10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

ý           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended July 25, 2004

or

o      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 incorporation or organization)	(I.R.S. Employer Identification No.)

136 Heber Avenue, #303

P.O.  Box 4552

Park City, Utah 84060

(Address of principal executive office)

(Zip Code)

(435) 615-0340

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None.

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value

(Title of Each Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days.

Yes ý    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act.

Yes o    No ý

The aggregate market value of the registrant’s outstanding common stock held by non-affiliates of the registrant on January 25, 2004, determined using the per share closing price thereof on the Over the Counter Bulletin Board, was approximately $2.4 million.  As of September 26, 2004, 31,738,183 shares of common stock were issued and outstanding, of which 14,760,530 shares were Class A common stock.

American Skiing Company

Form 10-K Annual Report, for the year ended July 25, 2004

Table of Contents

			Page
	Part I
Item 1 and Item 2 Business and Properties			1
Item 3		Legal Proceedings	16
Item 4		Submission of Matters to a Vote of Security Holders	17
		Part II
Item 5		Market for Registrant’s Common Equity and Related Shareholder Matters and  Issuer Purchases of Equity Securities	17
Item 6		Selected Financial Data	19
Item 7		Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 7A		Quantitative and Qualitative Disclosures about Market Risk	35
Item 8		Financial Statements and Supplementary Data	37
Item 9		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	37
Item 9A		Controls and Procedures	37
		Part III
Item 10		Directors and Executive Officers of the Registrant	38
Item 11		Executive Compensation	38
Item 12		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	38
Item 13		Certain Relationships and Related Transactions	38
Item 14		Principal Accountant Fees and Services	38
		Part IV
Item 15		Exhibits, Financial Statement Schedules and Reports on Form 8-K	39
Signatures			46

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PART I

Items 1 and 2 - Business and Properties

American Skiing Company

Business Description

We were incorporated in 1997 and are organized as a holding company, operating through various wholly owned subsidiaries.  Refer to Note 1 - “Basis of Presentation” in the consolidated financial statements included in this report for a discussion of the general development of our business, subsidiaries, and predecessors.  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.  For information by reportable segment refer to Note 15 - “Business Segment Information” in the consolidated financial statements included in this report.

Our revenues and net loss available to common shareholders for the year ended July 25, 2004 (fiscal 2004) were $284.1 million and $(28.5) million, respectively.  Resort segment revenues and real estate segment revenues for fiscal 2004 were $250.7 million and $33.4 million, respectively.  For more information relating to our financial condition, see “Certain Considerations — Our business is substantially leveraged and we face a number of financial risks.”  Cash flows  provided by (used in) operating activities, investing activities, and financing activities for fiscal 2004 were approximately $24.9 million, $(7.4) million, and $(17.1) million, respectively.  Resort segment cash flows provided by (used in) operating activities, investing activities, and financing activities for fiscal 2004 were approximately $11.6 million, $(7.4) million, and $(4.1) million, respectively.  Real estate segment cash flows provided by (used in) operating activities, investing activities, and financing activities for fiscal 2004 were approximately $13.3 million, $0, and $(13.0) million, respectively.

Our periodic and current reports are available on our website, www.peaks.com, free of charge as soon as is reasonably practicable after such materials are electronically filed with the Securities and Exchange Commission.

Resort Operations

Our resort business is generated primarily from our ownership and operation of seven ski resorts, several of which are among the largest in the United States.  During the 2003-04 ski season, our resorts  generated approximately 3.9 million skier visits, representing approximately 6.8% of total skier visits in the United States.  The following table summarizes certain key statistics of our resorts.

Resort, Location	Skiable Terrain (acres)	Vertical Drop (feet)	Trails	Total Lifts (high-speed)	Snowmaking Coverage		Ski Lodges	2003-04 Skier Visits (000s)
Western Resorts
Steamboat, CO	2,939	3,668	142	20 (5)	15	%	4	1,003
The Canyons, UT	3,500	3,190	144	16 (7)	6	%	3	374
Eastern Resorts
Killington/Pico, VT	1,182	3,050	200	31 (8)	70	%	8	955
Sunday River, ME	660	2,340	127	18 (4)	92	%	4	523
Mount Snow/Haystack, VT	757	1,700	145	23 (3)	75	%	6	490
Sugarloaf/USA, ME	1,410	2,820	129	15 (2)	92	%	2	335
Attitash Bear Peak, NH	280	1,750	70	12 (2)	97	%	2	207
Total	10,728	18,518	957	135 (31)			29	3,887

Resort Properties

Our resorts include several of the top resorts in the United States based on skier visits.  This includes Steamboat, the 4th largest ski resort in the United States with over 1.0 million skier visits in the 2003-04 ski season,  Killington, the 6th largest resort in the United States and the largest resort in the northeast with just under 1.0 million skier visits in the 2003-04 ski season, and Sunday River and Mount Snow, which together with Killington comprised 3 of the 5 largest resorts in New England during the 2003-04 ski season.

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                Steamboat.  Steamboat is the fourth largest ski resort in the United States generating approximately 1.0 million skier visits in 2003-04 ski season.  The Steamboat ski area is located in the Medicine Bow/Routt National Forest, Routt County, Colorado on the westerly slopes of Mt. Werner, approximately 2.5 miles southeast of downtown Steamboat Springs, Colorado.  Steamboat is serviced during the ski season by 5 major airline carriers with nonstop flights from nine cities, with convenient connections nationwide.  The area consists of approximately 3,486 acres of land licensed under a special use permit issued by the United States Forest Service and approximately 245 acres of private land which we own or license from third parties which are located at the base of the ski area.  Steamboat receives a significant amount of natural dry snow, averaging 308 inches annually over the past 6 ski seasons.  Steamboat is a year-round resort offering hiking, mountain biking, and various other summer amenities.

The Canyons.  The Canyons ski resort, which is located in the Wasatch Range of the Rocky Mountains adjacent to Park City, Utah, is one of the most accessible destination resorts in the world, with the Salt Lake International Airport only 32 miles away via direct major state highway access.  The Canyons is adjacent to the Utah Winter Sports Park, which served as the venue for the ski jumping, bobsled, and luge events in the 2002 Winter Olympic Games, and generated approximately 374,000 skier visits in the 2003-04 ski season.  The Canyons consists of 3,500 acres of skiable terrain and receives significant amounts of natural snow, averaging 304 inches annually over the past 6 seasons.  The Canyons is a year-round resort offering hiking, mountain biking, and various other summer amenities.  The current master development plan for The Canyons includes entitlements for approximately 5 million square feet of development.  We believe that The Canyons continues to have significant growth potential due to its proximity to Salt Lake City and Park City, its expansive ski terrain, and its extensive real estate development opportunities.

Killington.  Killington, located in central Vermont, is the largest ski resort in the northeastern region of the  United States and the sixth largest in the United States, generating approximately 955,000 skier visits in the 2003-04 ski season.  Killington is a seven-mountain resort consisting of 1,182 acres of skiable terrain.  We believe the size and diversity of skiable terrain at Killington make it attractive to all levels of skiers and one of the most widely recognized of our resorts with regional, national, and international clientele.  Killington is a year-round resort offering complete golf amenities including an 18-hole championship golf course, a driving range, mountain biking, hiking, water slides, and an alpine slide.

Sunday River.  Sunday River, located in the western mountains of Maine and approximately a three-hour drive from Boston, is the fourth largest ski resort in New England with approximately 523,000 skier visits during the 2003-04 ski season.  Extending across eight interconnected mountains, its facilities consist of approximately 660 acres of skiable terrain and an additional 7,000 acres of undeveloped terrain.  We have approved development plans for a resort village at the Jordan Bowl Area (the most westerly peak), which eventually could include over 1,350 units and 1.1 million square feet of total development.  Sunday River is a year-round resort offering hiking and various other summer amenities.  We entered into an agreement with an unrelated third party for the construction, development, and operation of an 18-hole championship golf course, designed by Robert Trent Jones, Jr., in the Jordan Bowl area which is expected to be completed during the summer of 2005.  We believe that, when completed, the golf course project will further enhance the value and attractiveness of the Sunday River resort as well as real estate development opportunities controlled by us.

                Mount Snow.  Mount Snow, located in West Dover, Vermont, is the fifth largest ski resort in New England with approximately 490,000 skier visits in the 2003-04 ski season and consists of 757 acres of skiable terrain.  Mount Snow is the southernmost of our eastern resorts and is the closest major Vermont ski resort to the New York metropolitan area.  A large percentage of the skier base for Mount Snow originates from Massachusetts, Connecticut, New York, and New Jersey.  Mount Snow owns and operates an 18-hole championship golf course and is the headquarters of our “Original Golf School”, which consists of three golf schools, two of which we operate and the other that we franchise in the eastern United States.

                Sugarloaf/USA.  Sugarloaf/USA is located in the Carrabassett Valley of Maine.  Sugarloaf/USA is a single mountain with a 4,237-foot summit and a 2,820-foot vertical drop.  During the 2003-04 ski season, Sugarloaf/USA generated approximately 335,000 skier visits.  Sugarloaf/USA offers large ski-in/ski-out base villages, containing numerous restaurants, retail shops and lodging facilities, including a Grand Summit Hotel.  Sugarloaf/USA is widely recognized for its challenging terrain and snowfields which represent the only lift-serviced above-tree line skiing in the Northeast.  As a destination resort, Sugarloaf/USA has a broad market, including areas as distant as New York, New Jersey, Pennsylvania, Washington D.C., and Canada.  Sugarloaf/USA also leases and operates an 18-hole

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championship golf course which was designed by Robert Trent Jones, Jr. and is consistently rated one of the top 100 public golf courses in the United States by Golf Digest and is the #1 rated public course in New England according to the New England Golf Journal.

Attitash Bear Peak.  Attitash Bear Peak is one of New Hampshire’s premier family vacation resorts.  Its 12 lifts (including three quad chairs) constitute one of New Hampshire’s largest lift networks.  During the 2003-04 ski season, Attitash generated approximately 207,000 skier visits.  Attitash Bear Peak consists of 280 acres of skiable terrain and is located in the heart of the Mount Washington Valley which boasts over 200 factory outlet stores, hundreds of bars and restaurants and a large variety of lodging options, including a 143-room slopeside Grand Summit Hotel and Conference Center which we operate.  Attitash Bear Peak is a year-round resort offering mountain biking, a water park, alpine slide, and various other summer amenities, and benefits from its close proximity to major metropolitan populations.

                Real Estate Properties.  We have significantly reduced our direct real estate development activities but we retain ownership of the front desk, retail space, restaurants, and conference facilities, or “commercial core”, of hotels developed by our real estate subsidiaries.  We currently own and operate the commercial core of eight Grand Summit Hotels (two at Sunday River and one each at Killington, Attitash Bear Peak, Mount Snow, Sugarloaf/USA, The Canyons, and Steamboat) and one whole-ownership condominium/hotel at The Canyons (the Sundial Lodge).  We also own smaller lodging properties, hotels, and inns at our various resorts and manage these properties along with other properties owned by third parties.

In addition to our income producing properties, we own a significant amount of non-operating assets, the majority of which are comprised of land available for development or sale.  While we do not engage in real estate development as a core business focus, from time to time we elect to sell such properties in order to generate cash for use in debt repayment and to finance capital spending projects at the resort level.  We enter into arrangements with real estate developers through which certain parcels may be developed.

Leased or Otherwise Committed Properties

Our operations are dependent upon our ownership or long-term control over the skiable terrain located within each resort.  The following summarizes certain non-owned real estate critical to ski operations at each of our resorts.  We believe each of the following leases, permits, or agreements is in full force and effect and that we are entitled to their benefit.  See “Certain Considerations — A significant portion of our ski resorts are operated under leases or forest services permits” for additional discussion of our leases and forest service permits.

Sunday River leases approximately 1,500 acres, constituting a substantial portion of its skiable terrain, under a 50-year lease terminating on October 14, 2030.  The lease renews automatically thereafter on a year-to-year basis unless terminated by either the lessor or lessee.  This lease was amended on January 23, 1998 to allow Sunday River to purchase portions of the leased property for real estate development at a predetermined amount per acre.  In January 1998, we acquired an undivided one-half interest in the fee title underlying the leased parcel.

Mount Snow leases approximately 1,315 acres, constituting a substantial portion of its skiable terrain.  Of this total, 893 acres are occupied by Mount Snow pursuant to a special use permit granted by the United States Forest Service.  The permit has a 40-year term expiring December 31, 2029 and is subject to renewal for an additional 30-year term at the option of Mount Snow if various conditions are satisfied.  Mount Snow also leases 252 acres of skiable terrain from the Town of Wilmington, Vermont.  The lease expires November 15, 2030 and while there are no specific renewal provisions included in the lease, we anticipate that a renewal could be obtained.  Mount Snow also has the option to purchase the Town of Wilmington leased property and a right of first refusal in the event the lessor receives an offer for the leased property.

Attitash Bear Peak uses approximately 280 acres of its skiable terrain pursuant to a special use permit issued by the United States Forest Service.  The permit has a 40-year term expiring July 18, 2034 and is renewable subject to given conditions.  In addition, Attitash Bear Peak leases a portion of its parking facilities under a lease expiring December 31, 2014.

Killington leases approximately 1,100 acres from the State of Vermont.  A portion of that property constitutes a substantial amount of Killington’s skiable terrain.  The initial lease was for a 10-year term which

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commenced in 1960 but contains nine 10-year renewal options.  Killington exercised the renewal option in 1970, 1980, 1990, and 2000.  Assuming continued exercise of the renewal options, the lease will ultimately expire in the year 2060.  The lease is subject to a buy-out option retained by the State of Vermont, as landlord.  At the conclusion of each 10-year term, or extended term, the State has the option to buy out the lease for an amount equal to Killington’s adjusted capital outlay plus 10% of the gross receipts from the operation for the preceding three years.  Adjusted capital outlay means total capital expenditures extending back to the date of origin of the lease depreciated at 1% per annum, except that non-operable assets depreciate at 2% per annum.  This buy-out option will next become exercisable in the year 2010.  Although we have not had confirmation from Vermont State officials, we have no reason to believe that the State intends to exercise the buy-out option at that time.

Killington leases from Farm & Wilderness, Inc., a Vermont non-profit corporation, the right to withdraw water for snowmaking purposes from the Woodward reservoir and transport the same over land owned by the lessor.  The lease has an initial term of 15 years, ending on December 31, 2012.   Killington has the right to renew the lease for three renewal terms of 25 years each.

Killington also leases from SP Land Company, LLC (SP Land), the right to use certain parking facilities and a golf course clubhouse at the Killington resort.  The parking facilities are leased for a period of 25 years, ending on March 31, 2029, although the lessor has the right to terminate the lease upon 12 months prior notice to Killington as to any portion of the property which the lessor then intends to develop.   The golf course clubhouse and certain parking ancillary thereto are leased for a period of 25 years, also ending on March 31, 2029.  This lease automatically renews for up to 10 successive 10 year periods unless Killington provides prior notice of its intent to terminate the lease.

Sugarloaf/USA leases the Sugarloaf Golf Course from the Town of Carrabassett Valley, Maine pursuant to a lease dated November 16, 2000.  The lease term expires November 2023.  Sugarloaf/USA has an option to renew the lease for an additional 5-year term.

The Canyons leases approximately 2,100 acres, including most of the base area and a substantial portion of its skiable terrain, under a lease from Wolf Mountain Resorts, LC.  The initial term of this lease is 50 years expiring July 2047, with an option to extend for three additional terms of 50 years each.  The lease provides an option to purchase those portions of the leased property that are intended for residential or commercial development, subject to certain reconveyance rights.  Under the agreement, we pay a cost of 5.5% of the full capitalized cost of the development in the case of property that we retain for a certain  number of parcels as defined by the agreement and 11% of the full capitalized cost of the development for any remaining parcels that we retain or intend to resell.  The Canyons also leases approximately 807 acres, which constitutes the area for a planned mid-mountain village and a substantial portion of its skiable terrain, from the State of Utah School and Institutional Trust Land Administration.  Our lease term ends in 2078 and provides an option to purchase those portions of the mid-mountain village area that are intended for real estate development at a cost of 25% of their fair market value on an undeveloped basis.  The Canyons also leases ski terrain from the Osguthorpe family under a long term easement agreement with a term expiring on August 14, 2024.

Steamboat uses approximately 3,486 acres, a substantial portion of which is skiable terrain, pursuant to a special use permit issued by the United States Forest Service which expires on August 31, 2029.  Under Steamboat’s existing master plan, an additional 958 acres of contiguous National Forest lands can be added to the permitted area.

Steamboat licenses the use of a portion of its base area operations from Steamboat Partners II, LLC (an unrelated third party).  The license terminates automatically upon commencement of physical development of the subject parcel by Steamboat Partners.  Steamboat also licenses certain overflow parking areas from Steamboat Partners for use during the ski season under a perpetual license.  Under the license, Steamboat Partners has the right to relocate the overflow parking to structured parking facilities constructed by Steamboat Partners.

The United States Forest Service can terminate most of our special use permits if it determines that termination is required in the public interest.  However, to our knowledge, no recreational special use permit or term special use permit for any major ski resort then in operation has ever been terminated by the United States Forest Service over the opposition of the permit holder.

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Resort Revenues

Our resort revenues are generated from a wide variety of sources and include lift ticket sales, food and beverage sales, retail sales including ski rentals and repairs, skier development, lodging and property management, golf and other summer activities, and miscellaneous other sources.  Lift ticket sales (including season pass sales) represent the single largest source of resort revenues and produced approximately 45% of total resort segment revenue for fiscal 2004.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in Item 7 of this report, for more information about the sources of our resort revenues for the last three fiscal years.

Lift Ticket Sales.  We manage the yield and features of our lift ticket programs and products in order to increase and maximize ticket revenues and operating margins.  Lift ticket programs include packages offered with accommodations in order to maximize total revenue.  We offer a wide variety of incentive-based lift ticket programs designed to maximize skier visits during non-peak periods, to attract specific market segments and to leverage the competitive advantage of our extensive resort network.

Season Passes.  We have traditionally attracted high frequency skiers to each of our resorts with season passes, which allow skiers unlimited access to lifts at each respective resort on any day of the week throughout the ski season.  We also offer ticket products to our customers that are valid at many, if not all of our resorts.  Examples of these innovative programs are the Ski America Pass, which allows unlimited skiing at any of our seven resorts, the Ultimate 7 College Pass, which allows the full-time college student to ski any of our seven resorts nationwide, and the mEticket, which is a flexible non-consecutive multi-day ticket valid at all seven resorts, with a sliding price schedule offering discounts based on the number of days purchased as well as a price discount for purchasing early.

Beginning with the 2003-04 ski season, we offered significantly discounted season passes for skiing privileges at our Attitash Bear Peak and Sunday River resorts.  Based on this initial success, we have created the “All for One” pass for the upcoming season, which can be used at any of our five eastern resorts.  This product is offered on a sliding scale pricing basis designed to attract skiers to our portfolio of eastern resorts.  We believe that this product introduction will enhance our season pass revenues, which serve to mitigate the in-season variability associated with day ticket sales, and improve our market share in the region.

Food and Beverage.  We own and operate a substantial majority of the food and beverage facilities at our resorts, with the exception of the Sugarloaf/USA resort, which is under a long-term concession contract with an unrelated third party.  Our food and beverage strategy involves providing a wide variety of restaurants, bars, cafes, cafeterias, and other food and beverage outlets at our resorts.  Over the past two years we have made substantial improvements in the quality, consistency, and profitability of our food and beverage operations.  We currently own and operate over 80 different food and beverage outlets.  We directly or indirectly control the substantial majority of our on-mountain and base area food and beverage facilities, which we believe allows us to capture a larger proportion of guest spending.

Retail Sales.  We own approximately 40 retail and ski rental shops operating at our resorts.  The large number of retail locations that we operate allows us to improve margins through large quantity purchase agreements and sponsorship relationships.  On-mountain shops sell ski equipment and accessories such as skis, snowboards, boots, goggles, sunglasses, hats, gloves and larger soft goods such as jackets and snowsuits.  In addition, all sales locations offer our own branded apparel which generally provides higher profit margins than other retail products.  In the non-winter seasons, the shops sell mountain bikes, in-line skates, tennis equipment and warm weather apparel.

Lodging and Property Management.  We currently own and operate the commercial core of eight Grand Summit Hotels (two at Sunday River and one each at Killington, Attitash Bear Peak, Mount Snow, Sugarloaf/USA, The Canyons, and Steamboat) and one whole-ownership condominium/hotel at The Canyons (the Sundial Lodge).  We also own smaller lodging properties, hotels, and inns at our various resorts and manage these properties along with other properties owned by third parties.  During the 2003-04 ski season, our lodging departments managed approximately 3,100 lodging units at our resorts.  The lodging departments perform a full complement of guest services, which include reservations, property management, housekeeping, and brokerage operations.  The Steamboat Grand Resort Hotel and the Grand Summit Resort Hotel at The Canyons have gained widespread recognition for delivering elite levels of guest service and amenities, both of which were awarded the AAA Four

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Diamond designation.  This distinction places them in a select group comprising less than 3% of the estimated 30,000 AAA-rated lodging establishments nationwide.

Skier Development. Our Guaranteed Learn to Ski Program was one of the first skier development programs to guarantee that a customer would learn to ski in one day.  The success of this program led to the development of “Perfect Turn,” which we believe was the first combined skier development and marketing program in the ski industry.  Perfect Turn ski professionals receive specialized instruction in coaching, communication and skiing, and are trained to sell related products, cross-sell other resort goods and services, and real estate.  At all of our resorts we operate a variety of skier and snowboarder programs for young children, teenagers, and adults.

Resort Operating Strategy

Our operating strategies include:

                Multi-Resort Network.Our network of resorts provides both geographic diversity and significant operating benefits.  We believe our geographic diversity reduces the risks associated with unfavorable weather conditions and insulates us from economic slowdowns in any one particular region.  This geographic diversity, coupled with the unique terrain and distinctive feel of each resort, increases the accessibility and visibility of our network of resorts to the overall North American skier population and allows us to offer a wide range of mountain vacation alternatives.

We believe that owning multiple resorts also provides us with the opportunity to:

•Create one of the largest cross-marketing programs in the industry,

•Achieve efficiencies and economies of scale when goods and services are purchased,

•Strengthen our distribution network of travel agents and tour operators by offering a range of mountain resort alternatives, consistent service quality, convenient travel booking, and incentive packages,

•Establish performance benchmarks for operations across all of our resorts,

•Utilize specialized individuals and cross-resort teams at the corporate level as resources for our entire business, and

•Develop and implement consumer information and technology systems for application across all of our resorts.

Increase Revenues Per Skier. We intend to continue to increase our revenues per skier by increasing our average revenues per ticket, expanding our revenue sources at each resort, and enhancing the effects of our on-mountain marketing efforts.  To meet our goals, we are:  (1) streamlining and enhancing our one day and multi-day ticket packages to more closely align ticket programs to specific customer market segments; (2) continuing to offer multi-resort ticket products; (3) introducing a variety of programs that offer packages of tickets with lodging and other services available at our resorts; and (4) providing a more comprehensive vacation planning experience through enhanced Internet store-fronts.  We are also expanding and enhancing our facilities and services in our retail, food and beverage, equipment rental, skier development, and lodging and property management operations.  In addition, we believe that our enhanced marketing capabilities and the cross selling of products and programs, such as our frequent skier and multi-resort programs, to resort guests will increase our resort revenues and profitability and further diversify our revenue sources.

We offer ticket products to our customers that are valid at many, if not all of our resorts.  Examples of these innovative programs are the Ultimate 7 College Pass, which allows the full-time college student to ski at any of our seven ski resorts nation-wide; and the mEticket, which is a flexible multi-day ticket valid at all seven of our resorts, with a sliding price schedule offering discounts based on the number of days purchased as well as a price break for purchasing early.  The mEticket program is a nation-wide program targeted at retaining skiers who ski six to twelve days each season, which our research indicates represents the majority of the ski population.  Beginning with the 2003-04 ski season, we offered significantly discounted season passes for skiing privileges at our Attitash Bear Peak and Sunday River resorts.  Based on this initial success, we have created the “All for One” pass for the upcoming season, which can be used at any of our five eastern resorts.  This product is offered on a sliding scale pricing basis designed to attract skiers to our portfolio of eastern resorts.  We believe that this product introduction will enhance our season pass revenues, which serve to mitigate the in-season variability associated with day ticket sales, and improve our market share in the region.  By giving guests an incentive to purchase their tickets for the year early in the ski season with the special values offered by the Ultimate 7 College Pass, the mEticket program, and the “All for

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One” pass, we believe that we can encourage guests to ski more often and do the majority of their skiing at our resorts.

Continue to Build Brand Awareness and Customer Loyalty.Our marketing programs build on and promote the strong brands and unique characteristics of each of our resorts, optimize cross-selling opportunities, and enhance our customer loyalty.  We have established joint marketing programs with major corporations such as Sprint, Mobil, Anheuser-Busch, American Express, Charles Schwab, Quaker Oats/Gatorade, Pepsi/Mountain Dew, SoBe, Balance Bar, Rossignol, Kodak, and Starbucks.  We believe these joint marketing programs give us a high-quality image and strong market presence, as well as access to operational and marketing resources on both a regional and national basis.  We believe that our customer loyalty can be increased through guest service initiatives used to support brand differentiation and our continued industry leadership in the areas of snowmaking and snow grooming.

Expand the Sales and Marketing Efforts.  We have restructured and consolidated our sales operations to achieve a regional, rather than a resort-specific focus.  Sales and marketing staff are located near major customers and customer bases, rather than at our resorts.  At the same time, we are directing more of our marketing resources toward advertising and customer promotions.  We have focused the selection of agencies around their strengths: brand strategy, media strategy, high-level conceptual creative and signature collateral, and advertising.  We continue to focus on the expansion of our group sales activities in the convention and group business areas, as well as on the expansion of our off-season business.  For example, each of our resorts has at least one slopeside hotel which is managed by us and offers services year round, including conference space and food and beverage support for group bookings.

Continued Focus on Cost Management.  We believe we have made significant progress in increasing the variability of our cost structure during the last two operating seasons, which allows us to more effectively adjust operation levels to meet in-season demand fluctuations.  We are further refining our seasonal staffing model to minimize our year-round cost structures.  We have also improved our ability to control  and more quickly manage the ramp-up and ramp-down of our resort operations during the customary beginning and ending of our resort operating season based upon ski conditions and expected visitation levels.  In addition, we have recently implemented cost management plans related to healthcare, property/casualty insurance and mountain operations.  We have sophisticated computerized snowmaking control systems at our eastern resorts, which allow us to optimize snowmaking production while controlling related energy costs.

Expand Golf and Convention Business.Sugarloaf/USA, Killington, and Mount Snow all operate championship resort golf courses.  The Sugarloaf/USA course, designed by Robert Trent Jones, Jr., has been consistently rated as one of the top 100 public courses in the country according to Golf Digest and the #1 public course in New England according to the New England Golf Journal.  Mount Snow owns and operates an 18-hole championship golf course and is the headquarters of our “Original Golf School”, which consists of three golf schools, two of which we operate and the other that we franchise in the eastern United States.  Additionally, we entered into an agreement with an unrelated third party for the construction, development, and operation of a golf course at Sunday River, designed by Robert Trent Jones, Jr.  The course is expected to open during the summer of 2005.  Our golf program and other recreational activities draw off-season visitors to our resorts and support our growing off-season convention business, as well as our real estate development operations.  We also have opportunities to develop golf courses at The Canyons and Attitash.  We are aggressively continuing to expand our in-season and off-season convention business by improving the quality, size, and compensation systems of our sales and marketing staff.

Improve Hotel Occupancy and Operating Margins.  We have reorganized our eastern sales force to continue to achieve operating efficiencies and improved marketing strategies which will improve the occupancy levels and operating margins of our lodging properties.  We have also developed tools to assist us in our yield management, established committees among our hotels to ensure that “best practices” are used, and have created benchmarking templates against our competitors to assist us in identifying areas for improvement.

Capitalize on Real Estate Growth Opportunities.  We creatively enter into opportunities with local builders and developers to utilize our existing real estate holdings to help expand the bed count, service offerings, and infrastructure of our resorts, while making minimal capital expenditures.  For example, we have initiated specific

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discussions with private real estate developers to develop land holdings in exchange for funding capital expenditure projects for new lifts and mountain access points at several of our resorts.

Real Estate Properties and Real Estate Development Activities

We own considerable developable real estate properties (both in acreage and value), which we offer for sale from time to time.  We have significantly reduced our direct real estate development activities and reduced the focus of real estate development as a core business.  The development of commercial or residential real estate helps us to drive increased revenues, skier visits, and summer guests to the mountain resorts.

In addition to developable real estate, we also operate and manage multiple on mountain lodging properties at each of our resorts.  As a result of past real estate development activities, we have retained ownership of the front desk, retail space, restaurants, and conference facilities, or “commercial core”, of hotels developed by our real estate subsidiaries.  Our resort companies currently own and operate the commercial core of four Grand Summit Hotels (two at Sunday River and one each at Killington,  and Sugarloaf/USA) and one whole-ownership condominium/hotel at The Canyons (the Sundial Lodge).  Our resort companies also operate and manage the commercial cores of four hotels (Mount Snow, Steamboat, The Canyons, and Attitash) owned by our real estate companies (see below).  In addition, we own smaller lodging properties, hotels, and inns at our various resorts and manage these properties along with other properties owned by third parties.

Real Estate Companies

Grand Summit Hotels.Our primary real estate development activities in recent years have been the construction of Grand Summit Hotels at each of our resorts.  The Grand Summit Hotel is an interval ownership product which is a signature element of our resorts.  Each hotel is a condominium complex consisting of fully furnished residential and commercial units with a spacious atrium lobby, one or more restaurants, retail space, a grand ballroom, conference space, a health club with an outdoor heated pool (except Sugarloaf/USA), and other recreational amenities.  Residential units in the hotel are sold in quarter and eighth share interests.  The balance of the hotel, including restaurants, retail space and conference facilities, is typically retained by us and managed by the host resort.  The initial sale of quarter and eighth share units generates revenue for the real estate segment, and our resort segment generates a continuing revenue stream from operating the hotel’s retail, restaurant, and conference facilities and from renting interval interests when not in use by their owners.

                We continue to develop and market to third parties development sites for townhomes, single family projects, and whole ownership condominium hotels, most recently at our Killington, Steamboat, Mount Snow, and Sugarloaf/USA resorts.

                Local approvals for our resort village plans are at various stages of completion.

•The Canyons:  Pursuant to our November 15, 1999 approved master plan, density for the residential units and commercial development for our 15-year master plan at The Canyons was approved.  As we seek to develop specific projects within the master plan at The Canyons, we will need local approval for specific site plans.  See “Certain Considerations — Our business is subject to heavy environmental and land use regulation” for additional discussion regarding the status of our master plan permits at The Canyons.  We have received a notice of non-compliance from the applicable governmental regulators and are working with them to resolve these matters of non-compliance.

•Killington:  The master plan for the Killington Resort Village was approved by local voters in the town of Killington in November 1999 and local and state permits were issued in July 2000.  Killington received partial and conceptual approval for the ten criteria which are part of the State of Vermont land use review and approval process.  Final approval of each of the criteria will be rendered upon submittal of actual construction plans for specific projects.

•Sunday River:  The resort village master plan for Jordan Bowl is complete.  Individual permits for projects will be required before beginning development.

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Alpine Resort Industry

The alpine resort industry achieved a record number of skier visits in three of the last four ski seasons.  During the 2003-04 ski season, approximately 490 ski areas in the United States generated approximately 57.1 million skier visits, down slightly by 0.9% from the record 57.6 million total skier visits in 2002-03.  The 2002-03 ski season was a record season for skier visits and the 2003-04 ski season was still up by 3.0% over the previous 4-year average of 55.4 million skier visits.  While no individual U.S. region (Northeast, Southeast, Midwest, Rocky Mountain, and Pacific West) set a record, all regions were above their ten-year averages.  In addition, since the 2000-01 ski season, season pass sales have increased approximately 35%.

The alpine resort industry is characterized by significant barriers to entry because the number of attractive sites is limited, the costs of resort development are high, and environmental regulations impose significant restrictions on new development.  Since 1985, the ski resort industry has undergone a period of consolidation and attrition, resulting in a significant decline in the total number of ski areas in North America.  The number of ski resorts in the United States has declined from approximately 735 in 1983 to approximately 490 in 2004, although the number of skier visits has remained relatively flat other than the recent growth trend.  Despite the recent consolidation trend overall, ownership of the smaller regional ski resorts remains highly fragmented.  We believe that technological advances and rising infrastructure costs are the primary reasons for the ski resort industry consolidation, and that further consolidation is possible as smaller regional resorts are acquired by larger resort operators with more sophisticated management capabilities and increased availability of capital.

The following chart shows a comparison of the industry-wide skier visits compared to our skier visits in the U.S. regional ski markets during the 2003-04 ski season:

Geographic Region	2003-04 Total Skier Visits* (in millions)	Percentage of Total Skier Visits		Skier Visits at Company Resorts (in millions)	Company Regional Market Share		Company Resorts
Northeast	12.9	22.6	%	2.5	19.4	%	Killington/Pico, Mount Snow/Haystack, Sunday River, Sugarloaf/USA, Attitash Bear Peak
Southeast	5.6	9.8	%	-	-
Midwest	7.8	13.7	%	-	-
Rocky Mountain	18.9	33.1	%	1.4	7.4	%	Steamboat, The Canyons
Pacific West	11.9	20.8	%	-	-
U.S. Overall	57.1	100.0	%	3.9	6.8	%

(*) Source:  Kottke National End of Season Survey 2003/04 Final Report

United States ski resorts range from small operations which cater primarily to day skiers from nearby population centers to larger resorts which attract both day skiers and destination resort guests.  We believe that day skiers focus primarily on the quality of the skiing and travel time, while destination travelers are attracted to the total ski and riding experience, including the non-skiing amenities and activities available at the resort, as well as the perceived overall quality of the vacation experience.  Destination guests generate significantly higher resort operating revenue per skier day than day skiers because of their additional spending on lodging, food and beverages, and other retail items over a multiple-day period.

The ski industry has enjoyed solid growth over the past quarter of a century, including a notable rebound in recent years from the overall participation trough experienced in 2000.  Baby boomers that drove the industry growth in the 1960’s and 1970’s are entering peak spending years, generating significantly more travel volume than other demographic groups.  These baby boomers have above average household income, and their numbers are expected to grow through 2012, according to the U.S. Department of Commerce.  According to the National Ski Area Association, the number of skier visits represented by snowboarders in the United States has increased to approximately 30.6% of total skier visits in the 2003-04 ski season, a compounded annual growth rate since 2000-2001 of approximately 4.1%.  We believe that snowboarding will continue to be an important source of lift ticket, skier development, retail, and rental revenue growth for us.

We believe that we are well positioned to capitalize on certain favorable trends and developments affecting the alpine resort industry in the United States.  These trends and developments include:

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•Advances in ski equipment technology, such as the development of parabolic skis which make skiing easier to learn and enjoy,

•The continued growth of snowboarding as a significant and enduring segment of the industry which in turn increases youth participation in alpine sports,

•A greater focus on leisure and fitness in general,

•Expanding demand for second home vacation real estate,

•The existence of approximately 66.7 million members of the baby boom generation who are now approaching the 40 to 59 year age group where discretionary income, personal wealth, and pursuit of leisure activities are maximized, and

•The emergence of the echo boom generation (children of baby boomers) as a significant economic force which is just beginning to enter the prime entry age for skiing, snowboarding, and other “on-snow” sports.

There can be no assurance, however, that these trends and developments will have a favorable impact on the ski industry.

Competition

The ski industry is highly competitive.  We compete with mountain resort areas in the United States, Canada, and Europe.  We also compete with other recreation resorts, including warm weather resorts, for vacationers.  In order to broaden its customer base, we market our resorts regionally, nationally, and internationally.  Our prices are directly impacted by the number and variety of alternatives presented to skiers in these markets and we look to provide competitive prices and ski packages comparable with other leading resorts. Our most significant competitors are resorts that are well capitalized, well managed, and have significant capital improvement and resort real estate development programs.

Employees and Labor Relations

We currently employ approximately 1,400 full-time, year-round employees supporting our resort and real estate operations, including corporate personnel.  At peak season last year, we employed approximately 8,600 employees.  Less than 1% of our employees are unionized.  We believe that we enjoy satisfactory relations with our employees.

Government Regulation

Our resorts are subject to a wide variety of federal, state, regional, and local laws and regulations relating to land use, environmental/health and safety, water resources, air and water emissions, sewage disposal, and the use, storage, discharge, emission, and disposal of hazardous materials and hazardous and nonhazardous wastes, and other environmental matters.  While we believe that our resorts are currently in material compliance with all land use and environmental laws, any failure to comply with these laws could result in costs to satisfy environmental compliance, remediation requirements, or the imposition of severe penalties or restrictions on operations by government agencies or courts that could adversely affect our operations.

We believe that we possess all the permits, licenses, and approvals from governmental authorities material to our operations as they currently exist.  We have not received any notice of material non-compliance with permits, licenses, or approvals necessary for the operation of any of our properties, with the exception of our Development Agreement at The Canyons, where we have received a notice of non-compliance from the applicable governmental regulators and are working with them to resolve compliance issues.  See “Certain Considerations - Our business is subject to heavy environmental and land use regulation” for additional discussion regarding the status of our master plan permits at The Canyons.

Resort and real estate capital programs require permits and approvals from certain federal, state, regional, and local authorities.  Our operations are heavily dependent upon our continued ability, under applicable laws, regulations, policies, permits, licenses, or contractual arrangements, to have access to adequate supplies of water with which to make snow and service the other needs of our facilities, and otherwise to conduct our operations.  There can be no assurance that new applications of existing laws, regulations, and policies, or changes in these laws, regulations, and policies will not occur in a manner that would have a material adverse effect on our business, or that

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important permits, licenses, or agreements will not be canceled, not renewed, or renewed on less favorable terms.  Major expansions of any one or more resorts could require the filing of an environmental impact statement under environmental laws and applicable regulations if it is determined that the expansion has a significant impact upon the environment and could require numerous other federal, state, and local approvals.  Although we have consistently been successful in implementing our capital expansion plans, no assurance can be given that necessary permits and approvals will be obtained.

Systems and Technology

Information Systems.Our information systems are designed to improve the ski experience by developing more efficient guest service products and programs.  We continue to deploy solutions that improve guest service, create internal efficiency, and enable more direct relationships between us and our guests.  We are implementing extensions to our central reservations software that will provide industry-leading integration between our web and call center vacation booking channels.

Snowmaking Systems and Technology.  We believe that we operate one of the largest consolidated snowmaking operations in the ski resort industry, with approximately 4,200 acres of snowmaking coverage.  Our proprietary snowmaking software program allows us to produce what we believe is some of the highest quality man-made snow in the industry.  Substantially all of our snowmaking systems are operated through computer-based control using industrial automation software and a variety of state of the art hardware and instrumentation.  We use efficient ground based, tower based, and fully automated snowgun nozzle technology and have developed software for determining the optimal snowmaking nozzle setting at multiple locations on any particular mountain.  This system monitors the weather conditions and system capacities and determines the proper operating water pressure for each nozzle, reducing the need for physical observations to make adjustments and ensuring that ideal snow quality is provided.  In addition, we are actively involved in testing and implementing new technologies to further improve the quality and efficiency of our snowmaking operations.

CERTAIN CONSIDERATIONS

                In addition to the other information contained in this Form 10-K, you should carefully consider the following matters in evaluating our business.  This Form 10-K contains forward-looking statements and our actual results could differ materially from those anticipated by any forward-looking statements as a result of numerous factors, including those set forth in the following description of considerations and elsewhere in this Form 10-K.  See Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Forward-Looking Statements”.

Pursuant to its terms, our Mandatorily Redeemable Convertible 10½% Series A Preferred Stock (Series A Preferred Stock) was redeemable on November 12, 2002 to the extent that there were legally available funds to effect such redemption.  We did not redeem the Series A Preferred Stock on that redemption date and can give no assurance that the necessary liquidity will be available to effect redemption in the future.  Any redemption of our Series A Preferred Stock could result in an event of default under some of our outstanding debt.

We have 36,626 shares of Series A Preferred Stock outstanding, with an accreted value of approximately $73.9 million as of July 25, 2004.  Our  Series A Preferred Stock was redeemable on November 12, 2002 at an aggregate redemption price of approximately $61.9 million, to the extent that we had funds legally available for that redemption.  If our Series A Preferred Stock is not permitted to be redeemed because there are not legally available funds, we must redeem that number of shares of Series A Preferred Stock which we can lawfully redeem, and from time to time thereafter, as soon as funds are legally available, we must redeem shares of the Series A Preferred Stock until we have done so in full.  Prior to the November 12, 2002 redemption date, based on all relevant factors, our Board of Directors determined not to redeem any shares of stock on the redemption date.  On January 27, 2003, the holders of the Series A Preferred Stock demanded that we redeem all of the Series A Preferred Stock immediately and on April 8, 2003, the Series A Preferred Stockholders demanded pursuant to Delaware law to review certain records.  We will continue to assess our obligations with respect to the requirements of the redemption provisions of the Series A Preferred Stock.  Because the Series A Preferred Stock was not redeemed on November 12, 2002, the certificate of designation for the Series A Preferred Stock provides that the holders are entitled to elect two new

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members of our board of directors.  We have not yet been advised by the holders of the Series A Preferred Stock whether they intend to exercise their right to elect two directors at or prior to our next annual shareholders meeting or whether they intend to take any other action, including legal action, to seek to compel our redemption of the Series A Preferred Stock.  If the holders of the Series A Preferred Stock were to commence any litigation to compel us to redeem the Series A Preferred Stock, based on present facts and circumstances, we would vigorously contest that litigation.

We are not permitted to redeem our Series A Preferred Stock under the terms of our $91.5 million resort senior secured loan facility from General Electric Capital Corporation (GE Capital) and CapitalSource Finance LLC (Capital Source) (the Resort Senior Credit Facility) and the terms of the indenture governing our 12% senior subordinated notes (the Senior Subordinated Notes).  If any redemption occurs or the holders of our Series A Preferred Stock obtain and seek to enforce a final judgment against us that is not paid, discharged or stayed, this could result in an event of default under those debt instruments, and the lenders and holders of that debt could declare all amounts outstanding to be due and payable immediately.  If we are required to redeem all or any portion of our Series A Preferred Stock, either as a result of a court judgment or otherwise, we would have to consider seeking an amendment or waiver of the terms of the Resort Senior Credit Facility and the indenture governing the Senior Subordinated Notes, selling material assets or operations, refinancing our indebtedness and our Series A Preferred Stock, seeking to raise additional debt or equity capital, delaying capital expenditures and other investments in our business, and/or restructuring our indebtedness and preferred stock.  No assurance can be given that we would be successful in taking any of these steps or that we would have the necessary liquidity or assets to effect any redemption of our Series A Preferred Stock and any indebtedness required to be repaid.  As a result, any redemption of, or legal requirement to redeem, our Series A Preferred Stock could have a material adverse effect on us.

On October 12, 2004, we entered into an Exchange Agreement with the holder of our Series A Preferred Stock.  Pursuant to the terms of the Exchange Agreement, we have agreed to issue 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 will be issued only in the event that we are successful in consummating a new senior secured credit facility and the tender offer.  See Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — General” for a description of the tender offer.  The new junior subordinated notes will 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 will be subordinated to all of our other debt obligations and all trade payables incurred in the ordinary course of our business.  None of our subsidiaries will be obligated on the new junior subordinated notes, and none of our assets will serve as collateral for repayment of the new junior subordinated notes.

Our business is substantially leveraged and we face a number of financial risks.

                We are highly leveraged.  As of September 26, 2004, we had $259.5 million of total indebtedness outstanding, including $117.1 million of secured indebtedness, and $352.2 million in redeemable preferred stock (liquidation value).

                Our high level of debt affects our operations in several important ways.  First of all, we will have significant cash requirements to service our debt, which will in turn reduce the funds available for our operations and capital expenditures.  A decrease in the availability of funds will make us more vulnerable to adverse general economic and industry conditions.  Secondly, the financial covenants and other restrictions contained in our debt agreements require us to meet certain financial tests and restrict our ability to raise additional capital, borrow additional funds, make capital expenditures, or sell our assets.  Failure to manage cash resources or an extraordinary demand for cash outside of our normal course of business could leave us with no cash availability.

Although we believe we have sufficient liquidity to fund our operations through at least fiscal 2005, our ability to make scheduled payments or refinance our debt and preferred stock obligations will depend on our future financial and operating performance, which will be affected by prevailing economic conditions, financial, business, and other factors.  Some of these factors are beyond our control.  There can be no assurance that our operating results, cash flows, and capital resources will be sufficient to pay our indebtedness.  If our operating results, cash flows, or capital resources prove inadequate we could face substantial liquidity problems and might be required to

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dispose of material assets or operations to meet our debt and other obligations.  We also could be forced to reduce or delay planned expansions and capital expenditures, sell assets, restructure or refinance our debt, or seek additional equity capital.  In addition, further efforts by management to refinance and restructure our debt and redeemable preferred securities could be negatively impacted and result in less favorable terms.  There can be no assurance that any of these actions could be effected on terms satisfactory to our business, if at all.

                Although we believe that capital expenditures above maintenance levels can be deferred to address cash flow or other constraints, these activities cannot be deferred for extended periods without adversely affecting our competitive position and financial performance.

                Continued improvement in our financial performance depends, in part, on our ability to maintain and improve the quality of our facilities, products, and management resources, and to engage in successful real estate development (either directly or through third parties).  To the extent that we are unable to do so with cash generated from operating activities, or through borrowed funds or additional equity investments, the growth and financial health of our business could be impaired.

We also have significant future capital requirements with respect to the retirement of debt and other securities.  For example, the Resort Senior Credit Facility matures on April 15, 2006 for the revolving credit facility (Revolving Credit Facility), the tranche A term loan (Tranche A Term Loan), and the supplemental term loan (Supplemental Term Loan) portions, and matures on June 15, 2006 for the tranche B term loan (Tranche B Term Loan) portion.  We must also retire or refinance our Senior Subordinated Notes in July 2006 and our 11.3025% convertible subordinated notes (the Junior Subordinated Notes) in August 2007.  Our preferred stock must be redeemed in accordance with its terms.  This includes our Series A Preferred Stock, which we did not redeem on November 12, 2002, our 12% Series C-1 convertible participating preferred stock (the Series C-1 Preferred Stock) which is mandatorily redeemable in July 2007, and our 15% Series C-2 preferred stock (the Series C-2 Preferred Stock) which is mandatorily redeemable in July 2007.  There can be no assurance that we will be able to retire, redeem, or refinance our indebtedness and preferred stock in the foreseeable future.  Failure to do so could have a material adverse effect on our business.  See Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for a description of such payments.

Our business is highly seasonal and unfavorable weather conditions can adversely affect our business.

                Ski resort operations are highly seasonal.  For fiscal 2004, we realized approximately 88% of resort segment revenues and over 100% of resort segment operating income during the period from November through April.  In addition, a significant portion of resort segment revenues and approximately 22% of annual skier visits were generated during the Christmas and Presidents’ Day vacation weeks in fiscal 2004.  Also, our resorts typically experience operating losses and negative cash flows for the period from May through November.  During the seven-month period from May through November 2003, for example, we had operating losses from resort segment operations aggregating $82.8 million and negative cash flows from resort segment operating activities aggregating $28.6 million.  These losses from resort segment operations included merger, restructuring, and asset impairment charges of $1.7 million and accretion of discount and dividends on mandatorily redeemable preferred stock of $14.3 million included in interest expense.  There can be no assurance that we will be able to finance our capital requirements from external sources during the period from May through November.

                A high degree of seasonality in our revenues increases the impact of certain events on our operating results.  Adverse weather conditions, access route closures, equipment failures, and other developments of even moderate or limited duration occurring during our peak business periods could reduce our revenues.  Adverse weather conditions can also increase power and other operating costs associated with snowmaking or can 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 and the early ski season snow conditions and skier perception of early ski season snow conditions influence the momentum and success of the overall ski season.  There is no way for us to predict future weather patterns or the impact that weather patterns may have on the results of operations or visitation.

We operate in a highly competitive industry which makes maintaining our customer base a difficult task.

                The skiing industry is highly competitive and capital intensive.  Our competitors include major ski resorts

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throughout the United States, Canada, and Europe as well as other worldwide recreation resorts, including warm weather resorts and various alternative leisure activities.  Our competitive position depends on a number of factors, such as our proximity to population centers, the availability (including direct flights by major airlines) and cost of transportation to and within a resort, natural snowfall, the quality and coverage of snowmaking operations, resort size, the attractiveness of terrain, lift ticket prices, prevailing weather conditions, the appeal of related services, the quality and the availability of lodging facilities, and resort reputation.  In addition, some of our competitors have greater competitive positions and relative ability to withstand adverse developments.  There can be no assurance that our competitors will not be successful in capturing a portion of our present or potential customer base.

Our revenues from real estate development are vulnerable to particular risks.

Our ability to generate revenues from real estate development activities could be adversely affected by a number of factors, such as our ability to successfully market our resorts, the national and regional economic climate, local real estate conditions (such as an oversupply of space or a reduction in demand for real estate), costs of environmental compliance and remediation associated with new development, renovations and ongoing operations, the attractiveness of the properties to prospective purchasers and tenants, competition from other available property or space, our ability to obtain all necessary zoning, land use, building, occupancy, and other required governmental permits and authorizations, and changes in real estate, zoning, land use, environmental, or tax laws.  Many of these factors are beyond our control.

                In addition, a portion of our real estate development business is conducted within the interval ownership industry.  As a result, any changes affecting the interval ownership industry, such as an oversupply of interval ownership units, a reduction in demand for interval ownership units, changes in travel and vacation patterns, changes in governmental regulations relating to the interval ownership industry, increases in construction costs, or taxes and tightening of financing availability, could have a material adverse effect on our real estate development business.

Changes in regional and national economic conditions could adversely affect our results of operations.

                The skiing and real estate development industries are cyclical in nature and are particularly vulnerable to shifts in regional and national economic conditions.  Skiing and vacation unit ownership are discretionary recreational activities entailing relatively high costs of participation, and any decline in the regional or national economies where we operate could adversely impact our skier visits, real estate sales, and revenues.  Accordingly, our financial condition, particularly in light of our highly leveraged condition, could be adversely affected by any weakening in the regional or national economy.

Our business is subject to heavy environmental and land use regulation.

                We are subject to a wide variety of federal, state, and local laws and regulations relating to land use and development and to environmental compliance and permitting obligations, including those related to the use, storage, discharge, emission, and disposal of hazardous materials.  Any failure to comply with these laws could result in capital or operating expenditures or the imposition of severe penalties or restrictions on our operations that could adversely affect our present and future resort operations and real estate development.  In addition, these laws and regulations could change in a manner that materially and adversely affects our ability to conduct our business or to implement desired expansions and improvements to our facilities.

                Our development activities at The Canyons in Utah are governed by permits issued pursuant to a Development Agreement with local authorities.  The Development Agreement requires us to achieve certain performance benchmarks in order to remain in compliance with the Development Agreement and obtain additional permits.  We have not achieved certain of these performance benchmarks within the time frames required under the Development Agreement, and the local authorities have advised us that these failures potentially constitute defaults under the Development Agreement.  We are working with the local authorities to address these failures and reassess the appropriate timing for compliance with these performance benchmarks.  Our failure to satisfy local regulatory authorities with respect to these matters may result in our inability to obtain additional permits under the Development Agreement and could significantly adversely impact our ability to meet our business and revenue expansion goals at The Canyons.  Defaults under the Development Agreement could also subject us to risk of litigation with third parties whose development plans are adversely impacted by the delay or loss of permits under the Development Agreement by virtue of our failure to meet performance benchmarks.

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A disruption in our water supply would impact our snowmaking capabilities and impact our operations.

                Our operations are heavily dependent upon our ability, under applicable federal, state, and local laws, regulations, permits, and licenses, or contractual arrangements, to have access to adequate supplies of water with which to make snow and otherwise conduct our operations.  There can be no assurance that applicable laws and regulations will not change in a manner that could have an adverse effect on our operations, or that important permits, licenses, or agreements will not be cancelled or will be renewed on terms as favorable as the current terms.  Any failure to have access to adequate water supplies to support our current operations and anticipated expansion would have a material adverse effect on our financial condition and  result of operations.

The loss of any of our executive officers or key personnel would harm our business.

                Our success depends to a significant extent upon the performance and continued service of various key management and operational personnel.  The loss of the services of these key personnel could have a material adverse effect on our business and operations.

We are structured as a holding company and have no assets other than the common stock of our subsidiaries.

                We are a holding company and our ability to pay principal and interest on debt will be dependent upon the receipt of dividends and other distributions, or the payment of principal and interest on intercompany borrowings, from our subsidiaries.  We do not have, and we do not expect in the future to have, any material assets other than the common stock of our direct and indirect subsidiaries.  The Resort Senior Credit Facility and other agreements governing the debt obligations of our subsidiaries contain contractual restrictions on the ability of our subsidiaries to make dividend payments or other distributions to us.  In addition, state law further restricts the payment of dividends or other distributions to us by our subsidiaries.  The breach of any of the provisions of the indebtedness of our subsidiaries could result in a default, which in turn could accelerate the maturity of our subsidiaries’ indebtedness.  If the maturity of any such indebtedness of our subsidiaries were accelerated, the indebtedness would be required to be paid in full before that subsidiary would be permitted to distribute any assets to us.  There can be no assurance that our assets or those of our subsidiaries would be sufficient to repay all of our outstanding debt.

Our business requires significant capital expenditures.  These expenditures do not, however, guarantee improved results.

                Although we believe that capital expenditures above maintenance levels can be deferred to address cash flow or other constraints, these expenditures cannot be deferred for extended periods without adversely affecting our competitive position and financial performance.  Our financial performance depends, in part, on our ability to maintain and improve the quality of our facilities, products, and management resources and to engage in successful real estate development (either directly or through third parties).  In addition, the Resort Senior Credit Facility limits the amount of non-real estate capital expenditures we can make.  To the extent that we are prohibited from making capital expenditures or are unable to obtain the funds to do so with cash generated from operations, or from borrowed funds or additional equity investments, our financial condition and results of operations could be affected.

Historically, a key element of our strategy has been attracting additional skiers through investment in on-mountain capital improvements.  These improvements are capital intensive and a lack of available funds for capital expenditures could have a material adverse effect on our ability to implement our operating strategy.  We conduct, and intend to continue to conduct, real estate development and to finance such activities through non-recourse debt.  We intend to finance resort capital improvements through internally generated funds and proceeds from the offering of debt and equity.  There can be no assurance that sufficient funds will be available to fund these capital improvements or real estate development or that these capital improvements will attract additional skiers or generate additional revenues.

Control of our company by principal shareholders.

