GREAT WOLF RESORTS, INC.

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may not be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

This prospectus relates to 14,032,896 shares of our common stock being sold by the selling stockholders named in this prospectus. We will not receive any proceeds from the issuance or sale of these shares.

The selling stockholders may offer their shares of common stock from time to time through public or private transactions, in the over-the-counter markets, on any exchanges on which our common stock is traded at the time of sale, at prevailing market prices or at privately negotiated prices. The shares may be sold directly or through agents or broker-dealers acting as principal or agent, or in block trades or through one or more underwriters on a firm commitment or best efforts basis. The selling stockholders may engage underwriters, brokers, dealers or agents, who may receive commissions or discounts from the selling stockholders. We will pay substantially all of the expenses incident to the registration of the shares, except for sales commissions and other seller’s compensation applicable to sales of the shares.

The selling stockholders and any underwriters, agents or broker-dealers that participate with the selling stockholders in the distribution of the common stock may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, and any commissions received by them and any profit on the resale of the common stock may be deemed to be underwriting commissions or discounts under the Securities Act.

Our common stock trades on the Nasdaq National Market under the symbol “WOLF.” On January 20, 2005, the last reported sales price of our common stock on the Nasdaq National Market was $21.59.

Investing in our common stock involves risks. See “Risk Factors” beginning on page 13.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.

We own, or claim ownership rights to, a variety of trade names, service marks and trademarks for use in our business, including Biko the Bear, Blue Harbor Resort, Boathouse Suite, Breaker Bay, Crew Club, Cub Club, Great Wolf Lodge, Great Wolf Resorts, KidAquarium Suite, KidCabin and Wiley the Wolf in the United States and, where appropriate, in foreign countries. This prospectus also includes product names and other tradenames and service marks owned by us and other companies. The tradenames and service marks of other companies are the property of such other companies.

SUMMARY

This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus, including “Risk Factors,” the audited financial statements of our predecessor companies and our consolidated financial statements and related notes, carefully before making an investment decision. References in this prospectus to “we,” “our,” “us” and “our company” refer to Great Wolf Resorts, Inc., a Delaware corporation, together with our consolidated subsidiaries.

Our Business

We are a family entertainment resort company that provides our guests with a high-quality vacation at an affordable price. We are the largest owner, operator and developer in the United States of drive-to family resorts featuring indoor waterparks and other family-oriented entertainment activities, based on the number of resorts in operation. We provide a full-service entertainment resort experience to our target customer base: families with children ranging in ages from 2 to 14 years old that live within a convenient driving distance from our resorts. Our resorts provide a consistent and comfortable environment throughout the year where our guests can enjoy our various amenities and activities. We are a fully integrated resort company with in-house expertise and resources in resort and indoor waterpark development, management, marketing and financing.

We own and operate four existing Great Wolf Lodge® resorts, our signature northwoods-themed resorts, and one Blue Harbor Resort, a nautical-themed property. In addition, we own two Great Wolf Lodge resorts that are under construction and scheduled to open for business during 2005. We are also the licensor and manager of an additional Great Wolf Lodge resort in Niagara Falls, Ontario that is owned and under development by an affiliate of Ripley Entertainment Inc., or Ripley’s. We are currently evaluating 12 to 14 additional markets for potential future development of Great Wolf Lodge resorts, six of which are in active site negotiation. We anticipate that most of our future resorts will be developed under our Great Wolf Lodge brand, but we may develop additional nautical-themed resorts in other appropriate markets.

We deliver value to our guests by providing an affordable and fun family vacation experience. Our resorts are located within a convenient driving distance of our target customer base, providing our guests with a less expensive, more convenient alternative to air travel. In addition, our resorts generally include the following features:

• Suites: approximately 270 to 400 family suites that sleep from six to ten people and each include a wet bar, microwave oven, refrigerator and dining and sitting area.

• Waterpark: an approximately 34,000 to 82,000 square-foot indoor waterpark highlighted by our signature 12-level treehouse water fort. Our water fort is an interactive water experience for the entire family and features over 60 water effects, including spray guns, fountains, valves and hoses, has cargo netting and suspension bridges, and is capped by an oversized bucket that dumps between 700 and 1,000 gallons of water every five minutes. Our waterparks also feature high-speed body slides and inner tube waterslides that wind in and out of the building into a splash-down pool, a lazy river, activity pools and large free-form hot tubs. Our room rates include use of the waterpark by four to six guests, depending on the type of room.

• Food and Beverage: themed restaurants, such as our: Camp Critter Bar & Grille, which features a two-story realistic tree with a canopy of leaves and canvas-topped booths with hanging lanterns, giving guests the impression that they are dining in a northwoods forest camp; Bear Claw Café ice cream shop and confectionery; and waterpark snack shop.

• Amenities and Activities: our Youkon Jack’s and Northern Lights game arcades, full-service Aveda® concept spa, Buckhorn Exchange gift shop, Iron Horse fitness center, two-story animated clocktower, Cub Club children’s activity program, meeting rooms and seasonal, holiday and other special activities.

Our four resorts open during the entire twelve-month period ended September 30, 2004, had the following financial performance:

• $211.30 average daily room rate, or ADR;

• $90.45 average non-room revenue per occupied room, or RevPOR;

• $301.75 total revenue per occupied room, or Total RevPOR;

• 65.1% occupancy;

• $137.61 revenue per available room, or RevPAR; and

• $196.51 total revenue per available room, or Total RevPAR.

We expect recurring annual capital expenditures for each resort to be 3-4% of the resort’s annual revenues, including the repair and maintenance of our waterpark equipment. Our waterpark equipment is designed for outdoor application and capable of withstanding intense physical use and the elements year-round. Therefore, wear and tear is minimal and we believe our waterpark equipment has a long useful life.

We were formed in May 2004 to succeed to the family entertainment resort business of our predecessor companies, The Great Lakes Companies, Inc, which we refer to in this prospectus as the management company, and a number of its related entities. We refer to these entities collectively as Great Lakes. Great Lakes has developed and operated hotels since 1995. In 1999, Great Lakes began its resort operations by purchasing the Great Wolf Lodge in Wisconsin Dells, Wisconsin and developing the Great Wolf Lodge in Sandusky, Ohio, which opened in 2001. In 2003, Great Lakes opened two additional Great Wolf Lodge resorts, one in Traverse City, Michigan and the other in Kansas City, Kansas. In June 2004, Great Lakes opened the Blue Harbor Resort in Sheboygan, Wisconsin. Immediately prior to the closing of our initial public offering of common stock, which we refer to in this prospectus as the initial public offering, Great Lakes had two additional Great Wolf Lodge resorts under construction, one in Williamsburg, Virginia and the other in the Pocono Mountains region of Pennsylvania. These resorts are scheduled to open in the Spring and Fall of 2005, respectively.

On December 20, 2004, in connection with the closing of the initial public offering, we acquired each of these resorts and the resorts currently under construction, as well as certain resort development and management operations, in exchange for an aggregate of 14,032,896 shares of our common stock and $98.1 million.

Our management team possesses substantial expertise in all aspects of family entertainment resort and indoor waterpark development, management, marketing and financing. We have safely and successfully managed the operational complexity of our current resorts and intend to operate our future resorts similarly. We operate our business from our headquarters in Madison, Wisconsin. We believe that the experience of our senior management team, particularly their development and operational experience, as well as our centralized reservations center, provide an infrastructure that will allow us to continue to increase the number of resorts that we develop and operate without proportionately higher overhead costs. As of December 31, 2004, we had approximately 120 corporate employees, including our central reservations center employees, and approximately 1,600 full and part-time resort-level employees.

Our principal executive offices are located at 122 West Washington Avenue, Madison, Wisconsin 53703, and our telephone number is (608) 251-6400. Our website can be found on the internet at www.greatwolfresorts.com. Information contained on our website is not part of this prospectus.

Our Competitive Strengths

Our competitive strengths include:

• Unforgettable Family Resort Experience. Our indoor waterpark resorts provide activities that the entire family can enjoy, including themed restaurants, an Aveda concept spa, a game arcade, ice cream shop and confectionery, gift shop, animated clocktower and fireside bedtime stories.

• Value, Comfort and Convenience. On average, a two-night stay for a family of four in one of our conveniently located resorts costs approximately $600.

• Favorable Market Trends. We believe recent vacation trends favor our Great Wolf Lodge concept as the number of families choosing to take shorter, more frequent vacations that they can drive to has increased over the past several years.

• Market Presence and Barriers to Entry.We believe that we benefit from the significant barriers to entry, including operational complexity, substantial capital requirements, availability of suitable sites in desirable markets and a difficult, multi-year permitting process.

• Focus on Safety. We invest heavily in safety measures in the design and operation of our resorts, including our state-of-the-art air quality and water treatment systems.

• Experienced Management Team. Our senior management team has an average of approximately 16 years of experience in the hospitality, family resort and real estate development industries and has significant expertise in operating complex, themed resorts featuring indoor waterparks.

Business and Growth Strategies

Our primary internal growth strategies are to:

• Increase Total Resort Revenue. We intend to increase total resort revenue by increasing our average room rate, average occupancy and other revenue.

• Leverage Our Economies of Scale. We intend to take advantage of our economies of scale by capitalizing on our increased purchasing power and centralizing certain of our services.

• Build Upon Brand Awareness and Loyalty. Our Great Wolf Lodge brand is symbolized by our distinctive and easily identifiable theming and recognizable logos and merchandise, which have fostered strong customer and brand loyalty, as evidenced by our high levels of repeat and referral guests.

Our primary external growth strategies are to:

• Capitalize on First-Mover Advantage. We intend to be the first to develop and operate family entertainment resorts featuring indoor waterparks in our selected target markets.

• Focus on Development and Strategic Growth Opportunities. Family entertainment resorts featuring indoor waterparks are a relatively new concept and a growing segment of the resort and entertainment industries. We intend to focus on this growth opportunity by building in target markets, licensing our resort concept internationally, forming strategic partnerships and expanding and enhancing existing resorts.

• Continue to Innovate. We intend to leverage our in-house expertise, in conjunction with the knowledge and experience of our third-party suppliers and designers, to develop and implement the latest innovations in family entertainment activities and amenities, including waterpark attractions.

Summary Risk Factors

Our ability to capitalize on our competitive strengths and implement the business and growth strategies described above may be affected by matters discussed under “Risk Factors” beginning on page 13, which you should carefully consider prior to deciding whether to invest in our common stock, including:

• our ability to develop new resorts or further develop existing resorts on a timely or cost efficient basis;

• our ability to compete with other family vacation travel destinations and resorts;

• our ability to manage our expected growth;

• potential accidents or injuries in our resorts and competing resorts;

• our ability to achieve or sustain profitability;

• changes in family vacation patterns and consumer spending habits, downturns in our industry segment and extreme weather conditions;

• our ability to attract a significant number of guests from our target markets;

• increases in operating costs and other expense items and costs;

• uninsured losses or losses in excess of our insurance coverage; and

• our ability to protect our intellectual property and the value of our brands.

Properties

We have five family entertainment resorts that are currently operating and two additional resorts that are under construction, and we will manage one resort under construction that is owned by a third-party licensee. We also have identified additional target markets for future resort development and are in negotiations with respect to sites in six of these markets. The following table presents an overview of our portfolio of resorts:



									Twelve Months Ended September 30, 2004

													Revenue		Other		Total
	Opened/						Indoor				Average		per		Revenue per		Revenue per
	Target						Entertainment				Daily		Available		Occupied		Occupied
Location	Opening			Rooms			Area(1)		Occupancy		Rate		Room(2)		Room		Room(3)

							(approx. ft²)		(%)		($)		($)		($)		($)
Existing Resorts:
Wisconsin Dells, WI		May 1997(4	)		309			64,000		61.7		194.58		120.14		76.76		271.34
Sandusky, OH(5)		March 2001			271			41,000		68.4		231.38		158.34		92.78		324.16
Traverse City, MI		March 2003			281			51,000		68.9		222.71		153.47		98.29		321.00
Kansas City, KS		May 2003			281			49,000		61.8		195.06		120.50		94.21		289.27
Sheboygan, WI(6)		June 2004			183	(7)		54,000		—		—		—		—		—
Resorts Under Construction:
Williamsburg, VA		Spring 2005			301			66,000		—		—		—		—		—
Pocono Mountains, PA		Fall 2005			400			91,000		—		—		—		—		—
Niagara Falls, ONT(8)		Spring 2006			404			94,000		—		—		—		—		—


(1)	Our indoor entertainment areas generally include our indoor waterpark, game arcade, children’s activity room and fitness room, as well as our Aveda concept spa, 3D virtual reality theater, Wiley’s Woods and party room in the resorts that have such amenities.
(2)	Revenue per available room represents the total room revenue per total available rooms for the twelve months ended September 30, 2004, calculated by multiplying the occupancy by the average daily rate.
(3)	Total revenue per occupied room is calculated by adding the average daily rate and other revenue per occupied room.
(4)	Great Lakes purchased this property in November 1999.


(5)	Prior to May 2004, we operated this resort as a Great Bear Lodge.
(6)	Our Sheboygan property is branded as a Blue Harbor Resort. This resort is subject to a 98-year and 11-month ground lease with the Redevelopment Authority of the City of Sheboygan.
(7)	Our Blue Harbor Resort also features 64 individually owned two and four bedroom condominium units.
(8)	Ripley’s, our licensee, owns this resort. We are assisting Ripley’s with construction management and other pre-opening matters related to the Great Wolf Lodge in Niagara Falls. We have granted Ripley’s a license to use the Great Wolf Lodge name for this resort for ten years after opening. We have agreed to enter into a management agreement, pursuant to which we expect to operate the resort on behalf of Ripley’s for five years, and also a central reservations agreement. In conjunction with this project, we expect to receive a one-time construction management fee and ongoing license, central reservations and management fees.

Structure and Formation of Our Company

Formation Transactions

Each of the five existing resorts and the two resorts under construction that are owned and operated by us were, prior to the consummation of the initial public offering and the formation transactions, owned by a separate limited liability company. We refer to these limited liability companies as resort-owning entities. One member in each of these resort-owning entities was a separate limited liability company of which the management company was the managing member or manager. We refer to these entities as sponsor entities. In addition, investors had an ownership interest in the resort-owning entity of our Sandusky resort through a limited liability company that we refer to as Sandusky Investor LLC.

Pursuant to the formation transactions, among other things:

• The management company contributed its hotel management and multifamily housing management and development assets, which were unrelated to the resort business, to two subsidiaries of the management company and then distributed the interests in such subsidiaries to the former shareholders of the management company.

• We sold an aggregate of 16,100,000 shares of our common stock in the initial public offering, and we used the net proceeds from the initial public offering to accomplish the steps listed below and also to (1) pay an aggregate of $98.1 million of the cash consideration in connection with the formation transactions; (2) repay certain indebtedness existing prior to the closing of the initial public offering and the formation transactions in the aggregate amount of approximately $76.0 million; and (3) fund $75.4 million of our future resort development costs.

• We effected, through GWR Operating Partnership, L.L.L.P., our wholly owned operating partnership, the acquisition of each resort-owning entity, sponsor entity, Sandusky Investor LLC and the management company.

• Pursuant to these acquisitions, members of the resort-owning entities, sponsor entities and Sandusky Investor LLC received cash, unregistered shares of our common stock or a combination of cash and unregistered shares of our common stock. Also, shareholders of the management company received unregistered shares of our common stock pursuant to the merger of the management company with and into Great Lakes Services, LLC, a wholly owned subsidiary of the operating partnership, which we refer to as Great Lakes Services.

• We issued an aggregate of 130,949 shares of unregistered common stock to holders of tenant in common interests in our Poconos and Williamsburg resorts that were, immediately prior to the consummation of the formation transactions, convertible into our common stock.

• Concurrently with the consummation of the initial public offering and the formation transactions, we:

• repaid an aggregate of approximately $76.0 million of Great Lakes’ mortgage indebtedness on two of our resorts from the net proceeds of the initial public offering;

• refinanced existing mortgage indebtedness on two of our resorts with a total outstanding debt balance at September 30, 2004 of approximately $72.4 million; and

• entered into a $75.0 million revolving credit facility that is secured by two of our resorts. Based upon the financial and debt service ratios that are contained in the revolving credit facility, as of the date of this prospectus, approximately $55.0 million of the revolving credit facility is available. As of the date of this prospectus, we have not drawn any amounts under this facility. We expect to use the revolving credit facility to fund our future growth and resort development, to provide for working capital and for other corporate purposes.

• The former employees of the management company, other than those associated solely with the non-resort businesses, became employees of Great Lakes Services.

Eric S. Lund, Bruce D. Neviaser, Thomas A. Sather, Craig A. Stark, Marc B. Vaccaro and Kimberly K. Schaefer, each of whom was a shareholder of the management company, entered into indemnity agreements with us pursuant to which they have made certain representations and warranties to us relating to the formation transactions and the status of the properties operated by the resort-owning entities. Pursuant to these indemnity agreements, these shareholders have agreed to indemnify us for a period of one year following the closing of the formation transactions if those representations and warranties are not accurate. With respect to each shareholder, the maximum indemnification obligation under these agreements will not exceed 35% of the value of the number of shares of our common stock received by that shareholder in the formation transactions based on the initial public offering price of $17.00 per share. The maximum amount of the indemnification obligations under these agreements equals approximately $45.2 million in the aggregate. These shareholders may fulfill the indemnity obligations under the agreements solely through delivery of shares of our common stock that they own, valued at the time of delivery, or with an equivalent amount of cash. However, if any of these shareholders chooses to fulfill the indemnity obligation under the agreement through the delivery of shares, the maximum number of shares such shareholder will be obligated to deliver is 35% of the number of shares such shareholder received in the formation transactions.

Immediately following the completion of the initial public offering, Messrs. Lund, Neviaser and Sather received personal loans from an affiliate of Citigroup Global Markets Inc. (which served as lead underwriter in connection with the initial public offering). These loans are full-recourse and are secured by a pledge of all the shares of our common stock received by each in the formation transactions. While some of these shares may be released from the pledge over time, they may not be available as an alternative means to satisfy an indemnification obligation under the agreements.


	*Consequences of the Initial Public Offering and the Formation Transactions*

At the completion of the initial public offering and the formation transactions:

• We directly or indirectly own a fee simple interest in all of our resorts, except for a leasehold interest in our Sheboygan resort. We also are the licensor and manager of a Great Wolf Lodge resort in Niagara Falls, Ontario owned by Ripley’s that is currently under construction.

• Purchasers of our common stock in the initial public offering own approximately 53.2% of our outstanding common stock.

• We had incurred approximately $18.0 million of indebtedness in connection with our Williamsburg and Pocono Mountains resort developments between September 30, 2004 and the completion of the initial


		public offering, in addition to approximately $123.1 million of total pro forma indebtedness we had outstanding at September 30, 2004.


	*Benefits to Related Parties*

In connection with the formation transactions, the shareholders of the management company received material benefits, including:

• an aggregate of 8,087,151 unregistered shares of our common stock as consideration in the formation mergers; and

• the release of personal guarantees to repay approximately $167.1 million of indebtedness relating to the resort- owning entities. Approximately $76.0 million of this indebtedness was repaid with the proceeds of the initial public offering, approximately $72.4 million was refinanced and the remaining portion was assumed by us in connection with the formation transactions.

As of the date of this prospectus, the founding shareholders of Great Lakes beneficially own approximately 25.1% of the outstanding shares of our common stock.

The Offering

All of the shares offered hereby are being offered by the selling stockholders. We will not receive any proceeds from the offering. See “Use of Proceeds,” “Selling Stockholders” and “Plan of Distribution” herein.

Summary Financial and Other Data

The following table sets forth summary financial and operating data on a historical basis for Great Lakes and on an unaudited pro forma basis for Great Wolf Resorts, Inc. Historical financial and other data related to Great Lakes consists of the following:

• combined historical financial information for (1) Great Lakes’ management business, including development of, ownership interests in, and management contracts with respect to, certain non-resort hotels and multifamily housing assets, (2) the entities that own our Traverse City, Kansas City and Sheboygan operating resorts and (3) the entities that own our Williamsburg and Pocono Mountains resorts that are under construction (the “Predecessor Historical Information”); and

• combined historical financial information for the entities that own our Wisconsin Dells and Sandusky resorts (the “Dells/Sandusky Historical Information”).

Although we were the managing member with responsibility for day-to-day operations with respect to the entities that own our Wisconsin Dells and Sandusky resorts, another party controlled those entities. Therefore, we do not combine the Dells/Sandusky Historical Information with the Predecessor Historical Information.

We have not presented historical information for Great Wolf Resorts, Inc. in this summary because we have not had any operations since our formation and because we believe that a discussion of the results of Great Wolf Resorts, Inc. would not be meaningful. We have included audited consolidated historical financial statements for Great Wolf Resorts, Inc. elsewhere in this prospectus.

The summary Predecessor Historical Information as of September 30, 2004 and December 31, 2003 and 2002 and for the nine months ended September 30, 2004 and for each of the three years in the period ended December 31, 2003 are derived from, and are qualified in their entirety by, the Great Lakes Predecessor financial statements audited by Deloitte & Touche LLP, an independent registered public accounting firm, whose report with respect thereto is included elsewhere in this prospectus. The summary Dells/Sandusky Historical Information as of December 31, 2003 and 2002 and for each of the three years in the period ended December 31, 2003 are derived from, and are qualified in their entirety by, the Dells/Sandusky financial statements audited by Rubin, Brown, Gornstein & Co. LLP, an independent registered public accounting firm, whose report with respect thereto is included elsewhere in this prospectus. The summary Predecessor Historical financial and operating data for the nine months ended September 30, 2003 and Dells/Sandusky Historical financial and operating data as of September 30, 2004 and for the nine months ended September 30, 2004 and 2003, are derived from, and are qualified in their entirety by, the unaudited Great Lakes Predecessor and Dells/Sandusky financial statements. In the opinion of management, such unaudited financial data reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the results for those periods. Historical results are not necessarily indicative of the results to be expected in the future. You should read the following summary financial and other data together with “Business,” “Selected Financial and Other Data,” “Unaudited Pro Forma Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Great Lakes Predecessor and Dells/Sandusky financial statements and related notes appearing elsewhere in this prospectus.

The unaudited summary pro forma financial and operating data for the year ended December 31, 2003 and the nine months ended September 30, 2004 have been prepared to give pro forma effect to the initial public offering and the formation transactions as if they had occurred on January 1, 2003. The unaudited pro forma balance sheet data as of September 30, 2004 has been prepared to give effect to the initial public offering and the formation transactions as if they had occurred on September 30, 2004. The unaudited summary combined pro forma financial data are for informational purposes only and should not be considered indicative of actual results that would have been achieved had the initial public offering and the formation transactions actually been consummated on January 1, 2003 and do not purport to indicate results of operations as of any future date or for any future period. You should read the summary combined pro forma data in conjunction with “Unaudited Pro Forma Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Great Lakes Predecessor and Dells/Sandusky financial statements and related notes appearing elsewhere in this prospectus.



		Year Ended December 31,


		2003									2002						2001

		Consolidated						Dells/						Dells/						Dells/
		Pro Forma			Predecessor(1)(6)			Sandusky			Predecessor			Sandusky			Predecessor			Sandusky


		(dollars in thousands, except per share amounts and operating data)
Statement of Operations Data:
Revenues:
	Rooms		$47,973			$20,231			$29,172			$1,454			$28,995			$1,619			$25,650
	Food, beverage and other		20,947			9,580			11,546			234			11,432			482			8,988
	Management and other fees		—			3,109			—			3,329			—			3,022			—
	Other revenue from managed properties(2)		—			14,904			—			14,808			—			13,286			—

Total revenues			68,920			47,824			40,718			19,825			40,427			18,409			34,638

Operating expenses:
Departmental expenses
	Rooms		7,576			3,591			4,311			321			4,453			356			4,011
	Food, beverage and other		17,589			8,722			9,009			144			9,043			153			7,500
Other operating expenses:
	Selling, general and administrative		16,080			11,706			7,557			4,356			6,542			4,056			7,629
	Property operating costs		10,252			5,671			4,969			901			4,257			275			3,862
	Depreciation and amortization		15,327			8,045			8,090			602			8,414			531			8,764
	Other expenses from managed properties(2)		—			14,904			—			14,808			—			13,286			—

Total operating expenses			66,824			52,639			33,936			21,132			32,709			18,657			31,766

Operating income (loss)			2,096			(4,815	)		6,782			(1,307	)		7,718			(248	)		2,872
Interest expense			3,318			4,758			4,818			560			5,055			792			5,316
Income (loss) from continuing operations			(646	)		(6,807	)		2,116			(6,412	)		2,822			(588	)		(2,214	)
Net income (loss)			$(646	)		$(4,543	)		$2,116			$(6,755	)		$2,822			$(1,177	)		$(2,214	)
Pro forma basic loss per share(3)			$(0.02	)
Pro forma diluted loss per share(3)			$(0.02	)
Pro forma weighted average common shares outstanding — basic and diluted			30,262,308
Cash Flows Data:
Cash flows from:
	Operating activities					$8,126			$10,866			$376			$11,360			$5,580			$9,285
	Investing activities					$(64,280	)		$(4,753	)		$(46,276	)		$(5,323	)		$(9,166	)		$(39,189	)
	Financing activities					$54,854			$(6,392	)		$49,797			$(7,155	)		$2,822			$31,131
Balance Sheet Data (end of period):
Total assets						$173,494			$90,365			$106,751			$93,638			$54,191			$97,314
Total long-term debt						$105,841			$77,828			$42,764			$78,050			$14,643			$76,360
Long-term debt secured by assets held for sale						$14,220						$31,564						$34,193
Non-GAAP Financial Data:
EBITDA(4)			$17,423			$12,439			$14,872			$334			$16,132			$6,287			$11,636
Operating Data:
Total resorts open (end of period)			4
Total rooms (end of period)			1,142
Occupancy			64.1	%
Average daily rate			$210.07
Revenue per available room			$134.67
Total revenue per occupied room			$301.79



		Nine Months Ended September 30,


		2004

											2003
		Consolidated
		Pro Forma			Predecessor(1)			Dells/Sandusky			Predecessor(1)			Dells/Sandusky


		(dollars in thousands, except per share amounts and operating data)
Statement of Operations Data:
Revenues:
	Rooms		$49,595			$27,137			$23,702			$14,869			$23,682
	Food, beverage and other		22,063			12,979			9,239			6,931			9,166
	Management and other fees		—			2,497			—			2,515			—
	Other revenue from managed properties(2)		—			11,040			—			10,707			—

Total revenues			71,658			53,653			32,941			35,022			32,848

Operating expenses:
Departmental expenses
	Rooms		7,190			4,134			3,342			2,392			3,336
	Food, beverage and other		17,763			10,579			7,335			5,862			6,943
Other operating expenses:
	Selling, general and administrative		18,537			15,014			6,182			8,131			5,490
	Property operating costs		9,746			6,145			3,939			4,223			3,636
	Depreciation and amortization		15,105			9,490			5,552			4,675			5,752
	Other expenses from managed properties(2)		—			11,040			—			10,707			—

Total operating expenses			68,341			56,402			26,350			35,990			25,157

Operating income (loss)			3,317			(2,749	)		6,591			(968	)		7,691
Interest expense			4,265			4,755			3,529			2,635			3,614
Income (loss) from continuing operations			(465	)		(6,825	)		3,167			(784	)		4,189
Net income (loss)			$(465	)		$(4,961	)		$3,167			$1,177			$4,189
Pro forma basic loss per share(3)			$(0.02	)
Pro forma diluted loss per share(3)			$(0.02	)
Pro forma weighted average common shares outstanding— basic and diluted			30,262,308
Cash Flows Data:
Cash flows from:
	Operating activities					$(1,727	)		$6,549			$7,973			$9,276
	Investing activities					$(39,809	)		$(658	)		$(31,360	)		$(2,880	)
	Financing activities					$40,447			$(5,968	)		$22,102			$(6,493	)
Balance Sheet Data (end of period):
Total assets			$539,101			$207,963			$86,000
Total long-term debt			$123,055			$138,877			$76,035
Non-GAAP Financial Data:
EBITDA(4)			$18,422			$9,738			$12,143			$12,113			$13,443
Operating Data:
Total resorts open (end of period)			5
Total rooms (end of period)			1,325
Occupancy(5)			69.8	%
Average daily rate(5)			$213.20
Revenue per available room(5)			$148.82
Total revenue per occupied room(5)			$302.29


(1)		Includes the operations of our Traverse City, Kansas City and Sheboygan resorts that opened in March 2003, May 2003 and June 2004, respectively.

(2)		Reflects reimbursement of payroll, benefits and costs related to the operations of properties managed by Predecessor.

(3)		Pro forma basic and diluted loss per share are computed assuming the initial public offering was consummated as of the first day of the period presented and equals pro forma net loss divided by the number of shares of our common stock outstanding after the initial public offering.


(4)		EBITDA is a supplemental non-GAAP financial measure. EBITDA is commonly defined as net income plus (a) interest expense, (b) income taxes and (c) depreciation and amortization.

		We believe EBITDA is useful to an investor in evaluating our operating performance because:

		• a significant portion of our assets consists of property and equipment that are depreciated over their remaining useful lives in accordance with GAAP. Because depreciation and amortization are non-cash items, we believe that presentation of EBITDA is a useful measure of our operating performance;

		• it is widely used in the hospitality and entertainment industries to measure operating performance without regard to items such as minority interests and gain on sale of real estate; and

		• we believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the impact of items directly resulting from our asset base, primarily depreciation and amortization, from our operating results.

		Our management uses EBITDA:

		• as a measurement of operating performance because it assists us in comparing our operating performance on a consistent basis as it removes the impact of items directly resulting from our asset base, primarily depreciation and amortization and non-recurring or unusual items, from our operating results;

		• for planning purposes, including the preparation of our annual operating budget;

		• as a valuation measure for evaluating our operating performance and our capacity to incur and service debt, fund capital expenditures and expand our business; and

		• as one measure in determining the value of other acquisitions and dispositions.

		The covenants in our revolving credit facility require us to meet financial tests based upon EBITDA. Our revolving credit facility has customary financial and operating debt compliance covenants, such as:

		• a maximum amount of indebtedness we may incur under the facility at an advance rate of 3.75 multiplied by the combined net operating income (adjusted for non-recurring items, unusual items, infrequent items and asset impairment charges) of the two resorts securing the facility;

		• a maximum level of the amount of our total debt equal to 5.75 times our total EBITDA (adjusted for non-recurring items, unusual items, infrequent items, non-cash employee compensation expense and asset impairment charges);

		• a minimum interest coverage ratio, representing our total EBITDA (adjusted for non-recurring items, unusual items, infrequent items, non-cash employee compensation expense and asset impairment charges) divided by our total interest expense, of 2.0;

		• a minimum fixed charge coverage ratio, representing our total EBITDA (adjusted for non-recurring items, unusual items, infrequent items, non-cash employee compensation expense and asset impairment charges) divided by our total fixed charges, of 1.5; and

		• limitations on our ability to pay dividends.

		EBITDA as calculated by us is not necessarily comparable to similarly titled measures used by other companies. In addition, EBITDA (a) does not represent net income or cash flows from operations as defined by GAAP; (b) is not necessarily indicative of cash available to fund our cash flow needs; and (c) should not be considered as an alternative to net income, operating income, cash flows from operating activities or our other financial information as determined under GAAP.


		The tables shown below reconcile net loss to EBITDA for the periods presented (dollars in thousands).



		Consolidated Pro Forma

		Nine Months Ended			Year Ended
		September 30, 2004			December 31, 2003

Net (loss)		$	(465	)	$	(646	)
Adjustments:
	Interest expense, net		4,092			3,173
	Income tax expense (benefit)		(310	)		(431	)
	Depreciation and amortization		15,105			15,327

EBITDA		$	18,422		$	17,423



		Predecessor


		Nine Months Ended
		September 30,					Year Ended December 31,

		2004			2003		2003			2002			2001

Net income (loss)		$	(4,961	)	$	1,177	$	(4,543	)	$	(6,755	)	$	(1,177	)
Adjustments:
	Interest expense, net		5,130			4,205		6,542			2,920			3,468
	Income tax expense		—			—		—			—			—
	Depreciation and amortization		9,569			6,731		10,440			4,169			3,996

EBITDA		$	9,738		$	12,113	$	12,439		$	334		$	6,287



		Dells/Sandusky


		Nine Months Ended
		September 30,				Year Ended December 31,

		2004		2003		2003		2002		2001

Net income (loss)		$	3,167	$	4,189	$	2,116	$	2,822	$	(2,214	)
Adjustments:
	Interest expense, net		3,424		3,502		4,666		4,896		5,086
	Income tax expense		—		—		—		—		—
	Depreciation and amortization		5,552		5,752		8,090		8,414		8,764

EBITDA		$	12,143	$	13,443	$	14,872	$	16,132	$	11,636


(5)		Includes only the results for our four resorts that were open during the entire period.

(6)		As restated—see Note 11 to Predecessor’s combined financial statements.

Investment in our common stock involves risks. You should carefully consider the following risk factors in addition to other information contained in this prospectus before purchasing the common stock we are offering. The occurrence of any of the following risks might cause you to lose all or part of your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section entitled “Forward-Looking Statements.”

We may not be able to develop new resorts or further develop existing resorts on a timely or cost efficient basis, which would adversely affect our growth strategy.

As part of our growth strategy, we intend to develop additional resorts and to further expand our existing resorts. Development involves substantial risks, including the following risks:


	•	development costs may exceed budgeted or contracted amounts;

	•	delays in completion of construction;

	•	failure to obtain all necessary zoning, land use, occupancy, construction, operating and other required governmental permits and authorizations;

	•	changes in real estate, zoning, land use, environmental and tax laws;

	•	unavailability of financing on favorable terms;

	•	failure of developed properties to achieve desired revenue or profitability levels once opened;

	•	competition for suitable development sites from competitors that may have greater financial resources or risk tolerance than we do; and

	•	the incurrence of substantial costs in the event a development project must be abandoned prior to completion.

In particular, resort construction projects entail significant risks, including shortages of design and construction expertise, materials or skilled labor, unforeseen engineering, environmental or geological problems, work stoppages, weather interference, floods and unanticipated cost increases. There are also a limited number of suppliers and manufacturers of the equipment we use in our indoor waterparks. We may not be able to successfully manage our development to minimize these risks, and there can be no assurance that present or future developments will perform in accordance with our previous developments or our expectations.

Our resorts compete with other forms of family vacation travel, including theme, water and amusement parks and other recreational activities. Our business is also subject to factors that affect the recreation and leisure and resort industries generally, such as general economic conditions and changes in consumer spending habits. We believe the principal competitive factors of a family entertainment resort include location, room rates, name recognition, reputation, the uniqueness and perceived quality of the attractions and amenities, the atmosphere and cleanliness of the attractions and amenities, the quality of the lodging accommodations, the quality of the food and beverage service, convenience, service levels and reservation systems.

We anticipate that competition within some of our markets will increase in the foreseeable future. A number of other resort operators are developing family entertainment resorts with indoor waterparks that will compete with some or all of our resorts. In particular, one of our current competitors is constructing a resort in the Sandusky market. We compete for guests and for new development sites with certain of these entities that

We may not be able to manage our expected growth, which could adversely affect our operating results.

Since 1999, we have experienced substantial growth as we have grown from operating one resort to currently owning and operating five resorts with two additional owned resorts scheduled to open in 2005 and a licensed resort that we will manage scheduled to open in 2006. We intend to continue to develop additional resorts and manage additional licensed resorts owned by third parties. Our anticipated growth could place a strain on our management, employees and operations. Our growth has increased our operating complexity and the level of responsibility for new and existing management. Our ability to compete effectively and to manage our recent and future growth effectively will depend on our ability to implement and improve financial and management information systems on a timely basis and to effect changes in our business, such as implementing internal controls to handle the increased size of our operations and hiring, training, developing and managing an increasing number of experienced management-level and other employees. Unexpected difficulties during expansion, the failure to attract and retain qualified employees or our inability to respond effectively to recent growth or plan for future expansion, could adversely affect our results of operations.

Accidents or injuries in our resorts, particularly in our waterparks, may subject us to liability, and accidents or injuries at our resorts or at competing resorts with waterparks could adversely affect our safety reputation and attendance, which would harm our business, financial condition and results of operations.

There are inherent risks of accidents or injuries at family entertainment resorts, including accidents or injuries at waterparks, particularly for small children if their parents do not provide appropriate supervision. Despite our emphasis on safety, the lifeguards in our indoor waterparks and our other resort staff cannot prevent every accident or injury. Potential waterpark accidents and injuries include falls, cuts or other abrasions, sickness from contaminated water, injuries resulting from equipment malfunctions and drownings. One or more accidents or injuries at any of our waterparks or at other waterparks could reduce attendance at our resorts, adversely affect our safety reputation among our potential customers, decrease our overall occupancy rates and increase our costs by requiring us to take additional measures to make our safety precautions even more visible and effective.

If accidents or injuries occur at any of our resorts, we may be held liable for costs related to the injuries. We maintain insurance of the type and in the amounts that we believe are commercially reasonable and that are available to businesses in our industry, but there can be no assurance that our liability insurance will be adequate or available at all times and in all circumstances to cover any liability for these costs. Our business, financial condition and results of operations would be adversely affected to the extent claims and associated expenses resulting from accidents or injuries exceed our insurance recoveries.

We and our predecessor entities have a history of losses and we may not be able to achieve or sustain profitability.

Our predecessor entities incurred net losses in the nine months ended September 30, 2004 and in each of the three years ended December 31, 2003, 2002 and 2001. In addition, on a pro forma basis, we incurred a net loss for the year ended December 31, 2003 and for the nine months ended September 30, 2004. We cannot guarantee that we will become profitable. Given the increasing competition in our industry and capital intensive

Our business is dependent upon family vacation patterns, which may cause fluctuations in our revenues.

Since most families with small children choose to take vacations during school breaks and on weekends, our occupancy is highest on the weekends and during months with prolonged school breaks, such as the summer months and spring break weeks in March and April. Our occupancy is lowest during May and September as children return to school following these prolonged breaks. As a result of these family vacation patterns, our revenues may fluctuate. We may be required to enter into short-term borrowings in slower periods in order to offset such fluctuations in revenues and to fund our anticipated obligations. In addition, adverse events occurring during our peak occupancy periods would have an increased impact on our results of operations.

We may not be able to attract a significant number of customers from our key target markets, which would adversely affect our business, financial condition and results of operations.

Our strategy emphasizes attracting and retaining customers from the local, or drive-to, markets within a convenient driving distance from each of our resorts. Any resorts we develop in the future are similarly likely to be dependent primarily on the markets in the immediate vicinity of such resorts. There can be no assurance that we will be able to continue to attract a sufficient number of customers in our local markets to make our resort operations profitable. If we fail to do so, our business, financial condition and results of operations would be adversely affected.

Because we concentrate in a single industry segment, we may be adversely affected by a downturn in that industry segment.

Our assets and operations are concentrated in a single industry segment—family entertainment resorts. Our current strategy is to expand the number of our resorts and improve our existing resorts. Therefore, a downturn in the entertainment, travel or vacation industries, in general, and the family entertainment resort segment, in particular, could have an adverse effect on our business and financial condition.

Changes in consumer spending habits may affect our growth, financial condition and results of operations.

The success of our operations depends to a significant extent upon a number of factors relating to discretionary consumer spending, including economic conditions affecting disposable consumer income such as employment, business conditions, interest rates and taxation. There can be no assurance that consumer spending will not be adversely affected by economic conditions, thereby impacting our growth, financial condition and results of operations.

Increases in operating costs and other expense items could reduce our operating margins and adversely affect our growth, financial condition and results of operations.

Increases in operating costs due to inflation and other factors may not be directly offset by increased room and other revenue. Our most significant operating costs are our labor, energy, insurance and property taxes. Many, and in some cases all, of the factors affecting these costs are beyond our control. These costs represented approximately 38% and 36% of our overall costs for the year ended December 31, 2003 and the nine months ended September 30, 2004, respectively.

Labor is our primary resort-level operating expense. As of December 31, 2004, we employed approximately 1,600 hourly-wage and salaried employees in our resorts. If we face labor shortages or increased labor costs because of increased competition for employees, higher employee turnover rates or increases in the federal

Energy costs also account for a significant portion of our total resort-level operating expenses. The price of energy is volatile, and shortages sometimes occur. Significant increases in the cost of energy, or shortages of energy, could interrupt or curtail our operations and lower our operating margins.

The costs for maintaining adequate insurance coverage fluctuate and are generally beyond our control. If insurance rates increase and we are not able to pass along those increased costs to our customers through higher room rates and amenity costs, our operating margins could suffer.

Each of our resorts is subject to real and personal property taxes. The real and personal property taxes on our resorts may increase or decrease as tax rates change and as our resorts are assessed or reassessed by taxing authorities. If property taxes increase and we are unable to pass these increased costs along to our customers through higher room rates and amenity costs, our financial condition and results of operations may be adversely affected.

The covenants in our revolving credit facility impose significant restrictions on us.

The terms of our revolving credit facility impose significant operating and financial restrictions on us and our subsidiaries and require us to meet certain financial tests. These restrictions could also have a negative impact on our business, financial condition and results of operations by significantly limiting or prohibiting us from engaging in certain transactions, including:


	•	incurring or guaranteeing additional indebtedness;

	•	paying dividends or making distributions or certain other restricted payments;

	•	making capital expenditures and other investments;

	•	creating liens on our assets;

	•	issuing or selling capital stock of our subsidiaries;

	•	transferring or selling assets currently held by us;

	•	repurchasing stock and certain indebtedness;

	•	engaging in transactions with affiliates;

	•	entering into any agreements that restrict dividends from our subsidiaries; and

	•	engaging in mergers or consolidations.

The failure to comply with any of these covenants could cause a default under our other debt agreements. Furthermore, our revolving credit facility contains certain financial covenants, including establishing a maximum leverage ratio and requiring us to maintain a minimum interest coverage ratio, which, if not maintained by us, would cause us to be in default under the revolving credit facility. Any of these defaults, if not waived, could result in the acceleration of all of our debt, in which case the debt would become immediately due and payable. If this occurs, we may not be able to repay our debt or borrow sufficient funds to refinance it.

We may not be able to obtain additional financing on favorable terms, if at all.

We expect that we will require additional financing over time, the amount of which will depend on a number of factors, including the number of resorts we construct, additions to our current resorts and the cash flow generated by our resorts. The terms of any additional financing we may be able to procure are unknown at this time. Our access to third-party sources of capital depends, in part, on:


	•	general market conditions;

	•	the market’s perception of our growth potential;

	•	our then-current debt levels;

	•	our then-current and expected future earnings;

	•	our cash flow; and

	•	the market price per share of our common stock.

Any future debt financing or issuances of preferred stock that we may make will be senior to the rights of holders of our common stock, and any future issuances of common stock will result in the dilution of the then-existing stockholders’ proportionate equity interest.

Uninsured losses or losses in excess of our insurance coverage could adversely affect our financial condition and our cash flow, and there are a limited number of insurers that will underwrite coverage for resorts with indoor waterparks.

We maintain comprehensive liability, fire, flood (where appropriate) and extended coverage insurance with respect to our resorts with policy specifications, limits and deductibles that we believe are commercially reasonable for our operations and are available to businesses in our industry. Certain types of losses, however, may be either uninsurable or not economically insurable, such as losses due to earthquakes, riots, acts of war or terrorism. Should an uninsured loss occur, we could lose both our investment in, and anticipated profits and cash flow from, a resort. If any such loss is insured, we may be required to pay a significant deductible on any claim for recovery of such a loss prior to our insurer being obligated to reimburse us for the loss or the amount of the loss may exceed our coverage for the loss. In addition, we may not be able to obtain insurance in the future at acceptable rates, or at all, and insurance may not be available to us on favorable terms or at all, including insurance for the construction and development of our resorts, especially since there are a limited number of insurance companies that underwrite insurance for indoor waterparks.

We will be required to make certain capital expenditures to maintain the quality of our resorts, which could adversely affect our financial condition and results of operations.

Our resorts have an ongoing need for renovations and other capital improvements, including periodic replacement of furniture, fixtures and equipment. The cost of such capital improvements could have an adverse effect on our financial condition and results of operations. Such renovations involve certain risks, including the possibility of environmental problems, construction cost overruns and delays, the possibility that we will not have available cash to fund renovations or that financing for renovations will not be available on favorable terms, if at all, uncertainties as to market demand or deterioration in market demand after commencement of renovation and the emergence of unanticipated competition from other entities. If we are unable to meet our capital expenditure needs, we may not be able to maintain the quality of our resorts.

We may not be able to adequately protect our intellectual property, which could harm the value of our brands and adversely affect our business.

The success of our resorts depends in part on our brands, logos and branded merchandise. We rely on a combination of trademarks, copyrights, service marks, trade secrets and similar intellectual property rights to protect our brands, logos, branded merchandise and other intellectual property. The success of our growth strategy depends on our continued ability to use our existing trademarks and service marks in order to increase brand awareness and further develop our brand in both domestic and international markets. We also use our trademarks and other intellectual property on the Internet. If our efforts to protect our intellectual property are not adequate, or if any third party misappropriates or infringes on our intellectual property, either in print or on the Internet, the value of our brands may be harmed, which could have a material adverse effect on our business, including the failure of our brands, logos and branded merchandise to achieve and maintain market acceptance.

We have licensed our Great Wolf Lodge brand and intend to further license the brand in international markets. While we try to ensure that the quality of our brand is maintained by our current licensee, and will be maintained by any future licensees, we cannot assure you that these licensees will not take actions that adversely affect the value of our intellectual property or reputation.

We have registered certain trademarks and have other trademark registrations pending in the United States and foreign jurisdictions. There is no guarantee that our trademark applications will be granted. In addition, the trademarks that we currently use have not been registered in all of the countries in which we do, or intend to do, business and may never be registered in all of these countries. We cannot assure you that we will be able to adequately protect our trademarks or that our use of these trademarks will not result in liability for trademark infringement, trademark dilution or unfair competition.

We cannot assure you that all of the steps we have taken to protect our intellectual property in the United States and foreign countries will be adequate. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States.

Our operations may be adversely affected by extreme weather conditions and the impact of disasters.

We currently operate, and in the future intend to operate, our resorts in a number of different markets, each of which is subject to local weather patterns and their effects on our resorts, especially our guests’ ability to travel to our resorts. Extreme weather conditions can from time to time have an adverse impact upon individual resorts or particular regions. Our resorts are also vulnerable to the effects of destructive forces, such as fire, storms, high winds and flooding and any other occurrence that could affect the supply of water or electricity to our resorts. Although our resorts are insured against property damage, damages resulting from acts of God or otherwise may exceed the limits of our insurance coverage or be outside the scope of that coverage.

Compliance with the Americans with Disabilities Act and other governmental regulations and changes in governmental rules and regulations may adversely affect our financial condition and results of operations.

Under the Americans with Disabilities Act of 1990, or the ADA, all public accommodations are required to meet certain federal requirements related to access and use by disabled persons. While we believe that our resorts are substantially in compliance with these requirements, we have not conducted an audit or investigation of all of our resorts to determine our compliance. A determination that we are not in compliance with the ADA could result in the imposition of fines or an award of damages to private litigants. We cannot predict the ultimate cost of compliance with the ADA.

The resort industry is also subject to numerous federal, state and local governmental regulations including those related to building and zoning requirements, and we are subject to laws governing our relationship with our employees, including minimum wage requirements, overtime, working conditions and work permit

The illiquidity of real estate may make it difficult for us to dispose of one or more of our resorts.

We may from time to time decide to dispose of one or more of our real estate assets. Because real estate holdings generally, and family entertainment resorts like ours in particular, are relatively illiquid, we may not be able to dispose of one or more real estate assets on a timely basis or at a favorable price. The illiquidity of our real estate assets could mean that we continue to operate a facility that management has identified for disposition. Failure to dispose of a real estate asset in a timely fashion, or at all, could adversely affect our business, financial condition and results of operations.

We face possible liability for environmental cleanup costs and damages for contamination related to our properties, which could adversely affect our business, financial condition and results of operations.

Our operations and properties are subject to federal, state and local laws and regulations relating to the protection of the environment, natural resources and worker health and safety, including laws and regulations governing and creating liability relating to the management, storage and disposal of hazardous substances and other regulated materials. Our properties are also subject to various environmental laws and regulations that govern certain aspects of our on-going operations. These laws and regulations control such things as the nature and volume of our wastewater discharges, quality of our water supply and our waste management practices. The costs of complying with these requirements, as they now exist or may be altered in the future, could adversely affect our financial condition and results of operations.

Because we own and operate real property, various federal, state and local laws may impose liability on us for the costs of removing or remediating various hazardous substances, including substances that may be currently unknown to us, that may have been released on or in our property or disposed by us at third-party locations. The principal federal laws relating to environmental contamination and associated liabilities that could affect us are the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act; state and local governments have also adopted separate but similar environmental laws and regulations that vary from state to state and locality to locality. These laws may impose liability jointly and severally, without regard to fault and whether or not we knew of or caused the release. The presence of hazardous substances on a property or the failure to meet environmental regulatory requirements may materially adversely affect our ability to use or sell the property, or to use the property as collateral for borrowing, and may cause us to incur substantial remediation or compliance costs. In addition, if hazardous substances are located on or released from one of our properties, we could incur substantial liabilities through a private party personal injury claim, a claim by an adjacent property owner for property damage or a claim by a governmental entity for other damages, such as natural resource damages. This liability may be imposed on us under environmental laws or common-law principles.

Some of our resort properties may have contained, or are adjacent to or near other properties that have contained or currently contain underground storage tanks for the storage of petroleum products or other hazardous or toxic substances. If hazardous or toxic substances were released from these tanks, we could incur significant costs or, with respect to tanks on our property, be liable to third parties with respect to the releases.

On occasion, we may elect to develop properties that have had a history of industrial activities and/or historical environmental contamination. Where such opportunities arise, we engage third-party experts to evaluate the extent of contamination, the scope of any needed environmental clean-up work, and available measures (such as creation of barriers over residual contamination and deed restrictions prohibiting groundwater use or disturbance of the soil) for ensuring that planned development and future property uses will not present unacceptable human health or environmental risks or exposure to liabilities. If those environmental assessments indicate that the development opportunities are acceptable, we also work with appropriate governmental agencies and obtain their approvals of planned site clean-up, development activities and the proposed future property uses. We have followed that process in connection with the development of our Blue Harbor Resort in Sheboygan, Wisconsin where the City of Sheboygan has arranged for environmental clean-up work and ongoing groundwater monitoring and we have agreed to the use of a barrier preventing contact with residual contamination and implementation of a deed restriction limiting site activities. To our knowledge, our work at our Sheboygan resort has been conducted in accordance with requirements imposed by the Wisconsin Department of Natural Resources. Based on these efforts, we are not aware of any environmental liability or compliance concerns at our Sheboygan resort that we believe would materially adversely affect our financial conditions or results of operations. It is possible, however, that our efforts have not identified all environmental conditions at the property or that environmental conditions and liabilities associated with the property could change in the future.

Future acquisitions of properties subject to environmental requirements or affected by environmental contamination could require us to incur substantial costs relating to such matters. In addition, environmental laws, regulations, wetlands, endangered species and other land use and natural resource issues affecting either currently owned properties or sites identified as possible future acquisitions may increase costs associated with future site development and construction activities or business or expansion opportunities, prevent, delay, alter or interfere with such plans or otherwise adversely affect such plans.

Regulation of the marketing and sale of condominiums, including a prior offer of condominiums at our Blue Harbor Resort, could adversely affect our business.

Our marketing and sales of condominium units are subject to extensive regulation by the federal government and the states in which our condominiums are marketed and sold. On a federal level, the Federal Trade Commission Act prohibits unfair or deceptive acts or competition in interstate commerce. Other federal legislation to which we are or may be subject includes the Interstate Land Sales Full Disclosure Act, the Real Estate Settlement Practices Act and the Fair Housing Act. In addition, many states have adopted specific laws and regulations regarding the sale of condominiums. For example, certain state laws grant the purchaser the right to cancel a contract of purchase within a specified period following the earlier of the date the contract was signed or the date the purchaser has received the last of the documents required to be provided by the seller. No assurance can be given that the cost of qualifying under condominium regulations in all jurisdictions in which we desire to conduct sales will not be significant. The failure to comply with such laws or regulations could adversely affect our business, financial condition and results of operations.

There can be no assurance that prior or future sales of our condominium units will not be considered offers or sales of “securities” under federal law or the state law in the states where we desire to, or do, conduct sales or in which our properties are located. If such interests were considered to be securities, we would be required to comply with applicable state and federal securities laws, including laws pertaining to registration or qualification of securities, licensing of salespeople and other matters. There can be no assurance that we will be able to comply with the applicable state and federal securities requirements, and if the offers or sales of our condominium units are deemed to be offers or sales of securities, such a determination may create liabilities or contingencies that could have an adverse effect on our operations, including possible rescission rights relating to the units that have been sold, which, if exercised, could result in losses and would adversely affect our business, financial condition and results of operations.

