforcement thereof is effectively stayed and the claims secured thereby are being actively contested in good faith by appropriate proceedings satisfactory to the Administrative Agent and adequate reserves with respect thereto are maintained on the books of the applicable Restricted Group Member in conformity with GAAP; (k) possessory Liens in favor of securities intermediaries, commodity intermediaries, brokers and dealers arising in connection with the acquisition or disposition of Investments of the type permitted by Section 6.8(b), provided that such Liens (i) attach only to such Investments and (ii) secure only obligations incurred in the ordinary course of business of the relevant Restricted Group Member and arising in connection with the acquisition or disposition of such Investments and not any obligation in connection with margin financing; (l) leases permitted by Section 6.5; (m) Liens on Collateral securing Indebtedness incurred pursuant to Section 6.2(g), which Liens may also secure Specified Swap Agreements, in each case subject to the Intercreditor Agreement; and (n) Liens on insurance policies and the proceeds thereof securing the financing of the insurance premiums with respect thereto. 6.4. Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of all or substantially all of its property or business, except that: (a) any Restricted Group Member may be merged or consolidated with or into any other Restricted Group Member (provided that, in the case of any such merger or consolidation involving the Borrower, the Borrower shall be the continuing or surviving corporation); (b) any Restricted Subsidiary may Dispose of any or all of its assets (upon voluntary liquidation or otherwise) in a Disposition permitted by Section 6.5(c) or (ii) pursuant to any other Disposition permitted by Section 6.5; and (c) any Investment expressly permitted by Section 6.8 may be structured as a merger, consolidation or amalgamation. 6.5. Disposition of Property. Dispose of any of its property, whether now owned or hereafter acquired, or, in the case of any Restricted Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person, except: 47 (a) the Disposition in the ordinary course of business of obsolete or worn out property with an aggregate book value or fair market value, whichever is less, not in excess of $500,000 in any fiscal year; (b) the sale, lease or other disposition of inventory in the ordinary course of business; (c) Dispositions to any other Restricted Group Member (upon voluntary liquidation or otherwise); provided that any Disposition of Collateral included therein shall be made subject to the Liens of the Collateral Agent thereon and, prior to any such Disposition, the applicable Restricted Group Members shall have taken all action required by the Collateral Agent to create, perfect and protect such Liens and the priority thereof; (d) the sale or issuance of any Restricted Subsidiary's Capital Stock to any Restricted Group Member; (e) the Disposition of Non-Operating Assets for fair market value (measured in the case of Dispositions of Non-Operating Assets for consideration in excess of $5,000,000 based on the appraised value of such Non-Operating Assets) cash consideration not to exceed in the aggregate for any fiscal year of the Borrower, $4,000,000; provided that in any fiscal year of the Borrower, the $4,000,000 amount may be increased by the Additional Non-Operating Asset Sale Amount for such fiscal year if: (i) LTM EBITDA for the period ending on the last day of the third fiscal quarter of the preceding fiscal year was not less than the LTM EBITDA required for such period pursuant to Section 6.1, and (ii) an amount equal to at least 50% (or, if at the time of any Disposition pursuant to this clause (e) the aggregate amount of cash proceeds of Dispositions of Non-Operating Assets by the Restricted Group Members since the Closing Date exceeds $45,000,000, 75%) of the excess, if any, of (x) the aggregate amount Non-Operating Asset Sale Proceeds received by the Borrower in any fiscal year from Dispositions pursuant to this clause (c) over (y) $4,000,000 is applied in accordance with Section 2.6(b) (and such amount will be deemed to constitute Net Cash Proceeds of a Material Asset Sale for purposes of Section 2.6(b)); (f) the license of intellectual property in the ordinary course of business; (g) dispositions of Capital Stock of Grand Summit Resort Properties, Inc. and Community Water Company; (h) Leases that have a lease term of three years or less (or no more than five years with a five-year renewal term in the case of subclause (ii) below) that are (i) retail space leases to third-party retailers, (ii) other leases covering spaces of 10,000 square feet or less, or (iii) ground leases of real property other than (x) Skiable Terrain, (y) improved real property (except in the case of a replacement or renewal of any lease on such property existing as of the Closing Date) or (z) any other property necessary for the operation of any Ski Resort Properties in the ordinary course of business; (i) Dispositions of Non-Operating Assets consisting of capital contributions permitted by Section 6.8(j) 48 (j) transfers to Wolf Mountain Resorts, LC ("Wolf") of (i) 100 hotel/lodging unit undeveloped lots in Red Pine Village at The Canyons, together with associated water rights and utilities, in accordance with Section 12 of the Second Amendment to Ground Lease between ASC Utah and Wolf and (ii) ASC Utah's interest in the land underlying the Willow Draw subdivision, consisting of 35 undeveloped residential lots, in accordance with Section 9 of the Second Amendment to Ground Lease between ASC Utah and Wolf, together with associated water rights and utilities; and (k) modifications of the "Premises" under the Ground Lease between Wolf and ASC Utah to facilitate property re-alignment and base area development at The Canyons, on terms disclosed to and approved by the Administrative Agent. 6.6. Restricted Payments. Declare or pay any dividend (other than dividends payable solely in common stock of the Person making such dividend) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any Capital Stock of any Restricted Group Member, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of any Restricted Group Member (collectively, "Restricted Payments"), except that (a) any Restricted Group Member may make Restricted Payments to any other Restricted Group Member and (b) the Borrower shall be permitted make Restricted Payments of up to $5,000,000 in the aggregate since the Closing Date, whether in a single transaction or a series of related transactions, to purchase or acquire common stock of the Borrower not held by Oak Hill so long as (i) the ratio of (x) the sum of the outstanding amount of the Loans and the aggregate outstanding amount of the First Lien Debt and all available commitments in respect thereof on the date of any such Restricted Payment to (y) Consolidated EBITDA for the period of four consecutive fiscal quarters most recently ended as of such date for which financial statements have been delivered in accordance with Section 5.1(a) or (b) shall not be greater than 4.20:1.00, (ii) no Default or Event of Default shall have occurred and be continuing and (iii) after the consummation of such single transaction, the Borrower will no longer be subject to the reporting requirements of the Securities Exchange Act of 1934 (or such obligations shall be suspended) or, in any case where such purchases or acquisitions are being effected pursuant to a series of related transactions, it is reasonable to conclude that, after completion of all transactions in such series, (and the termination of any applicable suspension period) the Borrower will no longer be subject to such reporting requirements and, after completion of the final transaction in such series, the Borrower is, in fact, no longer subject to such reporting requirement. 6.7. Capital Expenditures. Make or commit to make any Capital Expenditure, except Capital Expenditures of the Restricted Group Members in the ordinary course of business made while no Event of Default has occurred and is continuing not exceeding in any fiscal year of the Borrower the sum of (i) $18,000,000, (ii) an amount equal to 50% of the aggregate excess of LTM EBITDA for the prior fiscal year over the minimum LTM EBITDA required by Section 6.1(a) for such fiscal year (without adding in any Non-Operating Asset Sale Proceeds as permitted by the proviso to such Section), (iii) an amount equal to Non-Operating Asset Sale Proceeds received during such fiscal year, up to a maximum of $4,000,000 for this clause (iii), and (iv) an amount equal to 50% of the Non-Operating Asset Sale Proceeds received during such fiscal year from any additional Disposition of Non-Operating Assets permitted pursuant to the proviso to Section 6.5(e); provided, that any such amount referred to above, if not so expended in the fiscal year for which it is permitted, may be carried over for expenditure in the next succeeding fiscal year; and provided, further, that the Restricted Group Members shall be permitted to make additional Capital Expenditures (A) as described on Schedule 6.7 so long as (x) such Capital Expenditures do not exceed in any such fiscal year the amount set forth for such fiscal year on Schedule 6.7 (provided that if the amount set forth on such Schedule to be expended for any such item in any fiscal year is not expended in such fiscal year for such item, the amount for such item not so expended in such 49 fiscal year may be expended for such item in any subsequent fiscal year) and are for the items described on such Schedule 6.7 and (y) for each such described item, the amount expended on such item does not exceed the amount set forth on such Schedule for such item; (B) in respect of the conversion of operating leases existing on the Closing Date and listed on Schedule 6.13 into Capital Leases within 60 days after the Closing Date and (C) with the Net Cash Proceeds of any Recovery Event with respect to which a Reinvestment Notice has been delivered in accordance with Section 2.9(b). 6.8. Investments. Make any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other debt securities of, or any assets constituting a business unit of, or make any other investment in, any Person (all of the foregoing, "Investments"), or have outstanding any Investment, except: (a) extensions of trade credit in the ordinary course of business; (b) Investments in Cash Equivalents; (c) Guarantee Obligations permitted by Section 6.2; (d) (i) existing Investments in the Capital Stock of Subsidiaries that are not Restricted Group Members, as described on Schedule 3.15, (ii) outstanding intercompany loans and advances, as listed as Indebtedness on Schedule 6.2(b) and permitted by Section 6.2, and (iii) other existing Investments described on Schedule 6.8(d); (e) Capital Expenditures permitted by Section 6.7 that are structured as Investments; (f) Restricted Payments permitted under Section 6.6; (g) intercompany Investments by any Restricted Group Member in any other Restricted Group Member; (h) Investments acquired in connection with the bankruptcy or workout of account debtors; and (i) Investments in respect of Swap Agreements permitted under Section 6.12; (j) the Investments described on Schedule 7.8(j); and (k) Investments in SS Associates, LLC in connection with the call by Killington, Ltd., or the put by TMG Associates, LLC to Killington, Ltd., of TMG Associates, LLC's membership interest in SS Associates, LLC in accordance with the terms of the Limited Liability Company Operating Agreement of SS Associates, LLC dated October 15, 2004 as such agreement is in effect on the date hereof. 6.9. Optional Payments and Modifications of Certain Debt Instruments. (a) Make or offer to make any optional or voluntary payment, prepayment, repurchase or redemption of or otherwise optionally or voluntarily defease or segregate funds with respect to any Junior Subordinated Notes; (b) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of any Junior Subordinated Notes (other than any such amendment, modification, waiver or other change that (i) would extend the maturity or reduce the amount of any payment of principal thereof or reduce the rate or extend any date for payment of interest thereon or waive any default or make any covenant less restrictive and (ii) does not involve the payment of a consent fee); (c) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of 50 any Preferred Stock (other than any such amendment, modification, waiver or other change that (x) would extend the scheduled redemption date or reduce the amount of any scheduled redemption payment or reduce the rate or extend any date for payment of dividends thereon and (y) does not involve the payment of a consent fee); or (d) designate any Indebtedness (other than obligations of the Restricted Group Members pursuant to the Loan Documents and the First Lien Loan Documents) as "Designated Senior Debt" (or any other defined term having a similar purpose) for the purposes of the Junior Subordinated Note Indentures. 6.10. Transactions with Affiliates. Enter into any transaction, including any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate (other than any Loan Party) except that a Restricted Group Member (a) may pay reasonable salaries, fees and bonuses (including the reimbursement of expenses and the granting of stock options and phantom stock awards) to its directors, officers and employees in accordance with prudent and customary business practices, (b) may enter into transactions with an Affiliate on terms that are not materially less favorable to such Restricted Group Member taken as a whole than those which could be obtained at the time from Persons who are not Affiliates and which transactions (x) to the extent in excess of $250,000 for each transaction or a series of related transactions are disclosed to the Administrative Agent in writing and (y) to the extent in excess of $5,000,000 for each transaction or a series of related transactions are approved by the Supermajority Lenders, in each case prior to the consummation of such transactions, (c) may amend, modify, waive or otherwise change the terms of any Junior Subordinated Notes or Preferred Stock to the extent permitted by (i) Section 6.9, (ii) the Loan Documents as permitted by the terms thereof, and (iii) the First Lien Loan Documents to the extent permitted by the Intercreditor Agreement, (d) may enter into and perform their obligations under the Loan Documents and (e) enter into such other transactions with Affiliates that have been approved in advance in writing by the Administrative Agent. Notwithstanding the foregoing, so long as no Event of Default is continuing, the Restricted Group Members may pay management fees to Affiliates in an aggregate amount for all such Affiliates not to exceed $100,000 in any fiscal year of the Borrower. 6.11. Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by any Restricted Group Member of real or personal property that has been or is to be sold or transferred by such Restricted Group Member to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of such Restricted Group Member, except in connection with a Disposition of Non-Operating Assets which otherwise complies with this Agreement. 6.12. Swap Agreements. Enter into any Swap Agreement, except (a) Swap Agreements entered into to hedge or mitigate risks to which such Restricted Group Member has actual exposure (other than those in respect of Capital Stock) and (b) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of such Restricted Group Member. 6.13. Changes in Fiscal Periods. Permit the fiscal year of the Borrower to end on a day other than the last Sunday in July or change the Borrower's method of determining fiscal quarters. 6.14. Restrictive Agreements. Enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of any Restricted Group Member to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Restricted Subsidiary to pay dividends or other distributions with respect to any shares of its Capital Stock or to make or repay loans or advances to any other Restricted Group Member or to guarantee Indebtedness of any other Restricted Group Member; provided that (i) the foregoing shall not 51 apply to restrictions and conditions imposed by law or by the Loan Documents or the First Lien Loan Documents, (ii) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 6.14 (but shall apply to any extension or renewal of any such restriction, or any amendment or modification of any such restriction or condition making such restriction or condition more restrictive), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary or assets or stock pending such sale, provided such restrictions and conditions apply only to the Subsidiary or assets or stock that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (v) clause (a) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof. 6.15. Lines of Business. Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement or that are reasonably related thereto. 6.16. Maintenance Capital Expenditures Variance. Permit the actual amount of maintenance Capital Expenditures of the Restricted Group Members in any fiscal year of the Borrower to be less than the maintenance Capital Expenditures of the Restricted Group Members budgeted for such fiscal year in the budget delivered for such fiscal year pursuant to Section 5.2(b) by more than 10%. SECTION VII. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) (i) the Borrower shall fail to pay any principal of any Loan when due in accordance with the terms hereof; or (ii) the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder or under any other Loan Document, within, in the case of subclause (ii) only, five days after any such interest or other amount becomes due in accordance with the terms hereof; or (b) any representation or warranty made or deemed made by any Loan Party herein or in any other Loan Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made; or (c) (i) any Loan Party shall default in the observance or performance of any agreement contained in Section 5.4, Section 5.5(b), Section 5.7(a), Section 5.10, Section 5.11 or Section 5.12 or Section 6 of this Agreement or Section 5.4 or 5.6(b) of the Guarantee and Collateral Agreement or (ii) an "Event of Default" under and as defined in any Mortgage shall have occurred and be continuing; or (d) any Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after notice to the Borrower from the Administrative Agent or the Required Lenders; or 52 (e) any Loan Party shall (i) default in making any payment of any principal of any Indebtedness (including any Guarantee Obligation with respect to Indebtedness, but excluding the Loans) on the scheduled or original due date with respect thereto; or (ii) default in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (iii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable; provided, that a default, event or condition described in clause (i), (ii) or (iii) of this paragraph (e) shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds, individually, $2,000,000, or in the aggregate, $5,000,000; provided, further that a First Lien Facilities Event of Default shall not constitute an Event of Default under this clause (e) unless such First Lien Facilities Event of Default shall continue uncured and unwaived for 60 days; or (f) (i) any Restricted Group Member shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or any Restricted Group Member shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against any Restricted Group Member any case, proceeding or other action of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against any Restricted Group Member any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) any Restricted Group Member shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) any Restricted Group Member shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) (i) any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer 53 Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could, in the sole judgment of the Required Lenders, reasonably be expected to have a Material Adverse Effect; or (h) one or more judgments or decrees shall be entered against one or more Restricted Group Members involving in the aggregate a liability (to the extent not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of $2,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or (i) any of the Security Documents shall cease, for any reason, to be in full force and effect, or any Loan Party or any Affiliate of any Loan Party, shall so assert, or any Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or (j) the guarantee contained in Section 2 of the Guarantee and Collateral Agreement shall cease, for any reason, to be in full force and effect or any Loan Party or any Affiliate of any Loan Party shall so assert; or (k) a Change of Control shall occur; or (l) any Junior Subordinated Notes shall cease, for any reason, to be validly subordinated to the Obligations, as provided in the relevant Junior Subordinated Note Indenture, or any Restricted Group Member, any Affiliate of any Restricted Group Member, the trustee in respect of the Junior Subordinated Notes or the holders of a majority in aggregate principal amount of the Junior Subordinated Notes shall so assert; (m) any license, approval or permit held by any Restricted Group Member is terminated, withdrawn or not renewed, or suspended for more than twenty Business Days and such termination, withdrawal, non-renewal or suspension could, in the judgment of the Required Lenders, reasonably be expected to have a Material Adverse Effect; (n) any material term of the Intercreditor Agreement shall cease, for any reason, to be in full force and effect, or any Restricted Group Member, any Affiliate of any Restricted Group Member, the First Lien Collateral Agent or the First Lien Required Lenders (as each such term is defined in the Intercreditor Agreement) shall so assert. then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents shall immediately become due and payable, and (B) if such event is any other Event of Default, with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Borrower. 54 SECTION VIII. THE AGENTS 8.1. Appointment. Each Lender hereby irrevocably designates and appoints each Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes each Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, no Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against any Agent. Each Lender (a) acknowledges that it has received a copy of the Intercreditor Agreement, (b) consents to the terms thereof, (c) agrees that it will be bound by the Intercreditor Agreement (including the provisions of Section 7.05 thereof) and will take no actions contrary to the provisions of the Intercreditor Agreement and (d) authorizes and instructs the Collateral Agent to enter into the Intercreditor Agreement as Collateral Agent and on behalf of such Lender. The foregoing provisions are intended as an inducement to the lenders under the First Lien Loan Documents to extend credit to the Borrower, and such lenders are intended third party beneficiaries of these provisions. 8.2. Delegation of Duties. Each Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. 8.3. Exculpatory Provisions. Neither any Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by such Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party a party thereto to perform its obligations hereunder or thereunder. No Agent shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party. 8.4. Reliance by Agents. Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including counsel to the Borrower), independent accountants and other experts selected by such Agent. Each Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. Each Agent shall be fully justified in failing or refusing to take any action under this Agreement or any 55 other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 8.5. Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless such Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. Each Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders); provided that unless and until such Agent shall have received such directions, such Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 8.6. Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither any Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs of the Borrower or any affiliate of the Borrower, shall be deemed to constitute any representation or warranty by such Agent to any Lender. Each Lender represents to each Agent that it has, independently and without reliance upon such Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, no Agent shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Borrower or any affiliate of the Borrower that may come into the possession of such Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 8.7. Indemnification. The Lenders agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Percentages in effect on the date on which indemnification is sought under this Section (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with such Percentages immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided 56 that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder. 8.8. Agents in Their Individual Capacities. Each Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though it were not an Agent. With respect to its Loans made or renewed by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include each Agent in its individual capacity. 8.9. Successor Agents. Each of the Administrative Agent and the Collateral Agent may resign in such capacity upon 10 days' notice to the Lenders and the Borrower. If the Administrative Agent or the Collateral Agent fails to perform its obligations under the Loan Documents, such Agent may be removed by the Required Lenders upon 10 days' notice to such Agent and the Borrower. If such Agent shall resign or be removed in such capacity under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall, unless an Event of Default shall have occurred and be continuing, be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent or Collateral Agent, as the case may be, and the term "Administrative Agent" or "Collateral Agent", as applicable, shall mean such successor agent effective upon such appointment and approval, and the former Agent's rights, powers and duties as such Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as the applicable Agent by the date that is 10 days following the applicable retiring Agent's notice of resignation or removal, the applicable retiring Agent's resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of such Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. After any retiring Agent's resignation as such Agent or its removal pursuant to this Section 8, the provisions of this Section VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent under this Agreement and the other Loan Documents. Notwithstanding the foregoing, the replacement of GECC as Collateral Agent by CSFB or any affiliate thereof, if agreed between GECC and CSFB, shall not require the consent of the Borrower or any Lender. 8.10. Syndication Agent. Notwithstanding the foregoing provisions of this Section VIII, the Syndication Agent shall not have any duties or responsibilities hereunder in its capacity as such. SECTION IX. MISCELLANEOUS 9.1. Amendments and Waivers. Neither this Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 9.1. The Required Lenders and each Loan Party party to the relevant Loan Document may, or, with the written consent of the Required Lenders, the Agents and each Loan Party party to the relevant Loan Document may, from time to time, (a) enter into written amendments, supplements or modifications hereto and to the other Loan Documents or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent (with the consent of the Required Lenders), as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, 57 supplement or modification shall (i) forgive the principal amount or extend any date of any payment on any Loan, reduce the stated rate of any interest or fee payable hereunder (except in connection with the waiver of applicability of any post-default increase in interest rates (which waiver shall be effective with the consent of the Required Lenders) or extend the date of any payment thereof, in each case without the written consent of each Lender directly affected thereby; (ii) eliminate or reduce the voting rights of any Lender under this Section 9.1 or under any other Loan Document without the written consent of such Lender; (iii) change the definition of Required Lenders or Supermajority Lenders, consent to the assignment or transfer by any Restricted Group Member of any of its rights and obligations under this Agreement and the other Loan Documents, release all or substantially all of the Collateral or release any Guarantor from its obligations under the Guarantee and Collateral Agreement (except in accordance with Section 9.14(b)), in each case without the written consent of all Lenders; (iv) amend, modify or waive any provision of Section VIII without the written consent of each Agent affected thereby; or (v) change the definition of the term "Obligations", "Excess Cash Flow" or "Net Cash Proceeds", expand the obligations secured by any of the Security Documents to include those other than the Obligations, amend, modify or waive any provision of Section 2.6, Section 6.2, Section 6.3, Section 6.5, Section 6.8 or the last two sentences of Section 8.1 of this Agreement, any provision of the Intercreditor Agreement or Section 6.5 of the Guarantee and Collateral Agreement, in each case described in this clause (v) without the consent of the Supermajority Lenders. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Administrative Agent and all future holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. 9.2. Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows in the case of any Loan Party and the Administrative Agent, and as set forth in an administrative questionnaire delivered to the Administrative Agent and the Borrower in the case of the Lenders, or to such other address as may be hereafter notified by the respective parties hereto: 58 The Loan Parties: c/o American Skiing Company 136 Heber Avenue, #303 Park City, UT 84060 Attention: Betsy Wallace Telecopy: (435) 615-4780 Telephone: (435) 615-0360 With a copy to: American Skiing Company One Monument Way Portland, ME 04101 Attention: Foster A. Stewart, Esq. Telecopy: (207) 791-2607 Telephone: (207) 773-7934 Administrative Agent: General Electric Capital Corporation 401 Merritt Seven, Second Floor Norwalk, CT 06851 Attention: Jennifer Lane Telecopy: (203) 229-1992 Telephone: (203) 229-1428 provided that any notice, request or demand to or upon the Administrative Agent or the Lenders shall not be effective until received. Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Section 2 unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications. 9.3. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 9.4. Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans and other extensions of credit hereunder. 9.5. Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the Administrative Agent and the Syndication Agent for all their respective reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and 59 any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including reasonable appraisal fees and expenses, the reasonable fees and disbursements of counsel to the Administrative Agent and filing and recording fees and expenses (but excluding costs and expenses of surveys conducted pursuant to Section 5.6(c)), with statements with respect to the foregoing to be submitted to the Borrower prior to the Closing Date (in the case of amounts to be paid on the Closing Date) and from time to time thereafter on a quarterly basis or such other periodic basis as the Administrative Agent shall deem appropriate (provided that the agreement by the Borrower to reimburse any such costs and expenses incurred by the Administrative Agent in connection with the development, preparation and execution of the Loan Documents and any other documents prepared in connection therewith shall be subject to the limitations and further agreements contained in the fee letter with the Co-Lead Arrangers and Joint Bookrunners (the "Fee Letter")), (b) to pay or reimburse each Lender and the Administrative Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including the fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to each Lender and of counsel to the Administrative Agent, (c) to pay, indemnify, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, that may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and the Administrative Agent and their respective officers, directors, employees, affiliates, agents and controlling persons (each, an "Indemnitee") harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents, including any of the foregoing relating to the use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of any Restricted Group Member or any of the properties it owns, operates or leases and the reasonable fees and expenses of legal counsel in connection with claims, actions or proceedings by any Indemnitee against any Restricted Group Member under any Loan Document (all the foregoing in this clause (d), collectively, the "Indemnified Liabilities"), provided, that the Borrower shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such Indemnified Liabilities are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee. Without limiting the foregoing, and to the extent permitted by applicable law, the Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waive and agree to cause its Subsidiaries to waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them may have by statute or otherwise against any Indemnitee, except to the extent resulting from the gross negligence or willful misconduct of such Indemnitee. All amounts due under this Section shall be payable not later than 10 days after receipt of written demand therefor. Statements payable by the Borrower pursuant to this Section 9.5 shall be submitted to Betsy Wallace (Telephone No. (435) 615-0360) (Telecopy No. (435) 615-4780), at the address of the Borrower set forth in Section 9.2, or to such other Person or address as may be hereafter designated by the Borrower in a written notice to the Administrative Agent. The agreements in this Section shall survive repayment of the Loans and all other amounts payable hereunder. 9.6. Successors and Assigns; Participations and Assignments. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and the attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. 60 (b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees (each, an "Assignee") all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans at the time owing to it) with the prior written consent of: (A) the Borrower (such consent not to be unreasonably withheld), provided that no consent of the Borrower shall be required for an assignment to a Lender, an affiliate of a Lender, an Approved Fund (as defined below) or, if an Event of Default has occurred and is continuing, any other Person; and (B) the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment of all or any portion of a Loan to a Lender, an Affiliate of a Lender or an Approved Fund. (ii) Assignments shall be subject to the following additional conditions: (A) except in the case of an assignment to a Lender, an affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender's Commitments or Loans under any Facility, the amount of the Commitments or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $1,000,000 unless the Borrower and the Administrative Agent otherwise consent, provided that (1) no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing and (2) such amounts shall be aggregated in respect of each Lender and its affiliates or Approved Funds, if any; (B) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; and (C) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an administrative questionnaire. For the purposes of this Section, "Approved Fund" means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. (iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) below, from and after the effective date specified in each Assignment and Assumption the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.2, 2.3, 2.4 and 9.5). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section. 61 (iv) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. (v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an Assignee, the Assignee's completed administrative questionnaire (unless the Assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (c) (i) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans owing to it); provided that (A) such Lender's obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to the proviso to the second sentence of Section 9.1 and (2) directly affects such Participant. Subject to paragraph (c)(ii) of this Section, the Borrower agree that each Participant shall be entitled to the benefits of Sections 2.13, 2.14 and 2.16 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.7(b) as though it were a Lender, provided such Participant shall be subject to Section 9.7(a) as though it were a Lender. (ii) A Participant shall not be entitled to receive any greater payment under Section 2.13 or 2.14 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower' prior written consent. Any Participant that is a Non-U.S. Lender shall not be entitled to the benefits of Section 2.14 unless such Participant complies with Section 2.14(d). (d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or Assignee for such Lender as a party hereto. 62 (e) The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph (d) above. (f) Notwithstanding the foregoing, any Conduit Lender may assign any or all of the Loans it may have funded hereunder to its designating Lender without the consent of the Borrower or the Administrative Agent and without regard to the limitations set forth in Section 9.6(b). The Borrower, each Lender and the Administrative Agent hereby confirms that it will not institute against a Conduit Lender or join any other Person in instituting against a Conduit Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Conduit Lender; provided, however, that each Lender designating any Conduit Lender hereby agrees to indemnify, save and hold harmless each other party hereto for any loss, cost, damage or expense arising out of its inability to institute such a proceeding against such Conduit Lender during such period of forbearance. 9.7. Adjustments; Set-off. (a) Except to the extent that this Agreement expressly provides for payments to be allocated to a particular Lender, if any Lender (a "Benefitted Lender") shall, at any time after the Loans and other amounts payable hereunder shall have become immediately due and payable pursuant to Section 7, receive any payment of all or part of the Obligations owing to it, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 7(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of the Obligations owing to such other Lender, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of the Obligations owing to each such other Lender, or shall provide such other Lenders with the benefits of any such collateral, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, while any Event of Default is continuing, to set off and appropriate and apply against any amount then due and payable any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application. 9.8. Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. 9.9. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 63 9.10. Integration. This Agreement and the other Loan Documents represent the entire agreement of the Borrower, the Administrative Agent and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. 9.11. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 9.12. Submission To Jurisdiction; Waivers. The Borrower hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in Section 9.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. 9.13. Acknowledgments. The Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between Administrative Agent and Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and 64 (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders. 9.14. Releases of Guarantees and Liens. (a) Notwithstanding anything to the contrary contained herein or in any other Loan Document, the Administrative Agent is hereby irrevocably authorized by each Lender (without requirement of notice to or consent of any Lender except as expressly required by Section 9.1) to take any action requested by the Borrower having the effect of releasing any Collateral or guarantee obligations (i) to the extent necessary to permit consummation of any transaction not prohibited by any Loan Document or that has been consented to in accordance with Section 9.1 or (ii) under the circumstances described in paragraph (b) below. (b) At such time as the Obligations shall have been Fully Satisfied, the Collateral shall be released from the Liens created by the Security Documents, and the Security Documents and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent and each Restricted Group Member under the Security Documents shall terminate, all without delivery of any instrument or performance of any act by any Person. The Administrative Agent agrees to execute such further agreements, instruments and other documents as may be reasonably requested by the Borrower, at the expense of the Borrower, to evidence and effect such termination. 9.15. Confidentiality. Each of the Administrative Agent and each Lender agrees to keep confidential all non-public information provided to it by any Restricted Group Member, the Administrative Agent or any Lender pursuant to or in connection with this Agreement that is designated by the provider thereof as confidential; provided that nothing herein shall prevent the Administrative Agent or any Lender from disclosing any such information (a) to the Administrative Agent, any other Lender or any affiliate thereof, (b) subject to an agreement to comply with the provisions of this Section, to any actual or prospective Transferee or any direct or indirect counterparty to any Swap Agreement (or any professional advisor to such counterparty), (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its affiliates, (d) upon the request or demand of any Governmental Authority (including any Governmental Authority having regulatory oversight of any Lender, including the FDIC and the Federal Home Loan Bank), (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (f) if requested or required to do so in connection with any litigation or similar proceeding, (g) that has been publicly disclosed, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender or to any Lender's funding source or lender, or (i) in connection with the exercise of any remedy hereunder or under any other Loan Document. 9.16. WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 65 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. AMERICAN SKIING COMPANY By: /s/ Foster A Stewart, Jr --------------------------------------- Name: Foster A Stewart, Jr Title: Senior Vice President GENERAL ELECTRIC CAPITAL CORPORATION, as Administrative Agent, as Collateral Agent and as a Lender By: /s/ Julia R Meade --------------------------------------- Name: Julia R Meade Title: Duly Authorized Signatory CREDIT SUISSE FIRST BOSTON, as Syndication Agent and as a Lender By: /s/ Robert Hetu --------------------------------------- Name: Robert Hetu Title: Director By: /s/ Vanessa Gomez --------------------------------------- Name: Vanessa Gomez Title: Associate NATEXIS BANQUES POPULARIES, as a Lender By: /s/ Harold Birk --------------------------------------- Name: Harold Birk Title: Vice President By: /s/ Tefta Ghilaga --------------------------------------- Name: Tifta Ghilaga Title: Vice President WELLS FARGO BANK, N.A., as a Lender By: /s/ Alan W Wray --------------------------------------- Name: Alan W Wray Title: Sr Vice President EX-10 7 form10qaexh10-3.txt INDENTURE AMERICAN SKIING COMPANY $76,673,300 (plus accreted interest) JUNIOR SUBORDINATED NOTES DUE 2012 INDENTURE Dated as of November 24, 2004 Madeleine LLC Trustee TABLE OF CONTENTS Page ARTICLE I. DEFINITIONS.........................................................1 Section 1.01 Definitions.......................................1 Section 1.02 Other Definitions.................................8 Section 1.03 Rules of Construction.............................9 ARTICLE II. THE NOTES..........................................................9 Section 2.01 Form and Dating...................................9 Section 2.02 Title and Terms..................................11 Section 2.03 Execution and Authentication.....................12 Section 2.04 Registrar and Paying Agent.......................13 Section 2.05 Paying Agent to Hold Money in Trust..............13 Section 2.06 Holder Lists.....................................13 Section 2.07 Transfer and Exchange............................13 Section 2.08 Replacement Notes................................18 Section 2.09 Outstanding Notes................................18 Section 2.10 Treasury Notes...................................18 Section 2.11 Temporary Notes; Global Notes....................19 Section 2.12 Cancellation.....................................20 ARTICLE III. REDEMPTION.......................................................20 Section 3.01 Notices to Trustee...............................20 Section 3.02 Selection of Notes to be Redeemed................20 Section 3.03 Notice of Redemption.............................20 Section 3.04 Effect of Notice of Redemption...................21 Section 3.05 Deposit of Redemption Price......................21 Section 3.06 Notes Redeemed in Part...........................21 Section 3.07 Optional Redemption..............................21 Section 3.08 Mandatory Redemption.............................22 ARTICLE IV. COVENANTS.........................................................22 Section 4.01 Payment of Notes.................................22 Section 4.02 Reports..........................................22 Section 4.03 Compliance Certificate...........................22 Section 4.04 Stay, Extension and Usury Laws...................23 Section 4.05 Corporate Existence..............................23 Section 4.06 Restricted Payments..............................23 Section 4.07 Change of Control................................24 Section 4.08 Compliance with Laws.............................26 Section 4.09 Taxes............................................26 ARTICLE V. SUBORDINATION......................................................26 Section 5.01 Agreement to Subordinate.........................26 i Section 5.02 Liquidation; Dissolution, Bankruptcy.............27 Section 5.03 Default on Senior Debt; No Stock Collateral......27 Section 5.04 Acceleration of Notes............................28 Section 5.05 When Distribution Must Be Paid Over..............28 Section 5.06 Notice...........................................29 Section 5.07 Subrogation......................................29 Section 5.08 Relative Rights..................................29 Section 5.09 