As a result of a shareholders’ agreement and the terms of the preferred stock held by Oak Hill Capital Partners, L.P. and certain related entities (Oak Hill), and Leslie B. Otten (Mr. Otten), the holder of all of the 14,760,530 shares of Class A common stock, Oak Hill controls a majority of our board of directors.  Oak Hill may have interests different from the interests of the holders of our common stock.

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A significant portion of our ski resorts are operated under leases or forest service permits.

                We lease a significant portion of the land underlying our ski resorts or use them pursuant to renewable permits or licenses.  If any of these arrangements were terminated or not renewed on expiration, or renewed on terms materially less favorable to us, our ability to possess and use the land would be impaired.  A substantial portion of the skiable terrain at our Attitash Bear Peak, Mount Snow, and Steamboat ski resorts is federal land that is used under the terms of permits with the United States Forest Service.  The permits give the United States Forest Service the right to review and comment on the location, design, and construction of improvements in the permit area and on certain other operational matters.  The permits can also be terminated or modified by the United States Forest Service to serve the public interest or in the event we fail to perform any of our obligations under the permits.  A termination or modification of any of our permits could have a material adverse affect on our results of operations.

Item 3

Legal Proceedings

The Killington resort has been identified by the U.S.  Environmental Protection Agency as a potentially responsible party at two sites pursuant to the Comprehensive Environmental Response, Compensation and Liability Act.  Killington has entered into a settlement agreement with the Environmental Protection Agency at one of the sites, the Solvents Recovery Service of New England Superfund site in Southington, Connecticut.  Killington rejected an offer to enter into a de minimis settlement with the Environmental Protection Agency for the other site, the PSC Resources Superfund (Superfund) site in Palmer, Massachusetts, because it disputes its designation as a potentially responsible party.  We believe that our liability for this Superfund site will not have a material adverse effect on our business, financial condition, results of operations, or cash flows.

ASC entered into an agreement on January 22, 2002 with Triple Peaks, LLC for the sale of the Steamboat resort.  The Company later determined that the sale of its Heavenly resort more closely achieved the Company’s restructuring objectives and concluded that it would not proceed with the sale of the Steamboat resort.  On April 5, 2002, Triple Peaks, LLC filed a lawsuit against ASC in Federal District Court in Denver, alleging breach of contract resulting from ASC’s refusal to close on the proposed sale of the Steamboat resort.  The suit sought both monetary damages resulting from the breach and specific performance of the contract.  On April 16, 2002, before an answer to its complaint was filed, Triple Peaks voluntarily dismissed its suit and re-filed a substantially identical complaint in Colorado State District Court in Steamboat, also naming Steamboat Ski & Resort Corporation, American Skiing Company Resort Properties, Inc. (Resort Properties), and Walton Pond Apartments, Inc. (each direct or indirect subsidiaries of ASC) as additional defendants.  On December 31, 2002, the Colorado State District Court issued summary judgment in ASC’s favor and against Triple Peaks, confirming that the damages ASC owes Triple Peaks under the contract are limited to $0.5 million.  On January 26, 2003, Triple Peaks appealed the decision of the Colorado State District Court.

On January 22, 2004, the Colorado Court of Appeals reversed the judgment of the Colorado State District Court in ASC’s favor, finding that the agreement between ASC and Triple Peaks did not, under the circumstances of ASC’s refusal to close, limit damages to $0.5 million.  The Court of Appeals remanded the case to the Colorado State District Court with instructions to determine whether damages or specific performance of the agreement was the proper remedy for ASC’s refusal to close.

ASC filed a Request for Rehearing with the Colorado Court of Appeals, which request was denied in March 2004.  ASC filed a Petition for Certiorari with the Colorado Supreme Court and to assert that damages under the agreement are limited to $0.5 million.  On July 12, 2004, the Company reached a settlement with Triple Peaks, LLC regarding this litigation.  In return for a cash settlement of $5.14 million, Triple Peaks LLC agreed to a full dismissal of all claims relating to the proposed sale of the Steamboat resort.  The Company had previously accrued $5.0 million in fiscal 2004 prior to the settlement and accrued the remaining $140,000 at the time of the settlement.  The Company paid an initial payment of $3.0 million and has an accrued liability for the remaining $2.14 million in its consolidated financial statements as of  July 25, 2004.   The $2.14 million is to be paid in April 2005.  If we do not make the payment on that date an interest rate of 12% will be computed from that date through December 31, 2005 and 16% thereafter plus other remedies.  In addition, we are required to make a bonus payment to Triple Peaks of $860,000 if we sell or transfer substantially all of our assets to a third party on or prior to December 31, 2005 and the closing occurs on or before April 1, 2006.  Triple Peaks also has the right of first refusal to buy Steamboat if the sale is on a stand alone basis.

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On April 22, 2003, we were sued in Utah state court by Westgate Resorts, Ltd. for breach of contract and other related claims arising from disputes involving two contracts between us (through two different subsidiaries, ASC Utah, Inc. and Resort Properties) and Westgate.  Generally, Westgate has alleged that ASC Utah and/or Resort Properties have breached obligations to Westgate to construct certain infrastructure at The Canyons resort and provide marketing support for Westgate’s project.  Westgate’s claim seeks specific performance of certain aspects of the two contracts.  It is not currently feasible to quantify the damages being sought in this action.  On May 13, 2003, we answered Westgate’s complaint and filed a counterclaim, alleging, among other things, that Westgate was in default on a joint promotional agreement with ASC Utah for failing to purchase approximately $2.0 million (now over $3.0 million) in lift tickets and that Westgate’s buildings at The Canyons encroach upon land owned or controlled by ASC Utah and/or Resort Properties.  Limited discovery has been taken in this matter and no timetable has been set for bringing the matter to trial.

In July 2003, the homeowners association of the Mount Snow Grand Summit Hotel filed a claim against Grand Summit for damages of $2.0 million for improper roof/insulation construction at that hotel.  Grand Summit has filed an answer and a crossclaim against the architect and general contractor for the project.  Discovery in this matter is at a very preliminary stage and no timetable has been set for bringing the matter to trial.

Each of our subsidiaries which operates resorts has claims pending and is regularly subject to personal injury claims related principally to skiing activities at the resort.  Each of our operating companies maintains liability insurance that we consider adequate in order to insure against claims related to the usual and customary risks associated with the operation of a ski resort.  We operate a captive insurance company authorized under the laws of the State of Vermont, which, until early fiscal 1999, provided liability and workers’ compensation coverage for our Vermont resorts.  We do not currently use this insurance subsidiary to provide liability and workers’ compensation insurance coverage, but it is still responsible for future claims arising from insurable events which may have occurred while it provided this coverage.  Our insurance subsidiary maintains cash reserves in amounts recommended by an independent actuarial firm and which we believe to be adequate to cover any such claims.

Item 4

Submission of Matters to a Vote of Security Holders

Not applicable.

PART II

Item 5

Market for the Registrant’s Common Equity and Related Shareholder Matters.

Our common stock is currently traded on the Over The Counter Bulletin Board under the symbol “AESK”.  Our Class A common stock is not listed on any exchange and is not publicly traded, but is convertible into our common stock.  As of September 26, 2004, 31,738,183 shares of our common stock were issued and outstanding, of which 14,760,530 shares were Class A common stock held by one holder and 16,977,653 shares of common stock held by approximately 9,000 holders.

The following table lists, for the fiscal quarters indicated, the range of high and low closing prices of our common stock as reported on the Over the Counter Bulletin Board, as applicable.

American Skiing Company Common Stock (AESK)

	Fiscal 2003				Fiscal 2004
	High		Low		High		Low
1st Quarter	$	0.28	$	0.14	$	0.22	$	0.09
2nd Quarter	$	0.26	$	0.13	$	0.20	$	0.10
3rd Quarter	$	0.16	$	0.08	$	0.16	$	0.10
4th Quarter	$	0.13	$	0.08	$	0.15	$	0.10

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Market Information

We have not declared or paid any cash dividends on our capital stock.  We intend to retain earnings, to the extent that there are any, to reduce our debt and to support our capital improvement and growth strategies.  We do not anticipate paying cash dividends on our common stock in the foreseeable future.  The payment of future dividends, if any, will be at the discretion of our board of directors after they take into account various factors, such as our financial condition, operating results, current and anticipated cash needs and plans for capital improvements and expansion.  Each of the indentures governing our Senior Subordinated Notes, our Resort Senior Credit Facility and the terms of our Series A Preferred Stock, Series C-1 Preferred Stock, and Series C-2 Preferred Stock contain certain restrictive covenants that, among other things, limit the payment of dividends or the making of distributions on our equity interests.  See Part II, Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources”.

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Item 6

Selected Financial Data

The following selected historical financial data has been derived from our consolidated financial statements as audited by: (1) KPMG LLP, as of July 29, 2001, July 28, 2002, July 27, 2003, and July 25, 2004 and for the fiscal years ended July 30, 2000, July 29, 2001, July 28, 2002, July 27, 2003, and July 25, 2004; and (2) Arthur Andersen LLP, as of July 30, 2000.  This data, excluding consolidated statements of cash flows data, has been restated to reflect Heavenly as discontinued operations and also includes certain reclassifications to be consistent with the current year presentation.

	Historical Year Ended (1)
	July 30, 2000			July 29, 2001			July 28, 2002			July 27, 2003			July 25, 2004
	(in thousands, except per share and per skier visit amounts)
Consolidated Statement of Operations Data:
Net revenues:
Resort (2)	$	240,226		$	275,686		$	243,842		$	251,638		$	250,706
Real estate	132,063			96,864			28,274			12,898			33,405
Total net revenues	372,289			372,550			272,116			264,536			284,111
Operating expenses:
Resort	170,156			187,715			166,968			168,010			167,518
Real estate	123,837			93,422			30,091			12,166			24,661
Marketing, general and administrative	46,903			49,011			46,699			49,645			54,801
Merger, restructuring and asset impairment charges (3)	-			76,015			111,608			1,451			137
Depreciation and amortization	35,493			34,941			26,238			27,513			26,477
Write-off of deferred financing costs	1,017			-			3,338			2,761			-
Total operating expenses	377,406			441,104			384,942			261,546			273,594
Loss from continuing operations before preferred stock dividends and cumulative effects of changes in  accounting principles	(33,743		)	(125,026		)	(167,578		)	(44,374		)	(28,502		)
Accretion of discount and dividends on mandatorily redeemable preferred stock	(20,994		)	(23,357		)	(32,791		)	(37,644		)	-
Loss from continuing operations available to common shareholders before cumulative effects of  changes in accounting principles	$	(54,737	)	$	(148,383	)	$	(200,369	)	$	(82,018	)	$	(28,502	)
Net loss available to common shareholders	$	(52,452	)	$	(141,572	)	$	(206,710	)	$	(82,018	)	$	(28,502	)
Basic and diluted net loss from continuing operations per share available to common shareholders	$	(1.81	)	$	(4.86	)	$	(6.34	)	$	(2.59	)	$	(0.90	)
Basic and diluted net loss per share available to common shareholders	$	(1.73	)	$	(4.64	)	$	(6.54	)	$	(2.59	)	$	(0.90	)
Balance Sheet Data:
Total assets	$	926,778		$	807,038		$	521,993		$	475,305		$	430,800
Long-term debt and redeemable preferred stock, including current maturities	634,723			638,620			582,096			638,928			603,653
Common shareholders’ equity (deficit)	185,497			44,826			(155,305		)	(237,295		)	(240,962		)
Consolidated Statement of Cash Flows Data:
Cash flows provided by (used in) operating activities	$	(43,891	)	$	44,576		$	(1,092	)	$	(7,999	)	$	24,917
Cash flows provided by (used in) investing activities	(17,403		)	(23,390		)	94,683			(4,658		)	(7,359		)
Cash flows provided by (used in) financing activities	62,376			(19,679		)	(98,259		)	12,329			(17,130		)
Other Data:
Skier visits (000’s)(4)	4,109			4,430			3,756			3,977			3,887
Resort revenues per skier visit	$	58.46		$	62.23		$	64.92		$	63.27		$	64.50

(1)The historical data above does not reflect the financial position or results of operations for our Heavenly resort (Heavenly).  The financial data for Heavenly is reflected as discontinued operations because Heavenly was sold during fiscal 2002.

(2)Resort revenues represent all revenues, excluding revenues generated by the sale of real estate interests.

(3)During fiscal 2001, we recognized the following merger, restructuring, and asset impairment charges: a $52.0 million asset impairment charge related to the assets at our Steamboat resort that were previously classified as assets held for sale as of July 29, 2001; a $15.1 million asset impairment charge related to the assets at our Sugarbush resort that are classified as assets held for sale as of July 29, 2001; a $3.6 million charge related to our terminated merger with Meristar Hotels and Resorts, Inc; $4.0 million in employee separation, legal, and financial consulting charges related to our strategic restructuring plan; and a $1.3 million impairment charge to net realizable value in the fourth quarter of fiscal 2001 to reduce the remaining units at the Attitash Grand Summit Hotel to their net realizable vaule.

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During fiscal 2002, we recognized the following merger, restructuring, and asset impairment charges: a $25.4 million asset impairment charge related to the assets at our Steamboat resort that were previously classified as held for sale as of July 29, 2001; a $38.7 million charge related to the remaining quartershare units at the Steamboat Grand Hotel and The Canyons Grand Summit Hotel; a $18.9 million charge related to land and land options at The Canyons; a $24.8 million charge related to master planning and real estate costs at The Canyons, Killington, Mount Snow, Sugarloaf/USA, Sunday River, and Steamboat; a $1.4 million charge related to a land option at Sunday River and certain resort fixed assets; $2.7 million in legal and financial consulting charges related to our strategic restructuring plan; offset by a $0.3 million gain to finalize the sale of Sugarbush.  During fiscal 2003, we recognized the following merger, restructuring and asset impairment charges: a $1.2 million charge related to certain resort fixed assets and other assets; and $0.4 million in restructuring charges; offset by a $0.2 million reversal of a previous impairment charge determined not to be needed.  During fiscal 2004, we recognized the following in merger, restructuring, and asset impairment charges:  $0.1 million in restructuring charges.

(4)For purposes of estimating skier visits, we assume that a season pass holder visits our resorts a number of times that approximates the average cost of a season pass divided by the average daily lift ticket price.

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Item 7

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

Forward-Looking Statements

Certain statements under the heading Part I, Item 1 and Item 2 — “Business and Properties”, this heading Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Annual Report on Form 10-K 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); any redemption of or legal requirement to redeem our Series A Preferred Stock; failure to maintain improvements to resort operating performance at the covenant levels required by our Resort Senior Credit Facility; 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; seasonal business activity; 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 resort 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 fiscal 2004 results of operations were favorable as compared to the prior year due to significantly improved snow conditions at our western resorts, a company-wide increase in our season pass revenues, revisions to our lift ticket pricing structure and comprehensive yield management at our resorts, reductions in our fixed cost structure, effective management of the ramp-up and ramp-down of seasonal operations, and day-to-day management of peak season operating costs, which positive results collectively were offset by challenging weather conditions at our eastern resorts.

We intend to restructure the Company’s debt and preferred stock facilities to more closely align them with our long-term strategic objectives.  During fiscal 2004, we successfully amended our real estate construction loan facilities.  In addition, during fiscal 2004 an auction was held at The Canyons to sell substantially all of the remaining units at The Canyons Grand Summit Hotel, which resulted in a $10.8 million paydown of our real estate

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construction loan facilities.  We also successfully restructured our real estate term facility (Real Estate Term Facility).

As a result of improved operating performance and the strengthening of our balance sheet following recent restructuring transactions, we have commenced marketing for a new senior secured credit facility.  The new facility is expected to total approximately $230 million, and consist of a revolving credit facility and term loan facilities.  The proceeds of the facilities would be used to refinance our Resort Senior Credit Facility and our Senior Subordinated Notes (which collectively total approximately $199.0 million as of July 25, 2004 and approximately $197.1 million as of September 26, 2004), as well as to pay fees and expenses related to the transaction.  Arrangement and consummation of a new senior secured credit facility is subject to satisfactory documentation and other customary conditions.  If our marketing efforts for the facility are successful, closing on the facility is expected to take place in November 2004.

On October 12, 2004, in conjunction with a proposed new senior secured credit facility, we commenced a tender offer for all of the Senior Subordinated Notes, which total $120.0 million.  The total consideration payable in connection with the offer is $1,015.63 per $1,000 principal amount plus accrued but unpaid interest for the Senior Subordinated Notes.  We also solicited consents from the holders of the Senior Subordinated Notes to eliminate substantially all of the restrictive covenants and certain events of default under the indenture for the Senior Subordinated Notes.  On October 22, 2004, we announced that we have received the requisite consents from the holders of the Senior Subordinated Notes to the proposed indenture amendments, and we entered into a supplemental indenture reflecting those amendments.  Closing of the tender offer and the proposed indenture amendments becoming operative are each subject to the consummation of a new senior secured credit facility in an amount sufficient to fund the total consideration for the Senior Subordinated Notes and to refinance our Resort Senior Credit Facility,  and certain other customary conditions.

                 On October 12, 2004, we entered into an Exchange Agreement with the holder of our Series A Preferred Stock.  Pursuant to the terms of the Exchange Agreement, we have agreed to issue 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 will be issued only in the event that we are successful in consummating a new senior secured credit facility and the tender offer.  The new junior subordinated notes will 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 will be subordinated to all of our other debt obligations and all trade payables incurred in the ordinary course of our business.  None of our subsidiaries will be obligated on the new junior subordinated notes, and none of our assets will serve as collateral for repayment of the new junior subordinated notes.

There can be no assurance that we will be successful in marketing the new senior secured credit facility on acceptable terms.  The description of our liquidity and capital resources which follows is made without giving effect to the proposed new senior secured credit facility, the tender for the Senior Subordinated Notes, or the exchange of our Series A Preferred Stock for junior subordinated notes.

The following is our discussion and analysis of financial condition and results of operations for fiscal  2004.  Please read this information in connection with our consolidated financial statements and related notes contained elsewhere in this report.

Liquidity and Capital Resources

We are a holding company whose only significant assets are the outstanding common stocks of our subsidiaries.  Our only source of cash to pay our obligations is distributions from our subsidiaries.

Short-Term.  Our primary short-term liquidity needs for resort operations include funding seasonal working capital requirements, funding our fiscal 2005 capital improvement program and servicing debt and other contractual obligations.  Our primary short-term liquidity needs for real estate operations are funding costs relating to marketing and sales of our real estate development projects and servicing debt.  Our cash requirements for ski-related and real estate development/sales activities are provided from separate sources.

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Our primary source of liquidity for ski-related working capital and ski-related capital improvements are cash flows from operations of our non-real estate subsidiaries and borrowings under our Resort Senior Credit Facility.  The total debt outstanding under our Resort Senior Credit Facility as of July 25, 2004 was approximately $79.0 million (not including approximately $0.3 million in undrawn letters of credit issued under the Resort Senior Credit Facility), with approximately $9.8 million available for borrowing on that date.  As of July 25, 2004, we are in compliance with all covenants of the Resort Senior Credit Facility.

Real estate development and real estate working capital is funded primarily through the Construction Loan Facility established for major real estate development projects and net proceeds from the sale of real estate developed for sale after required construction loan repayments.  The Construction Loan Facility is without recourse to us and our resort operating subsidiaries, and is collateralized by significant real estate assets of Resort Properties and its subsidiaries, including the assets and stock of Grand Summit, our primary hotel development subsidiary.  As of July 25, 2004, the total debt outstanding under the Construction Loan Facility was approximately $18.7 million.  As of July 25, 2004, we are in compliance with all covenants of the Construction Loan Facility.  As of July 25, 2004, the carrying value of the total assets that collateralized the Construction Loan Facility and which are included in the accompanying consolidated balance sheet was approximately $69.0 million.  See “Real Estate Liquidity — Real Estate Term Facility” below.

Resort Liquidity.  We entered into an agreement governing the Resort Senior Credit Facility on February 14, 2003 with GE Capital and CapitalSource.  The Resort Senior Credit Facility is secured by substantially all of our holding company assets, excluding the stock of Resort Properties and other real estate subsidiaries, and the assets of our resort operating subsidiaries.  Following the restructuring of the Real Estate Term Facility in May 2004, Resort Properties has become a guarantor of and its assets are  pledged as collateral under the Resort Senior Credit Facility.

The Resort Senior Credit Facility consists of the following:

•Revolving Credit Facility - $40.0 million, including letter of credit (L/C) availability of up to $5.0 million.  The amount of availability under the Revolving Credit Facility will be correspondingly reduced by the amount of each L/C issued.  As of July 25, 2004, we had approximately $29.9 million borrowed on this facility and approximately $0.3 million of outstanding L/Cs.

•Tranche A Term Loan -  $25.0 million borrowed as of July 25, 2004, $0 availability;

•Supplemental Term Loan - $4.1 million borrowed as of July 25, 2004, $0 availability; and

•Tranche B Term Loan -  $20.0 million borrowed as of July 25, 2004, $0 availability.

The Revolving Credit Facility, Tranche A Term Loan, and Supplemental Term Loan portions of the Resort Senior Credit Facility mature on April 15, 2006 and bear interest at JPMorgan Chase Bank’s prime rate plus 3.25%, payable monthly (7.25% as of July 25, 2004).  The Revolving Credit Facility must be reduced to $0 by April 1 of each fiscal year and therefore this portion of the debt is reflected in current liabilities in the accompanying consolidated balance sheets.  The Supplemental Term Loan requires payments of approximately $1.0 million on January 15 and July 15 of each year, with a final payment of approximately $1.0 million on April 15, 2006.  The Tranche B Term Loan matures on June 15, 2006 and bears interest at JPMorgan Chase Bank’s prime rate plus 5.0%, payable monthly (12.25% as of July 25, 2004) with an interest rate floor of 12.25%.  The Resort Senior Credit Facility contains affirmative, negative, and financial covenants customary for this type of credit facility, which includes maintaining a minimum level of EBITDA, as defined, places a limit on our capital expenditures, and contains an asset monetization covenant which requires us to refinance the facility or sell assets sufficient to retire the facility on or prior to December 31, 2005.  The financial covenants of the Resort Senior Credit Facility also restrict our ability to pay cash dividends on or redeem our common and preferred stock.

                As of September 26, 2004, we had $28.0 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.  Furthermore, as of September 26, 2004, we had approximately $0.3 million in outstanding L/Cs with approximately $11.7 million available for future borrowings under the Revolving Credit Facility.  We expect that the remaining borrowing capacity under the Revolving Credit Facility will be sufficient to meet our working capital needs through the end of fiscal 2005.

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We closely monitor our operating results that impact our ability to meet the financial covenants under our Resort Senior Credit Facility.  We take various actions to maintain compliance with our financial covenants, including reducing our cost structure during the off-season and seasonal low-visitation at our resorts and closely managing working capital throughout the year.  In the event of a violation of the financial covenants under our Resort Senior Credit Facility, we would engage in a discussion with our lenders for a waiver of those covenants for the period in question.

             We met the zero balance requirement under the Revolving Credit Facility on April 1, 2004, and were incompliance with all other financial covenants of the Resort Senior Credit Facility through the end of fiscal 2004

Our significant debt levels affect our liquidity.  As a result of our highly leveraged position, we have significant cash requirements to service interest and principal payments on our debt.  Consequently, cash availability for working capital needs, capital expenditures, and acquisitions is significantly limited, outside of any availability under the Resort Senior Credit Facility.  Furthermore, our Resort Senior Credit Facility and the indenture governing our Senior Subordinated Notes contain significant restrictions on our ability to obtain additional sources of capital and may affect our liquidity.  These restrictions include restrictions on the sale of assets, restrictions on the incurrence of additional indebtedness, and restrictions on the issuance of preferred stock.

Real Estate Liquidity.  To fund working capital, Grand Summit Resort Properties relies on the net proceeds from the sale of real estate developed for sale and the Construction Loan Facility.

Real Estate Term Facility:  Effective May 20, 2002, Resort Properties was in default on its Real Estate Term Facility due to its failure to make a mandatory principal payment of $3.75 million and the due date of the indebtedness was accelerated on May 31, 2002.  As a result, all indebtedness under the facility became immediately due and payable.

On May 14, 2004, Resort Properties completed the restructuring of the Real Estate Term Facility from Fleet National Bank, Ski Partners, LLC, and Oak Hill Capital Partners.  As a result of the restructuring, a new business venture called SP Land Company, LLC (SP Land) was created by Ski Partners, LLC, Resort Properties (an ASC subsidiary), and Killington, Ltd. (Killington) (an ASC subsidiary).  Certain developmental land parcels at the Killington resort and cash with a combined carrying value of approximately $2.2 million were transferred by Resort Properties and Killington into SP Land Company, LLC, together with all indebtedness, including related interest and fees, under the Real Estate Term Facility held by Fleet National Bank and Ski Partners, LLC (Tranche A and B of the Real Estate Term Facility) totaling $55.4 million.   All of the remaining collateral for the Real Estate Term Facility, including all of the capital stock of Grand Summit, all developmental real estate at The Canyons, the commercial unit in the Grand Summit Hotel at Mount Snow, and the Rams Head parking lot at the Killington resort, was released as security for the obligations under the Real Estate Term Facility.  Collectively Killington and Resort Properties own 25% of the membership interests of SP Land.  The remaining 75% of the membership interests in SP Land are owned by Ski Partners, LLC, together with a preferential interest in SP Land of approximately $37,175,000.  In accordance with FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities” (FIN No. 46R) and APB No. 18, SP Land is a variable interest entity and  is accounted for on the equity method because it does not meet the requirements for consolidation.

In conjunction with the restructuring of the Real Estate Term Facility, the $25.0 million in debt from Resort Properties to Oak Hill Capital Partners and its affiliate, OHSF ASTC, LLC, (Tranche C of the Real Estate Term Facility) was contributed by Oak Hill to ASC as additional paid-in capital.  This contribution was made for no additional consideration, and no equity was issued by ASC in return for the contribution.  As a result of the transfer of the $55.4 million in indebtedness (including interest and fees) from Resort Properties to SP Land and the exchange of $25.0 million in debt from Oak Hill for additional paid-in capital of ASC, approximately $80.4 million in real estate debt and related accrued interest and fees are no longer obligations of  ASC.

As part of the restructuring of the Real Estate Term Facility, Killington also contributed all of its interest in approximately 256 acres of developmental real estate with a carrying value of approximately $0.9 million into a joint venture entity called Cherry Knoll Associates, LLC.   Each of SP Land and Killington own 50% of the membership interests in Cherry Knoll Associates.  In addition, Killington maintains a preferential distribution interest in Cherry Knoll Associates of $1,500,000.  In accordance with FIN No. 46R and APB No. 18, Cherry Knoll Associates is a variable interest entity and is accounted for on the equity method because it does not meet the requirements for consolidation.

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Immediately following the restructuring of the Real Estate Term Facility, Resort Properties became a co-borrower under the Resort Senior Credit Facility and Resort Properties pledged its remaining assets as collateral security under the Resort Senior Credit Facility.

As a result of the restructuring of the Real Estate Term Facility, all previous defaults under the facility have been waived by the lenders and we are in compliance with all debt covenants and other terms of the remaining debt instruments as of July 25, 2004.

Construction Loan Facility:  We have historically conducted our real estate development through subsidiaries, each of which is a wholly owned subsidiary of Resort Properties.  Grand Summit owns the Grand Summit Hotel projects at Steamboat, The Canyons, and Attitash Bear Peak, which are primarily financed through the $110 million Senior Construction Loan.  Due to construction delays and cost increases at the Steamboat Grand Hotel project, on July 25, 2000, Grand Summit entered into the $10 million Subordinated Construction Loan, which was subsequently increased to $10.6 million.  Together the Senior Construction Loan and the Subordinated Construction Loan comprise the Construction Loan Facility.  The Construction Loan Facility is without recourse to us and our resort operating subsidiaries and is collateralized by significant real estate assets of Resort Properties and its subsidiaries, including the assets and stock of Grand Summit, our primary hotel development subsidiary.

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 at Attitash Bear Peak collateralize the Senior Construction Loan, which is subject to covenants, representations, and warranties customary for this type of construction facility.  The Senior Construction Loan is non-recourse to us and our resort operating subsidiaries other than Grand Summit.  Grand Summit has assets with a total carrying value of $69.0 million as of July 25, 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 $18.7 million as of July 25, 2004 and had an interest rate on funds advanced of prime plus 3.5%, with a floor of 9.0% (9.0% as of July 25, 2004).  During fiscal 2004, Grand Summit made payments on the Senior Construction Loan of approximately $13.0 million primarily as a result of an auction that was held in February 2004 to sell substantially all of the remaining units at The Canyons Grand Summit Hotel.

The Subordinated Construction Loan bears interest at a fixed rate of 20% per annum, payable monthly in arrears.  Only 50% of the amount of this interest is due and payable in cash and the other 50%, if no events of default exist under the Subordinated Construction Loan or the Senior Construction Loan is automatically 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 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 July 25, 2004.  The Subordinated Construction Loan is secured by the same collateral which secures the Senior Construction Loan.

The Senior Construction Loan, as amended, requires the following maximum outstanding principal balances as of the following dates:

September 30, 2004	$		18,000,000
December 31, 2004	$		17,000,000
March 31, 2005	$	14,000,000
June 30, 2005	$	12,000,000
September 30, 2005	$	11,000,000
December 31, 2005	$	10,000,000
March 31, 2006	$	5,000,000
June 30, 2006	$	-

As of September 26, 2004, the amount outstanding under the Senior Construction Loan was $18.5million and there were no borrowings available under this facility.  Prior to September 30, 2004, the amount outstanding under the Senior Construction Loan was under $18.0 million as required under the credit agreement.  As of

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September 26, 2004, the amount outstanding under the Subordinated Construction Loan was $10.6million and there were no borrowings available under this facility.

Series A Preferred Stock Redemption.  We have 36,626 shares of Series A Preferred Stock outstanding, with an accreted value of approximately $73.9 million as of July 25, 2004.  The Series A Preferred Stock was redeemable on November 12, 2002 at an aggregate redemption price of approximately $61.9 million, to the extent that we had funds legally available for that redemption.  In addition, because we are not permitted to redeem our Series A Preferred Stock under the terms of the Resort Senior Credit Facility and the terms of the indenture governing our Senior Subordinated Notes, we cannot effect the redemption of the Series A Preferred Stock unless we have first repaid the outstanding borrowings on the Resort Senior Credit Facility and the Senior Subordinated Notes or obtained the requisite consents from the holders of the debt under those facilities.  If the Series A Preferred Stock is not permitted to be redeemed because there are not legally available funds, we must redeem that number of shares of Series A Preferred Stock which we can lawfully redeem, and from time to time thereafter, as soon as funds are legally available, we must redeem shares of our Series A Preferred Stock until we have done so in full.  Prior to and since the November 12, 2002 redemption date, based on all relevant factors (including our inability to extinguish all indebtedness under the Resort Senior Credit Facility and the Senior Subordinated Notes with sufficient assurance of remaining assets from which to redeem the Series A Preferred Stock), our Board of Directors has determined not to redeem any shares of Series A Preferred Stock because they have concluded that funds are not legally available.  On January 27, 2003, the holder of the Series A Preferred Stock demanded that we redeem all of the Series A Preferred Stock immediately and on April 8, 2003, the Series A Preferred Stockholder demanded pursuant to Delaware law to review certain of our records.  However, the Series A Preferred Stockholder has not pursued reviewing any of our records.  We will continue to assess our obligations with respect to the requirements of the redemption provisions of our Series A Preferred Stock.  Because the Series A Preferred Stock was not redeemed on November 12, 2002, the certificate of designation for the Series A Preferred Stock provides that the holder is entitled to elect two new members of our board of directors.  The right to appoint board members is the sole remedy available to the holder of the Series A Preferred Stock as a result of our inability to redeem the Series A Preferred Stock on the redemption date, unless and until legally available funds are available for such redemption.  We have not yet been advised by the holder of the Series A Preferred Stock whether it intends to exercise its right to elect two  new directors at or prior to our next annual shareholders meeting or whether it intends to take any other action to seek to compel our redemption of the Series A Preferred Stock.  If the holder of the Series A Preferred Stock was to commence any litigation to compel us to redeem the Series A Preferred Stock, based on present facts and circumstances, we would vigorously contest that litigation.  If we are required to redeem all or any portion of the Series A Preferred Stock, it could have a material adverse effect on our business, results of operations, and financial condition.

Long-Term.  Our primary long-term liquidity needs are to fund skiing-related capital improvements at certain of our resorts.  With respect to capital needs, we have invested over $180 million in skiing-related facilities since the beginning of fiscal 1998, excluding investments made at Heavenly and Sugarbush (which were sold in fiscal 2002).  As a result, and in keeping with restrictions imposed under the Resort Senior Credit Facility, we expect our resort capital programs for the next several fiscal years will be more limited in size.

Our primary long-term liquidity needs for resort operations are to fund skiing-related capital improvements at certain of our resorts and servicing our debt and contractual obligations.  The Resort Senior Credit Facility places a maximum level of non-real estate capital expenditures for fiscal 2004 at $8.5 million, with the ability to increase this amount in the future if certain conditions are met (including sales of non-operating assets).  For fiscal 2005, we anticipate our maintenance capital needs to be approximately $9.0 million and our discretionary capital needs to be approximately $4.0 million.  In September 2004, an amendment to the Resort Senior Credit Facility was signed which allows us, for fiscal 2005 only, to spend an additional $3.0 million of capital expenditures in addition to the $1.0 million which was already permitted, with such increased amount to be funded through sales of non-operating assets.  The amendment also allows us to sell an additional $9.0 million of non-operating sales above what was previously allowed to provide additional corporate liquidity.  With this amendment for fiscal 2005, along with the carry over amounts from the previous fiscal year as allowed under the Resort Senior Credit Facility, we will be allowed to spend our anticipated capital needs of $13.0 million.  There is a considerable degree of flexibility in the timing and, to a lesser degree, scope of our growth capital program.  Although we can defer specific capital expenditures for extended periods, continued growth of skier visits, revenues, and profitability will require continued capital investment in on-mountain improvements.  Our primary long-term liquidity needs for real estate operations is funding the servicing and amortization of the Construction Loan Facility.

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We finance on-mountain capital improvements through resort cash flows, capital leases, and our Resort Senior Credit Facility.  The size and scope of the capital improvement program will generally be determined annually depending upon the strategic importance and expected financial return of certain projects, future availability of cash flows from each season’s resort operations, and future borrowing availability and covenant restrictions under the Resort Senior Credit Facility.

Contractual Obligations

Our noncancelable, minimum contractual obligations as of July 25, 2004 were as follows (in thousands):

			Payments due by period
Obligation	Total		Less than 1 Year		1 to 3 Years		After 3 years
Resort long-term debt and capital lease obligations	$	90,243	$	39,209	$	47,184	$	3,850
Real estate long-term debt	29,332		5,982		23,350		-
Subordinated notes and debentures	143,269		-		137,061		6,208
Mandatorily Redeemable 10 ½% Series A Preferred Stock	73,947		73,947		-		-
Mandatorily Redeemable 12% Series C-1 Preferred Stock	56,376		-		-		56,376
Mandatorily Redeemable 15% Series C-2 Preferred Stock	213,826		-		-		213,826
Operating leases	14,751		4,766		7,128		2,857
The Canyons infrastructure costs	900		900		-		-
The Canyons golf course obligations	3,000		-		3,000		-
The Canyons land options obligation	2,000		2,000		-		-
The Canyons obligation to build ski lifts	3,000		-		3,000		-
The Canyons skier visit obligation	1,000		250		750
Killington replacement parking obligation	1,500		-		1,500		-
Killington transportation center obligation	800		-		800		-
Steamboat air program contribution	925		925		-		-
Total	$	634,869	$	127,979	$	223,773	$	283,117

The operation of a substantial portion of our resort activities are dependent upon leased real estate.  The Company leases certain land and facilities used in the operations of its resorts under several operating lease arrangements that expire at various times from the year 2010 through the year 2060 and whose payments are generally based on a percentage of revenues.  As these obligations are contingent on future revenues, they are not included in the table above.  In addition, the Company is subject to additional one-time payments ranging from $250,000 to $3.0 million upon achievement of incremental annual skier visit levels.  These amounts are not included in the table above as it is unknown to the timing and probability of these payments.

Off-Balance Sheet Arrangements

Other than as set forth in the table above, we do not have any off-balance sheet transactions, arrangements, or obligations (including contingent obligations except for those noted above) that have, or are reasonably likely to have, a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles.  The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting periods.  Areas where significant judgments are made include, but are not limited to: allowances for doubtful accounts, long-lived asset valuations and useful lives, inventory valuation reserves, litigation and claims reserves, and deferred income tax asset valuation allowances.  Actual results could differ materially from these estimates.  The following are our critical accounting policies:

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    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 being depreciated over their estimated useful lives.  Due to the seasonality of our business, we record a full year of depreciation relating to our resort operating assets during the second and third quarters of our fiscal year.

Goodwill and Other Intangible Assets

During fiscal 2002, we adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets” (SFAS No. 142) and were required to evaluate our existing intangible assets and goodwill in a transitional impairment analysis.  As a result of the transitional impairment analysis, we recorded an impairment loss of $18.7 million representing 100% of our goodwill.  This loss was recorded as a cumulative effect of a change in accounting principle in the accompanying consolidated statement of operations for fiscal 2002.  Furthermore, as prescribed in SFAS No. 142, certain indefinite-lived intangible assets, including trademarks, are no longer amortized but are subject to annual impairment assessments.  An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value.  Definite-lived intangible assets continue to be amortized on a straight-line basis over their estimated useful lives of 31 years, and assessed for impairment utilizing guidance provided by SFAS No. 144.

    Long-Lived Assets

On July 30, 2001, we adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”.  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.  Prior to the adoption of SFAS No. 144, we accounted for impairment of long-lived assets and long-lived assets to be disposed of in accordance with SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”.  During fiscal 2002, we completed the sale of our Sugarbush resort and accounted for this sale under SFAS No. 121 and Accounting Principles Board Opinion No. 30 because the disposal activities relating to the sale of Sugarbush were initiated prior to our adoption of SFAS No. 144.

    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 is the second and third quarters of our fiscal year.  Our remaining resort revenues are generally recognized as the services are performed.  Real estate revenues are recognized under the full accrual method when title has been transferred, adequate initial and continuing investments are adequate to demonstrate a commitment to pay for the property, and no continuing involvement exits. Amounts received from pre-sales of real estate are recorded as restricted cash and deposits and deferred revenue in the accompanying consolidated balance sheets until the earnings process is complete.

    Seasonality

Our revenues are highly seasonal in nature.  For fiscal 2004, we realized approximately 88% of resort segment revenues and over 100% of resort segment operating income during the period from November through April.  In addition, a significant portion of resort segment revenue and approximately 22% of annual skier visits were generated during the Christmas and Presidents’ Day vacation weeks in fiscal 2004.  In addition, 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 our operating results.  Adverse weather conditions, access route closures, equipment failures, and other developments of even moderate or

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limited duration occurring during peak business periods could reduce revenues.  Adverse weather conditions can also increase power and other operating costs associated with snowmaking or could render snowmaking wholly or partially ineffective in maintaining quality skiing conditions.  Furthermore, unfavorable weather conditions, regardless of actual skiing conditions, can result in decreased skier visits.

Results of Operations

Fiscal Year Ended July 25, 2004 (fiscal 2004)

Versus Fiscal Year Ended July 27, 2003 (fiscal 2003)

Resort Operations:

                The components of resort operations for fiscal 2003 and fiscal 2004 are as follows:

									Increase/ (Decrease)
	Fiscal 2003				Fiscal 2004				Dollars					Percent
	(in millions, except skier visit and per skier visit amounts)
Revenue category:
Lift tickets	$	111.2			$		112.6		$		1.4			1.3	%
Food and beverage	36.7				35.4				(1.3				)	-3.5	%
Retail sales	25.7				23.9				(1.8				)	-7.0	%
Lodging and property	36.5				37.7				1.2					3.3	%
Skier development	21.1				22.8				1.7					8.1	%
Golf, summer activities, and other	20.4				18.3				(2.1				)	-10.3	%
Total resort revenues	$	251.6			$		250.7		$		(0.9		)	-0.4	%
Cost of resort operations	$	168.0			$		167.5		$		(0.5		)	-0.3	%
Marketing, general, and administrative	49.6				54.8				5.2					10.5	%
Merger, restructuring, and asset impairment charges	1.6				0.1				(1.5				)	-93.8	%
Depreciation and amortization	25.8				24.8				(1.0				)	-3.9	%
Write-off of deferred financing costs	2.8				-				(2.8				)	-100.0	%
Interest expense	27.1				70.1				43.0					158.7	%
Total resort expenses	$	274.9			$		317.3		$			42.4		15.4	%
Loss from continuing resort operations	$	(23.3		)	$		(66.6	)	$	(43.3			)	185.8	%
Total Skier Visits (000’s)	3,977				3,887				(91				)	-2.3	%
Total resort revenue per skier visit	$		63.3		$	64.5			$	1.2				2.0	%

During the 2003-04 ski season, skier visits at our eastern resorts decreased approximately 5.0% from approximately 2,642,000 to 2,510,000, primarily due to extreme negative weather conditions, including three separate rain events over the Christmas holiday period, extreme cold and high winds during mid-winter weekends, and lack of natural snowfall throughout the winter.  Skier visits at our western resorts increased 3.1% during the 2003-04 ski season from approximately 1,335,000 to approximately 1,377,000, due to timely natural snowfall throughout the winter.  Over our entire resort network, total skier visits were down 2.3% from the 2002-03 ski season.

Despite a more substantial shortfall in skier visits, revenues for fiscal 2004 were $250.7 million as compared to $251.6 million for fiscal 2003, a decrease of only $0.9 million, or 0.4%.  Sales of the new discounted season pass at Attitash and Sunday River accounted for $3.0 million of a $3.5 million increase in season pass revenue.  Revisions to the lift ticket pricing structure at Steamboat and comprehensive yield management programs at all resorts mitigated the impact of the decrease in lift ticket revenues, resulting in a 6.5% increase in day ticket yield.  Revenues from food and beverage and retail sales decreased with the decrease in skier visits.  However, revenues from skier development increased as a result of growth in destination business at our western resorts and expanded efforts company-wide to increase pre-sold business.  Golf, summer activities, and other declined due to lower summer visits caused by poor weather and a soft economy during the summer of calendar 2003.

Our resort segment produced an $66.6 million operating loss in fiscal 2004, compared to a $23.3 million operating loss in fiscal 2003.  This $43.3 million increase in the operating loss resulted primarily from the following:

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(i)$0.9 million decrease in resort revenues as explained above;

(ii)$1.5 million decrease in cost of resort operations and depreciation and amortization due to reductions in our fixed cost structure undertaken prior to the beginning of the ski season, effective management of the ramp-up and ramp-down of seasonal operations, and day-to-day management of peak season operating costs (excluding merger, restructuring, and asset impairment charges and write-off of deferred financing costs);

(iii)$5.2 million increase in marketing, general, and administrative expenses due to costs associated with the settlement of the Triple Peaks litigation (see Item 3, “Legal Proceedings”) and other legal matters, increased costs associated with compliance with the Sarbanes-Oxley Act, and  continuation of building a corporate human resource group, offset by a decrease in marketing costs;

(iv)$1.5 million decrease in merger, restructuring, and asset impairment charges as explained below;

(v)$2.8 million decrease in write-off of deferred financing costs as a result of the Resort Senior Credit Facility replacing a prior senior credit facility during the prior year; and

(vi)$43.0 million increase in interest expense due primarily to approximately $43.1 million of  accretion of discount and dividends on our mandatorily redeemable preferred stock for fiscal 2004 being classified as interest expense due to the adoption of SFAS No. 150, whereas in the prior years it was classified as accretion of discount and dividends on mandatorily redeemable preferred stock.

                We incurred merger, restructuring and asset impairment charges for fiscal 2004 and fiscal 2003 related to our resort operations.  The $0.1 million of merger, restructuring and asset impairment charges for fiscal 2004 is for employee severance charges.

The $1.6 million of merger, restructuring, and asset impairment charges for fiscal 2003 includes:

(i)$1.2 million of expenses related to the write-off of certain fixed assets and other assets; and

(ii)$0.4 million in employee severance charges.

Recent Trends:  Through September 26, 2004, our season pass sales for the 2004-05 ski season are approximately $9.1 million greater than at the same time last year due to the introduction of a discounted season pass for all of our eastern resorts.  Our hotel booking pace for the ski season is approximately $0.8 million behind the pace of our bookings at the same time last year.

Real Estate Operations:

The components of real estate operations are as follows:

							Increase/ (Decrease)
	Fiscal 2003			Fiscal 2004			Dollars			Percent
	(in millions)
Total real estate revenues	$	12.9		$	33.4		$	20.5		158.9	%
Cost of real estate operations	12.2			24.7			12.5			102.5	%
Merger, restructuring, and asset impairment charges	(0.2		)	-			0.2			-100.0	%
Depreciation and amortization	1.7			1.7			-			0.0	%
Interest expense	20.3			17.5			(2.8		)	-13.8	%
Gain on extinguishment of debt	-			(23.1		)	(23.1		)	n/a
Gain on transfer of assets associated with extinguishment of debt	-			(25.5		)	(25.5		)	n/a
Total real estate expenses	34.0			(4.7		)	(38.7		)	-113.8	%
Income (loss) from real estate operations	$	(21.1	)	$	38.1		$	59.2		-280.6	%

Real estate revenues increased by $20.5 million in fiscal 2004 compared to fiscal 2003, from $12.9 million to $33.4 million.  The increase is primarily due to the sale of three developmental land parcels at our Steamboat resort for $8.9 million, and an increase of $11.5 million in unit sales at The Canyons Grand Summit Hotel due to an

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auction in February 2004 that sold all of the remaining units except for one.  At the end of fiscal 2004, 58% of the units at the Steamboat Grand Hotel were sold.

Our real estate segment generated income before income taxes of $38.1 million in fiscal 2004, compared to a loss before income taxes of $21.1 million in fiscal 2003.  This $59.2 million increase results from the net effect of the following:

(i)$20.5 million increase in revenues as explained above;

(ii)$12.5 million increase in cost of operations due to an increase in revenues;

(iii)$23.1 million gain on extinguishment of debt;

(iv)$25.5 million gain on transfer of assets associated with extinguishment of debt; and

(v)$2.8 million decrease in real estate interest expense due to the restructuring of our Real Estate Term Facility on May 14, 2004 .

The gain on extinguishment of debt of approximately $23.1 million and the gain on transfer of assets associated with extinguishment of debt of approximately $25.5 million during fiscal 2004 was due to the restructuring of the Real Estate Term Facility as discussed previously.  See “Real Estate Term Facility Restructuring” above.

The $(0.2) million reversal of restructuring and asset impairment charges during fiscal 2003 was due to an impairment charge taken in fiscal 2002 that was subsequently determined not to be needed.

Recent Trends:  Sales volumes at our Grand Summit Hotel at Steamboat continue to decrease and are slightly behind the 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.  The benefit from income taxeswas $0 in fiscal 2003 and fiscal 2004.  We believe it is more likely than not that we will not realize income tax benefits from operating losses in the foreseeable future.

      Accretion of discount and dividends accrued on mandatorily redeemable preferred stock.  The dividends on mandatorily redeemable preferred stock for fiscal 2003 were $37.6 million. For fiscal 2004,  accretion of discount and dividends on mandatorily redeemable preferred stock of $43.1 million is not recorded as accretion of discount and dividends on mandatorily redeemable preferred stock but has been included in interest expense due to the adoption of SFAS No. 150.  This increase of the accretion is attributable to the compounding effect of accruing dividends on the value of the preferred shares.

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Fiscal Year Ended July 27, 2003 (fiscal 2003)

Versus Fiscal Year Ended July 28, 2002 (fiscal 2002)

Resort Operations:

                The components of resort operations for fiscal 2002 and fiscal 2003 are as follows.  Fiscal 2002 does not reflect the operations of Heavenly in the table below as they are discontinued operations due to Heavenly’s sale in May 2002.

										Increase/ (Decrease)
	Fiscal 2002			Fiscal 2003						Dollars			Percent
	(in millions, except skier visit and per skier visit amounts)
Revenue category:
Lift tickets	$	104.4		$				111.2		$	6.8		6.5	%
Food and beverage	35.6			36.7						1.1			3.1	%
Retail sales	25.1			25.7						0.6			2.4	%
Lodging and property	37.6			36.5						(1.1		)	-2.9	%
Skier development	20.1			21.1						1.0			5.0	%
Golf, summer activities, and other	21.0			20.4						(0.6		)	-2.9	%
Total resort revenues	$	243.8		$		251.6				$	7.8		3.2	%
Cost of resort operations	$	167.0		$			168.0			$	1.0		0.6	%
Marketing, general, and administrative	46.6			49.6						3.0			6.4	%
Merger, restructuring, and asset impairment charges	47.9			1.6						(46.3		)	-96.7	%
Depreciation and amortization	25.1			25.8						0.7			2.8	%
Write-off of deferred financing costs	3.3			2.8						(0.5		)	-15.2	%
Interest expense	36.3			27.1						(9.2		)	-25.3	%
Total resort expenses	$	326.2		$	274.9					$	(51.3	)	-15.7	%
Loss from continuing resort operations	$	(82.4	)	$	(23.3				)	$	59.1		-71.7	%
Total Skier Visits (000’s)	3,756			3,977						221			5.9	%
Total resort revenue per skier visit	$	64.9		$	63.3					$	(1.6	)	-2.5	%

During the 2002-03 ski season, skier visits at our eastern resorts increased approximately 7.1% from approximately 2.5 million to 2.6 million, primarily as a result of our eastern resorts experiencing improved snowfall when compared to the prior season.  Skier visits at our western resorts increased 3.5% during the 2002-03 ski season, primarily as a result of the improved performance at The Canyons following the 2002 Winter Olympic Games in fiscal 2002.  Over our entire resort network, total skier visits were up 5.9% from the 2001-02 ski season, excluding the skier visits at Heavenly.

Revenues for fiscal 2003 were $251.6 million as compared to $243.8 million for fiscal 2002, an increase of $7.8 million, or 3.2%.  Revenues from all of our ski-related lines of business were up between 2.4% and 6.5% over the prior year.  These increases resulted from a 5.9% increase in skier visits offset by a 2.5% decrease in revenue per skier visit.  Lodging revenues decreased by 2.9% due to a weakening economy which affected our conference sales business.

Our resort segment produced a $23.3 million operating loss in fiscal 2003, compared to a $82.4 million operating loss in fiscal 2002.  This $59.1 million decrease in the operating loss resulted primarily from the following:

(i)$7.8 million increase in resort revenues;

(ii)$7.5 million decrease in total resort expenses (excluding marketing, general, and administrative expenses, merger, restructuring, and asset impairment charges and write-off of deferred financing costs);

(iii)$3.0 million increase in marketing, general, and administrative expenses; and

(iv)$46.8 million decrease in merger, restructuring, and asset impairment charges and write-off of deferred financing costs.

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                We incurred merger, restructuring, and asset impairment charges for fiscal 2003 and fiscal 2002 related to our resort operations.  The $1.6 million of merger, restructuring, and asset impairment charges for fiscal 2003 includes:

(i)$1.2 million of expenses related to the write-off of certain fixed assets and other assets; and

(ii)$0.4 million in employee severance charges.

The $47.9 million of merger, restructuring, and asset impairment charges for fiscal 2002 includes:

(i)$25.4 million impairment charge to record the estimated fair value of net assets held for sale at Steamboat, recorded in the second quarter of fiscal 2002;

(ii)$18.9 million impairment charge on land and the land options at The Canyons;

(iii)$1.4 million impairment charge on certain corporate and Sunday River fixed assets and an option to purchase undeveloped land at Sunday River;

(iv)$2.5 million of legal, consulting, and financing costs incurred in connection with capital and debt restructuring; and

(v)$(0.3) million of gain to finalize the sale of the Sugarbush resort.

Real Estate Operations:

The components of real estate operations are as follows:

									Increase/ (Decrease)
	Fiscal 2002				Fiscal 2003				Dollars			Percent
	(in millions)
Total real estate revenues	$	28.3			$	12.9			$	(15.4	)	-54.4	%
Cost of real estate operations	30.1				12.2				(17.9		)	-59.5	%
Merger, restructuring, and asset impairment charges	63.7				(0.2			)	(63.9		)	-100.3	%
Depreciation and amortization	1.1				1.7				0.6			54.5	%
Interest expense	18.5				20.3				1.8			9.7	%
Total real estate expenses	113.4				34.0				(79.4		)	-70.0	%
Loss from real estate operations	$		(85.1	)	$		(21.1	)	$	64.0		-75.2	%

Real estate revenues decreased by $15.4 million in fiscal 2003 compared to fiscal 2002, from $28.3 million to $12.9 million.  Real estate revenues by project (in millions) are as follows:

	Fiscal 2002		Fiscal 2003		Increase/ (Decrease)
Steamboat Grand	$	7.1	$	3.2	$	(3.9	)
The Canyons Grand Summit	8.5		5.0		(3.5		)
Eastern properties	7.9		0.0		(7.9		)
Land sales	3.8		3.7		(0.1		)
Other revenues	1.0		1.0		-
Total	$	28.3	$	12.9	$	(15.4	)

Steamboat Grand:  During fiscal 2003, we realized $3.2 million in revenues from sales of units, compared to $7.1 million during fiscal 2002.  This decrease of $3.9 million was primarily the result of the continued disruptions related to our real estate restructuring as well as continued economic uncertainty.  As of the end of fiscal 2003, the Steamboat Grand was approximately 54% sold.

The Canyons: During fiscal 2002 and 2003, we realized $8.5 million and $5.0 million, respectively, in ongoing sales of units at The Canyons Grand Summit Hotel.  This decrease also relates to the continued disruptions related to our real estate restructuring as well as continued economic uncertainty.  As of the end of fiscal 2003, the Grand Summit Hotel at The Canyons was approximately 77% sold.

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Eastern Properties:  Revenues from sales at our eastern properties in fiscal 2003 were down $7.9 million from Fiscal 2002 as our projects in the east were almost completely sold out as of the end of fiscal 2002.

Our real estate segment generated a loss before income taxes of $21.1 million in fiscal 2003, compared to a loss before income taxes of $85.1 million in fiscal 2002.  This $64.0 million decrease in loss before income taxes results from the net effect of the following:

(i)$15.4 million decrease in revenues;

(ii)$17.9 million decrease in cost of operations;

(iii)$63.9 million decrease in restructuring and asset impairment charges;

(iv)$1.8 million increase in real estate interest expense; and

(v)$0.6 million increase in real estate depreciation.

We incurred restructuring and asset impairment charges for fiscal 2003 and fiscal 2002 related to our real estate segment.  The $(0.2) million reversal of restructuring and asset impairment charges during fiscal 2003 was due to an impairment charge taken in fiscal 2002  that was subsequently determined not to be needed.