In particular, it is possible that the prior offer of condominiums at our Sheboygan resort by Blue Harbor Resort Condominium, LLC, a former subsidiary of Great Lakes that we refer to as Condo LLC, may not have been in compliance with federal and state securities laws. Prior to the initial public offering and the completion of the formation transactions, interests in Condo LLC held by Great Lakes were distributed to Great Lakes’ shareholders. We did not acquire Condo LLC as a part of the formation transactions. Although Condo LLC has taken steps to correct any potential securities laws issues in connection with these offers, we cannot assure you that we would not be held liable to some extent for the offers made by Condo LLC or that the indemnification obligations of the Great Lakes’ principals to us would be sufficient to cover any such liabilities.

Certain of our existing stockholders exercise considerable influence over the company.

As of the date of this prospectus, Messrs. Lund, Neviaser, Sather, Stark and Vaccaro and Ms. Schaefer, the founding shareholders of Great Lakes, beneficially own approximately 25.1% of the outstanding shares of our common stock and, together with our other executive officers and directors as a group, beneficially own approximately 27.1% of the outstanding shares of our common stock. By reason of such holdings, these stockholders acting as a group will be able to exercise significant influence over our affairs and policies, including the election of our board of directors and matters submitted to a vote of our stockholders such as mergers and significant asset sales, and their interests might not be consistent with the interests of other stockholders.

There were no arm’s-length negotiations with respect to the terms of the formation transactions.

There were no arm’s-length negotiations with the owners of our predecessor companies with respect to terms of the formation transactions. The agreements entered into with the owners of our predecessor companies may contain provisions that are less favorable to us than those found in similar agreements negotiated at arm’s length. In particular, the founding shareholders of our predecessor companies had significant control over the representations and warranties made to us in the formation transaction agreements, as well as the representations and warranties and indemnity cap in their indemnity agreements. In addition, the founding shareholders, who had significant influence in structuring the formation transactions, had pre-existing ownership interests in resorts and received substantial economic benefits as a result of the formation transactions. Further, in the course of structuring the formation transactions, such founding shareholders had the ability to influence the type and level of benefits that they and our other executive officers will receive from us.

We may have assumed unknown liabilities in connection with the formation transactions.

As part of the formation transactions, we acquired our predecessor companies subject to existing liabilities, some of which may have been unknown at the time of the closing thereof. Unknown liabilities might include liabilities for cleanup or remediation of undisclosed environmental conditions, claims of vendors or other persons dealing with the entities prior to the closing of the formation transactions (that had not been asserted or threatened prior thereto), tax liabilities and accrued but unpaid liabilities incurred in the ordinary course of

With respect to each shareholder, the maximum indemnification obligation under these agreements will not exceed 35% of the value of the shares of our common stock received by that shareholder in the formation transactions based on the initial public offering price of $17.00 per share. The maximum amount of the indemnification obligations under these agreements equals approximately $45.2 million in the aggregate. To the extent required, these shareholders may fulfill the indemnity obligations under the agreements solely through delivery of shares of common stock that they own, valued at the time of delivery, or an equivalent amount of cash. However, if any of these shareholders chooses to fulfill the indemnity obligation under the agreement through the delivery of shares, the maximum number of shares such shareholder will be obligated to deliver is 35% of the number of shares such shareholder received in the formation transactions. As a result, there may be a significant shortfall in relation to the actual costs incurred from the indemnifiable event for which we will have no recourse against these shareholders. Three of the founding shareholders received personal loans that are secured by a pledge of all the shares of our common stock received by each such shareholder in the formation transactions. Accordingly, as these shares may not be available to the founding shareholders, the founding shareholders may be required to satisfy any indemnification obligations under these agreements in cash. There is no assurance that the founding shareholders will have adequate cash resources to satisfy their indemnification obligations under these agreements if necessary.

We may issue partnership interests in the future that may be dilutive to, and may have preferential rights over, our common stockholders.

We have formed a wholly owned operating partnership to serve as the parent entity of each of the surviving resort-owning entities. We are the limited partner of the partnership and the sole general partner of the partnership is a new wholly owned subsidiary that we have formed for that purpose. We formed the operating partnership to provide flexibility for future transactions as we execute our growth strategy. We believe that the ability to issue partnership units will enable us to acquire assets from sellers seeking certain tax treatment. While we do not anticipate issuing any interests in the operating partnership in the foreseeable future, we may issue such interests in the future. These additional interests may include preferred limited partnership units. Any partnership interests that we issue may be entitled to distributions of available cash that might otherwise be allocated to the execution of our business plan or generally available for future dividends, if any. In addition, any partnership interests may be convertible into our common stock, thus having a dilutive impact to our common stockholders, and may have voting or other preferential rights relative to those of our common stockholders.

Our stock price may be volatile, and you could lose all or part of your investment.

On December 20, 2004, we completed the initial public offering. Trading markets shortly after an initial public offering have been extremely volatile. The following factors could cause the price of our common stock in the public market to fluctuate significantly:


	•	variations in our quarterly operating results;

	•	changes in market valuations of companies in the resort industry, generally, and the family entertainment resort segment, specifically;

	•	fluctuations in stock market prices and volumes;


	•	issuances of common stock or other securities in the future;

	•	the addition or departure of key personnel; and

	•	announcements by us or our competitors of new properties, acquisitions or joint ventures.

Volatility in the market price of our common stock may prevent investors from being able to sell their common stock at or above our initial public offering price or the price an investor pays for our common stock in this offering. In the past, class action litigation has often been brought against companies following periods of volatility in the market price of those companies’ common stock. We may become involved in this type of litigation in the future. Litigation is often expensive and diverts management’s attention and company resources and could have a material adverse effect on our business, financial condition and operating results.

The sale of a substantial number of shares of our common stock may cause the market price of our common stock to decline.

As of the date of this prospectus, we have outstanding 30,262,308 shares of common stock. Of these shares, the 16,100,000 shares sold in the initial public offering are freely tradable. The 14,032,896 shares issued in connection with our formation transactions and to which the registration statement of which this prospectus constitutes a part relates are subject to lock-up provisions in our bylaws that prohibit the sale of any shares for a period of 180 days after the date of the initial public offering without the prior written consent of our board of directors or chief executive officer. Subject to certain restrictions, after the end of the lock-up period and following the effectiveness of this registration statement, all of these shares are freely tradable. If our stockholders sell substantial amounts of shares of common stock in the public market, including the shares issued in connection with our formation transactions registered hereby, or upon the exercise of outstanding options, or if the market perceives that these sales could occur, the market price of our common stock could decline. These sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate, or to use equity as consideration for future acquisitions.

Provisions in our certificate of incorporation, bylaws, employment agreements and Delaware law have anti-takeover effects that could prevent a change in control that could be beneficial to our stockholders, which could depress the market price of our common stock.

Our certificate of incorporation, bylaws, employment agreements and Delaware corporate law contain provisions that could delay, defer, increase the costs of or prevent a change in control of us or our management that could be beneficial to our stockholders. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors and take other corporate actions. As a result, these provisions could limit the price that investors are willing to pay in the future for shares of our common stock. These provisions might also discourage a potential acquisition proposal or tender offer, even if the acquisition proposal or tender offer is at a price above the then current market price for our common stock. These provisions:


	•	authorize our board of directors to issue “blank check” preferred stock and determine the powers, preferences and privileges of those shares without prior stockholder approval;

	•	prohibit the right of our stockholders to act by written consent;

	•	limit the calling of special meetings of stockholders;

	•	impose a requirement that holders of 50% of the outstanding shares of common stock are required to amend the provisions relating to actions by written consent of stockholders and the limitations of calling special meetings; and


	•	provide for payments to certain of our executive officers upon termination of employment within certain time periods before or after a change of control.

Certain information included in this prospectus contains, and other materials filed or to be filed by us with the Securities and Exchange Commission, or the SEC, contain or will contain, forward-looking statements. All statements, other than statements of historical facts, including, among others, statements regarding our future financial position, business strategy, projected levels of growth, projected costs and projected financing needs, are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Great Wolf Resorts, Inc. and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to our management that could cause actual results to differ materially from those in forward-looking statements include those set forth above under the section entitled “Risk Factors.”

We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. All written and oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by these cautionary statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time unless required by law.


	•	The management company contributed its hotel management and multifamily housing management and development assets, which were unrelated to the resort business, to two subsidiaries of the management company and then distributed the interests in such subsidiaries to the former shareholders of the management company.

	•	We sold an aggregate of 16,100,000 shares of our common stock in the initial public offering, and we used the net proceeds from the initial public offering to accomplish the steps listed below and also to (1) pay an aggregate of $98.1 million of the cash consideration in connection with the formation transactions; (2) repay certain indebtedness existing prior to the closing of the initial public offering and the formation transactions in the aggregate amount of approximately $76.0 million; and (3) fund $75.4 million of our future resort development costs.


	•	We effected, through GWR Operating Partnership, L.L.L.P., our wholly owned operating partnership, the acquisition of each resort-owning entity, sponsor entity, Sandusky Investor LLC and the management company.

	•	Pursuant to these acquisitions, members of the resort-owning entities, sponsor entities and Sandusky Investor LLC received cash, unregistered shares of our common stock or a combination of cash and unregistered shares of our common stock. Also, shareholders of the management company received unregistered shares of our common stock pursuant to the merger of the management company with and into Great Lakes Services, LLC, a wholly owned subsidiary of the operating partnership, which we refer to as Great Lakes Services.

	•	We issued an aggregate of 130,949 shares of unregistered common stock to holders of tenant in common interests in our Poconos and Williamsburg resorts that are convertible into our common stock.

	•	Concurrently with the consummation of the initial public offering and the formation transactions, we:


	•	repaid an aggregate of approximately $76.0 million of Great Lakes’ mortgage indebtedness on two of our resorts from the net proceeds of the initial public offering;

	•	refinanced existing mortgage indebtedness on two of our resorts with a total outstanding debt balance at September 30, 2004 of approximately $72.4 million; and

	•	entered into a $75.0 million revolving credit facility that is secured by two of our resorts. Based upon the financial and debt service ratios that are contained in the revolving credit facility, as of the date of this prospectus, approximately $55.0 million of the revolving credit facility is available. As of the date of this prospectus, we have not drawn any amounts under this facility. We expect to use the revolving credit facility to fund our future growth and resort development, to provide for working capital and for other corporate purposes.

	•	The former employees of the management company, other than those associated solely with the non-resort businesses, became employees of Great Lakes Services.

Messrs. Lund, Neviaser, Sather, Stark and Vaccaro and Ms. Schaefer, each of whom was a shareholder of the management company, entered into indemnity agreements with us pursuant to which they have made certain representations and warranties to us relating to the formation transactions and the status of the properties operated by the resort-owning entities. Pursuant to these indemnity agreements, these shareholders have agreed to indemnify us for a period of one year following the closing of the formation transactions if those representations and warranties are not accurate. These representations relate, among other things, to the following matters concerning Great Lakes:


	•	capital structure as of the time of the formation transactions;

	•	compliance with laws and possession of required authorizations;

	•	possession of all required consents and approvals;

	•	no breach of organizational documents or material agreements;

	•	no material tax dispute or claim;

	•	no payment of brokers’ or finders’ fees;

	•	no bankruptcy events;

	•	no material legal proceedings;

	•	reasonable insurance coverage for properties;


	•	liens and options and rights with respect to underlying properties;

	•	no labor disputes or unfair labor practices;

	•	ownership of real property and improvements thereto;

	•	no material environmental liabilities;

	•	no material defect in the condition of the properties;

	•	accuracy of financial statements;

	•	no material undisclosed liabilities, contracts or obligations;

	•	no damage or loss to its underlying properties in excess of $1 million; and

	•	ownership of intellectual property rights.

In addition, these shareholders have agreed to indemnify us for a period of one year against liabilities or obligations relating to claims asserted under federal or state securities laws arising out of the offer or sale of condominiums on or before the closing of the formation transactions by the management company or any affiliated entity of the management company. With respect to each shareholder, the maximum indemnification obligation under these agreements will not exceed 35% of the value of the number of shares of our common stock received by that shareholder in the formation transactions based on the initial public offering price of $17.00 per share. The maximum amount of the indemnification obligations under these agreements equals approximately $45.2 million in the aggregate. These shareholders may fulfill the indemnity obligations under the agreements solely through the delivery of shares of our common stock that they own, valued at the time of delivery, or with an equivalent amount of cash. However, if any of these shareholders chooses to fulfill the indemnity obligations under the agreement through the delivery of shares, the maximum number of shares such shareholder will be obligated to deliver is 35% of the number of shares such shareholder received in the formation transactions.

Immediately following the completion of the initial public offering, Messrs. Lund, Neviaser and Sather received personal loans from an affiliate of Citigroup Global Markets Inc. (which served as the lead underwriter in connection with the initial public offering). These loans are full-recourse and are secured by a pledge of all the shares of our common stock received by each in the formation transactions. While some of these shares may be released from the pledge over time, they may not be available as an alternative means to satisfy an indemnification obligation under the agreements.

In addition, GWR Operating Partnership, L.L.L.P. serves as the parent entity of each of the surviving resort-owning entities. In an effort to minimize our exposure to possible liability arising from our resort properties, we serve as the limited partner of the partnership and a wholly owned subsidiary, GWR OP General Partner, LLC, serves as the general partner of the partnership. We formed the operating partnership to provide flexibility for future transactions as we execute our growth strategy, in particular the flexibility to enter into transactions for the acquisition of property or assets where there may be tax or other advantages to the sellers of those properties or assets if we issue units in the operating partnership as consideration rather than shares of our common stock. We have not issued any interests in the operating partnership, other than interests issued to us and to GWR OP General Partner, LLC.

At the completion of the initial public offering and the formation transactions:


	•	We directly or indirectly own a fee simple interest in all of our resorts, except for a leasehold interest in our Sheboygan resort. We also are the licensor and manager of a Great Wolf Lodge resort in Niagara Falls, Ontario owned by Ripley’s that is currently under construction.


	•	Purchasers of our common stock in the initial public offering own approximately 53.2% of our outstanding common stock.

	•	We had incurred approximately $18.0 million of indebtedness in connection with our Williamsburg and Pocono Mountains resort developments between September 30, 2004 and the completion of the initial public offering, in addition to approximately $123.1 million of total pro forma indebtedness we had outstanding at September 30, 2004.

In connection with the formation transactions, the shareholders of the management company received material benefits, including:


	•	an aggregate of 8,087,151 unregistered shares of our common stock as consideration in the formation mergers; and

	•	the release of personal guarantees to repay approximately $167.1 million of indebtedness relating to the resort- owning entities. Approximately $76.0 million of this indebtedness was repaid with the proceeds of the initial public offering, approximately $72.4 million was refinanced and the remaining portion was assumed by us in connection with the formation transactions.

As of the date of this prospectus, the founding shareholders of Great Lakes beneficially own approximately 25.1% of the outstanding shares of our common stock.

The former shareholders of Great Lakes currently hold the following positions with us:

Prior to the formation transactions, these shareholders exercised managerial control over most of the resort-owning entities and the sponsor entities and had significant voting control over such entities.

In addition, pursuant to their current employment arrangements, three members of our management received approximately $2.3 million of bonus payments in the form of lump sum cash payments effective upon the completion of the initial public offering. Approximately $2.2 million of these bonus payments were made to members of management who have joined the company in the last year. These bonuses were offered to enable us to attract these executives and to incentivize them to successfully complete the initial public offering. Approximately $2.2 million of these bonus payments were deferred pursuant to our deferred compensation plan. Pursuant to elections by these members of management to have these bonus payments track the performance of our common stock, we contributed 129,412 shares of our common stock (based on the initial public offering price of $17.00 per share) to a trust that holds assets to pay obligations under our deferred compensation plan. These deferred bonuses will be deemed to be investments in shares of our common stock. As a result, the amount of cash ultimately paid from the deferred bonuses will increase and decrease as the price of our common stock increases and decreases.

Immediately following the completion of the initial public offering, loans in an aggregate amount equal to $11.5 million were made by an affiliate of Citigroup Global Markets Inc. (which served as lead underwriter in connection with the initial public offering) to certain founders of Great Lakes, including a loan of $6.5 million

to Mr. Neviaser, a loan of $3.5 million to Mr. Lund, and a loan of $1.5 million to Mr. Sather. These loans are two-year revolving commitments with principal due at maturity. However, Mr. Neviaser’s and Mr. Lund’s loans are subject to mandatory partial prepayment on or before the date that is seven months after the closing of the loan facility if borrowings are over a specified amount. Interest, payable monthly, accrues under the loans at the prime interest rate. These loans are full-recourse to each borrower and are directly secured by a pledge of all of the shares of our common stock received by each borrower in the formation transactions. Because we do not intend to pay dividends on our common stock, these individuals entered into these loans for personal liquidity purposes. These purposes may include the repayment or refinancing of indebtedness previously incurred by these individuals in connection with their investments in Great Lakes, tax payment obligations and general working capital purposes since they no longer receive distributions that were paid on their Great Lakes investments.

All of the shares offered hereby are being offered by the selling stockholders. We will not receive any proceeds from the offering.

Our common stock trades on the Nasdaq National Market under the symbol “WOLF.” The following table sets forth the high and low sales price of our common stock on the Nasdaq National Market for the periods presented. Our common stock began trading on the Nasdaq National Market on December 15, 2004.

As of January 20, 2005, there were 508 record holders of our common stock. On January 20, 2005, the last reported sales price of our common stock on the Nasdaq National Market was $21.59.

We have never declared or paid any cash dividends on our capital stock, and we do not anticipate paying cash dividends in the foreseeable future. We are prohibited from paying cash dividends under covenants contained in the credit facility. We currently intend to retain our earnings, if any, for future growth. Future dividends on our common stock, if any, will be at the discretion of our board of directors and will depend on, among other things, our operations, capital requirements and surplus, general financial condition, contractual restrictions and such other factors as our board of directors may deem relevant.

The following table sets forth Predecessor’s historical and our pro forma short-term debt and capitalization as of September 30, 2004. Our pro forma short-term debt and capitalization assumes the completion of the formation transactions, the issuance of 16,100,000 shares of our common stock in the initial public offering at the public offering price of $17.00 per share and the application of the net proceeds therefrom to:


	•	pay an aggregate of $98.1 million of the cash consideration in connection with our formation transactions;

	•	repay certain indebtedness existing prior to the closing of the initial public offering and the formation transactions in the aggregate amount of approximately $76.0 million; and

	•	fund $75.4 million of our future resort development costs.

You should read the capitalization table together with the sections of this prospectus entitled “Use of Proceeds,” “Selected Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and the related notes included elsewhere in this prospectus.


	•	1,656,300 shares reserved for issuance upon exercise of options that were granted pursuant to our 2004 Incentive Stock Plan upon consummation of the initial public offering; and

	•	1,722,920 additional shares that are reserved for future issuance under our 2004 Incentive Stock Plan.

The following table sets forth selected financial and operating data on a historical basis for Great Lakes. Historical financial and other data related to Great Lakes consists of the following:


	•	combined historical financial information for (1) Great Lakes’ management business, including development of, ownership interests in, and management contracts with respect to, certain non-resort hotels and multifamily housing assets, (2) the entities that own our Traverse City, Kansas City and Sheboygan operating resorts and (3) the entities that own our Williamsburg and Pocono Mountains resorts that are under construction (the “Predecessor Historical Information”); and

	•	combined historical financial information for the entities that own our Wisconsin Dells and Sandusky resorts (the “Dells/Sandusky Historical Information”).

We have not presented historical information for Great Wolf Resorts, Inc. in this table because we have not had any operations since our formation and because we believe that a discussion of the results of Great Wolf Resorts, Inc. would not be meaningful. We have included audited consolidated historical financial statements for Great Wolf Resorts, Inc. elsewhere in this prospectus.

The selected Predecessor Historical Information as of September 30, 2004 and December 31, 2003 and 2002 and for the nine months ended September 30, 2004 and for each of the three years in the period ended December 31, 2003 are derived from, and are qualified in their entirety by, the Great Lakes Predecessor financial statements audited by Deloitte & Touche LLP, an independent registered public accounting firm whose report with respect thereto is included elsewhere in this prospectus. The selected Dells/Sandusky Historical Information as of December 31, 2003 and 2002 and for each of the three years in the period ended December 31, 2003 are derived from, and are qualified in their entirety by, the Dells/Sandusky financial statements audited by Rubin, Brown, Gornstein & Co. LLP, an independent registered public accounting firm, whose report with respect thereto is included elsewhere in this prospectus. The selected Predecessor Historical financial and operating data as of December 31, 2001, for the nine months ended September 30, 2003 and for each of the two years in the period ended December 31, 2000 and Dells/Sandusky financial and operating data as of December 31, 2001, 2000 and 1999, for each of the two years in the period ended December 31, 2000, as of September 30, 2004 and for the nine months ended September 30, 2004 and 2003 are derived from, and are qualified in their entirety by, the unaudited Great Lakes Predecessor and Dells/Sandusky Historical financial statements. In the opinion of management, such unaudited financial data reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the results for those periods. Historical results are not necessarily indicative of the results to be expected in the future. You should read the following selected financial and other data together with “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Great Lakes Predecessor and Dells/Sandusky financial statements and related notes appearing elsewhere in this prospectus.

The unaudited summary pro forma financial and operating data for the year ended December 31, 2003 and the nine months ended September 30, 2004 have been prepared to give pro forma effect to the initial public offering and the formation transactions as if they had occurred on January 1, 2003. The unaudited pro forma balance sheet data at September 30, 2004 has been prepared to give effect to the initial public offering and the formation transactions as if they had occurred on September 30, 2004. The unaudited summary combined pro forma financial data are for informational purposes only and should not be considered indicative of actual results that would have been achieved had the initial public offering and the formation transactions actually been consummated on January 1, 2003 and do not purport to indicate results of operations as of any future date or for any future period. You should read the summary combined pro forma data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Great Lakes Predecessor and Dells/Sandusky financial statements and related notes appearing elsewhere in this prospectus.

The following discussion should be read in conjunction with the “Selected Financial and Other Data,” the audited combined financial statements of Great Lakes Predecessor as of September 30, 2004 and December 31, 2003 and 2002 and for the nine months ended September 30, 2004 and the years ended December 31, 2003, 2002 and 2001, the audited combined financial statements of the Wisconsin Dells and Sandusky resorts as of December 31, 2003 and 2002 and for the years ended December 31, 2003, 2002 and 2001, the unaudited combined financial statements of Great Lakes Predecessor for the nine months ended September 30, 2003 and the unaudited combined financial statements of the Wisconsin Dells and Sandusky resorts as of September 30, 2004 and for the nine months ended September 30, 2004 and 2003 appearing elsewhere in this prospectus. Where appropriate, the following discussion includes analysis of the effects of the formation transactions and the initial public offering. The effects are reflected in the pro forma condensed consolidated financial statements appearing elsewhere in this prospectus. All dollar amounts in this discussion, except for operating statistics, are in thousands. As discussed in Note 11 to Predecessor’s combined financial statements, the Predecessor’s December 31, 2003 combined financial statements have been restated. The accompanying management’s discussion and analysis gives effect to that restatement.

Business. We are a family entertainment resort company that provides our guests with a high-quality vacation at an affordable price. We are the largest owner, operator and developer in the United States of drive-to family resorts featuring indoor waterparks and other family-oriented entertainment activities. We provide a full-service entertainment resort experience to our target customer base: families with children ranging in ages from 2 to 14 years old that live within a convenient driving distance from our resorts. Our resorts are open year-round and provide a consistent and comfortable environment where our guests can enjoy our various amenities and activities.

We provide our guests with a self-contained vacation experience and focus on capturing a significant portion of their total vacation spending. We earn revenues through the sale of rooms, which includes admission to our indoor waterpark, and other revenue-generating resort amenities. Each of our resorts features a combination of the following revenue-generating amenities: themed restaurants, an ice cream shop and confectionery, full-service spa, game arcade, gift shop and meeting space. We also expect to generate revenues from licensing arrangements, management fees and construction fees with respect to properties owned by third parties, such as the licensing agreement we have entered into and management arrangement we have agreed to enter into with Ripley’s in connection with the Niagara Falls, Ontario resort.

The following table presents an overview of our portfolio of operating resorts and resorts under construction (including the Niagara resort that will be owned by a third party licensee):

Revenue and Key Performance Indicators. We seek to generate positive cash flows and net income from each of our owned resorts. Our rooms revenue represents sales to guests of room nights at our resorts, and is the largest contributor to our cash flows and profitability. Rooms revenue accounted for approximately 70% of our total resort revenue for the year ended December 31, 2003. We employ sales and marketing efforts to increase overall demand for rooms at our resorts. We seek to optimize the relationship between room rates and occupancies through the use of yield management techniques that attempt to project demand in order to selectively increase room rates during peak demand. These techniques are designed to assist us in managing our higher occupancy nights to achieve maximum rooms revenue, and include such practices as: monitoring our historical trends for occupancy and estimating our high occupancy nights; offering the highest discounts to previous guests in off-peak periods to build customer loyalty and enhance our ability to charge higher rates in peak periods; structuring rates to allow us to offer our previous guests the best rate while simultaneously working with a promotional partner or offering internet specials; monitoring sales of room types daily to evaluate the effectiveness of offered discounts; and offering specials on standard suites and yielding better rates on larger suites when standard suites sell out. In addition, we seek to maximize the amount of time and money spent on-site by our guests by providing a variety of revenue-generating amenities.

We have several key indicators that we use to evaluate the performance of our business. These indicators include the following:


	•	occupancy;

	•	average daily room rate, or ADR;

	•	revenue per available room, or RevPAR;

	•	total revenue per available room, or Total RevPAR;

	•	total revenue per occupied room, or Total RevPOR; and

	•	EBITDA.

Occupancy, ADR and RevPAR are commonly used measures within the hospitality industry to evaluate hotel operations.


	•	ADR is the average daily room rate charged and is calculated by dividing total rooms revenue by total occupied rooms.

	•	RevPAR is the product of occupancy and ADR.

Occupancy allows us to measure the general overall demand for rooms at our resorts and the effectiveness of our sales and marketing strategies. ADR allows us to measure the effectiveness of our yield management strategies. ADR and RevPAR only include rooms revenue. Total RevPOR and Total RevPAR include both rooms revenue and other revenue derived from food and beverage and other amenities at our resorts. We consider Total RevPOR and Total RevPAR to be key performance indicators for our business because we derive a significant portion of our revenue from food and beverage and other amenities. For the year ended December 31, 2003 and the nine months ended September 30, 2004, approximately 30% and 31%, respectively of our total revenues consisted of non-rooms revenue.

We use RevPAR and Total RevPAR to evaluate the blended effect that changes in occupancy, ADR and Total RevPOR have on our profitability. We focus on increasing ADR and Total RevPOR because those increases can have the greatest positive impact on our profitability. In addition, we seek to maximize occupancy, as increases in occupancy generally lead to greater total revenues at our resorts, and maintaining certain occupancy levels is key to covering our fixed costs. Increases in total revenues as a result of higher occupancy are, however, typically accompanied by additional incremental costs (including housekeeping services, utilities and room amenity costs). In contrast, increases in total revenues from higher ADR and Total RevPOR are typically accompanied by lower incremental costs, and result in a greater increase in profitability.

We also use EBITDA as a measure of the operating performance of each of our resorts. EBITDA is a supplemental financial measure, and is not defined by accounting principles generally accepted in the United States of America, or GAAP. EBITDA as calculated by us is not necessarily comparable to similarly titled measures used by other companies. In addition, EBITDA: (a) does not represent net income or cash flows from operations as defined by GAAP; (b) is not necessarily indicative of cash available to fund our cash flow needs; and (c) should not be considered as an alternative to net income, operating income, cash flows from operating activities or our other financial information as determined under GAAP (such as total revenues, operating profit and earnings per share). See “Non-GAAP Financial Measures” for further discussion of our use of EBITDA and a reconciliation to net income.

Formation. We were formed in May 2004 to succeed to the family entertainment resort business of our predecessor companies, The Great Lakes Companies, Inc. and a number of its related entities, which we refer to collectively as Great Lakes. Great Lakes has developed and operated hotels since 1995. In 1999, Great Lakes began its resort operations by purchasing the Great Wolf Lodge in Wisconsin Dells, Wisconsin and developing the Great Wolf Lodge in Sandusky, Ohio, which opened in 2001. In 2003, Great Lakes opened two additional Great Wolf Lodge resorts, one in Traverse City, Michigan and the other in Kansas City, Kansas. In June 2004, Great Lakes opened the Blue Harbor Resort in Sheboygan, Wisconsin. Immediately prior to the closing of the initial public offering, Great Lakes had two additional Great Wolf Lodge resorts under construction, one in Williamsburg, Virginia and the other in the Pocono Mountains region of Pennsylvania, and has licensed a resort owned by a third party that is under construction in Niagara Falls, Ontario (Canada). After completion of the initial public offering and the formation transactions, we became the owner and operator of each of these resorts, other than the Niagara Falls resort, and are the manager of all eight resorts.

We have set forth below a discussion of the historical operations of Great Lakes since we have not had any meaningful operations since our formation and because we believe that a discussion of the results of Great Wolf Resorts, Inc. would not be meaningful.

Industry Trends and Outlook. While no standard industry definition for a family entertainment resort featuring an indoor waterpark has developed, we generally consider resorts with at least 200 rooms featuring indoor waterparks larger than 25,000 square feet, as well as a variety of water slides and other water-based

attractions, to be competitive with our resorts. The concept of a family entertainment resort with an indoor waterpark was first introduced in Wisconsin Dells, Wisconsin and has evolved there over the past 15 years. We believe those resorts have historically outperformed standard hotels in that market. We believe that the rate premiums and increased market share in Wisconsin Dells have been significant and that no other operator or developer other than Great Lakes has established a regional portfolio of family entertainment resorts featuring indoor waterparks. We intend to continue to expand our portfolio of owned resorts throughout the United States and to selectively seek licensing and management opportunities domestically and internationally. The resorts we are currently constructing and plan to develop in the future require significant industry knowledge and substantial capital resources. We believe that a number of other resort operators are developing or considering the development of family entertainment resorts that will compete directly with our resorts. In particular, one of our current competitors is constructing a resort in Sandusky and another competitor is constructing a resort near Traverse City.

We believe there are characteristics of the domestic travel and leisure industry that indicate families favor frequent, short, drive-to vacations. According to the Travel Industry Association of America, or TIA, from 1994 to 2003 the number of domestic leisure trips taken by families grew from approximately 96 million trips in 1994 to 154 million trips in 2003. In 2003, approximately 45% of leisure trips lasted one to two nights. The primary mode of transportation for 77% of the overnight leisure trips in 2003 was by automobile. We believe these statistics provide evidence that our segment of the travel and leisure industry has strong demand characteristics that make our family entertainment resorts attractive to leisure travelers.

Our primary business objective is to increase long-term stockholder value. We believe we can increase stockholder value by executing our internal and external growth strategies. Our primary internal growth strategies are to: maximize total resort revenue; minimize costs by leveraging our economies of scale; and build upon our existing brand awareness and loyalty in order to compete more effectively. Our primary external growth strategies are to: capitalize on our first-mover advantage by being the first to develop and operate family entertainment resorts featuring indoor waterparks in our selected target markets; focus on development and strategic growth opportunities by seeking to develop and open at least two new owned resorts in target markets each year for the next several years and target selective licensing opportunities; and continue to innovate by leveraging our in-house expertise, in conjunction with the knowledge and experience of our third-party suppliers and designers.

In attempting to execute our internal and external growth strategies, we are subject to a variety of business challenges and risks. These challenges include: development and licensing of properties; increases in costs of constructing, operating and maintaining our resorts; competition from other entertainment companies, both within and outside our industry segment; and external economic risks, including family vacation patterns and trends. We seek to meet these challenges by providing sufficient management oversight to site selection, development and resort operations, concentrating on growing and strengthening awareness of our brand and demand for our resorts, and maintaining our focus on safety.

The Great Lakes Predecessor, or Predecessor, combined historical financial information includes the following:


	•	The Great Lakes Companies, Inc. and its consolidated subsidiaries, including development of, ownership interests in, and management contracts with respect to, resorts (“resort activity”) and certain non-resort hotels and multifamily housing development and management assets (“non-resort activity”);

	•	the entities that own our Traverse City, Kansas City and Sheboygan operating resorts; and

	•	the entities that own our Williamsburg and Pocono Mountains resorts that are under construction.

The Traverse City, Kansas City and Sheboygan resorts opened in March 2003, May 2003 and June 2004, respectively. Therefore, Predecessor’s historical results of operations only reflect operating results for Traverse City, Kansas City and Sheboygan for those periods after the resort opening dates.

Predecessor’s financial statements do not include the entities that own the Wisconsin Dells and Sandusky operating resorts as those entities are controlled by affiliates of AIG SunAmerica.


	•	lodging revenue, which consists of rooms, food and beverage and other department revenues from its consolidated and combined hotels and resorts;

	•	management fee revenue from both resort activity and non-resort activity, which includes fees received under its management agreements; and

	•	other revenue, which consists of accounting fees, development fees, central reservation fees, construction management fees and other fees.

Predecessor employs the staff at its managed properties. Under its management agreements, the hotel and resort owners reimburse Predecessor for payroll, benefits and certain other costs related to the operations of the managed properties. Emerging Issues Task Force, or EITF, Issue No. 01-14, “Income Statement Characteristics of Reimbursements for Out-of-pocket Expenses,” establishes standards for accounting for reimbursable expenses in Predecessor’s income statement. Under this pronouncement, the reimbursement of payroll, benefits and costs is recorded as revenue on Predecessor’s statement of operations, with a corresponding expense recorded as “other expenses from managed properties.”

Operating Expenses. Predecessor’s departmental operating expenses consist of rooms, food and beverage and other department expenses.


	•	selling, general and administrative expenses, which are associated with the management of hotels and resorts and which consist primarily of expenses such as corporate payroll and related benefits, operations management, sales and marketing, finance, legal, information technology support, human resources and other support services, as well as general corporate expenses;

	•	property operation and maintenance expenses;

	•	depreciation and amortization; and

	•	other expenses from managed properties, which are recorded as an expense in accordance with EITF 01-14.

The Dells/Sandusky combined historical financial information includes the entities that own our Wisconsin Dells and Sandusky operating resorts.

Revenues. Dells/Sandusky’s revenues consist of lodging revenue, which consists of rooms, food and beverage and other department revenues from its resorts.

Operating Expenses. Dells/Sandusky’s departmental operating expenses consist of rooms, food and beverage and other department expenses.


	•	selling, general and administrative expenses, which consists primarily of sales and marketing, finance, information technology support, human resources and other support services;


	•	property operation and maintenance expenses; and

	•	depreciation and amortization.


	•	the Predecessor combined historical financial information as described above, giving effect to the spin-off from Predecessor’s combined historical financial information of Predecessor’s non-resort activity;

	•	the Dells/Sandusky combined historical financial information as described above; and

	•	adjustments to give effect to the initial public offering and the formation transactions as if they had occurred at the beginning of the periods presented.

Revenues. Our revenues consist of lodging revenue, which includes rooms, food and beverage, and other department revenues from our resorts.

Operating Expenses. Our departmental operating expenses consist of rooms, food and beverage and other department expenses.


	•	selling, general and administrative expenses, which are associated with the management of resorts and which consist primarily of expenses such as corporate payroll and related benefits, operations management, sales and marketing, finance, legal, information technology support, human resources and other support services, as well as general corporate expenses;

	•	property operation and maintenance expenses; and

	•	depreciation and amortization.

The preparation of our consolidated financial statements and our financial reporting process involve the use of accounting estimates based on our current judgments. Certain accounting estimates are particularly sensitive because of their significance to our consolidated financial statements and because of the possibility that future events affecting them may differ from our current judgments.

Investments in Property and Equipment. We record investments in property and equipment at cost. Improvements and replacements are capitalized when they extend the useful life, increase capacity or improve the efficiency of the asset. Repairs and maintenance are charged to expense as incurred.

Depreciation and amortization are recorded on a straight-line basis over the estimated useful lives of the assets as follows:

We are required to make subjective assessments as to these useful lives for purposes of determining the amount of depreciation and amortization to record annually with respect to our investments in property and equipment. These assessments have a direct impact on our net income because if we were to shorten the expected useful lives of our investments in property and equipment we would depreciate and amortize such investments over fewer years, resulting in more depreciation and amortization expense and lower net income on an annual basis.

When circumstances, such as adverse market conditions, indicate the carrying values of a long-lived asset may be impaired, we perform an analysis to review the recoverability of the asset’s carrying value. We make estimates of the undiscounted cash flows (excluding interest charges) from the expected future operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects of demand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized to the extent that the carrying value exceeds the estimated fair value. Any impairment losses are recorded as operating expenses, which reduce net income.

We are required to make subjective assessments as to the fair value of assets and liabilities in connection with purchase accounting adjustments recorded related to real estate we acquire, including the resorts acquired through the formation transactions which are accounted for by the purchase method of accounting. For resorts acquired subsequent to June 30, 2001, the effective date of Statement of Financial Accounting Standards, or SFAS, No. 141, “Business Combinations,” this includes allocating the acquisition value among the property and equipment and identifiable intangible assets acquired.

Carrying Value of Goodwill. As a result of the formation transactions, we recorded approximately $213,000 of goodwill on our balance sheet. On an annual basis, we perform an analysis to determine any impairment of the carrying value of goodwill. To test goodwill for impairment, we analyze the fair value of the individual resort to which the goodwill is assigned to the carrying value of that resort. If the analysis indicates that the carrying value is less than the fair value of the individual resort, we compare the implied fair value of the resort’s goodwill with the carrying amount of that goodwill. The implied fair value of the goodwill is determined by allocating the fair value of the individual resort to all the assets and liabilities of that resort as if it had been acquired in a business combination. The excess of the fair value of the individual resort over the amounts assigned to its assets and liabilities is the implied fair value of the goodwill. If the implied fair value of the goodwill is less than the carrying value, an impairment loss is recognized. Any impairment losses are recorded as operating expenses, which reduce net income.

We use EBITDA as a measure of our operating performance. EBITDA is a supplemental non-GAAP financial measure. EBITDA is commonly defined as net income plus (a) interest expense, (b) income taxes and (c) depreciation and amortization.

EBITDA as calculated by us is not necessarily comparable to similarly titled measures by other companies. In addition, EBITDA (a) does not represent net income or cash flows from operations as defined by GAAP; (b) is not necessarily indicative of cash available to fund our cash flow needs; and (c) should not be considered as an alternative to net income, operating income, cash flows from operating activities or our other financial information as determined under GAAP.

We believe EBITDA is useful to an investor in evaluating our operating performance because:


	•	a significant portion of our assets consists of property and equipment that are depreciated over their remaining useful lives in accordance with GAAP. Because depreciation and amortization are non-cash items, we believe that presentation of EBITDA is a useful measure of our operating performance;

	•	it is widely used in the hospitality and entertainment industries to measure operating performance without regard to items such as minority interests and gain on sale of real estate; and

	•	we believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the impact of items directly resulting from our asset base, primarily depreciation and amortization, from our operating results.


	•	as a measurement of operating performance because it assists us in comparing our operating performance on a consistent basis as it removes the impact of items directly resulting from our asset base, primarily depreciation and amortization and non-recurring or unusual items, from our operating results;

	•	for planning purposes, including the preparation of our annual operating budget;

	•	as a valuation measure for evaluating our operating performance and our capacity to incur and service debt, fund capital expenditures and expand our business; and

	•	as one measure in determining the value of other acquisitions and dispositions.

Covenants in our revolving credit facility also require us to meet financial tests based upon EBITDA.

Using a measure such as EBITDA has material limitations. These limitations include the difficulty associated with comparing results among companies and the inability to analyze certain significant items, including depreciation and interest expense, which directly affect our net income or loss. Management compensates for these limitations by considering the economic effect of the excluded expense items independently, as well as in connection with its analysis of net income.

Nine Months Ended September 30, 2004 Compared with Nine Months Ended September 30, 2003

The following table shows key operating statistics for Predecessor’s Traverse City and Kansas City resorts for the nine months ended September 30, 2004 and 2003:

The Traverse City, Kansas City and Sheboygan resorts opened in March 2003, May 2003 and June 2004, respectively. As a result, comparisons of changes in total revenue, rooms revenue and other revenue between the nine-month periods ended September 30, 2004 (during which two resorts were open for the entire period and one resort opened) and September 30, 2003 (during which two resorts opened) are not meaningful.

Revenues. Total revenues increased $18,631 to $53,653 for the first nine months of 2004 compared to $35,022 for the first nine months of 2003. This increase was primarily due to:


	•	The commencement of operations at the Great Wolf Lodge in Traverse City, Michigan, which opened in March 2003. This resort had revenues of $18,445 in the first nine months of 2004 as compared to $13,927 in the first nine months of 2003, an increase of $4,518;

	•	The commencement of operations at the Great Wolf Lodge in Kansas City, Kansas, which opened in May 2003. This resort had revenues of $14,643 in the first nine months of 2004 compared to $6,588 in the first nine months of 2003, an increase of $8,055; and

	•	The commencement of operations at the Blue Harbor Resort in Sheboygan, Wisconsin, which opened in June 2004. This resort had revenues of $5,630 in the first nine months of 2004.

Operating expenses. Total departmental expenses increased $6,459 to $14,713 for the first nine months of 2004 compared to $8,254 for the first nine months of 2003, primarily due to the opening of the Traverse City, Kansas City and Sheboygan resorts in March 2003, May 2003 and June 2004, respectively.

Total other operating expenses increased $13,953 to $41,689 for the first nine months of 2004, compared to $27,736 for the first nine months of 2003. This increase was primarily due to:


	•	Selling, general and administrative expenses increased $6,883 to $15,014 for the first nine months of 2004 from $8,131 for the first nine months of 2003, primarily due to the effect of the Traverse City and Kansas City resorts opening in 2003 and the Sheboygan resort opening in 2004, and due to the effect of additional labor costs at The Great Lakes Companies due to increases in staffing.


	•	Property operating costs increased $1,922 to $6,145 for the first nine months of 2004 from $4,223 in the first nine months of 2003, primarily due to the effect of the Traverse City and Kansas City resorts opening in 2003 and the Sheboygan resort opening in 2004.

	•	Depreciation and amortization expense increased $4,815 to $9,490 for the first nine months of 2004 from $4,675 for the first nine months of 2003. This increase resulted from:


	•	the purchases or placement into service of property and equipment during 2003, primarily at the Traverse City and Kansas City resorts that opened in 2003, and the related increase in depreciation taken on those assets; and

	•	the purchases or placement into service of property and equipment in 2004, primarily at the Sheboygan resort that opened in 2004, and the related increase in depreciation taken on those assets.

Operating (loss). Operating (loss) for the first nine months of 2004 increased $1,781 to $(2,749) from $(968) for the first nine months of 2003.

Net income (loss). Net income decreased $6,138 to $(4,961) for the first nine months of 2004 from $1,177 in the first nine months of 2003. This decrease was due to the following:


	•	Net interest expense increased $1,918 to $4,553 in the first nine months of 2004 from $2,635 in the first nine months of 2003. This increase was due primarily to increased debt levels as a result of finishing construction of the Traverse City and Kansas City resorts during 2003 and the Sheboygan resort in 2004.

	•	Interest on mandatorily redeemable ownership interests increased $4,295 from $(3,220) in the first nine months of 2003 to $1,075 in the first nine months of 2004. This increase was due to an increase in the redemption value of certain mandatorily redeemable equity interests in the first nine months of 2004. Predecessor treated the following as mandatorily redeemable financial instruments:


	•	Class A and Class B shares of The Great Lakes Companies, Inc. that are obligated to be redeemed in cash if a shareholder dies or incurs certain triggering events. The redemption price is calculated based on a formula with The Great Lakes Companies, Inc.’s net operating income and a multiple based on the type of triggering event. The shares contain restrictions on transfers and sales by the shareholders.

	•	Class B Units of Great Wolf Lodge of Kansas City, LLC that are required to be redeemed in cash no later than the fifth anniversary date of the operating commencement date of the Kansas City resort. The redemption price is based on the greater of fair value or an internal rate of return.


	•	A cumulative effect of change in accounting principle of $460 related to the adoption of SFAS No. 150 was recorded in 2003. This gain resulted from recording at fair market value the value of certain mandatorily redeemable equity interests.


	•	A gain on sale of real estate of $1,653 in the first nine months on 2004 from the sales of land owned in Ontario, Canada and Beckley, West Virginia.

	•	Income from discontinued operations increased $363 to $1,864 in the first nine months of 2004 from $1,501 in the first nine months of 2003, due to the sale of certain hotel assets in 2003 for a larger gain than hotel assets sold in 2004.

Revenues. Total revenues increased $27,999 to $47,824 for 2003 compared to $19,825 for 2002. This increase was primarily due to:


	•	the commencement of operations at the Great Wolf Lodge in Traverse City, Michigan, which opened in March 2003. This property produced revenues of $18,232 in 2003; and

	•	the commencement of operations at the Great Wolf Lodge in Kansas City, Kansas, which opened in May 2003. This property produced revenues of $9,971 in 2003.

Operating expenses. Total departmental expenses increased $11,848 to $12,313 for 2003 compared to $465 for 2002, primarily due to the commencement of operations of the Traverse City and Kansas City resorts during 2003. The Traverse City resort had $7,167 of rooms, food and beverage and other expenses in 2003. The Kansas City resort had $5,054 of similar departmental expenses in 2003. These increases in departmental operating expenses were partially offset by the reduced expenses from the sale of the Manassas Country Inn & Suites, the Manassas Fairfield Inn and the Hampton Inn & Suites Warwick during 2003.

Total other operating expenses increased $19,659 to $40,326 for 2003, compared to $20,667 for 2002. This increase was primarily due to:


	•	Selling, general and administrative expenses increased by $7,350 to $11,706 for 2003 from $4,356 for 2002, primarily due to the effect of the Traverse City and Kansas City resorts commencing operations in 2003.

	•	Property operating costs increased $4,770 to $5,671 for 2003 from $901 in 2002, primarily due to the effect of the Traverse City and Kansas City resorts commencing operations in 2003.

	•	Depreciation and amortization expense increased by $7,443 to $8,045 for 2003 from $602 for 2002. This increase resulted from the purchases or placement into service of property, plant and equipment during 2003, primarily at the Traverse City and Kansas City resorts that commenced operations in 2003, and the related increase in depreciation taken on those assets.

	•	Other expenses from managed properties increased $96 to $14,904 for 2003 from $14,808 for 2002 due to increased payroll costs at managed properties.

Operating (loss). Operating (loss) for 2003 increased $3,508 to $(4,815) from $(1,307) for 2002.

Net (loss). Net (loss) decreased $2,212 to $(4,543) in 2003 from $(6,755) in 2002. This decrease was primarily due to the following:


	•	Distributions in excess of minority interest capital decreased $53 from $53 in 2002 to $0 in 2003. This change was due to decreased amounts of distributions in 2003 as compared to 2002.

	•	Interest on mandatorily redeemable ownership interests was $(3,136) in 2003 and $4,479 in 2002, due to the adoption of SFAS No. 150 on July 1, 2003 and the marking to fair value of the derivative instruments related to the mandatorily redeemable ownership interests.

	•	Income (loss) from discontinued operations increased $2,147 to $1,804 for 2003 from $(343) for 2002. SFAS No. 144 requires the net activity of assets held for sale or disposed of during a fiscal period to be classified as discontinued operations. The income from discontinued operations increased significantly in 2003 as a result of gains on sale of the Manassas Country Inn & Suites, the Manassas Fairfield Inn and the Hampton Inn & Suites Warwick during 2003.

	•	A cumulative effect of change in accounting principle of $460 related to the adoption of SFAS No. 150 was recorded in 2003. This gain resulted from recording at fair market value the value of certain mandatorily redeemable equity interests.

This decrease was partially offset by the increase in operating (loss), as well as:


	•	Net interest expense increased $4,232 to $4,703 in 2003 from $471 in 2002. This increase was due primarily to increased debt levels as a result of finishing construction of the Traverse City and Kansas City resorts during 2003.

	•	Minority interests increased $336 to $425 in 2003 from $89 in 2002 due to higher levels of earnings before minority interests.

Revenues. Total revenues increased $1,416 to $19,825 for 2002 compared to $18,409 in 2001. This increase was primarily due to higher management fee revenue and other revenue from managed properties in 2002 due to increased revenues at managed hotels.

Operating expenses. Total department expenses decreased $44 to $465 in 2002 from $509 in 2001. This decrease was primarily due to the sale of an office building in 2002.

Total other operating expenses increased $2,519 to $20,667 for 2002 compared to $18,148 for 2001. This increase was primarily due to:


	•	Selling, general and administrative expenses increased $300 to $4,356 for 2002 from $4,056 for 2001, due to increases in hotel-level expenses.

	•	Property operating costs increased $626 to $901 for 2002 from $275 in 2001. This increase was primarily due to increases in hotel-level expenses.

	•	Depreciation and amortization expense increased $71 to $602 for 2002 from $531 for 2001.

	•	Other expenses from managed properties increased $1,522 to $14,808 for 2002 from $13,286 for 2001. This increase was due to a larger number of total hotels managed in 2002 as compared to 2001.

Operating (loss). Operating (loss) for 2002 increased $1,059 to $(1,307) from $(248) for 2001.

Net (loss). Net (loss) increased $5,578 to $(6,755) in 2002 from $(1,177) in 2001. This increase was due primarily to the increase in operating (loss), as explained above, and to the following factors:


	•	Interest on mandatorily redeemable ownership interests increased $4,089 to $4,479 in 2002 from $390 in 2001. This increase was due to the creation of new mandatorily redeemable equity interests for the Kansas City resort in 2002.

	•	Distributions in excess of minority interest capital increased $53 from $0 in 2001. This change was due to increased distributions in the 2002 period.

	•	Minority interests expense increased $758 to $89 in 2002 from $(669) in 2001, due to higher levels of earnings before minority interests.

	•	(Loss) from discontinued operations increased $87 to $(343) for 2002 from $(256) for 2001. SFAS No. 144 requires the net activity of assets held for sale or disposed of during a fiscal period to be classified as discontinued operations. The (loss) from discontinued operations increased in 2002 due to lower levels of net income from hotels held for sale.


	•	Net interest expense decreased $244 to $471 in 2002 from $715 in 2001. This decrease was due primarily to decreased interest rates on variable rate debt in 2002 as compared to 2001.

	•	Gain on sale of real estate increased $109 to $13 in 2002 from $(96) in 2001.

Nine Months Ended September 30, 2004 Compared with Nine Months Ended September 30, 2003

The following table shows key operating statistics for Dells/ Sandusky for the nine months ended September 30, 2004 and 2003:

Dells/Sandusky’s total revenue remained relatively flat at $32,941 for the first nine months of 2004 compared to $32,848 for the first nine months of 2003. Rooms revenue increased $20, or less than 1%, for the first nine months of 2004 compared to the first nine months of 2003, while total non-rooms revenue increased $73, or 1%, period over period. The rooms revenue increase resulted from a slightly higher number of total available rooms in the first nine months of 2004, offset by a $0.42 decline in RevPAR for the first nine months of 2004 compared to the first nine months of 2003, reflecting a combination of lower overall ADR and occupancy in the first nine months of 2004. Non-rooms revenue per available room was $58.14 and $57.89 in the first nine months of 2004 and 2003, respectively. Total non-rooms revenue increased due to the slightly higher number of available rooms in the first nine months of 2004 and the $0.25 increase in non-rooms revenue per available room.

Operating expenses. Total departmental expenses increased $398, or 4%, to $10,677 for the first nine months of 2004 compared to $10,279 for the first nine months of 2003. Total departmental expenses as a percentage of total revenues increased to 32% for the first nine months of 2004 from 31% for the first nine months of 2003, primarily due to higher food costs and rooms department labor expense period over period.

Total other operating expenses increased $795, or 5%, to $15,673 for the first nine months of 2004, compared to $14,878 for the first nine months of 2003. This increase resulted primarily from:


	•	Selling, general and administrative expenses increased $692, or 13%, to $6,182 for the first nine months of 2004 from $5,490 for the first nine months of 2003. This increase resulted primarily from higher labor costs and legal expenses in the 2004 period.

	•	Property operation and maintenance expenses increased $303, or 8%, to $3,939 for the first nine months of 2004 from $3,636 for the first nine months of 2003. This increase resulted primarily from higher real estate and property taxes for both resorts.


	•	Depreciation and amortization expense decreased $200, or 3%, to $5,552 for the first nine months of 2004 from $5,752 for the first nine months of 2003.

Operating income. Operating income for the first nine months of 2004 decreased $1,100, or 14%, to $6,591 from $7,691 for the first nine months of 2003. This decrease was due to the combined effect of the increase in total revenue and increases in total departmental expenses and total other operating expenses, as discussed above.

Net income. Net income decreased $1,022 to $3,167 in the first nine months of 2004 from $4,189 in the first nine months of 2003. This decrease was primarily due to the decrease in operating income.

