-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UI4dhysBTRcvucA5mceXm+4H3ZScq/R+GGKoInoKu8KvBqloEKwSHXR89/LNmAih TmGytr2u+BhuZY2Z0hhABw== 0001001277-99-000017.txt : 19990209 0001001277-99-000017.hdr.sgml : 19990209 ACCESSION NUMBER: 0001001277-99-000017 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981030 FILED AS OF DATE: 19990208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOOTH CREEK SKI HOLDINGS INC CENTRAL INDEX KEY: 0001037253 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 841359604 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 333-26091 FILM NUMBER: 99523383 BUSINESS ADDRESS: STREET 1: 9705 HGWY 267 STE #2 CITY: TRUCKEE STATE: CA ZIP: 96161 BUSINESS PHONE: 5305505108 MAIL ADDRESS: STREET 1: 9705 HGWY 267 STE #2 CITY: TRUCKEE STATE: CA ZIP: 96161 10-K/A 1 AMENDEMNT TO 10-K FILED JANUARY 29, 1999 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ FORM 10-K/A (Mark One) [GRAPHIC OMITTED] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: October 30, 1998 OR [GRAPHIC OMITTED] 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: 333-26091 BOOTH CREEK SKI HOLDINGS, INC. (Exact name of registrant as specified in its charter) Delaware 84-1359604 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1000 South Frontage Road West, Suite 100 Vail, Colorado 81657 (970) 476-4030 (Address, including zip code and telephone number, including area code, of registrant's principal executive offices) ------------------ Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: None. ------------------ 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 Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [GRAPHIC OMITTED] No [GRAPHIC OMITTED] 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 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. [GRAPHIC OMITTED] As of January 15, 1999, the number of shares outstanding of the registrant's Common Stock, par value $.01 per share, was 1,000 shares. There is no trading market for the Common Stock. Accordingly, the aggregate market value of the Common Stock held by non-affiliates of the registrant is not determinable. See Part II, Item 5 of this Report. - ------------------------------------------------------------------------------ 1 Documents Incorporated by Reference: None FORM 10-K/A Table of Contents PART II Item 8. Annual Report on Form 10-K/A Booth Creek Ski Holdings, Inc. PART IV Item 14. Exhibits and Reports on Form 10-K/A (a) List of Documents Filed as Part of this Report: 3. List of Exhibits: 4.5 Supplemental Indunture No. 4 dated as of October 8, 1998. F-1 BOOTH CREEK SKI HOLDINGS, INC. ANNUAL REPORT ON FORM 10-K/A INDEX OF FINANCIAL STATEMENTS
Page Page Booth Creek Ski Holdings, Inc. Financial Statements - October 30, 1998 and October 31, 1997 Report of Independent Auditors....................................................... F-2 Consolidated Balance Sheets.......................................................... F-3 Consolidated Statements of Operations................................................ F-4 Consolidated Statements of Shareholder's Equity...................................... F-5 Consolidated Statements of Cash Flows................................................ F-6 Notes to Consolidated Financial Statements........................................... F-7
F-2 REPORT OF INDEPENDENT AUDITORS Booth Creek Ski Holdings, Inc. We have audited the accompanying consolidated balance sheets of Booth Creek Ski Holdings, Inc. as of October 30, 1998 and October 31, 1997, and the related consolidated statements of operations, shareholder's equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Booth Creek Ski Holdings, Inc. at October 30, 1998 and October 31, 1997, and the consolidated results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Sacramento, California December 18, 1998, except for the first paragraph of Note 5 for which the date is January 28, 1999 F-3 BOOTH CREEK SKI HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) October 30, October 31, 1998 1997 ------------ ----------- ASSETS Current assets: Cash ................................................. $ 625 $ 462 Accounts receivable, net of allowance of $54 and $35, respectively................................... 1,573 1,528 Inventories........................................... 4,370 3,059 Prepaid expenses and other current assets............. 1,377 1,396 ------------- ---------- Total current assets.................................... 7,945 6,445 Property and equipment, net............................. 156,469 123,639 Real estate held for development and sale............... 10,155 10,850 Deferred financing costs, net of accumulated amortization of $1,985 and $782, respectively...................... 6,649 6,229 Timber rights and other assets.......................... 7,428 7,402 Goodwill, net of accumulated amortization of $4,190 and $1,953, respectively.................................. 29,900 31,851 ------------ --------- Total assets............................................ $ 218,546 $ 186,416 ============ ========= LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities: Senior credit facility................................ $ 17,143 $ 15,000 Current portion of long-term debt..................... 1,785 947 Accounts payable and accrued liabilities.............. 22,110 17,132 ----------- ----------- Total current liabilities............................... 41,038 33,079 Long-term debt.......................................... 137,352 120,380 Other long-term liabilities............................. 145 196 Commitments and contingencies Preferred stock of subsidiary; 28,000 shares authorized, 21,000 shares issued and outstanding at October 30, 1998 (25,000 shares at October 31, 1997); liquidation preference and redemption value of $2,634 at October 30, 1998...................................... 2,634 3,354 Shareholder's equity: Common stock, $.01 par value; 1,000 shares authorized, issued and outstanding.............................. - - Additional paid-in capital............................ 72,000 46,500 Accumulated deficit................................... (34,623) (17,093) ------------ ----------- Total shareholder's equity.............................. 37,377 29,407 ------------ ----------- Total liabilities and shareholder's equity.............. $ 218,546 $ 186,416 ============ ===========