The $63.7 million of restructuring and asset impairment charges during fiscal 2002 related to our real estate segment is comprised of:

(i)$38.7 million of impairment charges to record the estimated fair value of the remaining quarter and eighth share inventory at Steamboat and The Canyons;

(ii)$24.8 million of impairment charges on master planning and real estate costs at The Canyons, Killington, Mount Snow, Sugarloaf/USA, Sunday River, and Steamboat; and

(iii)$0.2 million of legal, consulting, and financing restructuring costs.

The $1.8 million increase in real estate interest expense during fiscal 2003 when compared to fiscal 2002 was primarily due to the increase in the amount of debt outstanding to Fleet and the indebtedness accruing interest at default rates all year.

      Benefit from income taxes.  The benefit from income taxeswas $0 in fiscal 2002 and fiscal 2003.  We believe it is more likely than not that we will not realize income tax benefits from operating losses in the foreseeable future.

                Cumulative effect of a change in accounting principle.  During fiscal 2002, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets”.  SFAS No. 142 applies to goodwill and intangible assts acquired after June 30, 2001, as well as goodwill and intangible assets previously acquired.  As a result of the adoption of SFAS No. 142, we recorded an impairment charge of $18.7 million, which was recorded as a cumulative effect of a change in accounting principle in the accompanying fiscal 2002 consolidated statement of operations.

                Accretion of discount and dividends accrued on mandatorily redeemable preferred stock.  The dividends on mandatorily redeemable preferred stock increased $4.8 million, from $32.8 million for fiscal 2002 to $37.6 million for fiscal 2003.  This increase is attributable to the compounding effect of accruing dividends on the value of the preferred shares.

Recently Issued Accounting Standards

                In November 2002, the FASB issued FASB Interpretation (FIN) No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others - an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34”.  This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee.  The initial recognition and initial measurement provisions of FIN No. 45 are to be applied on a prospective basis to guarantees issued or modified after December 31, 2002.  The disclosure requirements of FIN No. 45 were effective for financial statements of interim or annual periods ended after December 15, 2002.  We adopted FIN No. 45

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effective for the interim period ended January 26, 2003.  The adoption of FIN No. 45 did not have an effect on our results of operations or financial position.

                In December 2003, the FASB issued a revision to Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN No. 46R).  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.

                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.  FIN No. 46R deferred the effective date of the Interpretation for public companies, to the end of the first reporting period ending after March 15, 2004.  Under these guidelines, we adopted FIN No. 46R during our third fiscal quarter of 2004.  The adoption of this interpretation did not have a material affect on our results of operations or financial position.

                In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (SFAS No. 150).  SFAS No. 150 establishes standards for how financial instruments with characteristics of both liabilities and equity should be measured and classified and requires that an issuer classify a financial instrument that is within its scope as a liability.  SFAS No. 150 was effective for financial instruments entered into or modified after May 31, 2003, and otherwise was effective at the beginning of the first interim period beginning after June 15, 2003.  We adopted SFAS No. 150 effective July 28, 2003.  As a result of adopting SFAS No. 150, approximately $298.7 million was reclassified to liabilities in the consolidated balance sheet in the first quarter fiscal 2004.  This represents the book value of all of the classes of preferred stock.  In addition, approximately $43.1 million of accretion of discount and dividends on the preferred stock in fiscal 2004 has been included in interest expense, whereas previously it was reported as accretion of discount and dividends on mandatorily redeemable preferred stock.

Item 7A

Quantitative and Qualitative Disclosures about Market Risk

Our financial instruments do not subject us to material market risk exposures, except for risks related to interest rate fluctuations.  As of July 25, 2004, we had $99.9 million, or approximately 38.1% of our outstanding debt, in floating interest rate long-term debt instruments.  Had we fully drawn on our Revolving Credit Facility, approximately 40.4% of our debt would be in floating interest rate debt instruments.  As of July 25, 2004, we did not have any interest rate swap agreements in place which swapped variable interest rate borrowings to fixed interest rate borrowings.

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The following sensitivity analysis presents the pro forma impact on fiscal 2004 annual interest expense  and cash flows resulting from hypothetical basis point increases in the U.S. prime lending rate (4.25% as of July 25, 2004) on each of our floating interest rate debt instruments (in thousands).

Variable Rate Debt (principal only)	Rate index and Margin		Interest Rate Floor		Balance Outstanding as of July 25, 2004			Average Balance Outstanding in FY 2004		Hypothetical 1% Change inRate Index		Hypothetical 2% Change in Rate Index
Resort Senior Credit Facility:
Revolving Credit Facility, Tranche A Term Loan, and Supplemental Term Loan	Prime Rate + 3.25	%	n/a		$		59,043	$	48,744	$	487	$	975
Tranche B Term Loan	Prime Rate + 3.25	%	12.25	%	20,000			20,000		-		-
Real Estate Term Facility, Tranche A	Prime Rate + 3.25	%	n/a		-			14,106		141		282
Construction Loan Facility	Prime Rate + 3.25	%	9.00	%	18,732			26,370		-		198
Real Estate Mortgage Note	Prime Rate		n/a		2,097			2,026		20		41
Total variable rate debt					$	99,872		$	111,246	$	648	$	1,496

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Item 8

Financial Statements and Supplementary Data

Selected Quarterly Operating Results

The following table presents certain unaudited quarterly financial information for the eight quarters ended July 25, 2004.  In the opinion of our management, this information has been prepared on the same basis as the annual consolidated financial statements (See Item 17 — Exhibits, Financial Statement Schedules and Reports on Form 8-K) appearing elsewhere in this Form 10-K and includes all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial results set forth herein.  We adopted Emerging Issues Task Force Issue No. 03-06, “Participating Securities and the Two Class Method Under FASB Statement No. 128, Earnings Per Share,” on April 26, 2004 and have retroactively adjusted reported basic and diluted net income per common share for the third quarters of fiscal 2003 and fiscal 2004.  Results of operations for any quarters are not necessarily indicative of results that may be achieved for any future period or any full fiscal year (amounts in thousands, except per share amounts):

	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
Fiscal 2004:
Net revenues	$	18,473		$	102,960		$	145,670		$	17,008
Income (loss) from operations	(18,430		)	891			47,276			(19,220		)
Net income (loss)	(41,258		)	(21,689		)	24,506			9,939
Less amounts allocated to participating securities	-			-			(14,208		)	(5,834		)
Net income (loss) available to common shareholders	(41,258		)	(21,689		)	10,298			4,105
Basic income (loss) per common share:
Net income (loss) available to common shareholders	$	(1.30	)	$	(0.68	)	$	0.32		$	0.13
Weighted average common shares outstanding	31,738			31,738			31,738			31,738
Diluted income (loss) per common share:
Net income (loss) available to common shareholders	$	(1.30	)	$	(0.68	)	$	0.32		$	0.13
Weighted average common shares outstanding	31,738			31,738			31,738			31,738
Fiscal 2003:
Net revenues	$	20,625		$	100,286		$	127,743		$	15,882
Income (loss) from operations	(17,900		)	4,593			34,362			(18,065		)
Net income (loss)	(30,174		)	(7,449		)	22,538			(29,289		)
Less preferred stock dividends and amounts allocated to participating securities	(8,931		)	(9,243		)	(16,618		)	(9,903		)
Net income (loss) available to common shareholders	(39,105		)	(16,692		)	5,920			(39,192		)
Basic income (loss) per common share:
Net income (loss) available to common shareholders	$	(1.23	)	$	(0.53	)	$	0.19		$	(1.24	)
Weighted average common shares outstanding	31,724			31,724			31,724			31,725
Diluted income (loss) per common share:
Net income (loss) available to common shareholders	$	(1.23	)	$	(0.53	)	$	0.19		$	(1.24	)
Weighted average common shares outstanding	31,724			31,724			31,724			31,725

Item 9

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A

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 Exchange Act 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

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were adequate and effective to ensure that material information relating to the Company would be made to known to them, particularly during the period in which this report was being prepared.

(b) Changes in internal controls over financial reporting.  No change occurred in the Company’s internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) during the quarter ended July 25, 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 III

                Pursuant to General Instruction G of Form 10-K, the information contained in Part III of this report (Items 10, 11, 12, 13, and 14) is incorporated by reference from our Definitive Proxy Statement, which is expected to be filed with the Securities and Exchange Commission on or before November 22, 2004.

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PART IV

Item 15

Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)   Documents filed as part of this report:

1.    Index to financial statements, financial statement schedules, and supplementary data, filed as part of this report:

	Page
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets	F-2
Consolidated Statements of Operations	F-4
Consolidated Statements of Shareholders’ Equity (Deficit)	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7

2.    Financial Statement Schedules:  All schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

3.    Exhibits filed as part of this report:

Exhibit No.	Description
3.1	Certificate of Incorporation of American Skiing Company (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-K for the report date of October 22, 1999).
3.2	Certificate of Designation of 12% Series C-1 Convertible Participating Preferred Stock of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K for the report date of September 4, 2001).
3.3	Certificate of Designation of 15% Series C-2 Preferred Stock of the Company (incorporated by reference to Exhibit 3.3 to the Company’s Form 8-K for the report date of September 4, 2001).
3.4	Certificate of Designation of Series D Participating Preferred Stock of the Company (incorporated by reference to Exhibit 3.4 to the Company’s Form 8-K for the report date September 4, 2001).
3.5	Amended and Restated Bylaws of the Company Adopted July 10, 2001 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K for the report date of September 4, 2001).
3.6	Articles of Merger ASC East, Inc. and ASC West, Inc. into American Skiing Company dated October 5, 1999 with Plan of Merger (incorporated by reference to Exhibit 4.3 to the Company’s Form 8-K for the report date of October 6, 1999).
3.7	Articles of Merger American Skiing Company into ASC Delaware, Inc. dated October 12, 1999 with Agreement and Plan of Merger (incorporated by reference to Exhibit 4.3 to the Company’s Form 8-K for the report date of October 6, 1999).
4.1.	Specimen Certificate for shares of Common Stock, $.01 par value, of the Company (incorporated by reference to Exhibit 4.1 to the Company’s Form 10-K for the report date of October 22, 1999).

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4.2	Indenture relating to 10 ½% Repriced Convertible Subordinated Debentures (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-1, Registration No. 333-33483).
4.3	Indenture relating to 11.3025% Convertible Subordinated Notes Due 2007 dated as of August 31, 2001 (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K for the report date of September 4, 2001).
4.4	Specimen Certificate for Class A Common Stock, $.01 par value, of the Company (incorporated by reference to Exhibit 4.4 to the Company’s Form 10-K for the report date of November 14, 2001).
4.5	Specimen Certificate for Series B Convertible Participating Preferred Stock, $.01 par value, of the Company (incorporated by reference to Exhibit 4.5 to the Company’s Form 10-K for the report date of November 14, 2001).
4.6	Specimen Certificates for Series C-1 Preferred Stock, $.01 par value, of the Company (incorporated by reference to Exhibit 4.6 to the Company’s Form 10-K for the report date of November 14, 2001).
4.7	Specimen Certificates for Series C-2 Preferred Stock, $.01 par value, of the Company (incorporated by reference to Exhibit 4.7 to the Company’s Form 10-K for the report date of November 14, 2001).
4.8	Specimen Certificates for Series D Preferred Stock, $.01 par value, of the Company (incorporated by reference to Exhibit 4.8 to the Company’s Form 10-K for the report date of November 14, 2001).
4.9	Indenture dated as of June 28, 1996 among ASC East, certain of its subsidiaries and United States Trust Company of New York, relating to Series A and Series B 12% Senior Subordinated Notes Due 2006 (incorporated by reference to Exhibit 4.1 to ASC East’s Registration Statement on Form S-4, Registration No. 333-9763).
4.10	First Supplemental Indenture dated as of November 12, 1997 among ASC East, Inc., its subsidiaries party thereto, and United States Trust Company of New York as Trustee (incorporated by reference to Exhibit 10.3 to the Company’s quarterly report on Form 10-Q for the quarter ended October 25, 1998).
4.11	Second Supplemental Indenture dated as of September 4, 1998 among ASC East, Inc., its subsidiaries party thereto, and United States Trust Company of New York as Trustee (incorporated by reference to Exhibit 4.3 to the Company’s Form 8-K for the report date of October 6, 1999).
4.12	Third Supplemental Indenture dated as of August 6, 1999 among ASC East, Inc., its subsidiaries party thereto, and United States Trust Company of New York as Trustee (incorporated by reference to Exhibit 4.3 to the Company’s Form 8-K for the report date of October 6, 1999).
4.13	Fourth Supplemental Indenture dated as of October 6, 1999 among ASC East, Inc., its subsidiaries party thereto, and United States Trust Company of New York as Trustee (incorporated by reference to Exhibit 4.3 to the Company’s Form 8-K for the report date of October 6, 1999).
4.14	Fifth Supplemental Indenture dated as of April 19, 2002 among the Company, its subsidiaries party thereto, and The Bank of New York as Trustee (incorporated by reference to Exhibit 99.2 to the Company’s Form 8-K for the report date of April 23, 2002).
4.15	Loan and Security Agreement among Grand Summit Resort Properties, Inc., Textron Financial Corporation and certain lenders dated as of September 1, 1998 (incorporated by reference to Exhibit 10.1 to the Company’s quarterly report on Form 10-Q for the quarter ended October 25, 1998).
4.16	First Amendment Agreement Re: Loan and Security Agreement Among Grand Summit Resort Properties, Inc., as Borrower and Textron Financial Corporation, as Administrative Agent dated as of April 5, 1999 (incorporated by reference to Exhibit 10.1 to the Company’s quarterly report on Form 10-Q for the quarter ended April 25, 1999).

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4.17	Accession, Loan Sale and Second Amendment Agreement Re: Loan and Security Agreement among Grand Summit Resort Properties, Inc. and Textron Financial Corp. and The Lenders Listed therein dated June 24, 1999 (incorporated by reference to Exhibit 10.22 to the Company’s annual report on Form 10-K for the fiscal year ended July 25, 1999).
4.18	Third Amendment Agreement Re: Loan and Security Agreement Among Grand Summit Resort Properties, Inc., as Borrower and Textron Financial Corporation, as Administrative Agent dated as of January 2000 (incorporated by reference to Exhibit 10.16 to the Company’s Form 10-K for the report date November 14, 2002).
4.19	Fourth Amendment Agreement Re: Loan and Security Agreement Among Grand Summit Resort Properties, Inc., as Borrower and Textron Financial Corporation, as Administrative Agent dated as of September 15, 2000 (incorporated by reference to Exhibit 10.17 to the Company’s Form 10-K for the report date November 14, 2002).
4.20	Fifth Amendment Agreement Re: Loan and Security Agreement Among Grand Summit Resort Properties, Inc., as Borrower and Textron Financial Corporation, as Administrative Agent dated as of August 20, 2001 (incorporated by reference to Exhibit 10.18 to the Company’s Form 10-K for the report date November 14, 2002).
4.21	Sixth Amendment Agreement Re: Loan and Security Agreement Among Grand Summit Resort Properties, Inc., as Borrower and Textron Financial Corporation, as Administrative Agent dated as of August 29, 2002 (incorporated by reference to Exhibit 99.2 to the Company’s Form 8-K for the report date October 11, 2002).
4.22	Statement of Intention and Special Additional Financing Agreement dated July 25, 2000 between Grand Summit Resort Properties, Inc. and Textron Financial Corporation (incorporated by reference from the Registrant’s Form 10-K for the fiscal year ended July 30, 2000).
4.23	First Amendment Agreement to the Statement of Intention and Special Additional Financing Agreement between Grand Summit Resort Properties, Inc. and Textron Financial Corporation dated August 20, 2001 (incorporated by reference to Exhibit 10.20 to the Company’s Form 10-K for the report date November 14, 2002).
4.24	Second Amendment Agreement to the Statement of Intention and Special Additional Financing Agreement between Grand Summit Resort Properties, Inc. and Textron Financial Corporation dated as of August 29, 2002 (incorporated by reference to Exhibit 99.2 to the Company’s Form 8-K for the report date October 11, 2002).
4.25	$91,500,000 Credit Agreement dated as of February 14, 2003 among American Skiing Company, certain of its subsidiaries as borrowers, the lenders from time to time party thereto, and General Electric Capital Corporation, as Agent (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K for the report date of February 14, 2003).
4.26	Seventh Amendment Agreement Re: Loan and Security Agreement Among Grand Summit Resort Properties, Inc., as Borrower and Textron Financial Corporation, as Administrative Agent dated as of December 31, 2003 (incorporated by reference to Exhibit 4.1 to the Company’s Form 10-Q for the quarter ended January 25, 2004).
4.27	Third Amendment Agreement to the Statement of Intention and Special Additional Financing Agreement between Grand Summit Resort Properties, Inc. and Textron Financial Corporation dated as of December 31, 2003 (incorporated by reference to Exhibit 4.2 to the Company’s Form 10-Q for the quarter ended January 25, 2004).
4.28	Loan Settlement Agreement dated as of March 31, 2004 among American Skiing Company, Killington Ltd., American Skiing Company Resort Properties, Inc., The Canyons Resort Properties, Inc., Fleet National Bank, Ski Partners LLC, Oak Hill Capital partners, L.P. and OHSF ASTC, LLC (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K for the report date June 9, 2004).

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4.29	Agreement Regarding Killington Resort and Certain Nearby Properties dated as of March 31, 2004, among American Skiing Company, American Skiing Company Resort Properties, Inc., Killington Ltd. And SP Land Company, LLC (incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K for the report date June 9, 2004).
4.30	Second Amendment and Consent dated as of May 14, 2004 among American Skiing Company, certain of its subsidiaries, General Electric Capital Corporation, as Administrative Agent, and the lenders party thereto (incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K for the report date June 9, 2004).
4.31	Third Amendment and Consent dated as of September 21, 2004 among American Skiing Company, certain of its subsidiaries, General Electric Capital Corporation, as Administrative Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K for the report date September 29, 2004).
10.1	Registration Rights Agreement dated November 10, 1997 by and between American Skiing Company and ING (U.S.) Capital Corporation (incorporated by reference to Exhibit 3 to the Company’s quarterly report on Form 10-Q for the quarter ended October 26, 1997).
10.2	Preferred Stock Subscription Agreement dated July 9, 1999 between the Registrant and the Purchasers listed on Annex A thereto, including a form of Stockholders Agreement, Voting Agreement and Certificate of Designation relating to the preferred stock to be issued (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K for the report date of July 9, 1999).
10.3	Stockholders Agreement dated as of August 6, 1999 among Oak Hill Capital Partners, L.P., and the other entities identified in Annex A attached thereto, Leslie B. Otten and the Registrant (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-K for the report date of October 22, 1999).
10.4	Amendment to Stockholders Agreement dated July 31, 2000 among the Registrant, Oak Hill Capital Partners, L.P. and Leslie B. Otten (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K for the report date of July 31, 2000).
10.5	Securities Purchase Agreement dated July 31, 2000 among the Registrant, American Skiing Company Resort Properties, Inc. and Oak Hill Capital Partners, L.P. (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K for the report date of July 31, 2000).
10.6	Securities Purchase Agreement dated as of July 15, 2001 among American Skiing Company, a Delaware corporation, Oak Hill Capital Partners, L.P., a Delaware limited partnership, and other entities identified in Annex A thereto (incorporated by reference to Exhibit 99.2 to the Company’s Form 8-K for the report date of July 16, 2001).
10.7	Amendment No. 1 to Securities Purchase Agreement among American Skiing Company, a Delaware corporation, Oak Hill Capital Partners, L.P., a Delaware Limited partnership dated August 22, 2001 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K for the report date of August 31, 2001).
10.8	Stock Purchase Agreement dated as of August 1, 1997, among Kamori International Corporation, ASC West and the Company (incorporated by reference to Exhibit 2.1 of the Company’s Registration Statement on Form S-1, Registration No. 333-33483).
10.9	Purchase and Sale Agreement dated as of October 16, 1996, among Sherburne Pass Mountain Properties, LLC, Pico Mountain Sports Center, LLC, Pico Mountain Operating Company, LLC, Harold L. and Edith Herbert, and Pico Ski Area Management Company (incorporated by reference to Exhibit 10.62 to ASC East’s Registration Statement on Form S-4, Registration No. 333-9763).

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10.10	Letter of Agreement dated August 27, 1996, among SKI Ltd and certain shareholders of Sugarloaf Mountain Corporation (incorporated by reference to Exhibit 10.63 to ASC East’s Registration Statement on Form S-4, Registration No. 333-9763).
10.11	Form of Master Lease Agreement dated as of various dates among BancBoston Leasing, Inc. as Lessor and Heavenly Valley Limited Partnership, Killington, Ltd., Mount Snow, Ltd., ASC Leasing, Inc., Steamboat Ski & Resort Corporation, and Sunday River Skiway Corp. as Lessees (incorporated by reference to Exhibit 10.41 to the Company’s annual report on Form 10-K for the year ended July 26, 1998).
10.12	Unlimited Guaranty by the Company in favor of BancBoston Leasing, Inc., dated as of July 20, 1998 (incorporated by reference to Exhibit 10.40 to the Company’s annual report on Form 10-K for the year ended July 26, 1998).
10.13	Assignment dated May 30, 1997, between Wolf Mountain Resorts, L.C. and ASC Utah (incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1 Registration No. 333-33483).
10.14	Indenture dated October 24, 1990, between Killington Ltd. and The Howard Bank, as trustee (representative of indentures with respect to similar indebtedness aggregating approximately $2,995,000 in original principal amount and maturing at various times from 2015 to 2016) (incorporated by reference to Exhibit 10.19 to ASC East’s Registration Statement on Form S-4, Registration No. 333-9763).
10.15	Lease dated October 15, 1980, among H. Donald Penley, Joseph Penley, Albert Penley and Sunday River Skiway Corporation (incorporated by reference to Exhibit 10.40 to ASC East’s Registration Statement on Form S-4, Registration No. 333-9763).
10.16	Lease/Option dated October 12, 2003, between John Blake and L.B.O. Holding, Inc. (incorporated by reference to Exhibit 10.38 to the Company’s Form 10-K for the fiscal year ended July 27, 2003).
10.17	Lease dated November 10, 1960, between the State of Vermont and Sherburne Corporation (predecessor to Killington, Ltd.) (incorporated by reference to Exhibit 10.44 to ASC East’s Registration Statement on Form S-4, Registration No. 333-9763).
10.18	Lease Agreement dated as of June 21, 1994, between the Town of Wilmington, Vermont and Mount Snow, Ltd. (incorporated by reference to Exhibit 10.46 to ASC East’s Registration Statement on Form S-4, Registration No. 333-9763).
10.19	Amended and Restated Lease Agreement between Sugarloaf Mountain Corporation and the Inhabitants of the Town of Carrabassett Valley, Maine, concerning the Sugarloaf Golf Course dated November 16, 2000 (incorporated by reference to Exhibit 10.35 to American Skiing Company’s Registration Statement on Form S-4, filed on January 9, 2001).
10.20	Ground Lease Agreement dated July 3, 1997, between ASC Utah and Wolf Mountain Resorts, L.C. (incorporated by reference to Exhibit 10.64 to the Company’s Registration Statement on Form S-1, Registration No. 333-33483).
10.21	Ground Lease Guaranty dated July 3, 1997, from the Company to Wolf Mountain Resorts, L.C. (incorporated by reference to Exhibit 10.65 to the Company’s Registration Statement on Form S-1, Registration No. 333-33483).
10.22	Stock Option Plan (incorporated by reference to Exhibit 10.89 to the Company’s Registration Statement on Form S-1, Registration No. 333-33483).
10.23	Form of Non-Qualified Stock Option Agreement (Five-Year Vesting Schedule) (incorporated by reference to Exhibit 10.90 to the Company’s Registration Statement on Form S-1, Registration No. 333-33483).

43

10.24	Form of Non-Qualified Stock Option Agreement (Fully-Vested) (incorporated by reference to Exhibit 10.91 to the Company’s Registration Statement on Form S-1, Registration No. 333-33483).
10.25	Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.92 to the Company’s Registration Statement on Form S-1, Registration No. 333-33483).
10.26	Executive Employment Agreement between the Registrant and Foster A. Stewart, Jr. dated as of September 1, 2003 (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended January 25, 2004).
10.27	Executive Employment Agreement between the Registrant and Helen E. Wallace dated as of November 7, 2002 (incorporated by reference to Exhibit 10.37 to the Company’s Form 10-K for the year ended July 28, 2002).
10.28	Employment Letter between the Registrant and Franklin Carey dated July 21, 2003 (incorporated by reference to Exhibit 10.23 to the Company’s Form 10-K for the fiscal year ended July 27, 2003).
10.29	The Canyons Resort Village Management Agreement dated as of November 15, 1999 (incorporated by reference to Exhibit 2 to the Company’s Form 10-Q for the quarter ended October 24, 1999).
10.30	Amended and Restated Development Agreement for The Canyons Specially Planned Area Snyderville Basin, Summit County, Utah dated as of November 15, 1999 (incorporated by reference to Exhibit 3 to the Company’s Form 10-Q for the quarter ended October 24, 1999).
10.31	American Skiing Company Phantom Equity Plan dated as of December 1, 2001 (incorporated by reference to Exhibit 10.41 to the Company’s Form 10-K for the year ended July 28, 2002).
10.32	Form of Phantom Equity Plan Grant Agreement (Five Year Vesting Schedule) (incorporated by reference to Exhibit 10.42 to the Company’s Form 10-K for the year ended July 28, 2002).
10.33	Form of Phantom Equity Plan Grant Agreement (Four Year Vesting Schedule) (incorporated by reference to Exhibit 10.43 to the Company’s Form 10-K for the year ended July 28, 2002).
10.34	Amended and Restated Limited Liability Company Operating Agreement of SP Land Company, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended April 25, 2004).
10.35	Limited Liability Operating Agreement of Cherry Knoll Development, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended April 25, 2004).
10.36	Full Release and Settlement Agreement dated July 8, 2004 among American Skiing Company, Steamboat Ski & Resort Corporation, Walton Pond Apartments, Inc., American Skiing Company Resort Properties, Inc., Triple Peaks, LLC and Steamboat, LLC (incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K for the report date July 13, 2004).
10.37	Restatement of Agreement dated August 1, 2001, by and among D.A. Osguthorpe, D.A. Osguthorpe Family Partnership, D. A. Osguthorpe as trustee of The Dr, D.A. Osguthorpe Trust, Stephen A. Osguthorpe and ASC Utah.
10.38	Amended and Restated Lease Agreement Number 419 between The State of Utah, acting through the School and Institutional Trust Lands Administration and ASC Utah, d/b/a The Canyons, dated July 1, 1998.
10.39	Agreement dated August 18, 1997, between Killington, Ltd. and Farm and Wilderness Foundation, Inc.
10.40	Third Amendment to Ground Lease Agreement dated September 16, 2004 among Wolf Mountain Resorts, L.C. and ASC Utah Inc.

44

10.41	Sixth Supplemental Indenture to the Indenture, dated as of June 28, 1996, among American Skiing Company, the Guarantors party thereto and The Bank of New York, as successor trustee to United States Trust Company of New York (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K for the report date October 22, 2004).
22.1	Subsidiaries of the Company.
23.2	Consent of Independent Registered Public Accounting Firm.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)          Reports filed on Form 8-K.

                The Company filed a report on Form 8-K on June 9, 2004 announcing the completion of its restructuring of its real estate credit facility.

                The Company filed a report on Form 8-K on June 9, 2004 announcing its results for the 13 and 39 weeks ended April 25, 2004.

                The Company filed a report on Form 8-K on July 13, 2004 announcing the settlement of litigation concerning its Steamboat resort.

45

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: November 8, 2004
	By:	/s/ William J. Fair
		William J. Fair
		President and Chief Executive Officer
		(Principal Executive Officer)

                Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated this 8^th day of November, 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)
	(Principal Accounting Officer)
By:	/s/ Leslie B. Otten
	Leslie B. Otten, Director
By:	/s/ Gordon M. Gillies
	Gordon M. Gillies, Director
By:	/s/ David Hawkes
	David Hawkes, Director

46

By:	/s/ Edward V. Dardani
	Edward V. Dardani, Director
By:	/s/ Steven Gruber
	Steven Gruber, Director
By:	/s/ J. Taylor Crandall
	J. Taylor Crandall, Director
By:	/s/ William Janes
	William Janes, Director
By:
	Paul Wachter, Director
By:	/s/ Robert Branson
	Robert Branson, Director
By:	/s/ William J. Fair
	William J. Fair, Director

47

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

 American Skiing Company:

We have audited the accompanying consolidated balance sheets of American Skiing Company and subsidiaries as of July 27, 2003 and July 25, 2004 and the related consolidated statements of operations, shareholders’ equity (deficit), and cash flows for each of the years in the three-year period ended July 25, 2004.  These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Skiing Company and subsidiaries as of July 27, 2003 and July 25, 2004 and the results of their operations and their cash flows for each of the years in the three-year period ended July 25, 2004 in conformity with U.S. generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” in the fiscal year ended July 28, 2002 and as a result changed its method for accounting for goodwill and intangible assets.  As discussed in Note 2 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” in the fiscal year ended July 25, 2004 and as a result changed its method for classifying certain of the Company’s financial instruments.

//KPMG LLP//

Salt Lake City, Utah

October 29, 2004

F-1

American Skiing Company and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

	July 27, 2003			July 25, 2004
Assets
Current assets
Cash and cash equivalents	$		6,596	$	7,024
Restricted cash	3,829			4,846
Accounts receivable, net of allowance for doubtful accounts of $1,028 and $1,057, respectively	5,862			5,628
Inventory	3,653			3,628
Prepaid expenses	3,326			3,132
Deferred income taxes	7,300			6,354
Other current assets	978			599
Total current assets	31,544			31,211
Property and equipment, net	372,926			353,509
Real estate developed for sale	48,234			25,024
Intangible assets, net	7,058			6,365
Deferred financing costs, net	6,705			3,933
Other assets	8,838			10,758
Total assets	$	475,305		$		430,800

(continued on next page)

The accompanying notes are an integral part of these consolidated financial statements.

F-2

American Skiing Company and Subsidiaries

Consolidated Balance Sheets (continued)

(In thousands, except share and per share amounts)

	July 27, 2003			July 25, 2004
Liabilities, Mandatorily Redeemable Preferred Stock, and Shareholders’ Deficit
Current liabilities
Current portion of long-term debt	$	138,506		$	45,191
Current portion of subordinated notes and debentures	1,466			-
Accounts payable and other current liabilities	53,058			44,604
Deposits and deferred revenue	9,843			13,144
Mandatorily Redeemable Convertible 10½% 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)	-			73,947
Total current liabilities	202,873			176,886
Long-term debt, net of current portion	60,162			74,384
Subordinated notes and debentures, net of current portion and discount	140,095			142,260
Other long-term liabilities	3,471			4,007
Deferred income taxes	7,300			6,354
Mandatorily Redeemable 8½% 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)	-			55,880
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)	-			211,991
Mandatorily Redeemable Nonvoting Series D Participating Preferred Stock, par value of $0.01 per share; 5,000 shares authorized; no shares issued or outstanding	-			-
Total liabilities	413,901			671,762
Mandatorily Redeemable Convertible 10½% Series A Preferred Stock, par value of $0.01 per share; 40,000 shares authorized; 36,626 shares issued and outstanding, including cumulative dividends (redemption value of $66,663)	66,663			-
Mandatorily Redeemable 8½% Series B Preferred Stock; 150,000 shares authorized, issued, and outstanding (redemption value of $0)	-			-
Mandatorily Redeemable Convertible Participating 12% Series C-1 Preferred Stock, par value of $0.01 per share; 40,000 shares authorized, issued, and outstanding, including cumulative dividends (redemption value of $50,105)	49,520			-
Mandatorily Redeemable 15% Nonvoting Series C-2 Preferred Stock, par value of $0.01 per share; 139,453 shares authorized, issued, and outstanding, including cumulative dividends (redemption value of $184,621)	182,516			-
Mandatorily Redeemable Nonvoting Series D Participating Preferred Stock, par value of $0.01 per share; 5,000 shares authorized; no shares issued or outstanding	-			-
Shareholders’ deficit
Common stock, Class A, par value of $0.01 per share; 15,000,000 shares authorized; 14,760,530 shares issued and outstanding	148			148
Common stock, par value of $0.01 per share; 100,000,000 shares authorized; 16,977,653 shares issued and outstanding	170			170
Additional paid-in capital	277,450			302,285
Accumulated deficit	(515,063		)	(543,565		)
Total shareholders’ deficit	(237,295		)	(240,962		)
Total liabilities, mandatorily redeemable preferred stock, and shareholders’ deficit	$	475,305		$	430,800

The accompanying notes are an integral part of these consolidated financial statements.

F-3

American Skiing Company and Subsidiaries

Consolidated Statements of Operations

(in thousands, except per share amounts)

	Year Ended
	July 28, 2002			July 27, 2003			July 25, 2004
Net revenues:
Resort	$	243,842		$	251,638		$	250,706
Real estate	28,274			12,898			33,405
Total net revenues	272,116			264,536			284,111
Operating expenses:
Resort	166,968			168,010			167,518
Real estate	30,091			12,166			24,661
Marketing, general, and administrative	46,699			49,645			54,801
Merger, restructuring, and asset impairment charges	111,608			1,451			137
Depreciation and amortization	26,238			27,513			26,477
Write-off of deferred financing costs	3,338			2,761			-
Total operating expenses	384,942			261,546			273,594
Income (loss) from operations	(112,826		)	2,990			10,517
Interest expense, net	(54,752		)	(47,364		)	(87,603		)
Gain on extinguishment of debt	-			-			23,091
Gain on transfer of assets associated with extinguishment of debt	-			-			25,493
Loss from continuing operations before benefit for income taxes and cumulative effects of change in accounting principle	(167,578		)	(44,374		)	(28,502		)
Benefit for income taxes	-			-			-
Loss from continuing operations before cumulative effects of change in accounting principle	(167,578		)	(44,374		)	(28,502		)
Income from discontinued operations of Heavenly resort (net of income taxes of $0)	12,317			-			-
Loss before cumulative effects of change in accounting principle	(155,261		)	(44,374		)	(28,502		)
Cumulative effects of change in accounting principle (net of income taxes of $0)	(18,658		)	-			-
Net loss	(173,919		)	(44,374		)	(28,502		)
Accretion of discount and dividends on mandatorily redeemable preferred stock	(32,791		)	(37,644		)	-
Net loss available to common shareholders	$	(206,710	)	(82,018		)	(28,502		)
Basic and diluted net loss per common share:
Loss from continuing operations before cumulative effects of change in accounting principle	$	(6.34	)	(2.59		)	(0.90		)
Income from discontinued operations, net of taxes	0.39			-			-
Cumulative effects of change in accounting principle, net of taxes	(0.59		)	-			-
Net loss available to common shareholders	$	(6.54	)	(2.59		)	(0.90		)
Weighted average common shares outstanding	31,628			31,724			31,738

The accompanying notes are an integral part of these consolidated financial statements.

F-4

American Skiing Company and Subsidiaries

Consolidated Statements of Shareholders’ Equity (Deficit)

(in thousands, except share amounts)

	Class A						Additional
	Common stock			Common stock			Paid-in				Accumulated
	Shares	Amount		Shares	Amount		Capital				Deficit			Total
Balance as of July 29, 2001	14,760,530	$	148	15,957,593	$	160	$		270,853		$	(226,335	)	$		44,826
Exercise of common stock options	-	-		6,018	-		12				-			12
Amortization of deferred compensation	-	-		-	-		69				-			69
Issuance of common stock	-	-		1,000,000	10		990				-			1,000
Extinguishment of warrants in connection with recapitalization	-	-		-	-		5,501				-			5,501
Other paid-in capital	-	-		-	-		(3			)	-			(3			)
Accretion of discount and issuance costs and dividends on mandatorily redeemable preferred stock	-	-		-	-		-				(32,791		)	(32,791			)
Net loss	-	-		-	-		-				(173,919		)	(173,919			)
Balance as of July 28, 2002	14,760,530	148		16,963,611	170		277,422				(433,045		)	(155,305			)
Exercise of common stock options	-	-		14,042	-		28				-			28
Accretion of discount and dividends on mandatorily redeemable preferred stock	-	-		-	-		-				(37,644		)	(37,644			)
Net loss	-	-		-	-		-				(44,374		)	(44,374			)
Balance as of July 27, 2003	14,760,530	148		16,977,653	170		277,450				(515,063		)	(237,295			)
Exchange of debt for capital contribution	-	-		-	-		24,835				-			24,835
Net loss	-	-		-	-		-				(28,502		)	(28,502			)
Balance as of July 25, 2004	14,760,530	$	148	16,977,653	$	170	$	302,285			$	(543,565	)	$	(240,962		)

The accompanying notes are an integral part of these consolidated financial statements.

F-5

American Skiing Company and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

	Year Ended
	July 28, 2002			July 27, 2003			July 25, 2004
Cash flows from operating activities
Net loss	$	(173,919	)	$	(44,374	)	$	(28,502	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	32,962			27,513			26,477
Non-cash interest and amortization of deferred financing costs	4,608			3,116			46,182
Amortization of discount on convertible debt	1,436			1,433			837
Non-cash interest on junior subordinated notes	1,283			1,554			1,724
Non-cash compensation expense	-			563			156
Stock compensation charge	69			-			-
Write-off of deferred financing costs	3,338			2,761			-
Cumulative effects of change in accounting principle	18,658			-			-
Loss (gain) from sale or impairment of assets, net	115,264			(499		)	(1,147		)
Gain on extinguishment of debt	-			-			(23,091		)
Gain on transfer of assets associated with extinguishment of debt	-			-			(25,493		)
Decrease (increase) in assets:
Restricted cash	(1,553		)	(904		)	(1,619		)
Accounts receivable, net	5,897			3,956			234
Inventory	2,853			404			25
Prepaid expenses	1,071			938			194
Real estate developed for sale	19,901			5,709			18,950
Other assets	(6,991		)	13,177			(831		)
Increase (decrease) in liabilities:
Accounts payable and other current liabilities	(21,741		)	876			6,735
Deposits and deferred revenue	(4,814		)	1,190			3,301
Other long-term liabilities	586			(25,412		)	785
Net cash (used in) provided by operating activities	(1,092		)	(7,999		)	24,917
Cash flows from investing activities
Capital expenditures	(7,531		)	(7,084		)	(9,573		)
Proceeds from sale of assets	102,214			2,426			2,214
Net cash provided by (used in) investing activities	94,683			(4,658		)	(7,359		)
Cash flows from financing activities
Proceeds from borrowings under Resort Senior Credit Facility	106,913			143,801			68,465
Repayment of principal on Resort Senior Credit Facility	(190,141		)	(124,679		)	(67,203		)
Proceeds from issuance of long-term debt	26,500			-			-
Repayment of principal on long-term debt	(26,660		)	(5,656		)	(4,915		)
Proceeds from issuance of real estate debt	19,803			9,715			6,159
Repayment of principal on real estate debt	(35,478		)	(6,860		)	(19,166		)
Payment of deferred financing costs	(206		)	(4,020		)	-
Proceeds from issuance of common stock	1,000			-			-
Payment for costs of extinguishment of debt	-			-			(470		)
Proceeds from exercise of stock options	12			28			-
Other, net	(2		)	-			-
Net cash (used in) provided by financing activities	(98,259		)	12,329			(17,130		)
Net (decrease) increase in cash and cash equivalents	(4,668		)	(328		)	428
Cash and cash equivalents, beginning of year	11,592			6,924			6,596
Cash and cash equivalents, end of year	$	6,924		$	6,596		$	7,024
Supplemental disclosures of cash flow information:
Cash paid for interest	$	54,499		$	42,970		$	40,951
Cash paid (refunded) for income taxes, net	100			(15		)	(113		)
Supplemental schedule of noncash investing and financing activities:
Accretion of discount and issuance costs and dividends on mandatorily redeemable preferred stock	32,791			37,644			-
Exchange of debt for capital contribution	-			-			24,835

The accompanying notes are an integral part of these consolidated financial statements.

F-6

American Skiing Company

Notes to Consolidated Financial Statements

1.             Basis of Presentation

American Skiing Company (ASC), a Delaware corporation, and its subsidiaries (collectively, the Company) own and operate resort facilities, real estate development companies, golf courses, ski and golf schools, retail shops, and other related companies.  The Company reports its results of operations in two business segments,  resort operations and real estate operations (see Note 15).  ASC owned and operated the following ski resorts during fiscal 2004 and 2003: Sugarloaf/USA and Sunday River in Maine, Attitash Bear Peak in New Hampshire, Killington and Mount Snow in Vermont, The Canyons in Utah, and Steamboat  in Colorado. During fiscal 2002, ASC also owned and operated Heavenly  in California/Nevada, which was sold in May 2002 and Sugarbush in Vermont, which was sold in September 2001 (see Note 18).  The Company has historically conducted its real estate development operations through its wholly owned subsidiary, American Skiing Company Resort Properties (Resort Properties), and Resort Properties’ subsidiaries, including Grand Summit and Canyons Resort Properties, Inc.

Business Conditions

For fiscal 2002, fiscal 2003, and fiscal 2004, the Company generated revenues of $272.1 million, $264.5 million, and $284.1 million, respectively, incurred net losses available to common shareholders of $206.7 million, $82.0 million, and $28.5 million, respectively, and generated cash flows (used in) provided by operating activities of $(1.1) million, $(8.0) million, and $24.9 million, respectively.  As of July 25, 2004, the Company had an accumulated deficit of $543.6 million and had negative working capital of $145.7 million.

The Company’s Mandatorily Redeemable Convertible 10½% Series A Preferred Stock (Series A Preferred Stock) was redeemable on November 12, 2002 at an aggregate redemption price of approximately $61.9 million (redemption price of approximately $73.9 million as of July 25, 2004), to the extent that the Company had funds legally available for that redemption.  The Company is not permitted to redeem its Series A Preferred Stock under the terms of the resort senior credit facility (Resort Senior Credit Facility) and its senior subordinated notes due 2006 (Senior Subordinated Notes) (see Note 8) unless the Company has first repaid the related outstanding borrowings or obtained waivers of the covenants preventing such redemption.  Prior to and since the November 12, 2002 redemption date of the Series A Preferred Stock, based upon all relevant factors (including the Company’s inability to extinguish all indebtedness under the Resort Senior Credit Facility and the Senior Subordinated Notes with sufficient assurance of remaining assets from which to redeem the Series A Preferred Stock), the Company’s Board of Directors has determined that legally available funds do not exist for the redemption of any shares of Series A Preferred Stock.

 Strategic Plan

The Company has undertaken a strategic plan designed to mitigate the effects of these negative business conditions and improve the Company’s financial condition, liquidity, and results of operations.  This plan  includes the following key components:

•Comprehensive financial restructuring package, including amendments to its resort and real estate construction credit facilities and redeemable preferred stock, additional capital infusion to enhance financial flexibility, and the refinancing of its Resort Senior Credit Facility and its Senior Subordinated Notes to improve financial flexibility,

•Reorganization, staff reduction, and performance enhancement programs designed to achieve operational cost savings and improve financial performance,

•Sale of Heavenly and Sugarbush resorts to reduce the debt of the Company, and

•Strategic redeployment of management and capital resources to emphasize the integration and growth of resort village development and operations.

Management has completed several components of this plan, including refinancing the Company’s resort senior credit facility, obtaining the additional capital infusion from Oak Hill Capital Partners, L.P. and certain related entities (collectively, Oak Hill), selling the Heavenly and Sugarbush resorts, implementing a staff reorganization plan to improve operational efficiencies, and strategically redeploying management.  Also, during fiscal 2004, the Company successfully amended its real estate construction loan facilities to extend the timing of mandatory principal

F-7

payments and provide additional liquidity to support ongoing sales and marketing activities for the remaining units to be sold.  During fiscal 2004, the Company held an auction to sell substantially all of the remaining units at The Canyons Grand Summit Hotel, which resulted in a $10.8 million reduction in the borrowings under the real estate construction loan facilities.  The Company also successfully restructured its real estate term facility (see Note 6).  As of July 25, 2004, the Company is in compliance with all debt covenants and other terms of its debt instruments.    As a result of these developments, management believes the Company has adequate liquidity and borrowing capacity to finance its operations through at least the end of fiscal 2005.

The Company has commenced marketing for a new senior secured credit facility.  The new facility is expected to total approximately $230.0 million, and consist of a revolving credit facility and term loan facilities.  The proceeds of the facilities would be 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.  Arrangement and consummation of a new senior secured credit facility is subject to satisfactory documentation and other customary conditions.  If the Company’s marketing efforts for the facility are successful, closing on the facility is expected to take place in November 2004.

On October 12, 2004, in conjunction with a proposed new senior secured credit facility, the Company commenced a tender offer for all of the Senior Subordinated Notes, which total $120.0 million.  The total consideration payable in connection with the offer is $1,015.63 per $1,000 principal amount plus accrued but unpaid interest for the Senior Subordinated Notes.  The Company also solicited consents from the holders of the Senior Subordinated Notes to eliminate substantially all of the restrictive covenants and certain events of default under the indenture for the Senior Subordinated Notes.  On October 22, 2004, the Company announced that it has received the requisite consents from the holders of the Senior Subordinated Notes to the proposed indenture amendments, and the Company entered into a supplemental indenture reflecting those amendments.  Closing of the tender offer and the proposed indenture amendments becoming operative are each subject to the consummation of a new senior secured credit facility in an amount sufficient to fund the total consideration for the Senior Subordinated Notes and to refinance the Company’s Resort Senior Credit Facility, and certain other customary conditions.

On October 12, 2004, the Company entered into an Exchange Agreement with the holder of the Series A Preferred Stock.  Pursuant to the terms of the Exchange Agreement, the Company has agreed to issue new junior subordinated notes due 2012 to the holder of the Series A Preferred Stock in exchange for all outstanding shares of Series A Preferred Stock.  The new junior subordinated notes will be issued only in the event that the Company is successful in consummating a new senior secured credit facility and the tender offer.  The new junior subordinated notes will 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 will be subordinated to all of the Company’s other debt obligations and all trade payables incurred in the ordinary course of business.  None of the Company’s subsidiaries will be obligated on the new junior subordinated notes, and none of the Company’s assets will serve as collateral for repayment of the new junior subordinated notes.

There can be no assurance that the Company will be successful in marketing the new senior secured credit facility on acceptable terms and, accordingly, there can be no assurance that the Company will be able to consummate the exchange of the Series A Preferred Stock for the new junior subordinated notes.

2.             Summary of Significant Accounting Principles

    Principles of Consolidation

The accompanying consolidated financial statements include the accounts of ASC and its wholly owned subsidiaries.  All significant intercompany accounts and transactions have been eliminated in consolidation.

    Fiscal Year

The Company’s fiscal year is a fifty-two week or fifty-three week period ending on the last Sunday of July. The periods ended July 28, 2002, July 27, 2003, and July 25, 2004 (fiscal 2002, fiscal 2003, and fiscal 2004, respectively) each consisted of fifty-two weeks.

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    Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with a remaining maturity of three months or less to be cash equivalents.  Cash equivalents, which consisted of short-term certificates of deposit, totaled approximately $1.4 million and $1.0 million as of July 27, 2003 and July 25, 2004, respectively.

    Restricted Cash

Restricted cash consists of deposits received and held in escrow related to pre-sales of real estate developed for sale, guest advance deposits for lodging reservations, and cash held in cash collateral accounts by lenders on behalf of the real estate companies.  The cash becomes available to the Company when the real estate units are sold,  the lodging services are provided, or upon approval of expenditures by lenders.

    Inventory

Inventory is stated at the lower of cost (first-in, first-out method) or market, and consists primarily of retail goods, food, and beverage products.

    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 being 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 operating assets during the second and third quarters of the Company’s fiscal year.

    Real Estate Developed for Sale

The Company capitalizes as real estate developed for sale the original acquisition cost of land, direct construction and development costs, property taxes, interest incurred on costs related to real estate under development, and other related costs (engineering, surveying, landscaping, etc.) until the property has been developed to the point it is ready for sale.  The cost of sales for individual parcels of real estate or quarter and eighth share units within a project is determined using the relative sales value method.  Selling costs are charged to expense in the period in which the related revenue is recognized.

    Goodwill and Other Intangible Assets

During the first quarter of fiscal 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets”, and was required to evaluate its existing intangible assets and goodwill in a transitional impairment analysis.  As a result of the transitional impairment analysis, the Company recorded an impairment loss of $18.7 million representing 100% of its goodwill.  This loss was recorded as a cumulative effect of a change in accounting principle in the accompanying consolidated statement of operations for fiscal 2002.  Furthermore, as prescribed in SFAS No. 142, certain indefinite-lived intangible assets, including trademarks, are no longer amortized but are subject to annual impairment assessments.  An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value.  Definite-lived intangible assets continue to be amortized on a straight-line basis over their estimated useful lives of 31 years, and assessed for impairment utilizing guidance provided by SFAS No. 144, “Accounting for the Impairment of Disposal of Long-Lived Assets.”

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As of July 27, 2003 and July 25, 2004, acquired intangible assets (other than goodwill) relate entirely to the resort segment and consist of the following (in thousands):

	July 27, 2003			July 25, 2004
Definite-lived Intangible Assets:
Lease agreements	$	1,853		$	1,853
Less accumulated amortization	(288		)	(346		)
	1,565			1,507
Indefinite-lived Intangible Assets:
Trade names	170			170
Water rights	5,323			4,688
Intangible Assets, net	$	7,058		$	6,365

                Amortization expense for definite-lived intangible assets was approximately $58,000 for each of fiscal 2002, fiscal 2003, and fiscal 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.

    Deferred Financing Costs

Costs incurred in connection with the issuance of debt are included in deferred financing costs, net of accumulated amortization.  Amortization is calculated on a straight-line basis over the respective original lives of the applicable issues.  Amortization calculated on a straight-line basis is not materially different from amortization that would have resulted from using the effective interest method.  As of July 27, 2003 and July 25, 2004, deferred financing costs were $6.7 million and $3.9 million, respectively, net of accumulated amortization of $4.8 million and $6.8 million, respectively.  Amortization expense related to deferred financing costs is included in interest expense and totaled $4.6 million, $3.1 million, and $2.6 million for fiscal 2002, fiscal 2003, and fiscal 2004, respectively.  In connection with the early extinguishments of debt in fiscal 2002 and fiscal 2003, the Company wrote off unamortized deferred financing costs of approximately $3.3 million and $2.8 million, respectively.  In fiscal 2004, approximately $0.2 million of deferred financing costs were included as part of the Tranche C portion of the real estate term facility restructuring as described in Note 6.

    Long-Lived Assets

Long-lived assets, such as property, 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.  Prior to the adoption of SFAS No. 144, the Company accounted for impairment of long-lived assets and long-lived assets to be disposed of in accordance with SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”.  During fiscal 2002, the Company completed the sale of its Sugarbush resort (see Note 18) and accounted for this sale under SFAS No. 121 and Accounting Principles Board Opinion No. 30 because the disposal activities relating to the sale of Sugarbush were initiated prior to the Company’s adoption of SFAS No. 144 on July 30, 2001.

    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 is the Company’s second and third quarters of its fiscal year.  The Company’s remaining resort revenues are generally recognized as the services are performed.  Real estate revenues are recognized under the full accrual method when title has been transferred, initial and continuing investments are adequate to demonstrate a commitment to pay for the property, and no continuing involvement exists.  Amounts received from pre-sales of real estate are recorded as restricted cash and deposits and deferred revenue in the accompanying consolidated balance sheets until the earnings process is complete.

     Interest

Interest is expensed as incurred except when it is capitalized in connection with significant capital additions and real estate developed for sale. The amounts of interest capitalized are determined by applying actual interest rates to the borrowings required to finance the construction.  During fiscal 2002, 2003, and 2004, the Company incurred total interest costs of $54.8 million, $47.4 million, and $41.7 million, respectively, of which no amounts have been capitalized to property, equipment, and real estate developed for sale.

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    Employee Savings Plan

The Company has a 401(k) plan that allows non-highly compensated employees, as defined, to defer up to 100% of their income up to a maximum annual deferral of $13,000 if they are under 50 years old or $16,000 if they are 50 years or older as prescribed by the Internal Revenue Service and provides for the matching of participant contributions at the Company’s discretion.  For highly-compensated employees, as defined, the plan allows employees to defer up to 7.5% of their income.  The Company’s matching contributions to the 401(k) plan for fiscal 2002, 2003, and 2004 were approximately $307,000, $267,000, and $340,000, respectively.

    Advertising Costs

Advertising costs are expensed the first time the advertising takes place.  As of July 27, 2003 and July 25, 2004, advertising costs of approximately $0.2 million and $0.1 million, respectively, were recorded in prepaid expenses in the accompanying consolidated balance sheets.  Advertising expense for fiscal 2002, 2003, and 2004 was approximately $6.8 million, $7.1 million, and $10.1 million, respectively.

    Seasonality

The Company’s revenues are highly seasonal in nature.  In fiscal 2004, the Company realized approximately 88% of resort segment revenues and over 100% of resort segment operating income during the period from November through April.  In addition, a significant portion of resort segment revenue and approximately 22% of annual skier visits were generated during the Christmas and Presidents’ Day vacation weeks in fiscal 2004.  In addition, the Company’s resorts typically experience operating losses and negative cash flows for the period from May through November.

A high degree of seasonality in the Company’s revenues increases the impact of certain events on its operating results.  Adverse weather conditions, access route closures, equipment failures, and other developments of even moderate or limited duration occurring during peak business periods could reduce revenues.  Adverse weather conditions can also increase power and other operating costs associated with snowmaking or could render snowmaking wholly or partially ineffective in maintaining quality skiing conditions.  Furthermore, unfavorable weather conditions, regardless of actual skiing conditions, can result in decreased skier visits.