The following table shows key operating statistics for Dells/ Sandusky for the years ended December 31, 2003 and 2002:

Dells/Sandusky’s total revenue increased $291, or 1%, to $40,718 for 2003 compared to $40,427 for 2002. Rooms revenue increased $177, or 1%, for 2003 compared to 2002 and total other revenue increased $114, or 1%, year over year. The rooms revenue increase resulted from a $1.38 improvement in RevPAR for 2003 compared to 2002, reflecting a combination of higher ADR, offset by lower overall occupancy and a slightly lower number of total available rooms in 2003. Non-rooms revenue per available room was $54.75 and $54.00 in 2003 and 2002, respectively. The total other revenue increase resulted from the $0.75 improvement in non-rooms revenue per available room, offset by the slightly lower number of available rooms in 2003.

Operating expenses. Total departmental expenses decreased $176, or 1%, to $13,320 for 2003 compared to $13,496 for 2002. Total departmental expenses as a percentage of total revenues decreased modestly to 32.7% in 2003 from 33.4% in 2002, reflecting growth in ADR and Total RevPOR.

Total other operating expenses increased $1,403, or 7%, to $20,616 for 2003, compared to $19,213 for 2002. The increase was primarily due to:


	•	Selling, general and administrative expenses increased $1,015, or 16%, to $7,557 for 2003 from $6,542 for 2002. This increase resulted primarily from increases in labor costs year over year and higher levels of advertising and promotion expenses to increase awareness and demand for the resorts, particularly for the Wisconsin Dells resort.

	•	Property operation and maintenance expenses increased $712, or 17%, to $4,969 for 2003 from $4,257 for 2002. This increase resulted from higher utilities costs at both resorts, and higher real estate and property taxes for the Wisconsin Dells resort.


	•	Depreciation and amortization expense decreased $324, or 4%, to $8,090 for 2003 from $8,414 for 2002. This decrease resulted from certain loan fees at the Wisconsin Dells resort becoming fully amortized during 2002 due to the refinancing of the loan.

Operating income. Operating income for 2003 decreased $936, or 12%, to $6,782 from $7,718 for 2002. This decrease was due to the effect of the increase in total other operating expenses, partially offset by the increases in total revenue and decrease in total departmental expenses, as discussed above.

Net income. Net income decreased by $706, to $2,116 in 2003 from $2,822 in 2002. This decrease was due to the decrease in operating income, as discussed above, partially offset by a decrease in net interest expense of $230, or 5%, to $4,666 for 2003 from $4,896 for 2002. This net interest expense decrease was primarily due to decreased rates on variable interest debt during the two years.

The following table shows key operating statistics for Dells/ Sandusky for the years ended December 31, 2002 and 2001:

Dells/ Sandusky’s total revenue increased $5,789, or 17%, to $40,427 for 2002 compared to $34,638 for 2001. Rooms revenue increased $3,345, or 13%, for 2002 compared to 2001 and total other revenue increased $2,444, or 27%, year over year. The rooms revenue increase resulted from a $2.89 improvement in RevPAR for 2002 compared to 2001, reflecting a combination of higher ADR, offset by lower overall occupancy, and an 11% increase in the number of total available rooms available in 2002 as compared to 2001, due to the opening of the Sandusky resort in March 2001. Non-rooms revenue per available room was $54.00 and $46.99 in 2002 and 2001, respectively. The total other revenue increase resulted from the $7.01 improvement in non-rooms revenue per available room and the higher number of available rooms in 2002.

Operating expenses. Total departmental expenses increased $1,985, or 17%, to $13,496 for 2002 compared to $11,511 for 2001, primarily due to the effect of a full year of operating results for the Sandusky resort during 2002. Total departmental expenses as a percentage of total revenues increased slightly to 33.4% in 2002 from 33.2% in 2001.

Total other operating expenses decreased $1,042, or 5%, to $19,213 for 2002, compared to $20,255 for 2001. This decrease was primarily due to:


	•	Selling, general and administrative expenses decreased by $1,087, or 14%, to $6,542 for 2002 from $7,629 for 2001. This decrease resulted primarily from start-up costs incurred in 2001 to support the opening of the Sandusky resort.

	•	Depreciation and amortization expense decreased by $350, or 4%, to $8,414 from $8,764 for 2001. This decrease resulted from $1,906 of goodwill amortization in 2001 that did not re-occur in 2002 due to the adoption of SFAS 142, partially offset by increased depreciation and amortization as a result of the Sandusky resort being open for a full year in 2002.


	•	Property operation and maintenance expenses increased by $395, or 10%, to $4,257 for 2002 from $3,862 for 2001. This increase was primarily due to a full year of operating results for the Sandusky resort in 2002.

Operating income. Operating income for 2002 increased $4,846 to $7,718 from $2,872 for 2001. This increase was due to the combined effect of the increase in total revenue and decrease in total other operating expenses, partially offset by the increase in total departmental expenses, as discussed above.

Net income (loss). Net income (loss) increased by $5,036 to net income of $2,822 in 2002 from a net (loss) of $(2,214) in 2001. This increase was due to the increase in operating income, as discussed above, as well as the decrease in net interest expense of $190, or 4%, to $4,896 for 2002 from $5,086 for 2001. This net interest expense decrease was primarily due to decreased rates on variable interest debt during the two years.

Great Wolf Resorts Pro Forma Nine Months Ended September 30, 2004 compared to Great Lakes Predecessor Historical Nine Months Ended September 30, 2004

The pro forma condensed consolidated statement of operations for the nine months ended September 30, 2004 is presented as if the initial public offering and the formation transactions had occurred on January 1, 2004.

Revenues. On a pro forma basis, our total revenues would have increased $18,005 to $71,658 for the first nine months of 2004 compared to $53,653 for the historical first nine months of 2004. This increase is primarily due to the operations of the Great Wolf Lodge resorts in Wisconsin Dells and Sandusky being included in the pro forma results but not the historical results. These two properties had combined revenues of $32,941 in the pro forma first nine months of 2004.

The increase in revenues would have been offset by the elimination of non-resort revenues of $2,872 and the elimination of $11,040 of other revenues from managed properties, representing reimbursement of payroll costs from managed hotels, due to the spin-off of the management of non-resort hotels and the purchase and resulting consolidation of the Wisconsin Dells and Sandusky properties in the pro forma results.

Operating expenses. On a pro forma basis, our total departmental operating expenses would have increased $10,240 to $24,953 for the first nine months of 2004 compared to $14,713 for the historical first nine months of 2004. This increase is primarily due to the inclusion of the Wisconsin Dells and Sandusky resorts in the pro forma results. These two properties had combined departmental operating expenses of $10,677 in the pro forma first nine months of 2004.

Total pro forma other operating expenses for the first nine months of 2004 would have increased $1,699 to $43,388 as compared to $41,689 for the historical first nine months of 2004. This increase reflects the inclusion of the Wisconsin Dells and Sandusky resorts in the pro forma results but not the historical results. These two properties had combined other operating expenses of $15,673 in the pro forma first nine months of 2004. This increase is partially offset by the elimination of non-resort other operating expenses of $2,668 and the elimination of $11,040 of other expenses from managed properties, due to the spin-off of the management and non-resort hotels and the purchase and resulting consolidation of the Wisconsin Dells and Sandusky properties in the pro forma results.

Operating income (loss). Operating income (loss) for the pro forma first nine months of 2004 would have increased $6,066 to operating income of $3,317 from operating (loss) of $(2,749) on a historical basis for the same period.

Net income (loss). Pro forma net income (loss) for the first nine months of 2004 would have increased $4,496 to net a net loss of $(465) from net loss of $(4,961) on a historical basis for the same period. This increase reflects the increase in operating income (loss), as explained above, as well as:


	•	Net interest expense on a pro forma basis for the first nine months of 2004 would have decreased $461 to $4,092 from $4,553 on a historical basis for the same period. This increase is due to the effect of reductions in debt due to the spin-off of Predecessor’s debt related to non-resort operations and the repayment of resort debt with proceeds from the initial public offering.

	•	Interest on mandatorily redeemable shares of $1,075 on a historical basis eliminated on a pro forma basis due to the conversion of the mandatorily redeemable interests to common stock in conjunction with the formation transactions.

	•	Minority interests of $53 on a historical basis eliminated due to the spin-off of non-resort hotel operations.


	•	Income tax benefit of $310 on a pro forma basis, reflecting the new entity’s structure as a C Corporation that pays income taxes, as opposed to pass-through entities with no income tax obligations on a historical basis.


	•	Gain on sale of $1,653 on a historical basis eliminated due to the spin-off of non-resort hotel operations.

	•	Income from discontinued operations of $1,864 eliminated on a pro forma basis due to the spin-off of non-resort hotel operations.

Great Wolf Resorts Pro Forma Year Ended December 31, 2003 compared to Great Lakes Predecessor Historical Year Ended December 31, 2003

The pro forma condensed consolidated statement of operations for 2003 is presented as if the initial public offering and the formation transactions had occurred on January 1, 2003.

Revenues. On a pro forma basis, our total revenues increased $21,096 to $68,920 for 2003 compared to $47,824 for the historical year 2003. This increase is primarily due to the operations of the Great Wolf Lodge resorts in Wisconsin Dells and Sandusky being included in the pro forma results but not the historical results. These two properties had combined revenues of $40,718 in 2003.

The increase in revenue is offset by the spin-off of non-resort revenues of $3,182 and the elimination of $14,904 of other revenue from managed properties, representing reimbursement of payroll costs from managed hotels, due to the spin-off of the management of non-resort hotels and the purchase and resulting consolidation of the Wisconsin Dells and Sandusky properties in the pro forma results.

Operating expenses. On a pro forma basis, our total departmental operating expenses would have increased $12,852 to $25,165 for 2003 compared to $12,313 for the historical year 2003. This increase is primarily due to the inclusion of the Wisconsin Dells and Sandusky resorts in the pro forma results. These two properties had combined departmental operating expenses of $13,320 in 2003.

Total pro forma other operating expenses for 2003 would have increased $1,333 to $41,659 as compared to $40,326 for the historical year 2003. This increase primarily relates to the inclusion of the Wisconsin Dells and Sandusky resorts in the pro forma results. These two properties had combined other operating expenses of $20,616 in 2003. This increase is partially offset by the spin-off of the non-resort other operating expenses of $3,479, and the elimination of $14,904 of other expenses from managed properties, due to the spin-off of the management of non-resort hotels and the purchase and resulting consolidation of the Wisconsin Dells and Sandusky properties in the pro forma results.

Operating income (loss). Pro forma operating income (loss) for 2003 would have increased $6,911 to net income of $2,096 from a net (loss) of $(4,815) on a historical basis for the same period.

Net (loss). Pro forma net (loss) for 2003 would have decreased $3,897 to $(646) from $(4,543) on a historical basis for the same period. This decrease reflects the increase in operating income (loss), as explained above, as well as:


	•	Net interest expense on a pro forma basis for 2003 would have decreased $1,530 to $3,173 from $4,703 on a historical basis for the same period. This decrease is due primarily to the effect of reductions in debt due to the spin-off of debt related to non-resort operations and the repayment of resort debt with proceeds from the initial public offering.

	•	Minority interests of $425 on a historical basis for 2003 eliminated due to the spin-off of non-resort hotel operations and the purchase of non-owned interests of the resorts.


	•	Income tax benefit would have been $(431) on a pro forma basis for 2003, reflecting the new entity’s structure as a C Corporation that owes income taxes, as opposed to pass-through entities with no income tax obligations on a historical basis for the same period.


	•	Interest on mandatorily redeemable shares of $(3,136) on a historical basis eliminated on a pro forma basis due to the conversion of the mandatorily redeemable interests to common stock in conjunction with the formation transactions.

	•	Income from discontinued operations of $1,804 eliminated on a pro forma basis due to the spin-off of non-resort hotel operations.

	•	Cumulative effect of change in accounting principle of $460 eliminated on a pro forma basis due to the spin-off of non-resort hotel operations and the purchase of non-owned interests of the resorts.

As of September 30, 2004, we had pro forma total indebtedness of approximately $123,055. Between September 30, 2004 and the consummation of the initial public offering, we incurred approximately $18,000 in indebtedness. Concurrently with the initial public offering and the completion of the formation transactions, we entered into a $75,000 revolving credit facility and a $75,000 secured mortgage financing. We intend to maintain conservative leverage in order to provide future financial flexibility.

Our short-term liquidity requirements consist primarily of funds necessary to pay operating expenses including:


	•	recurring maintenance, repairs and other operating expenses necessary to properly maintain our resorts;

	•	property taxes and insurance expenses;

	•	interest expense and scheduled principal payments on outstanding indebtedness; and

	•	general and administrative expenses.

Historically, we have satisfied our short-term liquidity requirements through operating cash flows, proceeds from borrowings and equity contributions from investors. In the future, we believe that cash generated by the initial public offering and our operations, together with borrowing capacity under our line of credit, will be sufficient to fund our requirements for working capital, capital expenditures and debt service for the next twelve months.

Our long-term liquidity requirements consist primarily of funds necessary to pay for scheduled debt maturities, renovations, expansion and other non-recurring capital expenditures that need to be made periodically to our resorts as well as the costs associated with the development of new resorts. In the three months ended December 31, 2004 and in 2005, we anticipate capital expenditures of approximately $40,000 and $83,200, respectively, for these purposes, which does not include costs to develop resorts after Williamsburg and Poconos. We expect to meet these needs through existing working capital, cash provided by operations and through a combination of mortgage financing on properties being developed, additional borrowings under a revolving credit facility that we entered into concurrently with the consummation of the initial public offering, and the issuance of equity instruments, including common stock, or additional or replacement debt, if market

Concurrently with the consummation of the initial public offering and the formation transactions, we:


	•	entered into a three-year, $75,000 revolving credit facility that is secured by two of our resorts;

	•	assumed and immediately repaid, using a portion of the net proceeds of the initial public offering, an aggregate of approximately $76,000 of mortgage indebtedness on the Wisconsin Dells and Sandusky resorts;

	•	refinanced existing mortgage indebtedness on two of our resorts with a total outstanding debt balance of approximately $72,400 as of September 30, 2004 with new secured mortgage financing totaling $75,000;

	•	assumed and left in place existing mortgage indebtedness on one of our resorts with an outstanding debt balance of approximately $29,475 as of September 30, 2004. This loan bears interest at the prime rate plus 2.0%, with a minimum interest rate of 7.00%, and matures in 2008;

	•	assumed and left in place existing construction financing on the Williamsburg resort currently under development. When fully drawn, this financing will total approximately $39,000. The loan bears interest at the prime rate plus 1.625%, with a minimum interest rate of 6.75%, and matures in 2008. Only interest payments are required during the construction period;

	•	assumed and left in place existing construction financing on the Poconos resort currently under development. When fully drawn, this financing will total approximately $61,500. The loan bears interest at the prime rate plus 2.0%, with a minimum interest rate of 6.75%, and matures in 2009. Only interest payments are required during the construction period;

	•	assume and left in place $8,063 of fixed rate debt recognized as a liability related to certain bonds issued by the City of Sheboygan and $3,985 of fixed rate debt recognized as a liability related to a loan from the City of Sheboygan. These liabilities will be satisfied by certain future minimum guaranteed amounts of real, personal property and room tax payments by our Sheboygan resort; and

	•	assume and left in place approximately $1,500 of existing financing from a state governmental agency related to the construction of the Poconos resort currently under development. The loan bears interest at 2.0% and matures in 2019.

Our revolving credit facility and secured mortgage financing are material sources to satisfy our long-term liquidity requirements. As such, compliance with their financial and operating debt compliance covenants is material to our liquidity. Non-compliance with the covenants would have a material effect on our financial condition and liquidity.

As we develop future resorts, we expect to finance a portion of the total construction cost of each resort through a stand-alone construction loan on the resort. We expect to fund the remainder of the total construction cost through cash provided from a combination of sources, including our revolving credit facility, cash on hand and cash provided by operating activities. We expect to consider converting stand-alone construction loans to longer-term permanent financing after each resort commences operations.

As referenced above, we have entered into a $75 million senior secured revolving credit facility with Citicorp North America, Inc., Societe Generale, Citigroup Global Markets, Inc., SG Americas Securities LLC


	•	a maximum amount of indebtedness we may incur under the facility as an advance rate of 3.75 multiplied by the combined net operating income (adjusted for non-recurring items, unusual items, infrequent items and asset impairment charges) of the two resorts securing the facility;

	•	a maximum level of the amount of our total debt equal to 5.75 times our total EBITDA (adjusted for non-recurring items, unusual items, infrequent items, non-cash employee compensation expense and asset impairment charges);

	•	a minimum interest coverage ratio, representing our total EBITDA (adjusted for non-recurring items, unusual items, infrequent items, non-cash employee compensation expense and asset impairment charges) divided by our total interest expense of 2.0;

	•	a minimum fixed charge coverage ratio, representing our total EBITDA (adjusted for non-recurring items, unusual items, infrequent items, non-cash employee compensation expense and asset impairment charges) divided by our total fixed charges of 1.5; and

	•	limitations on our ability to pay dividends.

Future borrowings under this facility will bear interest at LIBOR plus a margin of 2.25% to 3.00% depending upon our leverage ratio from time to time. The borrowing base debt service coverage ratio is a ratio of net operating income for the two resorts divided by the greater of (1) actual interest payments or (2) a loan constant of 8.5%, which shall not be less than 2.0 to 1.

Based upon the financial and debt service ratios contained in the revolving credit facility, as of the date of this prospectus, approximately $55,000 of the revolving credit facility is available. As of the date of this prospectus, we have not drawn any amounts under this facility. We expect to use the revolving credit facility, along with cash provided by operating activities and other sources of liquidity, to fund our future growth and resort development, to provide for working capital and for other corporate purposes.

As referenced above, we have entered into a $75 million mortgage loan facility with Citigroup Global Markets Realty Corp. and The Travelers Insurance Company. This secured mortgage financing has an annual interest rate equal to 5.835% with respect to $50 million of the outstanding principal amount, and 9.21% with respect to $25 million of the outstanding principal amount, a term of ten years and customary financial and operating debt compliance covenants, such as:


	•	a minimum debt service coverage ratio, representing the combined EBITDA (adjusted for non-recurring items, unusual items, infrequent items and asset impairment charges) of the two resorts securing this facility divided by their combined annual interest expense and principal amortization, of 1.50;

	•	a maximum level of the amount of our debt under this secured mortgage facility relative to the combined fair value of the two resorts securing this facility; and

	•	a prohibition on our ability to repay the facility for the earlier of: (1) two years following the securitization of the loan to other parties or (2) four years.

The following table summarizes Predecessor’s contractual obligations as of September 30, 2004:

In addition to the mandatorily redeemable ownership interests shown above, Predecessor also is obligated to redeem the Class A and Class B shares of any shareholder of Great Lakes who dies or becomes disabled. In addition, Great Lakes is obligated to redeem Class A shares and has the right, but is not obligated, to redeem Class B shares upon the retirement, bankruptcy or termination of employment of any shareholder or the attempted assignment, pledge or foreclosure of Class A or Class B shares. The redemption price is calculated by a formula using Great Lakes’ net operating income and a multiple based on the type of triggering event.

The following table is a pro forma presentation of our contractual obligations as of September 30, 2004:

Predecessor had $2,401 of cash and cash equivalent assets and a working capital deficit (current assets less current liabilities) of $(16,156) at September 30, 2004. Predecessor had $3,490 of cash and cash equivalent assets at December 31, 2003 compared to $4,790 at December 31, 2002, and a working capital deficit of $(16,618) at December 31, 2003, compared to $(8,292) at December 31, 2002.

On a pro forma basis, we had $79,841 of cash and cash equivalent assets and working capital of $63,034 at September 30, 2004. These increases to cash and working capital, as compared to Predecessor historical amounts, are primarily due to net cash provided by the initial public offering.

Comparison of Nine Months Ended September 30, 2004 to Nine Months Ended September 30, 2003

Operating Activities. Net cash provided by (used in) operating activities was $(1,727) for the nine months ended September 30, 2004, compared to net cash provided by operating activities of $7,973 during the nine months ended September 30, 2003. The decrease resulted primarily from a net loss in the 2004 period and higher levels of minority interests in the 2003 period.

Investing Activities. Net cash used in investing activities was $39,809 for the nine months ended September 30, 2004 compared to net cash used in investing activities of $31,360 during the nine months ended September 30, 2003. This increased use of cash resulted primarily from increased capital expenditures in the 2004 period as compared to the 2003 period, offset by a decrease in equity escrow in the 2004 period.

Financing Activities. Net cash provided by financing activities was $40,447 for the nine months ended September 30, 2004 compared to net cash provided by financing activities of $22,102 for the nine months ended September 30, 2003. This increase in cash provided by financing activities was due primarily to increased member contributions in the 2004 period.

Comparison of Year Ended December 31, 2003 to Year Ended December 31, 2002

Operating Activities. Net cash provided by operating activities was $8,126 for the year ended December 31, 2003, compared to net cash provided by operating activities of $376 during the year ended December 31, 2002. The increase resulted primarily from higher levels of depreciation and amortization in 2003, and a smaller net loss in 2003.

Investing Activities. Net cash used in investing activities was $64,280 for the year ended December 31, 2003 compared to net cash used in investing activities of $46,276 during the year ended December 31, 2002. This increased use of cash resulted primarily from higher levels of capital expenditures in 2003 compared to 2002.

Financing Activities. Net cash provided by financing activities was $54,854 for the year ended December 31, 2003 compared to net cash provided by financing activities of $49,797 for the year ended December 31, 2002. This change was due to increased amounts of proceeds from long-term debt in 2003 compared to 2002.

Comparison of Year Ended December 31, 2002 to Year Ended December 31, 2001

Operating Activities. Net cash provided by operating activities was $376 for the year ended December 31, 2002 compared to net cash provided by operating activities of $5,580 during the year ended December 31, 2001. The decrease resulted primarily from lower levels of net income in 2002.

Investing Activities. Net cash used in investing activities was $46,276 for the year ended December 31, 2002 compared to net cash used in investing activities of $9,166 during the year ended December 31, 2001. This increased use of cash was due primarily to purchases of property, plant and equipment of $46,224 in 2002 compared to $9,166 in 2001.

Financing Activities. Net cash provided by financing activities was $49,797 for the year ended December 31, 2002 compared to net cash provided by financing activities of $2,822 for the year ended December 31, 2001. This increase in cash provided by financing activities was due primarily to increased proceeds from long-term debt and member contributions in 2002 compared to 2001.

Our resort properties are able to change room and amenity rates on a daily basis, so the impact of higher inflation can often be passed along to customers. However, a weak economic environment that decreased overall demand for our products and services could restrict our ability to raise room and amenity rates to offset rising costs.

The Financial Accounting Standards Board, or FASB, recently issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” or SFAS 150. This statement requires issuers to classify as liabilities (or assets in some circumstances) three classes of freestanding financial instruments that embody obligations for the issuer. Previously, many such instruments had been classified as equity. A freestanding financial instrument is an instrument that is entered into separately and apart from any of the entity’s other financial instruments or equity transactions, or that is entered into in conjunction with some other transaction and is legally detachable and separately exercisable, such as certain put and call options. These provisions are effective for financial instruments entered into or modified after May 31, 2003, and otherwise are effective at the beginning of the first interim period beginning after June 15, 2003. As a result of applying SFAS 150 in accordance with this guidance from the FASB, Predecessor recorded a loss from a cumulative effect of a change in accounting principle of $460 on July 1, 2003. Additionally, Predecessor included in its liabilities as of September 30, 2004 liabilities related to these financial instruments with a fair value of $11,194.

On November 7, 2003, the FASB issued FASB Staff Position, or FSP, 150-3 indefinitely deferring the measurement provisions of SFAS 150 with respect to certain minority interests in consolidated ventures entered into prior to November 5, 2003.

Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. In the future, we intend to use derivative financial instruments to manage or hedge interest rate risks related to our borrowings. We do not intend to use derivatives for trading or speculative purposes and anticipate entering into derivative contracts only with major financial institutions with investment grade credit ratings.

As of September 30, 2004, we had pro forma total indebtedness of approximately $123,055. This debt consisted of:


	•	$75,000 of fixed rate debt secured by two of our resorts;

	•	$29,475 of variable rate debt secured by one of our resorts;

	•	$8,063 of fixed rate debt recognized as a liability related to certain bonds issued by the City of Sheboygan and $3,985 of fixed rate debt recognized as a liability related to a loan from the City of Sheboygan. These liabilities will be satisfied by certain future minimum guaranteed amounts of real and personal property tax payments and room tax payments to be made by the Sheboygan resort;

	•	$5,009 of variable rate debt secured by our Williamsburg resort that is under construction; and

	•	$1,523 of fixed rate debt secured by our Pocono Mountains resort that is under construction.

Between September 30, 2004 and the consummation of the initial public offering, we incurred approximately $18,000 of additional indebtedness in connection with our Williamsburg and Pocono Mountains resort developments. As a result, our total indebtedness as of the date of the initial public offering was approximately $141,055. Approximately $52,484, or 37% of that amount, is variable rate debt. In addition, we have entered into interest rate swap agreements for approximately $10,168 of our variable rate debt. As a result, approximately 70% of our total indebtedness, as of December 31, 2004, is subject to fixed interest rates.

Giving effect to the interest rate swaps described above, if LIBOR and the prime rate were to increase by 1%, or 100 basis points, the increase in interest expense on our unhedged variable rate debt would decrease future earnings and cash flows by approximately $423 annually. If LIBOR and the prime rate were to decrease by 1%, or 100 basis points, the decrease in interest expense on our unhedged variable rate debt would be approximately $423 annually.

We own and operate four existing Great Wolf Lodge® resorts, our signature northwoods-themed resorts, and one Blue Harbor Resort, a nautical-themed property. In addition, we own two Great Wolf Lodge resorts that are under construction and scheduled to open for business during 2005. We also are the licensor and manager of an additional Great Wolf Lodge resort in Niagara Falls, Ontario that is owned and under development by an affiliate of Ripley Entertainment Inc., or Ripley’s. We are currently evaluating 12 to 14 additional markets for potential future development of Great Wolf Lodge resorts, six of which are in active site negotiation. We anticipate that most of our future resorts will be developed under our Great Wolf Lodge brand, but we may develop additional nautical-themed resorts in other appropriate markets.


	•	Suites: approximately 270 to 400 family suites that sleep from six to ten people and each include a wet bar, microwave oven, refrigerator and dining and sitting area.

	•	Waterpark: an approximately 34,000 to 82,000 square-foot indoor waterpark highlighted by our signature 12-level treehouse water fort. Our water fort is an interactive water experience for the entire family and features over 60 water effects, including spray guns, fountains, valves and hoses, has cargo netting and suspension bridges, and is capped by an oversized bucket that dumps between 700 and 1,000 gallons of water every five minutes. Our waterparks also feature high-speed body slides and inner tube waterslides that wind in and out of the building into a splash-down pool, a lazy river, activity pools and large free-form hot tubs. Our room rates include use of the waterpark by four to six guests, depending on the type of room.

	•	Food and Beverage: themed restaurants, such as our: Camp Critter Bar & Grille, which features a two-story realistic tree with a canopy of leaves and canvas-topped booths with hanging lanterns, giving guests the impression that they are dining in a northwoods forest camp; Bear Claw Café ice cream shop and confectionery; and waterpark snack shop.

	•	Amenities and Activities: our Youkon Jack’s and Northern Lights game arcades, full-service Aveda® concept spa, Buckhorn Exchange gift shop, Iron Horse fitness center, two-story animated clocktower, Cub Club children’s activity program, meeting rooms and seasonal, holiday and other special activities.

Our four resorts open during the entire twelve-month period ended September 30, 2004, had the following financial performance:


	•	$301.75 Total RevPOR;

	•	65.1% occupancy;

	•	$137.61 RevPAR; and

	•	$196.51 Total RevPAR.

We were formed in May 2004 to succeed to the family entertainment resort business of our predecessor companies, The Great Lakes Companies, Inc. and a number of its related entities, which we refer to collectively as Great Lakes. Great Lakes has developed and operated hotels since 1995. In 1999, Great Lakes began its resort operations by purchasing the Great Wolf Lodge in Wisconsin Dells, Wisconsin and developing the Great Wolf Lodge in Sandusky, Ohio, which opened in 2001. In 2003, Great Lakes opened two additional Great Wolf Lodge resorts, one in Traverse City, Michigan and the other in Kansas City, Kansas. In June 2004, Great Lakes opened the Blue Harbor Resort in Sheboygan, Wisconsin. Immediately prior to the completion of the initial public offering and the formation transactions, Great Lakes had two additional Great Wolf Lodge resorts under construction, one in Williamsburg, Virginia and the other in the Pocono Mountains region of Pennsylvania, that are scheduled to open in the Spring and Fall of 2005, respectively.

Upon the closing of the initial public offering and the formation transactions, we acquired each of these resorts and the resorts currently under construction, as well as certain resort development and management operations, in exchange for an aggregate of 14,032,896 shares of our common stock and $98.1 million. As of September 30, 2004, we had pro forma total indebtedness of approximately $123.1 million. Between September 30, 2004 and the consummation of the initial public offering, we incurred approximately $18,000 of additional indebtedness in connection with our Williamsburg and Pocono Mountains resort developments.

We believe we are the market leader for family entertainment resorts that feature indoor waterparks and other family-oriented amenities in the United States. Our competitive strengths include:


	•	Unforgettable Family Resort Experience. Each of our resorts provides a welcome opportunity for families to spend quality time together, relax and reconnect. In addition to our indoor waterparks, our resorts provide other activities and amenities that the entire family can enjoy together. Our family amenities and activities include themed restaurants, a game arcade, ice cream shop and confectionery, gift shop, snack shop, animated clocktower and fireside bedtime stories. We also have amenities and activities tailored to each member of the family, including our full-service Aveda concept spa, Cub Club for kids and fitness room. Our resorts also offer special events, including seasonal and holiday activities, wild animal and nature educational programs and other special events. We believe that our


		focus on delivering an unforgettable family resort experience appeals to our target customers and results in repeat visits and referrals. For the twelve months ended September 30, 2004, we generated approximately 48% of our room revenue from repeat visitors and referral guests.

	•	Value, Comfort and Convenience. Guest rooms at each of our resorts are spacious and comfortable suites that generally range in size from approximately 385 square feet to 1,900 square feet and include a wet bar, microwave, refrigerator and dining and sitting area. Many of the suites have specific themes that are geared toward enhancing our younger guests’ experience, including our KidCabin® and Wolf Den Suites, which have a partitioned room with bunk beds designed as log cabins and northwoods forest dens, respectively. All of our resorts are within a convenient driving distance of our large target customer bases. Because our indoor waterparks and our other amenities generally are not impacted by weather conditions, we offer our guests a reliable experience. On average, a two-night stay at our resorts costs a family of four approximately $600, making it a very affordable family vacation option.

	•	Favorable Market Trends. We believe recent vacation trends favor our Great Wolf Lodge concept as the number of families choosing to take shorter, more frequent vacations that they can drive to has increased over the past several years. We believe that these trends will continue and that we are well positioned to take advantage of them. We believe our resorts are less affected by changes in economic cycles, as drive-to destinations are less expensive and more convenient than destinations that require air travel. In addition, we have identified over 50 markets in the United States that, according to Third Wave Research, each have populations in excess of five million people located within a convenient driving distance.

	•	Market Presence and Barriers to Entry. We are the largest owner and operator of family entertainment resorts with indoor waterparks in the United States based on the number of resorts in operation. We believe this market presence gives us a significant competitive advantage in attracting guests and efficiently developing additional resorts. We believe our closest competitor has one operating themed indoor waterpark resort and another under construction. In addition, we believe the significant barriers to entry present in our industry segment, including operational complexity, substantial capital requirements, availability of suitable sites in desirable markets and a difficult, multi-year permitting process, discourage other companies in the lodging and entertainment industries from developing similar family entertainment resorts. A new Great Wolf Lodge resort typically takes from one to three years to develop, which includes market selection, site selection and permitting, an additional 15 to 18 months to build and costs approximately $65 million to $95 million.

	•	Focus on Safety. We invest heavily in safety measures in the design and operation of our resorts. For example, we specifically design our waterparks with attention to sightlines and safety precautions and use one of the most respected training methods in the water safety industry to train each of our lifeguards. We design and construct our indoor waterparks with state-of-the-art air quality and water treatment systems. We also maintain and periodically upgrade our facilities to ensure that we provide our guests with best-in-class safety measures and systems.

	•	Experienced Management Team and Committed and Motivated Staff. Our senior management team has an average of approximately 16 years of experience in the hospitality, family resort and real estate development industries and has significant expertise in operating complex, themed, family entertainment resorts featuring indoor waterparks. In addition, we have a team of skilled, loyal and committed employees at each of our resorts. We offer our resort employees a number of benefits, including a pleasant and rewarding work environment, career-oriented training, the ability to obtain consistent year-round work, which is uncommon in the resort industry, and career growth opportunities. As a result, we believe our employees are committed to delivering a superb customer experience and personally assuring that our guests fully enjoy their family vacation.

Our primary business objective is to increase long-term stockholder value by executing our internal and external growth strategies. Our primary internal growth strategies are to:


	•	Increase Total Resort Revenue. We intend to increase total resort revenue by increasing:


	•	Average Room Rate: We plan to increase our average room rate over time by driving demand for our resorts and focusing on yield management techniques. We intend to increase demand through aggressive sales and marketing and increased visibility and by enhancing our brand image. We plan to employ our yield management techniques to project demand in order to effectively direct our sales and marketing efforts and selectively increase room rates. We believe that our focus on optimizing the relationship between room rates and occupancies will allow us to maximize profitability.

	•	Average Occupancy: We intend to maintain high occupancy levels during peak times and will focus on increasing our off-peak occupancies. Our off-peak occupancy levels generally occur in May, September and during the middle of the week. Our occupancy levels are affected by school calendars, with the summer months, spring break period and other school holidays achieving the highest occupancy levels. We will continue to seek to improve off-peak occupancy levels by holding special events and targeting group sales and conferences.

	•	Other Revenue: We provide our guests with a self-contained vacation experience and attempt to capture a significant portion of their spending on food and beverage, entertainment and merchandise. Each Great Wolf Lodge generally contains at least one themed restaurant, an ice cream shop and confectionery, snack shop, an Aveda concept spa, gift shop and game arcade. Our average non-room revenue, including the revenue from these amenities, was approximately $91 per occupied room night for the twelve months ended September 30, 2004. By providing these additional revenue-generating amenities, we seek to maximize the amount of time and money spent on-site by our guests. We have also entered into a number of co-marketing agreements with strategic partners and will enter into additional co-marketing agreements in the future in order to increase other revenue.


	•	Leverage Our Economies of Scale. We will take advantage of the following economies of scale:


	•	Increased Purchasing Power: We intend to capitalize on our increased purchasing power with respect to operating supplies, food and beverage, insurance and employee benefits. As the number of resorts we own and operate increases, we expect to be able to leverage our increased buying volume and power to obtain more advantageous and predictable pricing on commodity goods and services. In addition, we intend to manage increases and fluctuations in the cost of electricity, water and natural gas for each of our resorts by entering into volume-based contracts.

	•	Centralized Services: By centralizing certain of our services, we will focus on decreasing our per unit costs, increasing our control over those services and be in a position to deliver a greater quality of service to our customers. For example, our central reservations call center operates every day of the year, has approximately 75 full and part-time employees and accepts reservations for all of our resorts. The call center also has the capacity to efficiently handle high call volumes and will require only limited additional incremental costs over the next several years as we increase our portfolio of resorts.


	•	Build Upon Our Existing Brand Awareness and Loyalty. Our Great Wolf Lodge brand is symbolized by our distinctive and easily identifiable theming, from our captivating northwoods log cabin exterior, to our Native American totemic waterpark theme and signature treehouse water fort, to our mascots and recognizable logos and merchandise. We believe we have fostered strong customer and brand loyalty,


		which is evidenced by our high levels of repeat and referral guests. We will continue to focus on ensuring that each of our guests associates the Great Wolf Lodge brand with a memorable and consistent family vacation experience.


	•	Capitalize on First-Mover Advantage. We intend to be the first to develop and operate family entertainment resorts featuring indoor waterparks in our selected target markets. We intend to continue to leverage our development expertise, existing platform and model and our access to capital to take advantage of the significant barriers to entry associated with the development of large family entertainment resorts with indoor waterparks like our Great Wolf Lodge resorts. We will seek to set the standard for quality, build on visible sites and capitalize on the opportunity to be located near other popular local attractions that draw our target customers. We believe that the combination of our first mover advantage and the significant barriers to entry in our target markets provide us with a competitive advantage.

	•	Focus on Development and Strategic Growth Opportunities. Family entertainment resorts featuring indoor waterparks are a relatively new concept and a growing segment of the resort and entertainment industries. We intend to focus on this growth opportunity by:


	•	Building in Target Markets: We intend to develop and open at least two new owned resorts each year for the next several years. We have already identified potential development locations in 12 to 14 of these target markets that meet our other criteria for successful development. We are in negotiations for sites in six of these markets that, if appropriate, will provide ample land for us to expand or sell out-lots in the future for complementary uses. A new resort, from market selection to opening, can take over four years to develop and build. We believe that our experience will enable us to more efficiently develop and build new resorts in our target markets.

	•	Licensing Our Resort Concept Internationally: We plan to selectively seek licensing and management opportunities internationally. Similar to our arrangement with Ripley’s in Niagara Falls, Ontario, we intend to enter into license and management agreements with reputable companies that have local market knowledge in order to increase revenues and expand the reach of our Great Wolf Lodge brand.

	•	Forming Strategic Partnerships: We will consider strategic partnerships on a selective basis. For example, we have had discussions with several established companies that control superior sites in certain of our target markets and have indicated an interest in jointly developing a Great Wolf Lodge at or near one of their existing entertainment venues.

	•	Expanding and Enhancing Existing Resorts: We intend to focus on growth opportunities at our existing resorts by adding revenue-enhancing features that drive ancillary vacation spending to certain of our resorts and meet our target returns, including non-water based attractions. We also intend to pursue incremental revenue-generating opportunities, such as expanding the number of rooms and adding condominium units at certain of our resorts. In addition, we will consider adding conference centers at existing resorts to capture convention and other business travel revenue.


	•	Continue to Innovate. We intend to leverage our in-house expertise, in conjunction with the knowledge and experience of our third-party suppliers and designers, to develop and implement the latest innovations in family entertainment activities and amenities, including waterpark attractions. We have received numerous industry awards for our guests’ experiences, our operations, innovative development, sales and marketing initiatives and materials, and employee retention.

We operate in the family entertainment resort segment of the travel and leisure industry.

The concept of a family entertainment resort with an indoor waterpark was first introduced in Wisconsin Dells, Wisconsin and has evolved there over the past 15 years. In an effort to boost occupancy and daily rates, as well as capture off-season demand, hotel operators in the Wisconsin Dells market began expanding indoor pools and adding waterslides and other water-based attractions to existing hotels and resorts. The success of these efforts prompted several local operators to build new, larger destination resorts based primarily on this concept, including the Wilderness Hotel & Golf Resort, Treasure Island, Raintree Resort, Kalahari and the Great Wolf Lodge (formerly known as the Black Wolf Lodge), which Great Lakes purchased in 1999.

We believe that these properties, which typically are themed and include other resort features such as arcades, retail shops and full food and beverage service in addition to the indoor waterpark, have historically outperformed standard hotels in the market. According to United States Realty Consultants, Inc., or USRC, the six largest waterpark resorts in the Wisconsin Dells had a premium of 15 occupancy points and an ADR premium of $110 in 2003 as compared to the franchised non-waterpark hotels in the market. We believe that the rate premiums and increased market share in the Wisconsin Dells for hotels and resorts with some form of an indoor waterpark can be attributed to several factors, including the ability to provide a year-round vacation destination without weather-related risks, the wide appeal of water-based recreation and the favorable trends in leisure travel discussed below. Although the rate premiums and increased market share in Wisconsin Dells have been significant, no operator or developer other than Great Lakes has established a regional portfolio of family entertainment resorts featuring indoor waterparks.

No standard industry definition for a family entertainment resort featuring an indoor waterpark has developed. A recent USRC survey identified a total of 45 hotels with indoor waterpark facilities in the United States and Canada, of which 17 meet USRC’s definition of an indoor waterpark destination resort. We do not believe that the non-destination resorts in the USRC survey offer a comparable experience and quality level to compete with our resorts. Most of our resorts are located in well-established, traditional drive-to family vacation destinations, which allows us to leverage the popularity of these destinations by offering a complementary entertainment option to existing venues and a high-quality family resort alternative. In addition, many of these destinations offer beaches, theme parks, waterparks, amusement parks and many other forms of outdoor activities that are only available on a seasonal basis. Within our enclosed resort environment, our guests can enjoy a total resort experience year round, regardless of weather conditions.


(1)	Our indoor entertainment areas generally include our indoor waterpark, game arcade, children’s activity room and fitness room, as well as our Aveda concept spa, 3D virtual reality theater, Wiley’s Woods and party room in the resorts that have such amenities.
(2)	Revenue per available room represents the total room revenue per total available rooms for the twelve months ended September 30, 2004, calculated by multiplying the occupancy by the average daily rate.
(3)	Total revenue per occupied room is calculated by adding the average daily rate and other revenue per occupied room.
(4)	Great Lakes purchased this property in November 1999.
(5)	Prior to May 2004, we operated this resort as a Great Bear Lodge.
(6)	Our Sheboygan property is branded as a Blue Harbor Resort. This resort is subject to a 98-year and 11-month ground lease with the Redevelopment Authority of the City of Sheboygan.
(7)	Our Blue Harbor Resort also features 64 individually owned two and four bedroom condominium units.
(8)	Ripley’s, our licensee, owns this resort. We are assisting them with construction management and other pre-opening matters related to the Great Wolf Lodge in Niagara Falls. We have granted Ripley’s a license to use the Great Wolf Lodge name for this resort for ten years after opening. We have agreed to enter into a management agreement, pursuant to which we expect to operate the resort on behalf of Ripley’s for five years, and a central reservations agreement. In conjunction with this project, we expect to receive a one-time construction fee and ongoing license, central reservations and management fees. For more information see “—Properties Under Construction—Great Wolf Lodge of Niagara Falls, Ontario.”

Northwoods Lodge Theme. Each of our Great Wolf Lodge resorts has a northwoods lodge theme, with a rustic log exterior and cultured stone veneer that provides a dramatic and authentic log cabin appearance. Our three-story, approximately 5,000 to 7,800 square-foot atrium lobbies are designed in a northwoods cabin motif with exposed timber beams, massive stone fireplaces, mounted wolves and other northwoods creatures, North American art and an animated two-story clocktower that provides theatrical entertainment for our younger guests. Throughout the common areas and in each guest suite, we use sturdy, rustic furniture that complements

Guest Suites. All of our guest suites are themed luxury suites ranging in size from approximately 385 square feet to 880 square feet. Substantially all of our rooms also include a private deck or patio. Our resorts offer up to nine room styles to meet the needs and preferences of our guests, including a selection of rooms with lofts, jacuzzis and fireplaces. Our standard rooms include two queen beds and a third queen bed in the sleeper sofa, a wet bar, microwave oven, refrigerator and dining and sitting area, and can accommodate up to six people. Our specialty rooms can accommodate up to seven people and provide a separate area for children, including our KidCabin Suites that feature a log cabin bunk bed room, our Wolf Den Suites that feature a themed den enclosure with bunk beds and our KidKamp Suites that feature bunk beds in a themed tent enclosure. We also offer larger rooms, such as our Majestic Bear Suite, which has a separate bedroom with a king bed, a large dining and living area and can accommodate up to eight people. Our guest suites have wallpaper, artwork and linens that continue the northwoods theme and provide for full room service, pay-per-view movies and pay-per-play video games.

Indoor Waterparks. Our existing Great Wolf Lodge indoor waterparks are maintained at a warm and comfortable temperature, range in size from approximately 34,000 to 43,000 square feet and have a northwoods, totemic theme, including four-story totem poles, decorative rockwork and plantings, all of which is contained in a five-story wooden beam structure. The focus of each Great Wolf Lodge waterpark is our signature 12-level treehouse water fort. The fort is an interactive water experience for the entire family that features over 60 water effects, including spray guns, fountains, valves and hoses, has cargo netting and suspension bridges and is capped by an oversized bucket that dumps between 700 and 1,000 gallons of water every five minutes. Our Blue Harbor Resort has a 43,000 square-foot Breaker Bay waterpark including our 12-level Lighthouse Pier water fort featuring a 1,000 gallon tipping ship. Our waterparks also feature high-speed body slides and inner tube waterslides that wind in and out of the building into a splash-down pool, smaller slides for younger children, zero-depth water activity pools for small children with geysers, a water curtain, fountains and tumble buckets, a lazy river, additional activity pools for basketball, open swimming and other water activities and two large free-form hot tubs, one of which is for adults-only. Each waterpark is constructed with a special nonslip floor surface for maximum traction and has ample deck space and good sight lines to enhance parental oversight. Our resorts under construction will have indoor waterparks ranging in size from approximately 55,000 to 82,000 square feet with additional attractions such as wave pools and water rollercoasters.

Approximately one million gallons of water are cycled through each of our waterparks every hour in order to ensure cleanliness. Our primary operating equipment includes standard water pumps, tanks and filters, located in separate spaces to allow for quick repairs or replacement. The water and air quality of our waterparks is continuously monitored by computerized water and air treatment systems and highly trained technicians in order to ensure a clean and safe environment. We seek to minimize the use of chlorine. Most of the water purification is performed by an advanced ozone water treatment system, which ensures the highest water quality and an absence of the typical chlorine odor found in indoor pools. In addition, the water within each area circulates every hour to maximize hygiene. Each waterpark area has its own water system so that a problem with any one area can be quickly contained and does not affect the operations of the rest of the waterpark.

We expect recurring annual capital expenditures for each resort to be approximately 3-4% of the resort’s revenues, including the repair and maintenance of our waterpark equipment. As much of the equipment used in our waterparks is designed for outdoor application and capable of withstanding intense physical use and the elements year-round, wear and tear is minimal and we believe our equipment has a long useful life. In addition, our water purification system minimizes airborne chemicals and their potentially corrosive effects on materials and equipment and helps extend the life of our equipment.

The safety of our guests is a primary focus in our waterparks. Our lifeguards receive one of the highest levels of training and certification in the industry, provided by Jeff Ellis & Associates, Inc., an international

Our indoor waterparks are open from 8:30 a.m. until 10:00 p.m. seven days a week and admission is generally only available to resort guests. Our general guests-only policy, at all of our resorts other than our Sheboygan resort, allows our guests to avoid the long lines and other inconveniences of daily admission-based waterparks.

Amenities. Each of our existing resorts features, and each of our resorts under construction will feature, a combination of the following amenities. Our Blue Harbor resort amenities have similar appropriate nautical-themed names.


	•	Themed Restaurants. Our resorts feature one or more full-service, themed restaurants and a themed bar and grille that serves alcoholic beverages and sandwiches. Our themed restaurants include the Gitchigoomie Grill, with a life-sized sea plane suspended over the dining area, Lumber Jack’s Cook Shanty, the Loose Moose Bar & Grill, and the Camp Critter Bar & Grille, which features a two-story realistic tree with a canopy of leaves and canvas-topped booths with hanging lanterns, giving guests the impression that they are dining in a northwoods forest campsite. Our Blue Harbor Resort features our On the Rocks Bar & Grille and Rusty Anchor Buffet.

	•	Ice Cream Shop and Confectionery. Each of our Great Wolf Lodge resorts, with the exception of our Sandusky resort, has a Bear Claw Café ice cream shop and confectionery that provides sandwiches, Starbucks® coffee, pastries, ice cream, candies, home-made fudge and other snacks that families can share together. Our Blue Harbor Resort has a Sweetshop Landing confectionery.

	•	Snack Bar. Each of our waterparks has a snack bar that offers a variety of sandwiches, pizzas and similar foods with ample seating so that our guests do not have to leave the warmth and comfort of the waterparks.

	•	Gift Shop. Each of our resorts has a Buckhorn Exchange or Precious Cargo gift shop that provides unique themed gifts, including Great Wolf Lodge logo merchandise, souvenirs, collectibles and stuffed animals. The gift shop also offers resort toys, swimwear and personal necessities.

	•	Full-Service Spa. Each of our resorts, with the exception of our Sandusky resort, has an Aveda concept or Cameo spa that provides a relaxing get-a-way with a full complement of massages, facials, manicures, pedicures and other spa treatments, as well as yoga classes and a wide selection of Aveda products. We intend to add an Aveda concept spa to our Sandusky Great Wolf Lodge resort.

	•	Game Arcade. Our Youkon Jack’s or Northern Lights game arcades range in size from approximately 3,900 to 7,000 square feet, have over 70 games of skill and are divided into distinct areas with video and skill games that appeal to children of different ages. Tickets won from the games may be exchanged for a wide selection of merchandise that appeals to our younger guests.

	•	Cub Club. Our Cub Club rooms are professionally staffed children’s activity rooms with programmed activities, including arts and crafts, games and nature hikes. Cub Club is a frequent guest program for our younger guests. Cub Club membership is open to all children who have stayed at one of our resorts and includes a periodic newsletter, exclusive offers, rewards for each stay and a free meal and dessert when members visit during their birthday month. We currently have more than 10,000 Cub Club members. Our Blue Harbor Resort features a Crew Club frequent guest program and activities that are similar to our Cub Club.


	•	Animated Clocktower. Each of our Great Wolf Lodge resorts, with the exception of our Sandusky resort, has a two-story animated clocktower located in the resort’s main atrium lobby. The clocktower provides daily theatrical entertainment through talking and singing trees, animals and northwoods figures. Our Blue Harbor Resort features a 2,000 gallon water fountain featuring a hand-blown glass sculpture and a music and light show located in its main atrium lobby.

	•	Outdoor Water Amenities. Outdoor water amenities complement our indoor waterpark facilities and allow our guests to take advantage of favorable weather conditions. Our outdoor water amenities include activity pools and a large deck or patio area and are generally open from May until September. Our Wisconsin Dells resort also has outdoor waterslides.

	•	Fitness Room. Our fitness rooms contain aerobic exercise equipment and weight-lifting machines with numerous televisions for active viewing.

	•	Meeting Space. Our resorts offer meeting rooms ranging from approximately 3,000 to over 7,000 square feet that are available for guest meetings, including a 99-seat state-of-the-art symposium-style room at our Traverse City resort.

	•	Conference Facility. Our Blue Harbor Resort features an approximately 21,000 square-foot attached conference facility that provides spaces ranging from approximately 1,000 square feet to 10,000 square feet for a number of different types of conferences and conventions.

	•	Biko’s 3D Theatre. Our 3D theatres, located at our Wisconsin Dells and Traverse City resorts, provide a 12- minute virtual reality adventure for children and their parents.

	•	Wiley’s Woods. Wiley’s Woods is an interactive indoor live video game in a four-story, approximately 16,000 square-foot structure located at our Wisconsin Dells resort. Children ages three and older wear electronic wrist bands and gain points by navigating slides, bridges, nets and mazes and performing a variety of tasks on over 60 machines and gadgets. Admission to Wiley’s Woods is free for all resort guests and is open to the public for a fee of $6 for children and $9 for adults, with free admission for children under the age of three.

Our operating resorts are currently located in Wisconsin Dells, Wisconsin; Sandusky, Ohio; Traverse City, Michigan; Kansas City, Kansas; and Sheboygan, Wisconsin.

Our Great Wolf Lodge, located on 25 acres in Wisconsin Dells, Wisconsin, was originally constructed in 1997 and acquired by Great Lakes in 1999.

Wisconsin Dells is a renowned family vacation destination that features a number of entertainment options, including amusement parks, museums, live entertainment and other indoor waterparks. According to its Visitor and Convention Bureau, the Wisconsin Dells area attracts over two and a half million visitors each year and in 2003 attracted over $670 million of vacation-related expenditures. Wisconsin Dells is within a one-hour drive from Madison, Wisconsin; a two-hour drive from Milwaukee, Wisconsin; and a three and one-half hour drive from Chicago, Illinois. According to Third Wave Research, there are approximately 16.0 million people who live within 180 miles of the resort.

The Great Wolf Lodge of Wisconsin Dells has 309 guest suites and an approximately 38,000 square-foot indoor waterpark that includes our signature treehouse water fort. The resort offers a number of revenue-enhancing amenities, including a themed restaurant, Loose Moose Bar & Grill, Bear Claw Café ice cream shop and confectionery, Youkon Jack’s game arcade, Buckhorn Exchange gift shop, full-service Aveda concept spa,

For the twelve months ended September 30, 2004, the resort experienced average occupancy of 61.7%, an average daily room rate of $194.58, average revenue per available room of $120.14 and total revenue per occupied room of $271.34.

In spring 2005, we intend to begin construction of at least 64 condominium units. In connection with this project, we intend to expand our indoor waterpark accordingly, which we expect would be complete in 2005.