Subordination May Not Be Impaired by Company.....30 Section 5.10 Distribution or Notice to Representative.........31 Section 5.11 Rights of Trustee and Paying Agent...............31 Section 5.12 Authorization to Effect Subordination............32 Section 5.13 Payment..........................................32 Section 5.14 No Claims Against Subsidiaries...................32 Section 5.15 Amendments.......................................32 ARTICLE VI. CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE..............33 Section 6.01 Company May Consolidate, Etc. Only On Certain Terms.........................................33 Section 6.02 Successor Substituted............................34 ARTICLE VII. DEFAULTS AND REMEDIES............................................34 Section 7.01 Events of Default................................34 Section 7.02 Acceleration.....................................35 Section 7.03 Other Remedies...................................36 Section 7.04 Waiver of Past Defaults..........................36 Section 7.05 Control by Majority..............................36 Section 7.06 Limitation on Suits..............................36 Section 7.07 Rights of Holders to Receive Payment.............37 Section 7.08 Collection Suit by Trustee.......................37 Section 7.09 Trustee May File Proofs of Claim.................37 Section 7.10 Priorities.......................................37 Section 7.11 Undertaking for Costs............................38 Section 7.12 Additional Interest..............................38 ARTICLE VIII. TRUSTEE.........................................................39 Section 8.01 Duties of Trustee................................39 Section 8.02 Rights of Trustee................................39 Section 8.03 Individual Rights of Trustee.....................40 Section 8.04 Trustee's Disclaimer.............................40 Section 8.05 Notice of Defaults...............................40 Section 8.06 [Intentionally Omitted]..........................40 Section 8.07 Compensation and Indemnity.......................40 Section 8.08 Replacement of Trustee...........................41 Section 8.09 Successor Trustee by Merger, etc.................42 Section 8.10 Eligibility; Disqualification....................42 Section 8.11 Preferential Collection of Claims Against Company.......................................43 ii ARTICLE IX. DISCHARGE OF INDENTURE............................................43 Section 9.01 Termination of Company's Obligations.............43 Section 9.02 Repayment to Company.............................43 ARTICLE X. AMENDMENTS, SUPPLEMENTS AND WAIVERS................................44 Section 10.01 Without Consent of Holders.......................44 Section 10.02 With Consent of Holders..........................44 Section 10.03 Revocation and Effect of Consents................45 Section 10.04 Notation on or Exchange of Notes.................46 Section 10.05 Trustee Protected................................46 ARTICLE XI. MISCELLANEOUS.....................................................46 Section 11.01 [Intentionally Omitted]..........................46 Section 11.02 Notices..........................................46 Section 11.03 Communication by Holders with other Holders......48 Section 11.04 Certificate and Opinion as to Conditions Precedent.....................................48 Section 11.05 Statements Required in Certificate or Opinion....48 Section 11.06 Rules by Trustee and Agents......................48 Section 11.07 Legal Holidays...................................49 Section 11.08 No Recourse Against Others.......................49 Section 11.09 Counterparts and Facsimile Signatures............49 Section 11.10 Governing Law, Submission to Jurisdiction........49 Section 11.11 No Adverse Interpretation of other Agreements....49 Section 11.12 Successors.......................................49 Section 11.13 Severability.....................................49 Section 11.14 Table of Contents, Headings, etc.................50 iii INDENTURE, dated as of November 24, 2004, between American Skiing Company, a Delaware corporation (the "COMPANY"), and Madeleine LLC, as trustee (the "TRUSTEE"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders (as defined in Section 1.01 hereof) of the Company's Junior Subordinated Notes due 2012 (the "NOTES"): ARTICLE I DEFINITIONS Section 1.01 Definitions. "Accreted Value" means, for any Note, as of any date of determination, the sum of (i) the Original Issue Price of the Note and (ii) any interest in respect of such Note added to such Accreted Value pursuant to Section 2.02 of this Indenture and the terms of such Note. Initially, upon the Issuance Date, the amount under clause (ii) shall be zero. "Affiliate" of any specified Person means any other Person directly indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, however, that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "Agent" means any Registrar or Paying Agent. "Bank Credit Agreements" means (i) the Senior Credit Agreements, (ii) any other credit, loan, reimbursement or other similar agreements among the Company, any Subsidiary and any bank, insurance company, finance company or other institutional lender, (iii) each instrument pursuant to which Obligations under any of the agreements described in (i) or (ii) above, are amended, deferred, extended, increased, renewed, replaced, refunded or refinanced, in whole or in part, and (iv) each instrument now or hereafter evidencing, governing, guarantying or securing any Indebtedness under any agreements described in (i), (ii) or (iii) above, in each case, as modified, amended, reformed, renewed, extended, restated or supplemented from time to time. "Board of Directors" means the Board of Directors of the Company or any authorized committee of the Board of Directors. "Business Day" means any day that is not a Legal Holiday. 2 "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including, without limitation, partnership interests. "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries, taken as a whole, to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than the Permitted Holders, or (ii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as such term is used in Section 13(d)(3) of the Exchange Act), other than the Permitted Holders, becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the voting power of the Capital Stock of the Company, unless, in the case of this clause (ii), the Permitted Holders retain the right or ability, by voting power, contract or otherwise, to elect or designate a majority of the Board of Directors of the Company. "Company" means the party named as such above until a successor replaces it in accordance with Article VI and thereafter means the successor. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Depositary" shall mean The Depository Trust Company, its nominees and their respective successors. "Designated Senior Debt" means the Company's Obligations under the Bank Credit Agreements, Subordinated Convertible Notes and any other Senior Debt of such Person permitted to be incurred by the Company the principal amount of which is $25.0 million or more and that has been designated by the Board of Directors as "Designated Senior Debt" by notice to the Trustee from both the Company and the Senior Agent. "Disqualified Capital Stock" means any Capital Stock that, either by its terms or by the terms of any security into which it is convertible or exchangeable or otherwise, is or upon the happening of an event or passage of time would be, required to be redeemed prior to the one year anniversary of the final Stated Maturity of the principal of the Notes or is redeemable at the option of the holder thereof at any time prior to one year anniversary of the final Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to one year anniversary of the final Stated Maturity at the option of the holder thereof; provided, however, that (i) any class of Capital Stock of the Company that, by its terms, authorizes the Company to satisfy in full its obligations with respect to the payment of dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise) or 3 repurchase thereof or otherwise by the delivery of Qualified Capital Stock and that is not convertible into, puttable or exchangeable for Disqualified Capital Stock, shall not be deemed to be Disqualified Capital Stock so long as the Company satisfies its obligations with respect thereto solely by the delivery of Qualified Capital Stock and (ii) any class of Capital Stock which permits the holders thereof to require the Company to repurchase their Capital Stock upon a Change of Control shall not be deemed to be Disqualified Capital Stock so long as the terms of such Capital Stock provide that no repurchase may occur until after the Company has complied with all of its obligations under Section 4.07 hereunder. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any Indebtedness that is convertible into, or exchangeable for Capital Stock. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, which are in effect on the Issuance Date and are applied on a consistent basis. "Guarantee" means a guarantee, other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner, including, without limitation, letters of credit and reimbursement agreements in respect thereof, of all or any part of any Indebtedness. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest and currency rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest or currency exchange rates. "Holder" means a Person in whose name a Note is registered in the register referred to in Section 2.04. "Indebtedness" means, with respect to any Person, without duplication, (i) any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or representing the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in 4 accordance with GAAP, all indebtedness of others secured by a lien on any asset of such Person (whether or not such indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be the accreted value thereof, in the case of any Indebtedness issued with original issue discount. Indebtedness shall not include liabilities for taxes of any kind. "Indenture" means this Indenture, as modified, amended, reformed, renewed, extended, restated or supplemented from time to time. "Insolvency or Liquidation Proceeding" means, with respect to any Person, (i) any insolvency or bankruptcy or similar case or proceeding, or any reorganization, receivership, liquidation, dissolution or winding up of such Person, whether voluntary or involuntary, or (ii) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of such Person. "Interest Accrual Date" means, with respect to any installment of interest on any Notes, the dates specified in Section 2.02 as the fixed dates on which such installment of interest accrues and is added to the Accreted Value in effect immediately prior to the applicable Interest Accrual Date. "Issuance Date" means the date on which the Notes are first authenticated and issued. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Majority Holders" means, at any time, the Holders of a majority in aggregate Accreted Value of the then outstanding Notes. "Maturity" means, with respect to any Note, the date on which the Accreted Value of such Note becomes due and payable as therein provided and as provided in this Indenture, whether at the Stated Maturity, the Purchase Date or otherwise. "Notes" has the meaning set forth in the preamble hereto. "Obligations" with respect to any instrument or agreement means any and all principal, Accreted Value, interest (including Post-Petition Interest), penalties, premiums, fees (including, without limitation, to the extent provided for in such instrument or agreement, fees and expenses of counsel), indemnifications, reimbursements, damages and other charges, obligations and liabilities existing from time to time under such instrument or agreement, whether direct or indirect, joint or several, actual, absolute or 5 contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, including any obligations or liabilities to repay, redeem, repurchase, retire, acquire or defease any Indebtedness under such instrument or agreement, or any obligation to establish a sinking fund for any such purpose. "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer, the Secretary, any Assistant Treasurer or any Assistant Secretary of the Company. "Officers' Certificate" means a certificate of the Company signed by two Officers, one of whom must be the Chairman of the Board, the President, the Treasurer or a Vice President of the Company. "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Original Issue Price" means, with respect to any Note, the amount designated as original issue price on the face of such Note. "Permitted Holders" means (a) Leslie B. Otten (or, in the event of his incompetence or death, his estate and his estate's heirs, executor, administrator, committee or other representative (collectively, "Heirs")), (b) any Person in which Leslie B. Otten and his Heirs, directly or indirectly, have an 80% controlling interest, and/or (c) Oak Hill Capital Partners, L.P. and Oak Hill Securities Fund, L.P. and their respective affiliates and associates. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Post-Petition Interest" means, with respect to any Indebtedness of any Person, all interest accrued or accruing on such Indebtedness after the commencement of any Insolvency or Liquidation Proceeding against such Person in accordance with and at the contract rate (including, without limitation, any rate applicable upon default) specified in the agreement or instrument creating, evidencing or governing such Indebtedness, whether or not, pursuant to applicable law or otherwise, the claim for such interest is allowed as a claim in such Insolvency or Liquidation Proceeding. "Purchasers" means Madeleine LLC and its Affiliates. "Qualified Capital Stock" of any Person means any and all Capital Stock of such Person other than Disqualified Capital Stock. 6 "Representative" means, with respect to any Senior Debt, the agent or other representative(s), if any, of holders of such Senior Debt. "Responsible Officer," when used with respect to the Trustee, means (i) with respect to Madeleine LLC or any of its Affiliates as Trustee, means Mark A. Neporent, Vice President and Chief Operating Officer of Madeleine LLC or Kevin Genda, Vice President of Madeleine LLC, or any successor thereto and (ii) with respect to any other Person as Trustee, any Trust Officer of the Trustee or, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Senior Agents" means, collectively, (i) (A) until all Indebtedness under the Bank Credit Agreements is paid in full in cash, the agent (or the institution performing similar functions) under the Bank Credit Agreement under which the greatest aggregate principal amount of Indebtedness is outstanding and (B) if all Indebtedness under the Bank Credit Agreements has been paid in full, the Person (or representative of the Persons) holding the greatest amount of Senior Debt other than Senior Notes, (ii) until all Indebtedness under the Senior Notes has been paid in full in cash, the trustee under the Senior Indenture, and (iii) until all Indebtedness under the Subordinated Convertible Notes has been paid in full in cash, the trustee under the Subordinated Convertible Notes Indenture. "Senior Credit Agreements" means the credit agreements, dated November 24, 2004, between the Company, as borrower, General Electric Capital Corporation, as administrative agent, the lenders named therein, Credit Suisse First Boston ("CSFB"), as syndication agent, GECC Capital Markets Group, Inc. and CSFB, as co-lead arranging agents, and certain other parties named therein, as modified, amended, increased, restated or supplemented from time to time. "Senior Debt" of any Person means and includes all principal of, premium and interest on and other Obligations with respect to (i) the Bank Credit Agreements, (ii) the Senior Notes, (iii) the Subordinated Convertible Notes, (iv) any other Indebtedness of such Person (other than as otherwise provided in this definition), and (v) any trade payables incurred in the ordinary course of business, whether outstanding on the date of issuance of the Notes or thereafter incurred. Notwithstanding the foregoing, Senior Debt shall not include (1) the portion of any Indebtedness incurred in violation of this Indenture, (2) any Indebtedness that expressly provides that it shall rank pari passu with, or subordinated to, in right of payment with the Notes, (3) Indebtedness evidenced by the Notes, (4) Indebtedness which when incurred and without respect to any election under Section 1111(b) of the United States Bankruptcy Code is without recourse to the Company or any of its Subsidiaries, (5) any liability for foreign, federal, state, local or other taxes owed or owing by the Company, (6) Indebtedness of such Person to the extent such 7 liability constitutes Indebtedness to a Subsidiary of the Company or (7) Indebtedness owed by the Company for compensation to employees. "Senior Indenture" means the Indenture, dated as of June 28, 1996, between the Company (as successor to ASC East, Inc.), and United States Trust Company of New York as trustee, as modified, amended, restated or supplemented from time to time. "Senior Notes" means the 12% Series A and Series B Senior Subordinated Notes due 2006, issued by the Company pursuant to the Senior Indenture. "Stated Maturity" when used with respect to any Indebtedness or any installment of interest thereon, means the dates specified in such Indebtedness as the fixed date on which the principal of such Indebtedness, the Accreted Value or such installment of interest, as the case may be, is due and payable. "Stock Collateral" means any Equity Interests in any Subsidiary of the Company. "Subordinated Obligations" means all Indebtedness and other Obligations of the Company or any of its Subsidiaries, contingent or otherwise, now or hereafter existing under or in respect of the Notes (pursuant to the terms thereof or any other agreement or instrument relating thereto) or this Indenture. "Subordinated Convertible Notes" means the 11.3025% Convertible Subordinated Notes due 2007, issued by the Company pursuant to the Subordinated Convertible Notes Indenture. "Subordinated Convertible Notes Indenture" means the Indenture, dated as of August 31, 2001, between the Company and Oak Hill Capital Partners, L.P. as trustee, as modified, amended, restated or supplemented from time to time. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person (or a combination thereof) and (ii) any partnership (a) the sole general partner of the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means such successor. 8 "Trust Officer" means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. Section 1.02 Other Definitions. TERM DEFINED IN SECTION "AGENT MEMBERS"...................... 2.01 "BANKRUPTCY LAW"..................... 7.01 "CEDEL".............................. 2.01 "CHANGE OF CONTROL PAYMENT".......... 4.07 "COMMENCEMENT DATE".................. 4.07 "CUSTODIAN".......................... 7.01 "EUROCLEAR".......................... 2.01 "EVENT OF DEFAULT"................... 7.01 "GLOBAL NOTES"....................... 2.01 "LEGAL HOLIDAY"...................... 11.07 "NON-DEFAULT COVENANT BREACH"........ 7.12 "OFFER AMOUNT"....................... 4.07 "PAYING AGENT"....................... 2.04 "PAYMENT BLOCKAGE NOTICE"............ 5.03 "PAYMENT DEFAULT".................... 7.01 "PURCHASE DATE"...................... 4.07 "PURCHASE OFFER"..................... 4.07 "QIBS"............................... 2.01 "REGISTRAR".......................... 2.04 "REGULATION S GLOBAL NOTE"........... 2.01 "REGULATION S"....................... 2.01 "RESTRICTED NOTES"................... 2.01 "RULE 144A GLOBAL NOTE".............. 2.01 "RULE 144A".......................... 2.01 "SURVIVING ENTITY"................... 6.01 "TENDER PERIOD"...................... 4.07 9 Section 1.03 Rules of Construction. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP consistently applied; (c) "OR" is not exclusive; (d) words in the singular include the plural, and in the plural include the singular; (e) provisions apply to successive events and transactions; (f) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time; and (g) a reference to "$" or U.S. Dollars is to United States dollars. ARTICLE II THE NOTES Section 2.01 Form and Dating. (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto, which is hereby incorporated by reference and expressly made a part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). The Company shall furnish any such legend not contained in Exhibit A to the Trustee in writing. Each Note shall be dated the date of its authentication. The Notes shall be issued only in denominations of Accreted Value with $100 of Original Issue Price and integral multiples thereof. The terms and provisions of the Notes set forth in Exhibit A are part of this Indenture and to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes transferred in reliance on Regulation S under the Securities Act ("REGULATION S"), as provided in Section 2.07(a)(ii) hereof, 10 shall be issued in the form of one or more permanent Global Notes in definitive, fully registered form without interest coupons with the Global Notes Legend and Restricted Notes Legend set forth in Exhibit A hereto (the "REGULATION S GLOBAL NOTE"), which shall be deposited on behalf of the transferee of the Notes represented thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of the Euroclear System ("EUROCLEAR") or Cedelbank ("CEDEL"), duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. Notes transferred to Qualified Institutional Buyers ("QIBS") in reliance on Rule 144A under the Securities Act ("RULE 144A"), as provided in Section 2.07(a)(ii) hereof, shall be issued in the form of one or more permanent Global Notes in definitive, fully registered form without interest coupons with the Global Notes Legend and Restricted Notes Legend set forth in Exhibit A hereto ("RULE 144A GLOBAL NOTE"), which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. Notwithstanding the foregoing, for so long as the Purchasers hold the Notes, the Notes shall be held by them in certificated form. (c) Book-Entry Provisions. This Section 2.01(c) shall apply only to the Regulation S Global Note and the Rule 144A Global Note issued in the form of one or more permanent Global Notes (collectively, the "GLOBAL NOTES") deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with this Section 2.01(c), authenticate and deliver initially one or more Global Notes that (a) shall be registered in the name of the Depositary for such Global Note or Global Notes or the nominee of such Depositary and (b) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instructions or held by the Trustee as custodian for the Depositary. Members of, or participants in, the Depositary ("AGENT MEMBERS") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary or by the Trustee as the custodian of the Depositary or under such Global Note, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, 11 nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of the Depositary governing the exercise of the rights of an owner of a beneficial interest in any Global Note. Notwithstanding the foregoing, for so long as the Purchasers hold the Notes, the Notes shall not be issued in the form of Global Notes. (d) Certificated Notes. Notes transferred to "accredited investors" (as defined in Rule 501 (a) (1), (2), (3), (4), (5), (6) and (7) of Regulation D under the Securities Act), as provided in Section 2.07(a), or to any Person in a transaction exempt from the registration requirements of the Securities Act, other than a Person who elects to receive a Global Note as provided elsewhere in the Indenture, shall be issued in the form of one or more certificated Notes in definitive, fully registered form without interest coupons with the Restricted Notes Legend set forth in Exhibit A hereto ("RESTRICTED NOTES"), which shall be registered in the name of such Accredited Investor or its nominee, duly executed by the Company and authenticated by the Trustee as hereinafter provided. Such Restricted Notes may only be transferred in reliance on Regulation S or to QIBs in reliance on Rule 144A, pursuant to another exception from registration under the Securities Act or pursuant to an effective registration statement. In addition to the provisions of Section 2.11, owners of beneficial interests in Global Notes may, if the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of certificated Notes, receive a certificated Note, which certificated Note shall bear the Restricted Notes Legend set forth in Exhibit A hereto unless otherwise provided in this Section 2.01(d) and Section 2.07(b) hereof. Section 2.02 Title and Terms. The aggregate Original Issue Price of Notes which may be authenticated and delivered under this Indenture is limited to $76,673,300, except for Notes authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, other Notes pursuant to Sections 2.03, 2.04, 2.07, 2.08, 4.07 and 10.04. The Notes shall be known and designated as the "Junior Subordinated Notes due 2012" of the Company. The Stated Maturity of the Accreted Value of the Notes shall be May 24, 2012 and the Notes shall each bear interest on the Accreted Value thereof at rates as indicated below (subject to the increase as provided in Section 7.12 hereof) from November 24, 2004 until the Stated Maturity of the Accreted Value. Year Interest Rate ----------------- -------------- Remainder of 2004 11.25% 2005 11.25% 2006 11.25% 2007 11.75% 12 2008 12.50% 2009 12.50% 2010 12.75% 2011 13.00% 2012 13.00% On each January 1 on which the Notes are outstanding, commencing January 1, 2005, and at the Stated Maturity of the Accreted Value, interest on the Notes shall accrue and be paid through the addition of such interest to the Accreted Value in effect immediately prior to the applicable Interest Accrual Date. On the applicable Interest Accrual Date, the Accreted Value shall increase by the amount of such interest. On Maturity, the Accreted Value shall be payable at the office or agency of the Company maintained for such purpose. If a Holder so requests, Accreted Value, accrued and unpaid interest thereon, and premium, if any, may be paid by wire transfer of immediately available funds to an account previously specified in writing by such Holder to the Company and the Trustee. Holders shall have the right to require the Company to repurchase their Notes, in whole or in part, in the event of a Change of Control, pursuant to Section 4.07. Section 2.03 Execution and Authentication. One Officer shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time the Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of an authorized officer of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by an Officer, authenticate Notes for Original Issue Price up to an amount stated in paragraph 4 of the Note. The aggregate Notes outstanding at any time may not have an aggregate Original Issue Price that exceeds $76,673,300 except as provided in Section 2.08. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders, the Company or an Affiliate. 13 Section 2.04 Registrar and Paying Agent. The Company shall maintain (i) offices or agencies where the Notes may be presented for registration of transfer or for exchange ("REGISTRAR") and (ii) offices or agencies where the Notes may be presented for payment ("PAYING AGENT"); provided that if the only Holders are the Purchasers, such offices or agencies shall be the executive offices of the Company as set forth in Section 11.02. The Company shall act initially as principal Registrar and Paying Agent. The principal Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and, one or more additional paying agents in such other locations as it shall determine. The term "Registrar" includes any co-registrar and, the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without prior notice to any Holder. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Affiliates may act as Paying Agent or Registrar. Section 2.05 Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of the Accreted Value at Maturity, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee and to account for any money disbursed by it. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or an Affiliate of the Company) shall have no further liability for the money. If the Company or an Affiliate of the Company acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Section 2.06 Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee at such times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders. Section 2.07 Transfer and Exchange. Where Notes are presented to the Registrar or a co-registrar with a request to register a transfer or to exchange them for one or more new Notes of any authorized denomination or denominations, of a like aggregate Accreted Value, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met. To permit registrations of transfers and exchanges, the Company shall issue and the Trustee shall authenticate Notes at the Registrar's request. No service charge shall be made for any registration 14 of transfer or exchange (except as otherwise expressly permitted herein), but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer tax or similar governmental charge payable upon exchanges pursuant to Sections 2.11 or 10.05 hereof). (a) Notwithstanding any provision to the contrary herein, so long as a Global Note remains outstanding and is held by or on behalf of the Depositary, transfers of a Global Note, in whole or in part, or of any beneficial interest therein, shall only be made in accordance with Section 2.01(b) and this Section 2.07(a); provided, however, that beneficial interests in a Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Global Note in accordance with the transfer restrictions set forth in the Restricted Notes Legend. (i) Except for transfers or exchanges made in accordance with clauses (ii) through (iv) of this Section 2.07(a), transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to nominees of the Depositary or to a successor of the Depositary or such successor's nominee. (ii) Rule 144A Global Note to Regulation S Global Note. If an owner of a beneficial interest in the Rule 144A Global Note deposited with the Depositary or the Trustee as custodian for the Depositary wishes at any time to transfer its interest in such Rule 144A Global Note to a Person who is required to take delivery thereof in the form of an interest in the Regulation S Global Note, such owner may, subject to the rules and procedures of the Depositary, exchange or cause the exchange of such interest for an equivalent beneficial interest in the Regulation S Global Note. Upon receipt by the principal Registrar of (1) instructions given in accordance with the Depositary's procedures from an Agent Member directing the principal Registrar to credit or cause to be credited a beneficial interest in the Regulation S Global Note in an amount equal to the beneficial interest in the Rule 144A Global Note to be exchanged, (2) a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary and the Euroclear or Cedel account to be credited with such increase and (3) a certificate in the form of Exhibit B attached hereto given by the Holder of such beneficial interest, then the principal Registrar shall instruct the Depositary to reduce or cause to be reduced the Accreted Value of the Rule 144A Global Note and to increase or cause to be increased the Accreted Value of the Regulation S Global Note by the aggregate Accreted Value of the beneficial interest in the Rule 144A Global Note equal to the beneficial interest in the Regulation S Global Note to be exchanged or transferred, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Regulation S Global Note equal to the reduction in the Accreted Value of the Rule 144A Global Note and to debit or cause to be debited from the account of the Person making such exchange or transfer the beneficial interest in the Rule 144A Global Note that is being exchanged or transferred. 15 (iii) Regulation S Global Note to Rule 144A Global Note. If an owner of a beneficial interest in the Regulation S Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary wishes at any time to transfer its interest in such Regulation S Global Note to a Person who is required to take delivery thereof in the form of an interest in the Rule 144A Global Note, such Holder may, subject to the rules and procedures of Euroclear or Cedel, as the case may be, and the Depositary, exchange or cause the exchange of such interest for an equivalent beneficial interest in the Rule 144A Global Note. Upon receipt by the principal Registrar of (1) instructions from Euroclear or Cedel, if applicable, and the Depositary, directing the principal Registrar to credit or cause to be credited a beneficial interest in the Rule 144A Global Note equal to the beneficial interest in the Regulation S Global Note to be exchanged or transferred, (2) a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary and (3) a certificate in the form of Exhibit C attached hereto given by the owner of such beneficial interest, then Euroclear or Cedel or the principal Registrar, as the case may be, will instruct the Depositary to reduce or cause to be reduced the Accreted Value of the Regulation S Global Note and to increase or cause to be increased the Accreted Value of the Rule 144A Global Note by the aggregate Accreted Value of the beneficial interest in the Regulation S Global Note to be exchanged or transferred, and the principal Registrar shall instruct the Depositary, concurrently with such reduction, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Rule 144A Global Note equal to the reduction in the Accreted Value of the Regulation S Global Note and to debit or cause to be debited from the account of the Person making such exchange or transfer the beneficial interest in the Regulation S Global Note that is being exchanged or transferred. (iv) Global Note to Restricted Note. If an owner of a beneficial interest in a Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary wishes at any time to transfer its interest in such Global Note to a Person who is required to take delivery thereof in the form of a Restricted Note, such owner may, subject to the rules and procedures of Euroclear or Cedel, if applicable, and the Depositary, cause the exchange of such interest for one or more Restricted Notes of any authorized denomination or denominations and of the same aggregate Accreted Value. Upon receipt by the principal Registrar of (1) instructions from Euroclear or Cedel, if applicable, and the Depositary directing the principal Registrar to authenticate and deliver one or more Restricted Notes of the same aggregate Accreted Value as the beneficial interest in the Global Note to be exchanged, such instructions to contain the name or names of the designated transferee or transferees, the authorized denomination or denominations of the Restricted Notes to be so issued and appropriate delivery instructions, (2) a certificate in the form of Exhibit D attached hereto given by the owner of such beneficial interest to the effect set forth therein, (3) a certificate in the form of Exhibit E attached hereto given by the Person acquiring the Restricted Notes for which such interest is being exchanged, to the effect set forth therein, and (4) such other certifications, legal opinions or other information as the Company may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, then Euroclear or Cedel, if applicable, or the principal Registrar, as the case may be, will instruct the Depositary to reduce or cause to be reduced such Global Note by the aggregate Accreted Value of the beneficial interest therein to be 16 exchanged and to debit or cause to be debited from the account of the Person making such transfer the beneficial interest in the Global Note that is being transferred, and concurrently with such reduction and debit the Company shall execute, and the Trustee shall authenticate and deliver, one or more Restricted Notes of the same aggregate Accreted Value in accordance with the instructions referred to above. (v) Restricted Note to Restricted Note. If a Holder of a Restricted Note wishes at any time to transfer such Restricted Note to a Person who is required to take delivery thereof in the form of a Restricted Note, such Holder may, subject to the restrictions on transfer set forth herein and in such Restricted Note, cause the exchange of such Restricted Note for one or more Restricted Notes of any authorized denomination or denominations and of the same aggregate Accreted Value. Upon receipt by the principal Registrar of (1) such Restricted Note, duly endorsed as provided herein, (2) instructions from such Holder directing the principal Registrar to authenticate and deliver one or more Restricted Notes of the same aggregate Accreted Value as the Restricted Note to be exchanged, such instructions to contain the name or authorized denomination or denominations of the Restricted Notes to be so issued and appropriate delivery instructions, (3) a certificate from the Holder of the Restricted Note to be exchanged in the form of Exhibit D attached hereto, (4) a certificate in the form of Exhibit E attached hereto given by the Person acquiring the Restricted Notes for which such interest is being exchanged, to the effect set forth therein, and (5) such other certifications, legal opinions or other information as the Company may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, then the Registrar shall cancel or cause to be canceled such Restricted Note and concurrently therewith, the Company shall execute, and the Trustee shall authenticate and deliver, one or more Restricted Notes of the same aggregate Accreted Value, in accordance with the instructions referred to above. (vi) Restricted Note to Rule 144A Global Note. If an owner of a Restricted Note registered in the name of such owner wishes at any time to transfer such Restricted Note to a Person who is required to take delivery thereof in the form of an interest in the Rule 144A Global Note, such Holder may, subject to the rules and procedures of the Depositary, exchange or cause the exchange of such Restricted Note for an equivalent beneficial interest in the Rule 144A Global Note. Upon receipt by the principal Registrar of (1) instructions from the Company, directing the principal Registrar (A) to credit or cause to be credited a beneficial interest in the Rule 144A Global Note equal to the Accreted Value of the Restricted Note to be exchanged or transferred and (B) to cancel such Restricted Note to be exchanged or transferred, (2) a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary and (3) a certificate in the form of Exhibit C attached hereto given by the owner of such Restricted Note, then the principal Registrar will instruct the Trustee to cancel such Restricted Note and will instruct the Depositary to increase or cause to be increased the Accreted Value of the Rule 144A Global Note by the Accreted Value of 17 the Restricted Note to be exchanged or transferred, and the principal Registrar shall instruct the Depositary, concurrently with such cancellation of the Restricted Note, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Rule 144A Global Note equal to the Accreted Value of the Restricted Note to be canceled by the Trustee. (vii) Restricted Note to Regulation S Global Note. If an owner of a Restricted Note registered in the name of such owner wishes at any time to transfer such Restricted Note to a Person who is required to take delivery thereof in the form of an interest in the Regulation S Global Note, such owner may, subject to the rules and procedures of the Euroclear or Cedel, as the case may be, exchange or cause the exchange of such Restricted Note for an equivalent beneficial interest in the Regulation S Global Note. Upon receipt by the principal Registrar of (1) instructions from the Company, directing the principal Registrar (A) to credit or cause to be credited a beneficial interest in the Regulation S Global Note equal to the Accreted Value of the Restricted Note to be exchanged or transferred and (B) to cancel such Restricted Note to be exchanged or transferred, (2) a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Euroclear or Cedel account to be credited with such increase and (3) a certificate in the form of Exhibit B attached hereto given by the Holder of such Restricted Note, then the principal Registrar will instruct the Trustee to cancel such Restricted Note and will instruct the Depositary to increase or cause to be increased the Accreted Value of the Regulation S Global Note by the Accreted Value of the Restricted Note to be exchanged or transferred, and the principal Registrar shall instruct the Depositary, concurrently with such cancellation of the Restricted Note, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Regulation S Global Note equal to the Accreted Value of the Restricted Note to be canceled by the Trustee. (viii) Other Exchanges. In the event that a beneficial interest in a Global Note is exchanged for a certificated Note in definitive registered form pursuant to Section 2.11, such Notes may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of clauses (ii) through (v) above (including the certification requirements intended to ensure that such transfers comply with Rule 144A, Rule 144, Regulation S or any other available exemption from registration, as the case may be) and such other procedures as may from time to time be adopted by the Company. (b) If Notes are issued upon the transfer, exchange or replacement of Notes bearing the Restricted Securities Legend set forth in Exhibit A hereto, or if a request is made to remove such Restricted Notes Legend on Notes, the Notes so issued shall bear the Restricted Notes Legend, or the Restricted Notes Legend shall not be removed, as the case may be, unless there is delivered to the Company such satisfactory evidence, which may include an opinion of counsel licensed to practice law in the State of New York, as may be reasonably required by the Company, that neither the legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A, Rule 144, Regulation S or any other available exemption from registration under the Securities Act or, with respect to Restricted Notes, that such Notes are not "restricted" within the meaning of Rule 144 under the Securities Act. Upon provision of such satisfactory evidence, the Trustee, at the direction of the Company, shall authenticate and deliver Notes that do not bear the legend. 18 (c) Neither the Company nor the Trustee shall have any responsibility for any actions taken or not taken by the Depositary and the Company shall have no responsibility for any actions taken or not taken by the Trustee as agent or custodian of the Depositary. Section 2.08 Replacement Notes. If the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken or if such Note is mutilated and is surrendered to the Trustee, the Company shall issue and the Trustee shall authenticate a replacement Note if the Trustee's and the Company's requirements are met. If required by the Trustee or the Company, an indemnity bond must be sufficient in the judgment of both to protect the Company, the Trustee, any Agent or any authenticating agent from any loss which any of them may suffer if a Note is replaced. The Company may charge for its reasonable expenses in replacing a Note. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.09 Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, and those described in this Section as not outstanding. If a Note is replaced, paid or purchased pursuant to Section 2.08 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced, paid or purchased Note is held by a bona fide purchaser. If the Accreted Value of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. Except as set forth in Section 2.10 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. Section 2.10 Treasury Notes. In determining whether the Holders of the required Accreted Value of Notes have concurred in any direction, waiver or consent, Notes owned by the Company or a Subsidiary of the Company shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. 19 Section 2.11 Temporary Notes; Global Notes. (a) Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. (b) A Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary pursuant to Section 2.01 shall be transferred to the beneficial owners thereof in the form of certificated Notes only in accordance with Section 2.01(d) or if such transfer complies with Section 2.07 and (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Note or if at any time such Depositary ceases to be a "clearing agency" registered under the Exchange Act and a successor Depositary is not appointed by the Company within 90 days after receipt of such notice or after it becomes aware of such cessation or (ii) an Event of Default has occurred and is continuing. (c) Any Global Note that is transferable to the beneficial owners thereof in the form of certificated Notes pursuant to Section 2.01(d) or to this Section 2.11 shall be surrendered by the Depositary to the Trustee to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Note, an equal aggregate Accreted Value of Notes of authorized denominations in the form of certificated Notes. Any portion of a Global Note transferred pursuant to this Section 2.11 shall be executed, authenticated and delivered only in denominations of Accreted Value with $100 of Original Issue Price and any integral multiple thereof and registered in such names as the Depositary shall direct. Any Note in the form of certificated Notes delivered in exchange for an interest in the Global Notes shall, except as otherwise provided by Section 2.07(b), bear the Restricted Notes Legend set forth in Exhibit A hereto. (d) The registered Holder of a Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. (e) In the event of the occurrence of either of the events specified in Section 2.11(b), the Company will promptly make available to the Trustee a reasonable supply of certificated Notes in definitive, fully registered form without interest coupons. 20 Section 2.12 Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee shall promptly cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of canceled Notes as the Company directs. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. ARTICLE III REDEMPTION Section 3.01 Notices to Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of the Notes and Section 3.07 hereof, it shall notify the Trustee of the redemption date and the Accreted Value of Notes to be redeemed. The Company shall give each notice provided for in this Section 3.01 at least 45 days before the redemption date (unless a shorter notice period shall be reasonably satisfactory to the Trustee). Section 3.02 Selection of Notes to be Redeemed. If less than all of the Notes are to be redeemed at any time, selection of Notes shall be made by the Trustee on a pro rata basis or by lot or by method that complies with the requirements of any exchange on which the Notes are listed and that the Trustee considers fair and appropriate, provided that no Notes with Accreted Value with Original Issue Price of less than $100 shall be redeemed in part. The Trustee shall make the selection not more than 60 days and not less than 30 days before the redemption date from Notes outstanding not previously called for redemption. Notes and portions of Notes selected shall be in amounts of Accreted Value with $100 of Original Issue Price or integral multiples thereof. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall notify the Company promptly of the Notes or portions of Notes to be called for redemption. Section 3.03 Notice of Redemption. At least 30 days but not more than 60 days before a redemption date, the Company shall mail, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; 21 (b) the redemption price; (c) if any Note is to be redeemed in part only, the portion of the Accreted Value with $100 Original Issue Price thereof redeemed, and that, after the redemption date, upon surrender of such Note, a new Note in Accreted Value and Original Issue Price equal to the unredeemed portion thereof shall be issued in the name of the Holder thereof upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price plus accrued interest, if any; (f) that interest on Notes called for redemption ceases to accrue on and after the redemption date; and (g) the paragraph of the Notes pursuant to which the Notes called for redemption are being redeemed. At the Company's request, the Trustee shall give notice of redemption in the Company's name and at its expense; provided that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice, as provided in the preceding paragraph. Section 3.04 Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become due and payable on the redemption date at the price set forth in the Notes. A notice of redemption may not be conditional. Section 3.05 Deposit of Redemption Price. On or before the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall return to the Company any money not required for that purpose. Section 3.06 Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in Accreted Value and Original Issue Price to the unredeemed portion of the Note surrendered. Section 3.07 Optional Redemption. 22 The Company may redeem all or any portion of the Notes, upon the terms and at the redemption prices set forth in the Notes. Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. Section 3.08 Mandatory Redemption. The Company shall not be required to make mandatory redemption payments or sinking fund payments with respect to the Notes. ARTICLE IV COVENANTS Section 4.01 Payment of Notes. The Company shall pay the Accreted Value and any other amounts due on the Notes, if any, at Maturity in the manner provided in the Notes. The Accreted Value and other amounts due on the Notes, if any, shall be considered paid on the date due if the Paying Agent (other than the Company or an Affiliate of the Company) holds on that date money designated for and sufficient to pay all Accreted Value and such other amounts payable on the Notes, if any, then due. To the extent lawful, the Company shall pay interest (including Post-Petition Interest in any proceeding under any Bankruptcy Law) on overdue Accreted Value and any other amounts due on the Notes, if any, at the rate borne by the Notes, compounded annually. Section 4.02 Reports. Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall furnish within 45 days after the end of each fiscal quarter of the Company (90 days with respect to the end of the Company's fiscal year) to the Trustee and to the Holders, all quarterly and annual financial statements required to be contained in a filing with the SEC on Forms 10-Q and 10-K and, with respect to the annual information only, a report thereon by the Company's certified independent accountants, in each case, as required by the rules and regulations of the SEC as in effect on the Issuance Date. Section 4.03 Compliance Certificate. The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year of the Company, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under, and complied with the covenants and conditions contained in, this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his knowledge the Company has kept, observed, performed and fulfilled each and every covenant, and complied with the covenants and conditions contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, 23 describing all such Defaults or Events of Default of which he may have knowledge) and that to the best of his knowledge no event has occurred and remains in existence by reason of which payments on account of the aggregate Accreted Value on the Notes are prohibited. One of the Officers signing such Officers' Certificates shall be either the Company's principal executive officer, principal financial officer or principal accounting officer. The Company will, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon becoming aware of any Default or Event of Default or any failure to observe or perform any covenant or agreement contained herein for which an obligation to accrue additional interest under Section 7.12 may arise, an Officers' Certificate specifying such Default or Event of Default or such failure. Section 4.04 Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 4.05 Corporate Existence. Subject to Article V hereof, to the extent permitted by law, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each Subsidiary of the Company in accordance with the respective organizational documents of each Subsidiary and the rights (charter and statutory), licenses and franchises of the Company; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any Subsidiary, if the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries taken as a whole. Section 4.06 Restricted Payments. The Company shall not, directly or indirectly, (i) pay any dividend on, or make any distribution to holders of, any shares of the Company's Capital Stock (other than dividends or distributions payable solely in shares of its Qualified Capital Stock or in options, warrants or other rights to acquire shares of such Qualified Capital Stock and other than the accretion of dividends on the 24 Company's 12% Series C-1 Convertible Participating Preferred Stock and 15% Series C-2 Preferred Stock); or (ii) purchase, redeem, defease or otherwise acquire or retire for value, directly or indirectly, the Company's Capital Stock or options, warrants or other rights to acquire such Capital Stock. The foregoing provisions shall not prohibit (x) the purchase, repurchase, redemption, or other acquisition or retirement for value of any shares of any class of Capital Stock of the Company in exchange for other shares of Qualified Capital Stock of the Company and (y) the purchase, redemption, acquisition or retirement for value of shares of the Company's Capital Stock or options, warrants or other rights to acquire such Capital Stock so long as (i) the amounts paid to purchase, redeem or acquire such securities does not exceed $5 million in the aggregate and (ii) no amount is paid to Oak Hill Capital Partners, L.P., Oak Hill Securities Fund, L.P. or any of their Affiliates. Section 4.07 Change of Control. (a) Upon the occurrence of a Change of Control, each Holder of Notes shall have the right to require the Company to repurchase all or any part of such Holder's Notes (with Accreted Value with $100 of Original Issue Price or integral multiples thereof), pursuant to an offer to all Holders of the Notes to purchase Notes (the "PURCHASE OFFER") at a purchase price equal to the Accreted Value of such Notes plus accrued and unpaid interest to the date of purchase (the "CHANGE OF CONTROL PAYMENT"). (b) The Purchase Offer shall remain open for a period specified by the Company which shall be no less than 30 calendar days and no more than 40 calendar days following its commencement (the "COMMENCEMENT DATE") (as determined in accordance with this Section 4.07 hereof), except to the extent that a longer period is required by applicable law (the "TENDER PERIOD"). Upon the expiration of the Tender Period (the "PURCHASE DATE"), the Company shall irrevocably deposit with the Paying Agent an amount in immediately available funds sufficient to pay the aggregate Change of Control Payment for all the Notes required to be purchased pursuant to this Section 4.07 (the "OFFER AMOUNT"), to be held for payment in accordance with the terms of this Section 4.07. (c) The Company shall provide the Trustee with notice of the Purchase Offer at least 10 days before the Commencement Date. (d) Within 40 days following any Change of Control, the Company or the Trustee (at the expense of the Company) shall send, by first class mail, a notice to each of the Holders, which shall govern the terms of the Purchase Offer and shall state: (i) that the Purchase Offer is being made pursuant to which all Notes validly tendered will be accepted for payment and the length of time the Purchase Offer will remain open; 25 (ii) the purchase price (as determined in accordance with Section 4.07(a) hereof) and the Purchase Date, and that all Notes tendered will be accepted for payment; (iii) that any Note or portion thereof not tendered or accepted for payment will continue to accrue and accrete interest; (iv) that, unless the Company defaults in the payment of the purchase price, any Note or portion thereof accepted for payment pursuant to the Purchase Offer will cease to accrue or accrete interest after the Purchase Date; (v) that Holders electing to have a Note or portion thereof purchased pursuant to any Purchase Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Purchase Date; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Purchase Date, or such longer period as may be required by law, a letter or a telegram, telex or facsimile transmission (receipt of which is confirmed and promptly followed by a letter) setting forth the name of the Holder, the Accreted Value of the Note or portion thereof the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have the Note or portion thereof purchased; and (vii) that Holders whose Notes were purchased only in part will be issued new Notes equal in Accreted Value to the unpurchased portion of the Notes surrendered. (e) On the Purchase Date, the Company shall, to the extent lawful and subject to Article V hereof, (i) accept for payment the Notes or portions thereof properly tendered pursuant to the Purchase Offer, (ii) deliver or cause the depositary or Paying Agent to deliver to the Trustee Notes so accepted and (iii) deliver to the Trustee an Officers' Certificate stating such Notes or portions thereof have been accepted for payment by the Company in accordance with the terms of this Section 4.07. The Paying Agent shall promptly (but in any case not later than ten (10) calendar days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Note equal in Accreted Value to any unpurchased portion of the Note surrendered. Any Notes not so accepted shall be promptly mailed or delivered by or on behalf of the Company to the Holder thereof. (f) The Purchase Offer shall be made by the Company in compliance with all applicable provisions of the Exchange Act, and all applicable tender offer rules promulgated thereunder, and shall include all instructions and materials necessary to enable such Holders to tender their Notes. 26 (g) If and to the extent that a purchase of Notes required by this Section 4.07 is prohibited under the Bank Credit Agreements or the Subordinated Convertible Notes Indenture, then notwithstanding any other provision of this Section 4.07, such purchase shall not occur and be deferred until the first date on which such purchase shall be permitted to be made under the terms of the Bank Credit Agreements or the Subordinated Convertible Notes Indenture. Any Note that is not purchased on a scheduled Purchase Date as otherwise contemplated by this Section 4.07 shall continue to be outstanding and shall accrue interest until such Note is purchased. (h) The Company shall not be required to make a Purchase Offer if a third party makes the Purchase Offer in the manner and at the times prescribed by, and otherwise in compliance with the requirements set forth in, this Section 4.07 and purchases all Notes validly tendered and not withdrawn under such Purchase Offer. Section 4.08 Compliance with Laws. The Company shall, and shall cause each of its Subsidiaries to, comply in all respects with all laws, rules, regulations and governmental orders (whether Federal, state or local) applicable to it and the operation of its businesses whether now in effect or hereafter enacted if noncompliance with any such law, rule, regulation or governmental order, either individually or in the aggregate, would have a material adverse effect on (i) the business, assets, liabilities, properties, operations, prospects or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, or (ii) the ability of the Company to perform its obligations in accordance with the terms hereof or of the Notes. Section 4.09 Taxes. The Company shall, and shall cause each of its Subsidiaries to, pay prior to delinquency all material taxes, assessments and governmental levies, except as contested in good faith and by appropriate proceedings. ARTICLE V SUBORDINATION Section 5.01 Agreement to Subordinate. The Company, for itself and its successors, and each Holder of Notes by accepting a Note agrees, that the Subordinated Obligations are subordinated in right of payment, to the extent and in the manner provided in this Article, to the prior payment in full in cash of all Obligations with respect to Senior Debt of the Company (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt. 27 Section 5.02 Liquidation; Dissolution, Bankruptcy. Upon any distribution of cash, securities or other property to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, in an assignment for the benefit of creditors or any marshalling of the Company's assets and liabilities; (a) holders of Senior Debt of the Company shall be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Debt before Holders of the Notes shall be entitled to receive any payment with respect to the Notes (except that, so long as the holders of Senior Debt do not receive any equity securities in exchange for their Senior Debt, Holders may receive securities that are subordinated to the Indebtedness or debt securities received, or Senior Debt retained by the holders of the Senior Debt at least the same extent as the Notes are subordinated to the Senior Debt of the Company); and (b) until all Obligations with respect to Senior Debt of the Company (as provided in subsection (a) above) are paid in full in cash, any distribution to which Holders of Notes would be entitled but for this Article shall be made to holders of such Senior Debt (except that, so long as the holders of Senior Debt do not receive any equity securities in exchange for their Senior Debt, Holders may receive securities that are subordinated to the Indebtedness or debt securities received, or Senior Debt retained by the holders of the Senior Debt at least the same extent as the Notes to (i) Senior Debt of the Company and (ii) any securities issued in exchange for Senior Debt of the Company), as their interests may appear. Section 5.03 Default on Senior Debt; No Stock Collateral. The Company may not make any payment or distribution to the Trustee or any Holder in respect of Obligations with respect to the Notes and may not acquire from the Trustee or any Holder any Notes for cash or property (other than securities that are subordinated to the Indebtedness or debt securities received, or Senior Debt retained by the holders of the Senior Debt, at least the same extent as the Notes to Senior Debt of the Company, so long as the holders of Senior Debt do not receive any equity securities in exchange for their Senior Debt) until all principal and other Obligations with respect to such Senior Debt have been paid in full in cash if: (1) a default in the payment of the principal of or premium or interest on Senior Debt of the Company occurs and in continuing; or (2) a default, other than a payment default, under the agreement, indenture, or other document governing Designated Senior Debt occurs and is continuing that permits holders of the Designated Senior Debt as to which such default relates to accelerate its maturity and the Trustee receives a notice of such default (a "PAYMENT BLOCKAGE NOTICE") from a Senior Agent. If the Trustee receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice shall be effective for purposes of this Section unless until at least 360 days shall have elapsed since the effectiveness of the immediately prior 28 Payment Blockage Notice. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or made, the basis for a subsequent Payment Blockage Notice. The Company may and shall resume payments on and distributions in respect of the Notes and it may acquire them upon: (A) in the case of a default referred to in Section 5.03(1) hereof, the date upon which such default is cured or waived, or (B) in the case of a default referred to in Section 5.03(2) hereof, the earlier of the date upon which the default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of such Senior Debt has been accelerated, if this Article otherwise permits the payment, distribution or acquisition at the time of such payment or acquisition. The Company agrees that it will not, directly or indirectly, transfer or pledge or grant any security interests in any Stock Collateral for any of the Subordinated Obligations, and the Trustee and the Holders agree that neither the Trustee nor any Holder will demand or accept any such Stock Collateral, and should any transfer or pledge of or security interest in any Stock Collateral at any time be made to or received by the Trustee or any such Holder, such Stock Collateral shall be held for the benefit of the holders of Senior Debt of the Company and, upon request, delivered and transferred to the Senior Agent for the benefit of the holders of such Senior Debt. Section 5.04 Acceleration of Notes. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Debt of the Company of the acceleration. Section 5.05 When Distribution Must Be Paid Over. In the event that the Trustee or any Holder of Notes receives any payment of any Obligations with respect to the Notes at a time when such payment is prohibited by Section 5.03 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to the holders of Senior Debt of the Company as their interests may appear under the indenture or other agreement (if any) pursuant to which such Senior Debt may have been issued, as their respective interests may appear as set forth in a writing provided to the Trustee and consented to by all Representatives of the holders of Senior Debt of the Company, for application to the payment of all Obligations with respect to such Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving affect to any concurrent payment or distribution to or for the holders of such Senior Debt. 29 With respect to the holders of Senior Debt of the Company, the trustee undertakes to perform such obligations on the part of the Trustee as are specifically set forth in this Article V, and no implied covenants or obligations with respect to the holders of such Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt of the Company, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders of Notes of the Company or any other Person money or assets to which any holders of such Senior Debt shall be entitled by virtue of this Article V, except if such payment is made at a time when a Responsible Officer has actual knowledge that the terms of this Article V prohibit such payment. Section 5.06 Notice. The Company shall promptly notify the Trustee and the Paying Agent in writing of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article, but failure to give such notice shall not affect the subordination of the Notes to the Senior Debt of the Company as provided in this Article V. Section 5.07 Subrogation. After all Senior Debt of the Company is paid in full in cash and until the Notes are paid in full, Holders of Notes shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of such Senior Debt to receive distributions applicable to such Senior Debt to the extent that distributions otherwise payable to the Holders have been applied to the payment of such Senior Debt. A distribution made under this Article V to holders of Senior Debt of the Company that otherwise would have been made to Holders of Notes is not, as between the Company and Holders of Notes, a payment by the Company on the Notes. Section 5.08 Relative Rights. This Article V defines the relative rights of Holders of Notes and holders of Senior Debt of the Company. Nothing in this Indenture shall: (i) impair, as between the Company and Holders of Notes, the obligation of the Company, which is absolute and unconditional, to pay Accreted Value of and premium and interest on the Notes in accordance with their terms; (ii) affect the relative rights of Holders of Notes and creditors of the Company other than their rights in relation to holders of such Senior Debt; or (iii) prevent the Trustee or any Holder of Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders of owners of such Senior Debt to receive distributions and payments otherwise payable to Holders of Notes. 30 If the Company fails because of this Article V to pay Accreted Value of or premium or interest on a Note on the due date, the failure is still a Default or Event of Default. Section 5.09 Subordination May Not Be Impaired by Company. (a) No right of any holder of Senior Debt of the Company to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or the failure of the Company or any Holder to comply with this Indenture. (b) Without in any way limiting Section 5.09(a), the holders of any Senior Debt of the Company may, at any time and from time to time, without the consent of or notice to any Holders, without incurring any liabilities to any Holder and without impairing or releasing the subordination and other benefits provided in this Indenture or the Holders' obligations to the holders of such Senior Debt, even if any Holder's right of reimbursement or subrogation or other right or remedy is affected, impaired or extinguished thereby, but subject to the second sentence, of the definition of "Senior Debt," do any one or more of the following: (i) amend, renew, exchange, extend, modify, increase or supplement in any manner such Senior Debt or any instrument evidencing or guaranteeing or securing such Senior Debt or any agreement under which such Senior Debt is outstanding (including, but not limited to, changing the manner, place or terms of payment or changing or extending the time of payment of, or renewing, exchanging, amending, increasing, releasing, terminating or altering, (A) the terms of such Senior Debt, (B) any security for, or any guarantee of, such Senior Debt, (C) any liability of any obligor on such Senior Debt (including any guarantor) or any liability incurred in respect of such Senior Debt); (ii) sell, exchange, release, surrender, realize upon, enforce or otherwise deal with in any manner and in any order any property pledged, mortgaged or otherwise securing such Senior Debt or any liability of any obligor thereon, to such holder, or any liability incurred in respect thereof; (iii) settle or compromise any such Senior Debt or any other liability of any obligor of such Senior Debt to such holder or any security therefor or any liability incurred in respect thereof and apply any sums by whomsoever paid and however realized to any liability (including, without limitation, payment of any Senior Debt) in any manner or order; and (iv) release, terminate or otherwise cancel, or fail to take or to record or otherwise perfect, for any reason or for no reason, any lien or security interest securing such Senior Debt by whomsoever granted, exercise or delay in or refrain from exercising any right or remedy against any obligor or any guarantor or any other Person, elect any remedy and otherwise deal freely with any obligor and any security for such Senior Debt or any liability of any obligor to the holders of such Senior Debt or any liability incurred in respect to such Senior Debt. 31 Section 5.10 Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Debt of the Company, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article V, the Trustee and the Holders of Notes shall be entitled, to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article V. Section 5.11 Rights of Trustee and Paying Agent. Neither the Trustee nor any Paying Agent shall at any time be charged with the knowledge of the existence of any facts that would prohibit the making of any payment to or by the Trustee or Paying Agent under this Article V, unless and until the Trustee or Paying Agent shall have received written notice thereof from the Company, the Senior Agent, one or more holders of Senior Debt of the Company or a Representative of any holders of Senior Debt of the Company; and, prior to the receipt of any such written notice, the Trustee or Paying Agent shall be entitled to assume conclusively that no such facts exist. The Trustee shall be entitled to rely on the delivery to it of written notice by a Person representing itself to be a holder of Senior Debt (or a Representative thereof) to establish that such notice has been given. In the event that the Trustee or Paying Agent determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article V, the Trustee or Paying Agent may request such Person to furnish evidence to the reasonable satisfaction of the Trustee or Paying Agent as to the amount of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article V, and if such evidence is not furnished, the Trustee or Paying Agent may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Only the Company, a Representative or a holder of Senior Debt of the Company that has no Representative may give the notice. Nothing in this Article V shall impair the claims of, or payments to, the Trustee under or pursuant to Section 8.