See accompanying notes. F-4 BOOTH CREEK SKI HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands) Year Ended ---------------------------- October 30, October 31, 1998 1997 ------------- ------------ Revenue: Resort operations.................................... $ 97,248 $ 68,136 Real estate and other................................ 7,608 3,671 ------------ ---------- Total revenue.......................................... 104,856 71,807 Operating expenses: Cost of sales - resort operations.................... 61,325 44,624 Cost of sales - real estate and other................ 4,671 2,799 Depreciation and depletion........................... 15,515 9,728 Amortization of goodwill............................. 2,237 1,953 Selling, general and administrative expense.......... 19,645 13,719 ----------- --------- Total operating expenses............................... 103,393 72,823 ----------- --------- Operating income (loss)................................ 1,463 (1,016) Other income (expense): Interest expense..................................... (17,510) (13,269) Amortization of deferred financing costs............. (1,203) (1,809) Other income (expense)............................... (20) 166 ------------ --------- Other income (expense), net.......................... (18,733) (14,912) ------------ --------- Loss before income taxes, minority interest and extraordinary item................................... (17,270) (15,928) Income tax benefit..................................... - 1,728 ------------ --------- Loss before minority interest and extraordinary item... (17,270) (14,200) Minority interest...................................... (260) (229) ------------ ---------- Loss before extraordinary item......................... (17,530) (14,429) Extraordinary loss on early retirement of debt......... - (2,664) ------------ ---------- Net loss............................................... $ (17,530) $ (17,093) ============ ==========
See accompanying notes. F-5 BOOTH CREEK SKI HOLDINGS, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY YEARS ENDED OCTOBER 30, 1998 AND OCTOBER 31, 1997 (In thousands, except shares) Note Common Stock Additional Receivable ----------------- Paid-in from Accumulated Shares Amount Capital Shareholder Deficit Total ------- ------- ------------ ------------- ---------- --------- Initial capitalization and balance at October 31, 1996.. 1,000 $ - $ 2 $ (2) $ - $ - Payment received on shareholder note receivable............... - - - 2 - 2 Capital contributions.......... - - 46,498 - - 46,498 Net loss....................... - - - - (17,093) (17,093) ------- ------ ---------- ------------ ----------- ------- Balance at October 31, 1997.... 1,000 - 46,500 - (17,093) 29,407 Capital contributions.......... - - 25,500 - - 25,500 Net loss....................... - - - - (17,530) (17,530) ------- ------ ---------- ------------ ---------- ---------- Balance at October 30, 1998.... 1,000 $ - $ 72,000 $ - $ (34,623) $ 37,377 ======== ======= ========== ============= ========== ==========
See accompanying notes. F-6 BOOTH CREEK SKI HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended --------------------------- October 30, October 31, 1998 1997 ------------ -------------- Cash flows from operating activities: Net loss.............................................. $ (17,530) $ (17,093) Adjustment to reconcile net loss to net cash provided by operating activities: Depreciation and depletion........................ 15,515 9,728 Amortization of goodwill.......................... 2,237 1,953 Noncash cost of real estate sales................. 3,721 2,237 Amortization of deferred financing costs.......... 1,203 1,809 Deferred income tax benefit....................... - (1,548) Minority interest................................. 260 229 Extraordinary loss on early retirement of debt.... - 2,664 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable............................. 279 (914) Inventories..................................... (785) 1,115 Prepaid expenses and other current assets....... 103 303 Accounts payable and accrued liabilities........ 2,707 1,003 Other long-term liabilities..................... (151) 66 ------------ --------- Net cash provided by operating activities............. 7,559 1,552 Cash flows from investing activities: Acquisition of ski resorts, net of cash acquired...... (30,211) (142,028) Capital expenditures for property and equipment....... (15,500) (9,459) Capital expenditures for real estate held for development and sale................................ (1,717) (72) Other assets.......................................... (290) (1,126) ------------ --------- Net cash used in investing activities................. (47,718) (152,685) Cash flows from financing activities: Net borrowings under senior credit facility........... 2,143 15,000 Proceeds of long-term debt............................ 17,500 216,000 Principal payments of long-term debt.................. (2,218) (114,827) Deferred financing costs.............................. (1,623) (10,703) Purchase of preferred stock of subsidiary and payment of dividends........................................ (980) (375) Payment received on shareholder note receivable....... - 2 Capital contributions................................. 25,500 46,498 ------------ --------- Net cash provided by financing activities............. 40,322 151,595 ------------ --------- Increase in cash...................................... 163 462 Cash at beginning of year............................. 462 - ------------ ---------- Cash at end of year................................... $ 625 $ 462 ============ ==========
See accompanying notes. F-7 BOOTH CREEK SKI HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS October 30, 1998 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies Booth Creek Ski Holdings, Inc. ("Booth Creek") was organized on October 8, 1996 in the State of Delaware for the purpose of acquiring and operating various ski resorts, including Northstar-at-Tahoe ("Northstar"), Sierra-at-Tahoe ("Sierra"), Bear Mountain, Waterville Valley, Mt. Cranmore, the Summit at Snoqualmie Pass (the "Summit"), Grand Targhee and Loon Mountain as described more fully in Note 2. The consolidated financial statements include the accounts of Booth Creek and its subsidiaries (collectively referred to as the "Company"). Booth Creek owns all of the common stock of its subsidiaries. Ski Lifts, Inc. (the operator of the Summit) has shares of preferred stock owned by a third party. All significant intercompany transactions and balances have been eliminated. Booth Creek is a wholly-owned subsidiary of Booth Creek Ski Group, Inc. ("Parent"). Reporting Periods The Company's reporting periods end on the Friday closest to the end of each month. Fiscal 1998 and 1997 were both 52 week years. Business and Principal Markets Northstar is a year-round destination resort including ski and golf facilities. Sierra is a day ski area. Both Northstar and Sierra are located near Lake Tahoe, California. Bear Mountain is a day ski area located approximately two hours from Los Angeles, California. Waterville Valley, a destination resort, and Mt. Cranmore, a day ski area, are located in New Hampshire. Loon Mountain is a day ski area with other outdoor recreational activities located in Lincoln, New Hampshire. The Summit is located in Northwest Washington and is a day ski area. Grand Targhee is a destination ski resort located in Wyoming. Operations are highly seasonal at all locations with the majority of revenues realized during the ski season from late November through early April. The length of the ski season and the profitability of operations are significantly impacted by weather conditions. Although Northstar, Bear Mountain, Waterville Valley, Loon Mountain and Mt. Cranmore have snowmaking capacity to mitigate some of the effects of adverse weather conditions, abnormally warm weather or lack of adequate snowfall can materially affect revenues. Sierra, the Summit