In March 2001, we opened our Great Bear Lodge in Sandusky, Ohio, which has the same theming as each of our Great Wolf Lodge resorts and was re-named the Great Wolf Lodge of Sandusky in May 2004. Sandusky is a family destination near Cleveland, Ohio that is well known for its amusement parks. According to the Sandusky/ FIB Erie County Visitors and Convention Bureau, Sandusky attracts approximately seven million visitors each year. Sandusky is within a one-hour drive from Cleveland, Ohio; a two-hour drive from Detroit, Michigan; a two and one-half-hour drive from Columbus, Ohio; and a three-hour drive from Pittsburgh, Pennsylvania. According to Third Wave Research, there are approximately 23.7 million people who live within 180 miles of the resort.

The Great Wolf Lodge of Sandusky is located on approximately 15 acres and has 271 guest suites and an approximately 34,000 square-foot indoor waterpark that includes our signature treehouse water fort, tube slides, body slides, hot tubs and a lazy river. The resort offers a number of revenue-enhancing amenities, including our Gitchigoomie Grill and Lumber Jack’s Cook Shanty themed restaurants, Northern Lights game arcade, Buckhorn Exchange gift shop and meeting rooms. The resort also includes non-revenue-generating amenities such as our Cub Club room and Iron Horse fitness center.

For the twelve months ended September 30, 2004, the resort experienced average occupancy of 68.4%, an average daily room rate of $231.38, average revenue per available room of $158.34 and total revenue per occupied room of $324.16.

In March 2003, we opened our Great Wolf Lodge in Traverse City, Michigan. Traverse City is a traditional family vacation destination with skiing and lake activities. According to the Traverse City Convention and Visitors Bureau, Traverse City attracts approximately two million visitors each year. Traverse City is within a three-hour drive from Grand Rapids, Michigan and the Saginaw/ Flint, Michigan area and a four-hour drive from Detroit, Michigan. This resort also draws guests from Northern Indiana and Ohio. According to Third Wave Research, there are approximately 7.6 million people who live within 180 miles of the resort.

The Great Wolf Lodge of Traverse City is located on approximately 48 acres and has 281 guest suites and an approximately 40,000 square-foot indoor waterpark that includes our signature treehouse fort and Howling Wolf family raft. The resort offers a number of revenue-enhancing amenities, including our Camp Critter Bar & Grille and Loose Moose Cottage themed restaurants, Northern Lights game arcade, full-service Aveda concept spa, Bear Claw Café ice cream shop and confectionery, Biko’s 3D virtual reality adventure theater, Buckhorn Exchange gift shop and meeting rooms. The resort also includes non-revenue-generating amenities such as our animated two-story clocktower, Cub Club room and Iron Horse fitness center.

For the twelve months ended September 30, 2004, the resort experienced average occupancy of 68.9%, an average daily room rate of $222.71, average revenue per available room of $153.47 and total revenue per occupied room of $321.00.

In May 2003, we opened our Great Wolf Lodge in Kansas City, Kansas as part of the Village West tourist district that includes a Cabela’s superstore, Nebraska Furniture Mart and the Kansas Nascar Speedway. According to the Kansas City Convention and Visitors Bureau, Kansas City attracts approximately five million visitors each year. Kansas City is within a one-hour drive from Topeka, Kansas; a two and one-half hour drive from Jefferson City, Missouri; and a three-hour drive from Lincoln, Nebraska. According to Third Wave Research, there are approximately 7.0 million people who live within 180 miles of the resort.

The Great Wolf Lodge of Kansas City is located on approximately 17 acres and has 281 guest suites and an approximately 40,000 square-foot indoor waterpark that includes our signature treehouse water fort. The resort offers a number of revenue-enhancing amenities, including our Camp Critter Bar & Grille themed restaurant, Bear Claw Café ice cream shop and confectionery, full-service Aveda concept spa, Northern Lights game arcade, Buckhorn Exchange gift shop and meeting rooms. The resort also includes non-revenue-generating amenities such as our animated two-story clocktower, Cub Club room and Iron Horse fitness center.

For the twelve months ended September 30, 2004, the resort experienced average occupancy of 61.8%, an average daily room rate of $195.06, average revenue per available room of $120.50 and total revenue per occupied room of $289.27.

In June 2004, we opened our Blue Harbor Resort on an approximately 12-acre property on the shores of Lake Michigan in Sheboygan, Wisconsin. Sheboygan is a traditional family vacation destination featuring lake activities and golf. Due to the nature of Sheboygan as a family vacation destination on the water, we decided that a nautical theme would be more appropriate than our typical northwoods lodge theme. This resort is modeled after a grand beach resort and decorated in a manner consistent with that theme, including a nautical themed lobby and specialty rooms such as the KidAquarium Suite with bunk beds surrounded by walls of deep blue sea and schools of fish and the Boathouse Suite with rowboat bunk beds. According to the Sheboygan Convention and Visitors Bureau, visitors to Sheboygan spent approximately $260 million in 2002. Sheboygan is within a one-hour drive from Milwaukee and Green Bay, Wisconsin; a two-hour drive from Madison, Wisconsin; a three-hour drive from Chicago, Illinois; and a four-hour drive from Dubuque, Iowa. According to Third Wave Research, there are approximately 18.4 million people who live within 180 miles of the resort.

Our Blue Harbor Resort has 183 guest suites, with an additional 64 individually-owned, two and four bedroom condominium units located adjacent to the resort, and an approximately 43,000 square-foot Breaker Bay indoor waterpark with a 12-level Lighthouse Pier water fort. The resort offers a number of revenue-enhancing amenities, including our nautical-themed On the Rocks Bar & Grille and Rusty Anchor Buffet restaurants, Sweetshop Landing ice cream shop and confectionery, full-service Aveda concept spa, Northern Lights game arcade and Precious Cargo gift shop. This resort also has an approximately 21,000 square-foot attached conference facility capable of seating 1,000 people. The resort offers non-revenue-generating amenities such as our 2,000 gallon hand-blown glass water fountain featuring a music and light show, Crew Club for kids and Ship Shape Place fitness center. Admission to the indoor waterpark is available to residents of Sheboygan County for a fee. We currently manage the rental of substantially all of the condominium units at this resort. We receive a rental management fee of approximately 40% of net room revenue after the deduction of certain expenses. In addition, we receive reimbursement of certain waterpark expenses through the condominium association.

In December 2003, we began construction of our Great Wolf Lodge in Williamsburg, Virginia on a 65-acre site. Williamsburg is a popular family vacation destination with amusement parks and waterparks and other entertainment attractions. Williamsburg is a one-hour drive from Richmond, Virginia; a two and one-half-hour drive from Washington, D.C.; a three-hour drive from Baltimore, Maryland and a three and one-half-hour drive from Raleigh, North Carolina. According to Third Wave Research, there are approximately 16.7 million people who live within 180 miles of the resort.

The resort will occupy approximately 36 acres of the site. We may sell up to 11 acres of the excess land as out-lots and plan to retain the remaining acreage to support future expansion of the resort. As of September 30, 2004, total development costs incurred to date were approximately $25.4 million. We expect to incur an additional $36.7 million of costs to complete the project.

Upon completion, the Great Wolf Lodge of Williamsburg will have 301 guest suites and an approximately 55,000 square-foot indoor waterpark that includes our signature treehouse water fort. We are constructing a relatively large indoor waterpark in Williamsburg because we believe that the demand for this resort will support an expansion, including an additional number of rooms, over the next several years. The resort will offer a number of revenue-enhancing amenities, including themed restaurants, a full-service Aveda concept spa, game arcade, Bear Claw Café ice cream shop and confectionery, gift shop and approximately 7,000 square feet of meeting rooms. The resort will also include non-revenue-generating amenities such as a two-story animated clocktower, Cub Club room and fitness center. We anticipate that this resort will open in the spring of 2005.

In April 2004, we began construction of a Great Wolf Lodge in the Pocono Mountains on a 95-acre site near Stroudsburg, Pennsylvania. The Pocono Mountains area is a popular family vacation destination featuring family-oriented attractions and recreational activities. According to the Official Convention and Visitors Bureau of Pennsylvania’s Pocono Mountains, the Pocono Mountains region attracts approximately three million visitors each year. The resort will be located within a one and one-half-hour drive from New York, New York; a two-hour drive from Philadelphia, Pennsylvania; a three and one-half hour drive from Baltimore, Maryland and a four-hour drive from Washington, D.C. According to Third Wave Research, there are approximately 43.6 million people who live within 180 miles of the resort. As of September 30, 2004, total development costs incurred to date were approximately $19.2 million. We expect to incur an additional $72.9 million of costs to complete the project.

Upon completion, the Great Wolf Lodge of the Pocono Mountains will have 400 guest suites and an approximately 78,000 square-foot indoor waterpark that includes our signature treehouse water fort. The resort will offer a number of revenue-enhancing amenities, including a themed restaurant and bar and grille, full-service Aveda concept spa, game arcade, gift shop and approximately 7,900 square feet of meeting rooms. The resort will also include non-revenue-generating amenities such as a two-story animated clocktower, Cub Club room and fitness center. We anticipate that this resort will open in the fall of 2005.

In January 2004, Great Lakes entered into a license agreement with Ripley’s that authorizes Ripley’s to develop and operate a Great Wolf Lodge resort in Niagara Falls, Ontario. In addition, the agreement allows Ripley’s to use certain licensed trademarks, such as “Cub Club,” “KidCabin,” “Wiley’s Woods” and “Great Wolf Lodge.” The term of the license agreement is ten years, with the possibility of up to four successive five-year automatic renewals. Under the license agreement, Ripley’s is required to pay a monthly license fee, a brand marketing fee that we are obligated to contribute to a marketing program and a fee related to furniture,

We have also entered into a construction consulting agreement in connection with Ripley’s construction of the resort. Under the agreement, we will provide construction management and consulting services for a fee. In addition, we are currently negotiating a management services agreement and a reservation system agreement for this resort under which we will manage the resort and provide central reservation systems services.

Ripley’s began construction of the Niagara Falls resort in September 2004. Niagara Falls is a popular family vacation destination. According to the City of Niagara Falls, Ontario website, Niagara Falls attracts over 19 million visitors each year. Niagara Falls is less than a one hour drive from Buffalo, New York; a one and one-half-hour drive from Toronto, Ontario; and a two and one-half-hour drive from Syracuse, New York. Pursuant to the license agreement, we will operate the resort once it is completed.

Upon completion, the Great Wolf Lodge of Niagara Falls will have 404 guest suites with an approximately 82,000 square-foot indoor waterpark. The resort will offer a number of revenue-enhancing amenities, including themed restaurants, ice cream shop and confectionery, full-service Aveda concept spa, game arcade, gift shop and meeting space. The resort will also include non-revenue-generating amenities such as a two-story animated clocktower, Cub Club room and fitness center. We anticipate that this resort will open in the Spring of 2006.

We lease approximately 13,800 square feet of office space for our corporate offices and approximately 2,500 square feet of office space for our central reservations call center operations in Madison, Wisconsin. We believe these facilities are adequate for our current needs.

We choose sites for the development of new resorts based upon a number of factors, including:


	•	Large target customer base. We select development sites that generally have a minimum of five million target customers within a convenient driving distance. Because we offer an affordable vacation experience, we appeal to families in a variety of income ranges.

	•	Recognized tourist destination. We focus on drive-to destinations that attract a large number of tourists, including traditional family vacation markets. We believe we can charge premium rates in these markets due to the high quality of our resorts and our family-oriented amenities and activities. In addition, the indoor nature of many of our amenities and activities allows us to reduce the impact of seasonality that negatively affects other attractions in these areas. These areas also often have active and effective local visitors and convention bureaus that complement our marketing and advertising efforts at little or no cost to us.

	•	Highly visible and large sites. We develop resorts in highly visible locations along major roadways. Visibility from highways enhances easy drive-to access, provides marketing benefits due to high volumes of traffic and often produces synergies from adjacent land uses or complementary developments. We generally choose sites that have enough acreage to allow for potential expansions and future sales of out-lots.

Based upon these criteria, we have identified over 50 markets that have populations of at least five million people located within a convenient driving distance. We have already identified potential development locations in 12 to 14 of these target markets that meet our other criteria for successful development. We are in negotiations for sites in six of these markets. In addition, our licensee, Ripley’s, is developing a Great Wolf Lodge in Niagara Falls, Ontario that we will operate pursuant to our license and management agreement with Ripley’s.

Once we have identified a market that meets our development criteria, we search for potential sites, which may be difficult to find in some areas. We then perform initial analyses of the permitting process and access to utilities, before acquiring a sufficient amount of land from one or more landowners. Based upon the target customer base of the market, we develop initial specifications for the resort, such as the number of guest suites and size of the indoor waterpark and other amenities. We also formally begin the potentially lengthy and difficult process of obtaining the necessary approvals and permits from the appropriate local governmental bodies, including the necessary water rights and environmental permits. Once the permitting process is complete, we secure financing for the project and begin construction on the resort. This overall development process typically takes from two and one-half to four years.

The following table details several key performance indicators for each of the following resorts:


	•	our Sandusky, Ohio resort that opened in March 2001 after a 13-month construction period with a total development cost of approximately $40 million;

	•	our Traverse City, Michigan resort that opened in March 2003 after a 12-month construction period with a total development cost of approximately $53 million; and

	•	our Kansas City, Kansas resort that opened in May 2003 after a 12-month construction period with a total development cost of approximately $51 million.

These resorts represent the only resorts that we have developed and that were open for at least one year as of the completion of the initial public offering. The key indicators include (1) occupancy, (2) RevPAR, (3) Adjusted EBITDA margin and (4) Adjusted EBITDA Asset Yield. We define Adjusted EBITDA margin as the Adjusted EBITDA for a particular resort divided by that resort’s total revenue for the specified time period. We define Adjusted EBITDA Asset Yield as the Adjusted EBITDA for a particular resort divided by that resort’s average gross book value of property and equipment. We define average gross book value as the average of the beginning and ending book values for property and equipment at a specific resort for the specified time period.

Our Sandusky and Traverse City resorts were built in traditional family vacation destinations that had previously established vacation attractions prior to the development of our resorts. These resorts experienced a relatively rapid ramp-up to what we consider to be stabilized operating performance. However, our Kansas City resort was built as part of a new tourist district along with several other newly-constructed tourist attractions. Accordingly, this resort is experiencing a longer ramp-up to what we expect to be stabilized operating

EBITDA and Adjusted EBITDA as presented are supplemental non-GAAP financial measures. EBITDA is commonly defined as net income plus (a) interest expense, (b) income taxes and (c) depreciation and amortization. Our definition of Adjusted EBITDA is different from EBITDA because we further adjust net income for interest on mandatorily redeemable ownership interests. We believe Adjusted EBITDA is useful to an investor in evaluating a resort’s operating performance because:


	•	our resort assets are depreciated over their remaining useful lives in accordance with GAAP. Because depreciation and amortization are non-cash items, we believe that presentation of Adjusted EBITDA is a useful measure of a resort’s operating performance;

	•	it is widely used in the hospitality and entertainment industries to measure a resort’s operating performance without regard to items such as interest on mandatorily redeemable ownership interests; and

	•	we believe it helps investors meaningfully evaluate and compare a resort’s results of operations from period to period by removing the impact of certain items, primarily depreciation and amortization, from the resort’s operating results.


	•	as a measurement of a resort’s operating performance because it assists us in comparing the resort’s operating performance on a consistent basis by removing the impact of items directly resulting from our asset base, primarily depreciation and amortization, non-recurring or unusual items and interest on mandatorily redeemable interests, from the resort’s operating results;

	•	for planning purposes, including the preparation of a resort’s annual operating budget;

	•	as a valuation measure for evaluating a resort’s operating performance and the resort’s capacity to incur and service debt and fund capital expenditures; and

	•	as one measure in determining the value of resort acquisitions and dispositions.

We adjust for interest on mandatorily redeemable ownership interests as this item on the Kansas City resort’s historical financial statements relates to a membership interest that will be redeemed in conjunction with the formation transactions. Since this interest on mandatorily redeemable interests will not be present in the resort’s financial statements following the formation transactions, we believe adding it back provides a more meaningful comparison of our historical financial information and our expected future financial information.

Adjusted EBITDA as calculated by us is not necessarily comparable to similarly titled measures used by other companies. In addition, Adjusted EBITDA: (a) does not represent net income or cash flows from operations as defined by GAAP; (b) is not necessarily indicative of cash available to fund our cash flow needs; and (c) should not be considered as an alternative to net income, operating income, cash flows from operating activities or our other financial information as determined under GAAP.

The following table reconciles net income for our Sandusky, Kansas City, Traverse City and Wisconsin Dells resorts to Adjusted EBITDA for the periods presented (dollars in thousands):

Pursuant to our agreement with Tall Pines Development Corporation, or Tall Pines, the original developer of our Wisconsin Dells resort, we have agreed to pay a royalty fee to Tall Pines ranging from 0.5-2% of annual revenues, and for our Sandusky resort, additional incentive fees of up to 2% of annual revenues, for each resort we have developed and will develop in the future for a period of ten years after the opening of each such resort. In exchange for these fees, Tall Pines has granted us an exclusive, perpetual license to use certain information received from Tall Pines in connection with Great Lakes’ purchase of the Wisconsin Dells resort from Tall Pines in 1999, including information related to operating systems, financial information, historical costs, historical revenues, historical expenses and marketing. In addition, the agreement prohibits Tall Pines from developing properties featuring water amenities such as indoor waterparks within 200 miles of our resorts and, for developments outside 200 miles of our resorts, upon notice of such intent to develop from Tall Pines, we have a right of first refusal of such development. Our agreement with Tall Pines expires in 2018, although we will be obligated to make payments pursuant to the agreement for the ten-year period following a resort’s opening even if that period extends past 2018.

Each resort employs a general manager who is responsible for the operations of the particular resort and who typically has 20-25 years of experience in the hospitality or family entertainment industry. Our general managers oversee a staff of approximately 250 resort employees and are assisted by an assistant general manager and directors for each of human resources, food and beverage, housekeeping, aquatics, maintenance, sales and marketing and front office. A corporate-level liaison for each department ensures consistency throughout our resorts while allowing a particular resort to tailor its operations to best meet the needs of its guests.

Prior to assuming responsibility for a resort, general managers and assistant general managers undergo a management training program designed to familiarize each trainee with various facets of our management, operations and development programs. The program also emphasizes our guest service policies and provides hands-on operating experience at the resort level. Our management training program is intended to train assistant managers to become future general managers.

We strive to provide our guests with a fun and convenient experience in a warm and family-friendly environment from the first day a new resort opens. To achieve this, a team of experienced management members from our existing resorts, along with corporate liaisons, begins training personnel at our new resorts

We believe that our ability to provide a warm family atmosphere where families can relax, play and reconnect begins with our people and their ability to deliver quality customer service. We seek to recruit, train and retain employees who will make sure that our guests enjoy their stay, and we seek to promote from within our company. Each new resort employee undergoes a week-long orientation program and is paired with a more veteran employee for a month so that the new employee can learn more about our resorts, our culture and how we strive to provide the best possible customer service. Our employees are invested in our success and focused on ensuring a memorable experience for each of our guests. We believe that our high level of customer service sets us apart and promotes valuable referrals and repeat visits.

We place a significant emphasis on the sales and marketing of our unique, family-focused resorts. We work together with a third-party consulting firm to analyze the demographics of our markets and to identify potential guests for targeted marketing, both within our primary market areas and beyond those areas to attract occasional or seasonal travelers. We market to these potential customers through a combination of television, radio, newspaper and direct mail advertising, including advertising through local chambers of commerce and convention and visitors bureaus. We also rely upon repeat guests and guest referrals, as well as brand recognition and the visibility of the resorts themselves, which are located along major highways in high traffic areas. In addition, our engaging website offers detailed information about our resorts, including virtual tours and room layouts.

For new resorts, our marketing efforts begin before construction commences and we establish sales offices to generate advance bookings. Reservations may be made at our resorts, through our web site or through our central reservations call center. Our call center and highly trained staff allow us to offer consistent specials throughout our resorts, better track room occupancy levels and room rates and handle the high volume of calls that are usually associated with the opening of a resort.

We maintain an in-house sales force and graphic arts department comprised of 10 employees. Our experienced staff develops products and promotions for use in merchandising and marketing promotions. We also engage in cross-marketing, promotions and co-marketing arrangements with major vendors. We have received numerous awards for our general advertising, website, print media, radio commercials and sales presentations.

We have developed Cub Club, a frequent guest program for children. Membership is available to all children who have stayed at one of our resorts. The benefits of the program include coupons and other incentives, a periodic newsletter, access to the Cub Club activity rooms at each of our resorts and special offers to children who visit during their birthday month. Our Blue Harbor Resort features a Crew Club program for children similar to the Great Wolf Lodge resorts’ Cub Club.

Each of our resorts has an aquatics manager who is trained in all aspects of water quality and safety. Our waterparks are frequently inspected by on-site maintenance personnel. These inspections include safety checks of the equipment in the waterpark, as well as analyses of water and air quality. Our water quality levels are constantly monitored and tested by computers and by a full-time aquatics maintenance engineer, who works with an additional assistant during our busiest months. Our air quality system is designed to minimize humidity and moisture build-up, which materially reduces maintenance costs. Furthermore, we use Ellis & Associates as water safety consultants at our resorts in order to train lifeguards and audit safety procedures.

Our senior management and the individual resort personnel evaluate the risk aspects of each resort’s operation, including potential risks to the public and employees and staff. All of our staff is committed to maintaining and enhancing the quality of our resorts, from housekeeping personnel to the employees at the front desk. Each resort has six full time maintenance employees on staff that ensure building quality and three fulltime aquatics maintenance employees that ensure the ride safety and air and water quality inside the resort’s indoor waterpark. We use a state of the art filtration system and ozonators to balance the water and air quality within the waterpark in order to accommodate fluctuating quantities of visitors.

Our target customer base consists of families with children ranging in age from 2 to 14 years old who live within a convenient driving distance from our resorts. We believe that most families choose our resorts either for taking a primary vacation during the year or for weekend or holiday getaways. According to research conducted by Third Wave Research at our Wisconsin Dells and Sandusky resorts, families choosing us as their primary vacation destination account for approximately 60% of our annual room nights and approximately 40% of our total revenue, while families choosing us for weekend and holiday getaways account for approximately 25% of our annual room nights and approximately 30% of our total revenue. Although we have not had studies performed at our other resorts, we believe our other resorts would have similar statistics.

In addition, meeting facilities at our resorts allow us to attract other types of customers, such as small companies, business groups and social clubs. We believe that the 21,000 square foot conference center located at our Sheboygan resort will allow us to attract larger companies and industry groups to that resort.

Our resorts compete with other forms of family vacation travel, including theme parks, waterparks and amusement parks and other recreational activities, including other resorts located near these types of attractions. Our business is also subject to factors that affect the recreation and leisure and resort industries generally, such as general economic conditions and changes in consumer spending habits. We believe that the principal competitive factors of a family entertainment resort include location, room rates, name recognition, reputation, the uniqueness and perceived quality of the attractions and amenities, the atmosphere and cleanliness of the attractions and amenities, the quality of the lodging accommodations, the quality of the food and beverage service, convenience, service levels and reservation systems.

A recent USRC survey identified 17 existing properties meeting their definition of an indoor waterpark destination resort that are currently open, and five additional destination resorts expected to open in 2004 in the United States and Canada. Two of these resorts have opened since the survey was published, including our Blue Harbor Resort. We are aware of eight additional resorts that are under construction or in active development, including our three resorts under construction, which includes our licensed resort in Niagara Falls owned by Ripley’s. Based on the USRC survey, our five operating resorts and three additional resorts under construction comprise approximately 27% of the supply of new and existing resorts in this market segment.

As a result of our market presence and our management team’s substantial experience, we believe we have an opportunity to capitalize on our first-mover advantage in this industry segment and to achieve significant brand recognition. While we believe that our first-mover advantage is very beneficial to us, it does provide our competitors with an opportunity to monitor our success in our chosen markets. As such, a competitor may choose not to enter one of our markets based on our performance, or may subsequently develop a resort in our markets that is newer, has additional amenities, or offers more, larger or more exciting waterpark attractions than our resorts.

In most of our markets, there are few, if any, other family entertainment resorts featuring indoor waterparks. However, in Wisconsin Dells, Wisconsin, where indoor waterparks were first introduced, there are approximately 16 other resorts and hotels with some type of indoor water-related activity or amenity. As a result, we face significant competition from both lower priced unthemed waterparks and larger, more expensive waterparks with thrill rides and other attractions in the Wisconsin Dells market. While the Wisconsin Dells market has a significant number of resorts with indoor waterparks, we believe the competitive landscape in that small, regional market is not representative of the competition we may face as we further expand our portfolio of resorts. The vast majority of indoor waterpark resorts in Wisconsin Dells are family-owned or privately-operated businesses that have yet to develop additional resorts outside of Wisconsin Dells. In addition, we believe our ability to compete effectively in this highly competitive market will enable us to more effectively compete in other markets where we may not be the only family entertainment resort.

We anticipate that competition within some of our markets will increase in the foreseeable future. We believe that a number of other resort operators are developing or considering the development of family entertainment resorts with indoor waterparks, which will compete with our resorts. There area currently nine resorts that meet USRC’s definition of an indoor waterpark destination resort that are under construction or in active development, six of which will be operated by competitors. One of these resorts is being constructed by a competitor in Sandusky and another resort is being constructed by a competitor near Traverse City.

We believe that our properties are covered by adequate fire, flood and property insurance, as well as commercial liability insurance with what we believe are commercially reasonable deductibles and limits for our industry. Changes in the insurance market since September 11, 2001 have caused significant increases in insurance costs and deductibles, and have increased the risk that affordable insurance may not be available to us in the future.

While our management believes that our insurance coverage is adequate, if we were held liable for amounts and claims exceeding the limits of our insurance coverage or outside the scope of our insurance coverage, our business, results of operations and financial condition could be materially and adversely affected.

We have registered, applied for the registration of or claim ownership of a variety of trade names, service marks, copyrights and trademarks for use in our business, including Biko the Bear, Blue Harbor Resort, Boathouse Suite, Breaker Bay, Crew Club, Cub Club, Great Wolf Lodge, Great Wolf Resorts, KidAquarium Suite, KidCabin and Wiley the Wolf in the United States and, where appropriate, in foreign countries. There can be no assurance that we can obtain the registration for the marks where registration has been sought. We are not aware of any facts that would negatively impact our continuing use of any of the above trade names, service marks or trademarks. We consider our intellectual property rights to be important to our business and actively defend and enforce them.

The ownership and management of our resorts, as well as our development and construction of new resorts, subjects us to comprehensive federal, state and local laws regulating zoning, land development, land use, building design and construction, and other real estate-related laws and regulations. In addition, a number of states regulate the permitting and licensing of resorts by requiring registration, disclosure statements and compliance with specific standards of conduct. Our failure to maintain or acquire the requisite licenses, permits and authorizations required by such laws and regulations, as well as any failure on our part to comply with registration, disclosure and standards of conduct required by such laws and regulations could impact the operation, profitability and success of our current resorts or the development, completion and success of any resorts we may develop in the future. We believe that each of our resorts has the necessary permits and approvals to operate its business and is in material compliance with all applicable registration, disclosure and conduct requirements. We intend to continue to obtain such permits and approvals for any resorts we may develop in the future or additions or renovations to current resorts and to ensure that such resorts and additions or renovations comply with applicable registration, disclosure and conduct requirements.

We are also subject to laws and regulations governing our relationship with employees, including minimum wage requirements, overtime, working conditions and work permit requirements. An increase in the minimum wage rate, employee benefit costs or other costs associated with employees could increase our overall labor costs.

The operation of our waterparks subjects us to state and local regulations governing the quality of the water we use in our waterparks, including bacteriological, chemical, physical and radiological standards. In addition to inspections we conduct on our own, state and local authorities may also conduct inspections of our waterparks to determine our compliance with applicable standards. If we are found to be in violation of such regulations we could be subject to various penalties, including, but not limited to, monetary fines and the temporary closure of our waterparks. Changes in state or local regulations could impose more stringent standards with which we would have to comply.

We are subject to both federal and state environmental laws and regulations, including laws and regulations governing the discharge of water from our waterparks. Specifically, under the requirements of the Federal Clean Water Act, we must obtain National Pollutant Discharge Elimination System permits from the Environmental Protection Agency or from the state environmental agency to which the permit program has been delegated for discharges into waterways and comply with the permit terms regarding wastewater quality and discharge limits. Such permits must be renewed from time-to-time, as required by regulation and additional capital expenditures for wastewater treatment systems associated with the renewal of our water discharge permits may be required. Importantly, changes in federal or state legislation or regulations could impose more stringent release standards with which we would have to comply. Currently, our development in the Pocono Mountains is our only property subject to such laws and regulations governing the discharge of water and we intend to comply with these laws and regulations as we develop that property.

As a place of public accommodation, our resorts are subject to the requirements of the Americans with Disabilities Act of 1990, which we refer to as the ADA. As such, our resorts are required to meet certain federal requirements related to access and use by disabled persons. While we believe that our resorts are substantially in compliance with these requirements, we have not conducted an audit or investigation of all of our resorts to determine our compliance. Further, federal legislation or regulations may amend the ADA to impose more stringent requirements with which we would have to comply.

We obtain environmental assessment reports on the properties we own or operate as we deem appropriate. These reports have not revealed any environmental liability or compliance concerns that we believe would materially adversely affect our financial condition or results of operations. However, the environmental assessments that we have undertaken might not have revealed all potential environmental liabilities or claims for such liabilities. It is also possible that future laws, ordinances or regulations or changed interpretations of existing laws and regulations will impose material environmental liability or compliance costs on us, that the current environmental conditions of properties we own or operate will be affected by other properties in the vicinity or by the actions of third parties unrelated to us or that our guests could introduce hazardous or toxic substances into the resorts we own or manage without our knowledge and expose us to liability under federal or state environmental laws. The costs of defending these claims, complying with as yet unidentified requirements, conducting this environmental remediation or responding to such changed conditions could adversely affect our financial condition and results of operations.

As of December 31, 2004, we had approximately 120 corporate employees, including our central reservations center employees, and approximately 1,600 resort-level employees, approximately 700 of whom were part-time employees. Unlike more seasonal resorts and attractions, we are open year-round and are able to attract and retain high quality employees throughout the year. However, we do have fewer part-time employees during the winter months. None of our employees is covered by a collective bargaining agreement. We believe that our relationship with our employees is good.

We are party to various legal actions in the ordinary course of our business. We believe these actions are routine in nature and incidental to the operation of our business. While the outcome of these actions cannot be predicted with certainty, we believe that the ultimate resolution of these matters will not have a material adverse impact on our business, financial condition or prospects.

Our board of directors currently consists of nine directors, five of which are independent directors under applicable law. Pursuant to our certificate of incorporation, each of our directors is elected by our stockholders to serve until the next annual meeting and until their successors are duly elected and qualify. The first annual meeting of our stockholders as a publicly traded company will be held in 2005. Subject to rights pursuant to any employment agreements, officers serve at the pleasure of our board of directors.

The following table sets forth certain information concerning our directors and executive officers:


(1)	Member of the nominating and corporate governance committee.
(2)	Member of the audit committee.
(3)	Member of the compensation committee.

Bruce D. Neviaser has served as Chairman of the Board since we commenced operations in May 2004. Mr. Neviaser co-founded our predecessor companies and from 1992 until completion of the initial public offering, served as the Co-Chairman of Great Lakes and its predecessor companies, where he was involved in selecting development sites, designing deal structures and raising capital. Mr. Neviaser has over 20 years of experience in hotel and commercial real estate management, development and acquisition. Mr. Neviaser was recently appointed to the Advisory Board of the Weinert Center for Entrepreneurship at the University of Wisconsin-Madison School of Business and is an active community leader.

John Emery has served as our Chief Executive Officer and director since we commenced operations in May 2004. From January 2004 until completion of the initial public offering, Mr. Emery served as the Chief Executive Officer of Great Lakes. From 1995 to December 2003, Mr. Emery served in a number of management positions at Interstate Hotels & Resorts, Inc., a public company and the nation’s largest independent third-party hotel management company, most recently as president and chief operating officer. Additionally, from 1995 to November 2002, Mr. Emery served in a number of management positions at MeriStar Hospitality Corporation, a public company and one of the nation’s largest hotel real estate investment trusts, most recently as president and chief operating officer. Mr. Emery is a former member of the board of directors of Interstate Hotels & Resorts and MeriStar Hospitality. He currently serves on the Pamplin College of Business advisory council at Virginia Tech and is executive director of the Stone Circle Foundation, a private, non-profit organization.

Craig A. Stark has served as our President and a director since we commenced operations in May 2004. From 1995 until completion of the initial public offering, Mr. Stark served as the President of Great Lakes and its predecessor companies, where his responsibilities included overseeing site selection, operations, brand development and sales and marketing efforts. Mr. Stark has over 30 years of hospitality experience and has earned distinction for managing top performing and award-winning facilities. Mr. Stark holds a Bachelor of Science degree in Home Economics with a concentration in Hotel and Restaurant Management from the University of Wisconsin-Stout.

Elan Blutinger has been a managing director of Alpine Consolidated, LLC, a merchant bank specializing in consolidating fragmented industries, since 1996. Mr. Blutinger served as a director of Hotels.com, an online booking service of hotels and other travel-related services, from 2001 until its sale in 2003. Mr. Blutinger was a founder and director of Resortquest International, a leading public vacation property management and realty company, from 1997 until its sale in 2003, a founder and director of Travel Services International, a consolidator of specialized travel services, from 1996 until its sale in 2001, and a director of Online Travel Services, a U.K.-based online travel and technology company, from 2000 until its sale in 2004. Mr. Blutinger is a trustee of the Washington International School and The Sheridan School. Mr. Blutinger currently serves as one of our independent directors and as chair of our nominating and corporate governance committee.

Randy Churchey has been a private investor since the sale of RFS Hotel Investors, Inc., a public self-administered hotel real estate investment trust in July 2003. From November 1999 until July 2003, Mr. Churchey served as president and chief operating officer and a director of RFS Hotel Investors, Inc. From 1997 through October 1999, Mr. Churchey was senior vice president and chief financial officer of FelCor Lodging Trust, a public hotel owner and operator. For nearly 15 years prior to joining FelCor, Mr. Churchey held various positions in the audit practice of Coopers & Lybrand, LLP, where he most recently served as partner and as chairman of the firm’s Hospitality and Real Estate practice for the Southwestern United States. Mr. Churchey is a certified public accountant. Mr. Churchey is a director of Innkeepers USA Trust, a hotel real estate investment trust, and serves as chairman of its audit committee. Mr. Churchey currently serves as one of our independent directors, chair of our audit committee and as a member of our compensation committee.

Michael M. Knetter joined the University of Wisconsin-Madison School of Business as its dean in July 2002. From June 1997 to July 2002, Dean Knetter was associate dean of the MBA program and professor of international economics in the Amos Tuck School of Business at Dartmouth College. Dean Knetter has served as a senior staff economist for the President’s Council of Economic Advisors for former presidents George H.W. Bush and William Jefferson Clinton and has been a consultant to the International Monetary Fund. Dean Knetter is a research associate for the National Bureau of Economic Research and a Trustee of Lehman Brothers/First Trust Income Opportunity Fund and the Lehman Brothers Liquid Assets Trust. Dean Knetter currently serves as one of our independent directors and as a member of our audit committee and nominating and corporate governance committee.

Alissa N. Nolan is a long time entertainment/attractions industry analyst and development consultant. Since January 2001, she has served as director of strategic planning and development to The Tussauds Group, a visitor attractions company. Prior to joining Tussauds, Ms. Nolan was a director and principal with Economics Research Associates, a specialist advisor to global attractions and leisure developers and leisure investors, from 1993 to 1999. After leaving Economics Research Associates and prior to joining Tussauds, Ms. Nolan served as a private consultant. Ms. Nolan currently serves as one of our independent directors and as a member of our compensation committee and our nominating and corporate governance committee.

Howard Silver is the president and chief operating officer of Equity Inns, Inc., a public self-advised and self-administered real estate investment trust, having served in these capacities since June 1998. Mr. Silver joined Equity Inns in May 1994 and has served in various capacities including: executive vice president of finance, secretary, treasurer and chief financial officer. Mr. Silver has been a certified public accountant since 1980. Mr. Silver is a director of Capital Lease Funding, Inc., a public triple net lease real estate investment

Marc B. Vaccaro has served as a director since we commenced operations in May 2004. Mr. Vaccaro co-founded our predecessor companies and from 1992 until completion of the initial public offering, served as the Co-Chairman of Great Lakes and its predecessor companies. Mr. Vaccaro has over 16 years of experience in a wide array of commercial property acquisitions, developments and redevelopments, including hotel, shopping center, office and land projects. Mr. Vaccaro holds a Bachelors of Art degree in Economics from the University of Wisconsin. Mr. Vaccaro sits on several foundation boards, including the Menasha Corporations Foundation and the Theda Clark Smith Foundation.

James A. Calder has served as our Chief Financial Officer since we commenced operations in May 2004. From September 1997 to April 2004, Mr. Calder served in a number of management positions with Interstate Hotels & Resorts, Inc., a public company, and its predecessor company, serving most recently as chief financial officer. Additionally, from October 2001 to November 2002, Mr. Calder served as chief accounting officer of MeriStar Hospitality Corporation, a public company. From May 1995 to September 1997, Mr. Calder served as senior vice president and corporate controller of ICF Kaiser International, Inc., a public consulting and engineering company. Prior to that time, from 1984 to May 1995, Mr. Calder worked for Deloitte & Touche LLP in various capacities, serving most recently as senior manager for the real estate industry. Mr. Calder holds a Bachelor of Science degree in Accounting from The Pennsylvania State University. Mr. Calder is a certified public accountant and is president and treasurer of the Thomas W. Hetrick Memorial Scholarship Fund, a private, non-profit organization.

Eric S. Lund has served as our Executive Vice President of Sales and Marketing since we commenced operations in May 2004. From September 1996 until completion of the initial public offering, Mr. Lund served as Senior Vice President of Sales and Marketing of Great Lakes and its predecessor companies, where he was involved with brand development, sales and marketing. From January 1995 to November 1996, Mr. Lund held the position of regional marketing director for HFS, Inc. (now a part of Cendant, Inc.), then a public company and the world’s largest hotel franchisor, where he directed the marketing efforts for 125 hotel properties in 22 states. Mr. Lund has over 17 years of sales and marketing experience in the hospitality industry and holds a Bachelor of Science degree in Public Policy and Administration from the University of Wisconsin-Whitewater.

Hernan R. Martinez has served as our Executive Vice President of Development since we commenced operations in May 2004. During April 2004, Mr. Martinez served as Executive Vice President of Development of Great Lakes. From September 2002 to April 2004, Mr. Martinez was principal for Urbana Partners, a real estate advisory and development company serving international, private and institutional investors. From June 2000 to August 2002, Mr. Martinez served as chief operating officer for American Skiing Company Resort Properties and Executive Vice President of its parent American Skiing Company, a public company. Mr. Martinez holds a Diploma in Architecture from the University of Buenos Aires, Argentina, a Post-Graduate Diploma in Urban Development Planning, Development Planning Unit from the University College, London, U.K. and a Masters of Business Administration from Stanford University.

Kimberly K. Schaefer has served as our Chief Brand Officer since we commenced operations in May 2004. From May 1997 until completion of the initial public offering, Ms. Schaefer served as Senior Vice President of Operations of Great Lakes and its predecessor companies. At Great Lakes, Ms. Schaefer was involved in site selection and brand development and oversaw all resort operations. Ms. Schaefer has over 15 years of hospitality experience and holds a Bachelor of Science degree in Accounting from Edgewood College in Madison, Wisconsin. Ms. Schaefer is also involved with charitable work and sits on the advisory board for Edgewood College Business School. Ms. Schaefer is a certified public accountant.

J. Michael Schroeder has served as our General Counsel and Corporate Secretary since we commenced operations in May 2004. From November 1999 until completion of the initial public offering, Mr. Schroeder served in several senior management positions for Great Lakes, most recently as Senior Vice President and General Counsel. From September 1993 to November 1999, Mr. Schroeder was associated with several law firms in New York, New York and Greenwich, Connecticut where he specialized in real estate, real estate finance and corporate law, with a focus on the hospitality industry. Mr. Schroeder holds a Juris Doctor degree from Duke University School of Law and a Bachelor of Science degree in Finance from the University of Colorado.

Alexander P. Lombardo has served as our Treasurer since August 2004. From August 1998 to August 2004, Mr. Lombardo served in a number of positions with Interstate Hotels & Resorts, Inc., a public company, and its predecessor company, serving most recently as vice president of finance. Additionally, from August 1998 to December 2002, Mr. Lombardo served in a number of positions with MeriStar Hospitality Corporation, a public company, serving most recently as assistant treasurer. From August 1996 to August 1998, Mr. Lombardo served as cash manager of ICF Kaiser International, Inc., a public company. Mr. Lombardo holds a Bachelor of Business Administration degree from James Madison University.

Our board of directors has appointed an audit committee, compensation committee and nominating and corporate governance committee. The board of directors has adopted a written charter for each of these committees, copies of which are posted on our web site at www.greatwolfresorts.com. The inclusion of our web site address in this prospectus does not incorporate by reference the information on our web site into this prospectus.

Under our committee charters, the composition of each committee must comply with the rules and regulations of the Nasdaq Stock Market, as amended or modified from time to time. Each of these committees has at least three directors and is composed exclusively of independent directors. Our committee charters define “independent director” by reference to the rules and regulations of the Nasdaq Stock Market, which generally deem a director to be independent if the director has no relationship to us that may interfere with the exercise of his or her independence from management.

Audit Committee. The audit committee helps ensure the integrity of our financial statements, the qualifications and independence of our independent auditors and the performance of our internal audit function and independent auditors. The audit committee selects, assists and meets with the independent auditors, oversees each annual audit and quarterly review, establishes and maintains our internal audit controls and prepares the report that federal securities laws require be included in our annual proxy statement. Mr. Churchey has been designated as chair and Messrs. Silver and Knetter have been appointed as members of our audit committee. Mr. Churchey has been designated as an “audit committee financial expert.”

Compensation Committee. The compensation committee reviews and approves the compensation and benefits of our executive officers, administers and makes recommendations to our board of directors regarding our compensation and incentive stock plans and produces an annual report on executive compensation for inclusion in our proxy statement. Mr. Silver has been designated as chair and Ms. Nolan and Mr. Churchey have been appointed as members of our compensation committee.

Nominating and Corporate Governance Committee. The nominating and corporate governance committee will adopt a code of ethics, adopt policies with respect to conflicts of interest, monitor our compliance with corporate governance requirements of state and federal law and the rules and regulations of the Nasdaq Stock Market, establish criteria for prospective members of our board of directors, conduct candidate searches and interviews, oversee and evaluate our board of directors and management, evaluate from time to time the appropriate size and composition of our board of directors and recommend, as appropriate, increases, decreases

Our board of directors may from time to time establish certain other committees to facilitate the management of our company.

In addition to the independent directors serving on our board committees, we have structured our corporate governance in a manner we believe closely aligns our interests with those of our stockholders. The corporate governance initiatives that we have enacted include the following:


	•	Our board of directors is not staggered, with all of our directors subject to annual re-election;

	•	Of the nine directors who serve on our board, five have been determined by us to be independent for purposes of the rules and regulations of the Nasdaq Stock Market;

	•	We do not have a stockholder rights plan; and

	•	Our independent directors will meet regularly without the presence of any inside directors or our senior management.

Each of our directors who is not an employee of our company or any of our subsidiaries receives an annual fee of $40,000 for services as a director. Non-employee directors receive $1,000 for each board or committee meeting attended in person and $500 for each meeting of the board or a committee attended telephonically, other than committee meetings that occur on the same day as board meetings. The chair of the audit committee receives an additional annual fee of $10,000, and the chair of each other committee receives an additional annual fee of $5,000. Employees of our company or our subsidiaries do not receive compensation for their services as directors.

Upon the consummation of the initial public offering, we made grants of stock options to independent directors under our 2004 Incentive Stock Plan, and intend to make future grants under this plan. On the date of the closing of the initial public offering, each independent director received options to purchase 7,500 shares of our common stock at an exercise price equal to the initial public offering price of $17.00 per share. The compensation committee, in administering the 2004 Incentive Stock Plan, has provided that: (1) each independent director who is initially elected to our board of directors will receive options to purchase 7,500 shares of our common stock on the date of such initial election and (2) independent directors will receive options to purchase 5,000 shares of our common stock on the date of each annual meeting of stockholders at which the independent director is reelected to our board of directors. The exercise price will be equal to 100% of the fair market value of our common stock on the date of grant. The options granted to independent directors will be exercisable in three equal annual installments beginning on the first anniversary of the date of the grant of the option, subject to accelerated vesting as described below.

The following table sets forth the annual base salary and other compensation paid in 2004 to our Chief Executive Officer and our four other most highly compensated executive officers, whom we refer to as our named executive officers. Because we were only recently organized and several members of our management group joined us recently, historical compensation information for our named executive officers is not meaningful. We have entered into employment agreements with certain of our executive officers. Under the terms of their respective employment agreements, each of these executive officers are eligible to receive annual

performance-based bonuses as more fully described in “— Employment Agreements.” Pursuant to their respective employment agreements and our 2004 Incentive Stock Plan, Messrs. Emery, Stark, Martinez, Calder and Schroeder received options to purchase 350,000, 200,000, 150,000, 100,000 and 75,000 shares of our common stock, respectively, set forth under “Securities Underlying Options” upon consummation of the initial public offering. Pursuant to their current employment arrangements, Messrs. Emery and Calder received $2,000,000 and $200,000, respectively, in the form of lump sum cash payments upon consummation of the initial public offering. These cash payments have been deferred pursuant to our deferred compensation plan. Pursuant to elections by these members of management to have these bonus payments track the performance of our common stock, we contributed 129,412 shares of common stock (based on the initial public offering price) to a trust that holds assets to pay obligations under our deferred compensation plan. These deferred bonuses will be deemed to be investments in shares of our common stock. As a result, the amount of cash ultimately paid from the deferred bonuses payments will appreciate and depreciate as the price of our common stock increases and decreases. Pursuant to an employment arrangement in place prior to the initial public offering, Mr. Schroeder received $75,000 in the form of a lump-sum cash payment upon the consummation of the initial public offering.

We maintain a retirement savings plan under Section 401(k) of the Internal Revenue Code of 1986, as amended, or the Code, to cover our eligible employees. The plan allows eligible employees to defer, within prescribed limits, up to 20% of their compensation on a pre-tax basis through contributions to the plan. We intend to match each eligible participant’s contributions, within prescribed limits, with an amount equal to 50% of such participant’s initial 4% tax-deferred contributions. In addition, we reserve the right to make additional discretionary contributions on behalf of eligible participants. Our employees are eligible to participate in the plan if they meet certain requirements, including a minimum period of credited service. Any matching and discretionary company contributions may be subject to certain vesting requirements.

Our board of directors has adopted our 2004 Incentive Stock Plan, pursuant to which we may grant stock options, restricted stock, stock appreciation rights and other incentive awards to employees and directors of our company. Only company employees are eligible to receive incentive stock options under the plan. We have reserved a total of 3,380,520 shares of our common stock for issuance pursuant to the plan, subject to certain

Effective as of the consummation of the initial public offering, our board of directors delegated general administrative authority of the 2004 Incentive Stock Plan to its compensation committee. The plan provides that the compensation committee has the authority to designate recipients of awards and to determine the terms and provisions of awards, including the exercise or purchase price, expiration date, vesting schedule and terms of exercise. The plan provides that the maximum number of shares that may be subject to awards granted any individual in any calendar year will not exceed 350,000. Similarly, the maximum number of shares that may be subject to stock appreciation rights granted to any individual in any calendar year may not exceed 350,000. In addition, the 2004 Incentive Stock Plan provides a $5,000,000 limit on stock grants and stock unit grants to any individual in any calendar year, and restricts the number of nonforfeitable shares issuable pursuant to stock grants to 750,000.

The exercise price of nonqualified stock options and incentive stock options granted under the plan must be at least 100% of the fair market value of our common stock on the date of grant. Options intended to qualify as performance-based compensation under Section 162(m) of the Code must have an exercise price of at least 100% of the fair market value of our common stock on the date of grant. Incentive stock options granted to optionees who own more than 10% of our outstanding common stock on the date of grant (considering certain attribution rules) must have an exercise price that is at least 110% of our outstanding common stock on the grant date. Incentive stock options granted under the 2004 Incentive Stock Plan will expire no later than ten years after the date of grant, or five years after the date of grant with respect to optionees who own more than 10% of our outstanding common stock on the grant date. The purchase price, if any, of other awards will be determined by the compensation committee.

In the event of certain changes in our corporate structure or capitalization, the plan administrator may make appropriate adjustments to:


	•	the maximum number, kind and class of shares issuable under the plan;

	•	the number and class of shares subject to outstanding awards; and

	•	the grant or exercise price of each outstanding award.

In addition, in the event of a change in control (as defined in the plan), all conditions (other than payment conditions) to the exercise of outstanding options and stock appreciation rights and all outstanding issuance and forfeiture conditions (other than payments conditions) on stock grants and stock unit grants shall be deemed 100% satisfied. The board of directors will have the right, to the extent expressly required as part of such transaction, to cancel options and other awards after providing the award holder a reasonable period of time to exercise his or her options and stock appreciation rights and to take such other actions as necessary to receive the stock subject to the stock grants and the cash payable under any stock unit grants.

The board of directors may at any time amend or revise the terms of the 2004 Incentive Stock Plan; provided, however, that without the approval of our stockholders, no amendment may effect any change that would require stockholder approval under applicable law or the rules of the stock exchange on which the stock is listed, and no amendment may be made on or after a change of control which might adversely affect any rights which would otherwise vest on the related change effective date (as defined in the plan). In addition, any alteration or impairment of any outstanding award requires consent of the affected holder absent certain corporate events. No grants under the plan may be made after the earlier of the expiration of ten years from the date that it is adopted by our stockholders (in which case the plan otherwise continues until all outstanding options and stock appreciation rights have been exercised in full or are no longer exercisable and all stock issued under any stock grants have been forfeited or have become non-forfeitable, and all stock unit grants have

Effective upon consummation of the initial public offering, our board of directors adopted our Deferred Compensation Plan. Under this non-qualified plan, our senior executives and other highly compensated employees may elect to defer the receipt and taxation of up to 100% of their annual base salary and/or their bonus. We will credit a participant’s deferred compensation to a deferral bookkeeping account and also may credit participants’ accounts with matching and/or profit-sharing contributions in additional amounts that we determine provided the participant is an eligible employee on the last day of the year. Until changed by our chief executive officer, the matching contribution will not exceed 100% of a participant’s deferred compensation up to 4% of a participant’s aggregate compensation. We select investments for purposes of determining the rate of return to be credited on amounts deferred under the plan, one of which will be a deemed investment in our common stock. Participants may select from these investments for purposes of determining the rate of return to be credited on all their deferral accounts. Participants will be at all times fully vested in any amount they defer, and will become vested in any additional amounts that we credit to their deferral account equally over five years. No participant or beneficiary has any right under the plan to any of our assets which is greater than the right of a general and unsecured creditor of ours.

Upon completion of the initial public offering, bonus payments in the aggregate amount of $2.2 million to Messrs. Emery and Calder were placed in our deferred compensation plan. Pursuant to elections by these members of management to have these bonus payments track the performance of our common stock, we contributed 129,412 shares of common stock (based on the public offering price) to a trust that holds assets to pay obligations under our deferred compensation plan. These deferred bonuses will deemed to be investments in shares of our common stock. As a result, the amount of cash ultimately paid from the deferred bonuses will increase and decrease as the price of our common stock increases and decreases.

We entered into employment agreements, effective upon consummation of the initial public offering, with Messrs. Emery, Stark, Martinez, Calder, Schroeder and Lund and Ms. Schaefer. The employment agreements provide for Mr. Emery to serve as our Chief Executive Officer, Mr. Stark to serve as our President, Mr. Martinez to serve as our Executive Vice President of Development, Mr. Calder to serve as our Chief Financial Officer, Mr. Schroeder to serve as our General Counsel and Corporate Secretary, Mr. Lund to serve as our Executive Vice President of Sales and Marketing and Ms. Schaefer to serve as our Chief Brand Officer.

Each employment agreement has a term of three years and provides for automatic one-year extensions thereafter, unless either party provides at least 120 days notice of non-renewal.


	•	an annual base salary of $400,000 for Mr. Emery, $300,000 for Mr. Stark, $320,000 for Mr. Martinez, $250,000 for each of Messrs. Calder and Schroeder, and $225,000 for each of Mr. Lund and Ms. Schaefer;

	•	eligibility for annual bonuses to be determined by our compensation committee;

	•	eligibility for grants of options to purchase our common stock as determined by our compensation committee; and

	•	participation in employee benefit plans, programs and policies applicable generally to our senior executives.