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. 32 Section 5.12 Authorization to Effect Subordination. Each Holder of Notes by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article V, and appoints the Trustee to act as the Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 7.09 hereof at least 30 days before the expiration of the time to file such claim, a Senior Agent is hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. Section 5.13 Payment. For all purposes of this Article V, a "payment or distribution on account of Subordinated Obligations" shall include, without limitation, any direct or indirect payment or distribution on account of the purchase, prepayment, redemption, retirement, defeasance or acquisition of any Note, any recovery by the exercise of any right of set-off, any direct or indirect payment of principal, premium or interest with respect to or in connection with any mandatory or optional redemption or purchase provisions, any direct or indirect payment or distribution payable or distributable by reason of any other Indebtedness or Obligation being subordinated or any Subordinated Obligations, and any direct or indirect payment or recovery on any claim relating to or arising out of this Indenture, any Note or the issuance of the Notes. Section 5.14 No Claims Against Subsidiaries. The Company and the Holders acknowledge and agree as follows: (a) the Notes are an obligation of the Company only, and the Holders have and will have no claim, right or demand against any Subsidiary of the Company or any assets or properties of any Subsidiary of the Company on or in respect of the Notes; (b) the Company is, and is capitalized as, a separate legal entity such that any claim, right or demand by the Holders with respect to the assets and properties of any Subsidiary of the Company would be solely as a creditor of a direct or indirect shareholder of such Subsidiary, and that such arrangement has been relied upon by and is for the benefit of holders of Senior Debt of the Company or any such guarantor; and (c) the Company's direct and indirect Subsidiaries have no obligation to pay dividends to or to make investments in the Company, for the purpose of funding payment obligations of the Company to the Holders or otherwise. Section 5.15 Amendments. The provisions of this Article V shall not be amended or modified without the written consent of the holders of all Senior Debt of the Company. ARTICLE VI 33 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 6.01 Company May Consolidate, Etc. Only On Certain Terms. The Company shall not, in a single transaction or through a series of related transactions, consolidate with or merge with or into any other Person or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets to any Person or group of affiliated Persons, or permit any of its Subsidiaries to enter into any such transaction or transactions if such transaction or transactions, in the aggregate, would result in a sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of the Company and its Subsidiaries on a consolidated basis to any other Person or group of affiliated Persons, unless at the time and after giving effect thereto: (a) either (i) the Company shall be the continuing corporation or (ii) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by sale, assignment, conveyance, transfer, lease or disposition all or substantially all of the properties and assets of the Company and its Subsidiaries on a consolidated basis (the "SURVIVING ENTITY") shall be a corporation, partnership, limited liability company, business trust or other entity duly organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia and such Person expressly assumes, by a supplemental indenture, executed and delivered to the Trustee, in a form satisfactory to the Trustee, all the obligations of the Company under the Notes and this Indenture, and this Indenture shall remain in full force and effect; (b) immediately before and immediately after giving effect to such transaction on a pro forma basis, no Default or Event of Default shall have occurred and be continuing; and (c) at the time of the transaction, the Company or the Surviving Entity shall have delivered, or caused to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each to the effect that such consolidation, merger, transfer, sale, assignment, conveyance, transfer, lease or other transaction and the supplemental indenture in respect thereof comply with this Indenture and that all conditions precedent herein provided for relating to such transaction have been complied with. Paragraph (b) of this Section 6.01 shall not apply to any merger of the Company with or into any wholly owned Subsidiary of the Company. This Section 6.01 shall not apply to the transfer or lease of all or substantially all of the assets of the Company to any of its wholly owned Subsidiaries. 34 Section 6.02 Successor Substituted. Upon any consolidation or merger, or any sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of the Company in accordance with Section 6.01, the successor Person formed by such consolidation or into which the Company is merged or the successor Person to which such sale, assignment, conveyance, transfer, lease or disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture and the Notes, with the same effect as if such successor had been named as the Company herein or in the Notes. When a successor (other than a successor that is an Affiliate of the Company) assumes all the Obligations of its predecessor under this Indenture or the Notes, as the case may be, the predecessor shall be released from those Obligations; provided that in the case of a transfer of substantially all of the Company's assets (but not all of the assets), the predecessor shall not be released from the payment of the aggregate Accreted Value and any other payments due on the Notes. ARTICLE VII DEFAULTS AND REMEDIES Section 7.01 Events of Default. An "EVENT OF DEFAULT" occurs if: (a) the Company defaults in the payment of the aggregate Accreted Value of or premium on the Notes when the same becomes due and payable at Maturity, in connection with a Purchase Offer, upon declaration or otherwise (whether or not such payment is prohibited by the provisions of Article V hereof); (b) the Company defaults for 30 days in the payment when due of any other amounts payable on any Note (whether or not such payment is prohibited by the provisions of Article V hereof); (c) the Company fails to observe or perform for a period of 30 days after notice any covenant or agreement contained in Sections 4.07 and 6.01 hereof (other than, in the case of Section 4.07, a failure to purchase Notes in connection with a Purchase Offer); (d) the Company fails to observe or perform any covenant or agreement contained in Section 4.06 hereof; (e) the Company pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case; 35 (ii) consents to the entry of an order for relief against it in an involuntary case; (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property; (iv) makes a general assignment for the benefit of its creditors; or (v) admits in writing its inability generally to pay its debts as they become due; and (f) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company in an involuntary case; (ii) appoints a Custodian of the Company or for all or substantially all of the property of the Company; (iii) orders the liquidation of the Company and the order or decree remains unstayed and in effect for 60 consecutive days. The term "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar Federal, state or foreign law for the relief of debtors or the protection of creditors. The term "CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. Section 7.02 Acceleration. If an Event of Default (other than an Event of Default specified in clauses (e) and (f) of Section 7.01 hereof) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in aggregate Accreted Value of the then outstanding Notes by notice to the Company and the Trustee, may declare all the Notes to be due and payable. Upon such declaration, the aggregate Accreted Value plus accrued and unpaid interest thereon, and any other amounts payable on the Notes shall be due and payable immediately. If an Event of Default specified in clauses (e) or (f) of Section 7.01 hereof occurs, such amounts shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. Notwithstanding the foregoing, the Trustee and the Holders may not declare the Notes to be due and payable under the first sentence of this Section 7.02 until five Business Days after receipt by the Senior Agent of written notice of the acceleration of the Notes. The Majority Holders by notice to the Trustee may rescind an acceleration and its consequences (i) if the rescission would not conflict with any judgment 36 or decree of a court of competent jurisdiction and (ii) if all existing Events of Default have been cured or waived except nonpayment of Accreted Value or interest on the Notes that has become due solely because of the acceleration of the Notes. Section 7.03 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the aggregate Accreted Value plus accrued and unpaid interest thereon and any other amounts payable on the Notes, if any, or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 7.04 Waiver of Past Defaults. The Majority Holders by notice to the Trustee may on behalf of all of the Holders of the Notes waive an existing Default or Event of Default and its consequences except a continuing Default or Event of Default in the payment of the aggregate Accreted Value, accrued and unpaid interest thereon, and any other amount payable on any Note, if any. When a Default or Event of Default is waived, it is cured and ceases; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 7.05 Control by Majority. The Majority Holders may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, is unduly prejudicial to the rights of other Holders, or would involve the Trustee in personal liability. Section 7.06 Limitation on Suits. A Holder may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder gives to the Trustee notice of a continuing Event of Default; (b) the Holders of at least 25% in aggregate Accreted Value of the then outstanding Notes make a request to the Trustee to pursue the remedy; (c) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; 37 (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (e) during such 60-day period the Majority Holders do not give the Trustee a direction inconsistent with the request. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. Section 7.07 Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of the Accreted Value, accrued and unpaid interest thereon, and other amounts payable on the Note, if any, on or after the respective due dates expressed in the Note, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder made pursuant to this Section 7.07. Section 7.08 Collection Suit by Trustee. If an Event of Default specified in Section 7.01(a) or (b) hereof occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of the aggregate Accreted Value, accrued and unpaid interest thereon, remaining unpaid on the Notes and interest on overdue Accreted Value and such further amounts as shall be sufficient to cover the costs and, to the extent lawful, expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 7.09 Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders allowed in any judicial proceedings relative to the Company, its creditors or its property. Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 7.10 Priorities. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee for amounts due under Section 8.07 hereof; Second: to the holders of Senior Debt to the extent required by Article V; 38 Third: to Holders for amounts due and unpaid on the Notes for the Accreted Value, accrued and unpaid interest thereon, and other amounts payable under the Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for the aggregate Accreted Value, accrued and unpaid interest thereon, and other amounts, if any, respectively; and Fourth: to the Company. The Trustee may fix a record date and payment date for any payment to Holders made pursuant to this Section 7.10. Section 7.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 7.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 7.07 hereof, or a suit by Holders of more than 10% in aggregate Accreted Value of the then outstanding Notes. Section 7.12 Additional Interest. If the Company fails to observe or perform any covenant or agreement contained herein (other than any failure which may result in a Default or an Event of Default as provided in Section 7.01 (a), (b), (c) and (d)) and such failure continues for a period of 60 days after notice from the Trustee to the Company or from Holders of at least 25% in aggregated Accreted Value of then outstanding Notes to the Trustee and the Company (each, a "Non-default Covenant Breach"), additional interest will accrue on the Notes over and above the rates set forth in the Notes and this Indenture at a rate of 2% per annum for the period immediately following the end of the 60 day cure period until such failure is cured or waived; provided that the Company shall in no event be required to pay any additional interest for more than one Non-default Covenant Breach at any one time. 39 ARTICLE VIII TRUSTEE Section 8.01 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture and to confirm the correctness of all mathematical computations. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this subsection does not limit the effect of subsection (b) of this Section 8.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 7.05 hereof. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 8.01. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 8.02 Rights of Trustee. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. 40 (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. (e) The Trustee shall not be charged with knowledge of any Event of Default under subsection (c), (d), (e) or (f) (and subsection (a) or (b) if the Trustee does not act as Paying Agent) of Section 7.01 unless either (i) a Responsible Officer shall have actual knowledge thereof, or (ii) the Trustee shall have received notice thereof in accordance with Section 11.02 hereof from the Company or any Holder. Section 8.03 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or an Affiliate with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, subject to the exceptions set forth therein, the Trustee is subject to Sections 8.10 and 8.11 hereof. Section 8.04 Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in the Indenture or any statement in any Note other than its authentication. Section 8.05......Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Holders. Section 8.06 [Intentionally Omitted] Section 8.07 Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its services hereunder. The Trustee's compensation shall not be 41 limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it. Such disbursements and expenses may include the reasonable disbursements, compensation and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any loss or liability incurred by it except as set forth in the next paragraph. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees, disbursements and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence or bad faith. To secure the Company's payment obligations in this Section 8.07, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee, except money or property held in trust to pay Accreted Value and interest on particular Notes. Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services after an Event of Default specified in Section 7.01(g) or (h) hereof occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. All amounts owing to the Trustee under this Section 8.07 shall be payable by the Company in United States dollars. This Section 8.07 shall not apply so long as Madeleine LLC or any of its Affiliates is the Trustee. Section 8.08 Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 8.08. The Trustee may resign by so notifying the Company. The Majority Holders may remove the Trustee by so notifying the Trustee and the Company. If Madeleine LLC or any of its Affiliates is not the Trustee, the Company may remove the Trustee if: (a) the Trustee fails to comply with Section 8.10 hereof,; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; 42 (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Majority Holders may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% of the aggregate Accreted Value of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 8.10 hereof, any Holder who has been a bona fide Holder of a Note for at least six months may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee; provided, that the foregoing shall not apply if the Trustee is Madeleine LLC or any of its Affiliates. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 8.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 8.08 hereof, the Company's obligations under Section 8.07 hereof shall continue for the benefit of the retiring trustee with respect to expenses and liabilities incurred by it prior to such replacement. Section 8.09 Successor Trustee by Merger, etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. Section 8.10 Eligibility; Disqualification. Except for Madeleine LLC or any of its Affiliates is acting as Trustee, the Trustee shall always have a combined capital and surplus of at least $100,000,000 as set forth in its most recent published annual report of condition. 43 Section 8.11 Preferential Collection of Claims Against Company. If the Trustee shall be, or shall become, a creditor, directly or indirectly, secured or unsecured, of the Company, within three months prior to a Default, or subsequent to such a Default, then, unless and until such Default shall be cured, the Trustee shall set apart and hold in a special account for the benefit of the Trustee individually and the Holders: (a) an amount equal to any and all reductions in the amount due and owing upon any claim as such creditor in respect of principal or interest, effected after the beginning of such three months' period and valid as against the Company and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in paragraph (b) below, or from the exercise of any right of setoff which the Trustee could have exercised if a petition in bankruptcy had been filed by or against the Company upon the date of such Default; and (b) all property received in respect of any claim as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such three months' period, or an amount equal to the proceeds of any such property, if disposed of, subject, however, to the rights, if any, of the Company and its other creditors in such property or such proceeds. This Section 8.11 shall not apply if Madeleine LLC or any of its Affiliates is acting as Trustee. ARTICLE IX DISCHARGE OF INDENTURE Section 9.01 Termination of Company's Obligations. This Indenture shall cease to be of further effect (except that the Company's obligations under Sections 8.07 and 9.02 hereof shall survive) when all outstanding Notes theretofore authenticated and issued have been delivered to the Trustee for cancellation and the Company has paid all sums payable hereunder. Section 9.02 Repayment to Company. The Trustee and the Paying Agent shall promptly pay to the Company upon request any excess money or securities held by them at any time. The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of Accreted Value or interest that remains unclaimed for two years after the date upon which such payment shall have become due; provided, however, that the Company shall have first caused notice of such payment to the Company to be mailed to each Holder entitled thereto no less than 30 days prior to such payment. After payment to the Company, the Trustee and the Paying Agent shall have no further liability with respect to such money and Holders entitled to the money must look to the Company for payment as general creditors unless any applicable abandoned property law designates another Person. 