and Grand Targhee lack significant snowmaking capability but generally benefit from higher annual snowfall. Other operational risks and uncertainties that face the Company include competitive pressures affecting the number of skier visits and ticket prices; the success of marketing efforts to maintain and increase skier visits; the possibility of equipment failure; and continued access to water supplies for snowmaking. Cash Included in cash at October 30, 1998 and October 31, 1997 is restricted cash of $533,000 and $344,000, respectively, relating to advance deposits and rental fees due to property owners for lodging and property rentals. F-8 BOOTH CREEK SKI HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued) 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies - (Continued) Inventories Inventories are valued at the lower of cost (first-in, first-out method) or market. The components of inventories are as follows: October 30, October 31, 1998 1997 ------------ ---------- (In thousands) Retail products........................... $ 3,199 $ 2,560 Supplies.................................. 916 314 Food and beverage......................... 255 185 ----------- ---------- $ 4,370 $ 3,059 =========== ========== Property and Equipment Property and equipment are stated at cost. Depreciation is provided on the straight-line method based upon the estimated service lives, which are as follows: Land improvements........................................ 20 years Buildings and improvements............................... 20 years Lift equipment........................................... 15 years Other machinery and equipment............................ 3 to 15 years Amortization of assets recorded under capital leases is included in depreciation expense. Real Estate Activities The Company capitalizes as real estate held for development and sale the original acquisition cost (or appraised value in connection with purchase business combinations), direct construction and development costs, and other related costs. Property taxes, insurance and interest incurred on costs related to real estate under development are capitalized during periods in which activities necessary to get the property ready for its intended use are in progress. Land costs and other common costs incurred prior to construction are allocated to each land parcel benefited. Construction related costs are allocated to individual units in each development phase using the relative sales value method. Selling expenses are charged against income in the period incurred. Interest capitalized on real estate development projects for the year ended October 30, 1998 was $162,000 (none for the year ended October 31, 1997). Sales and profits on real estate sales are recognized using the full accrual method at the point that the Company's receivables from land sales are deemed collectible and the Company has no significant remaining obligations for construction or development, which typically occurs upon transfer of title. If such conditions are not met, the recognition of all or part of the sales and profit is postponed. Long-Lived Assets The Company evaluates potential impairment of long-lived assets and long-lived assets to be disposed of in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS No. 121"). SFAS No. 121 establishes F-9 BOOTH CREEK SKI HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued) 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies - (Continued) Long-Lived Assets - (Continued) procedures for review of recoverability, and measurement of impairment if necessary, of long-lived assets, goodwill and certain identifiable intangibles held and used by an entity. SFAS No. 121 requires that those assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. SFAS No. 121 also requires that long-lived assets and certain identifiable intangibles to be disposed of be reported at the lower of carrying amount or fair value less estimated selling costs. As of October 30, 1998 and October 31, 1997, management believes that there has not been any impairment of the Company's long-lived assets or goodwill. Fair Value of Financial Instruments The fair value of amounts outstanding under the Company's Senior Credit Facility approximates book value, as the interest rate on such debt generally varies with changes in market interest rates. The fair value of the Company's Senior Notes was approximately $124 and $114 million at October 30, 1998 and October 31, 1997, respectively, which is based on the market price of such debt. Revenue Recognition Revenues are recognized as services are provided and products are sold. Sales of season passes are initially deferred in unearned income and recognized ratably over the ski season. Amortization The excess of the purchase price over the fair values of the net assets acquired (goodwill) is being amortized using the straight-line method over a period of 15 years. Deferred financing costs are being amortized over the lives of the related obligations. Advertising Costs The cost of advertisements is expensed when the advertisement is initially released. The cost of professional services for advertisements, sales campaigns, promotion, and public relations is expensed when the services are rendered. The cost of brochures is expensed over the ski season. Advertising expenses for the years ended October 30, 1998 and October 31, 1997 were $3,193,000 and $1,983,000, respectively. Income Taxes Deferred income taxes are provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company is included in the federal and state tax returns of Parent. The provision for federal and state income tax is computed as if the Company filed separate consolidated tax returns. Comprehensive Income Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130") requires that comprehensive income and its components, as defined in the pronouncement, be reported within the F-10 BOOTH CREEK SKI HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued) 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies - (Continued) Comprehensive Income - (Continued) consolidated financial statements of the Company. The Company adopted SFAS No. 130 during the year ended October 30, 1998. The Company currently does not have any transactions that would necessitate disclosure of comprehensive income; however, the Company will continue to evaluate the impact of SFAS No. 130. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Pending Accounting Pronouncements In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 is required to be adopted by the Company during fiscal 1999. SFAS No. 131 requires that annual and interim financial and descriptive information about reportable operating segments be reported on the same basis used internally for evaluating segment performance and the allocation of resources. The Company anticipates providing segment disclosures for its resort operations and real estate and other segments. However, the Company does not expect any change to its primary financial statements. The Accounting Standards Executive Committee recently issued Statement of Position ("SOP") 98-1 providing guidance on accounting for the costs of computer software developed or obtained for internal use. The effective date for SOP 98-1 is for fiscal years beginning after December 15, 1998. Currently, the Company capitalizes purchased software above its capitalization threshold, and expenses development, production and maintenance costs associated with computer software developed for internal use. The Company is in the process of reviewing its current policies for accounting for costs associated with internal use software and how they may be affected by SOP 98-1. Reclassifications Certain amounts in the 1997 consolidated financial statements have been reclassified to conform with the current year's presentation. 