    Earnings Per Share

Basic net income (loss) per common share (Basic EPS) excludes dilution and is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the year. Diluted net income (loss) per common share (Diluted EPS) reflects the potential dilution that could occur if stock options or other contracts to issue common stock (such as Mandatorily Redeemable Preferred Stock) were exercised or converted into common stock.  In periods where losses are recorded, potentially dilutive securities would decrease the loss per share and therefore are not added to the weighted average shares outstanding.  For fiscal 2002, 2003, and 2004, basic and diluted net loss per common share are as follows:

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	Fiscal 2002				Fiscal 2003				Fiscal 2004
Loss	(in thousands, except per share amounts )
Loss from continuing operations before cumulative effects of change in accounting principle	$		(167,578	)	$	(44,374		)	$	(28,502		)
Income from discontinued operations, net of tax	12,317				-				-
Accretion of discount and dividends on mandatorily redeemable preferred stock	(32,791			)	(37,644			)	-
Loss before cumulative effects of change in accounting principle	(188,052			)	(82,018			)	(28,502			)
Cumulative effects of change in accounting principle, net of tax	(18,658			)	-				-
Net loss available to common shareholders	$	(206,710		)	$		(82,018	)	$		(28,502	)
Shares
Total weighted average common shares outstanding (basic and diluted)	31,628				31,724				31,738
Basic and diluted loss per common share
Loss from continuing operations before cumulative effects of change in accounting principle	$	(6.34		)	$		(2.59	)	$		(0.90	)
Income from discontinued operations, net of taxes	0.39				-				-
Cumulative effects of change in accounting principle, net of taxes	(0.59			)	-				-
Net loss available to common shareholders	$	(6.54		)	$		(2.59	)	$		(0.90	)

The Company had outstanding 76,626 shares of convertible preferred stock as of July 28, 2002, July 27, 2003, and July 25, 2004.  These shares are convertible into shares of the Company’s common stock (see Note 8).  If converted at their liquidation preferences as of July 28, 2002, July 27, 2003, and July 25, 2004, these convertible preferred shares would convert into 39,136,243, 43,950,901, and 49,425,186 shares of common stock, respectively.  However, the common stock shares into which these securities are convertible have not been included in the Diluted EPS calculation as the impact of their inclusion would be anti-dilutive.  The Company also has 4,226,579, 3,821,187, and 3,821,187 options outstanding to purchase shares of its common stock under the Company’s stock option plan as of July 28, 2002, July 27, 2003, and July 25, 2004, respectively.  These shares are also excluded from the Diluted EPS calculation as the impact of their inclusion would be anti-dilutive.

    Stock Compensation

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 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 value of the common stock at the date of grant.  Nonqualified stock options shall be granted at an exercise price as determined by the Compensation Committee.

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The status of the Company’s stock option plan is summarized below:

	Number of Shares		Weighted Average Exercise Price
Outstanding as of July 29, 2001	4,590,297		$	3.91
Granted	-		-
Exercised	(6,018	)	2.00
Forfeited	(357,700	)	1.94
Outstanding as of July 28, 2002	4,226,579		4.08
Granted	-		-
Exercised	(14,042	)	2.00
Forfeited	(391,350	)	2.46
Outstanding as of July 27, 2003	3,821,187		4.25
Granted	-		-
Exercised	-		-
Forfeited	-		-
Outstanding as of July 25, 2004	3,821,187		$	4.25

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 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 the option 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 would incur upon exercise.  The liability for this fixed tax bonus has been reduced to reflect $5.3 million in tax bonus payments made through July 25, 2004 in connection with options exercised.  The remaining $0.5 million tax bonus liability is reflected in accounts payable and other current liabilities in the accompanying consolidated balance sheet as of July 25, 2004.  The remainder of these original $2.00 options (160,480 shares) were granted under the Plan to certain members of management and are fully vested as of July 25, 2004.  For fiscal 2002, fiscal 2003, and fiscal 2004, the Company recognized $0.1 million, $0, and $0, respectively, of stock compensation expense relating to these options.

The following table summarizes information about the stock options outstanding under the Plan as of July 25, 2004:

Range of Exercise Prices	Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Exercisable	Weighted Average Exercise Price
$0.72	25,000	6.9	$	0.72	25,000	$	0.72
1.75 - 2.50	1,420,337	5.6	2.11		1,371,003	2.11
3.00 - 4.00	1,449,250	5.6	3.17		1,321,750	3.19
7.00 - 8.75	735,750	4.2	7.19		733,050	7.19
14.19 - 18.00	190,850	3.2	17.55		190,850	17.55
	3,821,187	5.2	$	4.25	3,641,653	$	4.33

The Company continues to account for stock-based compensation using the method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, under which no compensation expense for stock options is recognized for stock option awards granted to employees at or above fair value.  In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation -Transition and Disclosure - an amendment of FAS 123”.  SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based

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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 of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.  The Company has adopted the disclosure-only provisions of SFAS No. 148.  Had stock compensation expense been determined based on the fair value at the grant dates for awards granted under the Company’s stock option plan, consistent with the provisions of SFAS No. 148, the Company’s net loss available to common shareholders and net loss per common share would have been changed to the pro forma amounts indicated below (dollar amounts in thousands):

Fiscal Years Ended	2002				2003				2004
Net loss available to common shareholders
As reported	$		(206,710	)	$	(82,018		)	$	(28,502		)
Stock-based employee compensation expense included in reported net loss, net of tax	88				-				-
Stock-based employee compensation expense determined under fair-value method for all awards, net of tax	(1,346			)	(502			)	(348			)
Pro forma	$	(207,968		)	$		(82,520	)	$		(28,850	)
Basic and diluted net loss per common share
As reported	$	(6.54		)	$		(2.59	)	$		(0.90	)
Pro forma	(6.58			)	(2.60			)	(0.91			)

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model.  For fiscal 2002, fiscal 2003, and fiscal 2004, there were no options granted under the Plan.

Fair Value of Financial Instruments

The recorded amounts for cash and cash equivalents, restricted cash, accounts receivable, and accounts payable and other current liabilities approximate fair value due to the short-term nature of these financial instruments.  The fair value of amounts outstanding under the Company’s resort and real estate senior credit facilities and certain other debt instruments approximate their recorded values in all material respects, as determined by discounting future cash flows at current market interest rates as of July 25, 2004.  The fair value of the Company’s subordinated notes have been estimated using quoted market values.  The fair value of the Company’s other subordinated debentures have been estimated using discounted cash flow analyses based on current borrowing rates for debt with similar maturities and ratings.  The fair values of the Company’s preferred stock issuances have not been determined as such stock is not traded in the open market and a market price is not readily available.

The estimated fair values of the Senior Subordinated Notes, Convertible Subordinated Notes,  and other subordinated debentures as of July 27, 2003 and July 25, 2004 are presented below (in thousands):

	July 27, 2003				July 25, 2004
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
12% Senior Subordinated Notes	$	118,549	$	90,000	$	118,991	$	90,000
11.3025% Convertible Subordinated Notes	15,337		15,904		17,061		17,301
Other subordinated debentures	7,674		7,037		6,208		5,534

    Derivative Financial Instruments

All derivatives are recognized on the balance sheet at their fair values.  On the date the derivative contract is entered into, the Company designates the derivative as either a hedge of the fair value of a recognized asset or liability (“fair value” hedge), or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge).  During fiscal 2003, the Company terminated its existing interest rate swap agreements

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in connection with the refinancing of its Resort Senior Credit Facility (see Note 5).  As of July 27, 2003 and July 25, 2004, the Company was not party to any derivative financial instruments.

    Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes, as set forth in SFAS No. 109, “Accounting for Income Taxes”.  SFAS No. 109 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities, and net operating loss and tax credit carryforwards, utilizing currently enacted tax rates.  The effect of any future change in income tax rates is recognized in the period that includes the enactment date.

    Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Areas where significant judgments are made include, but are not limited to: allowances for doubtful accounts, long-lived asset valuations and useful lives, inventory valuation reserves, litigation and claims reserves, and deferred income tax asset valuation allowances.  Actual results could differ from those estimates.

    Reclassifications

Certain amounts in the prior years’ financial statements and related notes have been reclassified to conform to the fiscal 2004 presentation.

    Recently Issued Accounting Standards

In November 2002, the FASB issued FASB Interpretation (FIN) No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others - an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34” (FIN No. 45).  This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee.  The initial recognition and initial measurement provisions of FIN No. 45 are to be applied on a prospective basis to guarantees issued or modified after December 31, 2002.  The disclosure requirements of FIN No. 45 are effective for financial statements of interim or annual periods ended after December 15, 2002.  The Company adopted FIN No. 45 effective for the interim period ended January 26, 2003.  The adoption of FIN No. 45 did not have an effect on the Company’s results of operations or financial position.

In December 2003, the FASB issued a revision to Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN No. 46R).  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.  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.  FIN No. 46R deferred the effective date of the Interpretation for public companies to the end of the first reporting period ending after March 15, 2004.  Under these guidelines, the Company adopted FIN No. 46R during its third fiscal quarter of 2004.  The adoption of this interpretation did not have a material affect on the Company’s results of operations or financial position.

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”.  SFAS No. 150 establishes standards for how financial instruments with characteristics of both liabilities and equity should be measured and classified and requires that an issuer classify a financial instrument that is within its scope as a liability.  SFAS No. 150

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is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003.  The Company  adopted SFAS No. 150 effective July 28, 2003.  As a result of adopting SFAS No. 150, approximately $298.7 million was reclassified to liabilities in the consolidated balance sheet in the first quarter of fiscal 2004.  This represents the book value of all of the classes of preferred stock.  In addition, approximately $43.1 million of accretion of discount and dividends on the preferred stock in fiscal 2004 was included in interest expense, whereas previously it was reported as accretion of discount and dividends on mandatorily redeemable preferred stock.

3.             Property and Equipment

Property and equipment consists of the following (in thousands):

	July 27, 2003			July 25, 2004
Buildings and grounds	$	188,379		$		189,039
Machinery and equipment	122,993			123,620
Lifts and lift lines	124,880			125,066
Trails	25,454			25,536
Land improvements	9,579			9,830
	471,285			473,091
Less: accumulated depreciation and amortization	(176,078		)	(196,356			)
	295,207			276,735
Land	75,923			74,761
Construction-in-progress	1,796			2,013
Property and equipment, net	$	372,926		$	353,509

Property and equipment includes approximately $31.2 million and $22.1 million of machinery, equipment, and lifts held under capital lease obligations as of July 27, 2003 and July 25, 2004, respectively.  As of July 27, 2003 and July 25, 2004, related accumulated amortization on property and equipment held under capital lease obligations was approximately $10.8 million and $7.4 million, respectively.  Total depreciation and amortization expense relating to property and equipment was $25.9 million, $27.2 million, and $26.2 million for fiscal 2002, fiscal 2003, and fiscal 2004, respectively.

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4.             Long-Term Debt

Long-term debt consists of (in thousands):

	July 27,		July 25,
	2003		2004
Resort Senior Credit Facility (see Note 5)	$	77,779	$	79,043
Real Estate Term Facility (see Note 6)	64,187		-
Real estate construction loan facility with a face value of $110,000 (see Note 6)	31,718		18,732
Real estate construction loan facility with a face value of $10,000 to provide liquidity for the hotel development subsidiary and for completion of the Steamboat Grand Hotel (see Note 6)	9,965		10,600
Real estate mortgage note payable with a face value of $2,427 secured by an employee housing complex at the Company’s Steamboat resort. The note is on a 15 - year amortization schedule, maturing in February 2005 and principal and interest (4.75% as of July 25, 2004) are payable monthly. The interest rate is reset on January 1 of each year to the prime rate of the lending institution.	2,097		1,955
Note payable bearing interest at 9% per annum, which is payable monthly beginning January 1998 for a 15-year term and is secured by a building at Killington. The principal is due in full in December 2012.	2,250		2,250
Note payable with interest payable monthly beginning January 1998 for a 30-year term. The interest rate is 7.00% per annum for the first 10 years, 8.44% per annum for the second 10 years and 10.55% per annum for the final 10 years. The principal is due in full in December 2027. The note is secured by land at Killington.	1,600		1,600
Real estate note payable to general contractor with a face value of $3,878 secured by quarter and eighth share inventory at the Steamboat Grand Hotel.	370		-
Obligations under capital leases (see Note 17)	8,532		5,188
Other notes payable	170		207
	198,668		119,575
Less: current portion	138,506		45,191
Long-term debt, net of current portion	$	60,162	$	74,384

The carrying values of the above debt instruments approximate their fair values in all material respects (except for those listed in Note 2), determined by discounting future cash flows at current market interest rates as of  July 27, 2003 and July 25, 2004.  As of July 25, 2004, the Company had letters of credit outstanding under the Resort Senior Credit Facility totaling approximately $0.3 million.

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Long-term debt and subordinated notes and debentures (see Note 7) mature as follows (in thousands):

				Subordinated
	Long-term			notes and			Total
	debt			debentures			Debt
2005	$	45,629		$	-		$	45,629
2006	59,060			120,000			179,060
2007	124			17,061			17,185
2008	11,350			-			11,350
2009	-			-			-
2010 and thereafter	3,850			6,208			10,058
Interest related to capital lease obligations (rates ranging from 5.0% to 12.2%)	(438		)	-			(438		)
Debt discount	-			(1,009		)	(1,009		)
	119,575			142,260			261,835
Less current portion	(45,191		)	-			(45,191		)
Long-term debt, net of current portion	$	74,384		$	142,260		$	216,644

5.             Resort Senior Credit Facility

The Company entered into an agreement dated February 14, 2003 with General Electric Capital Corporation (GE Capital) and CapitalSource Finance LLC (CapitalSource) whereby GE Capital and CapitalSource have provided a $91.5 million senior secured loan facility (the Resort Senior Credit Facility) including a revolving credit facility (Revolving Credit Facility), tranche A term loan (Tranche A Term Loan), supplemental term loan (Supplemental Term Loan), and tranche B term loan (Tranche B Term Loan).  The Resort Senior Credit Facility is secured by substantially all the assets of the Company (except for the stock of its real estate subsidiary) and the assets of its resort operating subsidiaries.  Following the restructuring of the real estate term facility (Real Estate Term Facility) (as described in Note 6), Resort Properties has become a guarantor of, and its assets are pledged as collateral under, the Resort Senior Credit Facility.  The Resort Senior Credit Facility consists of the following:

•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.

•Tranche A Term Loan -  $25.0 million borrowed on the funding date of February 18, 2003.

•Supplemental Term Loan - $6.5 million borrowed on the funding date of February 18, 2003.

•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 mature on April 15, 2006 and bear interest at JPMorgan Chase Bank’s prime rate plus 3.25% payable monthly (7.5% as of July 25, 2004).  The Supplemental Term Loan requires payments of approximately $1.0 million on January 15 and July 15 of each year, and a final payment of approximately $1.0 million on April 15, 2006.  The Tranche B Term Loan matures on June 15, 2006 and bears interest at JPMorgan Chase Bank’s prime rate plus 5.0% payable monthly with an interest rate floor of 12.25% (12.25% as of July 25, 2004).  The Resort Senior Credit Facility contains affirmative, negative, and financial covenants customary for this type of credit facility, which includes maintaining a minimum level of EBITDA, as defined, places a limit on 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 or preferred stock.  The Company was in compliance with all covenants related to the Resort Senior Credit Facility through July 25, 2004.

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As of July 25, 2004, the Company had $29.9 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 July 25, 2004, the Company had $0.3 million of L/C’s issued under the Resort Senior Credit Facility.  As of July 25, 2004, the Company had $9.8 million available for future borrowings under the Revolving Credit Facility.

In conjunction with the restructuring of the prior resort senior credit facility during fiscal 2002, the Company expensed a pro-rata portion of its existing deferred financing costs in the amount of $3.3 million.  In connection  with the refinancing of the prior resort senior credit facility during fiscal 2003, the Company expensed its remaining deferred financing costs associated with this facility in the amount of $2.8 million.  These amounts are reflected in the accompanying consolidated statements of operations as a write-off of deferred financing costs.

6.             Real Estate Term Facility and Construction Loan Facility

    Real Estate Term Facility

On May 14, 2004, Resort Properties completed the restructuring of the Real Estate Term Facility with Fleet National Bank, Ski Partners, LLC and Oak Hill Capital Partners.  As a result of the restructuring, a new business venture called SP Land Company, LLC (SP Land) was created by Ski Partners, LLC, Resort Properties (an ASC subsidiary), and Killington, Ltd. (Killington) (an ASC subsidiary).  Certain developmental land parcels at the Killington resort and cash with a combined carrying value of approximately $2.2 million, were transferred by Resort Properties and Killington into SP Land, together with all indebtedness, including related interest and fees, under the Real Estate Term Facility held by Fleet National Bank and Ski Partners, LLC (Tranches A and B of the Real Estate Term Facility) totaling $55.4 million.  All of the remaining collateral for the Real Estate Term Facility, including all of the capital stock of Grand Summit, all developmental real estate at The Canyons, the commercial unit (core) in the Grand Summit Hotel at Mount Snow, and the Rams Head parking lot at the Killington resort, was released as security for the obligations under the Real Estate Term Facility.  Collectively, Killington and Resort Properties own 25% of the membership interests of SP Land.  The remaining 75% of the membership interests in SP Land are owned by Ski Partners, LLC, together with a preferential interest in SP Land of approximately $37,175,000.  In accordance with FIN No. 46R and APB No. 18, “The Equity Method of Accounting for Investment in Common Stock”, the Company accounts for SP Land  on the equity method as it does not meet the requirements as a variable interest entity that requires consolidation.

In conjunction with the restructuring of the Real Estate Term Facility, the $25.0 million in debt from Resort Properties to Oak Hill Capital Partners and its affiliate, OHSF ASTC, LLC, (Tranche C of the Real Estate Term Facility) was contributed by Oak Hill to ASC as additional paid-in capital.  This contribution was made for no additional consideration, and no equity was issued by ASC in return for the contribution.  As a result of the transfer of the $55.4 million in indebtedness (including accrued interest and fees) from Resort Properties to SP Land and the exchange of $25.0 million in debt from Oak Hill as additional paid-in capital of ASC, approximately $80.4 million in real estate debt and related accrued interest and fees have been settled and are no longer obligations of the Company.

As part of the restructuring of the Real Estate Term Facility, Killington also contributed all of its interest in approximately 256 acres of developmental real estate with a carrying value of approximately $0.9 million into a joint venture entity called Cherry Knoll Associates, LLC.   Each of SP Land and Killington own 50% of the membership interests in Cherry Knoll Associates.  In addition, Killington maintains a preferential distribution interest in Cherry Knoll Associates of $1,500,000.  In accordance with FIN No. 46R and APB No. 18, the Company accounts for Cherry Knoll Associates on the equity method as it does not meet the requirements as a variable interest entity that requires consolidation.

Immediately following the restructuring of the Real Estate Term Facility, Resort Properties became a co-borrower under the Resort Senior Credit Facility and pledged its remaining assets as collateral security under the Resort Senior Credit Facility.

As a result of the restructuring of the Real Estate Term Facility, all previous defaults under the facility have been waived by the lenders and the Company is in compliance with all debt covenants and other terms of the remaining debt instruments as of July 25, 2004.

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As a result of these restructuring transactions, the Company recorded a gain on extinguishment of debt of approximately $23.1 million and a gain on transfer of assets associated with extinguishment of debt of approximately $25.5 million.  Combined, these gains represented income of $1.53 per common share.  These gains are comprised of the net effects of the transfer of approximately $3.1 million of carrying value of assets to SP Land and Cherry Knoll Associates, the recording of an investment in Cherry Knoll Associates of approximately $0.4 million, the recording of an investment in SP Land of approximately $1.5 million and the impairment of 100% of that amount, the write-off of approximately $3.3 million of planning costs no longer deemed realizable to the Company, the elimination of approximately $80.4 million of debt, the recording of additional paid-in capital of approximately $24.8 million (net of deferred financing costs of $0.2 million), the expending of approximately $0.5 million in transaction and legal costs, and the recording of liabilities for future obligations of ski privileges of approximately $0.5 million.

                Interest expense applicable to the Real Estate Term Facility was $11.6 million, $15.6 million and $13.3 million for fiscal 2002, fiscal 2003, and fiscal 2004, respectively.

    Construction Loan Facility

                The Company conducts substantially all of its real estate development through subsidiaries, each of which is a wholly owned subsidiary of Resort Properties.  Grand Summit owns the existing Grand Summit Hotel projects 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 in December 2003.  Together, the Senior Construction Loan and the Subordinated Construction Loan comprise the Construction Loan Facility.  The Company used the Construction Loan Facility solely for the purpose of funding the completion of the Steamboat Grand Hotel.  The Construction Loan Facility is without recourse to ASC and its resort operating subsidiaries and is collateralized by significant real estate assets of Resort Properties and its subsidiaries, including the assets and stock of Grand Summit, ASC’s primary hotel development subsidiary.

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  Hotel parking garage, and the commercial core unit at Attitash Bear Peak collateralize the Senior Construction Loan, which is subject to covenants, representations and warranties customary for this type of construction facility.  The Senior Construction Loan is non-recourse to ASC and its resort operating subsidiaries other than Grand Summit.  Grand Summit has assets with a total carrying value of $69.0 million as of July 25, 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 $18.7 million as of July 25, 2004 and had an interest rate on funds advanced of prime plus 3.5%, with a floor of 9.0% (9.0% as of July 25, 2004).  During fiscal 2004, Grand Summit made payments on the Senior Construction Loan of approximately $13.0 million primarily as a result of an auction that was held in February 2004 to sell substantially all of the remaining units at The Canyons Grand Summit Hotel.

The Subordinated Construction Loan bears interest at a fixed rate of 20% per annum, payable monthly in arrears.  Only 50% of the amount of this interest is due and payable in cash and the other 50%, if no events of default exist under the Subordinated Construction Loan or the Senior Construction Loan, is automatically deferred until the final payment date.  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 July 25, 2004.  The Subordinated Construction Loan is secured by the same collateral which secures the Senior Construction Loan.

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The Senior Construction Loan, as amended, requires the following maximum outstanding principal balances as of the following dates:

September 30, 2004	$	18,000,000
December 31, 2004	$	17,000,000
March 31, 2005	$	14,000,000
June 30, 2005	$	12,000,000
September 30, 2005	$	11,000,000
December 31, 2005	$	10,000,000
March 31, 2006	$	5,000,000
June 30, 2006	$	-

7.             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 July 25, 2004, the unamortized original issue discount was approximately $1.0 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 amounted to $14.4 million in each of fiscal 2002, fiscal 2003, and fiscal 2004.  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.

The Company had previously entered into a series of non-cancelable interest rate swap agreements in connection with the Senior Subordinated Notes.  These agreements were non-hedging swaps which were carried at their fair value, with fluctuations recorded through interest expense.  In connection with the refinancing of the Company’s prior resort senior credit facility on February 18, 2003, the interest rate swap agreements were terminated with no significant gain or loss being incurred.

    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 (see Note 11).  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, which are convertible into shares of the Company’s Series D Participating Preferred Stock (Series D 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

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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 July 25, 2004, the outstanding balance on the Junior Subordinated Notes was approximately $17.1 million.

          Other Subordinated Debentures

Other subordinated debentures owed by the Company to institutions and individuals as of July 25, 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

8.         Mandatorily Redeemable Securities

    Series A Preferred Stock

Pursuant to a Securities Purchase Agreement (the Series A Agreement) dated July 2, 1997 (as amended July 25, 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 10½% Preferred Stock (Series A Preferred Stock. The total number of shares of Series A Preferred Stock issued in association with the exchange was 36,626 and each share has a face value of $1,000 per share.  As of July 25, 2004, cumulative dividends in arrears totaled approximately $37.3 million.

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.  In addition, because the Company is not permitted to redeem its Series A Preferred Stock under the terms of the Resort Senior Credit Facility and Senior Subordinated Notes, the Company cannot effect the redemption of the Series A Preferred Stock unless the Company has first repaid the outstanding borrowings on the Resort Senior Credit Facility and the Senior Subordinated Notes or obtained requisite consents from the holders of the debt under those facilities.  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 and since the November 12, 2002 redemption date, based upon all relevant factors (including the Company’s inability to extinguish all indebtedness under the Resort Senior Credit Facility and the Senior Subordinated Notes with sufficient assurance of remaining assets from which to redeem the Series A Preferred Stock), the Company’s Board of Directors has determined not to redeem any shares of Series A Preferred Stock because they have concluded that funds are not legally available.  On January 27, 2003, the holder of the Series A Preferred Stock demanded that the Company redeem all of the Series A Preferred Stock immediately and on April 8, 2003, the Series A Preferred Stockholder demanded pursuant to Delaware law to review certain records.  However, the Series A Preferred Stockholder has not pursued reviewing any of the Company’s records.  The Company will continue to assess its obligations with respect to the requirements of the redemption provisions of its Series A Preferred Stock.  Because the Series A Preferred Stock was not redeemed on November 12, 2002, the certificate of designation for the Series A Preferred Stock provides that the holder is entitled to elect two new members of the Company’s board of directors.  The right to appoint board members is the sole remedy available to the holder of the Series A Preferred

F-22

Stock as a result of the Company’s inability to redeem the Series A Preferred Stock on the redemption date, unless and until legally available funds are available for such redemption.  The Company has not yet been advised by the holder of the Series A Preferred Stock whether it intends to exercise its right to elect two new directors at or prior to the next annual shareholders meeting or whether it intends to take any other action to seek to compel the Company’s redemption of the Series A Preferred Stock.  If the holder of the Series A Preferred Stock was to commence any litigation to compel the Company to redeem the Series A Preferred Stock, based on present facts and circumstances, the Company would vigorously contest that litigation.  If the Company is required to redeem all or any portion of the Series A Preferred Stock, it could have a material adverse effect on its business, results of operations and financial condition.  Based on the status of the Series A Preferred Stock, it is classified as a current liability in the accompanying July 25, 2004 consolidated balance sheet.

The Mandatorily Redeemable 10½% Preferred Stock has voting rights as defined in the certificate of incorporation and ranks senior in liquidation preference to all common stock and Class A common stock outstanding as of July 25, 2004, common stock and Class A common stock issued in the future, all other preferred stock outstanding as of July 25, 2004 and any preferred stock issued in the future.

    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% Series B Convertible Participating Preferred Stock (Series B Preferred Stock) on August 9, 1999 to Oak Hill for $150.0 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 mandatorily redeemable Series C-1 and 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 (see Note 11).  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 current 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 (see Note 11).  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.  As of July 25, 2004, cumulative dividends in arrears totaled approximately $16.4 million and $74.4 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 July 25, 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 July 25, 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 shareholders.

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9.             Capital Stock

The Company has two classes of Common Stock outstanding, Class A common stock and common stock. The rights and preferences of holders of Class A common stock and common stock are substantially identical, except that, while any Class A common stock is outstanding, holders of Class A common stock will elect a class of directors that constitutes two-thirds of the Board of Directors (other than directors elected by holders of the Company’s various classes of preferred stock) and holders of common stock will elect a class of directors that constitutes one-third of the Board of Directors (other than directors elected by holders of the Company’s various classes of preferred stock).  Each share of Class A common stock is convertible into one share of common stock (i) at the option of the holder at any time, (ii) automatically upon transfer to any person that is not an affiliate of Leslie B Otten (Mr. Otten) the holder of 100% of the 14,760,530 shares of Class A common stock, and (iii) automatically if, at any time, the number of shares of Class A common stock outstanding represents less than 20% of outstanding shares of common stock and Class A common stock.

10.          Dividend Restrictions and Stockholders Agreement

    Dividend Restrictions

Borrowers under the Resort Senior Credit Facility, which include ASC, are restricted from paying cash dividends on any of their preferred or common stock.

                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 indenture governing the Senior Subordinated Notes, ASC is prohibited from paying cash dividends or making other distributions to its shareholders.

    Stockholders Agreement

The Company, Oak Hill, and Mr. Otten entered into a Stockholders Agreement, dated as of August 6, 1999, amended on July 31, 2000 (as amended, the “Stockholders Agreement”), pursuant to which each of Mr. Otten and Oak Hill agreed to vote its capital stock of the Company so as to cause there to be:

•Six directors of the Company nominated by Oak Hill, so long as Oak Hill owns 80% of the shares of common stock it owned as of July 30, 2000 on a fully diluted basis, such number of directors decreasing ratably with the percentage of Oak Hill’s ownership of the common stock on a fully diluted basis compared to such ownership as of July 30, 2000; and

•Two directors of the Company nominated by Mr. Otten, so long as Mr. Otten owns 15% of the shares of common stock outstanding on a fully diluted basis, and one director so nominated, so long as Mr. Otten owns at least 5% of the shares of common stock outstanding on a fully diluted basis.

As of July 25, 2004, Oak Hill owned not less than 80% of the shares of common stock it owned as of July 30, 2000, on a fully diluted basis, and Mr. Otten owned not less than 15% of the shares of common stock outstanding on a fully diluted basis.

The Stockholders Agreement provides that, so long as Oak Hill owns at least 20% of the outstanding shares of common stock on a fully diluted basis, the affirmative vote of at least one Oak Hill director is required prior to the approval of (i) the Company’s annual budget, (ii) significant executive personnel decisions, (iii) material actions likely to have an impact of 5% or more on the Company’s consolidated revenues or earnings, amendments to the Company’s articles of incorporation or bylaws, (iv) any liquidation, reorganization, or business combination of the Company, (v) the initiation of certain material litigation, and (vi) any material financing of the Company.

Under the Stockholders Agreement, Oak Hill and Mr. Otten have agreed not to dispose of their securities of the Company if, (i) as a result of such transfer, the transferee would own more than 10% of the outstanding shares of common stock of the Company (on a fully diluted basis), unless such transfer is approved by the Board of Directors

F-24

(x) including a majority of the Common Directors, as defined, or (y) the public stockholders of the Company are given the opportunity to participate in such transfer on equivalent terms, (ii) the transferee is a competitor of the Company or any of its subsidiaries, unless such transfer is approved by the Board of Directors, or (iii) such transfer would materially disadvantage the business of the Company or any of its subsidiaries.  The Stockholders Agreement provides for additional customary transfer restrictions applicable to each of Mr. Otten and Oak Hill as well as standstill provisions applicable to Oak Hill.

The Stockholders Agreement provides that, upon the Company’s issuance of shares of common stock or securities convertible into common stock, Mr. Otten and Oak Hill will have the right to purchase at the same price and on the same terms, the number of shares of common stock or securities convertible into common stock necessary for each of them to maintain individually the same level of beneficial ownership of common stock of the Company on a fully diluted basis as it owned immediately prior to the issuance.  This anti-dilution provision is subject to customary exceptions.

11.          Recapitalization

On July 15, 2001, the Company entered into a securities purchase agreement with Oak Hill to assist the Company in meeting its then current financing needs.  The agreement closed on August 31, 2001 and included the following key terms:

•The Company issued, $12.5 million aggregate principal amount of Junior Subordinated Notes to Oak Hill, which are convertible into shares of the Company’s Series D Preferred Stock;

•Oak Hill funded $2.5 million of the $3.5 million of availability remaining under Tranche C of the Real Estate Term Facility to facilitate amendments to that credit facility.  This was the final advance under Tranche C, as the maximum availability under this facility was reduced from $13.0 million to $12.0 million;

•Oak Hill agreed to provide a guaranty for a $14.0 million equipment lease for the Heavenly gondola, which guaranty was released upon the sale of Heavenly.  The fair value of the lease guaranty was approximately $1.7 million;

•Oak Hill purchased 1 million shares of the Company’s common stock for an aggregate purchase price of $1.0 million;

•Oak Hill agreed to cancel an agreement to provide it with warrants for 6 million shares of the Company’s common stock or 15% of the common stock of Resort Properties, the fair value of which was $2.2 million on the date of the transaction;

•The outstanding Series B Preferred Stock that was held by Oak Hill was stripped of all of its economic and governance rights and preferences, with the exception of the right to elect up to six directors in exchange for the items mentioned above and the Company issuing to Oak Hill two new series of Preferred Stock: (i) $40 million face value of Series C-1 Preferred Stock; and (ii) $139.5 million face value of Series C-2 Preferred Stock;

•At Oak Hill’s option, and subject to the consent of the other lenders under the Real Estate Term Facility, Tranche C of the Real Estate Term Facility is exchangeable in whole or in part into indebtedness of the Company when permitted under the existing debt agreements.

                The termination of the liquidation preference and other rights of the Series B Preferred Stock in exchange for the issuance of the Series C-1 and Series C-2 Preferred Stock was accounted for as a modification and recapitalization transaction in conjunction with the terms described above.  Accordingly, the carrying value of the Series B Preferred Stock of $172.1 million (net of $7.4 million unamortized discount) as of August 31, 2001 was removed and a corresponding amount recorded as Series C-1 Preferred Stock and Series C-2 Preferred Stock.  In addition, the fair values of the gondola lease guaranty of  $1.7 million and the warrant rights returned to the

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Company by Oak Hill of $2.2 million were added to the recorded value of the Series C-1 and Series C-2 Preferred Stock.  The gondola lease guaranty was accounted for as a prepaid lease cost that was amortized to lease expense based on the life of the gondola lease until the Heavenly resort was sold at which time the unamortized portion was written off.  The long-term liability related to the warrant rights was removed and the difference between its carrying value of $7.7 million and its fair value of $2.2 million was recorded as additional paid-in capital.  No gain or loss was recognized related to this recapitalization transaction.

12.      Merger, Restructuring, and Asset Impairment Charges

During fiscal 2002, fiscal 2003 and fiscal 2004, the Company recognized certain merger, restructuring and asset impairment charges as follows (in thousands):

	Fiscal 2002				Fiscal 2003				Fiscal 2004
Impairment of Steamboat assets	$		25,444		$		-		$	-
Impairment of Steamboat Grand Hotel and The Canyons Grand Summit Hotel  quarter and eighth share units	38,700				-				-
Impairment of The Canyons land and land options	18,921				-				-
Impairment of real estate master planning and infrastructure costs	24,756				(160			)	-
Impairment of resort land option at Sunday River and certain resort fixed assets and other assets	1,369				1,191				-
Impairment (recovery) of Sugarbush assets	(272			)	-				-
Restructuring charges	2,690				420				137
Total charges	$	111,608			$	1,451			$		137

    Merger and Asset Impairment Charges

                On May 20, 2002, Resort Properties defaulted on the Real Estate Term Facility due to its failure to make a mandatory principal payment of $3.75 million.  Until this time, Resort Properties had been able to obtain waivers or amendments to the Real Estate Term Facility whenever there were defaults.  However, given the combination of (1) extreme slow down in the resort sector economy and especially the slowdown in the real estate market, (2) the conservative lending environment, and (3) the negative terms of the Construction Loan restructuring and the possible negative terms of the Real Estate Term Facility restructuring, management determined that a significant adverse change in the economic environment and in the business plans of the Company occurred in the fourth quarter of fiscal 2002.  This adverse change affected the realizability of the Company’s long-lived assets and the Company recorded appropriate impairments.  In accordance with SFAS No. 144, the Company evaluated the carrying values of long-lived assets as of July 27, 2002.  In addition to the $25.4 million of asset impairments recorded on Steamboat fixed assets during the second quarter of fiscal 2002 (as discussed below), approximately $83.5 million of asset impairments were recorded during the fourth quarter of fiscal 2002 and are summarized as follows:

Real Estate Business Segment

•$38.7 million for quarter and eighth share inventory at the Steamboat Grand Hotel and The Canyons Grand Summit Hotel based on expected future cash flows,

•Approximately $24.8 million for master planning and real estate costs at The Canyons, Killington, Mount Snow, Sugarloaf/USA, Sunday River, and Steamboat based on expected future cash flows.

Resort Business Segment

•Approximately $18.9 million for land and land options at The Canyons based on appraisals and expected future cash flows,

•Approximately $1.4 million for certain resort fixed assets and a land option at Sunday River based on expected realizability,

•Approximately ($0.3) million gain to finalize the sale of Sugarbush.

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During the first quarter of fiscal 2002, the Company entered into a non-binding letter of intent to sell its Steamboat resort.  The Company recognized a $25.4 million impairment loss on the net assets held for sale in the second quarter of fiscal 2002 based on modifications from preliminary estimates to the final proposed purchase and sale agreement in addition to the $52.0 million impairment loss recorded in previous years.  The Company withdrew from the sale of Steamboat on March 26, 2002.

                In the first quarter of fiscal 2002, the Company finalized its sale of its Sugarbush resort.  In accordance with SFAS No. 121, the Company recorded a gain of approximately $272,000 which was reflected as an offset to impairment charges recorded in prior years.

                The Company incurred $1.4 million of merger, restructuring, and asset impairment charges for fiscal 2003 that consisted of  $1.2 million of expenses related to the write-off of certain fixed assets and other assets in its resort segment, $0.4 million in employee severance charges in its resort segment, offset by the reversal of $0.2 million of impairment charges in its real estate segment that were determined not to be needed.  Employee severance charges were paid in fiscal 2003.

                The Company incurred and paid $0.1 million in employee severance charges in its resort segment in fiscal 2004.

Restructuring Charges

On May 30, 2001, the Company initiated a comprehensive strategic plan to improve its capital structure and enhance future operating performance.  The plan included the following key components:

•Strategic redeployment of management and capital resources to emphasize the integration and growth of resort village development and operations.

•Intent to sell the Steamboat resort and use the net proceeds to reduce the debt of the Company.

•Reorganization, staff reduction, and performance enhancement programs to achieve operational cost savings and improve financial performance.

•A comprehensive financial restructuring package, including amendments to senior credit facilities and an anticipated new capital infusion to enhance financial flexibility.

During fiscal 2002, the Company incurred $2.7 million in charges related to the implementation of its comprehensive strategic plan.  These costs consisted mainly of legal, consulting, and financing costs incurred in connection with its resort and real estate credit facility amendments.  All of the amounts recognized during fiscal 2002 were paid or accrued for services rendered prior to July 28, 2002 and are included in merger, restructuring, and asset impairment charges in the accompanying fiscal 2002 consolidated statements of operations.

13.      Income Taxes

There was no provision or benefit for income taxes recorded in operations for fiscal 2002, fiscal 2003, or fiscal 2004.  Deferred income taxes reflect the tax impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. Under SFAS No. 109, the benefit associated with future deductible temporary differences and net operating loss or income tax credit carryforwards is recognized if it is more likely than not that a benefit will be realized.  The Company recorded no deferred tax (expense) benefit because there was no change in the net deferred tax asset or liability balance.

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Deferred tax (liabilities) assets are comprised of the following as of July 27, 2003 and July 25, 2004 (in thousands):

	July 27, 2003				July 25, 2004
Property and equipment basis differential	$	(49,545		)	$	(59,749	)
Other	(8,771			)	(8,887		)
Gross deferred tax liabilities	(58,316			)	(68,636		)
Tax loss and credit carryforwards	119,442				126,899
Capitalized costs	4,715				3,108
Deferred revenue and contracts	2,533				4,150
Stock compensation charge	603				667
Reserves and accruals	72,980				67,944
Gross deferred tax assets	200,273				202,768
Valuation allowance	(141,957			)	(134,132		)
Net deferred tax (liability) asset	$		-		$	-

The (provision) benefit for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory income tax rate of 35% to income (loss) before (provision) benefit for income taxes, cumulative effects of change in accounting principle, and income from discontinued operations as a result of the following differences (in thousands):

	Fiscal 2002			Fiscal 2003			Fiscal 2004
Income tax benefit at the statutory U.S. tax rates	$	58,652		$	15,531		$	(10,028	)
Increase (decrease) in rates resulting from:
State income taxes, net	10,416			3,054			(413		)
Change in valuation allowance	(67,732		)	(17,061		)	(7,825		)
Accretion of discount and dividends on Mandatorily Redeemable Preferred Stock included as interest expense	-			-			15,092
Stock option compensation	(163		)	-			-
Nondeductible items	(360		)	(1,461		)	1,450
Other	(813		)	(63		)	1,724
Income tax benefit at the effective tax rates	$	-		$	-		$	-

As of July 25, 2004, the Company has federal net operating loss carryforwards of approximately $263.9 million which expire in varying amounts though fiscal 2024, and approximately $1.5 million in general business credit carryforwards which expire in varying amounts through fiscal 2024.  The utilization of some of these losses and carryforwards will be limited pursuant to Internal Revenue Code Section 382 as a result of ownership changes.  Subsequent ownership changes, if any, could cause there to be additional limitations on  existing net operating loss and credit carryforwards.

Management has concluded that it is more likely than not that the Company will not have sufficient taxable income of an appropriate character within the carryback and carryforward period permitted by current law to allow for the utilization of certain carryforwards and other tax attributes generating the net deferred tax asset.  Therefore, a valuation allowance of approximately $142.0 million and $134.1 million has been established to reduce the deferred tax assets to their net realizable value as of July 27, 2003 and July 25, 2004, respectively.

14.      Cumulative Effects of Change in Accounting Principle

                During fiscal 2002, the Company adopted SFAS No. 142, which   applies to goodwill and intangible assets acquired after June 30, 2001, as well as goodwill and intangible assets previously acquired.  As a result of the adoption of SFAS No. 142, the Company recorded a goodwill impairment loss of $18.7 million, which has been recorded as a cumulative effect of change in accounting principle in the accompanying fiscal 2002 consolidated statement of operations.

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15.      Business Segment Information

The Company has classified its operations into two business segments, resorts and real estate.  Revenues at each of the resorts are derived from the same lines of business which include lift ticket sales, food and beverage, retail sales including rental and repair, skier development, lodging and property management, golf, other summer activities, and miscellaneous revenue sources.  The performance of the resorts is evaluated on the same basis of profit or loss from operations.  Additionally, each of the resorts has historically produced similar 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, “Disclosures About Segments of an Enterprise and Related Information.”  The Company’s real estate revenues are derived from the sale and leasing of interests in real estate development projects undertaken by the Company at its resorts and the sale of other real property interests.

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The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.  Data by segment is as follows (in thousands):

	July 28, 2002					July 27, 2003			July 25, 2004
Net revenues:
Resorts	$			243,842		$	251,638		$	250,706
Real estate	28,274					12,898			33,405
	$			272,116		$	264,536		$	284,111
Income (loss) before income taxes:
Resorts	$		(82,494		)	$	(23,319	)	$	(66,611		)
Real estate	(85,084				)	(21,055		)	38,109
	$		(167,578		)	$	(44,374	)	$	(28,502		)
Depreciation and amortization:
Resorts	$		25,152			$	25,791		$	24,750
Real estate	1,086					1,722			1,727
	$		26,238			$	27,513		$	26,477
Interest Expense, net:
Resorts	$		36,267			$	27,139		$	70,111
Real estate	18,485					20,225			17,492
	$	54,752				$	47,364		$	87,603
Merger, restructuring, and asset impairment charges, gain on extinguishment of debt, and gain on transfer of assets associated with extinguishment of debt:
Resorts	$	47,912				$	1,611		$	137
Real estate	63,696					(160		)	(48,584			)
	$	111,608				$	1,451		$	(48,447		)
Capital expenditures:
Resorts	$	6,903				$	6,819		$	9,573
Real estate	10,190					6,722			-
	$	17,093				$	13,541		$		9,573
Identifiable assets:
Resorts						$	349,300		$		340,965
Real estate						116,970			81,804
						$	466,270		$		422,769

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Capital expenditures for the Company’s real estate segment include the net change in real estate held for sale and real estate operating expenses for the periods presented.  A reconciliation of the totals reported for the operating segments to the totals reported in the consolidated financial statements is as follows:

	July 28, 2002		July 27, 2003		July 25, 2004
Capital expenditures:
Resort capital expenditures	$	6,903	$	6,819	$	9,573
Real estate capital expenditures	-		265		-
Capital expenditures for discontinued operations	628		-		-
	$	7,531	$	7,084	$	9,573
Assets:
Identifiable assets for segments			$	466,270	$	422,769
Intangible and deferred income tax assets not allocated to segments			9,035		8,031
Total consolidated assets			$	475,305	$	430,800

16.      Related Party Transactions

Tranche C of the Real Estate Term Facility was purchased by Oak Hill on July 31, 2001 (see Note 6).  The Company paid a $375,000 financing fee to Oak Hill in connection with this $13.0 million investment.  The Real Estate Term Facility and the related Securities Purchase Agreement with Oak Hill were restructured during the first quarter of fiscal 2002.  In conjunction with the restructuring of the Real Estate Term Facility, the $25.0 million in debt from Resort Properties to Oak Hill and its affiliates (Tranche C of the Real Estate Term Facility), was contributed by Oak Hill to ASC as additional paid-in capital.  This contribution was made for no additional consideration, and no equity was issued by ASC in return for the contribution.

On March 28, 2001, Mr. Otten resigned as the Company’s Chairman and Chief Executive Officer.  Mr. Otten is still a major shareholder of the Company and is a member of the Company’s Board of Directors.  As part of his separation agreement, the Company paid Mr. Otten and his executive assistant their salaries and medical benefits for two years.  These amounts totaled approximately $480,000 on an annual basis.  In addition, the Company granted Mr. Otten the use of Company office space for up to two years and the Company also transferred ownership of one of its vehicles (valued at approximately $20,000) to Mr. Otten at no charge.

In April 2003, the Company entered into a transaction with Mr. Otten at the Company’s Sunday River resort wherein the Company granted to Mr. Otten certain easements necessary for him to develop a restaurant near the resort in exchange for the grant by Mr. Otten of certain parking and access easements beneficial to the resort.  This transaction was reviewed and approved by the Audit Committee of the Company’s Board of Directors.

Mr. Wachter is the founder and Chief Executive Officer of Main Street Advisors.  Main Street Advisors, through Mr. Wachter, acted as one of the Company’s investment bankers in connection with the marketing of the Steamboat and Heavenly resorts for sale.  Main Street Advisors is entitled to a percentage-based fee in the event of the sale of any significant asset of the Company, other than the Sugarbush resort and certain undeveloped real estate properties.  During fiscal 2002, fiscal 2003, and fiscal 2004, the Company recorded expenses for obligations to  Main Street Advisors of $1.1 million, $0, and $0.4 million, respectively, in connection with these services.

17.      Commitments and Contingencies

The Company leases certain land and facilities used in the operations of its resorts under several operating lease arrangements.  These lease arrangements expire at various times from the year 2010 through the year 2060. Lease payments are generally based on a percentage of revenues.  Total rent expense under these operating leases as recorded in resort operating expenses in the accompanying consolidated statements of operations for fiscal 2002, fiscal 2003, and fiscal 2004 was $4.2 million, $4.2 million, and $4.1 million, respectively.

Significant portions of the land underlying certain of the Company’s ski resorts are leased or subleased by the Company or used pursuant to renewable permits or licenses.  A substantial portion of the land constituting skiable terrain at Attitash Bear Peak, Mount Snow, and Steamboat is located on federal land that is used under the terms of the permits with the United States Forest Service (the Forest Service). Generally, under the terms of such permits, the Forest Service has the right to review and comment on the location, design, and construction of improvements in the permit area and on many operational matters.  The permits can be terminated or modified by the

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Forest Service to serve the public interest.  The Company does not anticipate any limitations, modifications, or non-renewals which would adversely affect the Company’s operations.

Killington leases certain land from the State of Vermont.  The lease is subject to a buy-out option retained by the State of Vermont, as landlord.  At the conclusion of each 10-year term, or extended term, the State has the option to buy out the lease for an amount equal to Killington’s adjusted capital outlay plus 10% of the gross receipts from the operation for the preceding three years.  Adjusted capital outlay means total capital expenditures extending back to the date of origin of the lease depreciated at 1% per annum, except that non-operable assets depreciate at 2% per annum.  This buy-out option will next become exercisable in the year 2010.  Although the Company has not had confirmation from State of Vermont officials, it has no reason to believe that the State intends to exercise the buy-out option at that time.

Sunday River leases approximately 1,500 acres, constituting a substantial portion of its skiable terrain, under a 50-year lease terminating on October 14, 2030.  The lease renews automatically thereafter on a year-to-year basis unless terminated by either the lessor or lessee.  This lease was amended on January 23, 1998 to allow Sunday River to purchase portions of the leased property for real estate development at a predetermined amount per acre.  In January 1998, the Company acquired an undivided one-half interest in the fee title to the leased parcel.

The Company is also subject to a wide variety of federal, state, and local laws and regulations relating to land use and development and to environmental compliance and permitting obligations, including those related to the use, storage, discharge, emission, and disposal of hazardous materials.

In connection with the purchase of The Canyons, the Company entered into an operating lease arrangement with the seller for the lease of certain land to be used in the operation of the resort and for future real estate development.  The arrangement provides for an initial lease term of 50 years, with the option to extend for three additional 50-year periods for a fee of $1.0 million for each extension period.  Lease payments are based on a percentage of gross skiing and lodging revenues.  The arrangement also provides for additional one-time payments ranging from $250,000 to $3.0 million upon achievement of annual skier visit level increases in 100,000 visit increments up to 1,000,000.  The Company paid $750,000 during fiscal 2004 under this agreement.  The Company has entered into a modification to the agreement (finalization of the modification to the agreement is subject to the completion of certain documentation) for the next skier visit level that obligates the Company to pay $250,000 in April 2005 and $750,000 on April 2006.  These obligations are accrued as of  July 25, 2004 in accounts payable and other current liabilities and other long-term liabilities, as applicable, and a deferred charge has been established in other current assets and other assets that will be amortized over a two-year period.  Total rent expense under this arrangement, as recorded in resort operating expenses in the accompanying consolidated statements of operations for fiscal 2002, fiscal 2003, and fiscal 2004 was $1.2 million, $1.2 million, and $1.3 million, respectively.  In addition, the Company has the option to purchase parcels of land covered under the operating lease for real estate development.  The Company was obligated to make payments for these options totaling approximately $19.4 million at various times and in varying amounts through May 2003.  Through July 25, 2004, the Company has made $17.4 million of option payments.  The remaining $2.0 million in option payments have been accrued in other current liabilities in the accompanying consolidated balance sheet as of July 25, 2004 as the Company has entered into a non-cancelable agreement to make these payments.

The ski development rights for approximately 3,000 acres of skiable terrain that the Company has targeted for development at The Canyons are contained in a development agreement with Iron Mountain Associates, LLC, which agreement includes a lease of all skiable terrain for a term ending September 13, 2094.  The Company executed an amendment to this lease which provided that these ski development rights be acquired by April 2003.  In fiscal 2003, the Company paid approximately $5.0 million for the acquisition of these development rights.  In connection with the agreement, the Company will also be required to build two lifts over the next three years, which will be owned by the Company, for an estimated total cost of approximately $3.0 million.

The Company entered into an agreement with a third party land owner at The Canyons resort for an exchange of development properties which will include an obligation of the Company to complete certain road and utility infrastructure on the Company’s property adjacent to third party land owners property.  The estimated cost of the portion of this infrastructure for which the Company is responsible is $0.9 million.  In addition, the Company is

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required to provide culinary water rights to the third party owner, which rights the Company owns but for which there is no carrying value in the accompanying balance sheets due to their impairment.

The Company’s development activities at The Canyons are governed by permits issued pursuant to a Development Agreement with local authorities.  The Development Agreement requires the Company to achieve certain performance benchmarks in order to remain in compliance with the Development Agreement and obtain additional permits.  The Company has not achieved certain of these performance benchmarks within the time frames required under the Development Agreement, and the local authorities have advised management that these failures potentially constitute defaults under the Development Agreement.  Management is working with the local authorities to address these failures and reassess the appropriate timing for compliance with these performance benchmarks.  The Company is unable to determine if there will be any negative impact to the Company’s financial position or results of operations as a result of not achieving these performance benchmarks and no liability with respect to this matter has been included in the accompanying consolidated financial statements.

The Company believes that they possess all the permits, licenses, and approvals from governmental authorities material to the operations as they currently exist.  The Company has not received any notice of material non-compliance with permits, licenses, or approvals necessary for the operation of any of its properties, with the exception of the Development Agreement at The Canyons, where the Company has received a notice of non-compliance from the applicable governmental regulators and is working with them to resolve compliance issues.

In addition to the leases described above, the Company is committed under several operating and capital leases for various facilities, machinery and equipment. Rent expense under all operating leases was $10.3 million, $10.5 million, and $11.2 million (inclusive of $4.2 million, $4.2 million, and $4.3 million of contingent rental payments) for fiscal 2002, fiscal 2003, and fiscal 2004, respectively.

Future minimum lease payments for lease obligations, exclusive of contingent skier visit payments (discussed above), as of July 25, 2004 are as follows (in thousands):

	Capital			Operating
	Leases			Leases
2005	$	5,626		$	4,766
2006	-			3,535
2007	-			2,257
2008	-			1,336
2009	-			1,022
2010 and thereafter	-			1,835
Total payments	5,626			$	14,751
Less interest (rates ranging from 5.0% to 12.2%)	(438		)
Present value of net minimum payments	5,188
Less current portion	(5,188		)
Long-term obligations	$	-

The Killington resort has been identified by the U.S. Environmental Protection Agency (the EPA) as a potentially responsible party (PRP) at two sites pursuant to the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund).  Killington has entered into a settlement agreement with the EPA at one of the sites, the Solvents Recovery Service of New England Superfund site in Southington, Connecticut.  Killington rejected an offer to enter into a de minimis settlement with the EPA for the other site, the PSC Resources Superfund site in Palmer, Massachusetts, on the basis that Killington disputes its designation as a PRP.  The Company believes that its liability for these Superfund sites, individually and in the aggregate, will not have a material adverse effect on the business, financial condition, results of operations, or liquidity of the Company.

Pursuant to a contractual undertaking with an unrelated third party at The Canyons, the Company is obligated to fund up to $3.0 million in construction costs or other capital support for a golf course to be built at The

F-33

Canyons.  Part or all of this obligation may be satisfied by various capital improvements which would benefit the resort as well as the golf course.  Since the method of satisfying this obligation as well as the ultimate construction of the golf course is contingent upon the course developer being able to obtain sufficient funding (which is not probable as of this date), no liability has been recorded in the accompanying consolidated balance sheets for  this obligation.

ASC entered into an agreement on January 22, 2002 with Triple Peaks, LLC for the sale of the Steamboat resort.  The Company later determined that the sale of its Heavenly resort more closely achieved the Company’s restructuring objectives and concluded that it would not proceed with the sale of the Steamboat resort.  On April 5, 2002, Triple Peaks, LLC filed a lawsuit against ASC in Federal District Court in Denver, alleging breach of contract resulting from ASC’s refusal to close on the proposed sale of the Steamboat resort.  The suit sought both monetary damages resulting from the breach and specific performance of the contract.  On April 16, 2002, before an answer to its complaint was filed, Triple Peaks voluntarily dismissed its suit and re-filed a substantially identical complaint in Colorado State District Court in Steamboat, also naming Steamboat Ski & Resort Corporation, Resort Properties and Walton Pond Apartments, Inc. (each direct or indirect subsidiaries of ASC) as additional defendants.  On December 31, 2002, the Colorado State District Court issued summary judgment in ASC’s favor and against Triple Peaks, confirming that the damages ASC owes Triple Peaks under the contract are limited to $0.5 million.  On January 26, 2003, Triple Peaks appealed the decision of the Colorado State District Court.

On January 22, 2004, the Colorado Court of Appeals reversed the judgment of the Colorado State District Court in ASC’s favor, finding that the agreement between ASC and Triple Peaks did not, under the circumstances of ASC’s refusal to close, limit damages to $0.5 million.  The Court of Appeals remanded the case to the Colorado State District Court with instructions to determine whether damages or specific performance of the agreement was the proper remedy for ASC’s refusal to close.