44 ARTICLE X AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 10.01 Without Consent of Holders. The Company and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder: (a) to cure any ambiguity, defect or inconsistency; (b) to comply with Sections 5.12 and 6.01 hereof; (c) to provide for uncertificated Notes in addition to or in place of certificated Notes; (d) to make any change that provides additional rights or benefits to the Holders of the Notes; or (e) to make any change that does not adversely affect the interests hereunder of any Holder. Section 10.02 With Consent of Holders. Subject to Section 7.07 hereof, the Company and the Trustee may amend or supplement this Indenture or the Notes with the written consent of the Majority Holders. Subject to Sections 7.04 and 7.07 hereof, the Majority Holders may also waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment, supplement or waiver under this Section 10.02 may not: (a) reduce the percentage in aggregate Accreted Value of the then outstanding Notes the consent of whose Holders is required for any amendment, supplement to this Indenture or waiver of any provision of this Indenture; (b) change the Stated Maturity of the Accreted Value of any Note or alter the Accreted Value thereof or any amounts payable thereon under this Indenture, if any; (c) reduce the rate of or change the time for payment of interest on any Note; 45 (d) waive a default in the payment of the Accreted Value or any other amounts payable on any Note, if any, or impair the right to institute suit for the enforcement of any such payment on or after the Maturity thereof, except a rescission of acceleration of the Notes by the Majority Holders and a waiver of the payment default that resulted from such acceleration; (e) make any Note payable in money other than that stated in the Note; (f) make any change in Sections 7.04 or 7.07 hereof; (g) modify Article V in a manner adverse to the Holders of Notes; (h) except as provided by Article VI, consent to the assignment or transfer by the Company of any of its rights and obligations under the Indenture; and (i) make any change in the foregoing amendment and waiver provisions of this Article X. To secure a consent of the Holders under this Section 10.02, it shall not be necessary for the Holders to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 10.02 becomes effective, the Company shall mail to Holders a notice briefly describing the amendment or waiver. Section 10.03 Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to his Note or portion of a Note if the Trustee receives the notice of revocation before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite Accreted Value of Notes have consented to the amendment, supplement or waiver. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the provisions of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No consent shall be valid or effective for more than 90 days after such record date unless consents from Holders of the 46 Accreted Value of Notes required hereunder for such amendment or waiver to be effective shall have also been given and not revoked within such 90-day period. After an amendment, supplement or waiver becomes effective it shall bind every Holder, unless it is of the type described in any of clauses (a) through (i) of Section 10.02 hereof. In such case, the amendment or waiver shall bind each Holder who has consented to it and every subsequent Holder that evidences the same debt as the consenting Holder's Note. Section 10.04 Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall authenticate new Notes that reflect the amendment or waiver. Failure to make such notation on a Note or to issue a new Note as aforesaid shall not affect the validity and effect of such amendment or waiver. Section 10.05 Trustee Protected. The Trustee shall sign all supplemental indentures, except that the Trustee may, but need not, sign any supplemental indenture that adversely affects its rights. ARTICLE XI MISCELLANEOUS Section 11.01 [Intentionally Omitted] Section 11.02 Notices. Any notice or communication by the Company or the Trustee to the other is duly given if in writing and delivered in Person or mailed by first class mail to the other's address stated in this section. The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication to a Holder shall be mailed by first class mail to his address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. 47 All other notices or communications shall be in writing. In case by reason of the suspension of regular mail service, or by reason of any other cause, it shall be impossible to mail any notice as required by the Indenture, then such method of notification as shall be made with the approval of the Trustee shall constitute a sufficient mailing of such notice. The address of the Company's executive office is: American Skiing Company P. O. Box 4552 136 Heber Ave. Park City, UT 84060 Telecopy: (435) 615 0340 Attention: Chief Financial Officer with a copy to: American Skiing Company One Monument Way Portland, ME 04101 Attention: Foster Stewart and a copy to: Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, NY 10019 Telecopy: (212) 373-2377 Attention: John C. Kennedy, Esq. The Trustee's address is: Madeleine LLC 299 Park Avenue New York, NY 10171 Attention: Mark A. Neporent with a copy to: Stuart D. Freedman, Esq. Schulte Roth & Zabel LLP 919 Third Avenue New York, NY 10022 48 Section 11.03 Communication by Holders with other Holders. Holders may communicate with other Holders with respect to their rights under this Indenture or the Notes and may have access to information held by the Trustee. The disclosure of any such information as to the names and addresses of the Holders by the Trustee or the Company is hereby authorized and permitted and the Trustee or Company shall not be held accountable by reason of mailing any material pursuant to a request made by the Holders. Section 11.04 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. Section 11.05 Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than pursuant to Section 4.03) shall include: (a) a statement that the Person signing such certificate or rendering such opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, such Person has made such examination or investigation as is necessary to enable such Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with. Section 11.06 Rules by Trustee and Agents. The Trustee may make reasonable rules for action by, or a meeting of, Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. 49 Section 11.07 Legal Holidays. A "LEGAL HOLIDAY" is a Saturday, a Sunday or a day on which banking institutions in the State of New York are not required to be open. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If any other operative date for purposes of this Indenture shall occur on a Legal Holiday then for all purposes the next succeeding day that is not a Legal Holiday shall be such operative date. Section 11.08 No Recourse Against Others. A director, officer, employee, incorporator or shareholder of the Company, as such, shall not have any liability for any Obligations of the Company under the Notes or this Indenture or for any claim based on, in respect of or by reason of such Obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes. Se ction 11.09 Counterparts and Facsimile Signatures. This Indenture may be executed by manual or facsimile signature in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Section 11.10 Governing Law, Submission to Jurisdiction. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND THE NOTES, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF. Section 11.11 No Adverse Interpretation of other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or an Affiliate. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 11.12 Successors. All agreements of the Company in this Indenture and the Notes shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. Section 11.13 Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 50 Section 11.14 Table of Contents, Headings, etc. The Table of Contents, Cross-Reference Table, and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. AMERICAN SKIING COMPANY, as Company By: /s/ Foster A Stewart, Jr ----------------------------------------- Name: Foster A Stewart, Jr Title: Senior Vice President Madeleine LLC, as Trustee By: /s/ Mark A Neporent ------------------------------------------------ Name: Mark A Neporent Title: Vice President and Chief Operating Officer EXHIBIT A [FORM OF FACE OF NOTE] [Global Notes Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Notes Legend] THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, IF AVAILABLE, (c) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (d) TO AN ACCREDITED INVESTOR (AS DEFINED IN REGULATION D UNDER THE SECURITIES ACT)THAT, PRIOR A-1 TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THE NOTES (IN SUBSTANTIALLY FORM OF EXHIBIT E OF THE INDENTURE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN ACCRETED VALUE WITH AN ORIGINAL ISSUE PRICE (AS DEFINED IN THE TERMS OF NOTES) LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR ANY SUBSIDIARY THEREOF OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE PURCHASER WILL, AND EACH SUBSEQUENT PURCHASER IS REQUIRED TO, NOTIFY ANY SUBSEQUENT PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. A-2 No. ________ $76,673,300 Original Issue Price or such other amount as is indicated on Schedule A hereof* CUSIP No. [ ]/CINS No. [ ]** JUNIOR SUBORDINATED NOTE DUE 2012 American Skiing Company, a Delaware corporation (the "COMPANY"), promises to pay to Madeleine LLC or registered assigns, the Accreted Value of this Note (as defined on the reverse hereof) on May 24, 2012, subject to the further provisions of this Note set forth on the reverse hereof which further provisions shall for all purposes have the same effect as if set forth at this place. Interest Accrual Dates: Each January 1, commencing January 1, 2005 IN WITNESS WHEREOF, American Skiing Company has caused this Note to be signed manually or by facsimile by one of its duly authorized officers. Dated: ---------------------------- AMERICAN SKIING COMPANY By: -------------------------------------- TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Junior Subordinated Notes due 2012 described in the within-mentioned Indenture. Madeleine LLC, as Trustee By: -------------------------------------- Authorized Officer * Applicable to Global Notes Only ** To be included only if there is a CUSIP number or CINS number for the Notes A-3 [FORM OF REVERSE OF NOTE] AMERICAN SKIING COMPANY Junior Subordinated Note due 2012 1. Interest. American Skiing Company, a Delaware corporation (the "COMPANY," which term includes any successor Person under the Indenture hereinafter referred to), is the issuer of Junior Subordinated Notes due 2012 (the "NOTES"). The Company promises to pay the Accreted Value of this Note on May 24, 2012. The Notes will accrue interest, compounded annually, as provided in Section 2.02 of the Indenture on the Accreted Value of the Note, at a rate as indicated below (subject to the increase as provided in Section 7.12 of the Indenture): Year Interest Rate ----------------- -------------- Remainder of 2004 11.25% 2005 11.25% 2006 11.25% 2007 11.75% 2008 12.50% 2009 12.50% 2010 12.75% 2011 13.00% 2012 13.00% Interest on the Notes will accrue from November 24, 2004 and will be computed on the basis of a 360-day year of twelve 30-day months. The "ACCRETED VALUE" of this Note is defined as the sum of (i) the Original Issue Price of this Note, and (ii) any interest or premium in respect to this Note added to each Accreted Value pursuant to Section 2.02 of the Indenture and the terms of this Note. 2. Method of Payment. Interest on the Notes shall be payable through the addition of such interest to the Accreted Value in effect immediately prior to the applicable Interest Accrual Date. On the applicable Interest Accrual Date, the Accreted Value shall increase by the amount of such interest. On maturity, Holders must surrender Notes to a Paying Agent to collect the Accreted Value on such Notes. The Company will pay the Accreted Value, accrued and unpaid interest thereon, and premium, if any, in money of the United States that at the time of payment is legal tender for payment of public and private debts. If a Holder so requests, Accreted Value, accrued and unpaid interest thereon, and premium, if any, may be paid by wire transfer of immediately available funds to an account previously specified in writing by such Holder to the Company and the Trustee. A-4 3. Paying Agent and Registrar. The Company will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without prior notice. The Company or any of its Affiliates may act in any such capacity. 4. Indenture. The Company issued the Notes under the Indenture. The terms of the Notes include those stated in the Indenture. The Notes are subject to, and qualified by, all such terms, certain of which are summarized hereon, and Holders are referred to the Indenture. The Notes are unsecured general obligations of the Company limited (except as otherwise provided in the Indenture) to $76,673,300 in aggregate Original Issue Price and subordinated in right of payment to all existing and future Senior Debt of the Company. 5. Optional Redemption. At any time, the Notes are subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at a redemption price equal to the Accreted Value of such Notes plus accrued and unpaid interest thereon to the applicable redemption date. Notice of redemption will be mailed at least 30 but not more than 60 days before the redemption date to each Holder of the Notes to be redeemed at his address of record. The Company may redeem Notes in whole or in part in denominations of Accreted Value with $100 of Original Issue Price or integral multiples thereof. In the event of a redemption of less than all of the Notes, the Notes will be chosen for redemption by the Trustee in accordance with the Indenture. On and after the redemption date, interest ceases to accrue on the Notes or portions of them called for redemption. 6. Mandatory Redemption. The Company will not be required to make mandatory redemption or repurchase payments with respect to the Notes. There are no sinking fund payments with respect to the Notes. 7. Repurchase at Option of Holder. If there is a Change of Control, the Company shall be required to offer to purchase all outstanding Notes on the Purchase Date at the purchase price equal to the Accreted Value of such Notes, plus accrued and unpaid interest thereon to the Purchase Date. Holders of Notes that are subject to an offer to purchase will receive a Change of Control offer from the Company prior to any related Purchase Date and may elect to have such Notes or portions thereof in authorized denominations purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. 8. Subordination. The payment of the Accreted Value, accrued and unpaid interest thereon or any other amounts due on the Notes is subordinated in right of payment to all existing and future Senior Debt of the Company, as described in the Indenture. Each Holder, by accepting a Note, agrees to such subordination and authorizes and directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and appoints the Trustee as its attorney-in-fact for such purpose. A-5 9. Denominations, Transfer, Exchange. The Notes are in registered form, without coupons, in denominations of Accreted Value with $100 of Original Issue Price and any integral multiples thereof. The transfer of Notes may be registered, and Notes may be exchanged, as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. 10. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes. 11. Unclaimed Money. If money for the payment of Accreted Value or interest remains unclaimed for two years, the Trustee and the Paying Agent shall pay the money back to the Company at its written request. After that, Holders of Notes entitled to the money must look to the Company for payment unless an abandoned property law designates another Person and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 12. Defaults and Remedies. The Notes shall have the Events of Default set forth in Section 7.01 of the Indenture. Subject to certain limitations in the Indenture, if an Event of Default occurs and is continuing, the Trustee by notice to the Company or the Holders of at least 25% in aggregate Accreted Value of the then outstanding Notes by notice to the Company and the Trustee may declare all the Notes to be due and payable immediately, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all unpaid Accreted Value, accrued and unpaid interest thereon and other amounts payable on the Notes, if any, shall become due and payable immediately without further action or notice. The Majority Holders by written notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of Accreted Value, and other amounts due on the Notes, if any, that has become due solely because of the acceleration. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, the Majority may direct the Trustee in its exercise of any trust or power. The Company must furnish annually compliance certificates to the Trustee. The above description of Events of Default and remedies is qualified by reference, and subject in its entirety, to the more complete description thereof contained in the Indenture. 13. Amendments, Supplements and Waivers. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Majority Holders (including consents obtained in connection with a tender offer or exchange offer for Notes), and any existing default may be waived with the consent of the Majority Holders. Without the consent of any Holder, the Indenture or the Notes may be amended among other things, to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for assumption of the Company's obligations to Holders or to make any change that does not adversely affect the rights of any Holder. A-6 14. Trustee Dealings with the Company. The Trustee, in its individual or any other capacity may become the owner or pledgee of the Notes and may otherwise deal with the Company or an Affiliate with the same rights it would have, as if it were not Trustee, subject to certain limitations provided for in the Indenture. Any Agent may do the same with like rights. 15. No Recourse Against Others. A director, officer, employee, incorporator or shareholder of the Company, as such, shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes. 16. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE NOTES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. 17. Authentication. The Notes shall not be valid until authenticated by the manual signature of an authorized officer of the Trustee or an authenticating agent. 18. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and UGMA (= Uniform Gifts to Minors Act). The Company will furnish to any Holder of the Notes upon written request and without charge a copy of the Indenture. Request may be made to: American Skiing Company P. O. Box 4552 136 Heber Ave. Park City, UT 84060 Telecopy: (435) 615 0340 Attention: Chief Financial Officer with a copy to: American Skiing Company One Monument Way Portland, ME 04101 Attention: Foster Stewart A-7 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to (Insert assignee's social security or tax I.D. no.) (Print or type assignee's name, address and zip code) and irrevocably appoint _________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Your Signature: ------------------------------- (Sign exactly as your name appears on the other side of this Note) Date: --------------- Signature Guarantee: * --------------------------- In connection with any transfer of any of the Notes evidenced by this certificate occurring prior to the date that is two years after the later of the date of original issuance of such Notes and the last date, if any, on which such Notes were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Notes are being transferred: CHECK ONE BOX BELOW (1) to the Company or any subsidiary thereof, (2) to a qualified institutional buyer in compliance with Rule 144A, (3) outside the United States in compliance with Rule 904 under the Securities Act, (4) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available), (5) to an Accredited Investor (as defined in Regulation D under the Securities Act) in a transaction exempt from registration under the Securities Act, (6) pursuant to any other exemption from registration under the Securities Act or A-8 (7) pursuant to an effective registration statement under the Securities Act. * Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. However, such guarantee is not required so long as a Purchaser holds the Note. A-9 Signature Signature Guarantee* Signature must be guaranteed TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Date: _____________________ * Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. However, such guarantee is not required so long as a Purchaser holds the Note. NOTICE: To be executed by an executive officer A-10 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note or a portion thereof repurchased by the Company pursuant to Section 4.07 of the Indenture, check the box: [ ] If the purchase is in part, indicate the portion of Accreted Value with Original Issue Price in denominations of $100 or any integral multiple thereof to be purchased: Your Signature: -------------------------------------- (Sign exactly as your name appears on the other side of this Note) Date: ------------------ Signature Guarantee:**/ ------------------------------------- **/ Signature must be guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. However, this guarantee is not required so long as a Purchaser holds the Note. A-11 [TO BE ATTACHED TO GLOBAL NOTES] SCHEDULE A SCHEDULE OF ORIGINAL ISSUE PRICE The original issue price of this Global Note shall be $_______. The following increases or decreases in the Original Issue Price (as defined in the Indenture) of this Global Note have been made: Amount of increase Signature of Date of exchange Amount of decrease in in Original Issue Original Issue authorized officer following such Original Issue Price Price of this Price of this of Trustee or Notes decrease or of this Global Note Global Note Global Note Custodian increase - ---------------------- ------------------- --------------- ------------------- ------------------