2. Acquisitions As described below, Booth Creek consummated the Waterville Valley, Mt. Cranmore, California, Summit and Grand Targhee acquisitions prior to October 31, 1997, and the Loon Mountain acquisition prior to October 30, 1998. These acquisitions have been accounted for using the purchase method of accounting. The results of operations of the resorts have been included in the accompanying consolidated statements of operations since the effective dates of such acquisitions. The Waterville Valley and Mt. Cranmore Acquisitions On November 27, 1996, Booth Creek purchased the assets of the Waterville Valley and Mt. Cranmore resorts from subsidiaries of American Skiing Company ("ASC") for an aggregate purchase price of $17.5 million. The purchase price was paid with $14.75 million in cash, before giving effect to normal working capital adjustments for current assets acquired and current liabilities assumed, and the $2.75 million ASC Seller Note (Note 5). F-11 BOOTH CREEK SKI HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued) 2. Acquisitions - (Continued) The California Acquisitions On December 3, 1996, Booth Creek purchased from Fibreboard Corporation all of the issued and outstanding capital stock of Trimont Land Company, which operates Northstar, Sierra-at-Tahoe, Inc., which operates Sierra, and Bear Mountain, Inc., which operates Bear Mountain. The aggregate purchase price was $121.5 million in cash, before giving effect to normal working capital adjustments for current assets acquired and current liabilities assumed. The Summit Acquisition Effective January 15, 1997, Booth Creek purchased all of the issued and outstanding common stock of Ski Lifts, Inc. ("Ski Lifts"), the owner and operator of the ski resort assets of the Summit for an aggregate purchase price of approximately $14 million, which included the assumption of approximately $3.6 million of indebtedness, the issuance by Ski Lifts of the approximately $9.8 million Summit Seller Note, and other obligations to the selling shareholders of approximately $600,000. In connection with the consummation of the Summit acquisition, Ski Lifts transferred certain owned real estate held for development purposes and related buildings into a Delaware limited liability company (the "Real Estate LLC"), of which Ski Lifts is a member and 99% equity interest holder and Booth Creek is the other member and 1% equity interest holder. In addition, Ski Lifts granted the Real Estate LLC an option (the "Real Estate Option") to purchase acreage of developmental real estate for nominal consideration. Ski Lifts also issued 28,000 shares of non-voting preferred stock (the "Ski Lifts Preferred Stock") to its prior owners having an aggregate liquidation preference equal to $3.5 million, the aggregate estimated fair market value of the real estate transferred to the Real Estate LLC and the real estate subject to the Real Estate Option. Concurrently with these transactions, the Real Estate LLC entered into an agreement to purchase (the "Preferred Stock Purchase Agreement") the Ski Lifts Preferred Stock, on a quarterly basis over the five years following the date of the Summit Acquisition, at a purchase price equal to the liquidation preference thereof plus accrued dividends to the date of purchase. Through October 30, 1998, the Company has paid $875,000 under the Preferred Stock Purchase Agreement. The Real Estate LLC's obligations under the Preferred Stock Purchase Agreement are secured by a first priority lien on the developmental real estate held by the Real Estate LLC and substantially all of its other assets. The Ski Lifts Preferred Stock provides for a 9% cumulative dividend and is redeemable at the option of Ski Lifts without premium. In addition, pursuant to the terms of the Ski Lifts Preferred Stock, the holders thereof have no redemption rights. The Grand Targhee Acquisition On March 18, 1997, Booth Creek acquired all the issued and outstanding capital stock of Grand Targhee Incorporated, the owner of the ski resort assets of Grand Targhee, for an aggregate purchase price of approximately $7.9 million plus contingent payments of up to $1.5 million based on the performance of Grand Targhee during the 1998/99 ski season and additional commissions based on the number of dwelling units developed at the resort through 2012. The Loon Mountain Acquisition On February 26, 1998, the Company acquired Loon Mountain Recreation Corporation ("LMRC"), the owner and operator of the Loon Mountain ski resort. The aggregate net purchase price for the Loon Mountain acquisition was approximately $30.2 million (including the assumption of debt which was repaid in connection with the acquisition and acquisition costs). F-12 BOOTH CREEK SKI HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued) 2. Acquisitions - (Continued) Summary of Purchase Price Allocations Summary information regarding the purchase price allocations to the assets acquired and liabilities assumed in each of the acquisitions described above is as follows: Waterville Valley and Grand Loon Mt. Cranmore California Summit Targhee Mountain Acquisitions Acquisitions Acquisition Acquisition Acquisition ------------ ------------- ----------- ----------- ----------- (In thousands) Net working capital........ $ (714) $ (5,206) $ (5,822) $ (752) $ (1,339) Property and equipment..... 17,500 86,078 9,148 8,837 30,045 Real estate and other long- term assets.............. - 15,608 4,189 26 1,319 Goodwill................... 1,931 22,318 9,655 - 186 Long-term debt............. (3,172) (796) (9,880) (80) - Deferred income taxes and other long-term liabilities - - (6,782) (58) - --------- ---------- ---------- --------- --------- $ 15,545 $ 118,002 $ 508 $ 7,973 $ 30,211 ========= ========== ========== ========= =========