The employment agreements provide that, if an executive’s employment is terminated by us without “cause” or by the executive for “good reason” (each as defined in the applicable employment agreement), including non-renewal of the employment agreement by us upon the end of its term, the executive will be entitled to the following severance payments and benefits, subject to his or her execution and non-revocation of a general release of claims:


	•	a lump sum severance amount equal to the sum of that executive’s then-current annual base salary and most recent annual bonus paid for each of Messrs. Martinez, Calder, Schroeder and Lund and Ms. Schaefer, and two times such amount for each of Messrs. Emery and Stark;

	•	acceleration of vesting of all outstanding options to purchase our common stock; and

	•	a lump sum payment in an amount designed to roughly equal the pre-tax cost of health, life insurance and accidental death and dismemberment benefits in effect immediately prior to the termination of the executive’s employment for a period of time following the termination of executive’s employment.

Under the employment agreements, we have agreed to make an additional tax gross-up payment to the executive if any amounts paid or payable to the executive would be subject to the excise tax imposed on certain so-called “excess parachute payments” under Section 4999 of the Code. However, if a reduction in the payments and benefits of $25,000 or less would render the excise tax inapplicable, then the payments and benefits will be reduced by such amount, and we will not be required to make the gross-up payment.

Each employment agreement provides that, if the executive’s employment is terminated by us without cause or by the executive for good reason within 180 days prior to, or eighteen months following, a change in control, then the executive will receive the above benefits and payments as though the executive’s employment was terminated without cause or for good reason. However, the lump-sum cash severance payment will be equal to three times (in the case of each of Messrs. Emery and Stark) or two times (in the case of each of Messrs. Martinez, Calder, Schroeder and Lund and Ms. Schaefer) the sum of the executive’s then-current annual base salary and the most recent annual bonus paid to the executive.

Each employment agreement also provides that the executive or his or her estate will be entitled to certain severance benefits in the event of his or her death or disability.

The employment agreements also contain non-compete and standard confidentiality and non-solicitation provisions that apply during the term of the employment agreements and for a one-year period thereafter.

We have entered into noncompetition agreements with each of Messrs. Neviaser and Vaccaro, each of whom is a member of our board of directors. The noncompetition agreements provide that each of Messrs. Neviaser and Vaccaro will not, during their terms as directors of the company or an officer of the company, as applicable, or for the one-year period following their removal from the board of directors or such office or in the event Messrs. Neviaser or Vaccaro are not re-elected to the board of directors, compete with us. These agreements also contain standard confidentiality and non-solicitation provisions. In exchange for these agreements, we have agreed to accelerate the vesting of these individuals’ stock options if the individual is removed from or is not re-elected to our board of directors or is removed from his respective office.

Indemnification of Directors and Executive Officers and Limitation of Liability

As allowed by the Delaware General Corporation Law, or DGCL, we have adopted provisions in our certificate of incorporation that provide that our directors shall not be personally liable for monetary damages to us or our stockholders for a breach of fiduciary duty as a director to the fullest extent that the act permits the limitation or elimination of the liability of directors.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our officers or directors pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act, and is therefore unenforceable. In the event that a claim for indemnification for these liabilities, other than the payment by us of expenses incurred or paid by a director or officer in the successful defense of any action, suit or proceeding, is asserted by a director or officer, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question as to whether this indemnification is against public policy as expressed in the Securities Act and will be governed by the final adjudication of the issue.

We have entered into indemnification agreements with each of our directors to give such directors additional contractual assurances regarding the scope of their indemnification. The indemnification agreements provide indemnification to the fullest extent permitted under Delaware law and provide for the advancement of expenses incurred by a director in connection with the investigation, defense, settlement or appeal of any action or investigation. In addition, we maintain liability insurance for our directors and officers as required by their indemnification agreements.

None of our executive officers who are members of our board of directors participate in the approval of matters relating to their compensation, and none of them serve as members of the compensation committee. None of our executive officers currently serve on the compensation committee or board of directors of any other company of which any member or proposed member of our compensation committee is an executive officer.

Since 1999, directors and officers of Great Lakes, including Messrs. Lund, Neviaser, Sather, Stark and Vaccaro and Ms. Schaefer, as well as former employees of Great Lakes who have subsequently been released from such guarantees, have personally guaranteed certain loans made in connection with our resorts. Pursuant to such guarantees, such directors and officers, along with Great Lakes, each jointly and severally guaranteed the repayment of the outstanding debt on the loans in their entirety. In connection with the formation transactions, the application of the net proceeds from the initial public offering to repay a portion of the underlying debt and the refinancing of the remainder of this debt, these individuals were removed as guarantors from approximately $167.1 million of guarantees as of September 30, 2004, consisting of the following indebtedness:


	•	approximately $35.9 million and $36.5 million of mortgage indebtedness on our Kansas City and Traverse City resorts, respectively, for which Messrs. Neviaser, Stark and Vaccaro serve as guarantors, which was refinanced in connection with the formation transactions;

	•	approximately $25.8 million and $50.2 million of mortgage indebtedness on our Sandusky and Wisconsin Dells resorts, respectively, for which Messrs. Neviaser, Stark and Vaccaro serve as guarantors, which was repaid in connection with the formation transactions; and

	•	approximately $18.7 million of indebtedness on our Williamsburg resort that we assumed, for which each of these individuals served as a guarantor. In connection with our assumption of this indebtedness, these individuals were released from their guarantees.

Pursuant to separate transition services agreements, we agreed to provide certain services to each of Great Lakes Hospitality Partners, LLC and Great Lakes Housing Partners, LLC (the entities that succeeded to Great Lakes’ non-resort development and management business), and these entities have agreed to provide certain services to us, for a period not to exceed two years from the date of completion of the formation transactions. These services may include administrative services, corporate services, accounting services, financing services, legal services, tax services, information technology services, human resources services, payroll services and operational services. These services will be provided by the parties to the transition services agreements as and if any such service is reasonably requested to be performed during the two-year period of the agreements. The fees for these services will be determined as each such service is provided from time to time and will generally be equal to the cost of such services had the services been provided by an unaffiliated third party. The agreements also provide for customary expense reimbursement. Further, each party may terminate the agreement if the other party thereto defaults in the performance of its material obligations under, or breaches any of its warranties set forth in, the agreements, subject to a 30-day cure period.

Messrs. Lund, Neviaser, Sather, Stark and Vaccaro and Ms. Schaefer, each of whom was a shareholder of Great Lakes immediately prior to the consummation of the initial public offering and the formation transactions, have entered into indemnity agreements with us pursuant to which they have made certain representations and warranties to us relating to the formation transactions and the status of the properties operated by the resort-owning entities. Pursuant to these indemnity agreements, these shareholders have also agreed to indemnify us for a period of one year if those representations and warranties are not accurate. These representations and warranties relate, among other things, to the following matters concerning Great Lakes:


	•	capital structure as of the time of the formation transactions;

	•	compliance with laws and possession of required authorizations;

	•	possession of all required consents and approvals;

	•	no breach of organizational documents or material agreements;


	•	no material tax dispute or claim;

	•	no payment of brokers’ or finders’ fees;

	•	no bankruptcy events;

	•	material legal proceedings;

	•	reasonable insurance coverage for properties;

	•	liens and options and rights with respect to underlying properties;

	•	no labor disputes or unfair labor practices;

	•	ownership of real property and improvements thereto;

	•	no material environmental liabilities;

	•	no material defect in the condition of the properties;

	•	accuracy of financial statements;

	•	no material undisclosed liabilities, contracts or liabilities;

	•	no damage or loss to its underlying properties in excess of $1 million; and

	•	ownership of intellectual property rights.

In addition, these shareholders have agreed to indemnify us for a period of one year against liabilities or obligations relating to claims asserted under federal or state securities laws arising out of the offer or sale of condominiums on or before the closing of the formation transactions by the management company or any affiliated entity of the management company. With respect to each shareholder, the maximum indemnification obligation under these agreements will not exceed 35% of the value of the number of shares of our common stock received by that shareholder in the formation transactions based on the initial public offering price of $17.00 per share. The maximum amount of the indemnification obligations under these agreements will equal approximately $45.2 million in the aggregate. These shareholders may fulfill the indemnity obligations under the agreements solely through the delivery of shares of our common stock that they own, valued at the time of delivery, or with an equivalent amount of cash. However, if any of these shareholders chooses to fulfill the indemnity obligations under the agreement through the delivery of shares, the maximum number of shares such shareholder will be obligated to deliver is 35% of the number of shares such shareholder received in the formation transactions.

Immediately following the completion of the initial public offering, Messrs. Lund, Neviaser and Sather received personal loans which are full-recourse and are secured by a pledge of all the shares of our common stock received by each in the formation transactions. While some of these shares may be released from the pledge over time, they may not be available as an alternative means to satisfy an indemnification obligation under the agreements.

We granted to the participants in the formation transactions registration rights with respect to all shares of common stock owned by them. We have agreed to file a registration statement with the SEC with respect to sales of shares of common stock that constitute restricted shares by such persons within 60 days following the consummation of the formation transactions, and use our commercially reasonable efforts to cause such registration statement to be declared effective by the SEC as soon as possible. The registration statement of which this prospectus constitutes a part has been filed to satisfy this obligation. We will be obligated to maintain the effectiveness of such registration statement until the earlier of (1) such time as all of the shares

registered pursuant to such registration statement have been disposed of pursuant to such registration statement or (2) two years following the consummation of the formation transactions. The existence of this agreement may adversely affect the terms upon which we can obtain additional equity financing in the future. We have agreed to bear expenses incident to the registration requirements under these registration rights, except that such expenses will not include any underwriting discounts or commissions or transfer taxes. Regardless of when this registration statement becomes effective, each participant in the formation transactions will be subject to a lock-up period expiring 180 days after the completion of the initial public offering and the formation transactions pursuant to our bylaws and will not be able to sell any shares received in the formation transactions until the end of such lock-up period, unless such stockholder obtains our consent. We have agreed not to waive these lock-up provisions without the written consent of the underwriters.

We have entered into an indemnification agreement with each of our executive officers and directors as described in “Management—Employment Agreements—Indemnification of Directors and Executive Officers and Limitation of Liability.”

Prior to the consummation of the formation transactions, Great Lakes regularly used an aircraft owned by LVNCS, LLC, an entity owned by Messrs. Lund, Vaccaro, Neviaser and two of our other employees. During 2003, Great Lakes paid an aggregate of $149,077 for the lease of the aircraft for company business. These payments represented approximately 67% of the entity’s revenue for 2003. The entity that owns the aircraft also has one employee for whom Great Lakes provided payroll and benefit services during 2003, the costs of which were reimbursed by the entity. We believe that the costs Great Lakes incurred for use of this aircraft were substantially less than the costs that it would have incurred for the use of a similar aircraft owned by an independent third party. We intend to continue to use this aircraft in the future.

The following table sets forth the beneficial ownership of shares of our common stock as of December 20, 2004 for:


	•	each stockholder who is a beneficial owner of 5% or more of our outstanding common stock;

	•	each of our directors;

	•	our Chief Executive Officer, each of our four named executive officers and our other vice-presidents; and

	•	all of our directors and executive officers as a group.

Unless otherwise indicated in the footnotes to the table, each person named in the table has sole voting and investment power with respect to all of the shares of our common stock shown as beneficially owned by such person. Beneficial ownership is determined in accordance with the rules of the SEC. There are no options outstanding that are exercisable within 60 days of December 20, 2004. Unless otherwise indicated in the footnotes, the address of each named person is c/o Great Wolf Resorts, Inc., 122 West Washington Avenue, 6th Floor, Madison, Wisconsin 53703.


(1)	Includes (a) 45,248 shares held by DNEV, LLC for which Mr. Neviaser shares voting and investment power, and (b) 125,699 shares held by Neviaser Enterprises, LLC., of which Mr. Neviaser is the managing member and possesses sole voting and investment power over the shares.
(2)	In addition, pursuant to the bonus payment of $2 million that Mr. Emery received upon consummation of the initial public offering, we contributed 117,647 shares, based on the public offering price of $17.00 per share, to a trust that holds assets to pay obligations under our deferred compensation plan.


(3)	The address for Mr. Blutinger is c/o Alpine Consolidated, LLC, 2927 44th St., NW, Washington, D.C. 20016.
(4)	The address for Mr. Churchey is 2458 Dove Grove Cove, Germantown, Tennessee, 38139.
(5)	The address for Mr. Knetter is 5110 Grainger Hall, 975 University Avenue, Madison, Wisconsin 53706-1323.
(6)	The address for Ms. Nolan is c/o Chessington World of Adventures, Leatherhead Road, Chessington, Surrey, KT9 2NE United Kingdom.
(7)	The address for Mr. Silver is 7700 Wolf River Boulevard, Germantown, Tennessee, 38138.
(8)	Includes (a) 19,907 shares held by MV LLC, of which Mr. Vaccaro is the managing member and possesses sole voting and investment power over the shares, (b) 75,000 shares held by The Marc B. Vaccaro Grantor Retained Authority Trust, of which Mr. Vaccaro is the sole trustee and possesses sole voting and investment power and (c) 75,000 shares held by The Astrid G. VanZon Grantor Retained Annuity Trust, of which Astrid G. VanZon, Mr. Vaccaro’s spouse, is the sole trustee and possesses sole voting and investment power. Mr. Vaccaro disclaims beneficial ownership of the 75,000 shares held by The Astrid G. VanZon Grantor Retained Annuity Trust.
(9)	In addition, pursuant to the bonus payment of $200,000 that Mr. Calder received upon consummation of the initial public offering, we contributed 11,765 shares, based on the public offering price of $17.00 per share, to a trust that holds assets to pay obligations under our deferred compensation plan.
(10)	Includes 9,550 shares held jointly with Mr. Lund’s spouse.
(11)	Includes 33,009 shares held jointly with Ms. Schaefer’s spouse.

The selling stockholders received their shares of common stock in transactions with us as follows:


	•	13,901,947 shares of common stock offered by this prospectus were issued to investors in the formation transactions in exchange for their interests in the resort-owning entities, sponsor entities, Sandusky Investor LLC and the management company; and

	•	130,949 shares of common stock offered by this prospectus were issued to holders of tenant in common interests in our Poconos and Williamsburg resorts that were, until immediately prior to the consummation of the formation transactions, convertible into our common stock.

The following table sets forth information known by us with respect to beneficial ownership of our common stock by each selling stockholder immediately following the completion of the formation transactions and the initial public offering on December 20, 2004 and assumes that the only shares of our common stock owned by each such stockholder was received pursuant to the formation transactions, as described in this prospectus. The following table also assumes that the selling stockholders sell all of the shares offered hereby. We do not know how long the selling stockholders will hold the shares set forth in the following table before selling them or how many shares they will sell, if any, and we currently have no agreements, arrangements or understandings with any of the selling stockholders regarding the sale of any of the shares. There can be no assurance that all or any of the shares offered under this prospectus will be sold. In addition, pursuant to our bylaws shares of our common stock issued prior to the closing of the initial public offering are restricted from transfer, subject to certain limited exceptions, for 180 days following the closing of the initial public offering.

Information with respect to “beneficial ownership” shown below is based on information supplied by the respective beneficial owner or by other stockholders as well as filings made with the SEC or furnished to us. Unless otherwise indicated in the footnotes, the address of each named person beneficially owning 5% or more of our common stock is c/o Great Wolf Resorts, Inc., 122 West Washington Avenue, 6th Floor, Madison, Wisconsin 53703.


(1)	As of the date of this prospectus, such individual is an employee of Great Wolf Resorts, Inc. and/or its subsidiaries, and/or such individual was an employee of Great Lakes within the three years prior to the date of this prospectus.
(2)	In addition, pursuant to the bonus payment of $200,000 that Mr. Calder received upon consummation of the initial public offering, we contributed 11,765 shares, based on the public offering price of $17.00 per share, to a trust that holds assets to pay obligations under our deferred compensation plan.
(3)	In addition, pursuant to the bonus payment of $2 million that Mr. Emery received upon consummation of the initial public offering, we contributed 117,647 shares, based on the public offering price of $17.00 per share, to a trust that holds assets to pay obligations under our deferred compensation plan.
(4)	Includes 9,550 shares held jointly with Mr. Lund’s spouse.
(5)	Includes (a) 45,248 shares held by DNEV, LLC for which Mr. Neviaser shares voting and investment power, and (b) 125,699 shares held by Neviaser Enterprises, LLC, of which Mr. Neviaser is the managing member and possesses sole voting and investment power over the shares.
(6)	Includes 33,009 shares held jointly with Ms. Schaefer’s spouse.
(7)	Includes (a) 19,907 shares held by MV LLC, of which Mr. Vaccaro is the managing member and possesses sole voting and investment power over the shares, (b) 75,000 shares held by The Marc B. Vaccaro Grantor Retained Authority Trust, of which Mr. Vaccaro is the sole trustee and possesses sole voting and investment power and (c) 75,000 shares held by The Astrid G. VanZon Grantor Retained Annuity Trust, of which Astrid G. VanZon, Mr. Vaccaro’s spouse, is the sole trustee and possesses sole voting and investment power. Mr. Vaccaro disclaims beneficial ownership of the 75,000 shares held by The Astrid G. VanZon Grantor Retained Annuity Trust.

Our common stock may be offered for sale and sold in one or more transactions, including block transactions, at a fixed price or prices, which may be changed, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at prices determined on a negotiated or competitive bid basis. Shares of common stock may be sold directly, through agents designated from time to time, or by such other means as may be specified in the supplement to this prospectus. Participating agents or broker-dealers in the distribution of any of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act. Any discount or commission received by any underwriter and any participating agents or broker-dealers, and any profit on the resale of shares of common stock purchased by any of them may be deemed to be underwriting discounts or commissions under the Securities Act.

Shares of our common stock may be sold through a broker-dealer acting as agent or broker or to a broker-dealer acting as principal. In the latter case, the broker-dealer may then resell such shares of common stock to the public at varying prices to be determined by the broker-dealer at the time of resale.

To the extent required, the number of shares of common stock to be sold, information relating to the underwriters, the purchase price, the public offering price, if applicable, the name of any underwriter, agent or broker-dealer, and any applicable commissions, discounts or other items constituting compensation to such underwriters, agents or broker-dealers with respect to a particular offering will be set forth in an accompanying supplement to this prospectus.

If underwriters are used in a sale, shares of common stock will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. Shares of common stock may be offered to the public either through underwriting syndicates represented by one or more managing underwriters or directly by one or more firms acting as underwriters. The underwriter or underwriters with respect to a particular underwritten offering of shares of common stock will be named in the supplement to this prospectus relating to that offering and, if an underwriting syndicate is used, the managing underwriter or underwriters will be stated on the cover of the prospectus supplement.

Under the securities laws of some states, the shares of common stock registered by the registration statement may be sold in those states only through registered or licensed brokers or dealers.

Any person participating in the distribution of common stock registered under the registration statement that includes this prospectus will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the applicable SEC rules and regulations, including, among others, Regulation M, which may limit the timing of purchases and sales of any of our common stock by any such person. Furthermore, Regulation M may restrict the ability of any person engaged in the distribution of our common stock to engage in market-making activities with respect to our common stock. These restrictions may affect the marketability of our common stock and the ability of any person or entity to engage in market-making activities with respect to our common stock.

Upon sale under the registration statement of which this prospectus constitutes a part, the shares of common stock registered by the registration statement will be freely tradable in the hands of persons other than our affiliates.

The following summary of the terms of the stock of our company does not purport to be complete. Copies of our certificate of incorporation and bylaws are filed as exhibits to the registration statement of which this prospectus is a part. See “Where You Can Find More Information About Us.”

Our authorized capital stock consists of 250,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share. As of the date of this prospectus, we have 30,262,308 shares of our common stock outstanding. The following description of our capital stock is not complete and is subject to and qualified in its entirety by our certificate of incorporation and bylaws, which are included as exhibits to the registration statement of which this prospectus forms a part, and by the provisions of applicable Delaware law.

Holders of shares of common stock are entitled to one vote for each share held of record on all matters on which stockholders are entitled or permitted to vote. Our certificate of incorporation and bylaws provide that, except as otherwise provided by law, the affirmative vote of a majority of the shares entitled to vote, present in person or represented by proxy at a meeting at which a quorum is present, shall be the act of the stockholders. Delaware law requires the affirmative vote of a majority of the outstanding shares entitled to vote thereon to authorize certain extraordinary actions, such as mergers, consolidations, dissolutions of the corporation or an amendment to the certificate of incorporation of the corporation. There is no cumulative voting for the election of directors. Upon a liquidation, our creditors and any holders of preferred stock with preferential liquidation rights will be paid before any distribution to holders of our common stock. The holders of our common stock would be entitled to receive a pro rata amount per share of any excess distribution. Holders of common stock have no preemptive or subscription rights. There are no conversion rights, redemption rights, sinking fund provisions or fixed dividend rights with respect to the common stock. All outstanding shares of common stock are fully paid and nonassessable.

Our certificate of incorporation empowers our board of directors to issue up to 10,000,000 shares of preferred stock from time to time in one or more series. The board also may fix the designation, privileges, preferences and rights and the qualifications, limitations and restrictions of those shares, including dividend rights, conversion rights, voting rights, redemption rights, terms of sinking funds, liquidation preferences and the number of shares constituting any series or the designation of the series. Terms selected could decrease the amount of earnings and assets available for distribution to holders of common stock or adversely affect the rights and powers, including voting rights, of the holders of our common stock without any further vote or action by the stockholders. The rights of holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred shares that we may issue in the future. Additionally, the issuance of preferred stock may have the effect of decreasing the market price of the common stock and may adversely affect the voting and other rights of the holders of common stock. Although there are no shares of preferred stock currently outstanding and we have no present intention to issue any shares of preferred stock, any issuance could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock.

Certain Provisions of Delaware Law and of Our Certificate of Incorporation and Bylaws

Our bylaws provide that the number of directors of our company may be established by our board of directors and may not be fewer than three. Any vacancy will be filled, at any regular meeting or at any special meeting called for that purpose, by a majority of the remaining directors.

Pursuant to our bylaws, each of our directors is elected by our stockholders to serve until the next annual meeting and until their successors are elected and qualify. Holders of shares of our common stock will have no right to cumulative voting in the election of directors. Consequently, at each annual meeting of stockholders, the holders of a majority of the shares of our common stock will be able to elect all of our directors.

Our bylaws provide that a director may be removed with or without cause and only by the affirmative vote of a majority of the votes entitled to be cast in the election of directors.

Our certificate of incorporation may be amended by the affirmative vote of the holders of not less than a majority of all of the votes entitled to be cast on the matter.

Our bylaws provide that with respect to an annual meeting of stockholders, nominations of individuals for election to the board of directors and the proposal of business to be considered by stockholders may be made only (1) pursuant to our notice of the meeting, (2) by or at the direction of the board of directors or (3) by a stockholder who is entitled to vote at the meeting and who has complied with the advance notice procedures in the bylaws. With respect to special meetings of stockholders, only the business specified in our notice of the meeting may be brought before the meeting. Nominations of individuals for election to the board of directors at a special meeting may be made only (1) pursuant to our notice of meeting, (2) by or at the direction of the board of directors or (3) by a stockholder who is entitled to vote at the meeting and who has complied with the advance notice provisions of the bylaws.

Pursuant to our bylaws, shares of our common stock issued prior to the closing of the initial public offering are restricted from transfer, subject to certain limited exceptions, for 180 days following the closing of the initial public offering.

As allowed by the DGCL our certificate of incorporation contains a provision to limit the personal liability of our directors for violations of their fiduciary duty. This provision eliminates each director’s liability to us or our stockholders for monetary damages to the fullest extent permitted by Delaware law. The effect of this provision is to eliminate the personal liability of directors for monetary damages for actions involving a breach of their fiduciary duty of care, including such actions involving gross negligence. However, our directors will be personally liable to us and our stockholders for monetary damages if they violated their duty of loyalty, acted in bad faith, knowingly or intentionally violated the law, authorized illegal dividends or redemptions or derived an improper benefit from their actions as directors. Our certificate of incorporation further provides that if the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director shall be eliminated or limited to the fullest extent permitted by the

Our bylaws provide for indemnification of and the payment of expenses in advance to directors and officers to the fullest extent permitted by applicable law.

We have obtained directors’ and officers’ liability insurance, which insures against liabilities that our directors or officers may incur in such capacities. We have also entered into indemnification agreements with our directors and officers. The indemnification agreements provide indemnification to our directors and officers under certain circumstances for acts or omissions that may not be covered by directors’ and officers’ liability insurance.

Insofar as the indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

We have entered into indemnification agreements with each of our current officers and directors, to give such officers and directors additional contractual assurances regarding the scope of their indemnification. The indemnification agreements provide indemnification to the fullest extent permitted under Delaware law and provide for the advancement of expenses incurred by a director or officer in connection with the investigation, defense, settlement or appeal of any action or investigation.

We are subject to the “business combinations” provisions of the DGCL. In general, such provisions prohibit a publicly held Delaware corporation from engaging in various “business combination” transactions with any “interested stockholder” for a period of three years after the date of the transaction in which the person became an “interested stockholder,” unless:


	•	the board of directors approved the transaction before the “interested stockholder” obtained such status;

	•	upon consummation of the transaction that resulted in the stockholder becoming an “interested stockholder,” “the interested stockholder” owned at least 85% of our outstanding common stock at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned (1) by persons who are directors and are also officers and (2) employee stock plans in which the participants do not have the right to determine confidentially whether shares held subject to the plans will be tendered in the tender or exchange offer; or

	•	on or subsequent to such date, the business combination or merger is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by two-thirds of the holders of the outstanding common stock not owned by the “interested stockholder.”

A “business combination” is defined to include mergers, asset sales and other transactions resulting in financial benefit to a stockholder. In general, an “interested stockholder” is a person who, together with affiliates and associates, owns 15% or more of a corporation’s voting stock or within three years did own 15% or more of a corporation’s voting stock. The statute could prohibit or delay mergers or other takeover or change in control attempts.

Provisions of our certificate of incorporation and bylaws providing that only the board of directors, the chairman of the board of directors, the chief executive officer, the president or the holders of 35% or more of our common stock may call special meetings of stockholders, and prohibiting stockholder action by written consent, may have the effect of making it more difficult for a third party to acquire control of us, or of discouraging a third party from attempting to acquire control of us. In addition, our certificate of incorporation allows our board of directors to issue up to 10,000,000 shares of preferred stock that could have, when issued, voting rights or preferences that could impede the success of any hostile takeover, or delay a change in control or change in our management.

Our common stock is traded on the Nasdaq National Market under the symbol “WOLF.”

The transfer agent and registrar for our common stock and preferred stock is EquiServe.

Certain legal matters in connection with this offering will be passed upon for us by King & Spalding LLP.

The combined financial statements of Great Lakes Predecessor as of September 30, 2004 and December 31, 2003 and 2002, and for the nine months ended September 30, 2004 and each of the three years in the period ended December 31, 2003 and the balance sheet of Great Wolf Resorts, Inc. as of June 30, 2004, included in this prospectus have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports appearing herein (which report as to Predecessor expresses an unqualified opinion and includes an explanatory paragraph concerning the adoption of SFAS No. 150, Accounting for Certain Financial Instruments with Characteristic of Both Liabilities and Equity and the adoption of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and an explanatory paragraph relating to the restatement described in Note 11), and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

The Dells/Sandusky historical financial statements as of December 31, 2002 and 2003, and for each of the years in the three-year period ended December 31, 2003, included in this prospectus have been audited by Rubin, Brown, Gornstein & Co. LLP, an independent registered public accounting firm, as stated in their report appearing herein, and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

We have filed with the SEC a registration statement on Form S-1, including exhibits, schedules and amendments filed with the registration statement, under the Securities Act with respect to the shares of our common stock to be sold in this offering. This prospectus does not contain all of the information set forth in the registration statement and exhibits and schedules to the registration statement. For further information with respect to our company and the shares of our common stock to be sold in this offering, reference is made to the registration statement, including the exhibits to the registration statement. Statements contained in this prospectus as to the contents of any contract or other document referred to in this prospectus are not necessarily complete and, where that contract is an exhibit to the registration statement, each statement is qualified in all respects by the exhibit to which the reference relates. Copies of the registration statement, including the exhibits and schedules to the registration statement, may be examined without charge at the public reference room of the SEC, 450 Fifth Street, N.W. Room 1024, Washington, DC 20549. Information about the operation of the public reference room may be obtained by calling the SEC at 1-800-SEC-0300. Copies of all or a portion of the registration statement can be obtained from the public reference room of the SEC upon payment of prescribed fees. Our SEC filings, including our registration statement, will also available to you on the SEC’s web site, www.sec.gov.

We are subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended, and file annual, quarterly and other periodic reports and proxy statements and make available to our stockholders quarterly reports for the first three quarters of each fiscal year containing unaudited interim financial information.

The accompanying unaudited pro forma condensed consolidated balance sheet as of September 30, 2004 has been prepared to give pro forma effect to the initial public offering of common stock of Great Wolf Resorts, Inc. (the “Offering”) and the related formation transactions (the “Formation Transactions”) as if they had occurred on September 30, 2004. The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2004 and the year ended December 31, 2003 have been prepared to give pro forma effect to the initial public offering and the formation transactions as if they had occurred on January 1, 2003. All material adjustments necessary to reflect this offering and formation transactions are presented in the pro forma adjustments columns, which are further described in the notes below. The unaudited pro forma condensed consolidated financial statements assume (1) this offering and formation transactions are accounted for as a purchase of the resort-owning entities by The Great Lakes Companies, Inc. using the purchase method of accounting and (2) the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed consolidated financial statements.

The pro forma condensed consolidated financial statements assume all of the following occurred on September 30, 2004, in the case of the pro forma consolidated balance sheet, and as of January 1, 2003, in the case of the pro forma consolidated statements of operations:


	•	Initial public offering of 16,100,000 shares of common stock at $17.00 per share, with net proceeds of $249.5 million;

	•	Acquisition of all of the interests in the entities that own the Wisconsin Dells, Sandusky, Traverse City, Kansas City, Sheboygan, Williamsburg and Pocono Mountains resorts;

	•	The spin-off of the non-resort hotel and multifamily housing development and management business;

	•	Repayment of an aggregate of $76.0 million of mortgage indebtedness on two resorts;

	•	Refinancing of approximately $72.4 million of mortgage indebtedness on two resorts; and

	•	Establishment of a new $75.0 million secured revolving credit facility, none of which will be outstanding at closing.

The pro forma condensed consolidated financial statements should be read in conjunction with the historical combined financial statements of the Great Lakes Predecessor and Dells/ Sandusky and related notes appearing elsewhere in this prospectus.

The pro forma condensed consolidated financial statements are for informational purposes only and should not be considered indicative of actual results that would have been achieved had the initial public offering and the formation transactions actually been consummated on such date and do not purport to indicate results of operations as of any future date or for any future period.

Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet (dollars in thousands, except per share amounts)

(A) Reflects the historical condensed combined balance sheet of the Predecessor which consists of:


	1. The Great Lakes Companies, Inc., or GLC, and its consolidated subsidiaries; and

	2. The following entities that are under common management by GLC:


	•	Great Wolf Lodge of Traverse City, LLC

	•	Great Wolf Lodge of Kansas City, LLC

	•	Blue Harbor Resort Sheboygan, LLC

	•	Great Wolf Lodge of Williamsburg, LLC

	•	Great Wolf Lodge of Poconos, LLC

(B) Reflects the historical condensed combined balance sheet for the entities that own our Wisconsin Dells and Sandusky resorts.

(C) Reflects the effect of the spin-off from the Predecessor’s historical combined financial information of the non-resort hotel and multifamily housing businesses. These assets, which consist primarily of receivables and ownership interests in non-resort hotel and multifamily housing assets, and liabilities relate to the Predecessor’s development, ownership and management interests of non-resort hotels and multifamily housing properties and are unrelated to our resort business. The spin-off is expected to occur concurrently with the Offering and the Formation Transactions.

(D) Reflects the sale of 16,100,000 shares of common stock for $17.00 per share in conjunction with the Offering and Formation Transactions.

(E) Reflects the application of the purchase method of accounting in connection with GLC’s acquisition of the seven resort-owning entities. GLC is currently the manager for each of the five operating resorts and the developer of the two resorts under construction. Through their exchanges of shares of GLC for shares of Great Wolf Resorts, Inc., GLC’s shareholders as a group will have the largest minority portion of any organized group of shareholder interest in the combined corporation, Great Wolf Resorts, Inc., and GLC’s existing senior management will comprise the senior management of the combined entity. Accordingly, as prescribed by Statement of Financial Accounting Standards No. 141, “Business Combinations,” GLC has been identified as the accounting acquirer.


	•	total purchase price for each of the seven resort-owning entities was calculated based on:


	•	the number of shares of common stock of Great Wolf Resorts, Inc., valued at $17.00 per share, to be issued to existing owners of those entities in conjunction with the Formation Transactions and

	•	cash to be paid to buy out certain investors in the resort-owning entities and interests held by affiliates of AIG SunAmerica, Inc. in the Wisconsin Dells and Sandusky entities in conjunction with the consummation of the Offering and Formation Transactions;


	•	property and equipment, other assets and other liabilities of the seven resort-owning entities are recorded at their fair values;


	•	a deferred tax liability resulting from the difference between the fair value and the tax basis of assets acquired from the seven resort-owning entities is recorded at our anticipated effective tax rate of 40%;

	•	mandatorily redeemable ownership interests are eliminated due to the conversion of those ownership interests to our common stock in conjunction with the Formation Transactions;

	•	the excess of consideration in the purchase transaction over the fair value of net tangible assets acquired from the seven resort-owning entities is recorded as goodwill.

The following table summarizes the total purchase price, consisting of shares of common stock of Great Wolf Resorts, Inc. and cash, as shown in the table below, and resulting goodwill balance, the cost basis and fair value with the resulting step-up amount to fair value, and the calculation of the deferred tax liability for each of the resorts. The number of shares issued shown in the table below excludes 4,909,077 shares to be issued to the shareholders of GLC, the accounting acquirer, in conjunction with the Formation Transactions.

The adjustments to the applicable line items as a result of the purchase accounting and other items discussed above are as follows:

The values and amounts used in the application of purchase accounting for the pro forma condensed consolidated balance sheet are based on preliminary estimates and assumptions. These estimates and assumptions are subject to possible change at the date of the Offering.

(F) Reflects (1) the reduction in outstanding debt related to repayment of certain mortgage notes payable and (2) the refinancing of certain other mortgage notes payable with new secured mortgage financing in conjunction with the Offering and the Formation Transactions as follows:

(G) Reflects the payment of $3,000 of costs to obtain the new secured mortgage financing and revolving credit facility.

(H) Reflects the elimination of $600 of intercompany receivables and payables related to the Wisconsin Dells and Sandusky entities.

(I) Reflects the write-off of $1,469 of unamortized loan fees related to the existing debt retired in the Offering and Formation Transactions.

Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations (dollars in thousands)

(A) Reflects the historical condensed combined statement of operations of the Predecessor, which consists of:


	1. The Great Lakes Companies, Inc., or GLC, and its consolidated subsidiaries; and

	2. The following entities that are under common management by GLC:


	•	Great Wolf Lodge of Traverse City, LLC

	•	Great Wolf Lodge of Kansas City, LLC

	•	Blue Harbor Resort Sheboygan, LLC

	•	Great Wolf Lodge of Williamsburg, LLC

	•	Great Wolf Lodge of Poconos, LLC

(B) Reflects the historical condensed combined statement of operations for the entities that own our Wisconsin Dells and Sandusky resorts.

(C) Reflects the effect of the spin-off of the Predecessor’s historical combined financial information of the non-resort hotel and multifamily housing development and hotel management businesses. Expenses for the multifamily housing development and hotel management businesses include salary and overhead costs of certain employees currently employed by the Predecessor. The salary costs were allocated to the spun-off businesses based on estimated time to be devoted to those businesses by each current employee of the Predecessor. Overhead costs were calculated as 100% of the allocated salary costs.

(D) Reflects the elimination of aggregate intercompany revenue and expenses related to management fees, development fees, accounting fees and central reservation fees related to the Wisconsin Dells and Sandusky entities of $1,024 and $1,536 for the nine months ended September 30, 2004 and the year ended December 31, 2003, respectively.

(E) Reflects the elimination of the amounts in Predecessor’s financial statements related to the Wisconsin Dells and Sandusky resorts under Emerging Issues Task Force Issue No. 01-14, “Income Statement Characteristics of Reimbursements for Out-of-pocket Expenses,” which requires the recognition of certain revenue and expenses related to managed properties in the manager’s statement of operations. These amounts primarily relate to payroll costs at the managed properties where GLC was the employer. The reimbursement of those costs is recorded as revenue with a corresponding expense.

(F) Reflects the increase in general and administrative expenses of $473 and $970 for the nine months ended September 30, 2004 and the year ended December 31, 2003, respectively, as a result of becoming a public company. These amounts represent salaries based on employment agreements with executive officers who were hired as a result of becoming a public company. These amounts exclude bonuses of $2,275 to be paid under agreements with certain executives upon consummation of the offering as the charge to earnings will not have a continuing impact on our results of operations. In addition, we expect to incur approximately $5,400 of further incremental general and administrative costs annually as a result of becoming a public company. Those costs, which are not based on contractual arrangements as of the date of the Offering and are therefore not included in the pro forma condensed consolidated statements of operations, consist of the following: salaries, benefits and other employee-related costs—$2,630; professional fees—$780; insurance—$750; public company listing fees and investor and public relations costs—$620; expenses related to independent members of our board of directors—$250; and other miscellaneous costs—$370.

(G) Reflects the change in depreciation and amortization of property and equipment relating to purchase accounting adjustments to property and equipment balances resulting from the acquisition of the Wisconsin Dells, Sandusky, Kansas City, Traverse City and Sheboygan resorts by GLC. Depreciation and amortization are

(H) Reflects the net reduction in amortization expense as a result of the refinancing of debt in conjunction with the Offering. The adjustments to amortization expense are as follows:

(I) Reflects the net reduction in interest expense as a result of the repayment and refinancing of debt in conjunction with the Offering, based on secured mortgage financing as follows:


	•	$75,000, secured by two resorts, with a fixed interest rate equal to the 10-year treasury bill rate plus 2.75%.

An increase of 0.125% in the interest rate on the new secured mortgage financing would increase our interest expense by $70 and $63 for the nine months ended September 30, 2004 and the year ended December 31, 2003, respectively. A decrease of 0.125% in the interest rate would decrease our interest expense by $70 and $63 for the nine months ended September 30, 2004 and the year ended December 31, 2003, respectively.

(J) Reflects the elimination of interest on mandatorily redeemable shares as a result of or in connection with the Formation Transactions.

(K) Reflects the adjustments to record income tax expense (benefit) at our anticipated effective tax rates of 40% for both the nine months ended September 30, 2004 and for the year ended December 31, 2003.

(L) Pro forma basic and diluted earnings (loss) per share are computed assuming the Offering was consummated as of the first day of the period presented and equals pro forma net income (loss) divided by the number of shares of our common stock expected to be outstanding after the Offering.

(M) As restated—see Note 11 to the Predecessor’s combined financial statements.

We have audited the accompanying balance sheet of Great Wolf Resorts, Inc. (the “Company”) as of June 30, 2004. This financial statement is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

We conducted our audit 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 balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit of the balance sheet provides a reasonable basis for our opinion.

In our opinion, such balance sheet presents fairly, in all material respects, the financial position of Great Wolf Resorts, Inc. as of June 30, 2004, in conformity with accounting principles generally accepted in the United States of America.

Great Wolf Resorts, Inc. (the Company) was incorporated in May 2004 as a Delaware corporation. In August 2004, the Company filed a registration statement on Form S-1 with the Securities and Exchange Commission with respect to a proposed public offering (the Offering). The Company will enter into certain transactions (the Formation Transactions) that will occur simultaneously with the completion of the Offering. The Formation Transactions are designed to:


	•	acquire four existing Great Wolf Lodge resorts, a Blue Harbor Resort and two Great Wolf Lodge resorts under construction, each of which is currently owned by a separate limited liability company;

	•	acquire the resort management business of The Great Lake Companies, Inc. and its subsidiaries;

	•	facilitate the Offering; and

	•	enable the Company to raise the necessary capital to repay certain existing indebtedness, purchase certain interests held by a third party in two of the four existing resort-owning entities and fund its growth.

On December 20, 2004, the Company completed its Offering and the Formation Transactions discussed in Note 1. In connection with the Offering, 16.1 million shares were issued resulting in net proceeds of $249,541,000.

We have audited the accompanying combined balance sheets of Great Lakes Predecessor (the Predecessor), as defined in Note 1 to the combined financial statements, as of September 30, 2004 and December 31, 2003 and 2002, and the related combined statements of operations, equity, and cash flows for the nine months ended September 30, 2004 and for each of the three years in the period ended December 31, 2003. The combined financial statements include the accounts of The Great Lakes Companies, Inc. and affiliated entities as described in Note 1. These entities are under common management. These financial statements are the responsibility of the Predecessor’s management. Our responsibility is to express an opinion on these 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, such financial statements present fairly, in all material respects, the combined financial position of Great Lakes Predecessor as of September 30, 2004 and December 31, 2003 and 2002, and the combined results of its operations and its cash flows for the nine months ended September 30, 2004 and each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2 to the combined financial statements, effective July 1, 2003, Predecessor adopted SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” and effective January 1, 2001, Predecessor adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.”

As discussed in Note 11 to the combined financial statements, the accompanying combined financial statements for the year ended December 31, 2003 have been restated.

Great Lakes Predecessor (the Predecessor) is not a legal entity but rather a combination of certain real estate entities and operations that comprise its historical operations as described below. The Predecessor is engaged in the business of developing, owning, operating and managing various real estate assets in the United States and Canada, including family entertainment resorts, hotels and multi-family housing.

In conjunction with a proposed initial public offering (the Offering) and the execution of certain formation transactions (the Formation Transactions), which are both expected to be completed in 2004, the resorts and the related resort management business of the Predecessor will be acquired by Great Wolf Resorts, Inc. Certain assets of the non-resort hotel and multi-family housing development and management businesses of the Predecessor will be contributed to subsidiaries and then distributed to the stockholders of The Great Lakes Companies, Inc. (GLC), an entity included in the Predecessor’s combined financial statements.

The Predecessor’s combined financial statements include the accounts of the following, all of which are under common management:


	•	GLC and its consolidated subsidiaries

	•	Great Wolf Lodge of Traverse City, LLC—owns a 281-room resort in Traverse City, Michigan (opened in March 2003)

	•	Great Wolf Lodge of Kansas City, LLC—owns a 281-room resort in Kansas City, Kansas (opened in May 2003)

	•	Blue Harbor Resort Sheboygan, LLC—owns a 183-room resort in Sheboygan, Wisconsin (opened in June 2004)

	•	Great Wolf Lodge of Williamsburg, LLC—owns a 301-room resort in Williamsburg, Virginia (under construction, scheduled to open in Spring 2005)

	•	Great Wolf Lodge of Poconos, LLC—owns a 400-room resort in the Pocono Mountains (under construction, scheduled to open in Fall 2005).

All significant intercompany balances and transactions have been eliminated in combination.


	•	entities managed by GLC that will not be contributed to Great Wolf Resorts, Inc. in the Formation Transactions; and

	•	entities that own the Great Wolf Lodges in Wisconsin Dells, Wisconsin and Sandusky, Ohio. These entities, although managed by GLC and expected to be acquired by Great Wolf Resorts, Inc. as part of the Formation Transactions, are controlled by affiliates of AIG SunAmerica, Inc.

On June 25, 2004, GLC distributed its interests in Blue Harbor Resort Condominium LLC to its shareholders. The distribution consisted of $10,831 of property and equipment and $10,831 of related debt. The distribution was recorded at historical cost. Therefore, no gain or loss was recognized on the distribution.

Cash and Cash Equivalents—The Predecessor considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Unaudited Interim Financial Information—The accompanying unaudited interim combined statements of operations and cash flows for the nine months ended September 30, 2003 are unaudited. These unaudited interim combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of the Predecessor’s management, the unaudited interim combined financial statements have been prepared on the same basis as the audited combined financial statements and include all adjustments, consisting only of normal, recurring items, necessary for the fair presentation of the results of the Predecessor’s operations and its cash flows for the nine months ended September 30, 2003.

Allowance for Doubtful Accounts—The Predecessor provides an allowance for doubtful accounts when it determines it is more likely than not a specific account will not be collected. Bad debt expense for the nine months ended September 30, 2004 and the years ended December 31, 2003, 2002 and 2001 was $434, $524, $110 and $178, respectively, and writeoffs of accounts receivable in the nine months ended September 30, 2004 and the years ended December 31, 2003, 2002 and 2001 were zero, $136, $22 and zero, respectively.

Property and Equipment—The Predecessor records investments in property and equipment at cost. These assets are depreciated using the straight-line method over their estimated useful lives as follows:

Improvements and replacements are capitalized when they extend the useful life, increase capacity or improve the efficiency of the asset. Repairs and maintenance are expensed as incurred. Construction in process includes costs such as site work, permitting and construction related to resorts under development. The Predecessor capitalizes interest on construction in process balances during the construction period. Interest capitalized totaled $1,568, $1,381, $574 and $359 for the nine months ended September 30, 2004 and the years ended December 31, 2003, 2002 and 2001, respectively.

Loan Fees—The Predecessor capitalizes loan fees and amortizes them over the term of the loan using a method that approximates the effective interest method. Loan fees, net of accumulated amortization, were $3,811, $2,938 and $1,724 as of September 30, 2004 and December 31, 2003 and 2002, respectively. Amortization of loan fees was $1,523, $1,137, $984 and $227 for the nine months ended September 30, 2004 and the years ended December 31, 2003, 2002 and 2001, respectively.

Assets Held for Sale—The Predecessor classifies as held for sale those properties that are being actively marketed for sale. A property classified as held for sale is carried at the lower of its book value or estimated fair value less costs to sell. Depreciation of the held for sale property’s assets is ceased at the time the property is classified as held for sale. The Predecessor segregates the property and equipment, and long-term debt relating to the held for sale properties on its combined balance sheets. The Predecessor segregates the operating activity and any gains or losses upon disposition relating to the held for sale properties in income (loss) from discontinued operations in its combined statements of operations.

Equity Escrow—For certain of the entities included in the accompanying combined financial statements, the Predecessor has raised equity from members through private placements. Equity amounts raised through these private placements are held in escrow and used in construction of resorts. The Predecessor is only permitted to use these funds for the construction of the applicable resorts. The funds are held in a bank account which exceeds the FDIC insurance limit.

Goodwill— The excess of the purchase price over the estimated fair value of tangible and identifiable intangible assets acquired is recorded as goodwill. The Predecessor’s goodwill resulted from the acquisition of a hotel in 2000. Prior to January 1, 2002, goodwill was amortized on a straight-line basis over its estimated useful life. Effective January 1, 2002, the Predecessor adopted Statement of Financial Accounting Standards (SFAS) No. 142, which states that goodwill should not be amortized but instead tested for impairment and adjusted, if applicable. Accordingly, the Predecessor ceased amortization of goodwill as of January 1, 2002. Amortization expense for 2001 was $120. In connection with SFAS No. 142, the Predecessor is required to assess goodwill and intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. The Predecessor assesses goodwill for such impairment by comparing the carrying value of its reporting units to their fair values. The Predecessor performed its initial goodwill impairment assessment on January 1, 2002 in connection with the adoption of SFAS No. 142 and determined that the carrying amounts of its reporting units did not exceed their respective fair values. Accordingly, the initial implementation of this standard did not result in a charge and, as such, did not impact the Predecessor’s results of operations during 2002. Subsequent to the initial assessment, the Predecessor performed its review annually, or more frequently if circumstances indicated impairment may have occurred, and during the nine months ended September 30, 2004 and the years ended December 31, 2003 and 2002 determined that no such impairment had occurred.

Impairment of Long-Lived Assets— When circumstances, such as adverse market conditions, indicate that the carrying value of a long— lived asset may be impaired, the Predecessor performs an analysis to review the recoverability of the asset’s carrying value. The Predecessor makes estimates of the undiscounted cash flows (excluding interest charges) from the expected future operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects of demand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized to the extent that the carrying value exceeds the estimated fair value. Any impairment losses are recorded as operating expenses, which reduce net income. The Predecessor had no impairment losses in any of the periods presented.

Minority Interests— The Predecessor records the non-owned equity interests of GLC’s consolidated subsidiaries as minority interests on the combined balance sheets. The Predecessor recognizes losses that exceed the minority interest party’s capital in a consolidated entity. Distributions that exceed the minority interest partner’s capital in a consolidated entity are recorded as distributions in excess of minority interest capital expense.

Derivative Instruments— SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” requires an entity to recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. SFAS Nos. 137 and 138 amended certain provisions of SFAS No. 133. The Predecessor adopted these accounting pronouncements effective January 1, 2001. The Predecessor does not generally enter into derivative instruments; certain of the Predecessor’s contracts, however, contain derivative instruments as defined in SFAS No. 133. The Predecessor’s implementation of SFAS No. 133 resulted in the

classification of certain derivative instruments as liabilities and a charge recorded as a cumulative effect of a change in accounting principle of $333 for the year ended December 31, 2001.

Revenue Recognition— The Predecessor earns revenue from its hotel and resort operations, and from management, development and other related services. The Predecessor recognizes revenue from rooms, food and beverage, and other operating departments at the hotels and resorts as earned at the time of sale or rendering of service. Cash received in advance of the sale or rendering of services is recorded as advance deposits on the combined balance sheets. The Predecessor recognizes management and other fees as earned according to the contractual terms governing those fees. The Predecessor recognizes development fees as earned under the completed contract method for projects with a short duration, and the percentage of completion method (based on contract-to-date costs incurred compared to total expected costs) for longer-term projects.

Gains on Sales of Real Estate— SFAS No. 66, “Accounting for Sales of Real Estate,” requires an entity to recognize gains on sales of real estate only when a sale is consummated, the buyer’s initial and continuing investments are adequate to demonstrate a commitment to pay, and risks and rewards of ownership are transferred to the buyer. The Predecessor accounts for gains on sales of real estate in accordance with the provisions of SFAS No. 66. In the nine months ended September 30, 2004, the Predecessor recognized a gain on sale of real estate of $1,072 from the sale of land owned in Ontario, Canada and $581 from the sale of land in Beckley, West Virginia.

Income Taxes— The Predecessor is comprised of a Subchapter S Corporation and limited liability companies. Under applicable federal and state income tax rules, the net income or loss of each of these entities is reportable in the income tax returns of the stockholders, partners and members of the entities. Accordingly, no income tax provision is included in the accompanying combined financial statements.

Advertising— The Predecessor expenses advertising costs as incurred. Advertising expense for the nine months ended September 30, 2004 and the year ended December 31, 2003 was $2,020 and $2,218, respectively; advertising expense for 2002 and 2001 was insignificant.

Use of Estimates— To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management must make estimates and assumptions. These estimates and assumptions affect the reported amounts in the financial statements, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

New Accounting Pronouncements— In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 eliminates the amortization of goodwill and replaces it with a requirement to conduct an impairment analysis of the carrying value of the goodwill at least annually, and more often as circumstances warrant. The provisions of SFAS No. 142 are required to be applied starting with fiscal years beginning after December 15, 2001. The Predecessor adopted SFAS No. 142 on January 1, 2002.

In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 addresses financial accounting and reporting for the impairment and disposal of long-lived assets. SFAS No. 144 requires the current and prior period operating results of any asset that has been classified as held for sale or has been disposed of after January 1, 2002 and where the Predecessor has no continuing involvement to be recorded as discontinued operations. Any gains or losses on final disposition are also included in discontinued operations. The provisions of SFAS No. 144 are effective for financial statements

issued for fiscal years beginning after December 15, 2001. The Predecessor adopted SFAS No. 144 on January 1, 2002. Certain of the Predecessor’s hotel properties are classified as held for sale in the accompanying combined balance sheets and, accordingly, the operating results of those properties are recorded in discontinued operations in the combined statements of operations.

Effective January 1, 2002, the Predecessor adopted the provisions of Emerging Issues Task Force (EITF) Issue No. 01-14 “Income Statement Characterization of Reimbursements Received for Out-of-Pocket Expenses Incurred.” EITF Issue No. 01-14 establishes standards for accounting for reimbursements received for out-of-pocket expenses incurred and the characterization as revenue and expense in the statements of operations. In accordance with EITF Issue No. 01-14, the Predecessor has included in operating revenues and expenses the reimbursement of costs it incurs on behalf of the third-party owners of hotels managed by GLC. These costs relate primarily to payroll and benefit costs at managed hotels where GLC is the employer. The Predecessor receives reimbursements for these costs based upon its costs with no added margin. Therefore, the adoption of EITF Issue No. 01-14 did not impact its operating results, cash flows or financial position. The Predecessor adopted EITF Issue No. 01-14 by retroactively applying it to all periods presented in the accompanying combined financial statements. The effect of adopting EITF Issue No. 01-14 was an increase in operating revenues and expenses of $11,040, $14,904, $14,808 and $13,286 for the nine months ended September 30, 2004 and the years ended December 31, 2003, 2002 and 2001, respectively.

FASB Interpretation 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 45), was issued in November 2002. FIN 45 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 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year-end. The disclosure requirements in FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. There was no financial statement impact from the adoption of FIN 45.