ASC filed a Request for Rehearing with the Colorado Court of Appeals, which request was denied in March 2004.  ASC filed a Petition for Certiorari with the Colorado Supreme Court and to assert that damages under the agreement are limited to $0.5 million.  On July 12, 2004, the Company reached a settlement with Triple Peaks, LLC regarding this litigation.  In return for a cash settlement of $5.14 million, Triple Peaks LLC agreed to a full dismissal of all claims relating to the proposed sale of the Steamboat resort, and the Company expensed these settlement costs in fiscal 2004.  The Company paid an initial payment of $3.0 million and has established a liability in accounts payable and other accrued liabilities for the remaining $2.14 million as of July 25, 2004 that is to be paid in April 2005.  If the Company does not make the payment on that date an interest rate of 12% will be computed through December 31, 2005 and 16% thereafter plus other remedies.  In addition, the Company is required to make a bonus payment to Triple Peaks of $860,000 if the Company sells or transfers substantially all of its assets to a third party on or prior to December 31, 2005 and the closing occurs on or before April 1, 2006.  Triple Peaks also has the right of first refusal to buy Steamboat if the sale is on a stand alone basis.

On April 22, 2003, the Company was sued in Utah state court by Westgate Resorts, Ltd. for breach of contract and other related claims arising from disputes involving two contracts between the Company (through two different subsidiaries, ASC Utah, Inc. and American Skiing Company Resort Properties, Inc.) and Westgate.  Generally, Westgate has alleged that ASC Utah and/or American Skiing Company Resort Properties, Inc. have breached obligations to Westgate to construct certain infrastructure at The Canyons resort and provide marketing support for Westgate’s project.  Westgate’s claim seeks specific performance of certain aspects of the two contracts.  It is not currently feasible to quantify the damages being sought in this action.  On May 13, 2003, the Company answered Westgate’s complaint and filed a counterclaim, alleging, among other things, that Westgate was in default on a joint promotional agreement with ASC Utah for failing to purchase approximately $2.0 million in lift tickets and that Westgate’s buildings at The Canyons encroach upon land owned or controlled by ASC Utah and/or American Skiing Company Resort Properties, Inc.  No discovery has been taken in this matter and no timetable has been set for bringing the matter to trial.

In July 2003, the homeowners association of the Mount Snow Grand Summit Hotel filed a claim against Grand Summit for damages of $2.0 million for improper roof/insulation construction at that hotel.  Grand Summit has filed an answer and a crossclaim against the architect and general contractor for the project.  Discovery in this matter is at a very preliminary stage and no timetable has been set for bringing the matter to trial.

F-34

Certain claims, suits and complaints in the ordinary course of business are pending or may arise against the Company or its direct and indirect subsidiaries.  In the opinion of management, all matters are without merit or are of such kind, or involve such amounts that their ultimate resolution would not have a material effect on the financial position, results of operations or liquidity of the Company if disposed of unfavorably.

Killington leases certain land from SP Land (see Note 6) that it uses as a parking lot.  The lease is terminable in whole or in part upon 12 months notice and upon termination, Killington will be required to replace any parking spaces on the terminated portion of the lease with new parking spaces located on different parcels of land owned by Killington.  Part or all of this obligation may be satisfied by various capital improvements which would benefit the resort.  The estimated cost of this infrastructure for which the Company will be responsible is $1.5 million.   In addition, upon development of the parcels subject to the parking lot lease, Killington will be obligated to construct new transportation facilities supporting the resort.  The estimated cost of this infrastructure for which the Company will be responsible is $0.8 million.

The Company enters into certain programs with various airlines that provide airline service to an airport near its Steamboat resort.  Payments on these programs to the airlines are contingent upon number of seats used during the ski season.  As these payments are contingent upon the actual flights flown and usage of such flights, the Company has no recorded liability in the accompanying consolidated balance sheets for this obligation.  The Company recorded an expense relating to these programs of $1.2 million, $1.4 million, and $1.0 million for fiscal 2002, fiscal 2003, and fiscal 2004, respectively.

The Company is a member in a non-profit association of property owners at The Canyons called the Resort Village Management Association (RVMA).  In conjunction with its efforts to develop a golf course at The Canyons, the RVMA purchased 200 irrigation water shares from the Company and an unrelated third party.  Fifty of these 200 shares were purchased from the Company (the Company Shares).  The RVMA’s purchase of the 200 water shares triggered a third party obligation to provide to the Company an additional 110 culinary water shares (the Additional Shares).  In order to finance the purchase of the 200 irrigation water shares, the RVMA obtained a loan (the Water Loan) collateralized by the water shares that it purchased.  As further collateral for the Water Loan, the Company pledged to the lender its interest in the 110 Additional Shares, and deferred its right to receive the $500,000 purchase price for the Company Shares from the RVMA until after repayment in full of the Water Loan.  The Company is not directly obligated for any portion of the water loan, and provided no credit support for the Water Loan other than the Additional Shares and the deferral of purchase price.

The Company has issued approximately $0.3 million of letters of credit under the Resort Senior Credit Facility.  The Company has also issued a letter of credit for $0.3 million related to certain workers compensation obligations outside of the Resort Senior Credit Facility.  This letter of credit is secured by certain cash deposits of one of the Company’s wholly owned subsidiaries.

                ASC has established the American Skiing Company Phantom Equity Plan (the “LTIP”).  Certain of ASC’s Executive Officers participate in this plan.  Participants are entitled to a payment on awards granted under the LTIP, to the extent vested upon a Valuation Event or in certain cases upon termination of employment.  The amount of any awards are based ultimately on the Equity Value, as defined by the LTIP, obtained through a Valuation Event.  A Valuation Event is any of the following:  (i) a sale or disposition of a significant Company operation or property as determined by the Board; (ii) a merger, consolidation or similar event of the Company other than one (A) in which the Company is the surviving entity or (B) where no Change in Control has occurred; (iii) a public offering of equity securities by the Company that yields net proceeds to the Company in excess of $50 million; or (iv) a Change in Control, as defined by the LTIP.  The LTIP was ratified by the Company’s Board of Directors on March 6, 2003.  Compensation expense relating to the LTIP is estimated and recorded based on the probability of the Company achieving a Valuation Event.  During fiscal 2003 and fiscal 2004, the Company recorded an expense relating to the LTIP of approximately $0.6 million and $0.1 million, respectively, which is included in marketing, general and administrative expenses in the accompanying consolidated statements of operations.  At July 25, 2004, the total liability for the LTIP of $0.7 million is included in other long-term liabilities in the consolidated balance sheet.

The Company has entered into employment agreements with three of its executive officers.  These employment agreements provide for guaranteed annual base salaries ranging from $245,000 to $265,000 per person. 

F-35

The employment agreements also provide for contingent annual bonuses ranging from 30% to 75% of annual base salaries, involuntary termination benefits, termination benefits resulting from a change in control of the Company, LTIP participation levels and, in certain cases, benefits where the termination of employment was voluntary.  These agreements also provide for certain benefits in the event of the death of the executive.

The Company entered into a comprehensive management consulting agreement beginning in fiscal 2002 with Interstate Hotels & Resorts, Inc. (Interstate), under which Interstate was supporting the management and operations of the Company’s lodging and property management division.  The agreement was for a 5-year term ending on July 30, 2006.  However, at either party’s option, this agreement could be terminated during the 60-day period commencing on July 30, 2003.  The Company gave notice to Interstate in August 2003 that it was terminating the consulting agreement.  The agreement provided for a basic fee of $0.6 million per year as well as an incentive fee determined and paid in accordance with the agreement.  The Company settled the unpaid basic fees, incentive fees, and unpaid expenses for approximately $0.4 million subsequent to July 25, 2004.  The amount was appropriately accrued for in accounts payable and other current liabilities as of July 25, 2004.

18.      Assets/Liabilities Held For Sale and Discontinued Operations

    Heavenly Sale

On May 9, 2002, the Company completed the sale of its Heavenly resort to Vail Resorts, Inc. (Vail).  Management determined that the sale of Heavenly more closely achieved the Company’s restructuring objectives and resulted in a significantly higher asset valuation than the previously announced Steamboat sale transaction.  As a result, management concluded that the Company would not proceed with the sale of the Steamboat resort.  Total consideration for the sale of Heavenly was $104.9 million, which was comprised of a $102.0 million sales price, less $2.4 million in purchase price adjustments, plus $5.3 million of current liabilities assumed by Vail.  Vail also assumed $2.8 million in capital lease obligations leaving $96.8 million in net proceeds after assumption of the capital lease obligations.  At closing, the Company paid $1.8 million in costs related to the sale with net proceeds after transaction costs of $95.0 million.

The Company paid fees and accrued interest totaling $2.8 million related to the prior resort senior credit facility out of the sales proceeds and an early prepayment penalty associated with the retirement of a term loan, including accrued interest.  After these payments, the Company made reductions to its outstanding debt of the following amounts:

Real Estate Term Facility	$		2.0	million
Prior resort senior credit facility, term portion	28.6			million
Prior resort senior credit facility, revolver portion	44.1			million
Heavenly capital lease	12.8			million
Total	$	87.5		million

In connection with the completion of the sale of Heavenly, the availability under the revolving portion of the prior resort senior credit facility was reduced from $94.6 million to $52.1 million.  After prepayment penalties of $0.7 million and the total debt reduction of $87.5 million, the remaining proceeds from the sale of $4 million were deposited into a temporary cash account.  In conjunction with the repayment of the Heavenly capital lease, a guaranty provided by Oak Hill to secure that loan was released.

The sale of Heavenly was accounted for in accordance with SFAS No. 144 and the results of operations for Heavenly for fiscal 2002 have been removed from continuing operations and classified as discontinued operations.  The gain on sale of Heavenly was $2.9 million which is included in income from discontinued operations in the accompanying fiscal 2002 consolidated statement of operations.  Revenues applicable to the operations of Heavenly were $51.6 million for fiscal 2002.

F-36

    Sugarbush Sale

On September 28, 2001, the Company finalized the sale of its Sugarbush resort in Warren, Vermont to Summit Ventures NE, Inc. This sale generated net proceeds of $5.2 million that were used by the Company to permanently pay down the revolving and term portions of its prior resort senior credit facility, on a pro-rata basis, in accordance with the mandatory prepayment requirements of the facility.  The Company accounted for the sale of its Sugarbush resort under SFAS No. 121 which precludes disclosure of the resort’s operating results as discontinued operations (see Note 2).

Summary resort segment operating results for Sugarbush for fiscal 2002 are as follows (in thousands):

Fiscal Years Ended	2002
Total revenues	$		781
Total expenses	1,696
Income (loss) from operations	$	(915		)

19.    Subsequent Events

As a result of improved operating performance and the strengthening of the Company’s balance sheet following recent restructuring transactions, the Company has commenced marketing for a new senior secured credit facility.  The new facility is expected to total approximately $230.0 million, and consist of a revolving credit facility and term loan facilities.  The proceeds of the facilities would be 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.  Arrangement and consummation of a new senior secured credit facility is subject to satisfactory documentation and other customary conditions.  If the Company’s marketing efforts for the facility are successful, closing on the facility is expected to take place in November 2004.

On October 12, 2004, in conjunction with a proposed new senior secured credit facility, the Company commenced a tender offer for all of the Senior Subordinated Notes, which total $120.0 million.  The total consideration payable in connection with the offer is $1,015.63 per $1,000 principal amount plus accrued but unpaid interest for the Senior Subordinated Notes.  The Company also solicited consents from the holders of the Senior Subordinated Notes to eliminate substantially all of the restrictive covenants and certain events of default under the indenture for the Senior Subordinated Notes.  On October 22, 2004, the Company announced that it has received the requisite consents from the holders of the Senior Subordinated Notes to the proposed indenture amendments, and the Company entered into a supplemental indenture reflecting those amendments.  Closing of the tender offer and proposed indenture amendments becoming operative are each subject to the consummation of a new senior secured credit facility in an amount sufficient to fund the total consideration for the Senior Subordinated Notes and to refinance the Company’s Resort Senior Credit Facility, and certain other customary conditions.

                 On October 12, 2004, the Company entered into an Exchange Agreement with the holder of the Company’s Series A Preferred Stock.  Pursuant to the terms of the Exchange Agreement, the Company has agreed to issue 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 will be issued only in the event that the Company is successful in consummating a new senior secured credit facility and the tender offer.  The new junior subordinated notes will 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 will be 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 will be obligated on the new junior subordinated notes, and none of the Company’s assets will serve as collateral for repayment of the new junior subordinated notes.

There can be no assurance that the Company will be successful in marketing the new senior secured credit facility on acceptable terms.  The financial statements presented herein do not give effect to the proposed new senior secured credit facility, the tender for the Senior Subordinated Notes, or the exchange of the Series A Preferred Stock for junior subordinated notes.

F-37

EX-10.37

Exhibit 10.37

RESTATEMENT OF AGREEMENT

THIS AGREEMENT ismade and entered into this 1^st day of August, 2001, to be effective as of August 14, 1996 (“Effective Date”), by and among D. A. Osguthorpe (“Osguthorpe”), D. A. Osguthorpe Family Partnership (“Partnership”), D.A. Osguthorpe, as trustee of The Dr. D.A. Osguthorpe Trust (“Trust”), Stephen A. Osguthorpe (“S. Osguthorpe”) and ASC Utah, Inc., a Maine corporation (“ASCU”). Osguthorpe, the Trust, the Partnership, S. Osguthorpe, and ASCU are collectively referred to herein as the “Parties”, or singly as a “Party” as the context requires or permits.

RECITALS:

A.            Osguthorpe, the Trust and/or the Partnership is the owner of certain real property consisting of approximately 560 acres as described in annexed Exhibit “A” (the “Property”);

B.          By agreement dated August 14, 1996, Osguthorpe, the Partnership and Wolf Mountain Resorts, L.L.C. (predecessor-in-interest to ASCU) (“Wolf”) entered into that certain agreement (the “Initial Agreement”) under which Osguthorpe and the Partnership granted certain rights to Wolf in, to and over the Property for use as a commercial recreational area, including the installation, maintenance and operation of two (2) ski lifts, snow making and clearing of ski trails and such other related facilities, structures and roads as may be required to allow Wolf to use the Property as a commercial recreation area, and Osguthorpe agreed to provide services to Wolf;

C.            On July 28, 1997, ASCU, Osguthorpe, the Partnership and S. Osguthorpe entered into acertain agreement amending and clarifying certain provisions of the Initial Agreement (the “First Amendment”);

D.            Among other things, the First Amendment provided that ASCU “will include the Osguthorpes in their master planning process”;

E.             On August 10, 1998, Osguthorpe, the Partnership, S. Osguthorpe and ASCU entered into an agreement (the “Second Amendment”) (the Initial Agreement, First Amendment and Second Amendment are herein referred to collectively as the “Documents”) which amends the Initial Agreement and the First Amendment;

F.             On or about May 13, 1998, the Trust acquired an interest in the Property;

G.            ASCU is the owner and operator of The Canyons resort and the Property is used in ASCU’s operations.  ASCU intends to expand its operations on the Property and, as it has done in the past, ASCU intends to hire personal services of Osguthorpe and/or S. Osguthorpe to assist it in the master planning or development of The Canyons resort;

H.            S. Osguthorpe has provided, and agrees to provide in the future, services to ASCU to assist ASCU in its master planning and development process for The Canyons resort;

I.              A dispute has arisen between Osguthorpe, the Trust, the Partnership, S. Osguthorpe and ASCU regarding, among other things, whether the payments under the Documents are payments for lease rentals and services rendered or whether the payments are solely for lease rentals;

J.             The Parties desire to resolve their disputes by clarifying the provisions of the Documents and establishing a process to (i) allocate that portion of the annual payment to the fair market value for ASCU’s rights in and to the Property and to use the Property as part of its operations of The Canyons resort, and (ii) pay for services provided by Osguthorpe and/or S. Osguthorpe under the Documents; and

K.            The Parties desire to set forththeir understandings and agreements in writing,

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NOW, THEREFORE, in consideration of the mutual agreements and covenants set forth herein and for other good and valuable consideration, the receipt, sufficiency and adequacy which is hereby acknowledged by each of the Parties, the Parties agree as follows:

1.             Restatement of Documents.  The Initial Agreement, First Amendment and Second Amendment are hereby amended and restated in their entirety.

2.             Easement Grant.  Osguthorpe, the Trust and the Partnership hereby grant, and reaffirm the granting of, an easement (the “Easement”) on, under and over the Property to ASCU for use as a commercial recreational area, including the installation, maintenance and operation of two (2)ski lifts, snow making and clearing of ski trails and such other related facilities, structures and roads as may be required for such use. Specifically Saddleback and Doc’s Knob chair lifts as identified on annexed Exhibit “B”, including ski trails servicing Doc’s Knob and lower sliver of the quarter section additionally identified on annexed Exhibit “B”, Ski trials, lifts and facilities shall not be constructed on the southernmost parcel #6 (40 acres) and parcel #5 (40 acres) other than those previously identified on the Property as described in annexed Exhibit “B”.

2.1           The Parties agree and acknowledge that in connection with the Easement ASCU has performed, or is hereby given the right to perform, the following:

2.1.1        ASCU will construct a jeep/snowmobile road from the top of Saddleback towards Red Pine Lake and on toward the bottom of Saddleback area. The road will also be continued from the top of Saddleback to the northwest corner of Section 3. S. Osguthorpe and Blaise Carrig will approve the alignment prior to construction.

2.1.2        ASCU will relocate and upgrade the existing Saddleback lift to the location approved by S. Osguthorpe and Blaise Carrig.

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2.1.3        ASCU will be able to complete the Saddleback area trail construction as approved by S. Osguthorpe and Blaise Carrig.

2.1.4        ASCU is able to relocate and upgrade the existing Spotted Owl chair to the location shown on the attached map. This relocation to be approved by Blaise Carrig and S. Osguthorpe.

2.1.5        ASCU will repair and upgrade the lower jeep road on the Property as shown on the attached map for construction and maintenance access.

2.1.6        ASCU will construct and maintain a road on the Property from Red Pine Lake to the top of Tombstone. This road is to be used by the Canyons construction and maintenance only.

2.1.7        ASCU commits to working with Osguthorpe and Partnership to ensure that snowmobile and horse riding operation can continue for the entire term of this Agreement. ASCU is committed to working with Osguthorpe and Partnership to resolve any issues of the interference or conflict between these operations and the ski development of The Canyons resort.

2.1.8        ASCU can construct a ski trail that crosses the south west corner of lot 5 of the Property quarter section. This trail to be approved by S. Osguthorpe and Blaise Carrig.

2.1.9        ASCU will construct and maintain a work access road from the existing road at Red Pine Lake through the sound end of section 3 towards the area known as Ninety Nine - 90 of the Property. S. Osguthorpe and Blaise Carrig to approve the alignment of the rod prior to construction.

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2.1.10      ASCU will be permitted to have alpine ski operations (consistent with their current operations) on the north side of Ninety Nine - 90 and through the southeast corner of section 3 of the Property.

2.2           ASCU acknowledges that under the Documents Osguthorpe and Partnership have retained the right to use all of the Property as part of their ranch operation, including, without limitation, grazing and other activities in connection with their sheep and cattle operation, and to otherwise use and improve the Property, so long as such ranch operations and other use and improvements do not damage the towers or other facilities lawfully constructed on the Property by ASCU (or its predecessors-in-interest) and does not unreasonably interfere with the use of the Property by ASCU in the winter as part of ASCU’s winter skiing operations.  ASCU agrees that use of the Property during the spring, summer and fall months will not interfere with the ranch operations of Osguthorpe and the Partnership.

2.3           The term of the Easement is for twenty-eight (28) years commencing August 14, 1996.

3.Services.  Osguthorpe and/or S. Osguthorpe agree to make themselves available for consultation and/or render services to ASCU in conjunction with the operation of The Canyons resort, the master planning for and the development of The Canyons resort, and such other services as are reasonably requested by ASCU and which are necessary for the development of The Canyons resort. ASCU agrees that Osguthorpe and/or S. Osguthorpe shall have the right to delegate to a third person approved by ASCU those services required of them under this Section 3.

5

4.Annual Consideration.  The total annual aggregate consideration for the Easement and services rendered under this Agreement shall be Two Hundred Thousand Dollars ($200,000). The Parties agree that this total consideration will be apportioned as follows:

4.1           Within sixty (60) calendar days prior to August 12, 2001. Osguthorpe, the Trust or the Partnership and ASCU shall each have appointed a real estate appraiser (each such appraiser shall have no less than ten (10) years’ experience) who shall provide appraisals setting forth the fair market value of the Easement. At or prior to the expiration of such sixty (60) day period, the Parties shall, for purposes of establishing the fair market value of the Easement, take an average of the two (2) appraised values of the Easement and such average shall be the amount of consideration to be allocated as payment for the Easement.

4.2           All of the remaining part of the annual consideration of Two Hundred Thousand Dollars ($200,000) shall be allocated to the payment for availability for consultation and/or of services rendered under and in accordance with the provisions of Section 3.

4.3           The annual consideration is due and payable by ASCU to the Osguthorpes not later than August 12 of each year.

5.Mutual Covenants.  The Parties mutually covenant and agree as follows:

5.1           Each Party agrees to work with each other Party in good faith to accomplish the intended purposes of this Agreement to maintain open communications.

52            ASCU assumes the obligation to notify Osguthorpe, the Trust and the Partnership and to seek their approval of any matters of change to the Property.

6.Successors and Assigns.  This Agreement and its provisions shall be binding upon and inure to the benefit of the respective heirs, legal representatives, successors, and assigns of each of the Parties.

6

7.             Memorandum of Agreement.  Simultaneous with the execution of this Agreement, the Parties shall execute and record the Memorandum of Agreement annexed as Exhibit “C”.

8.             Counterparts.  This Agreement may be executed in counterparts and delivered by facsimile.

IN WITNESS WHEREOF, the Parties have executed this document as of the Effective Date.

OSGUTHORPE
/s/ D.A. Osguthorpe
D.A. Osguthorpe
THE PARTNERSHIP:
D. A. OSGUTHORPE FAMILY PARTNERSHIP
By:	/s/ D.A. Osguthorpe
	D.A. Osguthorpe, Its Partner
S. OSGUTHORPE:
/s/ Stephen A. Osguthorpe
	Stephen A. Osguthorpe
THE TRUST:
THE DR. D.A. OSGUTHORPE TRUST
/s/ D.A. Osguthorpe
	D.A. Osguthorpe, Trustee

7

ASCU:
ASC UTAH, INC., A Maine corporation
By:	/s/ Blaise Carrig
Print Name:			BLAISE CARRIG
Title:		PRESIDENT

8

EXHIBIT A

TO

RESTATEMENT OF AGREEMENT

Legal Description

The following described property is located in Summit County, Utah and is more particularly described as follows:

PARCEL 1:

Lots 3, 4, 5 and 6, Section 1, Township 2 South, Range 3East, Salt Lake Base and Meridian.

PARCEL 2:

Lots 1, 2, 7, 8, 9, 10 and the Southeast ¹/₄ of Section 3, Township 2 South, Range 3 East, Salt Lake Base and Meridian.

A-1

EXHIBIT B

TO

RESTATEMENT OF AGREEMENT

Property Map

B-1

EXHIBIT C

TO

RESTATEMENT OF AGREEMENT

Memorandum of Agreement

C-1

WHEN RECORDED, PLEASE MAIL TO:

Parsons Behle & Latimer

201 South Main Street, Suite 1800

Post Office Box 45898

Salt Lake City, Utah 84145-0898

Attention: Shawn C. Ferrin

MEMORANDUM OF AGREEMENT

NOTICE IS HEREBY GIVEN that ASC Utah, Inc., a Maine corporation (“ASCU”); and D. A. Osguthorpe, the D. A. Osguthorpe Family Partnership, D.A. Osguthorpe, as trustee of The D.A. Osguthorpe Trust, and Stephen A. Osguthorpe (“collectively, “Osguthorpe”), have entered into that certain Restatement of Agreement dated August 1, 2001 (“Agreement”), which establishes, among other things, certain rights and obligations by and among Osguthorpe and ASCU concerning a certain parcel of real property located in Summit County, Utah and more particularly described on Exhibit A attached hereto and incorporated herein by this reference.

All of the terms and provisions of the Agreement are hereby incorporated herein by reference. Additional information regarding the Agreement may be obtained by contacting any of the following:

Party 1:	ASC Utah, Inc.
	The Canyons
	4000 The Canyons Resort Drive
	Park City, Utah 84098
	Attention: Managing Director
Party 2:

This Memorandum in no way modifies or amends the terms and provisions of the Agreement. This Memorandum is executed solely for the purpose of providing record notice of the Agreement and is to be recorded in the real property records of Summit County, Utah.

IN WITNESS WHEREOF, ASCU and Osguthorpe have executed this Memorandum of Agreement as of August   , 2001.

OSGUTHORPE:	ASCU:
	ASC Utah, Inc.,
D. A. Osguthorpe	a Maine corporation
Stephen A. Osguthorpe	By:
	Print Name:
D.A. Osguthorpe Family Partnership	Title:
By:
Print Name:
Title:
The Dr. D. A. Osguthorpe Trust
D. A. Osguthorpe, Trustee

STATE OF	)
	:  ss.
COUNTY OF	)

The foregoing instrument was acknowledged before me this         day of August, 2001, by                                        , the                                               of ASC Utah, Inc.

	NOTARY PUBLIC
	Residing at:
My Commission Expires:

2

STATE OF	)
	:  ss.
COUNTY OF	)

The foregoing instrument was acknowledged before me this          day of August, 2001, by                                                       , the                                                     of theD.A. Osguthorpe Family Partnership.

	NOTARY PUBLIC
	Residing at:
My Commission Expires:

STATE OF	)
		:  ss.
COUNTY OF		)

The foregoing instrument was acknowledged before me this         day of August, 2001, by                                                       , the                                                     of The Dr. D.A. Osguthorpe Trust.

	NOTARY PUBLIC
	Residing at:
My Commission Expires:

STATE OF	)
	:  ss.
COUNTY OF	)

The foregoing instrument was acknowledged before me this               day of August, 2001, by D.A. Osguthorpe.

	NOTARY PUBLIC
	Residing at:
My Commission Expires:

3

STATE OF	)
	:  ss.
COUNTY OF	)

The foregoing instrument wasacknowledged before me this             day of August, 2001, by Stephen A. Osguthorpe.

	NOTARY PUBLIC
	Residing at:
My Commission Expires:

4

EXHIBIT A
TO
MEMORANDUM OF AGREEMENT

LEGAL DESCRIPTION

The real property referenced in the foregoing instrument is located in Summit County, Utah, and is more particularly described as:

PARCEL 1:

Lots 3, 4, 5 and 6, Section 1, Township 2 South, Range 3 East, Salt Lake Base and Meridian.

PARCEL 2:

Lots 1, 2, 7, 8, 9, 10 and the Southeast ¹/₄ of Section 3, Township 2 South, Range 3 East, Salt Lake Base and Meridian.

A-1

EX-10.38

Exhibit 10.38

AMENDED AND RESTATED LEASE AGREEMENT

NUMBER 419

between

THE STATE OF UTAH, acting through
the School and Institutional
Trust Lands Administration
as Lessor

and

ASC UTAH, d/b/a The Canyons
as Lessee

Dated as of July 1, 1998

LEASE AGREEMENT NO. 419

THIS AMENDED AND RESTATED LEASE AGREEMENT (“Lease”) is entered into as of the 1st day of July, 1998 by and between the State of Utah, acting by and through the Director of the School and Institutional Trust Lands Administration (“Lessor”) and ASC Utah, a Maine corporation, d/b/a The Canyons (“Lessee”).

R E C I T A L S

A.Lessor owns, subject to the provisions of Section 18.23 hereof, the Premises (as defined herein) located in Summit and Salt Lake Counties, State of Utah, which Premises are leased to Lessee by Lessor under Lease Agreement No. 419.

B.Lease Agreement 419 was originally established between Lessor and Halbet Properties, Inc. and has since been amended by amendments dated May 1, 1987, February 28, 1989 and May 23, 1995 and has been assigned contemporaneously herewith to ASC Utah, Inc.

C.The Premises have been designated as Development Property, as defined in Rule 850-140 of the Utah Administrative Code, and this Lease is entered into pursuant to such rule.

A G R E E M E N T

IN CONSIDERATION of the foregoing recitals, the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lessor and Lessee hereby agree as follows:

ARTICLE 1.  DEFINITIONS

As used herein, the following terms shall have the meanings respectively indicated:

1.1“Applicable Environmental Law” means the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901, et seq., the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251 et seq., the Clean Air Act, 42 U.S.C. §§ 7401, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. §§ 1801 et seq., the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq., and the Safe Drinking Water Act, 42 U.S.C. §§ 300f through 300j-26, as such acts have been or are hereafter amended from time to time; any so called superfund or superlien law; and any other federal, state and local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material as now or any time hereafter in effect.

1.2“Commercial Lot” means any Improved Lot located in the Development Parcel and used or designated for use primarily as a commercial or retail facility, hotel, inn or other non-residential-type development.

1.3“Common Area Amenities” means improvements to be constructed by the Lessee upon the Premises and adjacent property to create amenities supporting the proposed resort development, including but not limited to:  trail systems, recreational facilities and landscaping.

1.4“Covenants” means the declaration of covenants, conditions and restrictions that Lessee shall be required to prepare and record providing for, among other things, the creation of an association or associations, as the case may be, of lot and unit owners within the Premises, covenants, conditions and restrictions that will protect and enhance the value of the lots and units within the Premises, and easements and rights-of-way for skiing, biking and pedestrian access.

1.5“Design Control Documents” means this Lease, the Covenants, the Improvement Documents, and such other documents as Lessor deems necessary from time to time in connection with the design and development of the Premises.

1.6“Development Parcel” means that portion of the Premises situated in Summit County, Utah, which is described on Exhibit A, Part 2 to this Lease.

1.7“Development Plan” means the preliminary or the final approved comprehensive development plan for the Premises, including site plan(s) of the Premises showing the location of all proposed Lessee Improvements and development plats with respect to the Premises (which development plats shall have been prepared in accordance with applicable laws, ordinances, rules and regulations and recorded in the county where the Premises are located), and as such Development Plan is more particularly set forth and described in Exhibit C to this Lease, as amended from time to time in accordance with the terms hereof.  The Development Plan and Development Schedule will be amended or revised from time to time as the planning for improvements at the Premises progresses. As material changes in the planning for the Premises are proposed, Lessee shall submit such changes to Lessor for Lessor’s approval and upon approval by Lessor such changes shall be included in the Development Plan and Development Schedule. Lessor shall not unreasonably withhold or delay its consent to proposed amendments or revisions.

1.8“Development Schedule” means the schedule, as amended or revised from time to time by Lessee, of respective times for completion of development, as set forth in the Design and Approval Schedule attached hereto as Exhibit B, and as set forth in the Development Plan. The Development Plan and Development Schedule will be amended or revised from time to time as the planning for improvements at the Premises progresses.  As material changes in the planning for the Premises are proposed, lessee shall submit such changes to Lessor for Lessor’s approval and upon approval by Lessor such changes shall be included in the Development Plan and Development Schedule.  Lessor shall not unreasonably withhold or delay its consent to proposed amendments or revisions.

1.9“Fair Market Value” means the value of a Residential Lot, a Public Lot and any other portion of the Premises designated by Lessee for sale, as determined in accordance with Section 6.4 of this Lease, based on the value of a lot as improved, in accordance with the terms and conditions set forth in this Lease.

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1.10(i)“Gross Receipts” means the sales prices or rentals received by Lessee, or any party occupying any portion of the Development Parcel (whether or not such lands have been conveyed in fee to Lessee or third parties pursuant to this Agreement) under a rental lease, license, conveyance or other arrangement with Lessee during the applicable period with respect to all services, goods, wares and merchandise sold, leased, licensed or delivered by Lessee or any party occupying any portion of the Development Parcel (whether or not such lands have been conveyed in fee to Lessee or third parties pursuant to this Agreement) under a rental lease, license, conveyance or other arrangement with Lessee in, at or from, the specific parcel located within the Development Parcel that is being evaluated for the purpose of calculating percentage rent in accordance with the provisions of Section 4.3, whether for wholesale, retail, cash, credit, or otherwise; and

Gross Receipts shall include, without limitation, all receipts: (A) where the orders therefor originate in, at or from, such parcel, whether delivery or performance is made from such parcel or from some other place, (B) made or performed by means of mechanical or other vending devices on such parcel, (C) which Lessee (or such third party, as applicable) in the normal and customary course of its business would credit or attribute to its operations at such parcel or any part thereof, notwithstanding the fact that such receipts are transacted and collected offsite, and (D) from property management services provided for properties within the Premises. Any sums otherwise satisfying the definition of Gross Receipts that are deposited with and forfeited to Lessee shall be included in Gross Receipts. Receipts from any installment or credit sale shall be treated as received when and as recorded on the Lessee’s books of account as revenue realized. No franchise or capital stock tax and no income or similar tax based on income or profits shall be deducted from Gross Receipts.  Gross Receipts shall not include, or if included there shall be deducted (but only to the extent they have been included in Gross Receipts, as the case may be): (E) The amount of any cash or credit refunds upon any sale from such parcel where the merchandise sold, or some part thereof, is returned by the purchaser to Lessee after the sale (not exceeding in amount the selling price of the item in question); (F) Exchanges or transfers of merchandise between stores of Lessee, if any, where such exchanges are made solely for the convenient operation of Lessee’s business and not for the purpose of consummating a sale made at, in, upon or from such parcel or of depriving Lessor of the benefit of a sale which otherwise would have been made in, at, upon or from such parcel; (G) Returns to shippers or manufacturers; (H) Sales of furniture, fixtures and equipment after substantial use in the conduct of Lessee’s business in such parcel; (I) The amount of any city, county, state or federal sales, use, gross receipts, transaction privilege, luxury or excise tax on such sale which is both added to the selling price (or absorbed in the price) and paid to the taxing authorities by Lessee (but not by any vendor of Lessee); (J) Sales to employees; (K) Service charges, interest and collection expenses received or receivable from customers for sales on credit and service, credit card and other charges or fees paid by Lessee to credit card companies, banks and similar organizations resulting from use of credit or debit cards by customers; (L) Charges paid or payable by customers for mailing or delivery of merchandise; (M) The redemption of gift certificates (but not the purchase of gift certificates); (N) Receipts from vending machines or telephones located on such parcel, expect such portion as may be retained by Lessee; (O) Sales discounts or noncash donations to nonprofit, charitable or religious organizations; (P) Bad debts and charge backs, to

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the extent previously included in Gross Receipts, as the case may be; (Q) The proceeds of any Leasehold Mortgage; (R) Any amounts paid to Lessor in connection with an assignment of the Lease by Lessee; (S) Receipts from the sale of lift tickets or passes associated with use of ski lifts and trails for skiing, snowboarding or other snow-play or recreational activities; and (T) Proceeds from the sale of Improved Lots, and Public Lots, or any portion thereof, in accordance with the provision of Article 6.

1.11“Hazardous Substance” means any hazardous or toxic substance, material, or waste which is or becomes regulated by any local governmental authority, the State of Utah, or the United States Government, including, without limitation, (a) any substance, chemical or waste that is or shall be listed or defined as hazardous, toxic or dangerous under Applicable Environmental Law; (b) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any federal, state or local governmental authority pursuant to any environmental, health and safety or similar law, code, ordinance, rule, regulation, order or decree and which may or could pose a hazard to the health and safety of occupants or users of the Premises or any part thereof, any adjoining property or cause damage to the environment; (c) any petroleum products; (d) PCBs; (e) leaded paint; and (f) asbestos.

1.12“Improved Lot” means a portion of the Development Parcel designated as a separate lot or project area on a recorded subdivision plat or a separate unit or project area on a record of survey map or otherwise designated in the Development Plan as a lot or parcel upon which on site improvements will be constructed and for which all Pre-Development Improvements, as defined in paragraph 1.18 have taken place. For purposes of this definition, project area means the land area included in any Integrated Development Project. Improved Lots may include both Residential Lots and Public Lots.

1.13“Improvement Documents” means the subdivision plats, record of survey maps, construction plans, site plan(s) and such other documents as may be necessary or appropriate in connection with the improvement of the Premises as described in the Development Plan.

1.14“Integrated Development Project” means any improvement or series of improvements presented for final project-specific permitting by Summit County, Utah authorities on a consolidated basis due to the functionally related or integral nature of such improvements. Lessee and Lessor shall jointly determine, by written agreement, whether a series of improvements are sufficiently functionally related or integrated to constitute an Integrated Development Project, based upon the following factors:

(a)The spatial relationship and acreage “footprint” of the proposed improvements;

(b)Whether the proposed improvements are presented for final project permitting on a unified or integrated basis;

(c)Whether the proposed improvements are part of a unified or integrated planning and design program;

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(d)Whether the proposed improvements will be marketed and/or sold through an integrated marketing program;

(e)Whether the proposed improvements will be operated, managed or will otherwise function on a unified or integrated basis; and

(f)Whether the improvements will be financed through a common plan of financing.

1.14“Lease Year” means the period during the Lease Term (as defined in Section 3.1) commencing on August 1^st in each year and ending at midnight on the 31st of July of that year, except that the first Lease Year shall commence at the start of the Lease Term and shall end at midnight on the 31st of July of that year, and except that the last Lease Year shall end at the expiration of the term of this Lease or at the time of any earlier termination of this Lease in accordance with the terms hereof.

1.15“Lessee Improvements” means the on site and off site improvements described in the Design Control Documents on the Premises and adjacent properties by Lessee as generally described in the Development Plan, which shall include, without limitation, those improvements required for a lot to qualify as an Improved Lot.

1.16“Lessor Indemnitees” means Lessor, its officers, directors, employees, agents, successors and assigns and elected and appointed officials of the State of Utah.

1.17“Marketing Plan” means the Lessee’s plan for marketing the developed portions of the Premises, as amended from time to time. Lessee shall submit its initial Marketing Plan, including but not limited to product types, projected absorption rates, marketing schedules, pricing targets and marketing methods to be utilized, to Lessor for review and approval within six months of commencement of the Lease Term.

1.18“Pre-Development Improvements” means all improvements to be constructed by the Lessee to the boundary of an Improved Lot, in accordance with the Improvement Documents and as required by applicable governmental approvals in order to commence development of the Improved Lot in accordance with the Improvement Documents, including but not limited to:

(a)sanitary sewer lines, culinary water lines and storm sewer lines installed to the boundaries of the lot;

(b)all utilities necessary to use the lot for its designated purpose, including, without limitation, telephone, natural gas and electricity, installed to the boundaries of the lot;

(c)all necessary streets and other access way providing access to the lot; and

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(d)all other improvements required by the Development Plan and any other applicable covenants, conditions and restrictions with respect to the lot prior to development shall have been completed.

All of said improvements shall be constructed in accordance with all applicable codes and regulations of the county and the city in which the property is located.

1.20“Premises” means: the parcel of land situated in Summit and Salt Lake Counties, State of Utah, which is described on Exhibit A, Part 1 to this Lease including (a) all appurtenant water and water rights and all non-appurtenant water and water rights held, owned, or used in connection with such parcel of land; and (b) all other rights and easements which are appurtenant to such parcel of land, other than the mineral estate reserved below, RESERVING, HOWEVER, to Lessor, its successors and assigns, any and all oil, gas, coal and other minerals underlying such land.

1.219“Public Lot” means any Improved Lot used or designated in the Development Plan for use for a nonprofit or public purpose on which parks (including open space, common areas and scenic areas), roads and other municipal infrastructure, churches or other religious facilities, schools, governmental buildings or facilities and other public facilities, including, without limitation, police and fire protection facilities and amenities for the use and enjoyment of owners of Improved Lots, have been or are allowed to be built.

1.20“Quarter” means a fiscal quarter based upon an August 1 to July 31 fiscal year.

1.21“Rent” means collectively Base Rent, Development Parcel Interim Rent, Development Parcel Minimum Percentage Rent, Development Parcel Percentage Rent and Commercial Activity Percentage Rent, as each term is defined in Article 4.

1.22“Residential Lot” means any Improved Lot on which single-family houses, condominiums, town homes, timeshare interests, and other residential-type developments, or mixed use projects containing both residential- and commercial-type developments, have been or are planned to be built by Lessee as described in the Development Plan.  To the extent reasonably possible based upon the design and configuration of a mixed use project, the land area underlying exclusively commercial or retail uses will not constitute a portion of the Residential Lot to which it relates.  Lessor and Lessee agree to cooperate in a commercially reasonable manner to identify those areas of land underlying commercial and retail uses which are readily susceptible of being separated from residential uses to which they relate.

ARTICLE 2.  LEASE OF PREMISES

2.1Lease.  Subject to the terms and conditions of this Article 2 and in consideration of the covenants of Lessee contained in this Lease, Lessor leases the Premises to Lessee, as of the Commencement Date set forth in Section 3.1, in an “AS IS” condition, including any and all defects, latent or otherwise existing as of the Commencement Date; SUBJECT, HOWEVER, to: (a) current taxes and assessments, reservations in patents and all rights-of-way, easements, covenants, conditions, restrictions, obligations, liens, encumbrances, and liabilities of record as

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of the date hereof; (b) all matters which an accurate survey or physical inspection of the Premises would disclose; and (c) all zoning and building code requirements and other governmental laws, rules, ordinances and regulations now or hereafter in effect.

2.2Obligations and Contingencies Prior to Commencement Date.

(a)Lessee’s Due Diligence.  On or before the date which is fifteen (15) days before the Commencement Date, Lessee shall obtain or waive its right to obtain the following with respect to the Premises:

(i)Survey.  A survey (the “Survey”) of the Premises prepared by a licensed civil engineer satisfactory to Lessee. Lessor shall receive a copy of any Survey prepared by Lessee, or on its behalf, free of charge. The cost of the Survey shall be paid by Lessee.

(ii)Preliminary Title Report.  A commitment for title insurance (the “Title Report”) insuring Lessee’s leasehold interest on the Premises. Lessor shall receive a copy of any Title Report prepared by or on behalf of Lessee free of charge. The cost of such Title Report shall be paid by Lessee.

(iii)Environmental Site Assessment.  A Phase I environmental site assessment of the Premises (the “Environmental Report”). Lessor shall receive a copy of any Environmental Report prepared by or on behalf of Lessee free of charge. The cost of the Environmental Report shall be paid by Lessee.

(b)Right of Review and Cancellation.  Lessee shall have fifteen (15) days following receipt of the Survey, the Title Report, and the Environmental Report (the “Review Period”) in which to review and to give Lessor written notice of any objection of Lessee to any matter disclosed by the Survey, the Title Report, or the Environmental Report. If Lessee does not object to a matter disclosed by the Survey, the Title Report, or the Environmental Report within the Review Period, such matter shall be deemed to have been approved by Lessee.  If Lessee gives notice of objection as to any such matter within the Review Period, Lessor shall have the option to immediately cancel the Lease, or if Lessor elects (without, however, Lessor having any obligation to do so), Lessor shall have a reasonable time period (the “Cure Period”) following receipt of notice of objection from Lessee, not to exceed 90 days, to attempt to eliminate, cure, or otherwise remediate, at Lessor’s cost, such disapproved matters.  Notice of Lessor’s election to terminate or to attempt to cure shall be given to Lessee within fifteen (15) days following receipt of Lessee’s notice of objection, with Lessor’s failure to give any such notice being deemed an election by Lessor to attempt to cure.  If Lessor elects to cure, Rent shall be abated until such objection is cured to Lessee’s satisfaction. If, however, Lessor does not eliminate, cure or otherwise remediate the disapproved matters within the Cure Period, Lessee’s sole and exclusive remedy shall be to cancel this Lease by giving written notice of cancellation to Lessor on or before expiration of the Cure Period. If Lessee does not elect to cancel on or before expiration of the Cure Period, Lessee shall be deemed to have elected to waive any uncured matters, and the Lease shall continue in full force and

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effect, subject to all of the matters disclosed by the Survey, the Title Report and the Environmental Report.

(c)Contingencies.  Lessee’s obligations under the Lease are subject to the condition that if Lessee, at its sole cost, is unable, within thirty (30) days of the Commencement Date, to obtain a standard coverage leasehold policy of title insurance issued by a recognized, reputable local title company in the amount of $20,000,000, insuring Lessee that, as of the Commencement Date, the leasehold interest in the Premises created pursuant to this Lease is vested in Lessee, subject only to (i) the usual printed exceptions and exclusions contained in such title insurance policies; (ii) the matters disclosed by the Survey and the Title Report which have been approved (or deemed approved) as provided above; and (iii) any other matters approved in writing by Lessee, then Lessee may, at Lessee’s option, terminate this Lease by submitting written notice thereof to Lessor, such notice to accompanied by an explanation detailing the basis of such determination by Lessee.

2.3Lessee’s Inspection of the Premises.  Subject to the terms and conditions set forth in Section 2.2 above, Lessee acknowledges that Lessee has inspected the Premises to Lessee’s complete satisfaction, observed its physical characteristics and existing conditions, the operations thereon and on adjacent areas, and Lessee hereby waives any and all objections to, complaints about, or claims regarding (including, but not limited to, federal, state or common law based actions and any private right of action under state and federal law, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, and any state or local equivalent, to which the Premises is or may be subject) the Premises and its physical characteristics and existing conditions, including, without limitation, subsurface soil and water conditions and solid and hazardous waste and hazardous substances on, under or adjacent to the Premises.  Lessee further hereby assumes the risk of changes in applicable laws and regulations relating to past, present and future environmental conditions on the Premises and the risk that adverse physical characteristics and conditions, including, without limitation, the presence of hazardous substances or other contaminants, may not have been revealed by its investigation. Lessor is hereby released from all responsibility and liability regarding the operation, condition (including the presence in the soil, air, structures, and surface and subsurface waters of materials or substances that have been or may in the future be determined to be toxic, hazardous, undesirable or subject to regulation and that may need to be specially treated, handled and/or removed from the Premises under current or future federal, state and local laws and regulations), valuation or utility of the Premises, or its suitability for any purpose whatsoever. Lessee expressly acknowledges that Lessee has not relied on any warranties, promises, understandings or representations, express or implied, oral or written, of Lessor or of any agent of Lessor, relating to the Premises, except as specifically set forth in this Lease.

2.4Covenant of Quiet Enjoyment.  Lessor covenants that so long as Lessee shall perform the obligations of Lessee contained in this Lease and shall not be in default in the performance of any of such obligations, Lessor shall take no act or fail to take any action that would deny Lessee and its permitted sublessees, licensees, successors and assigns the right to

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freely, peaceably, and quietly have, hold and enjoy full and exclusive use and enjoyment of the Premises.

2.5Lessor’s Access to Premises.

(a)General Access.  Lessor and its agents, at all reasonable times and upon notice to Lessee, shall have free and full access to the Premises for the purpose of examining or inspecting the condition thereof, for the purpose of determining if Lessee is performing the covenants and agreements of this Lease, and for the purpose of posting such notices as Lessor may desire to protect the rights of Lessor, provided the exercise of such rights does not unreasonably interfere with Lessee’s development, use and enjoyment of the Premises.

(b)Mineral Access.  During the Lease Term, Lessor shall not have the right to grant subleases or mineral leases or rights of entry to third parties to enter upon or use the Premises for purposes of exploration or production of the reserved mineral estate, without the prior written consent of Lessee, which consent Lessee may withhold in its sole and absolute discretion.

2.6Ski Parcels.  Notwithstanding any other term or condition of this Lease, Lessee acknowledges that the Lessee’s interest in and to the property consisting of approximately 240 acres and described as the “Trust Lands Property” in that certain Amended and Restated Lease Agreement No. 825 and Phased Development Agreement, dated of even date herewith (the “Phased Development Agreement”), to which Lessor and IRON MOUNTAIN ALLIANCE, INC. and IRON MOUNTAIN ASSOCIATES, LLC (collectively, “Iron Mountain”) are parties (the “Subject Property”) extends only to the “Ski Rights” (as defined in the Phased Development Agreement) therein. “Ski Rights” shall mean the access and use rights to open-space areas of the surface estate of the Subject Property, which shall be designated on the applicable “Preliminary Development Plans” (as defined in the Phased Development Agreement), and which shall be compatible with the purpose of the development contemplated thereunder, including without limitation the construction, operation, and maintenance of ski lifts and related improvements, ski trails, snowmaking equipment and related infrastructure, ski training and instruction facilities, first aid, medical, or ski patrol related facilities, or other facilities necessary and proper for skiing activities on or about the Subject Property and the “Ski Areas” (as defined in the Phased Development Agreement).

In this connection, Lessee acknowledges that Lessor is leasing the ski parcels described in Exhibit A, Part I, section II, together with approximately 240 acres to be excluded from the premises as described in Exhibit A, Part I, section I (collectively the “Ski Parcels”) to Iron Mountain, so that Iron Mountain may use density entitlements associated with the Ski Parcels for a development project located outside of the Premises in which both Lessee and Lessor have an independent interest, subject to and except for Lessee’s right to “Density Credits” as described in Section 2.0l(b) of the Development Agreement between Tenant and Iron Mountain dated September 18, 1997.

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ARTICLE 3.  TERM

3.1Commencement Date and Term.  The term of this Lease (the “Lease Term”) shall be for a period of eighty-one (81) years, commencing on July 1, 1998 (the “Commencement Date”) at 12:01 a.m., and continuing to 11:59 p.m. on that day which is eighty-one (81) years after the Commencement Date, subject to the terms and conditions set forth in this Lease which may permit or provide for an earlier termination.

3.2Obligations on Lease Termination.  Upon the termination of this Lease for any cause whatsoever, Lessee shall immediately surrender peaceable possession of the Premises.

3.3Holding Over.  If Lessee or any successor in interest of Lessee should remain in possession of the Premises after termination of the Lease Term without executing a new lease, then such holding over shall be construed as a tenancy from month-to-month, subject to all the covenants, terms, provisions and obligations of this Lease except for the provisions relating to the Rent payable hereunder, which Rent, during any holdover period shall be equal to two (2) times the amount of Rent otherwise calculated to be paid during the holdover period, together with all other sums owing to Lessor hereunder. Nothing contained herein shall be construed as Lessor’s permission for Lessee to hold over or as limiting Lessor’s remedies against a holdover lessee, and if the Premises are not surrendered at the end of the Lease Term, Lessee shall indemnify Lessor for, from and against any loss or liability resulting from delay by Lessee in so surrendering the Premises, including without limitation, any claims made by any succeeding Lessee based on such delay.

ARTICLE 4.  RENT

4.1Base Rent.

(a)Obligation to Pay Base Rent.  Lessee shall pay to Lessor for each Lease Year during the Lease Term, the sum of Sixty Thousand Dollars ($60,000), such amount, as adjusted from time to time as provided in Section 4.1(b), being referred to as the “Base Rent.” Base Rent shall be paid annually, in advance, on the first day of each Lease Year of the Lease Term, without any deduction or offset.  If the Lease Term commences on a day other than the first day of a Lease Year, then upon the commencement of the Lease Term, Lessee shall pay to Lessor, as Base Rent for the partial Lease Year, a pro rata portion on a per diem basis of the Base Rent payable for a full Lease Year.

(b)Adjustments to Base Rent.  The Base Rent shall be adjusted every three years as set forth below. Commencing August 1, 2000, the Base Rent for the next three (3) calendar years shall be equal to the following, except that in no event shall the Base Rent for any three-year period be less than the Base Rent for the immediately preceding three-year period:

The Base Rent for the immediately preceding period, multiplied by a fraction, the numerator of which is the average CPI Index (as defined below) for

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the calendar year preceding the year in which the adjustment is made and the denominator of which is the average CPI Index for the year in which the term of the Lease commenced, or the year in which the most recent adjustment was made hereunder, as applicable. For purposes of this Lease, “CPI Index” means the Consumer Price Index, published by the U.S. Bureau of Labor Statistics, All Urban Consumers, Western Region Average, All Items
(1982-84=100). If, on an adjustment date, the CPI Index does not exist in any format described in this Lease, Lessor shall substitute any official index published by the Bureau of Labor Statistics or any successor thereto, or similar governmental agency, which is then in existence and which is then most nearly comparable to the CPI Index.

(c)Base Rent Not In Lieu of Other Rent Obligations.  Lessee’s obligation to pay the Base Rent shall be in addition to, and not in lieu of, the payment obligations of Lessee under Sections 4.2 and 4.3.

4.2Development Parcel Interim Rent.

(a)Obligation to Pay Development Parcel Interim Rent.  Lessee shall pay to Lessor for each Lease Year during the Lease Term, the sum of Seventy Five Thousand Dollars ($75,000.00), such amount, as adjusted from time to time as provided in Section 4.2(b), being referred to as the “Development Parcel Interim Rent.” Development Parcel Interim Rent shall be paid in annual installments in advance on the first day of each Lease Year of the Lease Term, without any deduction or offset.  If the Lease Term commences on a day other than August 1st, then upon the commencement of the Lease Term, Lessee shall pay Lessor, as Development Parcel Interim Rent for the partial Lease Year, a pro rata portion on a per diem basis of the Development Parcel Interim Rent payable for a full Lease Year.

(b)Adjustments to Development Parcel Interim Rent.  At such time as Lessee has completed construction of improvements in accordance with the Development Plan on fifty (50) percent of the Base Density within the Development Parcel, the Development Parcel Interim Rent shall be reduced to Twenty Five Thousand Dollars ($25,000.00) per year.  At such time as Lessee has completed construction of improvements in accordance with the Development Plan on ninety (90) percent of the Base Density, the Development Parcel Interim Rent shall be reduced to One Hundred Dollars ($100.00) per year.  At such time as Lessee has completed construction of improvements in accordance with the Development Plan on one hundred (100) percent of the Base Density, Lessee’s obligation to pay Development Parcel Interim Rent shall cease.  In the event that Lessee fails to complete construction of improvements in accordance with the Development Plan on fifty (50) percent of the Base Density within the Development Parcel by August 1, 2006, the Development Parcel Interim Rent shall be adjusted on that date and thereafter in the same manner as provided in Section 4.1(b) hereof. The determination of the percentage of completed construction within the Development Parcel shall be made annually on the first day of each Lease Year. As used

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in this subsection, the term “Base Density” shall mean Base Density, as reduced with Lessor’s approval pursuant to Section 5.1 hereof.

(c)Development Parcel Interim Rent Not In Lieu Of Other Rent Obligations.  Lessee’s obligation to pay Development Parcel Interim Rent shall be in addition to, and not in lieu of, the payment obligations under Sections 4.1 and 4.3.

4.3Percentage Rent.  Lessee shall pay to Lessor percentage rent on the Gross Receipts generated within the Development Parcel. For purposes of this Section 4.3, any commercial use, activity or business operated on a Residential Lot shall be deemed to be a Commercial Lot, and shall be included as though it were a Commercial Lot in the calculation of percentage rent, notwithstanding that the title to the Residential Lot may have been conveyed to Lessee or third parties. Lessee acknowledges that it is repsonsible for paying percentage rent on the Gross Receipts arising from or in connection with all commercial activities conducted by itself or third parties within any Improved Lot, whether or not such lot has been conveyed to Lessee or any third party. The amount of percentage rent shall be calculated, reported and paid for each specific parcel on a separate basis, as follows:

(a)Obligation to Pay Development Parcel Minimum Percentage Rent.  For each Commercial Lot, Lessee shall pay to Lessor during each Lease Year, a sum equal three (3) percent of the Gross Receipts from such Commercial Lot, as projected by Lessee in accordance with Section 4.3(a)(i), such amount, as adjusted from time to time as provided in Section 4.3(a)(i), being referred to as “Development Parcel Minimum Rent.” The Development Parcel Minimum Percentage Rent for each Commercial Lot shall be paid in quarterly installments, in advance, on the first day of each Quarter of the Lease Term and, except as provided in Section 4.3(b)(i), shall be paid without any deduction or setoff.