Pro Forma Financial Information The following table represents unaudited pro forma financial information which presents the Company's consolidated results of operations for the years ended October 30, 1998 and October 31, 1997 as if the acquisitions and related financing transactions occurred on November 1, 1996. 1998 1997 ---- ---- (In thousands) Statement of operations data: Revenues................................. $ 115,495 $ 97,825 Income (loss) from operations............ $ 5,114 $ (3,929) Net loss................................. $ (14,758) $ (21,241) Other data: EBITDA................................... $ 27,382 $ 14,236 Noncash cost of real estate sales........ $ 3,721 $ 2,370 EBITDA represents income from operations before depreciation, depletion and amortization expense and the noncash cost of real estate sales. The pro forma information does not purport to be indicative of results that actually would have occurred had the acquisitions been made on the date indicated or of results which may occur in the future. Proposed Seven Springs Acquisition On August 28, 1998 the Company, Booth Creek Ski Acquisition, Inc., a wholly owned subsidiary of Booth Creek ("Aquisition Sub"), and Seven Srings Farm, Inc. ("Seven Springs"), the owner and operator of the Seven Springs Mountain Resort, a ski resort and conference center, entered into an Agreement of Merger (the "Merger Agreement"), pursuant to which the Company would acquire Seven Springs through the merger of Acquistion Sub with and into Seven Springs. The aggregate merger consideration and related payments will be approxmimately $83.0 F-13 BOOTH CREEK SKI HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued) 2. Acquisitons - (Continued) Proposed Seven Springs Acquisition (continued) million plus certain deferred payments, subject to certain price adjustments. The proposed acquisition is conditioned on the receipt of a judicial determination that the terms of a certain shareholders' agreement among Seven Springs and its shareholders (the "Seven Springs Shareholder Agreement") does not apply to the transactions contemplated by the Merger Agreement, as well as customary closing conditions. In connection with the proposed acquisition, certain shareholders of Seven Springs filed a lawsuit in the Court of Common Pleas of Somerset County, Pennsylvania against the Company, Acquisition Sub, and Seven Springs and certain of its directors, seeking a declaratory judgment, along with other relief including the rescission of the Merger Agreement. Plaintiffs allege that the terms of the Seven Springs Shareholder Agreement ban the consummation of the proposed acquisition. On October 29, 1998, the Court entered a final judgment denying Plaintiff's motion and has permitted the consummation of the transactions contemplated by the Merger Agreement. On December 28, 1998, the Plaintiff's filed an amended notice of appeal which is currently pending. While the Company believes that Seven Springs will prevail with its position that the Seven Springs Shareholders Agreement does not apply to the transactions contemplated by the Merger Agreement, no assurance can be made regarding the timing or the outcome of this litigation. 3. Property and Equipment Property and equipment consist of the following: October 30, October 31, 1998 1997 ------------- ------------ (In thousands) Land and improvements.............. $ 36,933 $ 28,791 Buildings and improvements......... 45,309 34,624 Lift equipment..................... 42,807 32,998 Other machinery and equipment...... 45,099 29,008 Construction in progress........... 10,670 7,491 ----------- ----------- 180,818 132,912 Less accumulated depreciation..... 24,349 9,273 ----------- ----------- $ 156,469 $ 123,639 =========== =========== 4. Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consist of the following: October 30, October 31, 1998 1997 ------------ ----------- (In thousands) Accounts payable..................... $ 10,652 $ 7,618 Accrued compensation and benefits.... 3,164 1,575 Taxes other than income.............. 973 545 Unearned income and deposits......... 4,017 3,341 Interest............................. 2,349 2,027 Other................................ 955 2,026 ----------- ----------- $ 22,110 $ 17,132 =========== =========== F-14 BOOTH CREEK SKI HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued) 5. Financing Arrangements Senior Credit Facility The following is a summary of certain provisions of the Amended and Restated Credit Agreement (the "Senior Credit Facility"), as amended and restated on January 28, 1999 and effective beginning October 30, 1998, among Booth Creek, its subsidiaries, the financial institutions party thereto and BankBoston, N.A., as administrative agent ("Agent"). General - The Senior Credit Facility provides for borrowing availability of up to $25 million. The Senior Credit Facility requires that the Company not have borrowings thereunder in excess of $8.0 million in addition to certain amounts maintained by the Company in certain depository accounts with the Agent for a period of 60 consecutive days each year commencing sometime between February 1 and February 28. Borrowings under the Senior Credit Facility are collectively referred to herein as the "Loans." Total borrowings outstanding under the Senior Credit Facility at October 30, 1998 was $17,143,000. Interest - For purposes of calculating interest, the Loans can be, at the election of the Company, Base Rate Loans or LIBOR Rate Loans or a combination thereof. Base Rate Loans bear interest at the sum of (a) a margin of between 0% and .5%, depending on the level of consolidated EBITDA of the Company and its subsidiaries (as determined pursuant to the Senior Credit Facility), plus (b) the higher of (i) the Agent's base rate or (ii) the federal funds rate plus .5%. LIBOR Rate Loans bear interest at the LIBOR rate plus a margin of between 2% and 3%, depending on the level of consolidated EBITDA. The Senior Credit Facility also requires a commitment fee of .375% based on the unused borrowing base. As of October 30, 1998 the borrowings outstanding bore interest at 8%, pursuant to the Base Rate Loans option. Repayment - Subject to the provisions of the Senior Credit Facility, the Company may, from time to time, borrow, repay and reborrow under the Senior Credit Facility. The entire unpaid balance under the Senior Credit Facility is due and payable on November 15, 1999. Security - Borrowings under the Senior Credit Facility are secured by (i) a pledge of the Agent for the ratable benefit of the financial institutions party to the Senior Credit Facility of all of the capital stock of Booth Creek's principal subsidiaries and (ii) a grant of a security interest in substantially all of the consolidated assets of Booth Creek and its subsidiaries (excluding the Real Estate LLC). Covenants - The Senior Credit Facility contains financial covenants relating to the maintenance of (i) ratios of (a) financing debt to consolidated cash flow, (b) adjusted consolidated cash flow to consolidated debt service and (c) consolidated cash flow to consolidated interest expense, (ii) consolidated net worth, and (iii) consolidated cash flow. The Senior Credit Facility also contains restrictive covenants pertaining to the management and operation of Booth Creek and its subsidiaries. The covenants include, among others, significant limitations on indebtedness, guarantees, mergers, acquisitions, fundamental corporate changes, capital expenditures, asset sales, leases, investments, loans and advances, liens, dividends and other stock payments, transactions with affiliates, optional payments and modification of debt instruments and issuances of stock. F-15 BOOTH CREEK SKI HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued) 5. Financing Arrangements - (Continued) Long-Term Debt Long-term debt consists of the following instruments, which are described below: October 30, October 31, 1998 1997 ------------ ----------- (In thousands) Senior Notes........................ $ 133,500 $ 116,000 ASC Seller Note..................... 2,400 2,500 Other debt.......................... 3,237 2,827 ------------ ----------- 139,137 121,327 Less current portion............... 1,785 947 ------------- ----------- $ 137,352 $ 120,380 ============= =========== Senior Notes As of October 30, 1998, the Company had outstanding $133.5 million aggregate amount of its senior debt securities (the "Senior Notes"). The Senior Notes mature on March 15, 2007, and bear interest at 12.5% per annum, payable semi-annually on March 15 and September 15. The Senior Notes are redeemable at the option of the Company, in whole or in part, at any time after March 15, 2002, with an initial redemption price of 106.25% declining through maturity, plus accrued and unpaid interest to the redemption date. The Senior Notes are unconditionally guaranteed, on an unsecured senior basis, as to the payment of principal, premium, if any, and interest, jointly and severally (the "Guarantees"), by all Restricted Subsidiaries of the Company (as defined in the Indenture) having either assets or shareholders' equity in excess of $20,000 (the "Guarantors"). All of the Company's direct and indirect subsidiaries are Restricted Subsidiaries, except the Real Estate LLC. Each Guarantee is effectively subordinated to all secured indebtedness of such Guarantor. The Senior Notes are general senior unsecured obligations of the Company ranking equally in right of payment with all other existing and future senior indebtedness of the Company and senior in right of payment to any subordinated indebtedness of the Company. The Senior Notes are effectively subordinated in right of payment to all secured indebtedness of the Company and the Guarantors, including indebtedness under the Senior Credit Facility. In addition, the Senior Notes are structurally subordinated to any indebtedness of the Company's subsidiaries that are not Guarantors. The indenture for the Senior Notes (the "Indenture") contains covenants for the benefit of the holders of the Senior Notes that, among other things, restrict the ability of the Company and any Restricted Subsidiaries to: (i) incur additional indebtedness; (ii) pay dividends and make distributions; (iii) issue stock of subsidiaries; (iv) make certain investments; (v) repurchase stock; (vi) create liens; (vii) enter into transactions with affiliates, (viii) enter into sale and leaseback transactions, (ix) create dividend or other payment restrictions affecting Restricted Subsidiaries; (x) merge or consolidate the Company or any Guarantors; and (xi) transfer and sell assets. The Guarantors are wholly-owned subsidiaries of Booth Creek and have fully and unconditionally guaranteed the Senior Notes on a joint and several basis. Booth Creek is a holding company and has no operations, assets or cash flows separate from its investments in its subsidiaries. In addition, the assets, equity, income and cash flow of the Real Estate LLC, Booth Creek's only non-guarantor subsidiary, are inconsequential and the common stock of the Real Estate LLC is entirely owned by Booth Creek. Accordingly, Booth Creek has not presented separate financial statements and other disclosures concerning the Guarantors or its non-guarantor subsidiary because management has determined that such information is not material to investors. F-16 BOOTH CREEK SKI HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued) 5. Financing Arrangements - (Continued) Long-Term Debt (continued) On March 18, 1997, the Company consummated an offering of $110 million in Senior Notes. A portion of the proceeds from the offering were used to repay $90 million in bridge notes bearing interest at approximately 11%. Existing deferred financing costs at March 18, 1997 of $2,664,000 relating principally to the bridge notes repaid, were charged off in connection with the early extinguishment of debt, and have been reflected as an extraordinary item in the accompanying statement of operations for the year ended October 31, 1997. ASC Seller Note As part of the purchase price for the acquisitions of Waterville Valley and Mt. Cranmore, Booth Creek issued a promissory note to American Skiing Company in the aggregate principal amount of $2.75 million. The ASC Seller Note requires annual principal payments at an initial level of $100,000 per year and increasing to $350,000 by January 31, 2003, with the remaining principal balance of $1,150,000 due on June 30, 2004. The ASC Seller Note bears interest at 12% per annum payable semi-annually on each June 30 and December 31. Other Debt Other debt of $3,237,000 and $2,827,000 at October 30, 1998 and October 31, 1997, respectively, consists of various capital lease obligations, notes payables and improvement bond obligations. For the year ended October 30, 1998, the Company entered into long-term debt and capital lease obligations of approximately $2.5 million for the purchase of equipment. During the years ended October 30, 1998 and October 31, 1997, the Company paid cash for interest costs (net of amounts capitalized) of $17,176,000 and $11,243,000, respectively. 6. Commitments and Contingencies Lease Commitments The Company leases certain machinery, equipment and facilities under operating leases. Aggregate future minimum lease payments as of October 30, 1998 are as follows: Year Ending October (In thousands) ------- -------------- 1999.................................. $ 2,713 2000.................................. 1,888 2001.................................. 1,619 2002.................................. 1,427 2003.................................. 1,421 Thereafter............................ 284 ----------- $ 9,352 =========== Total rent expense for all operating leases amounted to $2,675,000 and $2,882,000 for the years ended October 30, 1998 and October 31, 1997, respectively. F-17 BOOTH CREEK SKI HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued) 6. Commitments and Contingencies - (Continued) Lease Commitments (continued) The Company leases certain machinery and equipment under capital leases. Aggregate future minimum lease payments as of October 30, 1998 for years ending October 1999 and October 2000 were $783,000 and $823,000, respectively. The cost and accumulated depreciation of equipment recorded under capital leases at October 30, 1998 were $2,511,000 and $791,000, respectively. In addition, the Company leases property from the U.S. Forest Service under Special Use Permits for all or certain portions of the operations of Sierra, Bear Mountain, Waterville Valley, Loon Mountain, the Summit and Grand Targhee. These leases are effective through 2008, 2020, 2034, 2006, 2032 and 2034, respectively. Lease payments are based on a percentage of revenues, and were $1,014,000 and $665,000 for the years ended October 30, 1998 and October 31, 1997, respectively. Other Commitments Commitments for future capital expenditures totaled approximately $4.4 million at October 30, 1998. In September 1997, the Company acquired a two year land purchase option for $500,000. The land purchase option permits the Company to acquire certain land for additional consideration of approximately $3.2 million. If the land purchase option is not exercised due to certain events, $250,000 of the option price is refundable. Litigation The nature of the ski industry includes the risk of skier injuries. Generally, the Company has insurance to cover potential claims; in some cases the amounts of the claims may be substantial. The Company is also involved in a number of other claims arising from its operations. Management, in consultation with legal counsel, believes resolution of these claims will not have a material adverse impact on the Company's consolidated financial condition or results of operations. Pledge of Stock The stock of the Company is pledged to secure $54.0 million of indebtedness of the Parent. 