In January 2003, the FASB issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” an interpretation of Accounting Research Bulletin No. 51, “Consolidated Financial Statements.” FIN 46 prescribes how to identify variable interest entities and how an enterprise assesses its interests in a variable interest entity to decide whether to consolidate the entity. FIN 46 requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. The original provisions of FIN 46 were effective February 1, 2003 for all arrangements entered into after January 31, 2003. For arrangements entered into before February 1, 2003, the provisions of FIN 46 applied in the first fiscal year or interim period beginning after June 15, 2003.

In December 2003, the FASB issued a revision of FIN 46 (FIN 46R) to clarify some of its provisions. FIN 46R deferred the effective date for FIN 46 for arrangements entered into before February 1, 2003 and results in multiple effective dates based on the nature as well as the creation date of the variable interest entity. Variable interest entities created after January 31, 2003 but prior to December 24, 2003, may be accounted for either based on the original or the revised interpretations. Variable interest entities created after December 24, 2003 must be accounted for under the revised interpretations. FIN 46R is effective for periods ending after March 15, 2004. The Predecessor has applied FIN 46 to variable interest entities created after January 31, 2003

for the year ended December 31, 2003. The Predecessor has applied FIN 46R to variable interest entities effective January 1, 2004. Prior to the implementation of FIN 46 and FIN 46R, the Predecessor consolidated entities for which it controlled major management and operating decisions. There was no financial statement impact from the adoption of FIN 46 and FIN 46R.

In May 2003, the FASB issued SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS No. 150 requires the classification of certain financial instruments that were previously classified as equity to be classified as liabilities. The implementation of SFAS No. 150 is effective for financial instruments issued or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Predecessor’s implementation of SFAS No. 150 resulted in the classification of certain mandatorily redeemable interests as liabilities, resulting in a cumulative effect of a change in accounting principle of $460 for the year ended December 31, 2003.

The Predecessor’s borrowings, excluding borrowings related to assets held for sale, consist of the following:

The lines of credit are borrowings of GLC and are generally secured by business security agreements, which pledge as collateral GLC’s assets, assignments of stockholder interests of GLC’s principals and guarantees of GLC’s stockholders. The lines of credit are subject to annual renewals. The net book value of assets securing these lines was approximately $12,626 at September 30, 2004. As of September 30, 2004, GLC had $66 available on these lines of credit.

The mortgage debt is secured by certain hotel, resort and multi-family housing properties as well as the guarantees of various individual investors, including certain stockholders of GLC. The total book value of assets securing mortgage debt was approximately $180,002 at September 30, 2004.

The City of Sheboygan (the City) bonds amount represents the face amount of bond anticipation notes (BANs) issued by the City in November 2003 in conjunction with the Predecessor’s construction of the Blue Harbor Resort in Sheboygan, Wisconsin. In accordance with the provisions of EITF Issue No. 91-10, the Predecessor has recognized as a liability the obligations for these BANs. The notes bear interest at 3.95% and mature in 2008. The notes are not a general obligation of the City and are payable from (a) the proceeds of bond anticipation notes or other funds appropriated by the City for the payment of interest on the BANs and (b) the proceeds to be delivered from the issuance and sale of securities by the City. The Predecessor has an obligation to fund payment of these BANs. The Predecessor’s obligation to fund repayment of the notes will be satisfied by certain minimum guaranteed amounts of room tax payments to be made by the Blue Harbor Resort through 2028.

The City of Sheboygan loan amount represents a loan made by the City in 2004 to the Predecessor in conjunction with the Predecessor’s construction of the Blue Harbor Resort in Sheboygan, Wisconsin. The loan is noninterest-bearing and matures in 2018. The Predecessor’s obligation to repay the loan will be satisfied by

certain minimum guaranteed amounts of real and personal property tax payments to be made by the Blue Harbor Resort through 2018.

The City of Los Angeles loan is secured by a multi-family housing project under development in Hollywood, California. The loan represents proceeds received under the federal government’s loan guarantee provision of the Community Development Block Grant program. The proceeds were used to finance a portion of the construction costs of the project. Repayment of the total proceeds amount will be satisfied through a combination of payments by the Predecessor to the City of Los Angeles and payments by the City of Los Angeles to the United States Department of Housing and Urban Development. The loan bears interest at 5.0%. Repayments on the loan are in installments over a 27-year period, beginning in 2007.

The Hillview loan is unsecured. The loan was made to the Predecessor to finance a portion of the construction costs of a multi-family housing project under development in Hollywood, California. The loan bears interest at 3.27% per annum, with interest computed beginning when the project achieves breakeven operating income performance. The loan will be repaid based on a 30-year amortization schedule, with any unpaid principal amount due on June 30, 2033.

In connection with certain loan agreements, the Predecessor must maintain replacement reserve funds. Those agreements require monthly deposits of three or four percent of gross operating revenues to fund capital improvements and replacements. The replacement reserve funds are pledged as collateral for the respective mortgage debt. As of December 31, 2003, two replacement reserve funds were under-funded, which constituted a covenant violation of the related loan agreement. The Predecessor has obtained a permanent waiver of one of these covenant violations and a waiver through December 31, 2004 for the other covenant violation. It is probable that the covenant waiver that expires on December 31, 2004 will be met at the next compliance date.

As of September 30, 2004, December 31, 2003 and 2002, the fair values of the Predecessor’s mortgage loans and other secured loans approximate the carrying values as the terms are similar to those currently available to the Predecessor for debt with similar risks and remaining maturities.

The carrying amounts for cash and cash equivalents, other current assets, equity escrows and accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments.

The Predecessor provides management, development, accounting, central reservations and other services to the real estate entities invested in by the Predecessor and to affiliates of the owners of the Predecessor. All management, development and other fees were earned from entities for which GLC or its stockholders are the managing members or investees. Amounts due from related parties were $1,510, $1,521 and $1,206 at September 30, 2004, December 31, 2003 and 2002, respectively.

The Predecessor has regularly used an aircraft owned by an entity owned by several of its stockholders and other employees. The Predecessor paid $155, $149, $122 and $-0- in the nine months ended September 30, 2004 and the years ended December 31, 2003, 2002, and 2001, respectively, for the lease of the aircraft for company business. The entity that owns the aircraft also has one employee for whom Predecessor provided payroll and benefit services, the costs of which were reimbursed by the entity.

One of the Predecessor’s stockholders owns a 25% interest in the entity that leases space at the Great Wolf Lodge in Wisconsin Dells and operates the spa located within that resort. That entity made payments of $33 and $35 in the nine months ended September 30, 2004 and the year ended December 31, 2003, respectively, to the resort and no payments in 2002 and 2001.

The Predecessor received fees from an affiliate in connection with arranging the financing transactions for certain of the Predecessor’s resorts. Total fees received by the Predecessor from this entity were $604, $395, $432 and $162 in the nine months ended September 30, 2004 and the year ended December 31, 2003, 2002 and 2001, respectively

In the course of normal business activities, various lawsuits, claims and proceedings have been or may be instituted or asserted against the Predecessor. Based on currently available facts, management believes that the disposition of matters pending or asserted will not have a material adverse effect on the Predecessor’s combined financial position, results of operations or liquidity.

In connection with the construction of the Blue Harbor Resorts, GLC has supplied a $1,000 letter of credit in favor of the City of Sheboygan. The letter of credit expires on December 31, 2004. There have been no draws on this letter of credit.

Based on certain criteria, FIN 45 requires a guarantor to recognize, at the inception of a guarantee, a liability for that guarantee. The objective of the initial measurement of the liability is the fair value of the guarantee at its inception. The following is a summary of significant guarantees recognized in the combined balance sheets:


	•	In connection with the construction of the Blue Harbor Resort in Sheboygan, Wisconsin, Blue Harbor Resort Sheboygan, LLC (BH Resort LLC) entered into agreements with the City of Sheboygan and The


		Redevelopment Authority of the City of Sheboygan, Wisconsin (collectively, the City) whereby the City funded certain costs of construction. The City funded $4,000 toward the construction of the Blue Harbor Resort and related public improvements and $8,200 toward construction of a convention center connected to the resort.


		In exchange for the $4,000 funding, BH Resort LLC guaranteed real and personal property tax payments over a fourteen-year period totaling $16,400. This obligation is also guaranteed jointly by Predecessor and by three of its principals. The guarantee was entered into on July 30, 2003.

		In exchange for the $8,200 funding, BH Resort LLC entered into a lease for the convention center with the City. The initial term of the lease is 25 1/2 years with 15, 5-year renewal options. Under the lease, BH Resort LLC will satisfy repayment of the $8,200 funding by making guaranteed room tax payments totaling $25,944 over the initial term of the lease. This obligation is also guaranteed jointly by GLC and by three of its principals. This guarantee was also entered into on July 30, 2003.

		As the debt related to the $4,000 and $8,200 fundings is included in the accompanying combined balance sheet, the Predecessor has not recorded any liability related to the guarantees on those fundings.


	•	Sun Prairie Apartments, LLC (SPLLC) owns the Hamilton Place Apartments in Sun Prairie, WI. GLC has a small equity interest in SPLLC. On April 8, 2003 GLC entered into a guarantee with SPLLC’s lender for an interest reserve account related to SPLLC’s debt on April 8, 2003. Under this guarantee, GLC’s obligations are limited to $165. Based on the Predecessor’s assessment of the likelihood of GLC having to possibly perform on this guarantee, the fair value of this guarantee at the inception of the guarantee had a nominal value and no liability has been recorded in the combined financial statements at December 31, 2003. The guarantee was released in April 2004.

Subsequent to December 31, 2003, lenders approved GLC’s request to revoke and release the guarantee related to Port Washington Hotel, LLC. This guarantee release is subject to the completion of the Offering.

The Predecessor leases land, office space, storage space and office equipment under various operating leases. Most of the leases include renewal options. Future minimum payments on these operating leases

(including payments to minority members of certain combined entities) as of September 30, 2004 are as follows:

Rent expense for the nine months ended September 30, 2004 and the years ended December 31, 2003, 2002 and 2001 was not significant.

The Predecessor also has commitments on contracts to build the Predecessor’s resorts under construction. Commitments on these contracts total $50,646 for periods subsequent to September 30, 2004.

Under a program available in the State of Kansas, the Predecessor entered into a transaction with a local government for the sole purpose of enabling the Predecessor to save approximately $800 in sales and compensation use taxes that would have been otherwise payable on materials and equipment incorporated into the Predecessor’s resort in Kansas City, Kansas. To effect the transaction, the Predecessor transferred title to the site and the resort to the local government, which leased the resort back to the Predecessor with an option (and ultimately the obligation) to purchase for a nominal amount at the end of the lease term. The local government issued $42,260 of industrial revenue bonds (“IRBs”), which were purchased by the Predecessor. The purchase of the IRBs was funded by the deposit of proceeds of a third-party construction loan with the bond trustee for application to payment of costs of the resort. The IRBs bear interest at 6.00%. Both principal and interest are payable at maturity on December 1, 2012. The lease calls for lease payments to be made by the Predecessor equal to the principal and interest payments the Predecessor is to receive on the IRBs. As the principal and interest payments on the IRBs equal the lease payments due under the lease, no cash payments will occur to effect the IRB and lease transactions (these transactions are recorded in memo entry form only, and no entry was recorded on the Predecessor’s books at the time of the transfer of the resort to the local governmental agency or the issuance of the IRBs).

Although the form of the Kansas City transactions described above involves the sale and subsequent lease-back of the resort by the Predecessor, the substance of the transaction is that the Predecessor has not sold the resort. As specified in the lease document, the Predecessor is treated as the resort’s owner and retains the risks and rewards normally associated with ownership in that the local government is obligated to sell the resort back to the Predecessor for a nominal amount at the end of the lease term. The Predecessor is obligated to buy back the resort at the end of the lease term, to maintain insurance on the resort, and to rebuild the resort or provide payment to the local government in the event of destruction of the resort. As a result, the substance of the transaction is that the Predecessor has constructed a resort for which it holds all risks and rewards of ownership and for which the Predecessor is obligated to pay the third-party construction debt. As a result, the Predecessor

has included in its combined financial statements the asset value of the constructed resort and the third-party construction debt associated with the resort.

A right of offset exists with regard to the lease obligation and the IRBs inasmuch as the Predecessor controls all remedies with respect to the lease and the IRBs. This right of offset is enforceable by law (for example, if the Predecessor fails to make payments under the lease, the local government is not obligated to pay interest on the IRBs). Accordingly, the Predecessor has excluded the asset associated with the ownership of the IRBs and the liability related to the lease discussed above from its combined financial statements and excluded the lease obligations from the commitments shown in the table above.

The Predecessor has given notice of the exercise of its option to purchase the Kansas City, Kansas resort and proposes to tender the IRBs plus the nominal option price to effect the purchase. The local government has accepted this proposal, has authorized the transfer of title back to Predecessor, and has executed and delivered a deed and bill of sale in escrow pending consummation of the purchase by surrender of the IRBs for cancellation. At that time, the lease will terminate.

Predecessor maintains a 401(k) profit sharing plan for its employees. Eligibility for participation in the plan is based on an employee meeting certain minimum age and service requirements. Participants may make voluntary, pre-tax contributions through salary deferrals to the plan. Employer matching contributions are discretionary and are based on a percentage of employee contributions. Predecessor’s contributions to the plan were $143, $166, $131 and $105 for the nine months ended September 30, 2004 and the years ended December 31, 2003, 2002 and 2001, respectively.

The Predecessor is comprised of a Subchapter S Corporation and limited liability companies. As a result, equity includes par value and retained earnings (for the Subchapter S Corporation) and members’ equity (for the limited liability companies). The entities included in the Predecessor’s combined historical financial statements conduct business under various operating agreements. These agreements govern the various classes of members, distribution preferences, payment of dividends, liquidation preferences and voting rights.

The accompanying combined financial statements include certain entities that are under common management by GLC, as described in Note 1. Members’ equity of combined entities on the combined balance sheets represents the portion of owners’ equity of those combined entities not owned by GLC.

The Predecessor accounts for repurchases of treasury shares under the cost method. Treasury stock consisted of 29 Series A shares and 551 Series B shares at September 30, 2004, December 31, 2003 and December 31, 2002.

In accordance with the provisions of SFAS No. 150, the Predecessor has identified the following items as meeting the criteria of a mandatorily redeemable financial instrument:


	•	Class A and Class B shares of GLC. GLC is obligated to redeem in cash the A Shares and B Shares of a shareholder who dies or incurs certain triggering events (as defined in the Term Sheet of Buy and Sell Provisions for Shares in The Great Lakes Companies, Inc.). The redemption price is calculated by a formula using GLC’s net operating income and a multiple based on the type of triggering event, as described in the Term Sheet. Both the A Shares and the B shares contain restrictions on transfers and sales by the stockholders.

	•	Class B Units of Great Wolf Lodge of Kansas City, LLC. In accordance with provisions in the Kansas City LLC Agreement, the LLC is required to redeem in cash the Class B Units no later than the fifth anniversary date of the operating commencement date of the Kansas City resort. The redemption price is based on the greater of fair value or an internal rate of return.

The rights of GLC’s shareholders and Great Wolf Lodge of Kansas City’s Class B unitholders to require the Predecessor to redeem these equity instruments represent embedded derivative instruments. The Predecessor has recorded these derivative instruments at their estimated fair values at each of the reporting dates in the accompanying combined balance sheets. The fair values of the derivative instruments are included in mandatorily redeemable ownership interests. For each period presented, the Predecessor has marked the underlying derivative to its estimated fair value. The change in the estimated fair value between periods is included in interest on mandatorily redeemable ownership interests in the accompanying combined statements of operations.

The Predecessor adopted the provisions of SFAS No. 150 effective July 1, 2003. Prior to the adoption of SFAS No. 150, the Predecessor accounted for the Kansas City Class B units under the provisions of EITF Issue No. D-98. In accordance with that pronouncement, the Predecessor accounted for the Kansas City Class B units as a mandatorily redeemable security and classified the redemption amount outside of equity in the combined balance sheet. The security was initially recorded at its fair value at date of issue, using accepted valuation techniques, and the security was adjusted to its estimated redemption amount at each balance sheet date and recorded as mandatorily redeemable ownership interests. On November 7, 2003, the FASB issued FASB Staff Position No. 150-3, or FSP 150-3, indefinitely deferring the measurement provisions of SFAS 150 with respect to certain minority interests in consolidated ventures entered into prior to November 5, 2003. As a result, the Predecessor thereafter continued to account for the Kansas City security under the provisions of EITF Issue No. D-98.

Equity interests which are subject to mandatory redemption have been reclassified from equity as follows:

As of September 30, 2004, December 31, 2003 and December 31, 2002, the Predecessor has classified $11,602, $11,194 and $11,698, respectively, related to these mandatorily redeemable items as liabilities in the

combined balance sheet. Of the $11,602 total liabilities amount at September 30, 2004, $333 is attributable to the GLC mandatorily redeemable interests and $11,269 is attributable to the Kansas City mandatorily redeemable interests.

As of December 31, 2001, an office building held by one of the Predecessor’s subsidiaries was classified as held for sale. The building was sold in 2002. The gain realized upon sale was not recognized because GLC had continuing involvement in the real estate after the sale. In May 2004, GLC was released from the guarantee of the buyer’s mortgage and the sale was recognized, resulting in a gain of $548. The operating activity of this office building is included in discontinued operations in the combined statements of operations.

As of December 31, 2002, the Predecessor had five hotels classified as held for sale. Three of these hotels were sold in 2003, resulting in a gain of $10,967, and the remaining two hotels were sold in 2004, resulting in a gain of $4,779. Operating results (and the gain or loss on disposition, if applicable) for the hotels classified as held for sale are included in income (loss) from discontinued operations in the combined statements of operations for the nine months ended September 30, 2004 and the years ended December 31, 2003, 2002 and 2001.

Interest on mortgage debt related to properties sold has been included in the operating results above.

Subsequent to the issuance of its combined financial statements for the year ended December 31, 2003, the Predecessor determined that it had inadvertently failed to include Historic Hollywood Hillview LLC, a majority-owned subsidiary of GLC, in its combined financial statements. Accordingly, the Predecessor has restated its financial statements as of and for the year ended December 31, 2003 to properly reflect the consolidation of this entity. A summary of the significant effects of the restatement is as follows:

Historic Hollywood Hillview LLC is related to Predecessor’s non-resort business and will be spun-off as part of the Formation Transactions. Great Wolf Resorts, Inc. will not acquire Historic Hollywood Hillview LLC as part of the Formation Transactions.

On December 20, 2004, Great Wolf Resorts, Inc. completed its Offering and the Formation Transactions discussed in Note 1.

We have audited the accompanying combined balance sheet of Great Bear Lodge of Wisconsin Dells, LLC and Great Bear Lodge of Sandusky, LLC as of December 31, 2003 and 2002, and the related combined statements of operations, members’ equity and cash flows for each of the years in the three-year period ended December 31, 2003. These combined financial statements are the responsibility of the management of Great Bear Lodge of Wisconsin Dells, LLC and Great Bear Lodge of Sandusky, LLC. Our responsibility is to express an opinion on these combined financial statements based on our audits.

We conducted our audits in accordance with 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 combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Great Bear Lodge of Wisconsin Dells, LLC and Great Bear Lodge of Sandusky, LLC as of December 31, 2003 and 2002, and the results of their combined operations and their cash flows for each of the years in the three-year period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

The combined financial statements include the accounts of Great Bear Lodge of Wisconsin Dells, LLC and Great Bear Lodge of Sandusky, LLC (the Companies). The Companies have common ownership by entities related to AIG SunAmerica Housing Funds and The Great Lakes Companies, Inc. All material intercompany account balances and transactions have been eliminated in combination. The Companies’ operations are described in Note 2.

The accompanying unaudited interim combined balance sheet as of September 30, 2004, the combined statements of operations and cash flows for the nine months ended September 30, 2004 and 2003 and the combined statement of members’ equity for the nine months ended September 30, 2004 are unaudited. These unaudited interim combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of the Companies’ management, the unaudited interim combined financial statements have been prepared on the same basis as the audited combined financial statements and include all adjustments necessary for the fair presentation of the Companies’ statement of financial position as of September 30, 2004, and their results of operations and their cash flows for the nine months ended September 30, 2004 and 2003. The results for the nine months ended September 30, 2004 are not necessarily indicative of the results to be expected for the year ending December 31, 2004.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Companies define cash and cash equivalents as highly liquid, short-term investments with a maturity at the date of acquisition of three months or less. The Companies maintain cash accounts which, at various times, exceed the FDIC insured limits of $100 per bank.

Certificates of deposit are valued at cost plus accrued interest which approximates fair value.

Accounts receivable are reported at the amount management expects to collect on balances outstanding at year end. Management closely monitors outstanding balances and writes off, as of year end, all balances that have not been collected by the time the financial statements are issued.

The Companies expense non-specific and daily advertising costs to operations when incurred. Advertising expense was $2,076, $1,531 and $1,610 for the years ended December 31, 2003, 2002 and 2001, respectively, and is included in general and administrative expenses in the accompanying combined statement of operations. Expenditures incurred related to advertising in travel guides over a specific period of time are capitalized, and amortized over the life of the travel guide. Expenditures related to travel guide advertising were capitalized in the amount of $57 at December 31, 2003, and are included in prepaid expenses.

Inventories consist primarily of food, beverage, arcade and gift shop merchandise and are valued at lower of cost, using the first-in, first-out (FIFO) method, or market.

Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives. Major expenditures for property and equipment are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and resulting gains or losses are included in income.

Interest on borrowings directly related to construction in process balances are capitalized during the construction period. Interest capitalized totaled $0, $0 and $476 for 2003, 2002 and 2001, respectively.

Great Bear Lodge of Wisconsin Dells, LLC has allocated $28,586 of the original purchase price of the resort to goodwill.

Goodwill was being amortized using the straight-line method over 15 years through December 31, 2001. Accumulated amortization at December 31, 2003 and 2002 was $4,129. Amortization of goodwill charged against income amounted to $1,906 for the year ended December 31, 2001.

Effective for years beginning January 1, 2002, Financial Accounting Standards Board (FASB) Statement No. 142 states that goodwill shall not be amortized. Instead, goodwill is tested for impairment, and adjusted if applicable. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. If fair value exceeds the carrying cost, there is no impairment. FASB 142 does not change the tax method reporting for goodwill amortization.

Combined net loss for the year ended December 31, 2001 adjusted to exclude amortization expense is as follows:

At December 31, 2003, fair value exceeds the carrying cost and therefore no impairment has been recognized.

At December 31, 2003, loan fees of $1,680 have been capitalized and are being amortized on a straight-line basis over the terms of the loans. Accumulated amortization was $1,113 and $844 at December 31, 2003 and 2002, respectively. Amortization of loan fees charged against income amounted to $268, $1,280 and $518 for the years ended December 31, 2003, 2002 and 2001, respectively.

The Companies review the recoverability of intangible (other than goodwill) and long-lived assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. If the expected future cash flows from the use of such assets (undiscounted and without interest charges) are less than the carrying value, the Companies’ policies are to record a write-down, which is determined based on the difference between the carrying value of the asset and the estimated fair value. At December 31, 2003, 2002 and 2001, no provision for impairment was considered necessary.

The Companies recognize revenue from their resorts as earned on the close of business each day.

Advance deposits are deposits made by the customers when reservations are made. The Companies’ policies are to charge a cancellation fee if reservations are canceled prior to 72 hours before the reserved date,

with the remainder of the advance deposit refunded. Cancellations within 72 hours of the reserved date result in no refund of the advance deposit. The Companies invest cash received from advance deposits in interest bearing certificates of deposit. There are no specific requirements on investment of advance deposits.

The carrying amounts of cash and cash equivalents, certificates of deposit, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short maturity of those instruments. At December 31, 2003 and 2002, the Companies estimate that the fair value of its long-term debt is not materially different from its financial statement carrying value because either the stated interest rates fluctuate with current market rates or the interest rates approximate the current rates at which the Companies could borrow funds.

The Companies are organized as separate limited liability companies. They are not taxpaying entities for federal or state income tax purposes and thus no provision for income taxes has been recorded in these combined financial statements. The Companies’ income, losses and credits are included in the income tax returns of their members.

Certain defined terms contained in the Operating Agreements are denoted with initial capital letters throughout the combined financial statements.

Great Bear Lodge of Wisconsin Dells, LLC (the Dells) was formed between SunAmerica Housing Fund 815, LP, a Nevada Limited Partnership (Class A Member) and GLGB Manager II, LLC, a Delaware Limited Liability Company (Class B Member), on October 7, 1999 in the state of Delaware. The Company was established to purchase and operate a resort hotel, the Great Wolf Lodge in Wisconsin Dells, Wisconsin. The resort offers an indoor and outdoor waterpark, redemption arcade, themed restaurant, gift shop and fitness facility.

Great Bear Lodge of Sandusky, LLC (Sandusky) was formed between SunAmerica Housing Fund 726 LP, a Nevada Limited Partnership (Class A Member), GLGB Investor I, LLC, a Delaware Limited Liability Company (Class B Member) and GLGB Manager I, LLC, a Delaware Limited Liability Company (Class C Member) on May 20, 1999 in the state of Delaware. The company was established to construct and operate a resort hotel, the Great Bear Lodge in Sandusky, Ohio. The resort, which opened March 2001, offers an indoor and outdoor waterpark, redemption arcade, themed restaurants, gift shops and a fitness facility.

Depreciation charged against income amounted to $7,821, $7,134 and $6,340 for the years ended December 31, 2003, 2002 and 2001, respectively.

Interest expense charged against operations amounted to $4,818, $5,055 and $5,316 for the years ended December 31, 2003, 2002 and 2001, respectively.

In connection with the loan agreements, the Companies must maintain replacement reserve funds. The agreements require monthly deposits of 4% of gross operating revenues for the Dells and monthly amounts not below $42 for Sandusky to fund capital improvements and replacements. The replacement reserve funds are pledged as collateral for the notes payable. The Dells’ December 2003 replacement reserve deposit was not funded timely in accordance with the loan agreement. The bank waived this violation in a letter dated May 10, 2004.

In addition, Sandusky’s Operating Agreement provides for a monthly deposit of 4% of gross operating revenues to fund capital improvements and replacements. This amount was under funded by approximately $364 at December 31, 2003, but was approved by the Class A Member as required by the Operating Agreement.

During 2003, Sandusky entered into an agreement with the bank to extend the note payable for an additional 36 months. The interest rate will be reduced to the LIBOR rate plus 2.75%. All other terms and conditions of the current note will remain unchanged.

The Dells resort and facility is managed by The Great Lakes Companies, Inc., a company affiliated through common ownership with GLGB Manager II, LLC, the Class B Member. The management agreement requires a fee of 3% of the Company’s adjusted gross revenue for each fiscal year. Management fees of $155, $589 and $604 were expensed for the years ended December 31, 2003, 2002 and 2001, respectively. Management fees of $221 were unpaid as of December 31, 2002 and are included in accounts payable—related party (see Note 8 regarding management fees during 2003).

The management agreement also provides for a central office services fee in an amount allocated among sharing hotels. Central office service fees amounted to $37 for the years ended December 31, 2003, 2002 and 2001. Central office fees of $3 and $6 were unpaid as of December 31, 2003 and 2002, respectively, and are included in accounts payable—related party.

During 2003 and a portion of 2002, an affiliate of The Great Lakes Companies, Inc. received a central reservation fee of 1-1/2% of gross room revenues. Reservation fees of $203 and $10 were expensed for the years ended December 31, 2003 and 2002, respectively. No reservation fees were incurred during 2001.

The Operating Agreement (the Agreement) provides an annual property asset management fee of $10 per year to SunAmerica Affordable Housing Partners, Inc., an affiliate of the Class A Member. Asset management fees of $2 and $10 were unpaid as of December 31, 2003 and 2002, respectively, and are included in accounts payable—related party.

Amounts due from The Great Lakes Companies, Inc., and affiliated entities amounted to $21 and $45 and are included in accounts receivable at December 31, 2003 and 2002, respectively.

The Sandusky resort and facility is managed by The Great Lakes Companies, Inc., a company affiliated through common ownership with GLGB Manager I, LLC, the Class C Member. The management agreement requires a fee of 3% of the Company’s adjusted gross revenue for each fiscal year. Management fees of $656, $621 and $435 and were expensed for the years ended December 31, 2003, 2002 and 2001, respectively. Management fees of $153 and $83 were unpaid as of December 31, 2003 and 2002, respectively, and are included in accounts payable—related party. In addition, beginning in 2002, the management agreement requires a subordinated management fee of 1% of the Company’s adjusted gross revenue for each full fiscal year. Subordinated management fees of $219 and $207 were expensed for the years ended December 31, 2003 and 2002, respectively. No subordinated management fees were incurred during 2001. The management agreement also provides for a central office services fee in an amount allocated among sharing hotels. Central office service fees amounted to $33 for the years ended December 31, 2003 and 2002, and $27 for the year ended

December 31, 2001. Central office fees of $3 were unpaid as of December 31, 2003 and 2002 and are included in accounts payable—related party.

Beginning in 2002, an affiliate of The Great Lakes Companies, Inc. received a central reservation fee of 2% of gross room revenues. Reservation fees of $233 and $22 were expensed for the years ended December 31, 2003 and 2002, respectively. Central reservation fees of $51 and $14 were unpaid as of December 31, 2003 and 2002, respectively. No reservation fees were incurred during 2001.

The Operating Agreement (the Agreement) provides an annual property asset management fee of $10 per year to SunAmerica Affordable Housing Partners, Inc., an affiliate of the Class A Member. Asset management fees of $10 were unpaid as of December 31, 2002, and are included in accounts payable—related party.

As noted above, accounts payable—related party includes management fees, central office service fees, asset management fees and miscellaneous expenses totaling $257 and $98 as of December 31, 2003 and 2002, respectively.

During 2001, Sandusky incurred a development/construction management fee of $1,317 payable to The Great Lakes Companies, Inc. for services rendered to the Company for overseeing the construction and development of the hotel.

During the year ended December 31, 2003, The Great Lakes Companies, Inc. funded amounts to Sandusky for operating expenses. As stated in the management agreement, The Great Lakes Companies, Inc. was not required to make such a payment and the amounts are due on demand. The unpaid balance as of December 31, 2003 was $50. The balance was repaid in January 2004, including interest of $4.

Sandusky entered into a Geographic Development Agreement which provides for Tall Pines Development Corporation (Tall Pines) to be paid the following development fees for ten years ending March 2011: (1) Base Development Fee which represents a fee of 2% of the Company’s adjusted gross revenue for each fiscal year (2) Tier One Incentive Development Fee and/or (3) Tier Two Incentive Development Fee.

Tier One Incentive Development Fee is an amount equal to 1% of revenues if the following conditions are met: (1) Revenue per available room is greater than $100 and (2) Gross Operating Profit is greater than 45% and (3) Sandusky earns a minimum cash-on-cash return on equity of 10%. If only the third criteria is met for the fiscal year, Tall Pines shall be entitled to payment of 1/2 of the Tier One Incentive Development Fee.

Tier Two Incentive Development Fee is an amount equal to 1% of Revenue over and above the Base Development Fee and Tier One Incentive Development Fee. The following are the conditions: (1) Revenue per available room is greater than $125 and (2) Gross Operating Profit is greater than 45% and (3) the Company earns a minimum cash-on-cash return on equity of 10%.

The Base Development Fee, which is required to be paid on a monthly basis, of $365, $346, and $240 was expensed for the years ended December 31, 2003, 2002 and 2001, respectively. The base development fee of $47 and $24 was unpaid as of December 31, 2003 and 2002, respectively, and is included in accrued expenses.

For the years ended December 31, 2003 and 2002, only the third criteria of the Tier One Incentive Development Fee was met, which entitles Tall Pines to .5% of adjusted revenues. In addition, for the years ended December 31, 2003, 2002 and 2001, the criteria for the Tier Two Incentive Development Fee were not met. However, in 2003, an agreement was made with Tall Pines Development to waive the criteria described above as the nature of the agreement was not being upheld. Therefore, the fee associated with Tier One and Two were paid for 2003, amounting to $365. Additional expenses of $260 were paid in 2003 which related to additional 2002 expenses.

The Companies maintain a 401(k) profit sharing plan covering all eligible employees. Employees become eligible after completing one year of service with at least 1,000 hours. Company contributions are discretionary. Currently, the Companies match 50% of the first 4% of each eligible employee’s contributions. The plan is sponsored by The Great Lakes Companies, covering multiple entities. The Companies combined contributions to the plan amounted to $71, $34 and $30 in 2003, 2002 and 2001, respectively.

As defined in Dells’ Operating Agreement, net profits and losses are generally allocated 70% to SunAmerica Housing Fund 815, LP and 30% to GLGB Manager II, LLC, except that the Agreement specifies allocation limitations and special allocations in certain situations, including, “Capital Transactions.” The Agreement defines Capital Transactions as sale, refinance, exchange, transfer, assignment, or other disposition of all or any portion of the Dells resort.

The agreement also provides for priority distributions from Net Cash Flow, as defined in the Agreement, to be distributed in the following priority:


	1.	First priority is a “Class A Senior Priority Return,” of 14% on its original capital contribution of $16,500 which calls for a cumulative return of $577 per calendar quarter to the Class A Member, payable 45 days after the end of the calendar quarter. Distributions under the Class A Senior Priority Requirements of $2,310 were made to the Class A Member during the year ended December 31, 2002. At December 31, 2003 and 2002, $385 is due to the Class A Member (see note below regarding 2003 distributions and management fees).

	2.	Second priority is payment of 12% interest per annum, or any optional capital contributions (OCC) to the Class A Member to fund operating deficits or other reasonable and necessary obligations of the Company.

	3.	Third priority is repayment of “Class A Net OCC.”

	4.	Fourth priority is payment of “Class B OCC Priority Return” at 12% interest per annum.

	5.	Fifth priority is payment of “Class B Net OCC.”


	6.	Sixth priority is distribution to the Class B Member equal to the “Catch-Up Amount,” which is defined as “Catch-Up Percentage,” Class B Percentage divided by Class A Percentage, multiplied by Class A Senior Priority Return for the calendar quarter preceding the “Payment Date,” as defined in the Agreement. Distributions under the sixth priority distribution requirements of $440 and $990 were made to the Class B Member for the year ended December 31, 2002 and 2001, respectively.

	7.	Seventh priority is distributions to the Class A Member until the Class A Net Mandatory Capital Contribution has been reduced to zero, in the ratio of Class A Percentage to the Class A Member, either as repayment of the “Equity Bridge Loans,” as defined, or in reduction of its Class A Net Mandatory Capital Contribution, or both, and the Class B Percentage to the Class B Member as distribution.

	8.	Thereafter, as a distribution in the ratio of the Class A percentage to the Class A Member and the Class B percentage to the Class B Member. No distributions were required under this category during 2003 or 2002. Distributions made to members amounted to $603 during 2001.

The Agreement provides for revisions to the above mentioned priorities upon the contribution of any additional capital by either the Class A or Class B Members.

During 2003, the Class A and Class B Members agreed in principle to limit “Class A Senior Priority Return” payments and the Class B Member’s management fees to support the Company’s current cash flow needs. The “Class A Senior Priority Return” will continue to be paid in the future as cash flow improves. The Class B Member’s management fees (3% of revenues) from April 2003 to December 2003 will not be funded and have been “waived” by the Class B Member. Management fees from April 2003 through December 2003 have not been accrued as of December 31, 2003.

As defined in Sandusky’s Operating Agreement, net profits and losses are generally allocated 50% to SunAmerica Housing Fund 726, LP, 30% to GLGB Investor I, LLC, and 20% to GLGB Manager I, LLC, except that the Agreement specifies allocation limitations and special allocations in certain situations, including, “Capital Transactions.” The Agreement defines Capital Transactions as sale, refinance, exchange, transfer, assignment, or other disposition of all or any portion of the Sandusky resort.

The agreement also provides for priority distributions from Net Cash Flow, as defined in the Agreement, to be distributed in the following priority:


	1.	First priority is a “Class A Senior Priority Return,” of 12% on its original capital contribution of $8,000. Distributions under the Class A Senior Priority Requirements of $503, $692 and $2,031 were made to the Class A Member during the years ended December 31, 2003, 2002 and 2001, respectively.

	2.	Second priority is repayment of 12% interest per annum to the Class A Member for “Loan Returns.”

	3.	Third priority is repayment of “Class A Net Term Loan Capital Contribution.”

	4.	Fourth priority is payment of “Class C Net OCC Priority Return” at 12% interest per annum.

	5.	Fifth priority is repayment of “Class A Net OCC.”


	6.	Sixth priority is a “Class B Senior Priority Return,” of 12% on its original capital contribution of $4,000. Distributions under the Class B Senior Priority Requirement of $256, $351 and $384 were made to the Class B Member during the year ended December 31, 2003, 2002 and 2001, respectively.

	7.	Seventh priority is payment of accrued “Class C Term Loan Priority Return.”

	8.	Eighth priority is repayment of “Class C Net Term Loan Capital Contribution.”

	9.	Ninth priority is payment of accrued “Class C Net OCC Priority Return.”


	10.	Tenth priority is repayment “Class C Net OCC.”

	11.	Eleventh priority is payment of “Class A Net Development Capital Contribution” until reduced to the Target Amount. Distributions after the Target Amount was reached were $2,087 and $2,003 to the Class A Member, $1,043 and $1,001 to the Class B Member and $2,087 and $2,003 to the Class C Member for the years ended December 31, 2003 and 2002, respectively. No amounts were paid relating to this priority during 2001.

	12.	Twelfth priority is repayment of “Class A Net Development Capital Contribution.”

	13.	Thereafter, as a distribution in the ratio of the Class A percentage to the Class A Member, the Class B percentage to the Class B Member and the Class C percentage to the Class C Member.

The Agreement provides for revisions to the above mentioned priorities upon the contribution of any additional capital by any of the members.

During 2003, the Dells obtained a loan commitment with a lender in an amount not to exceed the lessor of $21,000 or 75% of the appraised value of the pending condominium development and water park expansion project adjacent to the existing “Dells” facility to fund the construction of condominiums. In connection with the loan commitment, the Company paid approximately $158 to the lender, which has been capitalized as of December 31, 2003 and will be amortized over the term of the two year agreement. The commitment is for 24 months, bears interest at either an annual fixed rate of 7.25% or a variable annual rate of prime plus 1.625% (not to be below 6.75% per year) and is secured by a first deed of trust on the condominium development, assignment of all condominium rents, construction commitment deposits and personal guarantees of certain officers of The Great Lakes Companies, Inc. As of December 31, 2003, no amounts have been borrowed against this commitment.

A vendor of the Dells has filed suit for alleged premature termination of a supply and service contract with the Dells. The vendor is seeking liquidated damages of approximately $600 for breach of the contract. The Dells has filed a counterclaim and intends to vigorously contest the pending claim by the vendor. Although management believes that the lawsuit is without merit and that the ultimate liability, if any, with respect to this issue will not materially affect the financial position, results of operations, or the liquidity of the Company, the ultimate outcome of the litigation is uncertain. If an unfavorable outcome were to occur, the impact could be

material to the Dells. As of September 30, 2004, the Dells has accrued and charged against operations a final settlement, which was funded in October 2004. The settlement was substantially less than the vendor’s original claim.

Except for the item note above, during the normal course of business, the Dells and Sandusky are involved in various legal matters which, in the opinion of management, are not expected to have a material effect on either the financial position or the operating results of the Dells and Sandusky.

The following sets forth the various expenses and costs (other than underwriting discounts and commissions) expected to be incurred in connection with the sale and distribution of the securities being registered. All of the amounts shown are estimated except for the registration fee of the Securities and Exchange Commission and the filing fee of the National Association of Securities Dealers, Inc.:

As permitted by Section 102(b)(7) of the Delaware General Corporation Law, the Registrant’s Certificate of Incorporation contains a provision that eliminates the personal liability of the Registrant’s directors for monetary damages for any breach of fiduciary duty as a director. Such provision, however, does not eliminate a director’s liability (i) for any breach of the director’s duty of loyalty to the Registrant or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law; (iii) under Section 174 of the Delaware General Corporation Law (in respect of certain unlawful dividend payments or stock purchases or redemptions); or (iv) for a transaction from which the director derived an improper personal benefit.

As permitted by Section 145 of the Delaware General Corporation Law, the Registrant’s Amended and Restated Certificate of Incorporation provides that it shall indemnify any and all persons whom it has the power to indemnify under Delaware law from and against any and all of the expenses, liabilities or other matters referred to in or covered by Section 145 of the Delaware General Business Corporation Law, and the indemnification provided for in the Amended and Restated Certificate of Incorporation shall not be deemed to be exclusive of any other rights to which those indemnified may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person.

Further, the Registrant’s Amended and Restated Bylaws provide that it shall indemnify its officers and directors to the fullest extent permitted by the Delaware General Corporation Law upon a determination by a majority of the Board of Directors, by independent legal counsel in a written opinion or by the stockholders that the person seeking indemnification has acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Registrant and had no reasonable cause to believe such person’s conduct was unlawful. Any expense incurred by a director or officer in defending or investigating a threatened or pending action, suit or proceeding shall be paid by the Registrant in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay

The Registrant may, to the extent authorized by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Registrant similar to those conferred to directors and officers of the Registrant as described above.

The Registrant has entered into indemnification agreements with each of its current officers and directors to give such officers and directors additional contractual assurances regarding the scope of their indemnification. The indemnification agreements provide indemnification to the fullest extent permitted under Delaware law and provide for the advancement of expenses incurred by a director or officer in connection with the investigation, defense, settlement or appeal of any action or investigation.

The Registrant has insurance policies providing for indemnification of officers and directors against liabilities and expenses incurred by any of them in certain proceedings and under certain conditions, such as in the absence of fraud.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”), may be permitted to directors and officers of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

In connection with our formation transactions, which became effective simultaneously with the completion of the initial public offering, we issued common stock to certain holders of securities, who, among other things, have certified to us as to their status as “accredited investors,” in each of the Property and Sponsor LLCs, as well as to each holder of securities in Sandusky Investor LLC and Great Lakes, in an offering exempt from registration under the Securities Act pursuant to Section 4(2) and Rule 506 of Regulation D. In total, we issued an aggregate of 13,901,947 shares of our common stock to such investors. In exchange, we received all or a portion of each such investor’s interest in the applicable Property LLC, Sponsor LLC or Sandusky Investor LLC and such entities became wholly owned subsidiaries of our company.

Also in connection with our formation transactions, we issued (1) 64,038 shares of our common stock to the holder of a tenant in common interest in our Poconos resort and (2) 67,516 shares of our common stock to the holder of a tenant in common interest in our Williamsburg resort. These shares were issued in offerings exempt from registration under the Securities Act pursuant to Section 4(2) and Rule 506 of Regulation D.

In addition, we issued 100 shares of common stock, par value $0.01 per share, to Great Lakes upon our formation on May 10, 2004. We received an aggregate of $1,000 in cash in exchange for these shares. We redeemed these shares in connection with the formation transactions. This issuance was exempt from registration under the Securities Act pursuant to Section 4(2) of the Securities Act.

The issuances described above were exempt from registration under the Securities Act, pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder as a transaction by an issuer not involving a public offering. Each investor receiving shares in the formation transactions will be an accredited investor, with knowledge and experience in financial and business matters sufficient for evaluating the associated merits and risks, has represented its intention to acquire the securities for investment purposes only and not with a view towards distribution and received or had access to adequate information about the Registrant. Appropriate legends have been affixed to the stock certificates in these transactions and there was no general solicitation or advertising.


**	Incorporated by reference to such Exhibit Number filed with the Registrant’s Registration Statement on Form S-1 (File No. 333-118148), as amended.


	(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:


	(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

	(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

	(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.


	provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.


	(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

	(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Act, each filing of the Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration

(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, Delaware Corporation law, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the question has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

Pursuant to the requirements of the Securities Act of 1933, as amended, the company has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Madison, State of Wisconsin, on January 21, 2005.

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints John Emery, James A. Calder and J. Michael Schroeder, and each of them, such person’s true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for such person and in such person’s name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and any subsequent related registration statements and amendments thereto pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact or such person’s substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on this 21st day of January, 2005 in the capacities indicated.


**	Incorporated by reference to such Exhibit Number filed with the Registrant’s Registration Statement on Form S-1 (File No. 333-118148), as amended.