(i)Projected Gross Receipts.  As and when Commercial Activities are fully permitted for operation at locations within the Development Parcel (“Commercial Activity”) in accordance with applicable laws, ordinances, rules and regulations, Lessee will prepare and deliver to Lessor, in writing, a five (5) year projected Gross Receipts range for each Commercial Activity operated within the Development Parcel. For the first five (5) years after the commencement of a Commercial Activity Lessee shall pay to Lessor a sum equal to three (3) percent of the lowest level of Lessee’s projected Gross Receipts. The Development Parcel Minimum Percentage for each Commercial Activity shall be adjusted every five (5) years thereafter to a sum equal to three (3) percent of the average Gross Receipts from each Commercial Activity for the preceding five (5) years.

(b)Obligation to Pay Development Parcel Percentage Rent.  For each Commercial Activity, Lessee shall pay to Lessor during each Lease Year, a sum equal to three (3) percent of the Gross Receipts from such Commercial Activity, less the amount of Development Parcel Minimum Percentage Rent paid by Lessee during such Lease

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Year from such Commercial Activity, such amount, as adjusted from time to time as provided in Section 4.3(b)(ii), being referred to as “Development Parcel Percentage Rent.”. The Development Parcel Percentage Rent for each Commercial Activity shall be computed each Quarter, and within sixty (60) days of the date such Quarter ends, Lessee shall pay to Lessor the amount by which the sum computed as the Gross Receipts from such Commercial Activity during that period exceeds the Development Parcel Minimum Percentage Rent paid by Lessee from such Commercial Activity for the same period.

(i)Annual Adjustment.  Within ninety (90) days after the end of each Lease Year, Lessee shall determine the amount of Lessee’s Gross Receipts for each Commercial Activity during that Lease Year and the amounts payable to Lessor as Development Parcel Minimum Percentage Rent and as Development Parcel Percentage Rent for each Commercial Activity for that Lease Year. If, based upon a separate calculation for each Commercial Activity, the total amount of Development Parcel Minimum Percentage Rent and Development Parcel Percentage Rent for each Commercial Activity owing for the Lease Year is greater than the total amount of Development Parcel Minimum Percentage Rent and Development Parcel Percentage Rent paid by Lessee for such Commercial Activity during the Lease Year, Lessee shall immediately pay the deficiency to Lessor, but in no event later than the ninetieth (90th) day after the end of that Lease Year. If, based upon a separate calculation for each Commercial Activity, the total amount of Development Parcel Minimum Percentage Rent and Development Parcel Percentage Rent paid by Lessee during a Lease Year exceeds the total amount of Development Parcel Minimum Percentage Rent and Development Parcel Percentage Rent required to be paid by Lessee for such Commercial Activity during such Lease Year, Lessee shall receive a credit equivalent to the excess, which shall be applied by Lessor to the next accruing payment or payments of either Development Parcel Minimum Percentage Rent or Development Parcel Percentage Rent due under the Lease for such Commercial Activity.

(ii)Adjustment to Development Parcel Percentage Rent.  As of January 1, 2006 and continuing throughout the Lease Term, the Development Parcel Minimum Percentage Rent, the Development Parcel Percentage Rent, and the Commercial Activity Percentage Rent for each Commercial Activity shall be calculated based on five (5) percent of the Gross Receipts from such Commercial Activity.

(c)Obligation to Pay Commercial Activity Percentage Rent.  Lessee shall pay to Lessor during each Lease Year, a sum equal to the three (3) percent of Gross Receipts arising from Lessee’s Commercial Activities at locations within the Development Parcel, excluding however, the Gross Receipts used in calculating the Development Parcel Minimum Percentage Rent and the Development Parcel Percentage Rent, such amount being referred to as “Commercial Activity Percentage Rent.” Commercial Activity

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Percentage Rent shall be computed each Quarter, and within sixty (60) days of the date each Quarter ends, Lessee shall pay to Lessor the amount so computed.

(d)Lessee Reports.  On or before the sixtieth (60) day following the end of each Quarter, Lessee agrees to submit to Lessor a written statement signed by Lessee and certified by Lessee to be true and correct, showing the amount of Gross Receipts during the preceding Quarter.  On or before the ninetieth (90th) day following the end of each Lease Year, Lessee agrees to submit to Lessor a written statement signed by Lessee and certified by Lessee to be true and correct, showing the amount of Gross Receipts during the preceding Lease Year.

(e)Lessee Records.  Lessee agrees to keep full, complete and proper books, records and accounts of Gross Receipts normally examined and required to be kept by an independent accountant pursuant to accepted auditing standards in performing an audit of Gross Receipts. All such books, records and accounts shall be kept for a period of at least three (3) years following the end of each Lease Year. Within three (3) years after the end of the Lease Year, Lessor, its agents and employees, upon at least seven (7) days’ prior written notice, may examine and inspect all of the books and records relating to the Premises (including income tax returns) for the purpose of investigating and verifying the accuracy of any statement of Gross Receipts during the prior Lease Year.  Because Percentage Rent is payable by Lessee upon Gross Receipts arising from the commercial activities of third parties within the Development Parcel, lessee shall require all such third parties to maintain records of Gross Receipts in accordance with this paragraph, and to permit audits in accordance with Section 4.3(f).

(f)Audit.  At any time within three (3) years after the end of a Lease Year, Lessor may cause an audit of Lessee’s business to be made for the purpose of verifying the accuracy of any statement of Gross Receipts during the prior Lease Year.  The audit shall be performed by a certified public accountant selected by Lessor, and Lessee agrees to make all records available for the audit at the Premises, unless Lessor agrees to a different location.  If the results of the audit show that Lessee’s statement of Gross Receipts for any period has been understated, then, within ten (10) days of the determination of such deficiency, Lessee shall pay any applicable deficiency to Lessor, together with interest thereon at the Default Rate provided in Section 4.5 from the date such payment should originally have been made until the date actually paid. If the results of the audit show that Lessee’s statement of Gross Receipts for any period has been understated by ten percent (10%) or more, then, within ten (10) days of the determination of such deficiency, Lessee shall also pay Lessor the cost of the audit.  Any claim by Lessor for revision of any statement of Gross Receipts or for additional Rent, which claim is not made to Lessee within three (3) years from the end of the Lease Year for which Gross Receipts or Rent is disputed, shall be deemed and hereby is waived by Lessor.  Any sublease established by Lessee shall contain provisions identical in all material respects to the foregoing enabling Lessor to audit the books and records of any sublessee.

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(g)Percentage Rent Not In Lieu of Other Rent Obligations.  Lessee’s obligation to pay Development Parcel Minimum Percentage Rent, Development Parcel Percentage Rent and Commercial Activity Percentage Rent shall be in addition to, and not in lieu of, the payment obligations of Lessee under Sections 4.1 and 4.2.

4.4Additional Rent.  In addition to Rent, all other payments to be made by Lessee under this Lease shall be deemed “Additional Rent” and shall be due and payable on demand if no other time for payment is specified.

4.5Payments by Lessor.  Upon ten (10) days prior written notice to Lessee, Lessor may pay any sum or do any act which Lessee has failed to do (however, Lessor shall have no obligation to do so), and Lessee agrees to pay Lessor, upon demand, all sums so expended by Lessor, together with interest at a rate (the “Default Rate”)equal to the lesser of (a) four (4) percentage points added to the prime lending rate of Zions First National Bank, as it varies from time to time, or (b) the maximum rate of interest permissible under the laws of the State of Utah from the date of expenditure until paid.  Such sum and interest shall also be deemed Additional Rent.

4.6Net Lease.  This is a net lease and it is the intention of the parties that, except as otherwise provided or limited by the specific provisions of this Lease, Lessee shall be responsible for all costs and expenses of the ownership, development, maintenance, repair and operation of the Premises incurred or accrued during the Lease Term. Any present or future law to the contrary notwithstanding, this Lease shall not terminate, nor shall Lessee be entitled to any abatement, reduction, set-off, counterclaim, defense or deduction with respect to any Rent or any Additional Rent or other sum payable hereunder, nor shall the obligations of Lessee hereunder be affected, by reason of any damage to or destruction of the Premises or by any taking of the Premises or any part thereof by condemnation, except as provided in this Lease.

4.7Interest on Past Due Obligations.  Any amount due to Lessor which is not paid when due and within any applicable notice and cure period shall bear interest from the original due date until paid at the Default Rate.

4.8Delinquent Rent Payment.  In the event Lessee is delinquent in making any rent payment as set forth herein, Lessee shall be obligated to pay a late fee of ten (10) percent of the amount due to cover the administrative costs incurred by Lessor in connection with such delinquent payment, which late fee shall be in addition to interest or other enforcement costs under this Lease.  The total amount of the delinquent rent payment plus the late fee shall bear interest at the Default Rate from the date of delinquency and shall continue until the entire amount (including the delinquent payment, the late fee and any accrued interest) is paid or until termination of the Lease with respect to that portion of the Premises with respect to which such delinquent payment was due. Unless Lessor agrees in writing to the contrary, Lessee shall not be relieved of its obligation to pay the late fee and interest accruing hereunder, even in the event Lessor has terminated the Lease with respect to that portion of the Premises with respect to which the delinquent payment was due.

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ARTICLE 5.  DEVELOPMENT OF THE PREMISES AND
CONSTRUCTION OF LESSEE IMPROVEMENTS

5.1Planning and Development.  Upon commencement of the Lease Term, Lessee shall proceed diligently to obtain final governmental approval of a comprehensive development plan and all necessary governmental permits and entitlements for development of the Premises in accordance with the Development Plan and the Development Schedule.  Lessee shall provide Lessor with copies of all filings made in connection with the planning and permitting process, and shall consult with Lessor concerning significant decisions and issues associated with such process. Lessee agrees not to propose or accept entitlement to a density of less than one million two hundred fifty thousand (1,250,000) square feet of developed space (the “Base Density”) within the Development Parcel without Lessor’s prior written consent, which shall not be unreasonably withheld or delayed.  Prior to Lessee’s acceptance and agreement with any local government entity regarding the final Development Plan, Lessee shall first receive Lessor’s written approval thereof, which approval shall not be unreasonably withheld or delayed.

5.2Construction.

(a)Development Plan.  Lessee shall provide Lessor with all development plans, applications for permits and licenses and any other material submitted to applicable governmental authorities relating to development within the Premises.

(b)Construction.  All of the Lessee Improvements shall be constructed at the sole cost and expense of Lessee, in a first class workmanlike manner, and in accordance with the requirements of any and all laws, ordinances and regulations applicable thereto, including zoning and building code requirements of any municipal or other governmental agency having jurisdiction over the Premises at the time said Lessee Improvements are constructed and including the Americans with Disabilities Act of 1990 (the “ADA”).

(c)Bonds.  In connection with any construction on the Premises, Lessee shall provide to Lessor, at Lessee’s expense, such payment, performance, and completion bonds as Lessor may reasonably request from time to time.

5.3Alterations.  In addition to the construction of Lessee Improvements by Lessee, at any time and from time to time during the Lease Term, Lessee, at its sole cost and expense, may demolish, replace and make additions and alterations to the Lessee Improvements now or hereafter located on the Premises, as Lessee determined appropriate, provided that (a) all such additions and alterations shall be constructed of new, high quality materials in a first class workmanlike manner; (b) all required approvals of such construction shall have been obtained from the governmental authorities and utilities having jurisdiction thereof; and (c) Lessee has complied with the provisions of Section 5.4 with respect thereto.

5.4Plans and Specifications; Contractors.  All construction of Onsite Improvements, and all alterations and additions thereto, shall be done in compliance with and pursuant to detailed plans, drawings and specifications and by duly licensed and reputable contractors.

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5.5Ownership and Removal of Lessee Improvements.  All Lessee Improvements, and all alterations and additions thereto constructed by or on behalf of Lessee shall be and remain the exclusive property of Lessee during the term of this Lease.  Notwithstanding the foregoing, any Lessee Improvements constituting real property may only be removed with the written consent of Lessor, which consent shall not be unreasonably withheld. Upon the expiration of this Lease, all such Lessee Improvements, except to the extent such Lessee Improvements have been sold or mortgaged pursuant to the terms of this Lease, and all alterations and additions thereto, shall become the property of Lessor, and Lessee, or those holding under or through Lessee, shall have no rights with respect thereto.  This Section is not intended to include (a) improvements which are sold prior to the termination of this Lease as part of a Public Lot or a Residential Lot, or (b) personal property, including any machinery or equipment placed upon or attached to the Premises which is susceptible of being removed.

5.6Demolition of Existing Improvements.  Any existing improvements, trees and plants located on the Premises may be demolished and/or removed by Lessee, subject to applicable laws, rules and regulation governing the removal of such items from the Premises.

5.7Development at Lessee’s Expense.  Lessee shall bear all expenses in connection with the design, pre-development, development, improvement, construction, alteration and repair of the Premises and all Lessee Improvements thereon and shall indemnify, defend and hold Lessor Indemnitees and the Premises harmless therefrom.

5.8Marketing.  Throughout the term of this Lease, Lessee shall fund and sustain the Marketing Plan so as to effectively present the Residential Lots and Public Lots for sale, together with single family homes, condominiums, town homes, timeshare interests or other residential and mixed use-type developments that may have been constructed by Lessee thereon, to the public. In the event market conditions dictate, Lessee shall revise, and if necessary, upgrade the marketing plan to address existing conditions. Lessee will consult with Lessor at least annually regarding its marketing plan and shall provide a copy of its marketing plan to Lessor to be held as a “business confidential” record by Lessor.  Lessee shall provide Lessor with an annual summary report regarding commercial activities on the Premises.

5.9Notice.  Prior to demolition or removal of any existing improvements or to grade the Premises, and before the commencement of any work of construction of any improvement on the Premises, Lessee shall give to Lessor thirty (30) days’ prior written notice thereof, specifying the nature and location of the intended work and the expected date of commencement thereof.

5.10Mechanics’ Liens.

(a)Lessee Is Not Lessor’s Agent.  The parties agree, and notice is hereby given, that Lessee is not the agent of Lessor for the construction, alteration or repair of any Lessee Improvements, the same being done at the sole direction and expense of Lessee. All contractors, materialmen, mechanics, and laborers are hereby charged with notice that they must look only to Lessee for the payment of any charge for work done or material furnished on the Premises during the Lease Term. Lessee shall have no right, authority or power to bind Lessor or any interest of Lessor for the payment of any claim

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for labor or material, or for any charge or expense, incurred by Lessee as to improvements, alterations or repairs on or to the Premises, and Lessee shall post notices on the Premises during all construction work of any nature whatsoever that Lessor is not responsible for any material and labor used on the Premises.

(b)Covenant Against Mechanics’ Liens.  Lessee shall not suffer or permit to be enforced against the Premises, or any part thereof, and shall indemnify and hold Lessor and the Premises harmless for, from, and against (i) any mechanic’s, materialman’s, contractor’s or subcontractor’s liens arising from any construction, repair, restoration, replacement, or improvement done by or on behalf of Lessee, and (ii) any claim for damage growing out of the work of any construction, repair, restoration, replacement, or improvement done by or on behalf of Lessee. Lessee shall pay or cause to be paid all of such liens, claims, or demands before any action is brought to enforce the same against the Premises. If Lessee shall in good faith contest the validity of any such lien, claim, or demand, then Lessee shall, at its expense, defend itself and Lessor against the same and shall pay and satisfy any adverse judgment that may be rendered thereon prior to execution thereof and in the event of any such contest Lessee shall at the request of Lessor provide such security and take such steps as may be required by law to release the Premises from the effect of such lien.

(c)In the event Lessee fails to satisfy or otherwise have removed any mechanics liens or similar liens or claims within a reasonable period following a request by Lessor, then Lessor may satisfy such claims directly and Lessee shall reimburse Lessor therefor upon demand.

5.11Grant of Easements; Restrictive Covenants.  In connection with the development of the Premises, provided Lessor shall have the right to approve of any documents evidencing the items set forth below, Lessor agrees to:

(a)Easements.  Join with Lessee in granting to public entities or public service corporations, for the purpose of serving only the Premises and as contemplated by the Development Plan, reasonable easements on, under, or over the Premises for telephone, electricity, water, natural gas, cable, sanitary or storm sewers or both, drainage facilities, and for other utilities; and

(b)Restrictive Covenants.  Consent to or join with Lessee in granting or otherwise subjecting portions of the Premises to such covenants, conditions, restrictions and reciprocal easements as are reasonably necessary or appropriate in connection with the development of the Premises and contemplated by the Development Plan, including, without limitation, the Covenants, which Lessor must approve in writing prior to recording.

Lessee shall be required to prepare and record the Covenants, which Covenants shall specify that the property subject thereto shall be held, sold and conveyed subject to the Covenants, which Covenants shall be for the benefit of the Premises and for the purpose of enhancing and protecting the value, desirability and attractiveness of the Premises, and which Covenants shall

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be declared to run with the land and declared to be binding upon all parties having or acquiring any right, title or interest in the Premises, including heirs, successors, grantees and assigns of such parties.

ARTICLE 6.  DEVELOPMENT OF RESIDENTIAL UNITS

6.1Sale of Residential and Public Lots.  Provided an Event of Default, as described in Section 17.1, has not occurred and is not continuing, and provided an event has not occurred which, with the giving of notice or the passage of time, or both, would constitute an Event of Default, Lessee shall be allowed to purchase all Residential Lots and Public Lots within the Premises, subject to the following terms and conditions:

(a)Restrictions on Sale.  The following restrictions shall apply to the sale of any portion of the Premises:

(i)Lessee shall be allowed to purchase only Residential Lots and Public Lots;

(ii)No purchase shall occur until (1) all the Pre-Development Improvements as defined in Section 1.18 have been constructed, or (2) Lessee has provided Lessor reasonable assurance that such Pre-Development Improvements will be constructed promptly following conveyance of the lot; this subsection (ii) being intended to allow for the financing of Pre-Development Improvements as part of a more comprehensive project.

(iii)Any sale shall be through an escrow established pursuant to an escrow agreement with a title company mutually acceptable to Lessee and Lessor, and such escrow agreement shall provide, among other things, that all purchase price due to Lessor (as set forth in Section 6.1(b) below) shall be paid to Lessor immediately upon the closing of such sale.

(iv)Lessee shall be entitled to purchase Residential Lots and/or Public Lots upon at least 90 days prior written notice setting forth the following information (the “Section 6.1 Notice”):

1.  A legal description of the parcel(s) to purchased, including an ALTA survey of the parcel prepared by a licensed surveyor;

2.  A certification that all necessary permits, licenses and approvals for the development of the parcel(s) in accordance with the Development Plan have been obtained from applicable governmental agencies, boards and bodies;

3.  A description of the utilities and other off site improvements required pursuant to the approvals referenced in Subsection 2 above;

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4.  The time and place of the proposed closing; and

5.  Lessee’s initial proposal as to the Fair Market Value of the parcel to be established under Section 6.4 hereof.

(b)Percentage Payments.  Upon the close of escrow in connection with the sale of any Residential Lot or Public Lot, Lessee shall pay to Lessor in cash purchase price equal to twenty five (25) percent of the Fair Market Value of such Residential Lot or Public Lot, determined in the manner described in Section 6.4 hereof.

6.2Construction of Improvements on Residential and Public Lots.  No home, condominium project, mixed use development or other structure or improvement shall be constructed on any Residential or Public Lot until a fee patent deed has been issued from Lessor with respect to such lot.

6.3Lessee to Pay All Costs.  Lessee shall pay any and all costs with respect to the development of the Residential and Public Lots and Common Area Amenities and public improvements, including, without limitation, any and all costs, fees and assessments incurred with respect to the Covenants or any owners association, and Lessee shall fully indemnify and hold harmless the Lessor Indemnitees from any claims or causes of action with respect to such costs, fees and assessments.  Lessee shall not allow any lien or encumbrance to attach to any portion of the Premises with respect to such costs, fees and assessments and shall immediately take such action as may be reasonably necessary to remove any such lien or encumbrance from any Premises.

6.4Determination of Fair Market Value.  (a) In connection with the sale of any Residential Lot or Public Lot to Lessee or a Lessee Affiliate, the Fair Market Value shall be deemed to be the higher of (i) the pre-construction land value of such lot based upon the density of the project to be developed on such lot described in Section 6.1 Notice, or (ii) the pre-construction land value of such lot based upon the total acreage of such lot (“Valuation Criteria”).  Fair Market Value shall be determined based upon the value of the undeveloped land, not including any value attributable to improvements to be constructed on the site by Lessee, but attributing value to the Pre-Development Improvements assuming (1) the Pre-Development Improvements are completed if such improvements have not then been completed, or (2) acknowledging that such improvements have been completed if they have been completed as of the date of determination.  The determination of Fair Market Value shall take into consideration the contemplated use of surrounding areas within the Premises; the risk, capital requirements and historical success rates of similarly situated development programs; zoning and density entitlements for the lot and the lots location within the resort complex.  Fair Market Value shall be a fair and appropriate balance of these factors.

The determination of the Fair Market Value shall be made by mutual agreement of Lessor and Lessee within thirty (30) days of the date of the Section 6.1 Notice. If Lessor and Lessee are unable to mutually agree upon the Fair Market Value of such lot, the Fair Market Value thereof shall be determined by an independent MAI appraiser mutually acceptable to Lessor and Lessee.  Lessor and Lessee may alter or adjust the appraised value by mutual agreement.  If no single

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appraiser is agreed upon by Lessor and Lessee within ten (10) days after (a) the parties have agreed to use an appraiser or (b) the expiration of the 30-day period for reaching mutual agreement (the “Single Appraiser Deadline”) then, the Fair Market Value shall be determined by a majority action of three independent MAI appraisers with expertise in appraising property similar to the Premises as being developed in accordance with the Development Plan. One such appraiser shall be selected by the Lessor, one such appraiser shall be selected by Lessee, and the third appraiser shall be chosen by the mutual consent of the first two appraisers. If either the Lessor or Lessee fails to name and secure the services of the appraiser within ten (10) days after the Single Appraiser Deadline, the appraisal shall be made solely by the appraiser(s) then named by either party. The third appraiser shall be chosen within ten (10) days after both the Lessor and Lessee have selected their respective appraiser. In the event the two appraisers are unable to agree upon appointment within such ten (10) day period, on behalf of both, one appraiser may request appointment of a third appraiser by any United States District Court judge for the district in Utah in which the Property is situated, or by the presiding Utah State Court judge sitting in or for the unincorporated portion of Summit County, Utah, acting in his individual, not judicial, capacity. Upon the failure, refusal or inability of any appraiser to act, a new appraiser shall be appointed in his place and stead, which appointment shall be made in the same manner as provided above for the appointment of the appraiser by a judge. For purposes of establishing Fair Market Value, the average of all the appraisals shall be deemed the Fair Market Value if the highest and lowest appraisals do not deviate more than fifteen (15) percent from the median appraisal. If the highest or lowest appraisal deviates from the median appraisal by more than fifteen (15) percent, such appraisal shall be ignored and the remaining two appraisals shall be averaged to establish the Fair Market Value. If both the highest and lowest appraisals deviate from the median appraisal by more than fifteen (15) percent, they shall both be disregarded and the median appraisal shall serve as the Fair Market Value. The appraiser or appraisers shall apply such methods of valuation as they deem appropriate and reasonable under the circumstances to determine the Fair Market Value based upon the Valuation Criteria. Each party to the appraisal shall pay the fees and expenses of the appraiser selected by such party and the fees and expenses of the third appraiser shall be born equally by Lessor and Lessee. The appraisals of all appraisers shall be completed within thirty (30) days after the appointment of the last appraiser.

(b)In the event construction of the project described in the Improvement Documents has not commenced within twenty-four (24) months following the sale and conveyance of the Residential Lot or Public Lot, then the purchase price for the Residential Lot or Public Lot shall be re-evaluated at such time as construction of the project commences using the same process set forth in subsection (a) above for the initial determination. Any increase in purchase price shall be paid to Lessor upon closing of the Lessee’s construction financing for the project.

6.5Lot Densities.  Lessee agrees to develop the Premises such that the lot densities will be as set forth in the Development Plan, as modified from time to time in accordance with the terms hereof. Lessor further agrees that any lot density entitlements associated with those parcels of the Premises described in Exhibit A, Part I, Subsection I shall be available to Lessee for use in its development activities.

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6.6Conveyance of Title.  Subject to the terms and conditions of this Lease, and upon receipt of the percentage payment described herein, Lessor shall, upon the closing of the escrow described in Section 6.1(a)(iv), deliver title to the Residential or Public Lot by state patent, subject to standard state reservations, to the grantee thereof.

6.7Removal from Premises Upon Sale.  Upon the close of escrow and the issuance of a fee patent with respect to an Improved Lot, such Improved Lot shall be removed from the Premises and otherwise released from the terms and conditions of this Lease, except as otherwise expressly set forth herein.  Lessee acknowledges that, notwithstanding the issuance of a fee patent with respect to an Improved Lot, it is required to pay percentage rent pursuant to Section 4.3 on all commercial activities occurring on such lot during the term of the lease.

6.8Waiver or Modification.  Lessor, in its sole and absolute discretion, may waive or modify in writing any restrictions or requirements contained in this Article 6; provided, however, that such waivers or modifications shall be with respect to a specified Improved Lot and shall not constitute a waiver or modification of any restriction or requirement with respect to any other Improved Lot.

6.9Public Lots.  Notwithstanding any provision of this Article 6 to the contrary, parks and roads required to be dedicated to public purposes may be acquired at no cost; provided, however, that each fee patent for such lands shall contain provisions for the automatic reversion of such lands to the State of Utah upon cessation of public use. Lessee shall not be entitled to obtain fee title to any Public Lot within the Development Parcel for dedication to open space or conservation purposes unless and until it has obtained full governmental approval of development equal to or in excess of the Base Density, or such lesser amount as is approved by Lessor pursuant to Section 5.1 hereof. Lessor shall, at the request of Lessee, grant conservation easements to qualified third-party conservation organizations on lands described in Exhibit A, Part I, Section I, other than lands within the Development Parcel; provided, however, that Lessor shall not be obligated to do so unless and until Lessee has obtained full governmental approval of development on the Development Parcel equal to or in excess of the Base Density, or such lesser amount as is approved by Lessor pursuant to Section 5.1 hereof. The grant of any conservation easement pursuant to this paragraph shall not terminate or reduce Lessee’s obligation to pay rent with respect to lands encumbered by such easement.

ARTICLE 7.  USE OF THE PREMISES

7.1Use.  Lessee may use the Premises only for the uses contemplated by the Development Plan and for other uses reasonably incidental thereto. Lessee agrees not to conduct or permit to be conducted any public or private nuisance on or from the Premises. Lessee agrees not to permit or commit any waste of the Premises. Lessee acknowledges that neither Lessor nor any agent of Lessor has made any representation or warranty as to the present or future suitability of the Premises for any purpose or use whatsoever.

7.2Observance of Governmental Regulations.  In Lessee’s use and occupancy of the Premises and the performance by Lessee of its rights and obligations under this Lease, Lessee

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shall fully comply with all laws, orders, rules, regulations, directives, ordinances and requirements of all governmental authorities having jurisdiction over Premises, or any part thereof, and Lessee shall pay all costs, expenses, liabilities, losses, fines, penalties, claims and demands including, without limitation, attorneys’ fees, that may in any way arise out of or be imposed because of the failure of Lessee to comply with such laws, orders, rules, regulations, directives, ordinances and requirements.

7.3Right of Contest.  Lessee shall have the right to contest the validity of any laws, orders, rules, regulations, directives, ordinances and requirements in the manner and under the conditions provided in this Lease with respect to contesting the validity of taxes, assessments or other liens. During such contest, Lessee may refrain from complying therewith, provided that (a) Lessor is not subjected to criminal prosecution as a result thereof; (b) Lessor’s title to the Premises is not subject to lien or forfeiture as a result thereof; and (c) neither the Premises nor any rights or interest of Lessor are otherwise prejudiced or jeopardized thereby.

7.4Environmental Compliance.

(a)Restrictions on Hazardous Substances; Remedial Work.  Lessee shall not cause or permit any Hazardous Substance to be brought, kept or used in or about the Premises by Lessee, its officers, directors, owners, agents, employees, sublessees, assignees, contractors, subcontractors, invitees, or concessionaires except in commercial quantities not in violation of Applicable Environmental Law and similar to those quantities usually kept on similar premises by others in the same business or profession. Lessee, its officers, directors, owners, agents, employees, sublessees, assignees, contractors, subcontractors, invitees, or concessionaires shall store, use and dispose of such materials in compliance with all applicable federal, state and local laws, including, without limitation, Applicable Environmental Law.  If the presence of any Hazardous Substance on, in or under the Premises caused or permitted by Lessee, its officers, directors, owners, agents, employees, sublessees, assignees, contractors, subcontractors, invitees, or concessionaires results in any contamination of the Premises, Lessee shall promptly take all actions, at its sole expense, as are necessary to return the affected area to the condition existing prior to the introduction of any such Hazardous Substance, including, without limitation, any investigation or monitoring of site conditions or any clean up, remediation, response, removal, encapsulation, containment or restoration work required because of the presence of any such Hazardous Substance on, in or under the Premises or any release or suspected release or threat of release of any such Hazardous Substance in the air, soil, surface water or ground water (collectively, the “Remedial Work”). Lessee shall obtain all necessary licenses, manifests, permits and approvals to perform the Remedial Work. Lessee shall promptly perform all Remedial Work and the disposal of all waste generated by the Remedial Work in accordance with all Applicable Environmental Law.

(b)Compliance with Applicable Environmental Law.  Without limiting the generality of the foregoing or any other provision of this Lease, Lessee shall be solely and completely responsible for insuring that the Premises and all activities thereon (including

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activities of Lessee, its officers, directors, owners, employees, agents, contractors, subcontractors, sublessees, assignees, licensees, and concessionaires) comply fully with Applicable Environmental Law, and for responding to, defending against and/or complying with any administrative order, request or demand relating to potential or actual contamination on the Premises, or third party claims (including the claims of current or future sublessees in the Premises, or other owners, lessees or sublessees of parcels adjoining or near the Premises) for Remedial Work or for the costs of any such Remedial Work or for the costs of any such Remedial Work which the third-party claimant has undertaken, whether such order, request, demand or claim names Lessor, Lessee or both, or refers to the Premises in any way. Lessee’s responsibility under this Section includes, but is not limited to, promptly responding to such orders, requests, demands and claims on behalf of Lessor and defending against any assertion of Lessor’s financial responsibility or individual duty to perform thereunder.

(c)Indemnification.  Lessee shall indemnify, save harmless and defend Lessor and Lessor Indemnitees for, from and against any and all claims (including, without limitation, third party claims for personal injury or real or personal property damage), actions, administrative proceedings (including informal proceedings), judgments, damages, punitive damages, penalties, fines, costs, liabilities, interest or losses (including, without limitation, diminution in value of the Premises and the Lessee Improvements, damages for the loss or restriction on use of rentable or usable space or of any amenity in the Lessee Improvements, damages arising from any adverse impact on marketing of space in the Lessee Improvements, and sums paid in settlement of claims, attorneys’ fees, consultants fees, expert fees and any fees and expenses incurred in enforcing this indemnity) incurred by, sought from or asserted directly or indirectly against any Lessor Indemnitee during or after the term of this Lease as a result of the presence of any Hazardous Substance on, in or under the Premises or any release of any Hazardous Substance into the air, soil, surface water or ground water, which Hazardous Substance was brought, kept or used in or about the Premises by Lessee, its officers, directors, owners, employees, agents, contractors, subcontractors, sublessees, assignees, licensees, and concessionaires, or as a result of a breach by Lessee of its obligations under this Section 7.4.  Lessee shall assume, pursuant to the foregoing indemnity, any liabilities or responsibilities which are assessed against any Lessor Indemnitee in any action described under Section 7.4(b) and under this Section 7.4(c).  Lessee shall promptly provide to Lessor copies of all communications, filings or other writings, photographs or materials given to or received from any person, entity or agency in connection with any cleanup or Remedial Work conducted by Lessee, and shall notify Lessor of, and permit Lessor’s representative to attend any meetings or oral communications relating thereto.

(d)Survival.  The obligations of Lessee and the foregoing indemnities of Lessee set forth in this Section 7.4 shall survive the termination or expiration of this Lease.

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ARTICLE 8.  REPAIRS AND MAINTENANCE

During the Lease Term, Lessee, at its sole cost and expense, shall keep and maintain all of the Lessee Improvements now or hereafter located on the Premises and all additions thereto, in good, first-class, attractive and safe condition and repair and shall make all necessary repairs, replacements and renewals, whether structural or non-structural, foreseen or unforeseen, ordinary or extraordinary, in order to maintain such state of repair and condition; it being the intention of the parties that Lessor shall have no liability for any of the foregoing, that Lessor shall obtain possession of the Lessee Improvements at the end of the Lease Term, and that the Lessee Improvements will be in good repair and condition at said time, reasonable wear and tear excepted and insured casualty loss excepted. Lessee, at Lessee’s expense, shall be responsible for all improvements, additions, alterations, maintenance, and repairs necessary or appropriate such that the Premises and all Lessee Improvements thereon are in compliance with the ADA. Lessee waives any provisions of law that may require any duty of repair by Lessor or permit Lessee to make repairs at the expense of Lessor.

ARTICLE 9.  UTILITIES

During the Lease Term, Lessee agrees to pay, when due, and to indemnify, defend and hold Lessor, Lessor Indemnitees and the Premises harmless for, from and against any liability for all charges for water, sewer, gas, electricity, telephone, CATV, and all other utility services of every kind and nature supplied to and used on the Premises, including all connection fees and/or pending assessment charges. Any interruptions or impairments of utility services of any nature or in any manner whatsoever shall not affect any of Lessee’s obligations under this Lease unless caused by the negligence, recklessness, or willful misconduct of Lessor, its agents, contractors, or employees, in which case Rent shall be equitably abated during the period of the interruption or impairment based on the portion of the Premises that are not useable as a result of such interruption or impairment.

ARTICLE 10.  TAXES AND ASSESSMENTS

10.1Payment of Taxes and Assessments.  Except as otherwise provided in Section 10.3, Lessee shall pay, prior to delinquency: (a) all taxes, assessments, levies, fees, fines, penalties and all other governmental charges, general and special, ordinary and extraordinary, foreseen and unforeseen, which are during the Lease Term, imposed or levied upon or assessed against (i) the Premises, (ii) any Rent or any Additional Rent or other sum payable by Lessee hereunder; (ii) this Lease, the leasehold estate hereby created or which arises in respect of the operation, possession or use of the Premises; and (b) all sales, transaction privilege, gross receipts or similar taxes imposed or levied upon, assessed against or measured by any Rent or other amounts payable to Lessor hereunder, but not income taxes. If Lessee fails to pay any of the foregoing before they become delinquent, Lessor, after notice to Lessee, may pay such delinquent taxes, assessments, levies, fees, fines, penalties and governmental charges, and all expenditures and costs incurred thereby shall be payable as Additional Rent hereunder within twenty (20) days after such notice to Lessee. Lessee will furnish to Lessor, promptly after demand therefor, proof of payment of all items referred to above which are payable by Lessee. If any such assessment may legally be paid in installments, Lessee may pay such assessment in installments.

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10.2Prorations.  All ad valorem real estate taxes and personal property taxes which are due and payable in the first Lease Year and within one year after the expiration of the term of this Lease shall be prorated as of the date this Lease is executed and delivered by each of the parties or the date of expiration of the term of this Lease, whichever is applicable, on the basis of the fiscal year with respect to which such taxes are assessed, and assuming that such taxes are payable in arrears. Lessee shall be responsible for and shall pay the portion of such taxes relating to the periods beginning with the date of execution and delivery of this Lease through and including the expiration or earlier termination of this Lease.

10.3Privilege of Contesting.  Upon at least ten (10) days prior written notice to Lessor and Lessee furnishing to Lessor such bonds or other security as determined and requested by Lessor, Lessee shall have the right to protest, contest, object to or oppose the legality or amount of any such taxes and assessments to be paid by Lessee hereunder.  In the event of any such contest, Lessee may defer payment of any such tax or assessment so long as the legality or the amount thereof is being so contested, diligently and in good faith; provided, however, that if at any time payment of the whole or any part thereof shall become necessary in order to prevent the termination by sale or otherwise of the right of redemption of any property affected thereby or to prevent physical eviction of either Lessor or Lessee because of nonpayment thereof, Lessee shall pay the same in order to prevent such termination of the right of redemption or such eviction. Any such contest shall be at the sole cost and expense of Lessee, and Lessee shall pay any costs or expenses incurred by Lessor as a result of any such contest.  Each refund of any tax, assessment, fee or charge so contested shall be paid to Lessee, and Lessor shall not, without prior approval of Lessee, make or enter into or finally agree to any settlement, compromise or any deposition of any contest or discontinue or withdraw any contest or accept any refund, other adjustment or credit of or from any such tax or assessment as a result of any contest. If there are any refunds of the taxes or assessment at the end of the Lease Term, the amounts will be prorated between Lessor and Lessee on the basis set forth in Section 10.2.  Any and all penalties and interest that become due as a result of any such contest shall be paid by Lessee.

ARTICLE 11.  INSURANCE AND INDEMNITY

11.1Indemnity.  Lessor shall not be liable for and Lessee covenants and agrees to indemnify and save all Lessor Indemnitees entirely harmless for, from and against each and every claim, demand, liability, loss, cost, damage and expense, including, without limitation, attorneys’ fees and court costs, arising out of any accident or other occurrence causing injury to or death of persons or damage to property by reason of construction or maintenance of any Lessee Improvements, of any additions, alterations or renovations thereto, or due to the condition of the Premises or any Lessee Improvements thereon, or the use or neglect of the Premises and any Lessee Improvements by Lessee or any agent, employee, invitee, contractor, or customer of Lessee, or any other person, or otherwise occurring upon the Premises or any improvements thereon, including without limitation, claims for death, personal injury or property damage arising out of use of the Premises for skiing and other winter or summer recreational activities. Lessee further agrees to indemnify and save all Lessor Indemnitees and the interests of Lessor in the Premises entirely harmless for, from and against all claims, demands, liabilities, damages and penalties arising out of any failure of Lessee to comply with any of Lessee’s obligations under

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this Lease, including without limitation attorneys’ fees and court costs. These indemnities shall survive the expiration of this Lease or the earlier termination thereof. Lessor shall be entitled to participate in the defense of any third party claim and to employ counsel at its own expense to handle such claim. If Lessor assumes control of the defense of any such claim, then Lessee’s obligation of indemnification shall terminate.

11.2Casualty Insurance.  Lessee will, at all times during the Lease Term and at the sole cost and expense of Lessee, keep all Lessee Improvements, equipment, and fixtures on the Premises insured for the benefit of Lessor and Lessee, as co-insureds, to the extent of one hundred percent (100%) of the full replacement cost thereof against such losses and in such amounts as Lessor shall determine from time to time in its sole discretion.

11.3Liability Insurance.  Lessee, at the sole cost and expense of Lessee, shall at all times during the Lease Term, maintain in force an insurance policy or policies which will name Lessor and Lessee as additional insureds insuring against all liability resulting from injury or death occurring to persons in or about the Premises, with limits for each occurrence of not less than $5,000,000, combined single limit, with respect to personal injury, death and property damage. The original of such policy or policies shall remain in possession of Lessee; provided, however, that Lessor shall have the right to receive from Lessee, upon written demand, a duplicate policy or policies of any such insurance or certificates of insurance evidencing its status as additional insureds. Lessee shall also maintain and keep in force all employees’ compensation insurance on its employees, if any, required under the applicable worker’s compensation laws of the state in which the Premises are located.

11.4Other Insurance.  Lessee, at the sole cost and expense of Lessee, shall at all times during the Lease Term, maintain in force such other and additional insurance policies as a prudent ground lessee or developer in the position of Lessee would maintain or as Lessor may reasonably require from time to time. Lessor shall be an additional insured on all such policies.

11.5Policy Requirements.  All insurance policies required or otherwise provided and maintained under this Article 11 shall contain provisions to the effect that the insurance shall not be canceled or modified without thirty (30) days prior written notice to Lessor and that no modification shall be effective unless approved in writing by Lessor.  All such policies shall be issued by a commercially reasonable company or companies, responsible and authorized to do business in the state in which the Premises are located, or shall be insured through a self insurance program approved by applicable insurance regulatory authorities as Lessee shall determine, and shall be approved by Lessor.

11.6Mutual Release of Subrogation Rights.  Without in any way limiting the applicability of Section 11.1, Lessee and Lessor each hereby release and relieve the other and the officers, directors, owners, shareholders, employees, agents and representatives of the other, and waive their entire right of recovery against the other and the officers, directors, owners, shareholders, employees, agents and representatives of the other, for loss or damage arising out of or incident to the perils insured against under this Article 11, which perils occur in, on or about the Premises, whether due to the negligence of Lessor or Lessee or their agents,

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employees, contractors, concessionaires and/or invitees, but only to the extent of insurance proceeds actually paid. Lessee shall, upon obtaining the policies of insurance required hereunder, give notice to and obtain waiver of subrogation agreements or endorsements from the insurance carrier or carriers concerning the foregoing mutual waiver of subrogation contained in this Lease.

ARTICLE 12.  DAMAGE AND DESTRUCTION

12.1No Abatement of Rent.  No damage to or destruction of Lessee Improvements shall effect an abatement or reduction in rental, it being understood that this is a ground lease. Lessee waives any provisions of the law that may be to the contrary.

12.2Damage or Destruction.  If any Lessee Improvements are damaged or destroyed during the Lease Term by any casualty which is required to be covered by a policy of insurance to be maintained pursuant to Article 11, Lessee shall repair and/or rebuild the same so that the repaired or rebuilt Lessee Improvements shall have at least the same values as such Lessee Improvements immediately prior to such damage or destruction, such construction to be undertaken and completed in accordance with the requirements of Article 5.  In no event whatsoever shall Lessor be required to repair, replace, or restore any Lessee Improvement as a result of any such damage or destruction.

12.3Termination by Lessee.  If the Lessee Improvements are damaged or destroyed by fire or other casualty covered under Lessee’s casualty insurance policy at any time during the last three (3) years of the term of this Lease or damaged or destroyed by casualties not required to be included in the coverage under Lessee’s casualty policy and the cost of repairing or rebuilding such Lessee Improvements exceeds fifty percent (50%) of the full replacement value thereof, Lessee, by giving written notice to Lessor within sixty (60) days after the occurrence of such damage or destruction and by removing, if requested by Lessor and approved by any permitted mortgagee, any damaged Lessee Improvements and leveling and grading that portion of the Premises underlying such removed Lessee Improvements, may elect to terminate this Lease with respect to that portion of the Premises underlying such removed Lessee Improvements.  Not withstanding anything contained in this Lease to the contrary, in the event of a termination of the Lease pursuant to this Section 12.3, and after available insurance proceeds have been used to pay off any existing leasehold mortgages on the Premises, the balance of any insurance proceeds payable to Lessee shall be divided between Lessor and Lessee equitably in a manner reflecting the respective values of Lessor’s reversionary interest in the Premises and Lessee Improvements thereon and Lessee’s leasehold interest (after paying the holder of any permitted encumbrance on Lessee’s leasehold estate).

ARTICLE 13.  CONDEMNATION

13.1Eminent Domain; Cancellation.  If the Premises are taken by any entity with the power of eminent domain (a “Condemning Authority”) or if the Premises are conveyed to a Condemning Authority by a negotiated sale, or if part of the Premises is so taken or conveyed such that the use of the remaining Premises is materially interfered with, or such that the Lessee

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Improvements cannot be rebuilt so that upon completion Lessee may again use the Premises without substantial interference, Lessee may terminate this Lease by giving Lessor written notice at any time after the occurrence of any of the foregoing and such termination shall be effective as of the date of the transfer to the Condemning Authority. If this Lease is terminated pursuant to this Section 13.1, Lessor shall refund to Lessee any Rent prepaid beyond the effective date of termination.

13.2Partial Takings.  If part of the Premises or any of the Lessee Improvements are taken or conveyed without substantially interfering with the use of the Premises, this Lease shall not terminate and rent shall not abate.  In such event, Lessor shall receive the portion of the award attributable to the value of the fee title estate taken, and Lessee shall receive all remaining awards and other compensation or sums, and Lessee shall apply all such amounts it received to the extent necessary to pay the cost of restoring the Lessee Improvements and/or the Premises so as to be suitable for Lessee’s use and obligations on the Premises.

13.3Basis of Awards.  All payments made for any taking or conveyance of the land as described in this Article 13 shall be paid to Lessor and Lessee hereby agrees that it shall have no claim to any such awards for any damage to its leasehold estate, except as may be provided by the law of the state in which the Premises are located.

ARTICLE 14.  ASSIGNMENT

14.1Prohibition Against Assignment.  Lessor and Lessee acknowledge that Lessor has entered into this Lease because of the unique development experience and abilities, planning skills and marketing expertise of Lessee. As a result, Lessee shall not have the right to assign all or part of this Lease without Lessor’s prior written consent, which consent shall not be unreasonably withheld, and any attempted assignment shall be null and void, shall constitute an immediate default under this Lease, and shall, at Lessor’s election, result in the immediate termination of this Lease. Notwithstanding the foregoing, Lessee agrees that Lessor, in determining whether to consent to any proposed assignment, may reasonably consider the proposed assignee’s development experience and abilities, planning skills, marketing expertise and ski area operating expertise and may refuse to consent to such assignment if, in the Lessor’s reasonable opinion, the proposed assignee lacks the necessary experience, skills, abilities or expertise to adequately perform Lessee’s obligations under this Lease. This Section 14.1 shall not prohibit an assignment of this Lease to any entity 80% of the capital or voting interests of which are owned by American Skiing Company. This clause shall not apply to any sale of all or substantially all the assets of American Skiing Company.

ARTICLE 15.  LESSOR/LESSEE FINANCING

15.1Lessor’s Right to Mortgage.  Lessor shall have the right to encumber its interest in the Premises by one or more mortgages, deeds of trust, assignments of rents and leases, security agreements or otherwise (a “Lessor Mortgage”);provided, however, any such Lessor Mortgage shall provide that, so long as Lessee is not in default under this Lease, then this Lease and Lessee’s leasehold interest shall not be disturbed by any such Lessor Mortgage.

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15.2Attornment.  If the holder of any Lessor Mortgage shall hereafter succeed to the rights of Lessor under this Lease, then at the option of such successor, Lessee shall attorn to and recognize such successor as Lessee’s lessor under this Lease, and shall promptly execute and deliver any instrument that may be necessary to evidence such Attornment.

15.3Lessee’s Right to Mortgage.  Provided Lessee is not in default under this Lease, and subject to the terms and conditions set forth in this Lease, Lessee shall have the right to encumber its leasehold interest by one or more mortgages, deeds of trust, security agreements or otherwise (a “Leasehold Mortgage”); subject, however, to the limitations set forth in this Article 15.  Any such Leasehold Mortgage shall be subject and subordinate to the rights of Lessor under this Lease and any holder of such Leasehold Mortgage shall execute a subordination and attornment agreement in a form acceptable to Lessor.

15.4Notice to Lessor of Leasehold Mortgage.  No holder of a Leasehold Mortgage on this Lease shall have the rights or benefits set forth in this Article 15, nor shall the provisions of this Article 15 be binding upon Lessor, unless and until a copy of the fully executed Leasehold Mortgage and of each assignment thereof shall have been delivered to Lessor, notwithstanding any other form of notice, actual or constructive.

15.5Leasehold Mortgagee Protection.  If Lessee shall enter into a Leasehold Mortgage pursuant to this Article 15, then so long as any such Leasehold Mortgage shall remain unsatisfied of record, the following provisions shall apply:

(a)Notice of Default.  Lessor, upon serving upon Lessee any notice of default under this Lease, shall also serve a copy of such notice upon the holder of such Leasehold Mortgage, at the address provided for in Section 15.5(f).

(b)Right to Cure.  Any holder of such Leasehold Mortgage, in case Lessee shall be in default under this Lease, shall, within the time period and otherwise as herein provided, have the right to remedy such default, or cause the same to be remedied, and Lessor shall accept such performance by or at the instance of such holder as if the same had been made by Lessee.

(c)No Default.  For purposes of this Article 15, no event of default shall be deemed to exist if the default is with respect to the performance of work, or of acts to be performed, or of conditions to be remedied, if steps shall, in good faith, have been commenced within the time permitted therefor to rectify the same and shall be prosecuted to completion with diligence and continuity.

(d)Leasehold Mortgagee Foreclosure.  Notwithstanding anything to the contrary contained herein, upon the occurrence of an event of default (including, without limitation, the occurrence of the events of default specified in Sections 15.5(b) and (c)), other than a default with respect to the payment of money, Lessor shall take no action to terminate the Lease without first giving the holder of such Leasehold Mortgage written notice thereof and a reasonable time thereafter within which either (i) to obtain possession of the Premises (including possession by a receiver); or (ii) to institute,

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prosecute and complete foreclosure proceedings or otherwise acquire Lessee’s interest under this Lease; so long as such holder cures all defaults then reasonably susceptible of being cured by such holder. Provided, however, that: (i) such holder shall not be obligated to continue such possession or to continue such foreclosure proceedings after such defaults have been cured; (ii) nothing herein contained shall preclude Lessor from exercising any rights or remedies under this Lease with respect to any other default by Lessee during the pendency of such foreclosure proceedings; and (iii) such holder shall agree with Lessor in writing to comply during the period of such forbearance with such of the terms, conditions and covenants of this Lease as are reasonably susceptible of being complied with by such holder.

(e)Termination of Lease.  In the event this Lease is terminated pursuant to the terms hereof prior to the expiration of the Lease Term, Lessor shall serve upon the holder of such Leasehold Mortgage written notice that the Lease has been terminated together with a statement of any and all sums which would at that time be due and owing under this Lease but for such termination, and of all other defaults, if any, under this Lease then known to Lessor.  Such holder shall thereupon have the option to obtain a new lease in accordance with and upon the following terms and conditions:

Upon written request of the holder of such Leasehold Mortgage, within thirty (30) days after service of such notice that this Lease has been terminated, Lessor shall enter into a new lease with such holder, or its designee, provided such new lease shall be: (i) entered into at the reasonable cost of the new lessee thereunder; (ii) effective as of the date of termination of this Lease; and (iii) for a term equal to the remaining term under this Lease and at the rent and upon all agreements, terms, covenants and conditions hereof, including applicable rights of renewal or options to extend. Such new lease shall require the new lessee to perform any unfulfilled obligations of Lessee under this Lease which is reasonably susceptible of being performed by such new lessee. Upon the execution of such new lease, the lessee named therein shall pay any and all sums which would at the time of the execution thereof be due under this Lease but for such termination, and shall pay expenses, including reasonable attorneys’ fees, court costs and disbursements incurred by Lessor in connection with such defaults and termination, the recovery of possession of the Premises, and the preparation, execution and delivery of such new lease.

(f)Delivery of Notice.  Any notice or other communication which Lessor shall desire or is required to give to or serve upon the holder of such Leasehold Mortgage on this Lease shall be in writing and shall be served by registered or certified mail, addressed to such holder at its address as set forth in such Leasehold Mortgage, or in the last assignment thereof delivered to Lessor pursuant to Section 15.4 hereof, or at such other place as such holder may designate in writing to Lessor.

(g)Priority of Leasehold Mortgagees.  Anything contained in this Lease to the contrary notwithstanding, if the holders of more than one Leasehold Mortgage shall make

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written requests upon Lessor for a new lease pursuant to Section 15.5(e) hereof, the new lease shall be entered into pursuant to the request of the holder whose Leasehold Mortgage is prior in lien (as determined by Lessor in its sole discretion) and thereupon the written requests for a new lease of each holder of a Leasehold Mortgage junior in lien thereto shall be void and of no force or effect.

(h)No Merger.  No union of the interests of Lessor and Lessee herein shall result in a merger of this Lease in the fee interest.

ARTICLE 16.  ADDITIONAL COVENANTS

16.1Sale of Premises by Lessor.  Lessor may sell, transfer, assign or otherwise dispose of the Premises, or this Lease, or any part thereof or interest therein, without the consent of Lessee. Upon any such sale, transfer, assignment or disposal of all of its interest in the Premises or this Lease, Lessor shall be automatically relieved of all obligations hereunder; provided this Lease shall not be affected by any such sale, transfer, assignment or disposal of Lessor’s interest, and Lessee agrees to attorn to Lessor’s purchaser or assignee.  Lessee agrees to cooperate with Lessor in the marketing of the Premises to prospective purchasers, including without limitation, by allowing access to the Premises to any such prospective purchasers and Lessor’s marketing agents or consultants, so long as such access does not materially interfere with the conduct by Lessee or any of Lessee’s sublessees of any business on the Premises.

16.2Estoppel Certificates.

(a)Delivery of Lessee Estoppel Certificate.  Lessee shall at any time upon ten (10) days prior written notice from Lessor execute, acknowledge and deliver to Lessor a statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modifications and certifying that this Lease, as so modified, is in full force and effect) and the date to which the rent and other charges are paid in advance, if any; (ii) acknowledging that there are not, to Lessee’s knowledge, any uncured defaults on the part of Lessor hereunder, or specifying such defaults if any are claimed; (iii) acknowledging that Lessee has unconditionally accepted the Premises, is in possession thereof, and no defense to enforcement of the Lease exists; (iv) agreeing to provide any mortgagee of Lessor with the opportunity to cure defaults by Lessor; and (v) agreeing not to amend, cancel or assign the Lease without the prior written content of any mortgagee of Lessor.  Any such statement may be conclusively relied upon by any prospective purchaser or encumbrancer of the Premises.

(b)Consequences if Lessee Estoppel Certificate not Delivered.  At Lessor’s option, Lessee’s failure to deliver such statement within such time shall be a material breach of this Lease.  Lessee’s failure shall also be conclusive upon Lessee (i) that this Lease is in full force and effect, without modification, except as may be represented by Lessor; (ii) that there are no uncured defaults in Lessor’s performance; (iii) that not more than one month’s rent has been paid in advance; (iv) that Lessee is in possession of the

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Premises; (v) that no defenses exist to the enforcement of the Lease; and (vi) that Lessee agrees to be bound by provisions in Section 16.2(a)(iv) and (v).