7. Income Taxes The income tax benefit (provision) consists of the following: Year Ended October 30, October 31, 1998 1997 ----------- ----------- (In thousands) Current: Federal.............................. $ - $ 200 State................................ - (20) --------- ----------- - 180 ========= ============ Deferred: Federal............................. - 1,442 State............................... - 106 --------- ----------- - 1,548 --------- ----------- $ - $ 1,728 ========= =========== F-18 BOOTH CREEK SKI HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued) 7. Income Taxes - (Continued) The difference between the statutory federal income tax rate and the effective tax rate is attributable to the following: Year Ended --------------------------- October 30, October 31, 1998 1997 --------------------------- (In thousands) Tax benefit computed at federal statutory rate of 35% of pre-tax loss..................... $ 6,045 $ 5,575 Net change in valuation allowance........... (6,073) (3,691) Other, net................................... 28 (156) ------------ ---------- $ - $ 1,728 ============ ========== As all of the income tax benefit for the year ended October 31, 1997 was attributable to the losses from continuing operations, none of the benefit was allocated to the extraordinary loss on early retirement of debt (Note 5). Accordingly, the extraordinary loss increased the Company's net operating losses by $2,664,000 and the valuation allowance by $972,000. In connection with the purchase accounting for the Loon Mountain acquisition, approximately $13 million of the Company's existing net operating losses were used to offset net taxable temporary differences relating principally to Loon Mountain's long-term assets. Accordingly, the Company's valuation allowance for net deferred tax assets was reduced by $4,639,000. After consideration for the Loon Mountain acquisition, the net increase in the Company's valuation allowance for the year ended October 30, 1998 was $826,000, which included the effect of adjustments to the prior year's estimated net operating loss. At October 30, 1998, the Company has net operating loss carryforwards of approximately $43 million for federal income tax reporting purposes, which expire in 2012 and 2018. Significant components of the Company's deferred tax assets and liabilities are as follows: October 30, October 31, 1998 1997 ------------ ----------- (In thousands) Deferred tax assets: Accruals and reserves.................. $ 1,216 $ 754 Alternative minimum tax credit carryforwards.......... 545 130 Net operating loss carryforwards....... 15,806 5,909 ------------ --------- Total deferred tax assets.......... 17,567 6,793 Deferred tax liabilities: Property and equipment................. (10,514) (2,000) ------------ -------- Total deferred tax liabilities......... (10,514) (2,000) ------------ -------- Net deferred tax assets................. 7,053 4,793 Valuation allowance..................... (7,053) (4,793) ------------ -------- Net deferred tax assets reflected in the accompanying consolidated balance sheet.................................. $ - $ - ============= ========= 8. Management Agreement and Related Party Transactions Booth Creek has in effect a management agreement with Booth Creek, Inc. (the "Management Company") dated November 27, 1996 (the "Management Agreement") pursuant to which the Management Company provides Parent, Booth Creek and its subsidiaries with financial advice with respect to, among other matters, cash F-19 BOOTH CREEK SKI HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued) 8. Management Agreement and Related Party Transactions - (Continued) management, accounting and data processing systems and procedures, budgeting, equipment purchases, business forecasts, treasury functions and investor relations. The Management Company also provides general supervision and management advice concerning tax, legal and corporate finance matters, administration and operation, personnel matters, business insurance and the employment of consultants, contractors and agents. Under the terms of the Management Agreement, the Company provides customary indemnification, reimburses certain costs and pays the Management Company an annual management fee of $350,000 plus an operating bonus (the "Operating Bonus"), not to exceed $400,000, equal to 2.5% of the excess of Consolidated EBITDA (as defined in the Management Agreement) for such year over $25 million. The Operating Bonus for each fiscal year must be paid within 15 days after Parent receives its fiscal year-end audited financial statements for that year. Booth Creek pays the Management Company amounts necessary to cover operations costs (other than office operations cost but including, without limitation, reasonable travel and entertainment costs) and reimburse certain costs and expenses, of the Management Company attributable to, arising out of, in connection with, or related to management services rendered by the Management Company. Management fees and reimbursable operating expenses during the years ended October 30, 1998 and October 31, 1997 were $646,000 and $350,000, respectively. During the year ended October 30, 1998, the Management Company incurred fees and expenses of approximately $119,000 in connection with certain of the acquisitions. For the year ended October 31, 1997, the Management Company and certain of its affiliates made advances and deposits of approximately $1,400,000, and incurred expenses of approximately $1,000,000, in connection with certain of the acquisitions. All of these costs were later reimbursed by the Company pursuant to the Management Agreement. At October 31, 1997, the Company had a receivable of $331,000 from Parent which is included in other current assets in the accompanying consolidated balance sheet at October 31, 1997 (none at October 30, 1998). 9. Employee Benefit Plan The Company maintains a defined contribution retirement plan (the "Plan"), qualified under Section 401(k) of the Internal Revenue Code, for certain eligible employees. Pursuant to the Plan, eligible employees may contribute a portion of their compensation, subject to a maximum amount per year as specified by law. The Company provides a matching contribution based on specified percentages of amounts contributed by participants. The Company's contribution expense for the years ended October 30, 1998 and October 31, 1997 was $490,000 and $215,000, respectively. 