A-12 EXHIBIT B FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM RULE 144A GLOBAL NOTE OR RESTRICTED NOTE TO REGULATION S GLOBAL NOTE (Transfers pursuant to Section 2.07(a)(ii) or 2.07(a)(vii) of the Indenture) [Name of Trustee] as Trustee [Address] Attn: Re: American Skiing Company Junior Subordinated Notes due 2012 (the "NOTES") Reference is hereby made to the Indenture, dated as of November 24, 2004 (the "INDENTURE"), between American Skiing Company, as Issuer, and Madeleine LLC, as Trustee. This letter relates to $[ ] [check one] (i) [ ] aggregate Accreted Value of Notes which are held in the form of the Rule 144A Global Note (CUSIP No. ) with the Depositary or (ii) [ ] Accreted Value of Restricted Note (CUSIP No. ) registered, in either case, in the name of [name of transferor] (the "TRANSFEROR") to effect the transfer of the Notes in exchange for an equivalent beneficial interest in the Regulation S Global Notes. The Original Issue Price of such Notes is $________. In connection with such request, the Transferor does hereby certify that such transfer has been effected in accordance with (i) the transfer restrictions set forth in the Notes and (ii) that: (1) the offer of the Notes was not made to a Person in the United States; (2) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any Person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the United States Securities Act of 1933, as amended (the "SECURITIES ACT"). In addition, if the sale is made during a distribution compliance period and the provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1), as the case may be. B-1 You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Capitalized terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S. [Name of Transferor] By: __________________________ Name: Title: Dated: ------------------- cc: American Skiing Company P. O. Box 4552 136 Heber Ave. Park City, UT 84060 Telecopy: (435) 615 0340 Attention: Chief Financial Officer and: American Skiing Company One Monument Way Portland, ME 04101 Attention: Foster Stewart B-2 EXHIBIT C FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM REGULATION S GLOBAL NOTE OR RESTRICTED NOTE TO RULE 144A GLOBAL NOTE (Transfers pursuant to Section 2.07(a)(iii) or 2.07(a)(vi) of the Indenture) [Trustee] as Trustee [Address] Attn: Re: American Skiing Company Junior Subordinated Notes due 2012 (the "NOTES") Reference is hereby made to the Indenture, dated as of November 24, 2004 (the "INDENTURE"), between American Skiing Company, as Issuer, and Madeleine LLC, as Trustee. Capitalized terms used but not defined herein shall have the respective meanings given them in the Indenture. This letter relates to $[ ] [check one] (i) [ ] aggregate Accreted Value of Notes which are held in the form of the Regulation S Global Note (CUSIP No. ____) with the Depositary or (ii) [ ] Accreted Value of Restricted Note (CUSIP No. ) registered, in each case, in the name of [name of transferor] (the "TRANSFEROR") to effect the transfer of the Notes in exchange for an equivalent beneficial interest in the Rule 144A Global Note. The Original Issue Price of such Notes is $_____. In connection with such request, and in respect of such Notes the Transferor does hereby certify that such Notes are being transferred in accordance with (i) the transfer restrictions set forth in the Notes and (ii) Rule 144A under the United States Securities Act of 1933, as amended, to a transferee that the Transferor reasonably believes is purchasing the Notes for its own account or an account with respect to which the transferee exercises sole investment discretion and the transferee and any such account is a "qualified institutional buyer" within the meaning of Rule 144A, in a transaction meeting the requirements of Rule 144A and in accordance with applicable securities laws of any state of the United States or any other jurisdiction. Dated: [Name of Transferor], ------------------------ By: ---------------------------- Name: Title: C-1 cc: American Skiing Company P. O. Box 4552 136 Heber Ave. Park City, UT 84060 Telecopy: (435) 615 0340 Attention: Chief Financial Officer and: American Skiing Company One Monument Way Portland, ME 04101 Attention: Foster Stewart C-2 EXHIBIT D FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM GLOBAL NOTE OR RESTRICTED NOTE TO RESTRICTED NOTE (Transfers pursuant to Section 2.07(a)(iv) or Section 2.07(a)(v) of the Indenture) [Name of Trustee], as Trustee [Address] Attn: Re: American Skiing Company Junior Subordinated Notes due 2012 (the "NOTES") Reference is hereby made to the Indenture, dated as of November 24, 2004 (the "INDENTURE"), between American Skiing Company, as Issuer, and Madeleine LLC, as Trustee. Capitalized terms used but not defined herein shall have the respective meanings given them in the Indenture. This letter relates to $[ ] aggregate Accreted Value of Notes which are held [in the form of the [Rule 144A/Regulation S]. [Global] [Restricted] Note (CUSIP No. [ ] CINS No. [ ]) [with the Depositary] in the name of [name of transferor] (the "TRANSFEROR") to effect the transfer of the Notes. The Original Issue Price of such Notes is $_________. D-1 In connection with such request, and in respect of such Notes, the Transferor does hereby certify that such Notes are being transferred (i) in accordance with the transfer restrictions set forth in the Notes and (ii) in accordance with applicable securities laws of any state of the United States or any other jurisdiction. *Insert, if appropriate. [Name of Transferor], By: ---------------------------------- Name: Title: Dated: ------------------- cc: American Skiing Company P. O. Box 4552 136 Heber Ave. Park City, UT 84060 Telecopy: (435) 615 0340 Attention: Chief Financial Officer and: American Skiing Company One Monument Way Portland, ME 04101 Attention: Foster Stewart D-2 APPENDIX E FORM OF LETTER TO BE DELIVERED BY INVESTORS OR OTHER PERSONS IN A TRANSACTION EXEMPT FROM REGISTRATION American Skiing Company P. O. Box 4552 136 Heber Ave. Park City, UT 84060 Ladies and Gentlemen: We are delivering this letter in connection with our acquisition of Junior Subordinated Notes due 2012 (the "Notes") of American Skiing Company, a Delaware corporation (the "Company"). We hereby confirm that: [(i) we are an "accredited investor" within the meaning of Rule 501 (a) (1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act"), or an entity in which all of the equity owners are accredited investors within the meaning of Rule 501 (a) (1), (2), (3) or (7) under the Securities Act (an "Institutional Accredited Investor");] [(ii) (A) any purchase of the Notes by us will be for our own account or for the account of one or more other Institutional Accredited Investors or as fiduciary for the account of one or more trusts, each of which is an "accredited investor" within the meaning of Rule 501 (a) (7) under the Securities Act and for each of which we exercise sole investment discretion or (B) we are a "bank," within the meaning of Section 3 (a) (2) of the Securities Act, or a "savings and loan association" or other institution described in Section 3 (a) (5) (A) of the Securities Act that is acquiring the Notes as fiduciary for the account of one or more institutions for which we exercise sole investment discretion;] (iii) in the event that we purchase any of the Notes, we will acquire Notes having a minimum Original Issue Price of not less than $250,000 for our own account or for any separate account for which we are acting; (iv) we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of purchasing the Notes; (v) we are not acquiring the Notes with a view to distribution thereof or with any present intention of offering or selling any of the Notes, except pursuant to an effective registration statement under the Securities Act or pursuant to an exemption from the registration requirements thereof, as provided below, provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary shall remain at all times within our control; and E-1 (vi) we acknowledge that we have had access to such financial and other information, and have been afforded the opportunity to ask such questions of representatives of the Company and receive answers thereto, as we deem necessary in connection with our decision to acquire the Notes. We understand that the Notes are being offered in a transaction not involving any public offering within the United States within the meaning of the Securities Act and that the Notes have not been registered under the Securities Act, and we agree, on our own behalf and on behalf of each account for which we acquire any Notes, that if in the future we decide to resell, pledge or otherwise transfer such Notes, such Notes may be offered, resold, pledged or otherwise transferred only: (a) to the Company or any of its subsidiaries, (b) to a person whom the seller reasonably believes is a Qualified Institutional Buyer or "QIB" (as defined in Rule 144A under the Securities Act) purchasing for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A, (c) in an offshore transaction meeting the requirements of Rule 904 of the Securities Act, (d) in a transaction meeting the requirements of Rule 144 under the Securities Act, (e) to an Accredited Investor that, prior to such transfer, furnishes the trustee a signed letter containing certain representations and agreements relating to the transfer of the Notes (in substantially this form) and, if such transfer is in respect of an Accreted Value with an Original Issue Price (as defined in the terms of Notes) less than $250,000, an opinion of counsel acceptable to the Company that such transfer is in compliance with the Securities Act, (f) in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel acceptable to the Company) or (g) pursuant to an effective registration statement and, in each case, in accordance with the applicable securities laws of any state of the United States, or any other applicable jurisdiction. We understand that the registrar and transfer agent for the Notes will not be required to accept for registration of transfer any Notes acquired by us, except upon presentation of evidence satisfactory to the Company and the transfer agent that the foregoing restrictions on transfer have been complied with. We further understand that any Notes acquired by us will be in the form of definitive physical certificates and will bear a legend reflecting the substance of this paragraph. We acknowledge that the Company and others will rely upon our confirmations, acknowledgments and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. E-2 THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. Dated: ---------------------------- -------------------------------- (Name of Purchaser) By: ------------------------------------ Name: Title: Address: cc: American Skiing Company One Monument Way Portland, ME 04101 Attention: Foster Stewart E-3 EX-10 8 form10qaexh10-6.txt SUPPLEMENTAL INDENTURE AMERICAN SKIING COMPANY EXCHANGE AGREEMENT This Exchange Agreement (this "Agreement") is made and entered into as of October 12, 2004, by and between American Skiing Company (the "Company") and Madeleine LLC (the "Holder"), the holder of 10.5% Repriced Convertible Exchangeable Preferred Stock (the "Preferred Stock") of the Company. RECITALS WHEREAS, the Holder currently holds 36,626 shares of Preferred Stock of the Company, representing all outstanding shares of Preferred Stock (the "Outstanding Preferred Stock"), on behalf of investment funds and accounts managed by Cerberus Capital Management, L.P. (such funds and accounts, collectively, the "Beneficiary Owners"); and WHEREAS, the Holder and the Company desire to exchange the Outstanding Preferred Stock for Junior Subordinated Notes due 2012 of the Company (the "Notes") on the terms and conditions set forth in this Agreement (the "Exchange"). NOW, THEREFORE, in consideration of the mutual agreements and obligations set forth herein, the parties hereby agree as follows: 1. Exchange of Preferred Stock. (a) Subject to the terms and conditions herein, the Holder shall sell, transfer, surrender and assign to the Company the Outstanding Preferred Stock and in exchange therefor, the Company shall issue to the Holder the Notes with a principal amount equal to the aggregate liquidation preference of such shares of Preferred Stock plus, without duplication, accrued and unpaid dividends thereon (rounded to the nearest multiple of $100). (b) Subject to the terms and conditions herein, the closing of the Exchange (the "Closing") shall occur immediately following the closing of the New Credit Agreement (as defined in Section 3(b)) at the offices of Paul, Weiss, Rifkind, Wharton & Garrison LLP or such other time and place as the parties agree. (c) At the Closing, (i) the Holder shall deliver to the Company one or more certificates or other instruments representing the Outstanding Preferred Stock duly endorsed in blank or accompanied by appropriate instruments of transfer duly endorsed in blank, (ii) the Company and the Holder, as trustee shall enter into an indenture governing the Notes (the "Indenture") which Indenture shall be in the form attached hereto as Exhibit A (with such changes as the parties may agree), (iii) the Company shall issue the Notes (which shall be in substantially the form attached as an exhibit to the Indenture attached hereto as Exhibit A) in certificated form registered in the name of the Holder and (iv) the Holder, as trustee under the Indenture, shall authenticate the Notes. (d) The Company shall notify the Holder of the proposed closing date and the principal amount of the Notes to be issued at least two days prior to the Closing. (e) Each of the Company and the Holder agrees to execute and deliver such other documents and instruments of transfer as may be necessary to carry out the Exchange. 2. Representations, Warranties and Covenants. (a) The Holder, for itself and for each of the Beneficiary Owners, hereby represents, warrants, acknowledges and agrees with the Company as follows: (i) The Holder is the sole legal owner of the Outstanding Preferred Stock, and holds the shares of Outstanding Preferred Stock on behalf of the Beneficiary Owners. The shares of Outstanding Preferred Stock being transferred hereunder are free and clear of any liens, charges or encumbrances and upon completion of the Exchange, the Holders will convey to the Company good title to the shares of Outstanding Preferred Stock free and clear of all liens, charges and encumbrances. (ii) The Holder and each of the Beneficiary Owners are "qualified institutional buyers" as defined in Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). (iii) The Holder and each of the Beneficiary Owners are acquiring the Notes for the Holder's own account for investment only, and not with a view towards their distribution in violation of the Securities Act. (iv) The Holder and each of the Beneficiary Owners have sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in the investment in the Notes. (v) The Holder and each of the Beneficiary Owners understand that the Notes have not been registered under the Securities Act and, therefore, may not be transferred, resold or otherwise disposed of except as permitted under the Securities Act and applicable state securities laws, pursuant to registration or exemption therefrom. (vi) (A) The Holder is duly formed, validly existing and in good standing under the laws of its jurisdiction of formation, (B) the Holder has all of the power and authority necessary to enter into this Agreement and to consummate the transactions contemplated hereunder and (C) this Agreement has been duly authorized, executed and delivered by the Holder and is a valid and binding obligation of the Holder, enforceable against the Holder in accordance with its terms, except (x) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights and (y) as limited by general principles of equity that restrict the availability of equitable remedies. 2 (vii) Upon consummation of the Exchange, the Holder, for itself and each of the Beneficiary Owners, solely in their capacity as owners of the Outstanding Preferred Stock, hereby releases and forever discharges the Company, its subsidiaries, affiliates, officers, directors, shareholders and employees from any and all actions, causes of action, damages, responsibilities and liabilities arising from or related to the failure by the Company to redeem the Outstanding Preferred Stock on or prior to the Closing. (b) The Company hereby represents, warrants, acknowledges and agrees with the Holder as follows: (i) (A) The Company is duly incorporated, validly existing and in good standing under the laws of the State of Delaware, (B) it has all of the corporate power and authority necessary to enter into this Agreement and to consummate the transactions contemplated hereunder, (C) this Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights and (b) as limited by general principles of equity that restrict the availability of equitable remedies. (ii) (A) the Company has all necessary power and authority to enter into the Indenture and perform its obligations thereunder; (B) the Indenture has been duly authorized by the Company and, when executed and delivered to the Company and the Holder, as trustee, pursuant to the terms thereof, will constitute a valid and binding obligation of the Company and enforceable against the Company in accordance with its terms, except (x) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights and (y) as limited by general principles of equity that restrict the availability of equitable remedies. (iii) (A) the Company has all necessary power and authority to execute, issue and deliver the Notes and perform its obligations thereunder; (B) the Notes have been duly authorized by the Company and, when executed, authenticated and issued in accordance with the terms of the Indenture and delivered to the Holder pursuant to this Agreement at the Closing, will constitute valid and binding obligations of the Company, entitled to the benefits of the Indenture, and enforceable against the Company in accordance with their terms, except (x) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights and (y) as limited by general principles of equity that restrict the availability of equitable remedies. 3. Conditions Precedent. (a) The obligations of the Holder hereunder to consummate the Exchange shall be subject to satisfaction (or waiver by the Holder) of the following conditions: 3 (i) all of the representation and warranties of the Company contained in Section 2(b) are true and correct in all material respects as of the Closing as if made on such date; and (ii) the Company shall have accepted for payment and paid for a majority of the outstanding 12% Senior Subordinated Notes due 2006 (the "Senior Notes") pursuant to the terms of the Offer to Purchase dated October 12, 2004 (the "Offer to Purchase"), the supplemental indenture for the proposed amendments to the indenture relating to the Senior Notes described in the Offer to Purchase shall have been executed and delivered and such proposed amendments shall have become operative. (b) The obligations of the Company hereunder to consummate the Exchange shall be subject to the satisfaction (or waiver by the Company) of the following conditions: (i) all of the representations and warranties of the Holder contained in Section 2(a) are true and correct in all material respects as of the Closing, as if made on such date; (ii) the Company shall have entered into new credit agreements on substantially the terms set forth in the commitment letter (including the term sheets delivered in conjunction therewith), dated September 28, 2004, with General Electric Capital Corporation, GECC Capital Markets Group, Inc. and Credit Suisse First Boston (collectively, the "New Credit Agreement"), and the closing of, and the initial funding under, the New Credit Agreement shall have occurred; and (iii) the Company shall have accepted for payment and paid for a majority of the outstanding Senior Notes pursuant to the terms of the Offer to Purchase, the supplemental indenture for the proposed amendments to the Indenture relating to the Senior Notes described in the Offer to Purchase shall have been executed and delivered and such proposed amendments shall have become operative. 4. Termination. If the Closing shall not have occurred prior to January 11, 2005, either party may terminate this Agreement by written notice to the other party; provided, however (i) that any party hereto that breaches its obligations hereunder shall have no right to terminate this Agreement; and (ii) the termination of this Agreement shall not relieve any breaching party from any liability arising from the breach of its obligations under this Agreement. 5. Supplemental Indenture. (a) At or immediately prior to the Closing, the Company and Oak Hill Capital Partners, L.P. as trustee shall enter into a supplement to the indenture, dated as of August 31, 2001, between the Company and Oak Hill Capital Partners, L.P. (the "Convertible Notes Indenture") that, among other things, extends the maturity of the 11.3025% Convertible Subordinated Notes due 2007 (the "Convertible Subordinated Notes") to the same date as the maturity date of the Notes in the form of Exhibit B hereto (the "Convertible Notes Supplemental Indenture") and (b) at or prior to the Closing, the Company and Oak Hill Capital Partners, L.P. 4 shall not amend, modify or alter any terms of Convertible Subordinated Notes or the Convertible Subordinated Notes Indenture other than as provided for in the Convertible Notes Supplemental Indenture; provided, however, that neither party shall be obligated to enter into the Convertible Notes Supplemental Indenture if the conditions set forth in Section 3(b) hereof are not satisfied or waived. 6. Successor Trustee. If the Holder transfers, sells, assigns or conveys any Notes to any person that is not an Affiliate (as defined in the Indenture) of the Holder or the Beneficiary Owners and if the trustee under the Indenture either resigns or is removed pursuant to Section 8.08 of the Indenture, the Company hereby agrees to promptly appoint a successor trustee that complies with the terms of the Indenture and is not an Affiliate of the Company, Oak Hill Capital Partners, L.P. or Oak Hill Securities Fund, L.P. at the Company's expense, which trustee shall be reasonably satisfactory to the Holder. 7. Successors and Assigns; No Third Party Beneficiary. This Agreement may not be assigned or transferred by either party without the prior written consent of the other party. Nothing in this Agreement is intended or shall be construed to confer upon, or give to, any person other than the parties hereto and their respective successors and assigns any rights whatsoever and all of the terms, covenants, conditions, promises and agreements contained in this Agreement shall be for the sole and exclusive benefit of the parties hereto and their respective successors and assigns. 8. Entire Agreement; Amendment. This Agreement constitutes the entire understanding and agreement among the parties with regard to all matters herein, and there are no other agreements, conditions or representations, oral or written, express or implied, with regard thereto. This Agreement may be amended only by an instrument in writing signed by each party. 9. Notice. All notices and other communications required or permitted under this Agreement must be in writing and will be deemed to have been duly given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one business day after deposit with a nationally recognized overnight courier, specifying next business day delivery, with written verification of receipt. All notices to a party hereto must be sent to the addresses set forth below or to such other address or person as such party may designate by notice to each other party. If to the Company: American Skiing Company P. O. Box 4552 136 Heber Ave. Park City, UT 84060 Telecopy: (435) 615 0340 Attention: Chief Financial Officer 5 with a copy to: American Skiing Company One Monument Way Portland, ME 04101 Attention: Foster Stewart and a copy to: Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, NY 10019 Telecopy: (212) 373-2377 Attention: John C. Kennedy, Esq. If to the Holder: Madeleine, LLC 299 Park Avenue New York, NY 10171 Attention: Mark A. Neporent with a copy to: Stuart D. Freedman, Esq. Schulte Roth & Zabel LLP 919 Third Avenue New York, NY 10022 10. Governing Law. This Agreement shall be governed by the laws of the State of New York applicable to agreements made and to be performed entirely within such State. 11. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not control or effect the meaning or construction of any of the provisions of this Agreement. 12. Counterparts. This Agreement may be executed by the parties hereto in one or more counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. 6 AMERICAN SKIING COMPANY By: /s/ Foster A Stewart, Jr ------------------------------------------------ Name: Foster A Stewart, Jr Title: Senior Vice President, Secretary and General Counsel MADELEINE LLC By: /s/ Mark A Neporent ------------------------------------------------ Name: Mark A Neporent Title: Vice President and Chief Operating Officer Accepted and agreed with respect to Section 5 hereof only: Oak Hill Capital Partners, L.P., By: OHCP GenPar, L.P., its general partner By: OHCP MGP, LLC, its general partner By: /s/ Kevin C Levy ------------------------------------------------ Name: Kevin C Levy Title: Vice President 7 EX-31 9 form10qaexh31-2.txt CFO CERTIFICATION SOA SEC 302 Exhibit 31.2 CERTIFICATION I, Helen E. Wallace, certify that: 1. I have reviewed this quarterly report on Form 10-Q of American Skiing 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 periods 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 officer(s) 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 first fiscal quarter 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: December 15, 2004 By: /s/ Helen E. Wallace -------------------------- Helen E. Wallace Senior Vice President, Chief Financial Officer (Principal Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----