(c)Delivery of Lessor Estoppel Certificate.  Lessor shall at any time upon ten (10) days prior written notice from Lessee execute, acknowledge and deliver to Lessee a statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modifications and certifying that this Lease, as so modified, is in full force and effect) and the date to which the rent and other charges are paid in advance, if any; (ii) acknowledging that there are not, to Lessor’s knowledge, any uncured defaults on the part of Lessee hereunder, or specifying such defaults if any are claimed; and (iii) acknowledging that Lessee is in possession of the Premises and no defense to enforcement of the Lease exists.  Any such statement may be conclusively relied upon by any prospective purchaser or encumbrancer of Lessee’s interest in the Premises.

(d)Consequences if Lessor Estoppel Certificate not Delivered.  At Lessee’s option, Lessor’s failure to deliver such statement within such time shall be a material breach of this Lease.  Lessor’s failure shall also be conclusive upon Lessor (i) that this Lease is in full force and effect, without modification, except as may be represented by Lessee; (ii) that there are no uncured defaults in Lessee’s performance; (iii) that not more than one month’s rent has been paid in advance; (iv) that Lessee is in possession of the Premises; and (v) that no defenses exist to the enforcement of the Lease.

ARTICLE 17.  DEFAULT

17.1Events of Default.  Any of the following occurrences or acts shall constitute an event of default (“Events of Default”) under this Lease:

(a)General.  If Lessee shall fail to:

(i)Pay any Rent, Additional Rent or other sum, within 10 days following written notice from Lessor that such payment was due and was not timely paid;

(ii)Provide any insurance coverage as required by this Lease, within ten (10) days of written request; or

(iii)Observe or perform any other provision hereof and such failure shall continue for thirty (30) days after notice to Lessee of such failure or such longer period as reasonably may be required to cure such default if the same cannot be cured within such 30-day period and Lessee commences to effect the cure within such 30-day period;

(b)Bankruptcy.  If Lessee shall file a petition in bankruptcy or for reorganization or for an arrangement pursuant to any federal or state bankruptcy law or any similar federal or state law, or shall be adjudicated a bankrupt or shall make an

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assignment for the benefit of creditors or shall admit in writing its inability to pay its debts generally as they become due, or if a petition or answer proposing the adjudication of Lessee as a bankrupt or its reorganization pursuant to any federal or state bankruptcy law or any similar federal or state law shall be filed in any court and Lessee shall consent to or acquiesce in the filing thereof or such petition or answer shall not be discharged or denied within 60 days after the occurrence of any of the foregoing;

(c)Other Insolvency Events.  If a receiver, trustee or liquidator of Lessee or of all or substantially all of the assets of Lessee or of the Premises or Lessee’s leasehold interest therein shall be appointed in any proceeding brought by Lessee, or if any such receiver, trustee or liquidator shall be appointed in any proceeding brought against Lessee and shall not be discharged within sixty (60) days after the occurrence thereof, or if Lessee shall consent to or acquiesce in such appointment;

(d)Abandonment.  If, following commencement of development of the Premises and prior to the sale of all lots to be improved pursuant to the Development Plan, Lessee shall abandon the Premises.

17.2Remedies.  If an Event of Default shall have happened and be continuing, Lessor shall have the following rights and remedies, to the maximum extent available or permitted under applicable law:

(a)Right to Terminate.  Lessor shall have the right to give Lessee notice of Lessor’s termination of the Lease. Upon the giving of such notice, the term of this Lease and the estate hereby granted shall expire and terminate on the date set forth in such notice as fully and completely and with the same effect as if such date were the date herein fixed for the expiration of the Lease Term, and all rights of Lessee hereunder shall expire and terminate, but Lessee shall remain liable as hereinafter provided.

(b)Right to Re-enter.  Lessor shall have the immediate right, whether or not the term of this Lease shall have been terminated pursuant to Section 17.2(a), to re-enter and repossess the Premises by summary proceedings, ejectment, any other legal action or in any lawful manner Lessor determines to be necessary or desirable and to remove all persons and property therefrom.  No such re-entry or repossession of the Premises shall be construed as an election by Lessor to terminate the term of this Lease unless a notice of such termination is given to Lessee pursuant to Section 17.2(a).

(c)Reletting of the Premises.  At any time or from time to time after the re-entry or repossession of the Premises pursuant to Section 17.2(b),whether or not the term of this Lease shall have been terminated pursuant to Section 17.2(a), Lessor shall use reasonable efforts to relet the Premises for the account of Lessee at a rental which is reasonable in light of the then existing market conditions in the community, in the name of Lessee or Lessor or otherwise, without notice to Lessee, for such term or terms and on such other conditions and for such uses as Lessor, in its absolute discretion, may determine. Lessor may collect and receive any rents payable by reason of such reletting.

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(d)Right to Finish Improvements; Assignment to Lessor.  Upon any uncured default set forth herein, and upon re-entry or repossession of the Premises pursuant to Section 17.2(b), Lessor shall have the right, but not the obligation, to complete the Lessee Improvements as set forth on the Development Plan and Lessee shall, subject to any prior rights of holders of Leasehold Mortgages, immediately upon Lessor’s written request assign to Lessor all Lessee’s right, title and interest in and to the Development Plan and any and all construction plans, drawings, site plans or other documents, construction contracts and other agreements prepared or entered into with respect to the development of the Premises, including, without limitation, all entitlements obtained by Lessee with respect to the Premises.

(e)No Release.  No expiration or termination of the term of this Lease pursuant to Section 17.2(a), by operation of law or otherwise, and no re-entry or repossession of the Premises pursuant to Section 17.2(b) or otherwise, and no reletting of the Premises pursuant to Section 17.2(c) or otherwise, shall relieve Lessee of its liabilities and obligations hereunder, all of which shall survive such expiration, termination, re-entry, repossession or reletting.

(f)Damages.  In the event of any expiration or termination of the term of this Lease or re-entry or repossession of the Premises by reason of the occurrence of an Event of Default, Lessee will pay to Lessor all Rent, Additional Rent and other amounts due to Lessor to and including the date of such expiration, termination, re-entry or repossession; and, thereafter, Lessee shall, until the end of what would have been the term of this Lease in the absence of such expiration, termination, re-entry or repossession, and whether or not the Premises shall have been relet, be liable to Lessor for, and shall pay to Lessor, as liquidated and agreed current damages: (i) all Rent on a current basis and all Additional Rent and other sums which would be payable under this Lease by Lessee in the absence of such expiration, termination, re-entry or repossession, less (ii) the net proceeds, if any, of the reletting affected for the account of Lessee pursuant to Section 17.2(c), after deducting from such proceeds all expenses of Lessor in connection with such reletting (including, but not limited to, all repossession costs, brokerage commissions, attorneys’ fees and expenses (including fees and expenses of appellate proceedings), employees’ expenses, alteration and construction costs, if any, and expenses of preparation for such reletting and other expenses related to Lessee’s default).  Lessee will pay such current damages on the days on which Rent would be payable under this Lease in the absence of such expiration, termination, re-entry or repossession, and Lessor shall be entitled to recover the same from Lessee on each such day.

17.3Remedies Not Exclusive.  No right or remedy herein conferred upon or reserved to Lessor is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder, or now or hereafter existing by law, in equity or by statute.

17.4Lessor Breach.  Should Lessor be in default of its obligations under this Lease, Lessee shall notify Lessor of such default in writing. Should such default continue for more than

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thirty (30) days after Lessor’s receipt of such notice, or if such default cannot be cured within thirty (30) days should Lessor have failed to commence and be diligently prosecuting the cure of such default, Lessee shall have, as its sole and exclusive remedy under this Lease, the right to file suit against Lessor in a court of competent jurisdiction for specific performance or damages, as the case may be. Notwithstanding the foregoing, in no event shall Lessee be allowed to any offset or abatement of any rental amounts hereunder, nor shall Lessee be allowed to terminate this Lease, except as specifically provided herein. Notwithstanding anything contained herein to the contrary, Lessee agrees to look solely to the estate and property of Lessor in the Premises, and subject to the prior rights of any mortgagee or beneficiary of any trust deed or any security interest on the same, for the collection of any judgment (or other judicial process) requiring the payment of money by Lessor in the event of any default or breach by Lessor with respect to any of the terms, conditions and covenants of this Lease to be observed and/or performed by Lessor, and no other assets of Lessor shall be subject to levy, execution or other procedures for the satisfaction of Lessee’s remedies.

17.5Arbitration.

(a)Procedures.  Whenever during the Lease Term, any disagreement or dispute arises between the parties as to the interpretation of this Lease or any rights, remedies or obligations arising hereunder, the matter shall be resolved by arbitration. In such cases, an arbitration board shall be established by the method set forth below:

(i)The party seeking arbitration shall notify the other party in writing, specifying the issue or issues in dispute.

(ii)Within five (5) days thereafter, the parties shall agree upon one arbitrator.

(iii)If the parties are unable to so agree after five (5) days, then within two (2) additional days Lessor and Lessee shall each select one arbitrator (but if either party fails or refuses to timely select an arbitrator, then the single arbitrator selected by the other party shall be deemed to be the single arbitrator of the dispute). The two arbitrators so selected thereafter shall, within seven (7) additional days, select a third arbitrator with expertise in the subject matter of the dispute, and the three arbitrators so selected shall arbitrate the dispute. In the event the two arbitrators selected by the parties are unable to agree on a third arbitrator, the third arbitrator shall be appointed by the American Arbitration Association.

(iv)The arbitrators shall meet with the parties immediately after their appointment to determine a schedule for arbitration, including whether and to what extent discovery is required. The arbitrators shall apply the procedural rules of the American Arbitration Association to the extent that those rules are not inconsistent with the procedures set forth herein or the other terms and conditions of this Lease. The arbitrators may set the matter for an evidentiary hearing, or oral argument, or may determine to dispose of the dispute based upon written

36

submissions only. If an evidentiary hearing is held, the normal rules of evidence shall be relaxed, pursuant to the arbitrator’s discretion. All parties shall have the right to participate in the hearing and may determine the most effective and efficient method for the presentation of their case. The parties may present evidence through live testimony, written reports and affidavits, or the argument of counsel or its representative at the hearing. The parties may be represented by any person of their choice at proceedings before the arbitrators, irrespective of whether the representative is an attorney.

(v)The decision of the arbitrators shall be binding on the parties and may be judicially enforced subject to and in accordance with the procedures set forth in Section 18.22.

(b)Costs and Expenses. The costs and expenses of the arbitration board shall be shared equally by and between the parties, unless the arbitrators shall otherwise rule.

(c)Effect of Arbitration Decisions. The arbitration board shall be authorized to issue equitable, as well as legal, remedies.

ARTICLE 18.  GENERAL PROVISIONS

18.1Indemnity Provisions.     Whenever this Lease provides that one party shall indemnify another person or entity, such indemnity obligation shall be construed to not extend to the gross negligence, recklessness, willful misconduct, or breach of this Lease by the person or entity so indemnified.

18.2Waiver of Breach.     No waiver of the breach of any provision of this Lease shall be construed as a waiver of any preceding or succeeding breach of the same or any other provision of this Lease, nor shall the acceptance of rent by Lessor during any period of time in which Lessee is in default in any respect other than payment of such rent be deemed to be a waiver of such default.

18.3Notices.     Notices shall be in writing and shall be given by (a) personal delivery, (b) deposit in the United States mail, certified mail, return receipt requested (which receipt shall be preserved as evidence of delivery), postage prepaid, or (c) overnight express delivery service, addressed or transmitted to Lessor and Lessee at the following addresses, or to such other addresses as either party may designate to the other in a writing delivered in accordance with the provisions of this Section:

If to Lessor:	School and Institutional Trust Lands Administration
	Attn: Development Department
	675 East 500 South, Suite 500
	Salt Lake City, UT 84102

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If to Lessee:	ASC Utah
	c/o American Skiing Company
	Sunday River Road
	P.O. Box 450
	Bethel, Maine 04217
	Attention: Christopher E. Howard

All notices shall be deemed to have been delivered and shall be effective upon the date on which the notice is actually received, if notice is given by personal delivery or by overnight express delivery service, or on the third day after mailing if notice is sent through the United States mail.

18.4Attorneys’ Fees.     If any action is brought by any party to this Lease in respect of its rights under this Lease, the prevailing party shall be entitled to reasonable attorneys’ fees and court costs as determined by the court. In the event that any person who shall not be a party to this Lease shall institute an action against a party to this Lease in which the other party to this Lease shall be involuntarily and without cause joined as a party, the party against whom said action is instituted shall reimburse the other party to this Lease for all attorneys’ fees incurred by such party in connection therewith.

18.5Severability.  The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof.

18.6Recording.  Lessor and Lessee shall enter into a memorandum of this Lease in a form reasonably acceptable to Lessor and Lessee and appropriate for recording.

18.7Cumulative Remedies.  No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies hereunder or at law or in equity.

18.8Construction.     The titles which are used following the number of each Section are so used only for convenience in locating various provisions of this Lease and shall not be deemed to affect the interpretation or construction of such provisions. The parties acknowledge that each party and its counsel have reviewed and revised this Lease. This Lease shall not be construed for or against Lessor or Lessee.  References in this Lease to “Sections” and “Articles” refer to the Sections and Articles of this Lease unless otherwise noted.

18.9Lessor’s Consent.  Whenever this Lease provides for or requires the consent or approval of Lessor, such consent or approval may be given or withheld in the sole and absolute discretion of Lessor, unless a standard of reasonableness is expressly stated.

18.10Successors.     Subject to the restrictions contained in Article 14, this Lease and all of provisions hereof shall be binding upon and inure to the benefit of the successors and assigns of Lessor and Lessee.

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18.11Governing Law.  The terms, conditions, covenants, and agreements herein contained shall be governed, construed, and controlled according to the laws of the State of Utah.

18.12Broker’s Commission.     Lessee and Lessor represent and warrant to each other that there are no claims for brokerage commissions or finder’s fees in connection with this Lease and each agrees to indemnify the other for, from and against all liabilities arising from any claims, including any attorneys’ fees connected therewith, relating to claims arising out of the other’s actions in violation of such representation and warranty.

18.13Time is of the Essence.

(a)Time of Essence.     Except as otherwise provided in Section 18.13(b), time is of the essence of this Lease and in the performance of all of the covenants and conditions hereof.

(b)Force Majeure.  If either Lessor or Lessee is delayed or hindered in or prevented from the performance of any act required hereunder by reason of inability to procure materials, failure of power, riots, insurrection, war, acts of God, labor disputes, and other reasons of a like nature not the fault of the party delayed in performing work or doing other acts required under the terms of this Lease, then performance of such act shall be excused for the period of delay and the time for the performance of any such act shall be extended for a period equivalent to the period of such delay.  The provisions of this Section 18.13(b) shall not operate to excuse Lessee from the prompt payment of Rent, Additional Rent or any other payments required by the terms of this Lease.

18.14Relationship of the Parties.     The relationship of the parties hereto is that of Lessor and Lessee, and it is expressly understood and agreed that Lessor does not in any way, nor for any purpose, become a partner of Lessee or a joint venturer with Lessee in the conduct of Lessee’s business, or otherwise, and that the provisions of any agreement between Lessor and Lessee relating to rent are made solely for the purpose of providing a method whereby rental payments are to be measured and ascertained.

18.15Time Periods.  In the event the time for the performance of any obligation or the taking of any action hereunder expires on a Saturday, Sunday or legal holiday, the time for performance or taking such action shall be extended to the next succeeding day which is not a Saturday, Sunday or legal holiday.

18.16Limitation on Interest.  This Lease is expressly limited so that in no event shall the amount paid or agreed to be paid for any loan or forbearance provided for in this Lease exceed the highest lawful rate permissible under any law which a court of competent jurisdiction may deem applicable. If, for any reason whatsoever, performance of this Lease, or of any other agreement entered into between the parties in connection with this Lease results in exceeding such highest rate of interest, then, ipso facto, the interest rate provided for in this Lease or in any related instrument shall be reduced to such highest lawful rate; and, if for any reason the payee shall receive as interest an amount which would exceed such highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the unpaid principal

39

balance and not to the payment of interest; and if a surplus remains after full payment of principal and lawful interest the surplus shall be remitted to the payor. This provision controls every other provision of this Lease.

18.17Quitclaim.  At the expiration or earlier termination of this Lease, Lessee shall execute, acknowledge and deliver to Lessor, within five (5) days after written demand, from Lessor to Lessee, any quitclaim deed or other document deemed necessary or desirable by Lessor’s counsel to remove the cloud of this Lease from the real property subject to this Lease.

18.18Termination of State Trust.     Nothing contained in this Lease shall operate to delay or prevent a termination of State trust responsibilities with respect to the Premises by the issuance of a fee patent or otherwise during the Lease Term; however, such termination shall not serve to abrogate this Lease. Lessor, Lessee and Leasehold Mortgagees shall be notified of any such change in the status of the Premises.

18.19Lessee’s Obligations to the State of Utah.     While the Premises are held in trust by the State of Utah or subject to a restriction against alienation imposed by the State of Utah, all of Lessee’s obligations under this Lease are to the State of Utah as well as to Lessor.

18.20Tax Immunity.  Nothing contained in this Lease shall be deemed to constitute a waiver of applicable laws providing tax immunity to trust property or any interest therein or income therefrom.

18.21Limited Waiver of Sovereign Immunity.  By this Lease, Lessor does not waive, limit, or modify any sovereign immunity from suit except as specifically provided herein. Lessor agrees to waive any sovereign immunity solely for the limited purpose of authorizing only Lessee to bring a judicial action in the Third District Court and for Summit County, State of Utah for the enforcement of an arbitration decision authorized under and relating to this Lease. This limited waiver of sovereign immunity does not consent to or authorize a judicial action for damages against Lessor other than a judgment for any unpaid amount not paid pursuant to this Lease and is strictly limited to the enforcement of arbitration decisions, including specific performance of an arbitration decision.

18.22Entire Agreement.  This Lease sets forth all the promises, inducements, agreements, conditions, and understandings between Lessor and Lessee relative to the Premises, and there are no promises, agreements, conditions, or understandings, either oral or written, express or implied, between them other than are set forth herein. No subsequent alteration, amendment, change, or addition to this Lease shall be binding upon Lessor or Lessee unless in writing and signed by each of them.  Parole evidence shall never be admissible in any court, tribunal, arbitration or governmental agency to modify, amend or vary the terms of this Lease.

18.23No Warranty as to Title.     Lessor claims title in fee simple, but does not warrant to Lessee the validity of title to the Premises.  Neither Lessee nor any successor in interest to Lessee, nor anyone claiming by or under Lessee’s interest in this Lease, shall have any claim for damages against Lessor for any claimed failure or deficiency of Lessor’s title to the Premises or for interference by any third party.  In the event of failure of Lessor’s title to any part of the

40

Premises, Lessee shall not be entitled to a refund of any Rent, Additional Rent or any other fees or amounts paid by Lessee pursuant to this Lease.

IN WITNESS WHEREOF, the parties hereto have executed this Lease on the day and year first written above.

	Lessor:
	STATE OF UTAH, acting through its
	SCHOOL AND INSTITUTIONAL TRUST LANDS ADMINISTRATION
	By	/s/ [ILLEGIBLE]
	Its	Assistant Director
Approved as to Form
/s/ John W. Andrews
Jan Graham, Utah Attorney General by John W. Andrews, Special Assistant Attorney General
	Lessee:
	ASC UTAH
	a Maine corporation d/b/a The Canyons
	By	/s/ Christopher E. Howard
	Its	Senior Vice President

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STATE OF UTAH	)
	)ss.
COUNTY OF SALT LAKE	)

On this 30 day of June, 1998, personally appeared before me [ILLEGIBLE], the Assistant Director of the School and Institutional Trust Lands Administration, who acknowledged that he/she, being duly authorized, did execute the foregoing instrument on behalf of the School and Institutional Trust Lands Administration.

[SEAL]
NOTARY PUBLIC
RUTH HAWE
50 South Main #1600
Salt Lake City, UT 84144
My Commission Expires
January 3, 1989	/s/ Ruth Hawe
STATE OF UTAH	Notary Public

STATE OF MAINE	)
	)ss.
COUNTY OF OXFORD	)

On this 30^th day of December, 1997, personally appeared before me Christopher E. Howard, the Senior Vice President of ASC Utah, a Maine corporation, who acknowledged that he/she, being duly authorized, did execute the foregoing instrument on behalf of ASC Utah.

Notary Public

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STATE OF UTAH	)
	)ss.
COUNTY OF	)

On this           day of                                     , 199    , personally appeared before me                                         , the                                     , of the School and Institutional Trust Lands Administration, who acknowledged that he/she, being duly authorized, did execute the foregoing instrument on behalf of the School and Institutional Trust Lands Administration.

Notary Public

STATE OF MAINE	)
	)ss.
COUNTY OF OXFORD	)

On this 30^th day of June, 1998, personally appeared before me Christopher E. Howard, the Senior Vice President of ASC Utah, a Maine corporation, who acknowledged that he/she, being duly authorized, did execute the foregoing instrument on behalf of ASC Utah.

/s/ [ILLEGIBLE]

Notary Public

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EXHIBIT A, PART 1

TO

LEASE AGREEMENT

LEGAL DESCRIPTION
OF THE PREMISES

I.SECTION 2: See Attached

Excluding approximately 240 acres located in the southeast corner of Section 2 at such time as such area is leased to Iron Mountain Associates. Until such time it shall be included in the leased Premises.

II.SKI PARCELS

A.Peak 9990: See Attached

B.Peak 9250: See Attached

C.Iron Mountain: See Attached

A-1-1

EXHIBIT A, PART 2

TO

LEASE AGREEMENT

LEGAL DESCRIPTION
OF DEVELOPMENT PARCEL

The development parcel consists of approximately 120 acres located in the area of the terminus of the new Flight of the Canyons gondola and Red Pine Lodge. Two separate plans for development of this parcel are attached showing different configurations of development. As the Development Plan is finalized, a more precise description of the Development Parcel will be prepared, approved by the parties using the same procedure as is described in the Lease for amendments to the Development Plan and attached hereto.

A-1-1

EXHIBIT B

TO

LEASE AGREEMENT

DESIGN AND APPROVAL SCHEDULE

Lessee and Lessor will continue to work collaboratively to refine this Schedule.  The current Schedule is as follows:

Date	Item
12/9/97	Master Plan - Initial Presentation
12/16/97	Master Plan - Public Forum
1/98	Finalize Conceptual Phase
2/98	Commence Technical Phase
4/98	Conclude Technical Phase
9/98	First “Project” Approval
10/98  5/99	Commence construction of first interval or club product.

B-1

EXHIBIT C

TO

LEASE AGREEMENT

DEVELOPMENT PLAN

See Plans Attached

D-1

EX-10.39

Exhibit 10.39

AGREEMENT

THIS AGREEMENT between Killington, Ltd. (“Killington”), a Vermont corporation with its principal place of business in Sherburne, Vermont, and Farm and Wilderness Foundation, Inc. (“F&W”), a Vermont non-profit corporation duly qualified under Internal Revenue Code Sec. 501(c)(3), with its principal place of business in Plymouth, Vermont, is entered into this 18^th day of August 1997.

I.Recitals.

1.Killington needs additional water-storage capacity for its snowmaking operations at the Killington ski resort (“Resort”) in Sherburne, Vermont.

2.F&W created water-storage capacity on real estate it owns in the Town of Plymouth by virtue of the installation and maintenance of its dam at Woodward Reservoir (the “Reservoir”).  F&W’s real-property rights are more particularly described in Schedule A attached hereto and incorporated herein by reference (the “Premises”).

3.The Reservoir is located close enough to Killington that it would be practical for Killington to utilize the water in its snowmaking operation.

4.The parties have consulted with the Agency of Natural Resources of the State of Vermont (“ANR”) and have been advised that a plan to convey water from F&W’s property to the Resort for purposes of snowmaking is a feasible and appropriate means to increase the water capacity for snowmaking at the Resort, subject to full regulatory review and approval.

5.The parties are entering into this Agreement to authorize Killington to utilize the dam at the Reservoir and/or to construct a

1

diversion structure and related improvements, and to convey water across the Premises, and to set forth the terms and conditions upon which F&W will allow Killington to exercise such rights.  Killington’s plan to divert water from and convey water across the Premises, and thence to convey water to lands owned or leased by Killington, for purposes of snowmaking at the Resort, is hereinafter called the “Project.”

6.The parties intend that this Agreement shall only be effective upon the approval by the Vermont Legislature of the “Land Exchange” described in a Memorandum of Understanding among the parties and the Vermont Agency of Natural Resources dated July 2, 1996.

II.Covenants.

NOW THEREFORE IN CONSIDERATION of the mutual covenants contained herein, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties covenant and agree as follows:

1.Access for Testing, etc.  F&W hereby authorizes Killington to enter on the Premises for purposes of:

A.Conducting such tests and studies as Killington determines reasonably necessary to assess the storage capacity created by F&W’s dam;

B.Inspecting, testing and analyzing site conditions associated with the Project; and

C.Performing such further studies, analyses and evaluations as may be required to develop engineering plans for the Project.

Notwithstanding the foregoing, Killington shall not have any right to conduct a test that would create an adverse impact on the operation of F&W’s camps or related uses.  This right of testing shall cease upon

2

completion of construction of the Project, except as strictly necessary under applicable regulatory permits or with the prior, written consent of F&W.  Testing as strictly necessary in connection with maintenance of improvements on the Premises may be conducted if prior written notice is sent to F&W at least 15 days before commencement of such tests.

2.Project Development.  Following its engineering and planning analysis of alternative methods, and in consultation with F&W, Killington shall propose a project design for F&W’s approval, which shall not unreasonably be delayed or withheld.  Killington and F&W shall utilize the methodology and basic principles set forth in Sections 5 and 6 below in developing and approving the Project design.

3.Restore Premises.  Killington shall not conduct any tests that involve excavation of earth, destruction of vegetation or any alteration of the landscape without at least 48 hours prior notice to F&W, and Killington shall promptly return the property as nearly as possible to its prior condition after completion of such tests.  In the event that such testing would involve the cutting of any trees on the Premises, or cause other changes to the landscape that cannot be fully restored upon completion of the tests, Killington shall consult with F&W prior to conducting such tests so the parties can explore ways to minimize or mitigate the anticipated changes to the landscape, and shall only proceed with such tests after written approval of F&W.

4.Furnish Documents.  Killington shall furnish to F&W, upon F&W’s written request, complete copies of all results of such testing, or any other technical studies of any kind commissioned by or furnished to Killington relating in any way to the Premises;  provided such materials

3

and data shall remain the exclusive property of Killington and may not beused or disseminated without Killington’s prior written consent. Notwithstanding the foregoing, such materials may be shared with F&W’s consultants for all purposes related to the Project.  Any materials that are filed with a regulatory body as part of an application for approval or a permit, or which otherwise become subject to disclosure pursuant to Vermont’s Public Record Act, 1 V.S.A. Sec. 315 et seq., shall be released from this confidentiality commitment.

Determining Project’s Use of F&W’s Premises

5.F&W Approval.  No application for any regulatory approvals or permits associated with the Project shall be made by Killington until F&W has provided written approval of the proposed plan for use of the Premises in connection with the Project (the “Project Plans”).  F&W shall not unreasonably withhold or delay its approval of the Project Plans so long as the Project Plans satisfy the following Basic Principles.

6.Basic Principles.  In developing the methodology for water withdrawal from the Premises the parties agree on, and Killington shall apply, the following basic principles (“Basic Principles”):

A.Killington needs the water for snowmaking.  F&W needs the water primarily for its summer camp season.  In order to assure that the Reservoir will be fully recharged from winter drawdowns in time to operate the summer camps and provide reasonable boating and swimming access for camp owners, Killington shall not withdraw any water from the reservoir after March 15 of each year.  Notwithstanding the foregoing, F&W may require Killington to cease water withdrawals up to 15 days earlier in a specific year if, as a result of unusually low precipitation or other factors, a Vermont-licensed professional engineer with experience in water management certifies to F&W that cessation of withdrawals at an earlier date (on or after March 1) is reasonably necessary to assure that the water level will be at elevation 1,345.5 feet mean sea level by June 1of that year.  The parties by agreement may elect to allow withdrawals by Killington after March 15 in any given, year at F&W’s sole discretion.

4

B.A drawdown methodology must be developed which assures to the extent reasonably possible that there will be no material negative effect upon fish and fish spawning beyond impacts generated by historic water draw down levels at the Reservoir, if any.

C.No water drawn by Killington shall be used for any purpose other than snowmaking.  In the event that a pipeline is constructed, however, it shall be designed to allow reasonable access by firefighters for drawing water to combat fires.

D.It is anticipated that the Project Plans will enable a more precise description of the Premises leased hereunder as provided in Section 16 hereof.  Therefore, after completion of the Project Plans and issuance of all necessary regulatory approvals and permits, that portion of the Premises leased hereunder shall be clearly defined and described on a Survey prepared at Killington’s sole expense by a Vermont-licensed surveyor reasonably satisfactory to both parties (the “Leased Premises.”)

E.F&W shall retain all beneficial use of the Premises except to the extent otherwise expressly granted to Killington hereunder. Specifically, and without limitation, F&W shall retain the right to use of the Premises for purposes of generating electricity provided such use does not adversely affect, interfere with or disrupt Killington’s use of the Premises for snowmaking purposes.

F.All construction, maintenance, repairs and operations on the Leased Premises shall be performed in a workmanlike and safe manner, in accordance with all applicable law and regulations.

G.Killington’s Project Plans shall have no material impact on F&W’s present or anticipated camping program or related uses; shall not cause undue, adverse aesthetic impacts;  and shall be compatible with the natural environment.

Permits and Regulatory Review

7.Permit Responsibility.  Killington shall be responsible at its sole expense for obtaining any and all permits and regulatory approvals necessary for, or associated with, the Project.

8.F&W Cooperation. Following approval of Project Plans pursuant to Section 5 hereof, and at Killington’s request, F&W shall execute and deliver, as owner of the Premises, such applications and requests for regulatory approval for use of the Premises described in the Project Plans, and to undertake such other actions as are reasonably necessary in

5

connection with obtaining permits and approvals for the Project.  Nothing herein shall be deemed to require F&W to present testimony at any regulatory hearing, except upon request of the regulatory body. F&W shall not oppose, or seek conditions inconsistent with, the Project Plans in any proceeding relating to such approvals or permits.  Any costs and expenses, including reasonable attorney’s fees, incurred by F&W in connection with activities undertaken at Killington’s request shall be reimbursed by Killington in the manner provided in Section 10.

F&W retains full and unrestricted right to appear or participate as a party in, or to furnish comments in connection with, any regulatory proceeding or review involving the Project; provided, however, that once F&W approves the Project Plans, F&W shall not oppose the Project Plans or seek conditions that are not consistent with the Project Plans.

9.Copies.  Killington shall promptly furnish to F&W copies of any and all correspondence with, submittals to, or requests and orders from any regulatory body in connection with applications for permits for the Project, to the same extent as an interested party intervenor would be entitled to such copies, whether or not F&W enters a separate appearance or otherwise elects to participate.  In addition, Killington shall promptly furnish to F&W upon written request a full and complete copy of correspondence to and from any regulatory agency relating to the Project to the same extent as an interested party intervenor would be entitled to obtain.  Nothing herein shall be deemed to constitute or require a waiver of attorney-client privilege by Killington.

6

Payments to F&W

10.Reimbursement of Costs and Expenses.

Killington shall promptly reimburse F&W all of its reasonable costs and expenses, including attorney’s fees, incurred in connection with the negotiation of this Agreement, and in connection with the testing, planning and regulatory activities described above, up to a maximum limit of $40,000.  F&W shall be paid in full within 30 days after submission of an invoice for such payments, unless Killington requests a more detailed accounting within 15 days of receipt of such invoice, in which case payment shall be due 15 days after receipt of such accounting.  However, if Killington shall contest the reasonableness of the costs and fees, or some other aspect of the accounting, it may demand arbitration in writing within such 15-day period, and such arbitration shall be undertaken as provided in Section 25(M).

11.Annual Payments.

Killington shall pay F&W for the use of the Leased Premises in connection with the Project and the interests granted pursuant to Section 16 hereof as follows:

A.  Basic Fee.  In Calendar Year 1997, Killington shall make a payment to F&W in the amount of Two-Hundred Thousand Dollars ($200,000.00) (the “Basic Fee”), reduced by one half of the sums paid by Killington to F&W pursuant to Section 10 hereof.  The Basic Fee, after such adjustment, shall be paid by Killington upon execution and delivery of this Agreement. The amount paid by Killington in Calendar Year 1997 shall be refunded, in full but without interest, to Killington upon the occurrence of either of the following two events:

7

(i)  If Killington, after exercising reasonably diligent efforts, has not obtained all necessary federal, state and local permits and approvals for, and completed construction sufficiently to be able to commence operation of, the Project on or before December 31, 1997; or

(ii)  If the State of Vermont General Assembly does not approve the “Land Exchange” during its 1997 session upon terms and conditions acceptable to Killington.

Killington shall submit a written request for such refund to F&W under sub-section (i) on or before January 15, 1998, or for sub-section (ii) on or before 30 days following the end of the 1997 adjournment of the Vermont General Assembly, or Killington shall be deemed to have waived any claim hereunder.  Such notice shall state with particularity the grounds for demanding refund of the payment.

B.  Adjusted Fee.  On or before February 1, 1998, and each February 1st thereafter during the Term of this Agreement, Killington shall pay to F&W the Adjusted Fee, as hereinafter defined.  The Adjusted Fee shall be due annually on such date during the term hereof regardless of whether during such year Killington is using water diverted from or across land of F&W, unless as of the date payment is due any one or more of the regulatory permits or approvals necessary to operate the facilities and to withdraw water as contemplated by this Agreement has been denied, revoked, lapsed or not reissued, provided Killington has exercised reasonable diligence to maintain or obtain such permit or approval.  The Adjusted Fee for any given year shall be the larger of the following two calculations:

i.CPI Calculation.  The Basic Fee shall be adjusted only upward using as an index the Consumer Price Index - All Urban Consumers (CPI-U) National Average for all items (1967=100) of the United States Department of Labor Statistics in effect and generally published for the referenced month (the “Price Index”).  If the aforementioned Consumer Price Index shall no longer be published, then another price index generally recognized as authoritative shall be substituted by the

8

parties.  Adjustments using the Price Index shall be made as follows:  The Price Index for the last day of October 1996 shall be deemed the “Base Index.”  For each subsequent year, the “Price Index Ratio” shall be determined by using the Price Index for the last day of October of the Preceding year as the numerator and the Base Index shall be the denominator.  The Basic Fee shall be multiplied by the Price Index Ratio to determine the Adjusted Fee for each year of the term.

For example, if the Base Index were 1.00, and if the Price Index on October 31, 1997 were 1.03, then the Adjusted Fee for 1998 would be determined by multiplying ($200,000.00) x (1.03/1.00) to yield an Adjusted Fee of $206,000.00 for 1998.

ii.   Resort Revenue Calculation.

The Basic Fee shall be adjusted only upward by a factor equal to the percentage increase in Resort Revenue (as hereinafter defined) for Killington’s fiscal year ended July 31, 1997 to its Resort Revenue for the most recently completed fiscal year of Killington as of the date of each adjustment. “Resort Revenue” shall mean all gross revenue, minus any returns and allowances granted to customers, from “Ski and Lodging Operations” at the “Resort.”   Ski and Lodging Operations shall mean the sale of ski tickets, group packages and all other revenue derived from mountain-based operations, plus revenue derived from food, food-service operations, guest lodging facilities from short- and long-term rentals, real-estate management services and all other amenity activities provided by the Resort.  Resort is defined in sub-section (C)(ii) hereafter.  The percentage increase in Resort Revenue shall be calculated based upon Killington’s audited consolidated statements of income, shareholder’s equity and cash flow for such fiscal years, reported by Price Waterhouse LLP, or other independent certified public accountants of recognized national standing, and as included in American Skiing Company’s or affiliate’s Form 10-K filings with the Securities and Exchange Commission.  The calculation of the percentage increase in Killington’s Resort Revenue shall be prepared by Killington’s independent public accountants, provided such accountants are of nationally recognized standing, and a certification (supported by copies of the original annual calculations) as to the percentage increase in Resort Revenue shall be provided to F&W on an annual basis on or before October 31 of each year. In the event that Killington is merged into another entity, or reorganized, or other circumstances change so that the above method is no longer feasible or does not produce an accurate and fair accounting of increases in Resort Revenue, the parties agree to work cooperatively to revise the calculation method accordingly.

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C.The Skier Day Fee.

i.  Beginning in calendar year 1998 and continuing each year during the Term thereafter, an additional fee calculated as set forth below, based on Skier Days, shall be paid by Killington to F&W, if due, on or before June 30 of each such year.  The Additional Fee shall be calculated as follows:

For each Skier Day (including both paid and unpaid Skier Days) after the first one million (1,000,000) Skier Days at the Killington Ski Area in each ski season, Killington shall pay to F&W an addition amount equal to fifty cents ($ .50).  The fifty-cent-per-Skier-Day charge shall increase each year by the same percentage as the increase in the Adjusted Fee as calculated using the methodology set forth in sub-section B. This shall be called the “Skier Day Fee.”

ii.  Killington shall furnish to F&W, on or before June 1 of each year during the term, a summary accounting of Skier Days generated at the Resort during each prior ski season commencing in the fall and completed in the spring, covering a portion of two calendar years.  Such calculations shall be based upon the same methodology for calculating Skier Days as used by Killington for all other purposes, and shall be in accordance with generally accepted practices in the ski resort industry. If requested by F&W, Killington shall grant physical access to all financial and operations records reasonably necessary for the purpose of validating or auditing the annual calculation of skier days.  If F&W does not conduct an audit examination, it shall be entitled to request from an independent auditing firm employed by Killington a special purpose report, at Killington’s sole expense, that provides reasonable assurance that the payments due hereunder have been paid in full and on a timely basis.  The “Resort” shall include the area historically known as the Pico Mountain Ski Area after such time that water diverted from the Reservoir can be used at

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the Pico Mountain Ski Area.  Before such water is available to Pico Ski Area, the method chosen by Killington to calculate skier days at Killington shall accurately and fairly account for the fact that tickets sold at Pico may also be used at the Killington Ski Area.

D.Interest.

Except as specifically provided otherwise in this Agreement, in the event that any payment due under this Section or any other Section of this Agreement is not paid on the date specified, time being strictly of the essence, then in addition to any other remedy provided herein or by law, the party who was entitled to such payment shall be entitled to receive interest in the same manner and at the same rate applicable to judgments issued by a Vermont Superior Court.

E.No Warranty.  Killington’s obligations under this Agreement are not conditional on Killington drawing any, or any given amount of, water, except as provided in Section 14.  Killington acknowledges that F&W has made no guarantees or representations as to the amount of water that Killington might be allowed to draw by the State of Vermont.  Killington further acknowledges that F&W has made no guarantee or representation that any minimum amount of water will be available for snowmaking in any given year.

F.Disputes.  In the event of a dispute between the parties about the calculation of the Adjusted Fee or the Skier-Day Fee, including but not limited to disputes about the calculations provided by Killington in any given year or about changes in the Resort Revenue methodology to account for corporate mergers or other changed circumstances, either party may demand binding arbitration pursuant to Section 25(M).

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12.Term.  The “Term” of this Agreement shall be fifteen years, and the Agreement shall terminate on December 31, 2012 unless sooner terminated in accordance with the provisions herein set forth.

13.Renewal Terms.  Killington shall have a right to renew this Agreement for three Renewal Terms, each of twenty-five years.

A.Notice.  Killington shall give written notice to F&W on or before June 30, 2012 of its intent to renew the Agreement for the First Renewal Term, and shall pay to F&W on or before that date the Renewal Fee (as hereinafter defined).  In the event that Killington fails to give such notice to F&W and to pay the Renewal Fee by such date, it shall be deemed to have waived any and all renewal rights granted hereunder.  With respect to each additional Renewal Term, Killington shall give written notice of its intent to renew the Agreement for an additional Renewal Term to F&W, and shall pay the Renewal Fee, on or before June 30 of the calendar year immediately before the year in which the current Renewal Term expires.

For example, Killington must give such notice and pay the Renewal Fee on or before June 30, 2037 to renew for an additional renewal term after December 31, 2037.

In the event that such notice and fee are not received on or before such date, Killington shall be deemed to have waived any and all renewal rights granted hereunder.  The Renewal Fee shall be the product of Two-Hundred and Fifty Thousand Dollars ($250,000.00) multiplied by the Price Index Ratio to the year of payment in the same manner as set forth in Section 12(B)(1).

For example, if the Base Index were 1.00, and if the Price Index on October 31, 2010 were 1.75, then the Renewal Fee for the First Renewal Term, payable on or before June 31, 2011, would be determined by multiplying ($250,000.00) x (1.75/1.00) to yield a Renewal Fee of $437,500.00.

D.No further renewal terms.  Nothing herein shall be construed as

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granting any right of renewal for additional terms after December 31, 2087.

14.Termination. A. For Reasons Pertaining to Title and Condition of Premises.  Killington may terminate this Agreement and receive a full refund of the Basic Fee, not including interest, at any time on or before December 31, 1997 if it determines that F&W does not have fee simple and absolute title to the Premises, or if there is any fact, circumstance, condition, easement, restriction, encumbrance, violation, covenant or any circumstance respecting the Premises that is unacceptable to Killington. Such termination shall be made by written notice to F&W on or before the December 31, 1997, or this condition shall be deemed waived.  Killington hereby acknowledges that F&W has made no representations as to title or condition of property on which it is relying in entering into this Agreement.  Further, Killington acknowledges that prior to execution of this Agreement, and pursuant to the testing provisions hereof, Killington has now or will have full and complete opportunity to examine the Premises, and accepts use of the same pursuant to this Agreement in “as is” condition.

B.For Reasons Pertaining to Regulatory Approval.  Killington may terminate this Agreement by giving notice to F&W in writing if it does not before December 31, 1999 obtain all approvals from all applicable governmental authorities, as are necessary for the construction and operation of the Project, containing such terms, provisions and conditions as are acceptable to Killington in its discretion, and all appeal periods with respect thereto have expired.  In the event that Killington exercises this contingency after January 1, 1998, it shall not be entitled to any refund of fees paid hereunder except as provided in Section 11(A).  If this

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condition is not exercised on or before December 31, 1999, it shall be deemed waived.

C.For Reasons Pertaining to Material Adverse Impact on the Camps. F&W may terminate this Agreement if the installation or operation of Killington’s Project, or Killington’s exercise of rights or performance of duties hereunder, proximately causes a Material Adverse Impact (as hereinafter defined) on F&W’s camps, as operated by F&W in a manner consistent with operations before the date hereof.  The parties intend that this right of termination shall only be exercisable after provision of written notice by F&W to Killington of such impact, and after an appropriate opportunity to cure taking into consideration the nature and extent of the impact, including such cooperative efforts as the parties may deem appropriate to abate or mitigate such impacts.  This right to terminate shall be exercisable as follows:

i.Definition.  A Material Adverse Impact on the camps as operated by F&W in a manner consistent with operations before the date hereof shall mean:

(a) An impact that has caused the Reservoir, its tributaries or surface waters downstream to violate on a continuing or regular basis any physical, chemical or biological criterion, or other water-quality standard, specified in the Vermont Water Quality Standards (“WQS”), as now promulgated or as the WQS may hereafter be amended, supplemented or superseded by other statutory or regulatory criteria for Vermont surface waters, whether or not an enforcement action has been initiated to abate or mitigate such violation;  or

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(b)An impact that has in a substantial manner impaired, interfered with or disrupted use on a continuing or regular basis by F&W of the Reservoir for swimming, boating, fishing, aesthetic enjoyment and other purposes associated with its camping or other non-profit operations as of the date hereof; or

(c)An impact that has in a substantial manner otherwise impaired, interfered with or disrupted the uses associated with F&W’s camping and other non-profit operations on adjoining lands of F&W.

ii.Intent to Cooperate.

The parties agree that it would generally be in the best interests of both parties if F&W raises any concerns about the installation or operation of Killington’s Project, or about Killington’s exercise of rights or performance of duties hereunder, in an informal manner when such concerns arise during the term of this Agreement.  Such informal communications shall not limit the parties’ obligations to provide formal notices hereunder.  The parties further agree to endeavor in good faith to resolve any such concerns informally and reasonably while continuing to operate under the terms of this Agreement.  However, neither party shall be deemed to have waived any claim under this Agreement by virtue of participating (or not) in any such discussions, or by virtue of the use (or not) of the environmental fund established pursuant to Section 29.

iii.Environmental Fund.

In the event that F&W gives notice to Killington that F&W believes that a condition may have been caused by installation or operation of

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Killington’s Project, or by Killington’s exercise of rights or performance of duties hereunder, which is, or might if unremedied become, a Material Adverse Impact, then Killington shall within 45 days following notice from F&W of such condition, establish the Environmental Fund as provided in Sec. 29 hereof.

iv.Notice to Cure.

In the event that F&W contends that a Material Adverse Impact has been caused by installation or operation of Killington’s Project, or by Killington’s exercise of rights or performance of duties hereunder, F&W shall not have any right to terminate until it has served Killington with a notice to cure.  F&W shall specify in the notice each and every specific violation, impairment, interference or disruption (“the Problem”) that forms the basis for F&W’s belief that a Material Adverse Impact has been caused by Killington’s installation or operations.  Killington shall have a period of six calendar months after receipt of such notice during which it may propose specific alternative conditions to cure the Problem.  In the event that any cure proposed by Killington does not reasonably satisfy F&W, or in the event that Killington contends that the Problem (considered with or without any proposed cure) does not constitute a Material Adverse Impact caused by the installation or operation of Killington’s Project, or by Killington’s exercise of rights or performance of duties hereunder, then either party may submit to binding arbitration, as provided in Section 25(M), the question of whether F&W is entitled under the standards herein to terminate this Agreement.  The arbitrator shall apply the business-judgment rule in deciding whether F&W’s determination was reasonable under all the circumstances.

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15.Environmental Matters.  Killington agrees to indemnify, defend and hold F&W and its respective officers, employees and agents harmless from any claims, judgments, damages, fines, penalties, costs, liabilities (including sums paid in settlement of claims) and/or loss, including reasonable attorney’s fees and expenses, consultants’ fees and expenses, and experts’ fees and expenses that arise during and/or after the Term in connection with the presence or alleged presence of toxic or hazardous substances on or above the surface of the Premises as a result of Killington’s actions or failure to act, or from the Project, its construction, operation or removal.  F&W shall have no duty or obligation to undertake any action with respect to any matter relating to Killington’s use of the Leased Premises.  To the extent that such toxic or hazardous substances were present before the date hereof (whether or not discovered after the date hereof), or are present as the result of placement or discharge by, or the negligence or misconduct of, F&W or its respective invitees, contractors, officers, employees or agents, or is otherwise the result of F&W’s actions or failure to act, Killington shall have no duty of indemnification hereunder.  Without limitation, indemnification hereunder specifically covers costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision because of the presence or suspected presence of asbestos or toxic or hazardous substances on or under the Premises.  The right of indemnification shall include the right by F&W to require Killington to take such actions as are required by any governmental entity with jurisdiction to remove such toxic or hazardous material and/or to take

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other remedial action reasonably necessary to comply with applicable law. If Killington shall fail to commence to do so within thirty (30) days after F&W’s notice and demand therefor, F&W may take such actions and recover the reasonable costs thereof without waiving any other claim hereunder.  The parties obligations hereunder shall survive the expiration or earlier termination of this Agreement.  If, at any time after the date hereof until the termination date, Killington or F&W receives notice from any person or entity that there is any asbestos and/or any other toxic and/or hazardous material in, and/or under the Premises, such party shall within 21 days thereafter give the other party written notice thereof, setting forth specific information about such material.

16.Confirmation of Leased Rights.  Upon Killington obtaining all necessary permits and approvals for the Project, the parties shall develop, draft, execute and deliver such instruments as may be reasonably required in accordance with best practices for real estate conveyancing in the State of Vermont in order to accurately establish the precise nature, scope and location of the Leased Premises, as reflected in the Project Plans.  Such lease instruments and the Survey prepared pursuant to Sec. 6(D) hereof shall be recorded in the land records of the Town of Plymouth.  Whether or not such instruments and Survey are executed, delivered and recorded, this Agreement shall none-the-less constitute a lease of such portion of the Premises as is strictly necessary to construct, own and operate the Project in accordance with the Project Plans, and may be recorded to evidence of record the commitments made hereunder.

17.Insurance.   From and after the date Killington commences construction at the Leased Premises, Killington agrees to carry Commercial

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General Liability and Premises Liability insurance (which may be provided during construction through builder’s risk insurance) on the Leased Premises, (specifically including the Reservoir dam in the event the Project Plans include any improvements, piping or pumping in, at or around the dam, but excluding downstream liability coverage), during the balance of the Term hereof covering both Killington and F&W as their interest may appear, with companies reasonably satisfactory to F&W and giving F&W and Killington a minimum of thirty (30) days written notice by the insurance company prior to cancellation, termination or change in such insurance. Such insurance shall be for limits of not less than Three Million Dollars ($3,000,000.00) combined Bodily Injury and Property Damage Liability.  Any insurance required of Killington under this Section 17 may be effected by a blanket or multi-peril or all-risk policy or policies issued to Killington or to any person or entity with which Killington is affiliated, and covering the Leased Premises as well as other properties owned by or leased to Killington or persons or entities affiliated with Killington.  F&W shall be a named insured on such policy or policies.  Killington shall furnish a certificate of insurance demonstrating that this required coverage is in effect within five business days of a written request by F&W, time being strictly of the essence.

18.Damage & Destruction.   In the event the Premises, or any part thereof, including but not limited to the dam at the Reservoir, are hereafter damaged or destroyed as a result of any act, or failure to act, by Killington (including without limitation its employees, contractors, agents, or invitees), Killington shall promptly repair and replace such damage or destruction, and shall defend, hold harmless and indemnify F&W in

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connection therewith from any third-party claims in the manner set forth in Section 19.  Killington shall also hold-harmless and indemnify F&W from any and all damages to F&W proximately caused thereby.  This Section is expressly applicable to damages to, or destruction of natural resources that exceed any incidental trimming, excavation or related impacts reasonably necessary as a result of construction and operation of the Project in accordance with generally accepted engineering or resource management standards within the State of Vermont.  This Section shall survive termination of this Agreement.

19.Third-Party Claims.  Killington shall defend, hold harmless and indemnify F&W in full from and against any and all loss, costs, damages, claims and liability resulting from any third-party claims against F&W alleged to arise in any manner connected to Killington’s use of the Leased Premises.  Notwithstanding the foregoing, Killington shall have no duty to hold harmless and indemnify (but Killington shall have a duty to defend) F&W against any claim alleged to arise as a result of willful misconduct on the part of F&W, its agents or employees.  Killington’s duty to indemnify and hold-harmless hereunder may be satisfied by payment in full under any applicable contract of insurance as provided in Section 17, and the defense required hereunder may be satisfied by Killington if an insurance carrier as provided in Section 17 furnishes a professionally competent defense to F&W (without reservation of any rights) under any applicable contract of insurance.  It is understood and agreed by the parties that claims made against F&W, even if covered by this section of the Agreement, could cause increased insurance premiums or even cancellation of insurance coverage of F&W, and therefore nothing herein shall be deemed to grant a cause of

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action for contribution by Killington or any insurer of Killington against any insurer of F&W, except with respect to any claims not subject to indemnification hereunder.  It is the intention of the parties that this Section be construed in a manner that will relieve F&W and/or its insurers of any costs of any type relating to claims covered hereunder. Notwithstanding any other provision of this Agreement, Killington shall have no obligation to indemnify and hold-harmless F&W from any claim of negligence in which it is adjudicated that damage was proximately caused by negligent maintenance of the Dam (as hereinafter defined);  and Killington shall have no obligation to defend F&W from any claim in which it is alleged that the sole breach of duty that caused damage to the claimant was negligent failure to maintain the Dam.  The “Dam” shall mean the earth-filled dam of the Reservoir, along with the roadway crossing the earth-filled dam, the emergency spillway, drop inlet, low-level outlet and sluice gate.  This Section shall survive termination of this Agreement.

20.Compliance with Law.  Killington shall comply with all federal, state and municipal laws, statutes, ordinances, orders, rules and/or regulations in connection with Killington’s use and occupancy of the Leased Premises.  Killington shall defend, hold-harmless and indemnify F&W from any and all liabilities or costs arising out of Killington’s failure to comply with any such federal, state or municipal laws, statutes, ordinances, orders, rules and/or regulations in connection with Killington’s use and occupancy of the Leased Premises.

21.Dam Maintenance, Improvements and Reconstruction.  F&W shall maintain the Dam as necessary to comply with all applicable local, state and federal regulations, and in conformance with reasonable engineering

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standards.  Killington shall reimburse F&W for all reasonably necessary costs, including but not limited to the professional fees of a Vermont-licensed engineer reasonably acceptable to F&W and to Killington, associated with such maintenance of the Dam.  F&W shall make reasonable efforts to consult in advance with Killington before incurring expenses hereunder, but failure to consult shall not relieve Killington of its obligations to pay such costs provided the costs are reasonable. Reimbursement shall be paid within 30 days after F&W presents Killington with invoices or written statements for such work.  In addition, F&W shall plan, obtain any necessary permits for, and complete any and all capital improvements, or capital reconstruction, reasonably necessary for operation, preservation and maintenance of the Dam.  Killington shall pay that portion of the total reasonable costs of such a capital project calculated by multiplying the total cost by a fraction in which the numerator is the remaining term of this Agreement (including the length of any and all Renewal Terms provided in Section 13) and the denominator is the useful life of the improvements or reconstruction for purposes of amortization according to reasonable accounting practices.

For example, if the remaining term of this Agreement (including the Renewal Terms) were ten years, the useful life of an improvement were thirty years, and the cost of a capital improvement were $10,000, then Killington would be required to pay (10/30) x ($10,000), or $3,333.33. The balance shall be paid by F&W.

Under no circumstances shall Killington be required to pay more than 100 percent of the cost of such a capital project.  In the event of a dispute as to whether an expense is a capital one for which Killington is liable only for a pro-rata share, or in the event of a dispute about the appropriate useful life of a capital project, or in the event of a dispute

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about the reasonableness of costs, either party may submit the question to binding arbitration in accordance with the procedures set forth in Section 25(M) hereof.  Notwithstanding the foregoing,  Killington shall be responsible for paying all of the costs of repair of any damage caused by, or performance of any capital repairs required as a result of, construction of the Project or related operations.  The parties recognize that they may choose to agree that Killington should assume maintenance responsibilities for the Dam, in which event they will amend this Section and Section 19 accordingly.  Notwithstanding any other provision of this Section, F&W shall not be required to undertake any maintenance or capital construction associated with the roadway over the Dam if such work is generally performed on the roadway by the Town of Plymouth.

22.Default.  A.  Default by Killinqton.