10. Business Segments The Company currently operates in two business segments, Resorts and Real Estate and other. Data by segment is as follows: October 30, October 31, 1998 1997 --------------- ------------- (In Thousands) Revenue: Resorts......................... $ 97,248 $ 68,136 Real estate and other........... 7,608 3,671 --------------- ------------ $ 104,856 $ 71,807 =============== ============ Operating income (loss): Resorts............................. $ (1,201) $ (1,628) Real estate and other............... 2,664 612 -------------- ------------- $ 1,463 $ (1,016) ============== ============ F-20 BOOTH CREEK SKI HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (Continued) 10. Business Segments - (Continued) October 30, October 31, 1998 1997 ----------- ---------- (In thousands) Depreciation, depletion and amortization: Resorts.............................. $ 17,479 $ 11,421 Real estate and other................ 273 260 ----------- ---------- $ 17,752 $ 11,681 =========== ========== Capital expenditures: Resorts.............................. $ 15,042 $ 8,918 Real estate and other................ 1,717 72 ----------- ---------- $ 16,759 $ 8,990 =========== ========== Identifiable assets: Resorts.............................. $ 162,796 $ 127,709 Real estate and other................ 15,240 16,559 ----------- ---------- $ 178,036 $ 144,268 =========== ========== F-21 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Truckee, State of California, as of February 5, 1999. BOOTH CREEK SKI HOLDINGS, INC. (Registrant) By: /s/ GEORGE N. GILLETT ---------------------- George N. Gillett Chairman of the Board of Directors and Chief Executive Officer By: /s/ ELIZABETH J. COLE ---------------------------------- Elizabeth J. Cole Executive Vice President and Chief Financial Officer By: /s/ BRIAN J. POPE ----------------------------------- Brian J. Pope Vice President of Accounting and Finance Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed by the following persons in the capacities and as of the dates indicated. Signature Title Date - --------- ------ ---- /s/ GEORGE N. GILLETT Chairman of the Board February 5, 1999 - ------------------------------- of Directors and Chief George N. Gillett Executive Officer /s/ ELIZABETH J. COLE Executive Vice President February 5, 1999 - -------------------------------- and Chief Financial Elizabeth J. Cole Officer /s/ BRIAN J. POPE Vice President of Accounting February 5, 1999 - ------------------------------ and Finance (Chief Accounting Brian J. Pope Officer) EX-4 2 4.5 SUPPLEMENTAL INDENTURE NO. 4 This SUPPLEMENTAL INDENTURE NO. 4 to INDENTURE (this "Supplemental Indenture") is entered into among Booth Creek Ski Holdings, Inc., a Delaware corporation (the "Company") and Booth Creek Ski Acquisition, Inc. ("Acquisition Sub"), a Pennsylvania corporation, and Marine Midland Bank, a New York banking corporation and trust company, as Trustee (the "Trustee"). RECITALS WHEREAS, the Company, the Guarantors and the Trustee have entered into that certain Indenture dated as of March 18, 1997, as amended by Supplemental Indenture No. 1 dated as of April 25, 1997, Supplemental Indenture No. 2 dated as of February 20, 1998 and Supplemental Indenture No. 3 dated as of February 26, 1998 (the "Indenture") providing for the issuance and delivery by the Company of its 12 1/2% Senior Notes due 2007; WHEREAS, the Company has entered into certain financing and related transactions; WHEREAS, Acquisition Sub has become a Restricted Subsidiary of the Company; WHEREAS, pursuant to Section 4.14 of the Indenture, any Restricted Subsidiary with assets or stockholder's equity in excess of $20,000 is required to become a Guarantor under the Indenture; and WHEREAS, Article 10 of the Indenture provides for the terms and conditions of the guarantee of the obligations of the Company under the Indenture by the Restricted Subsidiaries of the Company. NOW THEREFORE, in consideration of the mutual agreements contained herein and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows for the benefit of each other party and for the equal and ratable benefit of the Holders of the Company's 12% Senior Notes due 2007: Section 1. GUARANTEE. For value received. Acquisition Sub hereby agrees to become a party to the Indenture as a Guarantor under and pursuant to Article 10 of the Indenture and to jointly and severally unconditionally guarantee to each Holder and the Trustee (a) the due and punctual payment of the principal of, and premium, if any, and interest on each Note, when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest (including Additional Interest) on the overdue principal of, and premium, if any, and interest, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee, all in accordance with the terms set forth in such Note and Article 10 of the Indenture, and (b) in case of any extension of time of payment or renewal of any Notes or any of such other Obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Acquisition Sub further agrees that its obligations under Article 10 of the Indenture shall be absolute and unconditional, irrespective of, and shall be unaffected by, any invalidity, irregularity or unenforceability of any such Note or the Indenture, any failure to enforce the provisions of any such Note or the Indenture, any waiver, modification or indulgence granted to the Company with respect thereto by the Holder of such Note or the Trustee, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or such Guarantor. Section 2. MISCELLANEOUS. 2.1. GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE. 2.2. Confirmation of the Indenture. Except as amended hereby, the Indenture shall remain in full force and effect and is hereby ratified and confirmed in all respects. 2.3. Multiple Counterparts. The parties may sign multiple counterparts of this Supplemental Indenture. Each signed counterpart shall be deemed an original, but all of them together represent one and the same agreement. 2.4. Separability. Each provision of this Supplemental Indenture shall be considered separable and if for any reason any provision which is not essential to the effectuation of the basic purpose of this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 2.5. Headings. The captions of the various section headings of this Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. 2.6. The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Company and Acquisition Sub. 2.7. Definitions. All terms defined in the Indenture shall have the same meaning in this Supplemental Indenture unless otherwise defined herein. IN WITNESS WHEREOF, the parties hereto caused this Supplemental Indenture to be duly executed as of this 8th day of October, 1998. BOOTH CREEK SKI HOLDINGS, INC By: /s/ JEFFREY J. JOYCE -------------------------- Name: Jeffrey J. Joyce Title: Executive Vice President BOOTH CREEK SKI ACQUISITION. INC. By: /s/ JEFFREY J. JOYCE -------------------------- Name: Jeffrey J. Joyce Title: Executive Vice President MARINE MIDLAND BANK, as Trustee By: /s/ROBERT A. CONRAD --------------------------- Name: Robert A. Conrad Title: President -----END PRIVACY-ENHANCED MESSAGE-----