II-9 EX-5.1 2 g92795exv5w1.txt OPINION OF KING & SPALDIN LLP EXHIBIT 5.1 [KING & SPALDING LLP LETTERHEAD] January 21, 2005 Great Wolf Resorts, Inc. 122 West Washington Avenue Madison, Wisconsin 53703 RE: GREAT WOLF RESORTS, INC. -- REGISTRATION STATEMENT ON FORM S-1 Ladies and Gentlemen: We have acted as counsel to Great Wolf Resorts, Inc., a Delaware corporation (the "Company"), in connection with the preparation of the Registration Statement on Form S-1 (the "Registration Statement") filed with the Securities and Exchange Commission. The Registration Statement relates to the offer and sale of up to 14,032,896 shares of the Company's Common Stock, par value $0.01 per share (the "Shares"), to be sold by certain selling stockholders named in the Registration Statement ("Selling Stockholders"). In connection with this opinion, we have examined and relied upon such records, documents, certificates and other instruments as in our judgment are necessary or appropriate to form the basis for the opinions hereinafter set forth. In all such examinations, we have assumed the genuineness of signatures on original documents and the conformity to such original documents of all copies submitted to us as certified, conformed or photographic copies, and as to certificates of public officials, we have assumed the same to have been properly given and to be accurate. As to matters of fact material to this opinion, we have relied upon statements and representations of representatives of the Company and public officials. The opinions expressed herein are limited in all respects to the corporate law of the State of Delaware (which includes the Delaware General Corporation Law, applicable provisions of the Delaware Constitution and reported judicial interpretations concerning those laws), and no opinion is expressed with respect to the laws of any other jurisdiction or any effect which such laws may have on the opinions expressed herein. This opinion is limited to the matters stated herein, and no opinion is implied or may be inferred beyond the matters expressly stated herein. Based upon the foregoing, and subject to the assumptions, limitations and qualifications set forth herein, we are of the opinion that the Shares have been duly authorized and are validly issued, fully paid and nonassessable. This opinion is given as of the date hereof, and we assume no obligation to advise you after the date hereof of facts or circumstances that come to our attention or changes in law that occur which could affect the opinions contained herein. This opinion is being rendered for the benefit of the Company in connection with the matters addressed herein. Great Wolf Resorts, Inc. January 21, 2005 Page 2 We consent to the filing of this opinion as an Exhibit to the Registration Statement and to the reference to us under the caption "Legal Matters" in the Prospectus that is included in the Registration Statement. Very truly yours, /s/ KING & SPALDING LLP EX-10.5 3 g92795exv10w5.txt FORM OF EMPLOYMENT AGREEMENT EXHIBIT 10.5 FORM OF GREAT WOLF RESORTS, INC. EMPLOYMENT AGREEMENT FOR [EXECUTIVE] This is an Employment Agreement entered into between Great Wolf Resorts, Inc., a Delaware corporation, or the "Company," and [Executive], or "Executive," the terms and conditions of which are as follows: Section 1. TERM OF EMPLOYMENT 1.1. Term. Subject to the terms and conditions set forth in this Employment Agreement, the Company agrees to employ Executive and Executive agrees to be employed by the Company for a term of three (3) years, which term shall start on the date this Employment Agreement is signed on behalf of the Company and shall end on the third anniversary of such date. The term of this Employment Agreement shall automatically be extended from time to time for additional periods of one (1) calendar year from the date on which it would otherwise expire unless the Executive, on the one hand, or the Company, on the other, gives notice to the other party at least one-hundred and twenty (120) days prior to such date that it elects to permit the term of this Employment Agreement to expire without extension on such date. 1.2. Term. The term described in Section 1.1 plus any extension of such term shall be referred to in this Employment Agreement as the "Term." Section 2. TITLE, DUTIES AND RESPONSIBILITIES AND POWERS AND WORK SITE 2.1. Title. Executive's title initially shall be [title]. 2.2. Duties and Responsibilities and Powers. Executive's duties and responsibilities and powers shall be those commensurate with Executive's position that are set from time to time by the Company's Chief Executive Officer, and Executive shall report exclusively to and shall be accountable exclusively to the Company's Chief Executive Officer. Executive shall undertake to perform all Executive's duties and responsibilities and exercise all Executive's powers in good faith and on a full-time basis during the Company's normal work week for senior executives and shall at all times act in the course of Executive's employment under this Employment Agreement in the best interest of the Company. 2.3. Primary Work Site. Executive's primary work site for the Term shall be at the Company's headquarters in Madison, Wisconsin. However, Executive shall undertake such travel away from Executive's primary work site and shall work from such temporary work sites as necessary or appropriate to fulfill Executive's duties and responsibilities and exercise Executive's powers under the terms of this Employment Agreement. 2.4. Outside Activities. Executive shall have the right to continue to serve on the board of directors of those business, civic and charitable organizations on which Executive is serving on the date the Company signs this Employment Agreement as long as doing so has no adverse effect on the performance of Executive's duties and responsibilities or the exercise of Executive's powers under this Employment Agreement. Executive shall not serve on any other boards of directors and shall not provide services (whether as an employee or independent contractor) to any for-profit organization on or after the date the Executive signs this Employment Agreement absent the written consent of the Chairman of the Compensation Committee of the Company's Board of Directors. Section 3. COMPENSATION AND BENEFITS 3.1. Base Salary. Executive's initial base salary shall be $_________ per year, which base salary shall be payable in accordance with the Company's standard payroll practices and policies for senior executives and shall be subject to such withholdings as required by law or as otherwise permissible under such practices or policies. Executive's base salary shall be subject to annual review and periodic increases (but not decreases), if any, as determined by the Compensation Committee of the Company's Board of Directors or, at the discretion of such Board of Directors, the Board of Directors as a whole. 3.2. Annual Bonus. Executive during the Term shall be eligible to receive an annual bonus each year, and such bonus, if any, shall be set by the Compensation Committee of the Company's Board of Directors or, at the discretion of such Board of Directors, the Board of Directors as a whole. Each such bonus shall be reasonable in light of the contribution made by Executive for such year in relation to the contributions made and bonuses paid other senior Company executives for such year. 3.3. Stock Options and Restricted Stock. Executive shall be eligible for grants of options to purchase stock of the Company and restricted stock grants when and as recommended by the Compensation Committee of the Company's Board of Directors or, at the discretion of such Board of Directors, the Board of Directors as a whole. The number of shares subject to each such stock option grant or restricted stock grant shall be reasonable in light of the contribution made, or expected to be made, by Executive for the period for which such grant is made in relation to the number of shares subject to stock option grants and restricted stock grants made to other senior Company executives based on the contributions made, or expected to be made, by such other senior Company executives for such period. 3.4. Employee Benefit Plans, Programs and Policies. Executive shall be eligible to participate in the employee benefit plans, programs and policies maintained by the Company for similarly situated senior executives in accordance with the terms and conditions of such plans, programs and policies as in effect from time to time. 3.5. Vacation and Other Similar Benefits. Executive shall be entitled to vacation time to be credited and taken in accordance with the Company's policy from time to time in effect for senior executives. Such vacation time shall not be carried over year to year, and shall not be paid out upon termination of employment, or upon expiration of this Employment Agreement. 3.6. Business Expenses. Executive shall have a right to be reimbursed for Executive's reasonable and appropriate business expenses which Executive actually incurs in connection with the performance of Executive's duties and responsibilities under this Employment Agreement in accordance with the Company's expense reimbursement policies and procedures for its senior executives. Section 4. TERMINATION OF EMPLOYMENT 4.1. General. The Company shall have the right to terminate Executive's employment at any time, and Executive shall have the right to resign at any time. However, any non-renewal - 2 - by the Company of this Employment Agreement pursuant to Section 1.1 shall constitute a termination of Executive's employment under Section 4 of this Employment Agreement. Any non-renewal by the Executive of this Employment Agreement pursuant to Section 1.1 shall not constitute a resignation by Executive under Section 4 of this Employment Agreement. 4.2. Termination By The Company Other Than For Death, Cause Or Disability Or By Executive For Good Reason. (a) Before a Change in Control. If the Company terminates Executive's employment other than for Death, Cause (as defined in Section 4.2(c)) or a Disability (as defined in Section 4.2(d)) before the Effective Date (as defined in Section 4.2(e)(1)) of a Change in Control (as defined in Section 4.2(e)(2)) or Executive resigns for Good Reason (as defined in Section 4.2(f)) before such Effective Date, the Company (in lieu of any severance pay under any severance pay plans, programs or policies) shall (subject to applicable withholdings): (1) pay to Executive a lump sum amount equal to the product of (x) multiplied by (y), where (x) equals the sum of (A) and (B), with (A) equal to the Executive's annual base salary as in effect on the date the Executive's employment terminates and (B) equal to the amount of the Executive's most recently paid annual bonus, and (y) equals ______; (2) with respect to options to purchase Company stock which are granted to Executive before or after the date the Company signs this Employment Agreement, accelerate Executive's right to exercise 100% of such still-outstanding options so that Executive has the right to exercise 100% of such still-outstanding options on the date Executive's employment terminates, subject to the terms of the plan under which the options were granted; (3) pay to the Executive a lump sum amount equal to the product of (x) multiplied by (y), where (x) equals two times the Company's monthly contribution on behalf of Executive under the plans, programs and policies described in Section 3.4 which provide healthcare, life insurance and accidental death and dismemberment coverage to Executive immediately before Executive's employment terminates, and (y) equals ______; and (4) make one or, if necessary, more than one Gross Up Payment (as described in and paid in accordance with Section 4.2(g)) to Executive, if applicable. (b) After a Change of Control. If Executive resigns for Good Reason within one hundred eighty days (180) prior to, or eighteen (18) months following, the Effective Date of a Change in Control or the Company terminates Executive's employment (other than for Cause or a Disability) within one hundred eighty (180) days prior to, or eighteen (18) months following, the Effective Date of a Change of Control, the Company (in lieu of any severance pay under any severance pay plans, programs or policies) shall (subject to applicable withholdings): (1) pay to Executive a lump sum amount equal to the product of (x) multiplied by (y), where (x) equals the sum of (A) and (B), with (A) equal to the Executive's annual base salary as in effect on the date the Executive's employment terminates and (B) equal to the amount of the Executive's most recently paid annual bonus, and (y) equals ______; - 3 - (2) (a) with respect to options to purchase Company stock which are granted to Executive before or after the date the Company signs this Employment Agreement, accelerate Executive's right to exercise 100% of such still-outstanding options so that Executive has the right to exercise 100% of such still-outstanding options on the date Executive's employment terminates, subject to the terms of the plan under which the options were granted; and (b) treat Executive as if Executive had remained employed by the Company until the end of the three (3) year period which starts on the date Executive's employment terminates for the sole purpose that the time period over which Executive has the right to exercise such options shall be the same as if there had been no termination of Executive's employment until the end of such three (3) year period; (3) with respect to shares of restricted stock which are granted to executive after the date the Company signs this Employment Agreement and are still outstanding, deem any conditions applicable to such grant to have been satisfied in full; (4) pay to the Executive a lump sum amount equal to the product of (x) multiplied by (y), where (x) equals two times the Company's monthly contribution on behalf of Executive under the plans, programs and policies described in Section 3.4 which provide healthcare, life insurance and accidental death and dismemberment coverage to Executive immediately before Executive's employment terminates, and (y) equals ______; and (5) make one or, if necessary, more than one, Gross Up Payment (as described in and paid in accordance with Section 4.2(g)) to Executive, if applicable. (c) Cause. The term "Cause" as used in this Employment Agreement shall (subject to Section 4.2(c)(4)) mean: (1) Executive is convicted of, pleads guilty to, or confesses or otherwise admits to any felony or any act of fraud, misappropriation or embezzlement; (2) There is any act or omission by Executive involving malfeasance or gross negligence in the performance of Executive's duties and responsibilities under Section 2 or the exercise of Executive's powers under Section 2 to the material detriment of the Company; or (3) (A) Executive breaches any of the provisions of Section 5 or (B) Executive violates any provision of any code of conduct adopted by the Company which applies to Executive and any other Company employees if the consequence of such violation for any employee subject to such code of conduct ordinarily would be a termination of his or her employment by the Company; provided, however, (4) No such act or omission or event shall be treated as "Cause" under Section 4.2(c)(2) and Section 4.2(c)(3) and this Employment Agreement unless (A) Executive has been provided a detailed, written statement of the basis for the Company's belief that such act or omission or event constitutes "Cause" and an opportunity to - 4 - meet with the Company's Board of Directors (together with Executive's counsel if Executive chooses to have Executive's counsel present at such meeting) after Executive has had a reasonable period in which to review such statement and, if the act or omission or event is one which can be cured by Executive, Executive has had at least a thirty (30) day period to take corrective action and (B) the Company's Board of Directors after such meeting (if Executive exercises Executive's right to have a meeting) and after the end of such thirty (30) day correction period (if applicable) determines reasonably and in good faith and by the affirmative vote of at least a majority or, after the Effective Date of a Change in Control, at least three-fourths of the members of such Board of Directors then in office at a meeting called and held for such purpose that "Cause" does exist under this Employment Agreement; provided, however, if Executive is a member of such Board of Directors, Executive shall have no right to participate in such vote, and the number of members needed to constitute a majority of, or three-fourths of, whichever is applicable, the members of such Board of Directors shall be determined without counting Executive as a member of such Board of Directors; further provided, (d) Disability. The term "Disability" as used in this Employment Agreement means any physical or mental condition which renders Executive unable even with reasonable accommodation by the Company to perform the essential functions of Executive's job for at least a consecutive one hundred and eighty (180) day period and which makes Executive eligible to receive benefits under the Company's long-term disability plan as of the date that Executive's employment terminates. (e) Effective Date and Change in Control. (1) The term "Effective Date" as used in this Employment Agreement means either the date which includes the "closing" (as such term is commonly understood in the United States) of the transaction which makes a Change in Control effective if the Change in Control is made effective through a transaction which has such a "closing" or the earliest date a Change in Control is reported in accordance with any applicable law, regulation, rule or common practice as effective to any government or any agency of any government or to any exchange or market in which the Company effects any trades if the Change in Control is made effective other than through a transaction which has such a "closing." (2) The term "Change in Control" as used in this Employment Agreement means the occurrence of any of the following events: (A) any "person" (as that term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934), is or becomes the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities representing 30% or more of the combined voting power of the then outstanding securities of the Company eligible to vote for the election of the members of the Company 's Board of Directors unless (1) such person is the Company or any subsidiary of the Company, (2) such person is an employee benefit plan (or a trust which is a part of such a plan) which provides benefits exclusively to, or on behalf of, - 5 - employees or former employees of the Company or a subsidiary of the Company, (3) such person is an underwriter temporarily holding such securities pursuant to an offering of such securities, (4) such person is Executive, an entity controlled by Executive or a group which includes Executive or (5) such person acquired such securities in a Non-Qualifying Transaction (as defined in Section 4.2(e)(2)(D)); (B) during any period of two consecutive years or less beginning after the closing date of the initial public offering of the common stock of the Company, individuals who at the beginning of such period constitute the Board of Directors of the Company cease, for any reason, to constitute at least a majority of such Board of Directors, unless the election or nomination for election of each new director was approved by at least two-thirds of the directors then still in office who were directors at the beginning of the period (either by a specific vote of such directors or by the approval of the Company proxy statement in which each such individual is named as a nominee for a director without written objection to such nomination by such directors); provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board of Directors of the Company shall be deemed to be approved; (C) the shareholders of the Company approve any reorganization, merger, consolidation or share exchange as a result of which the common stock of the Company shall be changed, converted or exchanged into or for securities of another corporation (other than a merger with a wholly owned subsidiary of the Company) or any dissolution or liquidation of the Company or any sale or the disposition of 50% or more of the assets or business of the Company, or (D) the shareholders of the Company approve any reorganization, merger, consolidation or share exchange or similar form of corporate transaction involving the Company unless (1) the persons who were the beneficial owners of the outstanding securities eligible to vote for the election of the members of the Company 's Board of Directors immediately before the consummation of such transaction hold more than 60% of the voting power of the securities eligible to vote for the members of the board of directors of the successor or survivor corporation in such transaction immediately following the consummation of such transaction and (2) the number of the securities of such successor or survivor corporation representing the voting power described in Section 4.2(e)(2)(D)(1) held by the persons described in Section 4.2(e)(2)(D)(1) immediately following the consummation of such transaction is beneficially owned by each such person in substantially the same proportion that each such person had beneficially owned the outstanding securities eligible to vote for the election of the members of the Company 's Board of Directors - 6 - immediately before the consummation of such transaction, provided (3) the percentage described in Section 4.2(e)(2)(D)(1) of the securities of the successor or survivor corporation and the number described in Section 4.2(e)(2)(D)(2) of the securities of the successor or survivor corporation shall be determined exclusively by reference to the securities of the successor or survivor corporation which result from the beneficial ownership of shares of common stock of the Company by the persons described in Section 4.2(e)(2)(D)(1) immediately before the consummation of such transaction (any transaction which satisfies all of the criteria specified in (1), (2) and (3) above shall be deemed to be a "Non-Qualifying Transaction"); Notwithstanding the foregoing, the initial public offering of the common stock of the Company shall in no event constitute a Change in Control under this Employment Agreement. (f) Good Reason. The term "Good Reason" as used in this Employment Agreement shall (subject to Section 4.2(f)(6)) mean: (1) there is a material reduction or, after the Effective Date of a Change in Control, any reduction in Executive's base salary under Section 3.1 or there is a material reduction in Executive's opportunity to receive any annual bonus and stock option grants without Executive's express written consent; (2) there is a material reduction in the scope, importance or prestige of Executive's duties, responsibilities or powers at the Company or Executive's reporting relationships with respect to who reports to Executive and whom Executive reports to at the Company without Executive's express written consent; (3) the Company transfers Executive's primary work site from Executive's primary work site on the date the Company signs this Employment Agreement or, if Executive subsequently consents in writing to such a transfer under this Employment Agreement, from the primary work site which was the subject of such consent, to a new primary work site which is more than 30 miles (measured along a straight line) from Executive's then current primary work site unless such new primary work site is closer (measured along a straight line) to Executive's primary residence than Executive's then current primary work site; (4) the Company after the Effective Date of a Change in Control changes Executive's job title or fails to continue to make available to Executive the same or substantially equivalent plans, programs and policies pursuant to Section 3.4 as made available before such Effective Date absent Executive's express written consent; (5) there is a material breach or, after the Effective Date of a Change in Control, any breach of this Employment Agreement by the Company; provided, however, (6) No such act or omission shall be treated as "Good Reason" under this Agreement unless: - 7 - (A) (1) Executive delivers to the Compensation Committee of the Company's Board of Directors a detailed, written statement of the basis for Executive's belief that such act or omission constitutes Good Reason, (2) Executive delivers such statement before the later of (a) the end of the ninety (90) day period which starts on the date there is an act or omission which forms the basis for Executive's belief that Good Reason exists or (b) the end of the period mutually agreed upon for purposes of this Section 4.2(f)(6)(a)(2)(B) in writing by Executive and the Chairman of the Company's Board of Directors, (3) Executive gives such Board of Directors a thirty (30) day period after the delivery of such statement to cure the basis for such belief and (4) Executive actually submits Executive's written resignation to the Chairman of the Company's Board of Directors during the sixty (60) day period which begins immediately after the end of such thirty (30) day period if Executive reasonably and in good faith determines that Good Reason continues to exist after the end of such thirty (30) day period; or (B) the Company states in writing to Executive that Executive has the right to treat any such act or omission as Good Reason under this Employment Agreement and Executive resigns during the sixty (60) day period which starts on the date such statement is actually delivered to Executive; and (7) If Executive consents in writing to any reduction described in Section 4.2(f)(1) or Section 4.2(f)(2), to any transfer described In Section 4.2(f)(3) or to any change or failure described in Section 4.2(f)(4) in lieu of exercising Executive's right to resign for Good Reason and delivers such consent to the Chairman of the Company's Board of Directors, the date such consent is so delivered thereafter shall be treated under this definition as the Effective Date of a Change in Control for purposes of determining whether Executive subsequently has Good Reason under this Employment Agreement to resign as a result of any such subsequent reduction, transfer or change or failure. (g) Gross Up Payment. The term "Gross Up Payment" as used in this Employment Agreement shall mean a payment to or on behalf of Executive which shall be sufficient to pay (1) 100% of any excise tax described in this Section 4.2(g), (2) 100% of any federal, state and local income tax and social security and other employment tax on the payment made to pay such excise tax as well as any additional taxes on such payment and (3) 100% of any interest or penalties assessed by the Internal Revenue Service on Executive which are related to the timely payment of such excise tax (unless such interest or penalties are attributable to Executive's willful misconduct or gross negligence with respect to such timely payment). A Gross Up Payment shall be made by the Company promptly after either the Company or the Company 's independent accountants determine that any payments and benefits called for under this Employment Agreement together with any other payments and benefits made available to Executive by the Company and any other person will result in Executive's being subject to an excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (which shall be referred to in this Section 4.2(g) as the "Code") or such an excise tax is assessed against Executive as a result of - 8 - any such payments and other benefits if Executive takes such action (other than waiving Executive's right to any payments or benefits in excess of the payments or benefits which Executive has expressly agreed to waive under this Section 4.2(g)) as the Company reasonably requests under the circumstances to mitigate or challenge such excise tax; provided, however, if the Company or the Company's independent accountants make the determination described in this Section 4.2(g) and, further, determine that Executive will not be subject to any such excise tax if Executive waives Executive's right to receive a part of such payments or benefits and such part does not exceed $25,000, Executive shall irrevocably waive Executive's right to receive such part if an independent accountant or lawyer retained by Executive and paid by the Company agrees with the determination made by the Company or the Company's independent accountants with respect to the effect of such reduction in payments or benefits. Any determinations under this Section 4.2(g) shall be made in accordance with Section 280G of the Code and any applicable related regulations (whether proposed, temporary or final) and any related Internal Revenue Service rulings and any related case law and, if the Company reasonably requests that Executive take action to mitigate or challenge, or to mitigate and challenge, any such tax or assessment (other than waiving Executive's right to any payments or benefits in excess of the payments or benefits which Executive has expressly agreed to waive under this Section 4.2(g)) and Executive complies with such request, the Company shall provide Executive with such information and such expert advice and assistance from the Company 's independent accountants, lawyers and other advisors as Executive may reasonably request and shall pay for all expenses incurred in effecting such compliance and any related fines, penalties, interest and other assessments. 4.3. Termination By The Company For Cause or By Executive Other Than For Good Reason. If the Company terminates Executive's employment for Cause or Executive resigns other than for Good Reason, the Company's only obligation to Executive under this Employment Agreement shall (subject to applicable withholdings) be to pay Executive's base salary and annual bonus, if any, which were due and payable on the date Executive's employment terminated and to reimburse Executive for expenses Executive had already incurred and which would have otherwise been reimbursed but for such termination of employment. 4.4. Termination for Disability or Death. (a) General. The Company shall have the right to terminate Executive's employment on or after the date Executive has a Disability, and Executive's employment shall terminate at Executive's death. (b) Base Salary and Bonus. If Executive's employment terminates under this Section 4.4, the Company's only obligation under this Employment Agreement shall (subject to applicable withholdings) be (1) to pay Executive or, if Executive dies, Executive's estate the base salary and annual bonus, if any, which were due and payable on the date Executive's employment terminated and (2) to reimburse Executive or, if Executive dies, Executive's estate for any expenses which Executive had already incurred and which would have otherwise been reimbursed but for such termination of employment. 4.5. Benefits at Termination of Employment. Executive upon Executive's termination of employment shall have the right to receive any benefits payable under the Company's employee benefit plans, programs and policies which Executive otherwise has a nonforfeitable - 9 - right to receive under the terms of such plans, programs and policies independent of Executive's rights under this Employment Agreement; however, if a payment is made to Executive under Section 4.2(a) or Section 4.2(b), such payment shall be in lieu of any severance pay under any severance pay plan, program or policy. Section 5. COVENANTS BY EXECUTIVE 5.1. Company Property. (a) General. Executive upon the termination of Executive's employment for any reason or, if earlier, upon the Company's request shall promptly return all Property (as defined in Section 5.1(b)) which had been entrusted or made available to Executive by the Company and, if any copy of any such Property was made by, or for, Executive, each and every copy of such Property. (b) Property. The term "Property" means records, files, memoranda, tapes, computer disks, reports, price lists, customer lists, drawings, plans, sketches, keys, computer hardware and software, cellular telephones, credit cards, access cards, identification cards, personal data assistants and the like, company cars and other tangible personal property of any kind or description. 5.2. Trade Secrets. (a) General. Executive agrees that Executive will hold in a fiduciary capacity for the benefit of the Company and each of its affiliates, and will not directly or indirectly use or disclose to any person not authorized by the Company, any Trade Secret (as defined in Section 5.2(b)) of the Company or its affiliates that Executive may have acquired (whether or not developed or compiled by Executive and whether or not Executive is authorized to have access to such information) during the term of, and in the course of, or as a result of Executive's employment by the Company or its affiliates for so long as such information remains a Trade Secret. (b) Trade Secret. The term "Trade Secret" for purposes of this Employment Agreement means information, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers that (1) derives economic value, actual or potential, from not being generally known to, and not being generally readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use and (2) is the subject of reasonable efforts by the Company and its affiliates to maintain its secrecy. (c) Additional Rights. This Section 5.2 is intended to provide rights to the Company and its affiliates which are in addition to, not in lieu of, those rights the Company and its affiliates have under the common law or applicable statutes for the protection of trade secrets. 5.3. Confidential Information. (a) General. Executive while employed under this Employment Agreement and thereafter during the Restricted Period (as defined in Section 5.4) shall hold in a fiduciary capacity for the benefit of the Company and its affiliates, and shall not directly or - 10 - indirectly use or disclose to any person not authorized by the Company, any Confidential Information (as defined in Section 5.3(b)) of the Company or its affiliates that Executive may have acquired (whether or not developed or compiled by Executive and whether or not Executive is authorized to have access to such information) during the term of, and in the course of, or as a result of Executive's employment by the Company or its affiliates. (b) Confidential Information. The term "Confidential Information" for purposes of this Employment Agreement means any secret, confidential or proprietary information possessed by the Company or its affiliates relating to their businesses, including, without limitation, customer lists, details of client or consultant contracts, current and anticipated customer requirements, pricing policies, price lists, market studies, business plans, operational methods, marketing plans or strategies, product development techniques or flaws, computer software programs (including object codes and source codes), data and documentation, base technologies, systems, structures and architectures, inventions and ideas, past, current and planned research and development, compilations, devices, methods, techniques, processes, future business plans, licensing strategies, advertising campaigns, financial information and data, business acquisition plans and new personnel acquisition plans (not otherwise included in the definition of a Trade Secret under this Employment Agreement) that has not become generally available to the public by the act of one who has the right to disclose such information without violating any right of the Company or its affiliates. (c) Additional Rights. This Section 5.3 is intended to provide rights to the Company and its affiliates which are in addition to, not in lieu of, those rights the Company and its affiliates have under the common law or applicable statutes for the protection of confidential information. 5.4. Restricted Period. The term "Restricted Period" for purposes of this Employment Agreement shall mean the one-year period following termination of Executive's employment. 5.5. Nonsolicitation of Customers or Employees. (a) Customers. Executive, while employed under this Employment Agreement and thereafter during the Restricted Period, shall not, on Executive's own behalf or on behalf of any person, firm partnership, association, corporation or business organization, entity or enterprise, call on or solicit for the purpose of competing with the Company or its affiliates any customers of the Company or its affiliates with whom Executive had contact, knowledge, or association at any time during Executive's employment with the Company or its affiliates, or with respect to the Restricted Period, at any time during the twelve (12) month period immediately preceding the beginning of the Restricted Period. (b) Employees. Executive, while employed under this Employment Agreement and thereafter during the Restricted Period, shall not, either directly or indirectly, call on, solicit or attempt to induce any other officer, employee or independent contractor of the Company or its affiliates with whom Executive had contact, knowledge of, or association at any time during Executive's employment with the Company or its affiliates, or with respect to the Restricted Period, at any time during the twelve (12) month period immediately preceding the beginning of the Restricted Period, to terminate - 11 - his or her employment or business relationship with the Company or its or its affiliates and shall not assist any other person or entity in such a solicitation. 5.6. Intellectual Property Rights. Executive hereby unconditionally and irrevocably assigns to the Company all of Executive's right, title and interest in any ideas, inventions, trademarks, copyrights, developments and improvements that Executive conceives, alone or with others, during the Term, whether or not conceived during working hours, which are within the scope of the Company's business operations or relate to any of the Company's work, projects or research activities, all of which shall be referred to as "Intellectual Property," and Executive shall assist the Company, at the Company's expense, in obtaining patents, copyright and trademark registrations for Intellectual Property, execute and deliver all documents and do any and all things necessary and proper on Executive's part to obtain such patents and copyright and trademark registrations and execute specific assignments and other documents for such Intellectual Property as may be considered necessary or appropriate by the Company at any time during Executive's employment. This Section 5.6 shall not apply to any invention that Executive develops entirely on Executive's own time without using the Company's equipment, supplies, facilities or trade secret or confidential information. Executive agrees not place Intellectual Property in the public domain or disclose any inventions to third parties without the prior written consent of the Company. 5.7. Non-Compete. Executive and the Company agree that (a) the Company is engaged in the family entertainment resort business featuring indoor waterparks, which shall be referred to as the "Business," (b) the Business can be conducted anywhere, (c) the Business can be and is available to any person or entity with access to sufficient capital, (d) the Business consequently has no geographic boundary or limitation and will have none during the Term, (e) Executive is, and is expected to continue to be during the Term, intimately involved in the Business wherever it operates, and (f) this Section 5.7 is intended to provide fair and reasonable protection to the Company in light of the unique circumstances of the Business. Executive therefore agrees that Executive shall not during the Term and for the one (1) year period which starts on the date Executive's employment terminates under this Employment Agreement compete with the Company within fifty (50) miles of a location where the Company conducts its Business or is planning to conduct its Business; provided, however, Executive may own up to five percent (5%) of the stock of a publicly traded company that engages in such competitive business so long as Executive is only a passive investor and is not actively involved in such company in any way. 5.8. Reasonable and Continuing Obligations. Executive agrees that Executive's obligations under this Section 5 are obligations which will continue beyond the date Executive's employment terminates and that such obligations are reasonable and necessary to protect the Company's legitimate business interests. The Company in addition shall have the right to take such other action as the Company deems necessary or appropriate to compel compliance with the provisions of this Section 5. 5.9. Remedy for Breach. Executive agrees that the remedies at law of the Company for any actual or threatened breach by Executive of the covenants in this Section 5 would be inadequate and that the Company shall be entitled to specific performance of the covenants in this Section 5, including entry of an ex parte, temporary restraining order in state or federal court, preliminary and permanent injunctive relief against activities in violation of this Section 5, or both, or other appropriate judicial remedy, writ or order, in addition to any damages and legal expenses which -12- the Company may be legally entitled to recover. Executive acknowledges and agrees that the covenants in this Section 5 shall be construed as agreements independent of any other provision of this or any other agreement between the Company and Executive, and that the existence of any claim or cause of action by Executive against the Company, whether predicated upon this Employment Agreement or any other agreement, shall not constitute a defense to the enforcement by the Company of such covenants. Section 6. MISCELLANEOUS 6.1. Notices. Notices and all other communications shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail. Notices to the Company shall be sent to 122 West Washington Avenue, 10th Floor, Madison, Wisconsin 53703, Attention: General Counsel. Notices and communications to Executive shall be sent to the address Executive most recently provided to the Company. 6.2. No Waiver. Except for the notice described in Section 6.1, no failure by either the Company or Executive at any time to give notice of any breach by the other of, or to require compliance with, any condition or provision of this Employment Agreement shall be deemed a waiver of any provisions or conditions of this Employment Agreement. 6.3. Choice of Law and Courts. This Employment Agreement shall be governed by Delaware law (except to the extent that its choice of law provisions would call for the application of the law of another jurisdiction), and (subject to Section 6.8) any action that may be brought by either the Company or Executive involving the enforcement of this Employment Agreement or any rights, duties, or obligations under this Employment Agreement, shall be brought exclusively in the state or federal courts sitting in Delaware, and Executive consents and waives any objection to personal jurisdiction and venue in these courts for any such action. 6.4. Assignment and Binding Effect. This Employment Agreement shall be binding upon and inure to the benefit of the Company and any successor to all or substantially all of the business or assets of the Company. The Company may assign this Employment Agreement to any affiliate or successor, and no such assignment shall be treated as a termination of Executive's employment under this Employment Agreement. Executive's rights and obligations under this Employment Agreement are personal and shall not be assigned or transferred. Any such assignment or attempted assignment by Executive shall be null, void, and of no legal effect. 6.5. Other Agreements. This Employment Agreement replaces and merges any and all previous agreements and understandings regarding all the terms and conditions of Executive's employment relationship with the Company, and this Employment Agreement constitutes the entire agreement of the Company and Executive with respect to such terms and conditions. 6.6. Amendment. Except as provided in Section 6.7, no amendment or modification to this Employment Agreement shall be effective unless it is in writing and signed by the Company and by Executive. 6.7. Severability. If any provision of this Employment Agreement shall be found invalid or unenforceable, in whole or in part, then such provision shall be deemed to be modified or restricted to the extent and in the manner necessary to render such provision valid and enforceable, or shall be deemed excised from this Employment Agreement, as may be required under applicable law, and this Employment Agreement shall be construed and enforced to the -13- maximum extent permitted by applicable law, as if such provision had been originally incorporated in this Employment Agreement as so modified or restricted, or as if such provision had not been originally incorporated in this Employment Agreement, as the case may be. 6.8 Arbitration. The Company shall have the right to obtain an injunction or other equitable relief arising out of the Executive's breach of the provisions of Section 5 of this Employment Agreement. However, any other controversy or claim arising out of or relating to this Employment Agreement or any alleged breach of this Employment Agreement shall be settled by binding arbitration in Delaware in accordance with the rules of the American Arbitration Association then applicable to employment-related disputes and any judgment upon any award, which may include an award of damages, may be entered in the highest state or federal court having jurisdiction over such award. In the event of the termination of Executive's employment, Executive's sole remedy shall be arbitration under this Section 6.8 and any award of damages shall be limited to recovery of lost compensation and benefits provided for in this Employment Agreement. No punitive damages may be awarded to Executive. The Company and Executive shall split equally all reasonable fees of the arbitrator. 6.9 Executive's Legal Fees and Expenses. The Company shall (a) reimburse Executive for all reasonable costs incurred by Executive in bringing a proceeding to enforce the terms of this Employment Agreement, including without limitation all reasonable costs of investigation and reasonable attorneys fees and expenses, provided however, that the maximum aggregate amount of reimbursement paid to Executive under this Section 6.9(a) shall not exceed $100,000 for all claims brought under this Agreement and (b) make a payment to or on behalf of Executive which shall be sufficient to pay 100% of any federal, state and local income tax on the reimbursement and payments made to Executive under this Section 6.9. Further, the Company shall make one or more Gross-Up Payments under Section 4.2(g) if the Excise Tax under Section 4.2(g) is applicable to any amounts paid under this Section 6.9. 6.10 Release. As a condition to the Company's making any payments to Executive after Executive's termination of employment under this Employment Agreement (other than the compensation earned before such termination and the benefits due under the Company's employee benefit plans without regard to the terms of this Employment Agreement), Executive or, if Executive is deceased, Executive's estate shall execute a release in the form of the release attached to this Employment Agreement as Exhibit A, or in such other form as is acceptable to the Company and Executive. 6.11 Counterparts. This Employment Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same Employment Agreement. 6.12 Headings; References. The headings and captions used in this Employment Agreement are used for convenience only and are not to be considered in construing or interpreting this Employment Agreement. Any reference to a section (Section) shall be to a section (Section) of this Employment Agreement absent an express statement to the contrary in this Employment Agreement. IN WITNESS WHEREOF, the Company and Executive have executed this Employment Agreement in multiple originals to be effective on the date this Employment Agreement is signed by the Company. GREAT WOLF RESORTS, INC. -14- By:_________________________________________ Title:______________________________________ This ___ day of _______, 2004 EXECUTIVE ____________________________________________ This ___ day of _______, 2004 -15- SCHEDULE TO FORM OF EMPLOYMENT AGREEMENT An employment agreement, in the form attached hereto, has been executed with each of the following individuals, with the material terms indicated below: 1. John Emery: Annual salary - $400,000; Title - Chief Executive Officer; Severance payment upon termination without cause or for good reason - two times the sum of Mr. Emery's then- current base salary and most recent annual bonus paid; Severance payment upon termination without cause of for good reason preceding or following a change in control - three times the sum of Mr. Emery's then-current base salary and the most recent annual bonus paid 2. Craig A. Stark- Annual salary - $300,000; Title - President; Severance payment upon termination without cause or for good reason - two times the sum of Mr. Stark's then-current base salary and most recent annual bonus paid; Severance payment upon termination without cause of for good reason preceding or following a change in control - three times the sum of Mr. Stark's then-current base salary and the most recent annual bonus paid 3. Hernan R. Martinez- Annual salary - $320,000; Title - Executive Vice President of Development; Severance payment upon termination without cause or for good reason -the sum of Mr. Martinez's then-current base salary and most recent annual bonus paid; Severance payment upon termination without cause of for good reason preceding or following a change in control - two times the sum of Mr. Martinez's then-current base salary and the most recent annual bonus paid 4. James A. Calder - Annual salary - $250,000; Title - Chief Financial Officer; Severance payment upon termination without cause or for good reason -the sum of Mr. Calder's then- current base salary and most recent annual bonus paid; Severance payment upon termination without cause of for good reason preceding or following a change in control - two times the sum of Mr. Calder's then-current base salary and the most recent annual bonus paid 5. J. Michael Schroeder - Annual salary - $250,000; Title - General Counsel and Corporate Secretary; Severance payment upon termination without cause or for good reason -the sum of Mr. Schroeder's then-current base salary and most recent annual bonus paid; Severance payment upon termination without cause of for good reason preceding or following a change in control - two times the sum of Mr. Schroeder's then-current base salary and the most recent annual bonus paid 6. Eric S. Lund - Annual salary - $225,000; Title - Executive Vice President of Sales and Marketing; Severance payment upon termination without cause or for good reason -the sum of Mr. Lund's then-current base salary and most recent annual bonus paid; Severance payment upon termination without cause of for good reason preceding or following a change in control - two times the sum of Mr. Lund's then-current base salary and the most recent annual bonus paid 7. Kimberly K. Schaefer - Annual salary - $225,000; Title - Chief Brand Officer; Severance payment upon termination without cause or for good reason -the sum of Ms. Schaefer's then-V current base salary and most recent annual bonus paid; Severance payment upon termination without cause of for good reason preceding or following a change in control - two times the sum of Ms. Schaefer's then-current base salary and the most recent annual bonus paid -16- EX-10.6 4 g92795exv10w6.txt FORM OF NON-COMPETE, TRADE SECRET AND CONFIDENTIALITY AGREEMENT EXHIBIT 10.6 FORM OF NON-COMPETE, TRADE SECRET AND CONFIDENTIALITY AGREEMENT THIS AGREEMENT (the "Agreement") is made by and between GREAT WOLF RESORTS, INC. (the "Company") and _______________ ("_______") to confirm certain obligations of the parties hereto. WHEREAS, through a series of proposed transactions, the Company will succeed to the family entertainment resort business of The Great Lakes Companies, Inc. ("Great Lakes"); WHEREAS, _______ has served from time to time as an officer and/or director of Great Lakes and currently serves as an officer and/or director of the Company; WHEREAS, each of _______ and the Company desires that ______ continue to serve as an officer and/or director of the Company; WHEREAS, during _______'s tenure as an officer and/or director of Great Lakes and the Company, he has and will receive and has had and will have access to Trade Secrets and/or other Confidential Information of Great Lakes and the Company which are highly valuable and unique assets of the Company and the use or disclosure by _______ of any proprietary and/or Confidential Information of Great Lakes, the Company contrary to this Agreement would cause permanent, incalculable and irreparable injury and damage to the Company. WHEREAS, _________ has received from Great Lakes, and may in the future receive from the Company, training in the Company's Business, at considerable time and expense to the Company, and through such training _________ has had and will have the opportunity to gain close knowledge of and possible influence over customers of the Company, and will in such capacity possess the good will of the Company, and this Agreement is necessary to protect the Company against unfair loss of said customers, employees or goodwill. WHEREAS, each of Great Lakes and the Company has made a significant investment in its workforce, including valuable training, and this Agreement is necessary to protect the Company against unfair loss of its employees. NOW, THEREFORE, in consideration of the promises contained in this Agreement, the sufficiency of which is hereby acknowledged, the parties agree as follows: I. CONSIDERATION FROM THE COMPANY: A. In consideration for ______'s willingness to enter into this Agreement and to serve in certain capacities for the Company from time to time, the Company will (i) pay to ______ an annual fee, paid in accordance with the Company's payroll policies, of $_______, subject to annual adjustments in the discretion of the Compensation Committee; (ii) pay to _____ an annual bonus, determined in the sole discretion of the Compensation Committee, of up to 100% of the annual fee set forth in clause (i), as may be adjusted from time to time; and (ii) accelerate the vesting of any outstanding options granted to _____ pursuant to the Company's 2004 Incentive Stock Plan to the date upon which ______ either fails to be nominated for re-election to the Board of Directors of the Company or fails to be re-elected to the Board of Directors by the Company's stockholders; provided, however, that ______'s unwillingness to stand for re-election shall not cause the acceleration of vesting of any options pursuant to this Agreement. B. The Company would not have continued its relationship with _______ but for ________ entering into this Agreement. C. _________ acknowledges and agrees that the foregoing consideration from the Company is sufficient and valid consideration to support ________'s obligations in this Agreement. II. _________'S ASSURANCES: A. _______ is not under any contractual agreement, including any with a former employer, that would conflict with or in any way prevent _______ from entering into this Agreement or from performing any and all of ______'s obligations to the Company, including contacting any customers or prospective customers. B. _________ will not utilize any proprietary or confidential materials or information of any former employer (other than Great Lakes) while serving in any capacity for the Company. Proprietary or confidential information does not include general skills or knowledge generally known or available to others. III. NON-COMPETE AND NON-SOLICITATION AGREEMENT: During the period that _____ serves as an officer and/or director of the Company and for a period of one (1) year thereafter, ______ shall not, either directly or indirectly, for himself or on behalf of or in conjunction with any other person, company, partnership, corporation, business, group, or other entity (each, a "Person"): A. Compete with the Company by engaging in the development, construction, operation and/or management of family entertainment resorts featuring indoor waterparks within fifty (50) miles of a location where the Company conducts its Business or is planning to conduct its Business; B. Call on, solicit or attempt to induce any other officer, employee or independent contractor of the Company or its affiliates with whom ______ had contact, knowledge of, or association at any time during ______'s term as an officer and/or director of Great Lakes, the Company or any of their affiliates, or, with respect to the one (1) year period after _____ is no longer an officer and/or director of the Company (the "Restricted Period"), at any time during the twelve (12) month period immediately preceding the beginning of the Restricted Period, 2 to terminate his or her employment or business relationship with the Company or its affiliates and shall not assist any other person or entity in such a solicitation; or C. Call on or solicit for the purpose of competing with the Company or its affiliates any customers of Great Lakes, the Company or any of their affiliates with whom ______ had contact, knowledge or association at any time during the time that ______ served as an officer and/or director of Great Lakes or the Company or their affiliates, or, with respect to the Restricted Period, at any time during the twelve (12) month period immediately preceding the beginning of the Restricted Period. IV. FOR PURPOSES OF THE NON-COMPETE AND NON-SOLICITATION SECTION: A. The covenants in Section III of this Agreement are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. If any provision of this Agreement relating to the time period, scope, or geographic areas of the restrictive covenants shall be declared by a court of competent jurisdiction to exceed the maximum time period, scope, or geographic area, as applicable, that such court deems reasonable and enforceable, then this Agreement shall automatically be considered to have been amended and revised to reflect such determination. B. All of the covenants in this Agreement shall be construed as an agreement independent of any other provisions in this Agreement, and the existence of any claim or cause of action ________ may have against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants. C. ________ has carefully read and considered the provisions of this Agreement and, having done so, agrees that the restrictive covenants in this Agreement impose a fair and reasonable restraint on _______ and are reasonably required to protect the interests of the Company. D. _______ agrees that the Company shall be entitled to immediate injunctive relief for any breach or threatened breach of any of the provisions of this Agreement, and that a restraining order and/or an injunction may issue against ______ to prevent or restrain any such breach or threatened breach, in addition to any other rights or remedies at law the Company may have. _______ further agrees that, in the event that any legal action becomes necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled, in addition to its court costs, to such reasonable attorney's fees, expert witness fees, and legal expenses as shall be fixed by a court of competition jurisdiction. V. TRADE SECRETS AND CONFIDENTIAL INFORMATION: 3 A. For purposes of this Agreement, the "Business" of the Company means the development, construction, operation and/or management of family entertainment resorts featuring indoor waterparks. B. For purposes of this Agreement, "Confidential Information" includes, but is not limited to, any secret, confidential or proprietary information possessed by Great Lakes, the Company or any of their affiliates relating to their businesses, including, without limitation, customer lists, details of client or consulting contracts, current and anticipated customer requirements, pricing policies, price lists, market studies, business plans, operational methods, marketing plans or strategies, product development techniques or flaws, computer software programs (including object codes and source codes), data and documentation, base technologies, systems, structures and architecture, inventions and ideas, past, current and planned research and development, compilations, devices, methods, techniques, processes, future business plans, licensing strategies, advertising campaigns, financial information and data, business acquisition plans and new personnel acquisition plans (not otherwise included in the definition of a Trade Secret under this Agreement) that has not become generally available to the public by the act of one who has the right to disclose such information without violating any right of Great Lakes, the Company or any of their affiliates. C. For purposes of this Agreement, the term "Trade Secret" shall mean information, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers that (1) derives economic value, actual or potential, from not being generally known to, and not being generally readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use and (2) is the subject of reasonable efforts by the Company and its affiliates to maintain its secrecy. D. _______ acknowledge and agrees that he as an officer and/or director of Great Lakes, the Company or any of their affiliates, _____ is in a confidential relationship wherein, in the course of this relationship with Great Lakes, the Company or any of their affiliates, ______ has received or will receive and has had or will have access to Confidential Information and Trade Secrets of Great Lakes and/or the Company. Accordingly, ______ is willing to enter into the covenants contained in this Agreement in order to provide the Company with what _______ considers to be reasonable protection for its interests. E. _______ hereby agrees that, during the period that ____ serves as an officer and/or director of the Company and during the Restricted Period, ______ will hold in confidence all Confidential Information of Great Lakes, the Company and any of their affiliates that came into ______'s knowledge while holding such position and will not disclose, publish or make use of such Confidential Information without the prior written consent of the Company. 4 F. ______ hereby agrees to hold in confidence all Trade Secrets of Great Lakes, the Company and any of their affiliates that came into ______'s knowledge while holding any position as an officer and/or director of Great Lakes, the Company or any of their affiliates and shall not disclose, publish, or make use of at any time after the date hereof such Trade Secrets without the prior written consent of the Company for as long as information remains a Trade Secret. G. Notwithstanding the foregoing, the provisions of this Section will not apply to (i) information required to be disclosed by _______ in the ordinary course of his or her duties, (ii) Confidential Information or Trade Secrets that otherwise becomes generally known in the industry or to the public through no act of ______ or any person or entity acting by or on _______'s behalf, or (iii) Confidential Information or Trade Secrets which ______ is required to disclose by law, regulation, or court order. In the event that _______ is required to make a disclosure as set forth in subsection (iii), _______ shall notify the Company prior to making any disclosure. H. The parties agree that the restrictions stated in this Section are in addition to and not in lieu of protections afforded to Trade Secrets and Confidential Information under applicable state law. Nothing in this Agreement is intended to or shall be interpreted as diminishing or otherwise limiting the Company's rights under applicable state law to protect its Trade Secrets and Confidential Information. VI. CHOICE OF LAW AND FORUM: This Agreement has been entered into in and shall be governed by and construed under the laws of the State of Delaware, not including its choice of law rules. Furthermore, the state and federal courts within the State of Delaware shall have the exclusive jurisdiction over any disputes arising under or relating to this Agreement. The Employee's signature acknowledges that this Agreement serves as a waiver of any jurisdictional challenge, be it personal, subject matter or otherwise to the courts within the State of Delaware. VII. ENTIRE AGREEMENT: This Agreement constitutes a single integrated contract expressing the entire agreement of the parties hereto with respect to its subject matter. There are no agreements, written or oral, express or implied, between the parties hereto, concerning the subject matter hereof, except the agreements set forth in this Agreement. Notwithstanding the foregoing, nothing in this Agreement shall affect any other written employment contract or restrictive covenant agreement _____ may have with the Company or any of its affiliates. The Company may assign this Agreement to any successor, subsidiary, parent, or affiliate. _______ may not assign any part of this Agreement. 5 This ___ day of _____________, 2004. [NAME] Signed:________________________________ Print Name:____________________________ Date:__________________________________ GREAT WOLF RESORTS, INC. By:____________________________________ Title:_________________________________ Date:__________________________________ 6 SCHEDULE TO FORM OF NON-COMPETE, TRADE SECRET AND CONFIDENTIALITY AGREEMENT A Non-Compete, Trade Secret and Confidentiality Agreement, in the form attached hereto, has been executed with each of the following individuals, with the material terms indicated below: 1. Bruce D. Neviaser: Annual fee - $150,000 2. Marc B. Vaccaro: Annual fee - $130,000 7 EX-10.15 5 g92795exv10w15.txt REVOLVING CREDIT AGREEMENT Exhibit 10.15 EXECUTION COPY $75,000,000 REVOLVING CREDIT AGREEMENT Dated as of December 20, 2004 among GWR OPERATING PARTNERSHIP, L.L.L.P., as Borrower, GREAT WOLF RESORTS, INC., as the Parent Guarantor, THE SUBSIDIARY GUARANTORS NAMED HEREIN, as Subsidiary Guarantors, THE INITIAL LENDERS, INITIAL ISSUING BANK AND SWING LINE BANK NAMED HEREIN, as Initial Lenders, Initial Issuing Bank and Swing Line Bank, CITICORP NORTH AMERICA, INC., as Administrative Agent and as Collateral Agent, SOCIETE GENERALE, as Syndication Agent, CALYON NEW YORK BRANCH, as Documentation Agent, and CITIGROUP GLOBAL MARKETS INC., SG AMERICAS SECURITIES, LLC, and CALYON NEW YORK BRANCH, as Joint Lead Arrangers and Joint Book Running Managers Great Wolf Senior Secured Revolving Credit Facility TABLE OF CONTENTS

Great Wolf Senior Secured Revolving Credit Facility i ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default....................................................... 73 SECTION 6.02. Actions in Respect of the Letters of Credit upon Default................ 76 ARTICLE VII GUARANTY SECTION 7.01. Guaranty; Limitation of Liability....................................... 77 SECTION 7.02. Guaranty Absolute....................................................... 77 SECTION 7.03. Waivers and Acknowledgments............................................. 78 SECTION 7.04. Subrogation............................................................. 79 SECTION 7.05. Guaranty Supplements.................................................... 80 SECTION 7.06. Indemnification by Guarantors........................................... 80 SECTION 7.07. Subordination........................................................... 80 SECTION 7.08. Continuing Guaranty..................................................... 81 ARTICLE VIII THE AGENTS SECTION 8.01. Authorization and Action; Appointment of Supplemental Collateral Agents 81 SECTION 8.02. Agents' Reliance, Etc. ................................................. 82 SECTION 8.03. CNAI and Affiliates..................................................... 83 SECTION 8.04. Lender Party Credit Decision............................................ 83 SECTION 8.05. Indemnification by Lender Parties....................................... 83 SECTION 8.06. Successor Agents........................................................ 84 ARTICLE IX MISCELLANEOUS SECTION 9.01. Amendments, Etc......................................................... 85 SECTION 9.02. Notices, Etc............................................................ 85 SECTION 9.03. No Waiver; Remedies..................................................... 87 SECTION 9.04. Costs and Expenses...................................................... 87 SECTION 9.05. Right of Set-off........................................................ 88 SECTION 9.06. Binding Effect.......................................................... 88 SECTION 9.07. Assignments and Participations.......................................... 89 SECTION 9.08. Execution in Counterparts............................................... 91 SECTION 9.09. No Liability of the Issuing Banks....................................... 92 SECTION 9.10. Confidentiality......................................................... 92 SECTION 9.11. Release of Collateral................................................... 92 SECTION 9.12. Patriot Act Notification................................................ 93 SECTION 9.13. Jurisdiction, Etc....................................................... 93 SECTION 9.14. Governing Law........................................................... 93 SECTION 9.15. WAIVER OF JURY TRIAL.................................................... 93