1.The occurrence of any of the following shall constitute a default and breach of this Agreement by Killington if not cured or corrected in accordance herewith (herein referred to as a “Default”).  In the event of Default, F&W may terminate this Agreement by giving written notice to Killington.

a.Any failure by Killington to pay Basic Rent, Adjusted Rent, Skier Day Fees or any other payment required to be made by Killington hereunder within fifteen (15) days after receipt of written notice from F&W that payment thereof has not been made in accordance with the requirements of this Agreement; or

b.A failure by Killington to observe and perform any other provision of this Agreement to be observed or performed by Killington, where such failure continues for thirty (30) days after receipt of written

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notice thereof by F&W to Killington, except that this thirty (30) day period shall be extended for a reasonable period of time if the alleged default is not reasonably capable of cure within said thirty (30) day period and Killington commences to cure such default within such period of thirty (30) day period and thereafter diligently and continuously proceeds to cure the default; or

c.The making by Killington of general assignment for the benefit of creditors (exclusive of assignments in connection with financings), the filing by or against Killington of a petition to have Killington adjudged a bankrupt, or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Killington, the same is dismissed within ninety (90) days), the appointment of a trustee or receiver to take possession that is not restored to Killington within ninety (90) days, or the attainment, execution or other judicial seizure that is not discharged within ninety (90) days;  or

d.The failure by Killington to remedy a violation of a condition of any regulatory permit or applicable law within 30 days after receipt of notice from F&W of such violation with request to cure same, provided that it shall not be deemed a default hereunder if, at the time of such notice or within 30 days thereafter, Killington (a) contests the validity of the violation in a proceeding initiated with the agency or other body with jurisdiction over such permit, (b) has submitted to such agency or other body a fully completed application or motion to modify such condition, or (c) has submitted a plan acceptable to the regulatory agency for curing the violation in due course, or (d) demands arbitration in the manner provided herein as to whether such violation is insubstantial based upon the

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criteria set forth below.  Notwithstanding any other provision of this Agreement, the costs of such arbitration shall be paid in full by Killington unless the arbitrator finds that the violation is insubstantial or was not known to Killington, in which case the violation shall not be deemed a breach of this Agreement and the parties shall divide the costs of arbitration in equal share.  The parties agree that the standards for determining whether a violation is insubstantial or unknown to Killington are those set forth by the Vermont Supreme Court in Sherburne v. Carpenter, 155 Vt. 126 (1990) as standards for a court to consider when asked to enjoin a regulatory violation;  or

e.The failure by Killington to satisfy any indemnity obligation hereunder within the strict time limits set forth herein.

2.In addition to any other remedy available at law or equity, in the event of Default, F&W shall be entitled to obtain without bond a preliminary and/or final injunction to restrain or abate violations, or to specifically enforce, the terms and conditions of this Agreement (and of any instruments recorded hereafter pursuant to Section 16), and F&W further shall be entitled to recover its reasonable attorneys fees in the event F&W prevails in connection with any action to enforce its rights hereunder. Killington covenants and agrees that any violation of the terms of this Agreement, except an agreement to pay money on a specified date, shall be deemed to constitute irreparable harm.  Failure by F&W to assert a claim or pursue a remedy after breach by Killington shall not be deemed a waiver by F&W of any claim arising hereunder.

B.Default by F&W.  The parties agree that any substantial interruption of the use of the Leased Premises by Killington for snowmaking

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has the potential to cause damages to Killington that are difficult to liquidate or determine.  In light of the foregoing, the parties covenant and agree that Killington shall have no claim to terminate this Agreement or to sue F&W, its agents, officers or employees for monetary damages arising out of any alleged breach by F&W of this Agreement or of any instruments hereafter recorded pursuant to Section 16 hereof.  However, Killington shall have a right to seek specific performance of any term or condition hereof, without the requirement of posting any bond or security. The parties further agree that any breach of a term or condition by F&W shall be deemed for such purposes to constitute irreparable damages for which there is no adequate remedy at law.  Failure by Killington to assert a claim for specific performance after breach by F&W shall not be deemed a waiver by Killington of any claim for specific performance arising hereunder with respect to that breach, or any other breach (whether similar or dissimilar) occurring simultaneously with or separate from such breach. In the event that Killington alleges that F&W has breached the Covenant of Quiet Enjoyment set forth in Section 26 hereof,  it shall give written notice to F&W of such breach and state specifically therein what actions F&W must take to cure the alleged breach.   If, after such 60-day period, Killington believes that the breach has not been cured, then Killington may give written notice of termination to F&W.  Such notice shall be effective 15 days after receipt unless during such period F&W gives notice in writing to Killington that F&W wishes to submit to arbitration the question of whether the Covenant of Quiet Enjoyment has been breached.  In such event, the Agreement shall not be terminated and the matter shall be submitted to binding arbitration.  The arbitrator shall terminate the Agreement if it is

26

found that the Covenant of Quiet Enjoyment has been breached and that such breach is substantial.  F&W shall pay the costs of such arbitration unless the arbitrator finds that there has been no breach or that the breach is insubstantial, in which event the Agreement shall not be terminated, and the parties shall divide the costs of arbitration in equal share.

23.Notices Around the Reservoir.  Killington shall post all necessary signs around the Reservoir by November 1^st of each year during the term hereof to provide reasonable and effective warning of the dangers of the ice being unsupported by water underneath, and shall obtain all regulatory approvals, if any, necessary for such posting.  Signs shall be removed each year on or before April 30.

24.Improvements upon Termination.  Upon termination of this Agreement, F&W may require Killington to remove all improvements, if any, constructed on the Leased Premises pursuant to this Agreement, and to restore the Leased Premises as nearly as practicable to their condition before construction, provided only that F&W give Killington written notice of such request no longer than six months after the date of termination. Killington shall be entitled to remove any and all above-ground improvements in the event of termination of this Lease and shall have reasonably appropriate access to the Leased Premises to do so.

25.Miscellaneous Provisions. A. Condemnation.  In the event that a portion of the Leased Premises are taken by condemnation by public authority, and if such taking impairs the use of the Leased Premises in connection with the Project, and if such impairment cannot reasonably be remedied by Killington, then Killington, at its election, may terminate this Agreement as of the effective date of such taking.  Whether or not

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this Agreement is terminated by Killington, nothing herein shall be deemed to affect Killington’s right to file a separate claim for compensation from the condemning authority for damages to Killington’s right under this Agreement.

B.Notices.  Notices and demands required, or permitted, to be sent to those listed hereunder shall be sent by certified mail, return receipt requested, postage prepaid, or by Federal Express or other reputable overnight courier service and shall be deemed to have been given on the date the same is postmarked if sent by certified mail or the day deposited with Federal Express or such other reputable overnight courier service, but shall not be deemed received until one (1) business day following deposit with Federal Express or other reputable overnight courier service or five (5) business days following deposit in the United States Mail, if sent by certified mail to address shown below, or at such other address requested in writing by either party upon thirty (30) days notice to the other party:

If to F&W:

Mr. Len Cadwallader

Secretary of the Corporation and Executive Director

Farm & Wilderness Foundation, Inc.

Plymouth, Vermont

If to Killington:

President

Killington, Ltd.

Sherburne, VT

General Counsel

American Skiing Company

P.O. Box 450

Bethel, Maine 04217

The parties may in writing designate successor officers or new

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addresses for purposes of notice hereunder.

C.Remedies Cumulative.  All rights and remedies of F&W and Killington herein created or otherwise extending at law are cumulative, and the exercise of one or more rights or remedies may be exercised and enforced concurrently or consecutively and whenever and as often as deemed desirable.

D.Binding Effect.  All covenants, promises, conditions, representations and agreements herein contained shall be binding upon, apply and inure to the parties hereto and their respective heirs, executors, administrators, successors and assigns.

E.No Waiver.  The failure of either F&W or Killington to insist upon strict performance by the other of any of the covenants, conditions, and terms of this Agreement shall not be deemed a waiver of any subsequent breach or default in any of the covenants, conditions and agreements of this Lease.

F.No Joint Venture.  The parties hereto agree that it is their intention hereby to create only a relationship of landlord and tenant, with limited and specified duties to cooperate together.  Therefore, no provision hereof, or act of either party hereunder, shall ever be construed as creating the relationship of principal and agent, or a partnership, or a joint venture or enterprise between the parties hereto.

G.Deleted.

H.Applicable Law and Choice of Forum.  This Agreement shall be governed by the laws of the State of Vermont.  Any litigation arising hereunder shall be prosecuted in a court of competent jurisdiction within the State of Vermont or the United States District of Vermont.

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I.Entire Agreement.  This Agreement contains all of the understandings of the parties hereto with respect to matters covered or mentioned in this Agreement and no prior agreement, letters, representations, warranties, promises, or understandings pertaining to any such matters shall be effective for any such purpose.  This Agreement may be amended or added to only by an agreement in writing signed by the parties hereto or their respective successors in interest.

J.Preliminary Negotiations; Drafting Presumption.  F&W and Killington acknowledge and agree that neither of them shall be bound by the representations, promises or preliminary negotiations with respect to the Leased Premises made by their respective employees or agents.  It is their intention that neither party be legally bound in any way until this Agreement has been fully executed by both F&W and Killington.  This Agreement has been prepared by F&W, and its professional advisors, and reviewed by Killington and its professional advisors.  F&W, Killington, and their separate advisors believe that this Lease is the product of all of their efforts, that it expresses their agreement, and that it should not be interpreted in favor of either F&W or Killington, or against either F&W or Killington merely because of their efforts in preparing it.

K.Headings; Gender.  Paragraph headings, numbers and underscoring have been set forth herein for convenience only, do not define or limit the provisions hereof, and have no significance whatsoever.  The order in which the paragraphs appear in this Agreement has no significance whatsoever. Words of gender used in this Lease shall be deemed to include other genders, and singular and plural words shall be deemed to include the other, as the context may require.

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L.Survival.   In the event that the agreement isterminated before the Term has expired, the rights of defense, indemnity, to be held harmless and to restoration specified in Sections 3, 15, 18, 19, 24 and 28 shall survive, as shall any claim that arose under the Agreement before the date of termination.

M.Arbitration.  In connection with any right of arbitration specifically provided in this agreement, and unless otherwise agreed by the parties in writing, the arbitration shall take place in the City of Rutland, Vermont, and shall be conducted according to the applicable rules of the American Arbitration Association.  If the parties cannot agree on an arbitrator, each party shall select one arbitrator and the two arbitrators so chosen shall choose the third person.  Unless otherwise specified herein, the parties shall jointly bear all costs of arbitration.  All arbitration shall be binding.

N.Taxes.  Killington shall pay all real and personal property taxes levied against the improvements constructed by Killington on the Leased Premises.  F&W agrees to join in an application requesting the appropriate taxing authority to perform a tax parcel division and create a separate tax number for the improvements, if such a division is available.  If such a division is not available and real estate taxes must continue to be paid in F&W’s own name, then Killington shall contribute Killington’s proportionate share of such taxes based upon the taxes attributable to Killington’s improvements.  F&W shall furnish to Killington in writing its calculation of the taxes due in any current year after the tax bill has been received by F&W, and within 60 cays thereafter Killington shall pay to F&W the proportionate share due from Killington.  F&W shall be responsible

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for paying the taxing authority, and F&W shall deliver evidence satisfactory to Killington of the method of its calculation and payment of such taxes at least ten days before they would otherwise become delinquent. If F&W fails to provide such evidence of payment, Killington may, at Killington’s option, pay any unpaid taxes then due.  F&W shall immediately reimburse Killington for the amount of F&W’s taxes paid by Killington or, at Killington’s option, Killington may offset the amount of F&W’s taxes paid by Killington against any amounts due or to become due to F&W under this Lease.  In the event of a dispute with respect to the allocation of taxes, either party may submit the matter to binding arbitration. Killington shall have the right at its sole cost and expense to contest by appropriate legal proceedings any tax, assessment, levy or charges which may be levied, assessed, imposed or charged separately against the Leased Premises and/or Killington’s operations and/or directly against Killington’s improvements located in or on the Leased Premises, and which under this Agreement shall be paid by Killington.  Notwithstanding that Killington undertakes such contest, Killington shall not defer or suspend compliance with the obligation hereunder to pay any such taxes pending the outcome of such contest unless by law it is necessary that such payment be suspended to preserve or perfect Killington’s action or is otherwise permissible.  To the extent F&W is required by law to be a party to any such proceeding to execute any document or consent, or where such proceeding may only be brought in the name of F&W, F&W shall so act to enable Killington to enforce its right.

O.Repairs.  Killington shall be responsible for all maintenance and repairs of the improvements related to the Project, which repairs shall be

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performed in a workmanlike manner.  Any work performed besides routine maintenance or emergency repairs will require advance notice to F&W of Killington’s actions.  Routine maintenance shall not be conducted at times or in a manner that interferes with F&W’s program or services.  No trees, vegetation or brush shall be cut by Killington without F&W’s prior approval.

P.Materiality of Terms.  In accepting this Agreement, Killington acknowledges that the Leased Premises are a scenic natural area used for recreational and for conservation purposes, and that the terms and conditions of this Agreement are all material.  Killington further acknowledges that F&W is a non-profit organization concerned about preservation of those outstanding natural, recreational and scenic qualities.  F&W likewise acknowledges the importance of the terms to Killington, and acknowledges that all terms requiring performance by F&W are material.  Therefore, the parties expressly agree that any breach or violation shall be subject to injunctive relief without proof by the other party of any monetary damage, loss or injury to any property interest.

Q.            Authority of Parties.  F&W and Killington hereby represents, warrant and affirm that they have full authority to execute this Agreement. They further represent, warrant and affirm to each other that the Agreement is a binding and enforceable obligation.

R.Regulatory Notices During Term.  Killington shall promptly furnish to F&W during the term hereof a complete copy of any regulatory notices of violation, administrative orders, or correspondence from any local, state or federal official in which it is asserted that a violation of any applicable law or permit has or may occur on the Premises.

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S.Definition of “Agreement.”  As used herein, the “Agreement” shall be construed, after execution and recording of instruments pursuant to Section 16, as including all such instruments.

T.Changes in Project.  After approval of the initial Project Plans by F&W, Killington shall make no discernible changes in the Project that would have any likelihood of having any effect upon, or which are visible from the F&W campus, without the prior written consent of F&W.  F&W may withhold its consent to any such proposed changes in its sole discretion. In the event of a dispute between the parties as to whether any particular change requires F&W’s consent, either party may submit the question to binding arbitration.  Killington shall promptly furnish to F&W copies of any and all “change orders” issued by or on behalf of Killington during initial construction of the Project.  To the extent reasonably feasible, such copies shall be given to F&W before the change is implemented.  After completion of the initial construction of the Project, Killington shall give notice in writing to F&W of any and all proposed changes in the Project that Killington contends would not have any likelihood of having any effect upon F&W, or which are not visible from the F&W campus.  Such notice shall be given at least 15 days before the change is implemented. Notwithstanding the foregoing, Killington may without the prior consent of F&W make any changes expressly required by a regulatory agency to comply with applicable law, provided that such changes are also consistent with the Basic Principles.  Killington shall give notice to F&W if it intends to make such changes required by a regulatory agency.  The notice shall include a copy of the order of such regulatory agency that requires such changes.  If F&W does not within 30 days of receipt of such notice demand

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arbitration of the question whether the change is consistent with the Basic Principles, F&W’s consent shall be deemed granted.  No construction or change shall take place during such 30-day period, or during the time required to complete any arbitration demanded by F&W.

U.Notice of termination or non-renewal.  In the event that this Agreement is terminated pursuant to Section 14 or in the event that Killington elects not to renew the Agreement pursuant to Section 13, F&W may record in the land records of the Town of Plymouth, after the effective date of termination, notice that the Agreement has terminated.  Such recorded notice shall be conclusive notice of termination of this Agreement as to any third-parties.  Any summary or short-form notice of this Agreement recorded by Killington in the land records of the Town of Plymouth shall include the full text of this Section 25(U) .

V.Lease.  The parties agree that the rights conveyed hereunder are leased, and that this instrument does not transfer a fee interest. Notwithstanding the foregoing, in the event that any taxing authority alleges that F&W is obligated to pay any land-gain, capital gain or other tax as a result of executing and delivering this instrument, or the transactions incorporated herein, Killington shall defend, hold-harmless and indemnify F&W therefrom.  Nothing herein shall be construed to require Killington to defend, hold-harmless or indemnify F&W from any tax liabilities incurred as a result of lease payments hereunder.

26.Covenant of Quiet Enjoyment.  F&W covenants that Killington shall have quiet and peaceable possession of the Leased Premises after commencement of construction and during the Term hereof, and that F&W will not disturb Killington’s enjoyment thereof as long as Killington is not in

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default under this Agreement. F&W further covenants not to construct or permit, approve, cause or otherwise allow on the Leased Premises any improvements, structure or other facility that would interfere with Killington’s use of the Leased Premises under this Agreement.  It shall not be a breach by F&W of this covenant if F&W uses or allows use of the Premises that does not substantially interfere with the rights of Killington hereunder; provided, however, it shall be a breach by F&W of this covenant if F&W undertakes any action of any type of its own accord by contract to or with any third party that has, or would have, a material adverse effect on the exercise of Killington’s rights hereunder, specifically including without limiting the generality of the foregoing, any actions that impair or otherwise negatively impact the volume of water in the Reservoir or the historical water levels at the Reservoir.  F&W covenants and agrees not to undertake any such action.  Nothing herein shall be deemed to restrain F&W from notifying any local, state or federal agency of a violation or potential violation of applicable law, or to restrain F&W from taking action required by any applicable federal, state or municipal law, statute, ordinance, order, rule and/or regulation.

27.Assignment.  Killington shall not assign its right, title and interest hereunder to any third party except with the prior written consent of F&W, which may be refused for any reason.  Notwithstanding the foregoing, Killington may assign and transfer any or all of its right, title and interest hereunder:

A.To any entity owned, controlled or under the management of the American Skiing Company;

B.To the purchaser of all or substantially all of the assets of

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Killington, Ltd. or the American Skiing Company; or

C.To an entity that merges or consolidates with or into Killington or the American Skiing Company, or into which Killington or the American Skiing Company is merged or consolidated.

F&W hereby consents to the collateral assignment of all Killington’s right, title and interest in and to this Agreement to any third parties extending credit to Killington or the American Skiing Company, and hereby covenants and agrees to execute and deliver such consents to assignment as may be reasonably required by any lenders to Killington or the American Skiing Company, determined based upon commercial lending practices for credits in excess of $20,000,000.  Such consents may include, without limitation, the following provisions, to which F&W hereby consents and agrees:

A.Providing notice of any default by Killington under this Agreement in addition to notices otherwise required hereunder and providing a reasonably opportunity for the lender or lenders to cure such default;

B.Extending the right to such lenders to act as the lessee hereunder for such period as the lender or lenders may deem appropriate prior to any assignment of its interest in and to this Agreement in connection with any foreclosure or other similar proceeding initiated against Killington or the assets;

C.Extending to Lender the right to assign its interest under this Lease in connection with any foreclosure or similar proceeding involving the Leased Premises or Killington; and

D.Agreeing that the lender or lenders need not assume any

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responsibility for monetary defaults by Killington or pay any amounts in arrears owed by Killington in connection with their exercise of their right to take over the lessee’s interest under this Agreement and foreclose upon such interest or otherwise assign such interest in a foreclosure or similar proceeding involving the Leased Premises or Killington.

F&W hereby acknowledges and agrees that the foregoing provisions are illustrative of, and not a complete list of, terms and provisions typically found in commercially reasonable leasehold mortgages or assignments and F&W hereby agrees to cooperate with Killington and its lender or lenders to develop, execute and deliver such leasehold mortgages or assignments as may reasonably acceptable to Killington’s lender or lenders.

Notwithstanding the foregoing, F&W’s obligation to consent to any such assignments is conditioned upon the assignee or lender, in the event of a foreclosure or other exercise of the assignee’s or lender’s rights, agreeing in writing to assume and perform all obligations of Killington arising under this Agreement on or after the date upon which the assignee or Lender takes possession of the Leased Premises or exercises rights under instruments prepared in accordance with Section 16 hereof.  Nothing herein, however, shall be deemed to limit F&W’s remedies against Killington, including the right to terminate this Agreement on account of Killington’s breach.

With advance notice to Killington, F&W may pledge, mortgage, assign, grant and/or transfer any or all of its right, title and interest hereunder.

28.Unconditional Guarantee.  In consideration of the mutual

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covenants contained herein, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, American Ski Corporation (“ASC”) hereby unconditionally covenants and agrees to guarantee any and all of Killington’s obligations hereunder to defend, indemnify and/or hold F&W harmless.  Any notice given hereunder to Killington shall be deemed to be full and complete notice to ASC, and ASC hereby waives any other claim to notice.  This unconditional guarantee shall survive termination of the Agreement.

29.Environmental Fund.   The Fund shall be established by Killington as provided in Sec. 14(C)(iii) hereof (the “Fund”) in the initial amount of $100,000.00.  The purpose of the Fund is to allow for study and remediation of adverse environmental or aesthetic impacts that may be associated with Killington’s installation or operations.  The parties intend that the Fund be used as a means to avoid conflict between the parties during the Term.  The Fund shall be established and maintained as follows:

A.The Fund shall be managed in accordance with the terms of this Agreement by an Escrow Agent (the “Agent”) chosen by F&W, provided that the Agent is a banking corporation licensed to do business in Vermont, or an attorney licensed to do business in Vermont, or a law firm with its principal place of business in the State of Vermont.

B.The custodian of the Fund shall be a banking corporation licensed to do business in the State of Vermont unless Killington, F&W and the Agent agree otherwise in writing.

C.The Fund may be drawn upon in accordance with the procedure set forth in Section 29(d) below solely for the following purposes:

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i.To pay a professional fee and reasonable expenses to the Agent and/or to the custodian of the Fund.

ii.Unless Killington objects in writing as provided in Section 29(D), to pay:

a.A third party or parties for study of environmental or aesthetic impacts reasonably believed by F&W to have been caused by, or related to, Killington’s installations or operations under this Agreement.

b.A third party or parties for remediation or mitigation of environmental, aesthetic or use impacts reasonably believed by F&W to have been caused by, or related to, Killington’s installations or operations under this Agreement.

D.F&W shall provide prior written notice to Killington of any proposal to draw on the Fund for any purpose other than payment of the Agent or custodian of the Fund.  Such notice shall be sent prior to commencement of any study or project, but need be sent only once in connection with any study or project.  Nothing herein shall be construed to require multiple notices in connection with each disbursement involved in a single study or project.  Such notice shall set forth a description of the work to be undertaken, the maximum expense of such work, the anticipated schedule for the project, and the name of the proposed consultant or contractor.  The notice shall also set forth the basis for FSW’s belief that the proposed expenditure is caused by or related to Killington’s installations or operations under this Agreement.  Killington shall have 30 days after the date upon such notice is sent to serve written notice of its intent to contest this use of the Fund.

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E.Any notice of intent to contest by Killington shall be sent certified mail, return receipt requested, or delivered in hand, to the Agent and in accordance with Section 25(B).  If such notice of intent to contest is not received by the Agent within such 30 days, then Killington shall be deemed to have waived any and all claim hereunder to contest such use of the Fund.

F.The sole reason why Killington may contest use of the Fund is that the proposed use is not for payment of:

a.A third party or parties reasonably qualified to study environmental or aesthetic impacts that a reasonable person might believe were caused by or are related to Killington’s installations or operations under this Agreement.

b.A third party or parties reasonably qualified to remediate or mitigate environmental, aesthetic or use impacts that a reasonable person might believe were caused by, or are related to, Killington’s installations or operations under this Agreement.

G.Killington’s notice shall state specifically why it contends that the standards set forth in Section 29(F) have not been satisfied.

H.In the event that the parties have not been able to resolve any dispute about whether the proposed use of the Fund satisfies the standards set forth in Section 29(F), then either party may at any time submit the question to binding arbitration pursuant to Section 25(M).

I.In the event that the principal amount of the Fund drops below Fifty-Thousand Dollars ($50,000.00), F&W may require Killington to replenish the Fund.  Within 60 days after receipt of notice from F&W

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pursuant to this sub-section, Killington shall pay to the Escrow Agent the sum necessary to bring the principal of the Fund to at least One-Hundred-Thousand Dollars ($100,000.00), and Escrow Agent shall immediately deposit such payment into the Fund.  Such notice from F&W shall include a written statement from the Escrow Agent certifying the balance of the Fund on a date specified no more than 60 days before the date of such notice, and the amount of Killington’s payment shall be calculated based on that Fund balance.  Notwithstanding the foregoing, if at the time such payment is due, the Price Index has increased to 1.50 or greater, then Killington’s payment shall increase the balance of the Fund to One-Hundred-and-Fifty-Thousand Dollars ($150,000.00), and any payments thereafter pursuant to this sub-section shall be similarly calculated so that the resulting balance of the Fund is at least equal to the product of ($100,000.00) x(Price Index).

J.             Killington shall be entitled to receive a written accounting of any and all use of the Fund monthly upon application in writing to the Agent.  The Agent shall furnish such accounting within a reasonable time after such request.  F&W shall be entitled to receive accountings on the same basis, and as may otherwise be agreed between the Agent and F&W.  Any disputes arising out of the accountings shall be subject to arbitration in accordance with Section 25(M) at the request of any party, or of the Agent.

K.The Agent and Custodian shall be entitled to reasonable professional fees.  The Agent may require proof from F&W that it has strictly complied with the notice requirements specified herein before making a disbursement pursuant to Sec. 29(C)(ii).  Written certification from an authorized representative of F&W that such notice was given on a

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specified date shall beconclusive proof to the Agent that notice was given on such date, and Agent shall have no duty to make any further inquiry.  In the event that Killington serves notice of intent to contest a proposed use of the Fund in accordance with the strict time provisions set forth herein, Escrow Agent shall not make any disbursements related to the matter being contested except upon written authorization from Killington or in accordance with the decision of the arbitrator.  As a condition of being named Agent, the Agent shall execute an acknowledgement of arbitration or other written instrument that binds the Agent to the arbitration provisions of this Agreement with respect to the use of the Fund.

L.If Killington elects not to contest a proposed use of the Fund, this failure to contest shall not be construed as an admission of any kind whatsoever.  For example, without limitation, failure to contest a proposed use of the Fund shall not be construed as an admission by Killington that its installation or operation has caused a Material Adverse Impact.  The parties agree that the purpose of the Fund is to avoid conflict and to solve problems.  Therefore Killington may consent to use of the Funds for a particular purpose even though Killington does not believe that its installation or operation has in fact caused a particular Problem.

M.Upon termination of this Agreement, the Agent shall prepare a final accounting (to cover the period since the last accounting furnished to Killington and to F&W.)  Upon approval by both parties in writing of the final accounting, or upon an arbitrator’s decision with respect to any disputes about the final accounting, the Agent shall pay the full amount of the Fund to Killington.  Notwithstanding the foregoing, if any additions have been made to the Fund from a source other than Killington or the

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earnings of the Fund, the final accounting shall include a proposal to equitably account for such additions by remittance or payment to Killington, F&W or a third party (or parties) in the final distribution. Such payments shall not be made until written consents have been received from F&W or Killington, or in accordance with an arbitrator’s decision.

N.In the event that Killington believes that any and all outstanding Problems have been resolved or mitigated to F&W’s reasonable satisfaction, and that no further testing, study or monitoring is required, Killington may serve notice in writing on Escrow Agent and on F&W that it requests all funds then held in escrow to be remitted to Killington. Escrow Agent shall remit such funds within 30 days thereafter unless, within such time, F&W serves written notice on Escrow Agent and on Killington that it believes that any and all outstanding Problems have not been reasonably mitigated or resolved, or require further testing, study or monitoring.  In the event that the parties cannot thereafter resolve a dispute about whether the escrow funds should be remitted to Killington, either Killington or F&W may submit the matter to binding arbitration in accordance with the provisions of Section 25(M) hereof.  The escrow funds shall be retained by Escrow Agent unless the arbitrator finds that any and all outstanding Problems have been resolved or mitigated to F&W’s reasonable satisfaction, and further finds that no further testing, study or monitoring is reasonably required.  The arbitrator shall have no authority to order a partial release of escrow funds.

O.            For all purposes of tax reporting, any and all earnings of the Fund shall be treated as income by Killington.  F&W agrees that to the extent permissible under applicable law, all expenses of the Fund may be

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claimed by Killington as expenses for purposes of tax reporting.

30.Multiple Originals.  This instrument shall be executed in four original copies.

IN WITNESS WHEREOF, the parties hereto have signed this Lease Agreement on the day and year first above written.

In the Presence of:		Killington Ltd.
/s/ [ILLEGIBLE]	By:	/s/ [ILLEGIBLE]
Witness as to Killington		Its duly authorised agent
	Farm and Wilderness Foundation, Inc.
/s/ [ILLEGIBLE]	By:	/s/ Leonard Cadwallader
Witness as to Farm & Wilderness		Its Duly Authorized Agent
	American Skiing Company
/s/ [ILLEGIBLE]	By:	/s/ [ILLEGIBLE]
Witness as to American Skiing		Its duly Authorized Agent

STATE OF MAINE
OXFORD COUNTY, SS

At                                    , on this         day of 1997, personally appeared, before me,                        ,and   he thereupon acknowledged the foregoing instrument as h         free act and deed, and the free act and deed of Killington, Ltd.

Notary Public

STATE OF VERMONT

WINDSOR COUNTY,   SS

At Plymouth Vermont, on this 18day of August 1997, personally appeared, before me, Leonard Cadwallader, and  he thereupon acknowledged the foregoing instrument as his free act and deed, and the free act and deed of the Farm and Wilderness Foundation, Inc.

/s/ [ILLEGIBLE]

Notary Public

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STATE OF MAINE
OXFORDCOUNTY, SS

At                                                       , on this             day of 1997, personally appeared, before me,                                        , and      he thereupon acknowledged the foregoing instrument as h         free act and deed, and the free act and deed of American Skiing Company.

Notary Public

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ACKNOWLEDGMENT OF ARBITRATION

The undersigned acknowledge and agree that this Agreement contains agreements to arbitrate certain disputes, as provided in Sections 11, 13, 25, 41 and 47 hereof.  After signing this document, we understand that we will not be able to bring a lawsuit concerning any dispute that may arise which is covered by the arbitration agreement in Section 40, unless it involves a question of constitutional or civil rights.  Instead, we agree to submit any such claim to an impartial arbitrator.

In the Presence of:		Killington, Ltd.
/s/ [ILLEGIBLE]	By:	/s/ [ILLEGIBLE]
		Its duly authorized agent
	Farm and Wilderness, Inc.
/s/ [ILLEGIBLE]	By:	/s/ Leonard Cadwallader
		Its Duly Authorized Agent
	American Skiing Company
/s/ [ILLEGIBLE]	By:	/s/ [ILLEGIBLE]
		Its duly Authorized Agent

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Schedule A

The Premises are “Woodward Reservoir,” also known as “Plymouth Reservoir,” in the Town of Plymouth, County of Windsor, State of Vermont. The Premises include any and all right, title and interest to lands below the high water level thereof, the reservoir dam, along with any and all flowage rights appurtenant thereto.

Excepted from the Premises are those premises conveyed to the State of Vermont by Warranty Deed of Plymouth Reservoir Company, Incorporated, dated December 4, 1970 and recorded December 14, 1970 in Book 33, Page 16 of the Plymouth Land Records.

The Premises are SUBJECT to an easement from Plymouth Reservoir Company, Inc. to Central Vermont Public Service Corporation dated September 11, 1967 and recorded December 20, 1967 in Book 31, Page 56 of the Plymouth Land Records.

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EX-10.40

Exhibit 10.40

THIRD AMENDMENT
TO GROUND LEASE AGREEMENT

THIS THIRD AMENDMENT TO GROUND LEASE AGREEMENT (this “Amendment”), is entered into to be effective as of September 16, 2004 (the “Effective Date”), by and between WOLF MOUNTAIN RESORTS, L.C., a Utah limited liability company (“Wolf Mountain”) and ASC UTAH, INC., a Maine corporation (“ASCU”).

A.            WOLF MOUNTAIN has leased certain land and other interests in real property located in Summit and Salt Lake Counties, Utah, formerly known as the Wolf Mountain Ski Resort and now known as The Canyons resort (the “Resort”), to ASCU pursuant to that certain Ground Lease Agreement dated as of July 2, 1997, as amended by that certain First Amendment to Ground Lease Agreement dated August 1, 1998, as further amended by that certain Second Amendment to Ground Lease Agreement dated November 12, 1999 (as amended, the “Ground Lease”).

B.            ASCU and Gerald M. Friedman (“Friedman”) previously entered into that certain Owner Agreement, dated July 17, 1998, as amended by that certain Amended and Restated to Owner Agreement by and between ASCU, Friedman and Sugarbowl Associates, L.L.C. (“Sugarbowl”) (as amended, the “Owner Agreement”).  Friedman and Sugarbowl are the owners of that certain real property referred to therein as the “Owner Property.”  ASCU owns in part, leases in part, and controls certain real property referred to therein as the “ASCU Property,” a portion of which is the Resort leased from Wolf Mountain under the Ground Lease.

C.            As contemplated in the Owner Agreement, Friedman and Sugarbowl, have entered into that certain Exchange of Property Agreement with ASCU whereby Friedman and Sugarbowl will transfer and convey that portion of the Owner Property described on Exhibit A attached hereto (“Owner Exchange Property”), and ASCU will transfer and convey that portion of the ASC Property described on Exhibit B attached hereto (“ASC Exchange Property”), such ASC Exchange Property being previously owned by Wolf Mountain and conveyed by Wolf Mountain to ASCU in exchange (in part) for certain consideration and payments described below.  Such transaction is referred to herein as the “Exchange”.  The Owner Exchange Property and the ASC Exchange Property are depicted on Exhibit E attached hereto.

D.            In addition, as contemplated in the Owner Agreement, Friedman and Sugarbowl will grant certain easements to Wolf Mountain (the “Wolf Mountain Easements”), and Wolf Mountain will grant certain easements to Friedman and Sugarbowl (the “Owner Easements”), such easements each being described on Exhibit C attached hereto.  Such transactions are part of the “Exchange” referred to herein.

E.             Immediately following the Exchange, ASCU and Wolf Mountain wish to amend the Ground Lease as provided in this Amendment.

NOW THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, Wolf Mountain and ASCU agree as follows:

1.             Defined Terms and References.  All capitalized terms used and not defined herein shall have the meanings given them in the Ground Lease.

2.             Amendment.  The parties hereby cancel and terminate the Ground Lease with respect to the ASC Exchange Property and hereby release the ASC Exchange Property from the Premises encumbered by the Ground Lease.  All right, title and interest of ASCU in and to the ASC Exchange Property is extinguished as of the Effective Date.  The parties furthermore hereby agree to include the Owner Exchange Property and the Owner Easements as part of the Premises and acknowledge that the Owner Exchange Property and Wolf Mountain’s interest in and to the Owner Easements shall be deemed to be part of the Premises for all intents and purposes under the Ground Lease.

3.             Additional Payment for the ASC Exchange Property.  The parties hereby acknowledge and agree that as partial consideration to Wolf Mountain to convey the ASC Exchange Property to Friedman and Sugarbowl, ASCU has paid to Wolf Mountain the sum of $1,680,000.00 in immediately available funds (the “Initial Payment”), which payment is stipulated sum based on 11% of the estimated development/construction costs to be effected on the ASC Exchange Property.  ASCU and Wolf Mountain, however, agree that the Initial Payment shall not be adjusted upward unless the total square footage of density on the ASC Exchange Property exceeds 76,363 square feet.  To the extent that the density exceeds 76,363 square feet, ASCU shall pay to Wolf Mountain $22.00 per square foot of such density over and above 76,363 square feet.  The $22.00 per square foot figure represents 11% of $200.00 per square foot of development/construction costs agreed to by the parties.  Such amounts shall be due and payable to Wolf within thirty (30) days of the issuance of any certificate of occupancy for any such development, which when aggregated with other density constructed or approved for construction exceeds 76,363 square feet.  To the extent that the density on the ASC Exchange Property is less than 76,363 square feet, upon final completion of such Friedman Project (as defined below), Wolf Mountain shall permit ASCU to deduct from the next accruing rent payments under the Lease an amount equal to $22.00 multiplied by the positive difference between 76,363 square feet and the actual density (in square feet) built on the ASC Exchange Property. For purposes of this calculation, “final completion” shall occur on the date on which all approved density is constructed on the Friedman Project.  As used herein, the “Friedman Project” shall be defined as the ASC Exchange Property and the property described on Exhibit D attached hereto (being certain property adjacent thereto).

4.             Default.  Any default by ASCU hereunder shall be an event of default under the Lease.

5.             Notice of Amendment.  Wolf Mountain and ASCU shall execute a Notice of Amendment of Ground Lease, and ASCU shall have the right to record such notice in the Official Records of Summit County in order to evidence this Agreement.

6.             Full Force and Effect.  Except as expressly amended and modified by this Amendment, all terms, conditions and agreements set forth in the Ground Lease shall remain in full force and effect.  As amended hereby, the parties reaffirm the continuing validity and effect of their respective rights and obligations under the Ground Lease.  In the event of a conflict in

2

the terms, conditions or agreements of this Amendment or those set forth in the Ground Lease, the terms, conditions and agreements set forth in this Amendment shall control.

7.             Counterparts and Facsimile.  The Amendment may be signed in one or more original counterparts, which together shall constitute an original document.  For the purposes of this Agreement, facsimile signatures shall be deemed originals.

IN WITNESS WHEREOF, the parties have executed and delivered this Amendment as of the Effective Date.

WOLF MOUNTAIN:
WOLF MOUNTAIN RESORTS, L.C., a Utah limited liability company
By	/s/ Michael M. Baker
Name
Title	Managing Member
ASCU:
ASC UTAH, INC., a Maine corporation
By	/s/ Timothy C. Vetter
Name
Title	Vice President

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EXHIBIT A

TO THIRD AMENDMENT TO GROUND LEASE AGREEMENT

OWNER EXCHANGE PROPERTY

The property referenced in the foregoing instrument is located in Summit County, State of Utah, and is more particularly described as follows:

PARCEL 3

Commencing at the south quarter corner of Section 36, Township 1 South, Range 3 East, Salt Lake Base & Meridian, a found brass cap, (Basis of bearing being S.89°59’43” E. a distance of 2667.10 feet along the section line from the said south quarter corner to the southeast corner of said Section 36, a found brass cap) thence along said section line, S.89°59’43”E., a distance of 91.60 feet; thence leaving said section line North, a distance of 113.25 feet to a point in the easterly right-of-way line of High Mountain Road Extension, said point being the TRUE POINT OF BEGINNING; thence leaving said right-of-way N.86°13’00”W., a distance of 96.45 feet; thence N.41°13’00”W., a distance of 84.26 feet; thence N.48°47’00”E., a distance of 97.00 feet; thence S.86°13’00”E., a distance of 26.72 feet; thence N.48°47’00”E., a distance of 22.18 feet to the easterly right-of-way line of said Sundial Road and point of curve of a non tangent curve to the left, of which the radius point lies N.79°50’16”E., a radial distance of 525.00 feet; thence southerly along the arc of said curve and said right-of-way, through a central angle of 04°02’18”, a distance of 37.00 feet; thence continuing along said right-of-way line S.14°12’02”E., a distance of 100.44 feet to a point of curve to the right having a radius of 325.00 feet and a central angle of 02°20’54”; thence southerly along the arc of said curve and said right-of-way line a distance of 13.32 feet to the POINT OF BEGINNING.  Containing 13,398 square feet, more or less.

PARCEL 4

Commencing at the south quarter corner of Section 36, Township 1 South, Range 3 East, Salt Lake Base & Meridian, a found brass cap, (Basis of bearing being S.89°59’43” E. a distance of 2667.10 feet along the section line from the said south quarter corner to the southeast corner of said Section 36, a found brass cap) thence along said section line, S.89°59’43”E., a distance of 399.52 feet; thence leaving said section line North, a distance of 415.29 feet to the POINT OF BEGINNING; thence N.35°20’43” W., a distance of 17.34 feet; thence N.12°31’12”E., a distance of 26.62 feet to the westerly right-of-way line of High Mountain Road Extension and point of curve of a non tangent curve to the right, of which the radius point lies N.48°54’12”E., a radial distance of 275.00 feet; thence northwesterly along the arc of said curve and said right-of-way line, through a central angle of 24°46’18”, a distance of 118.89 feet; thence leaving said right-of-way line N.48°47’00”E., a distance of 25.63 feet; thence S.41°03’00”E., a distance of 80.99 feet; thence S.03°47’00”W., a distance of 95.00 feet; thence S.48°47’00”W., a distance of 7.00 feet to the POINT OF BEGINNING.   Containing 4,889 square feet, more or less.

A-1

PARCEL 5

Commencing at the south quarter corner of Section 36, Township 1 South, Range 3 East, Salt Lake Base & Meridian, a found brass cap, (Basis of bearing being S.89°59’43” E. a distance of 2667.10 feet along the section line from the said south quarter corner to the southeast corner of said Section 36, a found brass cap) thence along said section line, S.89°59’43”E., a distance of 410.80 feet; thence leaving said section line North, a distance of 275.74 feet to the POINT OF BEGINNING; thence N.84°15’00”E., a distance of 8.13 feet; thence S.05°45’00”E., a distance of 13.66 feet; thence N.36°29’52”W., a distance of 15.89 feet to the POINT OF BEGINNING.

Containing 55.50 square feet, more or less.

2

EXHIBIT B

TO THIRD AMENDMENT TO GROUND LEASE AGREEMENT

ASC EXCHANGE PROPERTY

The real property referenced in the foregoing instrument is located in Summit County, Utah and is more particularly described as follows:

PARCEL 6

Commencing at the south quarter corner of Section 36, Township 1 South, Range 3 East, Salt Lake Base & Meridian, a found brass cap, (Basis of bearing being S.89°59’43” E. a distance of 2667.10 feet along the section line from the said south quarter corner to the southeast corner of said Section 36, a found brass cap), thence along said section line, S.89°59’43”E., a distance of 56.15 feet; thence leaving said section line North, a distance of 259.76 feet to right-of-way line of High Mountain Road Extension, said point being the TRUE POINT OF BEGINNING; said point also being the beginning of a curve to the right, of which the radius point lies N.79°50’16”E., a radial distance of 525.00 feet; thence northerly along the arc of said curve and said right-of-way, through a central angle of 13°34’17”, a distance of 124.35 feet; thence continuing along said right-of-way the following courses: N.03°24’33”E., a distance of 108.66 feet to a point of curve to the left having a radius of 1,225.00 feet and a central angle of 03°53’24”; thence northerly along the arc a distance of 83.17 feet; thence N.00°28’51”W., a distance of 107.83 feet to a point of curve to the right having a radius of 275.00 feet and a central angle of 60°47’42”; thence northeasterly along the arc a distance of 291.80 feet to a point of compound curve to the right having a radius of 110.00 feet and a central angle of 91°25’52”; thence easterly along the arc, a distance of 175.54 feet to a point of compound curve to the right having a radius of 150.00 feet and a central angle of 52°21’44”; thence southerly along the arc, a distance of 137.08 feet to a point of reverse curve to the left having a radius of 275.00 feet and a central angle of 40°25’58”; thence southerly along the arc, a distance of 194.06 feet; thence leaving said right-of-way S.48°47’00”W., a distance of 300.60 feet; thence S.03°47’00”W., a distance of 55.00 feet; thence S.48°47’00”W., a distance of 70.04 feet to the POINT OF BEGINNING.

Containing 3.09 acres, more or less.

B-1

PARCEL 7

Commencing at the south quarter corner of Section 36, Township 1 South, Range 3 East, Salt Lake Base & Meridian, a found brass cap, (Basis of bearing being S.89°59’43” E. a distance of 2667.10 feet along the section line from the said south quarter corner to the southeast corner of said Section 36, a found brass cap), thence along said section line, S.89°59’43”E., a distance of 95.18 feet to the easterly right of way line of High Mountain Road Extension and TRUE POINT OF BEGINNING; said point also being the beginning of a curve to the left, of which the radius point lies N.81°46’27”W., a radial distance of 325.00 feet; thence leaving said section line and running northerly along the arc of said curve and said right of way, through a central angle of 20°04’41”, a distance of 113.89 feet; thence leaving said right of way, S.86°13’00”E., a distance of 1.65 feet; thence N.48°47’00”E., a distance of 233.00 feet; thence N.03°47’00”E., a distance of 36.00 feet; thence N.48°47’00”E., a distance of 171.00 feet; thence S.35°20’43”E., a distance of 60.21 feet; thence S.46°03’44”W., a distance of 73.34 feet; thence S.36°29’52”E., a distance of 73.01 feet; thence S.13°05’15”E., a distance of 84.49 feet; thence S.04°22’31”E., a distance of 174.81 feet to the south line of said Section 36; thence along said section line, N.89°59’43”W., a distance of 362.26 feet to the POINT OF BEGINNING.

Less and excepting the following description:

Commencing at the south quarter corner of Section 36, Township 1 South, Range 3 East, Salt Lake Base & Meridian, a found brass cap, (Basis of bearing being S.89°59’43” E. a distance of 2667.10 feet along the section line from the said south quarter corner to the southeast corner of said Section 36, a found brass cap) thence along said section line, S.89°59’43”E., a distance of 338.14 feet; thence leaving said section line North, a distance of 60.37 feet to the POINT OF BEGINNING; thence N.05°45’00”W., a distance of 207.00 feet; thence N.84°15’00”E., a distance of 93.87 feet; thence S.36°29’52”E., a distance of 15.89 feet; thence S.05°45’08”E., a distance of 193.34 feet; thence S.84°15’00”W., a distance of 102.00 feet to the POINT OF BEGINNING.

Containing 1.653 acres, more or less.

B-2

EXHIBIT C

TO THIRD AMENDMENT TO GROUND LEASE AGREEMENT

OWNER EASEMENTS/WOLF MOUNTAIN EASEMENTS

OWNER EASEMENTS

Nonexclusive Access Easement Roadway Access and Utilities by and among, ASCU, Sugarbowl and Wolf Mountain Resorts, L.C. dated                        , 2004 and recorded as Entry No.                                , in Book                at Page                  of the Official Records of Summit County, Utah.

Grant of Easement (Utility Improvements) by and among ASCU, Sugarbowl and Wolf Mountain, dated                     , 2004, and recorded as Entry No.                                , in Book                at Page                  of the Official Records of Summit County, Utah.

Construction License Agreement by and among ASCU, Sugarbowl and Wolf Mountain dated                        , 2004, and recorded as Entry No.                                , in Book                at Page                  of the Official Records of Summit County, Utah.

Grant of Easement for Turn-around Area (Hammerhead) by and among ASCU, Sugarbowl and Wolf Mountain dated                        , 2004, and recorded as Entry No.                                , in Book                at Page                  of the Official Records of Summit County, Utah.

Skier Access Easement by and between ASCU, Sugarbowl and Wolf Mountain dated                        , 2004, and recorded as Entry No.                                 , in Book                at Page                  of the Official Records of Summit County, Utah.

WOLF MOUNTAIN EASEMENTS

Ski and Lift Easement (South Lift) by and between ASCU, Sugarbowl and Wolf Mountain dated                        , 2004, and recorded as Entry No.                                 , in Book              at Page                  of the Official Records of Summit County, Utah.

Triangle Parcel Access and Parking Easement by and between ASCU, Sugarbowl and Wolf Mountain dated                        , 2004, and recorded as Entry No.                                 , in Book                at Page                  of the Official Records of Summit County, Utah.

C-1

EXHIBIT D

TO THIRD AMENDMENT TO GROUND LEASE AGREEMENT

ADJACENT PROPERTY COMPRISING FRIEDMAN PROJECT

LEGAL DESCRIPTION PARCEL 1

Commencing at the south quarter corner of Section 36, Township 1 South, Range 3 East, Salt Lake Base & Meridian, a found brass cap, (Basis of bearing being S.89°59’43” E. a distance of 2667.10 feet along the section line from the said south quarter corner to the southeast corner of said Section 36, a found brass cap) thence along said section line, S.89°59’43”E., a distance of 91.60 feet; thence leaving said section line North, a distance of 113.25 feet to a point on the easterly right-of-way line of High Mountain Road Extension, said point being the TRUE POINT OF BEGINNING; said point also being the beginning of a curve to the left, of which the radius point lies S.78°08’52”W., a radial distance of 325.00 feet; thence northerly along the arc of said right-of-way and said curve, through a central angle of 02°20’54”, a distance of 13.32 feet; thence continuing along said right-of-way N.14°12’02”W., a distance of 100.44 feet to a point of curve to the right having a radius of 525.00 feet and a central angle of 04°02’18”; thence northerly along the arc of said curve and said right-of-way a distance of 37.00 feet; thence leaving said easterly right-of-way N.48°47’00”E., a distance of 70.04 feet; thence N.03°47’00”E., a distance of 55.00 feet; thence N.48°47’00”E., a distance of 300.60 feet to the westerly right-of-way line of said Sundial Road, said point being the point of curve of a non tangent curve to the left, of which the radius point lies N.73°40’29”E., a radial distance of 275.00 feet; thence southeasterly along the arc of said curve and said right-of-way, through a central angle of 24°46’18”, a distance of 118.90 feet; thence leaving said right-of-way S.12°31’12”W., a distance of 26.62 feet; thence S.35°20’43”E., a distance of 17.34 feet; thence S.48°47’00”W., a distance of 171.00 feet; thence S.03°47’00”W., a distance of 36.00 feet; thence S.48°47’00”W., a distance of 233.00 feet; thence N.86°13’00”W., a distance of 1.65 feet to the POINT OF BEGINNING.   Containing 1.450 acres, more or less.

PARCEL 2

Commencing at the south quarter corner of Section 36, Township 1 South, Range 3 East, Salt Lake Base & Meridian, a found brass cap, (Basis of bearing being S.89°59’43” E. a distance of 2667.10 feet along the section line from the said south quarter corner to the southeast corner of said Section 36, a found brass cap) thence along said section line, S.89°59’43”E., a distance of 338.14 feet; thence leaving said section line North, a distance of 60.37 feet to the POINT OF BEGINNING; thence N.05°45’00”W., a distance of 207.00 feet; thence N.84°15’00”E., a distance of 93.87 feet; thence S.36°29’52”E., a distance of 15.89 feet; thence S.05°45’08”E., a distance of 193.34 feet; thence S.84°15’00”W., a distance of 102.00 feet to the POINT OF BEGINNING.  Containing 21,058 square feet, more or less.

D-1

EX-22.1

Exhibit 22.1

Company Subsidiaries

Subsidiaries of American Skiing Company, a Delaware corporation:

ASC Utah, a wholly-owned Maine corporation

ASC Leasing, Inc., a wholly-owned Maine corporation

Blunder Bay Development, Inc., a wholly-owned Maine corporation

Grand Summit Resort Hotel Sales, Inc., 80% owned Maine corporation

Sunday River Skiway Corporation, a wholly-owned Maine corporation

Sunday River, Ltd., a wholly-owned Maine corporation

Perfect Turn, Inc., a wholly-owned Maine corporation;

L.B.O. Holding, Inc., a wholly-owned Maine corporation

S-K-I, Ltd., a wholly-owned Delaware corporation

American Skiing Company Resort Properties, Inc., a wholly-owned Maine

corporation

Steamboat Ski and Resort Corporation, a wholly-owned Delaware corporation

Subsidiaries of ASC Utah:

Community Water Company, a wholly owned Utah corporation

Subsidiaries of Steamboat Ski & Resort Corporation:

Walton Pond Apartments, Inc., a 90% owned Delaware corporation

Subsidiaries of S-K-I, Ltd.:

Killington, Ltd., a wholly-owned Vermont corporation

Sugarloaf Mountain Corporation, a wholly-owned Maine corporation

SKI Insurance Company, a wholly-owned Vermont corporation

Mount Snow, Ltd, a wholly-owned Vermont corporation

Pico Ski Area Management Company, a wholly-owned Vermont corporation

Killington West Ltd., a wholly-owned California corporation

Subsidiaries of Killington, Ltd.:

Killington Restaurants, Inc., a wholly-owned Vermont corporation

Subsidiaries of Sugarloaf Mountain Corporation:

Mountainside, a wholly-owned Maine corporation

Sugarloaf Land Partners I, a 10% owned Maine partnership

Sugarloaf Land Partners II, a 10% owned Maine partnership

Subsidiary of Mount Snow, Ltd.:

Dover Restaurants, Inc., a wholly-owned Vermont corporation

Subsidiary of Pico Ski Area Management Company:

Uplands Water Company, a 92.5% owned Vermont corporation

Subsidiaries of American Skiing Company Resort Properties, Inc.:

Grand Summit Resort Properties, Inc., a wholly-owned Maine corporation

Steamboat Resort Properties, Inc., a wholly-owned Maine corporation

The Canyons Resort Properties, Inc., a wholly-owned Maine corporation

Killington Resort Properties, Inc., a wholly-owned Maine corporation

Mount Snow Resort Properties, Inc., a wholly-owned Maine corporation

Whisper Ridge, Inc. (fka Attitash Resort Properties, Inc.), a wholly-owned

Maine corporation

EX-23.2

EXHIBIT 23.2

Consent of Independent Registered Public Accounting Firm

The Board of Directors

American Skiing Company:

We consent to the incorporation by reference in Registration Statement No. 333-48449 on Form S-8 of American Skiing Company of our report dated October 29, 2004, on the consolidated balance sheets of American Skiing Company and subsidiaries as of July 27, 2003 and July 25, 2004, and the related consolidated statements of operations, shareholders’ equity (deficit), and cash flows for each of the years in the three-year period ended July 25, 2004, which report appears in the July 25, 2004 Annual Report on Form 10-K of American Skiing Company.

Our report refers to the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” in the fiscal year ended July 28, 2002 and the adoption of Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” in the fiscal year ended July 25, 2004.

//KPMG LLP//

Salt Lake City, Utah

November 4, 2004

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, William J. Fair,certify that:

1.I have reviewed this annual report on Form 10-K 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 fourth 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:  November 8, 2004
	By: /s/ William J. Fair
	William J. Fair
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Helen E. Wallace,certify that:

1.I have reviewed this annual report on Form 10-K 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 fourth 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: November 8, 2004
	By: /s/ Helen E. Wallace
	Helen E. Wallace
	Senior Vice President, Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

AMERICAN SKIING COMPANY

SARBANES-OXLEY ACT SECTION 906 CERTIFICATIONS

In connection with the Annual Report of American Skiing Company (the “Company”) on Form 10-K for the period ended July 25, 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:  November 8, 2004
	By:  /s/ William J. Fair
	William J. Fair
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

AMERICAN SKIING COMPANY

SARBANES-OXLEY ACT SECTION 906 CERTIFICATIONS

In connection with the Annual Report of American Skiing Company (the “Company”) on Form 10-K for the period ended July 25, 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: November 8, 2004
	By:/s/ Helen E. Wallace
	Helen E. Wallace
	Senior Vice President, Chief
	Financial Officer
	(Principal Financial Officer)