Great Wolf Senior Secured Revolving Credit Facility ii SCHEDULES Schedule I - Commitments and Applicable Lending Offices Schedule II - Borrowing Base Assets Schedule III - Designated Joint Ventures Schedule 4.01(b) - Subsidiaries Schedule 4.01(f) - Disclosed Litigation Schedule 4.01(n) - Existing Debt Schedule 4.01(o) - Surviving Debt Schedule 4.01(p) - Existing Liens Schedule 4.01(q) - Owned Real Property Schedule 4.01(r) - Leased Real Property Schedule 4.01(s) - Environmental Concerns Schedule 4.01(x) - Existing Loans to Directors and Executive Officers Schedule 4.01(y) - Excluded Subsidiaries and Excluded Subsidiary Agreements Schedule 4.01(z) - Plans and Welfare Plans EXHIBITS Exhibit A - Form of Note Exhibit B - Form of Notice of Borrowing Exhibit C - Form of Guaranty Supplement Exhibit D - Form of Assignment and Acceptance Exhibit E-1 - Form of Opinion of DeCampo, Diamond & Ash Exhibit E-2 - Form of Opinion of King & Spaulding LLP Exhibit E-3 - Form of Opinion of Local Counsel for the Loan Parties Exhibit F - Form of Security Agreement Exhibit G - Form of Mortgage Exhibit H - Form of Assignment of Leases Exhibit I - Form of Borrowing Base Certificate Great Wolf Senior Secured Revolving Credit Facility iii REVOLVING CREDIT AGREEMENT REVOLVING CREDIT AGREEMENT dated as of December 20, 2004 (this "AGREEMENT") among GWR OPERATING PARTNERSHIP, L.L.L.P., a Delaware limited liability limited partnership (the "BORROWER"), GREAT WOLF RESORTS, INC., a Delaware corporation (the "PARENT GUARANTOR"), the entities listed on the signature pages hereof as the subsidiary guarantors (together with any Additional Guarantors (as hereinafter defined) acceding hereto pursuant to Section 7.05, the "SUBSIDIARY GUARANTORS" and, together with the Parent Guarantor, the "GUARANTORS"), the banks, financial institutions and other institutional lenders listed on the signature pages hereof as the initial lenders (the "INITIAL LENDERS"), the Swing Line Bank (as hereinafter defined), CITICORP NORTH AMERICA, INC. ("CNAI"), as the initial issuer of Letters of Credit (as hereinafter defined) (the "INITIAL ISSUING BANK"), CNAI, as administrative agent (together with any successor administrative agent appointed pursuant to Article VIII, the "ADMINISTRATIVE AGENT") for the Lender Parties (as hereinafter defined), CNAI, as collateral agent (together with any successor collateral agent appointed pursuant to Article VIII, the "COLLATERAL AGENT", and together with the Administrative Agent, the "AGENTS") for the Secured Parties (as hereinafter defined), Societe Generale, as syndication agent, CALYON NEW YORK BRANCH, as documentation agent, and CITIGROUP GLOBAL MARKETS INC. ("CGMI"), SG AMERICAS SECURITIES, LLC ("SG AMERICAS") and CALYON NEW YORK BRANCH ("CALYON"), as joint lead arrangers and joint book running managers (the "ARRANGERS"). ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ADDITIONAL GUARANTOR" has the meaning specified in Section 7.05. "ADJUSTED NET OPERATING INCOME" means, with respect to any Borrowing Base Asset, (a) the Net Operating Income attributable to such Borrowing Base Asset less (b) the amount, if any, by which (i) the Management Reserve for such Borrowing Base Asset for the consecutive four fiscal quarters most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be, exceeds (ii) all management fees payable in respect of such Borrowing Base Asset during such fiscal period. "ADMINISTRATIVE AGENT" has the meaning specified in the recital of parties to this Agreement. "ADMINISTRATIVE AGENT'S ACCOUNT" means the account of the Administrative Agent maintained by the Administrative Agent with Citibank, N.A., at its office at 2 Penns Way, Suite 200, New Castle, Delaware 19720, ABA No. 021000089, Account No. 36852248, Account Name: Agency/Medium Term Finance, Reference: Great Wolf, Attention: Global Loans/Agency, or such other account as the Administrative Agent shall specify in writing to the Lender Parties. "ADVANCE" means a Revolving Credit Advance, a Swing Line Advance or a Letter of Credit Advance. "AFFILIATE" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Great Wolf Senior Secured Revolving Credit Facility 1 Person. For purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 15% or more of the Voting Interests of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Interests, by contract or otherwise. "AGENTS" has the meaning specified in the recital of parties to this Agreement. "AGREEMENT" has the meaning specified in the recital of parties to this Agreement. "AGREEMENT VALUE" means, for each Hedge Agreement, on any date of determination, an amount determined by the Administrative Agent equal to: (a) in the case of a Hedge Agreement documented pursuant to the Master Agreement (Multicurrency-Cross Border) published by the International Swap and Derivatives Association, Inc. (the "MASTER AGREEMENT"), the amount, if any, that would be payable by any Loan Party or any of its Subsidiaries to its counterparty to such Hedge Agreement, as if (i) such Hedge Agreement was being terminated early on such date of determination, (ii) such Loan Party or Subsidiary was the sole "Affected Party", and (iii) the Administrative Agent was the sole party determining such payment amount (with the Administrative Agent making such determination pursuant to the provisions of the form of Master Agreement); or (b) in the case of a Hedge Agreement traded on an exchange, the mark-to-market value of such Hedge Agreement, which will be the unrealized loss on such Hedge Agreement to the Loan Party or Subsidiary of a Loan Party party to such Hedge Agreement determined by the Administrative Agent based on the settlement price of such Hedge Agreement on such date of determination, or (c) in all other cases, the mark-to-market value of such Hedge Agreement, which will be the unrealized loss on such Hedge Agreement to the Loan Party or Subsidiary of a Loan Party party to such Hedge Agreement determined by the Administrative Agent as the amount, if any, by which (i) the present value of the future cash flows to be paid by such Loan Party or Subsidiary exceeds (ii) the present value of the future cash flows to be received by such Loan Party or Subsidiary pursuant to such Hedge Agreement; capitalized terms used and not otherwise defined in this definition shall have the respective meanings set forth in the above described Master Agreement. "APPLICABLE LENDING OFFICE" means, with respect to each Lender Party, such Lender Party's Domestic Lending Office in the case of a Base Rate Advance and such Lender Party's Eurodollar Lending Office in the case of a Eurodollar Rate Advance. "APPLICABLE MARGIN" means, at any date of determination, a percentage per annum determined by reference to the Leverage Ratio as set forth below:
APPLICABLE MARGIN APPLICABLE MARGIN PRICING FOR BASE RATE FOR EURODOLLAR RATE LEVEL LEVERAGE RATIO ADVANCES ADVANCES - ------- -------------------------------- ----------------- ------------------- I > or = 5.00:1.00 2.00% 3.00% II > or = 4.50:1.00 but < 5.00:1.00 1.75% 2.75% III > or = 4.00:1.00 but < 4.50:1.00 1.50% 2.50% IV < 4.00:1.00 1.25% 2.25%
The Applicable Margin for each Base Rate Advance shall be determined by reference to the Leverage Ratio in effect from time to time and the Applicable Margin for any Interest Period for Great Wolf Senior Secured Revolving Credit Facility 2 all Eurodollar Rate Advances comprising part of the same Borrowing shall be determined by reference to the Leverage Ratio in effect on the first day of such Interest Period; provided, however, that (a) no change in the Applicable Margin resulting from the Leverage Ratio shall be effective until three Business Days after the date on which the Administrative Agent receives (x) the financial statements required to be delivered pursuant to Section 5.03(b) or (c), as the case may be, and (y) a certificate of a Responsible Officer of the Borrower demonstrating the Leverage Ratio, and (b) the Applicable Margin shall be at Pricing Level I for so long as the Borrower has not submitted to the Administrative Agent as and when required under Section 5.03(b) or (c), as applicable, the information described in clause (a) of this proviso. "APPRAISAL" means an appraisal complying with the requirements of the Federal Financial Institutions Reform, Recovery and Enforcement Act of 1989, commissioned by and prepared for the account of the Collateral Agent (for the benefit of the Lenders) by a MAI appraiser selected by the Collateral Agent in consultation with the Borrower, and otherwise in scope, form and substance satisfactory to the Collateral Agent. "APPRAISED VALUE" means, for any Borrowing Base Asset, the fair market value of such Borrowing Base Asset, determined by the Administrative Agent based on an Appraisal of such Borrowing Base Asset, after discretionary adjustments of the value shown in such Appraisal by the Administrative Agent in consultation with the Borrower; provided, however, that Administrative Agent confirms that the valuation methodologies used in the Appraisals of the Wisconsin Dells Asset and the Sandusky Asset delivered to and approved by the Administrative Agent prior to the Closing Date shall be acceptable methodologies for any future Appraisals with respect to such Borrowing Base Assets. "APPROVED MANAGER" means (i) an Affiliate of the Parent Guarantor, or (ii) a nationally recognized theme park resort manager (a) with (or controlled by a Person or Persons with) at least ten years of experience in the theme park resort management industry, (b) that is engaged pursuant to a written management agreement and (c) that has entered into a subordination agreement, in form and substance reasonably satisfactory to the Collateral Agent. For purposes of this definition, the term "control" (including the term "controlled by") of a Person means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Interests, by contract or otherwise. "ARRANGERS" has the meaning specified in the recital of parties to this Agreement. "ASSETS" means Resort Assets, Development Assets and Joint Venture Assets. "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into by a Lender Party and an Eligible Assignee, and accepted by the Administrative Agent, in accordance with Section 9.07 and in substantially the form of Exhibit D hereto. "ASSIGNMENTS OF LEASES" has the meaning specified in Section 3.01(a)(iii). "AVAILABLE AMOUNT" of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing). Great Wolf Senior Secured Revolving Credit Facility 3 "BANKRUPTCY LAW" means any applicable law governing a proceeding of the type referred to in Section 6.01(f) or Title 11, U.S. Code, or any similar foreign, federal or state law for the relief of debtors. "BASE RATE" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of (a) the rate of interest announced publicly by Citibank, N.A. in New York, New York, from time to time, as Citibank, N.A.'s base rate and (b) 1/2 of 1% per annum above the Federal Funds Rate. "BASE RATE ADVANCE" means an Advance that bears interest as provided in Section 2.07(a)(i). "BORROWER" has the meaning specified in the recital of parties to this Agreement. "BORROWER'S ACCOUNT" means the account of the Borrower maintained by the Borrower with Wachovia Bank, N.A. at its office at 1753 Pinnacle Drive, 3rd Floor, McLean, VA 22102, ABA No. 051400549, Account No. 2000026799144 or such other account as the Borrower shall specify in writing to the Administrative Agent. "BORROWING" means a borrowing consisting of simultaneous Revolving Credit Advances of the same Type made by the Lenders or a Swing Line Borrowing. "BORROWING BASE ASSETS" means only those Resort Assets (a) listed on Schedule II hereto (as supplemented from time to time pursuant to Section 5.01(j)(iv)), (b) for which the applicable conditions (as may be determined by the Collateral Agent in its sole discretion) in Section 3.01 and, if applicable, 5.01(j) have been satisfied and (c) that the Required Lender Parties in their sole discretion have elected to treat as Borrowing Base Assets for purposes of this Agreement. "BORROWING BASE CERTIFICATE" means a certificate in substantially the form of Exhibit I hereto, duly certified by a Responsible Officer of the Parent Guarantor. "BORROWING BASE CONDITIONS" means, with respect to any Proposed Borrowing Base Asset, that (i) such Proposed Borrowing Base Asset (a) is a Resort Asset located in one of the 48 contiguous states of the United States of America or the District of Columbia that has been in operation for at least one year; (b) is wholly-owned directly or indirectly by the Borrower either in fee or subject to a Qualifying Ground Lease; (c) is fully operating, open to the public, and not under significant development or redevelopment; (d) is free of all material structural defects or architectural deficiencies, title defects, environmental conditions casualties, condemnation or other material adverse matters; (e) is operated by an Approved Manager or any other manager approved by the Administrative Agent; (f) is not subject to mezzanine Debt financing; (g) is not, and no interest of the Borrower or any of its Subsidiaries therein is, subject to any Lien (other than Permitted Liens) or any Negative Pledge, and (h) is owned by a Loan Party that is a single-purpose Subsidiary of the Borrower and (i) none of the Borrower's or the Parent Guarantor's direct or indirect Equity Interests in such Subsidiary is subject to any Lien (other than Permitted Liens) or any Negative Pledge and (ii)(a) on or prior to the date such Asset is added to the Collateral, such Subsidiary shall have duly executed and delivered to the Administrative Agent a Guaranty Supplement in substantially the form of Exhibit C hereto, or such other guaranty supplement in form and substance satisfactory to the Administrative Agent, guaranteeing the other Loan Parties' Obligations under the Loan Documents, and (b) the Borrower directly, or indirectly through a Subsidiary, has the right to take the following actions without the need to obtain the consent of any Person: (A) to create Liens on such Asset as security for Debt of the Great Wolf Senior Secured Revolving Credit Facility 4 Borrower of such Subsidiary, as applicable, and (B) to sell, transfer or otherwise dispose of such Asset. "BORROWING BASE DEBT SERVICE COVERAGE RATIO" means, at any date of determination, the ratio of (a) the aggregate Adjusted Net Operating Income for all Borrowing Base Assets to (b) the greater of (i) the actual interest expense of the Borrower under this Agreement for the consecutive four fiscal quarters of the Parent Guarantor most recently ended for which financial statements are required to be delivered pursuant to Section 5.03(b) or (c), as the case may be, and (ii) the payments that would have been required to be made for such fiscal period on an assumed Debt in an aggregate principal amount equal to the Facility Exposure applying a debt constant of 8.5%. "BUSINESS DAY" means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market. "CALYON" has the meaning specified in the recital of parties to this Agreement. "CAPITALIZED LEASES" means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases. "CASH EQUIVALENTS" means any of the following, to the extent owned by the Parent Guarantor or any of its Subsidiaries free and clear of all Liens other than Liens created under the Collateral Documents and having a maturity of not greater than 90 days from the date of issuance thereof: (a) readily marketable direct obligations of the Government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of the United States, (b) certificates of deposit of or time deposits with any commercial bank that is a Lender Party or a member of the Federal Reserve System, issues (or the parent of which issues) commercial paper rated as described in clause (c) below, is organized under the laws of the United States or any State thereof and has combined capital and surplus of at least $1,000,000,000 or (c) commercial paper in an aggregate amount of not more than $50,000,000 per issuer outstanding at any time, issued by any corporation organized under the laws of any State of the United States and rated at least "Prime-1" (or the then equivalent grade) by Moody's or "A-1" (or the then equivalent grade) by S&P. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time. "CERCLIS" means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency. "CGMI" has the meaning specified in the recital of parties to this Agreement. "CHANGE OF CONTROL" means the occurrence of any of the following: (a) any Person or two or more Persons acting in concert shall have acquired and shall continue to have following the date hereof beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Voting Interests of the Parent Guarantor (or other securities convertible into such Voting Interests) representing 35% or more of the combined voting power of all Voting Interests of the Parent Guarantor, it being agreed that officers and directors of the Parent Guarantor shall not be deemed to be acting in concert merely by virtue of their being officers and directors; or (b) there is a change in the composition of the Parent Guarantor's Board of Directors over a period of 24 Great Wolf Senior Secured Revolving Credit Facility 5 consecutive months (or less) such that a majority of Board members (rounded up to the nearest whole number) ceases, by reason of one or more proxy contests for the election of Board members, to be comprised of individuals who either (i) have been Board members continuously since the beginning of such period or (ii) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board; or (c) the sole member of OP General Partner ceases to be a wholly-owned Subsidiary of the Parent Guarantor; or (d) the Parent Guarantor ceases to be the direct legal and beneficial owner of at least 70% of limited partnership interests in the Borrower and the indirect beneficial owner (through its Equity Interest in OP General Partner) of all general partnership interests in the Borrower; or (e) OP General Partner ceases to be the general partner of the Borrower unless it is succeeded by another wholly-owned subsidiary of the Parent Guarantor; or (f) the Parent Guarantor shall create, incur, assume or suffer to exist any Lien on the Equity Interests in the Borrower owned by it, unless (and only for so long as) the same is the subject of a Good Faith Contest. "CLOSING DATE" means December 20, 2004 or such other date as may be agreed upon by the Borrower and the Administrative Agent. "CNAI" has the meaning specified in the recital of parties to this Agreement. "COLLATERAL" means all "Collateral" and all "Mortgaged Property" referred to in the Collateral Documents and all other property that is or is intended to be subject to any Lien in favor of the Collateral Agent for the benefit of the Secured Parties and will include, without limitation, all Borrowing Base Assets. "COLLATERAL AGENT" has the meaning specified in the recital of parties to this Agreement. "COLLATERAL DOCUMENTS" means the Security Agreement, the Mortgages, the Assignments of Leases and any other agreement entered into by a Loan Party that creates or purports to create a Lien in favor of the Collateral Agent for the benefit of the Secured Parties. "COLLATERAL TRIGGER EVENT" has the meaning specified in Section 5.01(j)(i). "COMMITMENT" means a Revolving Credit Commitment, a Swing Line Commitment or a Letter of Credit Commitment. "COMMUNICATIONS" has the meaning specified in Section 9.02(b). "COMPANY DEBT SERVICE COVERAGE RATIO" means, at any date of determination, the ratio of (a) EBITDA to (b) the sum of (i) interest (including capitalized interest) payable on, and amortization of debt discount in respect of, all Debt for Borrowed Money, plus (ii) principal amounts of all Debt for Borrowed Money (other than scheduled maturities) payable, in each case, of or by the Parent Guarantor and its Subsidiaries (without duplication) for the consecutive four fiscal quarters of the Parent Guarantor most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be; provided, however, that for purposes of calculating the Company Debt Service Coverage Ratio at any date of determination occurring during the fiscal quarter of the Parent Guarantor ending December 31, 2004, (x) the amount described in clause (a) shall be deemed to equal the amount of EBITDA attributable to the three consecutive fiscal quarters of the Parent Guarantor ending September 30, 2004 computed on a pro forma basis, and (y) the amounts described in Great Wolf Senior Secured Revolving Credit Facility 6 clause (b) shall be deemed to equal the sum of such items for the three consecutive fiscal quarters of the Parent Guarantor ending September 30, 2004 computed on a pro forma basis; provided further, that calculations which pertain to the fiscal quarters of the Parent Guarantor ending on or prior to December 31, 2004 shall be made on a pro forma basis, including to give effect to the IPO and the Formation Transactions. "CONFIDENTIAL INFORMATION" means information that any Loan Party furnishes to any Agent or any Lender Party in writing designated as confidential, but does not include any such information that is or becomes generally available to the public or that is or becomes available to such Agent or such Lender Party from a source other than the Loan Parties. "CONSOLIDATED" refers to the consolidation of accounts in accordance with GAAP. "CONTINGENT OBLIGATION" means, with respect to any Person, any Obligation or arrangement of such Person to guarantee or intended to guarantee any Debt, leases, dividends or other payment Obligations ("PRIMARY OBLIGATIONS") of any other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including, without limitation, (a) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the Obligation of a primary obligor, (b) the Obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement or (c) any Obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term "Contingent Obligation" shall not include guarantees by the Parent Guarantor of primary obligations of a direct or indirect Subsidiary with respect to trade payables to the extent such guarantees, in the aggregate, do not exceed, at any time, $5,000,000. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder), as determined by such Person in good faith. "CONVERSION", "CONVERT" and "CONVERTED" each refer to a conversion of Advances of one Type into Advances of the other Type pursuant to Section 2.07(d), 2.09 or 2.10. "CUSTOMARY CARVE-OUT AGREEMENT" has the meaning specified in the definition of Non-Recourse Debt. "DEBT" of any Person means, without duplication for purposes of calculating financial ratios, (a) all Debt for Borrowed Money of such Person, (b) all Obligations of such Person for the deferred purchase price of property or services other than trade payables incurred in the ordinary course of business and not overdue by more than 90 days, (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all Obligations of such Person created or arising under any conditional sale or other title retention agreement with respect Great Wolf Senior Secured Revolving Credit Facility 7 to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Obligations of such Person as lessee under Capitalized Leases, (f) all Obligations of such Person under acceptance, letter of credit or similar facilities, (g) all Obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interests in such Person or any other Person (other than Preferred Interests that are issued by any Loan Party or Subsidiary thereof and classified as either equity or minority interests pursuant to GAAP) or any warrants, rights or options to acquire such Equity Interests, (h) all Obligations of such Person in respect of Hedge Agreements, valued at the Agreement Value thereof, (i) all Contingent Obligations of such Person and (j) all indebtedness and other payment Obligations referred to in clauses (a) through (i) above of another Person secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness or other payment Obligations; provided, however, that in the case of the Parent Guarantor and its Subsidiaries, "Debt" shall also include, without duplication, the JV Pro Rata Share of Debt for each Joint Venture (other than an Excluded Joint Venture). "DEBT FOR BORROWED MONEY" of any Person means all items that, in accordance with GAAP, would be classified as indebtedness on a Consolidated balance sheet of such Person; provided, however, that in the case of the Parent Guarantor and its Subsidiaries "Debt for Borrowed Money" shall also include, without duplication, the JV Pro Rata Share of Debt for Borrowed Money for each Joint Venture (other than an Excluded Joint Venture); provided, further, that as used in the definition of "Fixed Charge Coverage Ratio", "Company Debt Service Coverage Ratio" and "Interest Coverage Ratio", in the case of any acquisition or disposition of any direct or indirect interest in any Asset (including through the acquisition of Equity Interests) by the Parent or any of its Subsidiaries during the consecutive four fiscal quarters of the Parent most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be, the term "Debt for Borrowed Money" (a) shall include, in the case of an acquisition, any Debt for Borrowed Money directly relating to such Asset existing immediately following such acquisition computed as if such indebtedness also existed for the portion of such period that such Asset was not owned by the Parent Guarantor or such Subsidiary, and (ii) shall exclude, in the case of a disposition, for such period any Debt for Borrowed Money to which such Asset was subject to the extent such Debt for Borrowed Money was repaid or otherwise terminated upon the disposition of such Asset. "DEFAULT" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "DEFAULT TERMINATION NOTICE" has the meaning specified in Section 2.01(b). "DESIGNATED JOINT VENTURE" means, at any time, (i) a Joint Venture listed on Schedule III hereto as of the date hereof and (ii) any other Joint Venture designated as such by the Administrative Agent. "DEVELOPMENT ASSETS" means all Real Property acquired for development into Resort Assets that, in accordance with GAAP, would be classified as development property on a Consolidated balance sheet of the Parent Guarantor and its Subsidiaries. "DISCLOSED LITIGATION" has the meaning specified in Section 3.01(f). Great Wolf Senior Secured Revolving Credit Facility 8 "DOMESTIC LENDING OFFICE" means, with respect to any Lender Party, the office of such Lender Party specified as its "Domestic Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender Party, as the case may be, or such other office of such Lender Party as such Lender Party may from time to time specify to the Borrower and the Administrative Agent. "EBITDA" means, at any date of determination, the sum of the following items, in each for the four consecutive fiscal quarters of the Parent Guarantor most recently ended: (a) the sum of (i) net income (or net loss) (excluding gains (or losses) from extraordinary, infrequent, and unusual items), (ii) interest expense, (iii) income tax expense, (iv) depreciation expense, (v) amortization expense, and (vi) to the extent subtracted in computing net income, without duplication, (A) income attributable to minority interests, (B) non-cash employee compensation, asset impairment charges and other non-cash items, (C) the cumulative effect of changes in accounting principles, and (D) expenses incurred in connection with the Formation Transactions and the IPO and other non-recurring items, in each case of the Parent Guarantor and its Subsidiaries determined on a Consolidated basis and in accordance with GAAP for such four fiscal quarter period, plus (b) with respect to each Joint Venture (other than an Excluded Joint Venture), the JV Pro Rata Share of the sum of (i) net income (or net loss) (excluding gains (or losses) from extraordinary and unusual items), (ii) interest expense, (iii) income tax expense, (iv) depreciation expense, (v) amortization expense, and (vi) to the extent subtracted in computing net income of such Joint Venture, without duplication, (A) income from minority interests, (B) non-cash employee compensation, asset impairment charges and other non-cash items, (C) the cumulative effect of changes in accounting principles, and (D) non-recurring items, in each case of such Joint Venture determined on a Consolidated basis and in accordance with GAAP for such four fiscal quarter period; provided, however, that for purposes of this definition, in the case of any acquisition or disposition of any direct or indirect interest in any Asset in an amount in excess of $1,000,000 (including through the sale or acquisition of Equity Interests) by the Parent Guarantor or any of its Subsidiaries during such four fiscal quarter period, EBITDA will be adjusted (1) in the case of an acquisition, by adding thereto an amount equal to the acquired Asset's actual EBITDA (computed as if such Asset was owned by the Parent Guarantor or one of its Subsidiaries for the entire four fiscal quarter period) generated during the portion of such four fiscal quarter period that such Asset was not owned by the Parent Guarantor or such Subsidiary, and (2) in the case of a disposition, by subtracting therefrom an amount equal to the actual EBITDA generated by the Asset so disposed of for such four fiscal quarter period; and provided further, that calculations which pertain to the fiscal quarters of the Parent Guarantor ending on or prior to December 31, 2004 shall be made on a pro forma basis, including to give effect to the IPO and the Formation Transactions. "EFFECTIVE DATE" means the first date on which the conditions set forth in Article III shall be satisfied. "ELIGIBLE ASSIGNEE" means (a) with respect to the Revolving Credit Facility, (i) a Lender; (ii) an Affiliate or Fund Affiliate of a Lender; (iii) a commercial bank organized under the laws of the United States, or any State thereof, respectively, and having total assets in excess of $500,000,000; (iv) a savings and loan association or savings bank organized under the laws of the United States or any State thereof, and having total assets in excess of $500,000,000; (v) a commercial bank organized under the laws of any other country that is a member of the OECD or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or a political subdivision of any such country, and having total assets in excess of $500,000,000, so long as such bank is acting through a branch or agency located in the United States; (vi) the central bank of any country that is a member of the Great Wolf Senior Secured Revolving Credit Facility 9 OECD; and (vii) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and having total assets in excess of $500,000,000, and (b) with respect to the Letter of Credit Facility, a Person that is an Eligible Assignee under subclause (iii) or (v) of this definition and is approved by the Administrative Agent (such approval not to be unreasonably withheld) and, unless a Default has occurred and is continuing at the time any assignment is effected pursuant to Section 9.07, approved by the Borrower, such approval not to be unreasonably withheld or delayed; provided, however, that neither any Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible Assignee under this definition. "ENVIRONMENTAL ACTION" means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, any Environmental Permit or Hazardous Material or arising from alleged injury or threat to the environment or injury or threat to human health and safety from Hazardous Materials, including, without limitation, such matters brought (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. "ENVIRONMENTAL LAW" means any applicable Federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, writ, judgment, injunction, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment or natural resources or protection of human health and safety from Hazardous Materials, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials. "ENVIRONMENTAL PERMIT" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "EQUITY INTERESTS" means, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA AFFILIATE" means any Person that for purposes of Title IV of ERISA is a member of the controlled group of any Loan Party, or under common control with any Loan Party, within the meaning of Section 414 of the Internal Revenue Code. "ERISA EVENT" means (a)(i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC or (ii) the requirements of Section 4043(b) Great Wolf Senior Secured Revolving Credit Facility 10 of ERISA apply with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan in a distress termination pursuant to Section 4041(c) of ERISA; (d) the cessation of operations at a facility of any Loan Party or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by any Loan Party or any ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions for imposition of a lien under Section 302(f) of ERISA shall have been met with respect to any Plan; (g) the adoption of an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, such Plan. "EUROCURRENCY LIABILITIES" has the meaning specified in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "EURODOLLAR LENDING OFFICE" means, with respect to any Lender Party, the office of such Lender Party specified as its "Eurodollar Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender Party (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender Party as such Lender Party may from time to time specify to the Borrower and the Administrative Agent. "EURODOLLAR RATE" means, for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate per annum (rounded upward, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. dollars at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period for a period equal to such Interest Period or, if for any reason such rate is not available, the average (rounded upward, if necessary, to the nearest 1/100 of 1%, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to such Reference Bank's Eurodollar Rate Advance comprising part of such Borrowing to be outstanding during such Interest Period (or, if such Reference Bank shall not have such a Eurodollar Rate Advance, $1,000,000) and for a period equal to such Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. "EURODOLLAR RATE ADVANCE" means an Advance that bears interest as provided in Section 2.07(a)(ii). "EURODOLLAR RATE RESERVE PERCENTAGE" means, for any Interest Period for all Eurodollar Rate Advances comprising part of the same Borrowing, the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Great Wolf Senior Secured Revolving Credit Facility 11 Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Advances is determined) having a term equal to such Interest Period. "EVENTS OF DEFAULT" has the meaning specified in Section 6.01. "EXISTING DEBT" means Debt of each Loan Party and its Subsidiaries outstanding immediately before giving effect to the Formation Transactions. "EXCLUDED JOINT VENTURE" means, at any time, a Joint Venture in which (a) the economic interest of the Parent Guarantor and its Subsidiaries is less than 15% of the total economic interests of all Persons therein, and (b) the JV Pro Rata Share of Debt for such Joint Venture is less than or equal to $10,000,000. "EXCLUDED SUBSIDIARY" at any time means (a) any direct or indirect Subsidiary of the Borrower that is unable, or pursuant to Section 5.01(j)(ii) will become unable, to guaranty the Obligations of the Loan Parties under the Loan Documents at such time because it is or will be party to one or more Excluded Subsidiary Agreements that prohibit such Excluded Subsidiary from entering into the Guaranty set forth in Article VII or a Guaranty Supplement and (b) any Limited Subsidiary. "EXCLUDED SUBSIDIARY AGREEMENT" for each Excluded Subsidiary means any agreement (and any amendments thereto to the extent not prohibited by the terms of this Agreement) set forth opposite the name of such Excluded Subsidiary on Schedule 4.01(y) hereto (as such Schedule may be supplemented from time to time pursuant to Sections 5.01(j)(i) and 5.01(j)(ii)) and any agreement (and any amendments thereto to the extent not prohibited by the terms of this Agreement) pursuant to which such Excluded Subsidiary incurs Refinancing Debt with regard to the Debt, if any, incurred pursuant to such Excluded Subsidiary Agreement. "FACILITY" means the Revolving Credit Facility, the Swing Line Facility or the Letter of Credit Facility. "FACILITY EXPOSURE" means, at any date of determination, the sum of (a) the aggregate principal amount of all outstanding Advances, plus (b) the amount (not less than zero) equal to the Available Amount under all outstanding Letters of Credit less all amounts then on deposit in the LC Cash Collateral Account, plus (c) all Obligations of the Loan Parties in respect of Secured Hedge Agreements, valued at the Agreement Value thereof. "FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "FEE LETTER" means the fee letter dated as of October 13, 2004 among The Great Lakes Companies, Inc., CNAI and CGMI, as the same may be amended from time to time. Great Wolf Senior Secured Revolving Credit Facility 12 "FF&E" means , with respect to any Real Property, any furniture, fixtures and equipment, including any beds, lamps, bedding, tables, chairs, sofas, curtains, carpeting, smoke detectors, mini bars, paintings, decorations, televisions, telephones, radios, desks, dressers, towels, bathroom equipment, heating, cooling, lighting, laundry, incinerating, loading, swimming pools, landscaping, garage and power equipment, machinery, engines, vehicles, fire prevention, refrigerating, ventilating and communications apparatus, carts, dollies, elevators, escalators, kitchen appliances, restaurant equipment, computers, reservation systems, software, cash registers, switchboards, cleaning equipment or any other items of furniture, fixtures and equipment typically used in hotel or resort properties (including furniture, fixtures and equipment used in guest rooms, lobbies, common areas, front desk, back office, bars, restaurants, kitchens, laundries, concierge, bellman, recreation, amusement, landscaping, parking and other areas of hotels or resorts) and any replacements of all or any portion of any of the foregoing. "FF&E RESERVE" means, with respect to any Asset or Assets for any fiscal period, an amount equal to 4.0% of the total revenues generated from the operation of such Asset or Assets for such fiscal period. "FISCAL YEAR" means a fiscal year of the Parent Guarantor and its Consolidated Subsidiaries ending on December 31 in any calendar year. "FIXED CHARGE COVERAGE RATIO" means, at any date of determination, the ratio of (a) EBITDA to (b) the sum of (i) interest (including capitalized interest) payable on, and amortization of debt discount in respect of, all Debt for Borrowed Money plus (ii) principal amounts of all Debt for Borrowed Money payable (excluding maturities) plus (iii) all cash dividends payable on any Preferred Interests, plus (iv) the FF&E Reserve for all Assets, in each case, of or by the Parent Guarantor and its Subsidiaries for the consecutive four fiscal quarters of the Parent Guarantor most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be; provided, however, that for purposes of calculating the Fixed Charge Coverage Ratio at any date of determination occurring during the fiscal quarter of the Parent ending December 31, 2004, (x) the amount described in clause (a) shall be deemed to equal the amount of EBITDA attributable to the three consecutive fiscal quarters of the Parent Guarantor ending September 30, 2004 computed on a pro forma basis, and (y) the amounts described in clause (b) shall be deemed to equal the sum of such items for the three consecutive fiscal quarters of the Parent Guarantor ending September 30, 2004 computed on a pro forma basis; provided further, that calculations which pertain to the fiscal quarters of the Parent Guarantor ending on or prior to December 31, 2004 shall be made on a pro forma basis, including to give effect to the IPO and the Formation Transactions. "FORMATION TRANSACTIONS" means the "formation transaction" all as more fully described in the Registration Statement and otherwise on terms reasonably satisfactory to the Administrative Agent. The Formation Transactions shall include (a) the formation by the Borrower of certain wholly owned Subsidiaries and the merger of such Subsidiaries into the existing owners of certain Resort Assets, and (b) the purchase of the interests held by certain Affiliates of AIG SunAmerica in the Wisconsin Dells Asset and the Sandusky Asset. "FUND AFFILIATE" means, with respect to any Lender that is a fund that invests in bank loans, any other fund that invests in bank loans and is advised or managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "GAAP" has the meaning specified in Section 1.03. Great Wolf Senior Secured Revolving Credit Facility 13 "GREAT WOLF LODGE CONDOMINIUM" means the condominium association referred to in that certain Declaration of Easements and Covenant to Share Costs for Great Wolf Lodge shown on Schedule B of the Mortgage Policy issued in respect of the Wisconsin Dells Asset. "GOOD FAITH CONTEST" means the contest of an item as to which: (a) such item is contested in good faith, by appropriate proceedings, (b) reserves that are adequate are established with respect to such contested item in accordance with GAAP and (c) the failure to pay or comply with such contested item during the period of such contest is not reasonably likely to result in a Material Adverse Effect. "GUARANTEED OBLIGATIONS" has the meaning specified in Section 7.01. "GUARANTY" means the Guaranty by the Guarantors pursuant to Article VII, together with any and all Guaranty Supplements required to be delivered pursuant to Section 5.01(j). "GUARANTY SUPPLEMENT" means a supplement entered into by an Additional Guarantor in substantially the form of Exhibit C hereto. "HAZARDOUS MATERIALS" means (a) petroleum or petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls, radon gas and mold and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law. "HEDGE AGREEMENTS" means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other hedging agreements. "HEDGE BANK" means any Lender Party or an Affiliate of a Lender Party in its capacity as a party to a Secured Hedge Agreement. "INDEMNIFIED COSTS" has the meaning specified in Section 8.05(a). "INDEMNIFIED PARTY" has the meaning specified in Section 7.06(a). "INFORMATION MEMORANDUM" means the information memorandum dated September, 2004 used by the Arrangers in connection with the syndication of the Commitments. "INITIAL EXTENSION OF CREDIT" means the earlier to occur of the initial Borrowing and the initial issuance of a Letter of Credit hereunder. "INITIAL ISSUING BANK" has the meaning specified in the recital of parties to this Agreement. "INITIAL LENDERS" has the meaning specified in the recital of parties to this Agreement. "INSUFFICIENCY" means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA. "INTELLECTUAL PROPERTY ASSET" means any and all rights or interests in any intellectual property (including but not limited to patents, copyrights, trademarks, service marks, domain Great Wolf Senior Secured Revolving Credit Facility 14 names, trade dress, logos, designs, slogans, trade names, business names, corporate names and other source identifiers, whether registered or unregistered) held by Great Wolf Services, LLC, regardless of whether the same is now or hereafter used, held or acquired. "INTEREST COVERAGE RATIO" means, at any date of determination, the ratio of (a) EBITDA to (b) the sum of interest (including capitalized interest) payable on, and amortization of debt discount in respect of, all Debt for Borrowed Money, in each case, of or by the Parent Guarantor and its Subsidiaries (without duplication) for the consecutive four fiscal quarters of the Parent Guarantor most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be; provided, however, that for purposes of calculating the Interest Coverage Ratio at any date of determination occurring during the fiscal quarter of the Parent Guarantor ending December 31, 2004, (x) the amount described in clause (a) shall be deemed to equal the amount of EBITDA attributable to the three consecutive fiscal quarters of the Parent Guarantor ending September 30, 2004 computed on a pro forma basis, and (y) the amounts described in clause (b) shall be deemed to equal the sum of such items for the three consecutive fiscal quarters of the Parent Guarantor ending September 30, 2004 computed on a pro forma basis; provided further, that calculations which pertain to the fiscal quarters of the Parent Guarantor ending on or prior to December 31, 2004 shall be made on a pro forma basis, including to give effect to the IPO and the Formation Transactions. "INTEREST PERIOD" means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance, and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, as the Borrower may, upon notice received by the Administrative Agent not later than 12:00 Noon (New York City time) on the third Business Day prior to the first day of such Interest Period, select; provided, however, that: (a) the Borrower may not select any Interest Period with respect to any Eurodollar Rate Advance that ends after the Termination Date; (b) Interest Periods commencing on the same date for Eurodollar Rate Advances comprising part of the same Borrowing shall be of the same duration; (c) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; provided, however, that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (d) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month. Great Wolf Senior Secured Revolving Credit Facility 15 "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "INVESTMENT" means (a) any loan or advance to any Person, any purchase or other acquisition of any Equity Interests or Debt or the assets comprising a division or business unit or a substantial part or all of the business of any Person, any capital contribution to any Person or any other direct or indirect investment in any Person, including, without limitation, any acquisition by way of a merger or consolidation and any arrangement pursuant to which the investor incurs Debt of the types referred to in clause (i) or (j) of the definition of "DEBT" in respect of any Person, and (b) the purchase or other acquisition of any unimproved land, Development Assets or Resort Assets. "IPO" means the initial public offering of common stock of the Parent Guarantor and its registration as a public company with the Securities and Exchange Commission. "ISSUING BANK" means the Initial Issuing Bank and any other Lender approved as an Issuing Bank by the Administrative Agent and the Borrower and any Eligible Assignee to which a Letter of Credit Commitment hereunder has been assigned pursuant to Section 9.07 so long as each such Lender or each such Eligible Assignee expressly agrees to perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as an Issuing Bank and notifies the Administrative Agent of its Applicable Lending Office and the amount of its Letter of Credit Commitment (which information shall be recorded by the Administrative Agent in the Register) for so long as such Initial Issuing Bank, Lender or Eligible Assignee, as the case may be, shall have a Letter of Credit Commitment. "JOINT VENTURE" means any joint venture (a) in which the Parent Guarantor or any of its Subsidiaries holds any Equity Interest, (b) that is not a Subsidiary of the Parent Guarantor or any of its Subsidiaries and (c) the accounts of which would not appear on the Consolidated financial statements of the Parent Guarantor. "JOINT VENTURE ASSETS" means, with respect to any Joint Venture at any time, the assets owned by such Joint Venture at such time. "JV PRO RATA SHARE" means (a) with respect to any Joint Venture (other than a Designated Joint Venture), at any time, the fraction, expressed as a percentage, obtained by dividing (i) the total book value of all Equity Interests in such Joint Venture held by the Parent Guarantor and any of its Subsidiaries by (ii) the total book value of all outstanding Equity Interests in such Joint Venture at such time, and (b) with respect to a Designated Joint Venture, at any time, the percentage interest of the applicable party in profits and losses of such Joint Venture at such time. "L/C CASH COLLATERAL ACCOUNT" means an account of the Borrower to be maintained with the Administrative Agent, in the name of the Administrative Agent and under the sole control and dominion of the Administrative Agent and subject to the terms of this Agreement. "L/C RELATED DOCUMENTS" has the meaning specified in Section 2.04(b)(ii)(A). "LENDER PARTY" means any Lender, the Swing Line Bank or any Issuing Bank. Great Wolf Senior Secured Revolving Credit Facility 16 "LENDERS" means the Initial Lenders and each Person that shall become a Lender hereunder pursuant to Section 9.07 for so long as such Initial Lender or Person, as the case may be, shall be a party to this Agreement. "LETTER OF CREDIT ADVANCE" means an advance made by any Issuing Bank or any Lender pursuant to Section 2.03(c). "LETTER OF CREDIT AGREEMENT" has the meaning specified in Section 2.03(a). "LETTER OF CREDIT COMMITMENT" means, with respect to any Issuing Bank at any time, the amount set forth opposite such Issuing Bank's name on Schedule I hereto under the caption "Letter of Credit Commitment" or, if such Issuing Bank has entered into one or more Assignment and Acceptances, set forth for such Issuing Bank in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Issuing Bank's "Letter of Credit Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.05. "LETTER OF CREDIT FACILITY" means, at any time, an amount equal to the lesser of (a) the aggregate amount of the Issuing Banks' Letter of Credit Commitments at such time, and (b) $5,000,000, as such amount may be reduced at or prior to such time pursuant to Section 2.05. "LETTERS OF CREDIT" has the meaning specified in Section 2.01(b). "LEVERAGE RATIO" means, at any date of determination, the ratio of Total Debt to EBITDA as at the end of the most recently ended fiscal quarter of the Parent Guarantor for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be; provided, however, that, for purposes of this definition, Total Debt shall be computed without regard to the Obligations described by clause (h) of the definition of "Debt". "LIEN" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "LIMITED SUBSIDIARY" means, at any date of determination, a Subsidiary of a Loan Party (a) that is prohibited by the terms of any loan agreement or indenture or other material agreement to which it is or is then becoming a party from providing guarantees of the Obligations of the Loan Parties under the Loan Documents, (b) that is being formed with the intention of incurring Non-Recourse Debt permitted under Section 5.02(b)(iii)(E) in respect of Assets that are not Borrowing Base Assets, or (c) that is inactive or holds de minimis assets. For the avoidance of doubt, it is acknowledged that assets comprised of a single liquor license (or other similar license) relating to a Borrowing Base Asset are deemed not to be de minimis for purposes of this definition. "LOAN DOCUMENTS" means (a) this Agreement, (b) the Notes, (c) the Fee Letter, (d) each Letter of Credit Agreement, (e) each Guaranty Supplement, (f) the Collateral Documents, and (g) each Secured Hedge Agreement, in each case, as amended. "LOAN PARTIES" means the Borrower and the Guarantors. Great Wolf Senior Secured Revolving Credit Facility 17 "LOAN VALUE" means, with respect to any Borrowing Base Asset, an amount equal to 60% of the most recent Appraised Value of such Borrowing Base Asset. "MANAGEMENT AGREEMENT" means individually (and collectively, as the context may require) (x) the Management Agreement, of even date herewith, between Great Lakes Services, LLC and Great Bear Lodge of Wisconsin Dells, LLC, (y) the Management Agreement, of even date herewith, between Great Lakes Services, LLC and Great Bear Lodge of Sandusky, LLC and (z) any Management Agreement in respect of a Borrowing Base Asset entered into after the Closing Date in compliance with Section 5.01(o). "MANAGEMENT RESERVE" means, with respect to any Asset for any fiscal period, an amount equal to 3.0% of the total revenues generated from the operation of such Asset for such fiscal period. "MARGIN STOCK" has the meaning specified in Regulation U. "MATERIAL ADVERSE CHANGE" means any material adverse change in the business, condition (financial or otherwise), results of operations or prospects of the Borrower or the Borrower and its Subsidiaries, taken as a whole. "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the business, condition (financial or otherwise), operations or prospects of the Borrower and its Subsidiaries, taken as a whole, (b) the rights and remedies of any Agent or any Lender Party under any Loan Document, (c) the ability of any Loan Party to perform its Obligations under any Loan Document to which it is or is to be a party or (d) the value of the Collateral. "MATERIAL CONTRACT" means each contract to which the Borrower or any of its Subsidiaries is a party involving aggregate consideration payable to or by the Borrower or such Subsidiary in an amount of $5,000,000 or more per annum or which, if terminated, would be reasonably likely to result in a Material Adverse Change. "MATERIAL DEBT" means Debt of any Loan Party or any Subsidiary of a Loan Party that is outstanding in a principal amount (or, in the case of any Hedge Agreement, an Agreement Value) of $10,000,000 or more, either individually or in the aggregate; in each case (a) whether the primary obligation of one or more of the Loan Parties or their respective Subsidiaries, (b) whether the subject of one or more separate debt instruments or agreements, and (c) exclusive of Debt outstanding under this Agreement. "MOODY'S" means Moody's Investors Services, Inc. and any successor thereto. "MORTGAGE POLICIES" has the meaning specified in Section 3.01(a)(iii)(B). "MORTGAGES" has the meaning specified in Section 3.01(a)(iii). "MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Loan Party or any Great Wolf Senior Secured Revolving Credit Facility 18 ERISA Affiliate and at least one Person other than the Loan Parties and the ERISA Affiliates or (b) was so maintained and in respect of which any Loan Party or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "NEGATIVE PLEDGE" means, with respect to any asset, any provision of a document, instrument or agreement (other than a Loan Document) which prohibits or purports to prohibit the creation or assumption of any Lien on such asset as security for Debt of the Person owning such asset or any other Person. "NET ASSET SALES PROCEEDS" has the meaning specified in Section 5.02(e)(i)(B). "NET OPERATING INCOME" means, with respect to any Borrowing Base Asset, (a) the total rental revenue and other revenues from the operation of such Borrowing Base Asset, minus (b) the FF&E Reserve for such Borrowing Base Asset and all expenses and other proper charges incurred in connection with the operation and maintenance of such Borrowing Base Asset, including, without limitation, management fees, repairs, real estate and chattel taxes and bad debt expenses, but before payment or provision for debt service charges, income taxes and depreciation, amortization, asset impairment charges and other non-cash expenses and non-recurring charges, all as determined in accordance with GAAP and in each case for consecutive four fiscal quarters of the Parent Guarantor most recently ended for which financial statements are required to be delivered pursuant to Section 5.03(b) or (c), as the case may be. "NON-RECOURSE DEBT" means Debt for Borrowed Money with respect to which recourse for payment is limited to (a) any building(s) or parcel(s) of real property or any related assets encumbered by a Lien securing such Debt for Borrowed Money and/or (b) (i) the general credit of the Property-Level Subsidiary that has incurred such Debt for Borrowed Money, and/or the direct Equity Interests therein and/or (ii) the general credit of the immediate parent entity of such Property-Level Subsidiary provided that such parent entity's assets consist solely of Equity Interests in one or more Property-Level Subsidiaries, it being understood that the instruments governing such Debt may include customary carve-outs to such limited recourse (any such customary carve-outs or agreements limited to such customary carve-outs, being a "CUSTOMARY CARVE-OUT AGREEMENT") such as, for example, personal recourse to the Parent Guarantor or any Subsidiary of the Parent Guarantor for fraud, misrepresentation, misapplication or misappropriation of cash, waste, environmental claims, damage to properties, non-payment of taxes or other liens despite the existence of sufficient cash flow, interference with the enforcement of loan documents upon maturity or acceleration, voluntary or involuntary bankruptcy filings, violation of loan document prohibitions against transfer of properties or ownership interests therein and liabilities and other circumstances customarily excluded by lenders from exculpation provisions and/or included in separate indemnification and/or guaranty agreements in non-recourse financings of real estate. "NOTE" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Revolving Credit Advances, Swing Line Advances and Letter of Credit Advances made by such Lender. "NOTICE" has the meaning specified in Section 9.02(c). "NOTICE OF BORROWING" has the meaning specified in Section 2.02(a). Great Wolf Senior Secured Revolving Credit Facility 19 "NOTICE OF ISSUANCE" has the meaning specified in Section 2.03(a). "NOTICE OF RENEWAL" has the meaning specified in Section 2.01(b). "NOTICE OF SWING LINE BORROWING" has the meaning specified in Section 2.02(b). "NOTICE OF TERMINATION" has the meaning specified in Section 2.01(b). "NPL" means the National Priorities List under CERCLA. "OBLIGATION" means, with respect to any Person, any payment, performance or other obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 6.01(f). Without limiting the generality of the foregoing, the Obligations of any Loan Party under the Loan Documents include (a) the obligation to pay principal, interest, Letter of Credit commissions, charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by such Loan Party under any Loan Document and (b) the obligation of such Loan Party to reimburse any amount in respect of any of the foregoing that any Lender Party, in its sole discretion, may elect to pay or advance on behalf of such Loan Party. "OECD" means the Organization for Economic Cooperation and Development. "OP GENERAL PARTNER" means GWR OP General Partner, LLC, a Delaware limited liability company. "OTHER TAXES" has the meaning specified in Section 2.12(b). "PARENT GUARANTOR" has the meaning specified in the recital of parties to this Agreement. "PARTICIPANT" has the meaning specified in Section 2.03(c)(i). "PATRIOT ACT" has the meaning specified in Section 9.12. "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "PERMITTED LIENS" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens for taxes, assessments and governmental charges or levies not yet due and payable; (b) Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's Liens and other similar Liens arising in the ordinary course of business securing obligations that (i) are not overdue for a period of more than 30 days and (ii) individually or together with all other Permitted Liens outstanding on any date of determination do not materially adversely affect the use of the property to which they relate; (c) pledges or deposits to secure obligations under workers' compensation or unemployment laws or similar legislation or to secure public or statutory obligations; (d) easements, zoning restrictions, rights of way and other encumbrances on title to real property that do not materially adversely affect the use or value of such property for its present purposes; (e) Tenancy Leases; (f) Permitted Encumbrances (as defined in each of the Great Wolf Senior Secured Revolving Credit Facility 20 Mortgages); and (g) with respect to any Excluded Subsidiary, any non-monetary Liens permitted under agreements pertaining to Non-Recourse Debt. "PERSON" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "PLAN" means a Single Employer Plan or a Multiple Employer Plan. "PLATFORM" has the meaning specified in Section 9.02(b). "POST PETITION INTEREST" has the meaning specified in Section 7.07(c). "PREDECESSORS" means (a) "Great Lakes Predecessor" or "Predecessor", as more particularly described in and as such terms are defined in, the Registration Statement, (b) Great Bear Lodge of Sandusky, LLC, and (c) Great Bear Lodge of Wisconsin Dells, LLC. "PREFERRED INTERESTS" means, with respect to any Person, Equity Interests issued by such Person that are entitled to a preference or priority over any other Equity Interests issued by such Person upon any distribution of such Person's property and assets, whether by dividend or upon liquidation. "PROPERTY-LEVEL SUBSIDIARY" means any Subsidiary of the Borrower or any Joint Venture that holds a direct fee or leasehold interest in any single building (or group of related buildings, including, without limitation, buildings pooled for purposes of a Non-Recourse Debt financing) or parcel (or group of related parcels, including, without limitation, parcels pooled for purposes of a Non-Recourse Debt financing) of real property and related assets and not in any other building or parcel of real property. "PROPOSED BORROWING BASE ASSET" has the meaning specified in Section 5.01(j)(iv). "PRO RATA SHARE" of any amount means, with respect to any Lender at any time, the product of such amount times a fraction the numerator of which is the amount of such Lender's Revolving Credit Commitment at such time (or, if the Commitments shall have been terminated pursuant to Section 2.05 or 6.01, such Lender's Revolving Credit Commitment as in effect immediately prior to such termination) and the denominator of which is the Revolving Credit Facility at such time (or, if the Commitments shall have been terminated pursuant to Section 2.05 or 6.01, the Revolving Credit Facility as in effect immediately prior to such termination). "QUALIFYING GROUND LEASE" means a ground lease containing the following terms and conditions: (a) a remaining term (exclusive of any unexercised extension options) of 30 years or more from the Closing Date; (b) the right of the lessee to mortgage and encumber its interest in the leased property without the consent of the lessor; (c) the obligation of the lessor to give the holder of any mortgage Lien on such leased property written notice of any defaults on the part of the lessee and agreement of such lessor that such lease will not be terminated until such holder has had a reasonable opportunity to cure or complete foreclosures, and fails to do so; (d) reasonable transferability of the lessee's interest under such lease, including ability to sublease; and (e) such other rights customarily required by mortgagees making a loan secured by the interest of the holder of a leasehold estate demised pursuant to a ground lease. Great Wolf Senior Secured Revolving Credit Facility 21 "REAL PROPERTY" means all right, title and interest of the Borrower and each of its Subsidiaries in and to any land and any improvements located thereon, together with all equipment, furniture, materials, supplies, personal property and all other rights and property within the scope of the definition of Mortgaged Property (as defined in the Form of Mortgage attached hereto as Exhibit G) in which such Person has an interest now or hereafter located on or used in connection with such land and improvements, and all appurtenances, additions, improvements, renewals, substitutions and replacements thereof now or hereafter acquired by such Person. "REFERENCE BANKS" means Citibank, N.A., Societe Generale and Calyon. "REFINANCING DEBT" means, with respect to any Debt, any Debt extending the maturity of, or refunding or refinancing, in whole or in part, such Debt, provided that the terms of any Refinancing Debt, and of any agreement entered into and of any instrument issued in connection therewith, (a) do not provide for any Lien on any Borrowing Base Assets and, (b) do not cause a breach of any of the covenants set forth in Section 5.04, and (c) are not otherwise prohibited by the Loan Documents. "REGISTER" has the meaning specified in Section 9.07(d). "REGISTRATION STATEMENT" means the Parent Guarantor's Form S-1 Registration Statement filed with the Securities and Exchange Commission in connection with the IPO, as amended. "REGULATION U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "REQUIRED LENDER PARTIES" means (a) CNAI, Societe Generale and Calyon, in each case to the extent such Person or an Affiliate thereof is a Lender at such time, and (b) such additional Lenders, if any, as shall, together with CNAI, Societe Generale and Calyon, be necessary to constitute Required Lenders. "REQUIRED LENDERS" means, at any time, Lenders owed or holding greater than 50% of the sum of (a) the aggregate principal amount of the Advances outstanding at such time, (b) the aggregate Available Amount of all Letters of Credit outstanding at such time and (c) the aggregate Unused Revolving Credit Commitments at such time. For purposes of this definition, the aggregate principal amount of Swing Line Advances owing to the Swing Line Bank and of Letter of Credit Advances owing to any Issuing Bank and the Available Amount of each Letter of Credit shall be considered to be owed to the Revolving Lenders ratably in accordance with their respective Revolving Credit Commitments. "RESORT ASSET" means Real Property (other than any Joint Venture Asset) that operates or is intended to be operated as a hotel or resort that features indoor water parks or other family oriented facilities or is a structure from which a hotel or resort that features indoor water parks or other family oriented facilities is operated or intended to be operated. "RESPONSIBLE OFFICER" means any officer of, or any officer of any general partner or managing member of, the relevant Loan Party, which officer shall have (a) responsibility for performing the underlying function that is the subject of the action required of such officer hereunder, or (b) supervisory responsibility for such an officer. "REVOLVING CREDIT ADVANCE" has the meaning specified in Section 2.01(a). Great Wolf Senior Secured Revolving Credit Facility 22 "REVOLVING CREDIT COMMITMENT" means, (a) with respect to any Lender at any time, the amount set forth opposite such Lender's name on Schedule I hereto under the caption "Revolving Credit Commitment" or (b) if such Lender has entered into one or more Assignment and Acceptances, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Lender's "Revolving Credit Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.05. "REVOLVING CREDIT FACILITY" means, at any time, the aggregate amount of the Lenders' Revolving Credit Commitments at such time. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. and any successor thereto. "SALE AND LEASEBACK TRANSACTION" shall mean any arrangement with any Person providing for the leasing by the Parent Guarantor or any of its Subsidiaries of any Real Property that has been sold or transferred or is to be sold or transferred by the Parent Guarantor or such Subsidiary, as the case may be, to such Person. "SANDUSKY ASSET" means the Resort Asset owned by Great Bear Lodge of Sandusky, LLC located in Sandusky, Ohio. "SARBANES-OXLEY" means the Sarbanes-Oxley Act of 2002, as amended. "SCOTRUN ASSET" means the Resort Asset owned by Great Wolf Lodge of the Poconos, LLC located in Scotrun, Pennsylvania. "SECURED HEDGE AGREEMENT" means any Hedge Agreement required or permitted under Article V that is entered into by and between any Loan Party and any Hedge Bank and that is secured by the Collateral Documents. "SECURED OBLIGATIONS" means, collectively, the "Secured Obligations" as defined in Section 2 of the Security Agreement. "SECURED PARTIES" means the Agents, the Lender Parties and the Hedge Banks. "SECURITIES ACT" means the Securities Act of 1933, as amended to the date hereof and from time to time hereafter, and any successor statute. "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended to the date hereof and from time to time hereafter, and any successor statute. "SECURITY AGREEMENT" has the meaning specified in Section 3.01(a)(ii). "SHEBOYGAN ASSET" means the Resort Asset owned by Blue Harbor Resort Sheboygan, LLC located in Sheboygan, Michigan. "SINGLE EMPLOYER PLAN" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Loan Party or any ERISA Affiliate and no Person other than the Loan Parties and the ERISA Affiliates or (b) was so maintained and in respect of which any Loan Party or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. Great Wolf Senior Secured Revolving Credit Facility 23 "SG AMERICAS" has the meaning specified in the recital of parties to this Agreement. "SOLVENT" means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person, on a going-concern basis, is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person, on a going-concern basis, is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time (including, without limitation, after taking into account appropriate discount factors for the present value of future contingent liabilities), represents the amount that can reasonably be expected to become an actual or matured liability. "STANDBY LETTER OF CREDIT" means any Letter of Credit issued under the Letter of Credit Facility, other than a Trade Letter of Credit. "SUBORDINATED OBLIGATIONS" has the meaning specified in Section 7.07(a). "SUBSIDIARY" of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) 50% or more of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate, in each case, is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "SUBSIDIARY GUARANTOR" has the meaning specified in the recital of parties to this Agreement. "SUPPLEMENTAL COLLATERAL AGENT" has the meaning specified in Section 8.01(b). "SURVIVING DEBT" means Debt of each Loan Party and its Subsidiaries outstanding immediately before and after giving effect to the IPO and the Formation Transactions. "SWING LINE ADVANCE" means an advance made by (a) the Swing Line Bank pursuant to Section 2.01(c) or (b) any Lender pursuant to Section 2.02(b). "SWING LINE BANK" means CNAI, in its capacity as the Lender of Swing Line Advances, and its successors and permitted assigns in such capacity. "SWING LINE BORROWING" means a borrowing consisting of a Swing Line Advance made by the Swing Line Bank pursuant to Section 2.01(c) or the Lenders pursuant to Section 2.02(b). Great Wolf Senior Secured Revolving Credit Facility 24 "SWING LINE COMMITMENT" means, with respect to the Swing Line Bank, the amount of the Swing Line Facility set forth in Section 2.01(b), as such amount may be reduced at or prior to such time pursuant to Section 2.05. "SWING LINE FACILITY" has the meaning specified in Section 2.01(c). "TAXES" has the meaning specified in Section 2.12(a). "TENANCY LEASES" means operating leases, subleases, licenses, occupancy agreements and rights-of-use entered into by the Borrower or any of its Subsidiaries in its capacity as a lessor or a similar capacity in the ordinary course of business that do not materially and adversely affect the use of the Real Property encumbered thereby for its intended purpose (excluding any lease entered into in connection with a Sale and Leaseback Transaction). "TERMINATION DATE" means the earlier of (a) the third anniversary of the Closing Date and (b) the date of termination in whole of the Revolving Credit Commitments, the Swing Line Commitment and the Letter of Credit Commitments pursuant to Section 2.05 or 6.01. "TOTAL DEBT" means, at any date of determination, all Consolidated Debt of the Parent Guarantor and its Subsidiaries as at the end of the most recently ended fiscal quarter of the Parent Guarantor for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be. "TOTAL LOAN VALUE" means an amount equal to the lesser of (a) the sum of the Loan Values of all Borrowing Base Assets and (b) the sum of (i) 3.75 times Adjusted Net Operating Income, and (ii) a credit equal to the lesser of (A) 60% of the actual cost to upgrade the waterpark at the Wisconsin Dells Asset and (B) $5,400,000, which credit shall decline on a straight-line basis over the 12-month period following completion of such upgrade. "TRADE LETTER OF CREDIT" means any Letter of Credit that is issued under the Letter of Credit Facility for the benefit of a supplier of inventory to the Borrower or any of its Subsidiaries to effect payment for such Inventory. "TRANSFER" has the meaning specified in Section 5.02(e)(i). "TYPE" refers to the distinction between Advances bearing interest at the Base Rate and Advances bearing interest at the Eurodollar Rate. "UNUSED FEE" has the meaning specified in Section 2.08(a). "UNUSED REVOLVING CREDIT COMMITMENT" means, with respect to any Lender at any time, (a) such Lender's Revolving Credit Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Revolving Credit Advances, Swing Line Advances and Letter of Credit Advances made by such Lender (in its capacity as a Lender) and outstanding at such time plus (ii) such Lender's Pro Rata Share of (A) the aggregate Available Amount of all Letters of Credit outstanding at such time, (B) the aggregate principal amount of all Letter of Credit Advances made by the Issuing Banks pursuant to Section 2.03(c) and outstanding at such time and (C) the aggregate principal amount of all Swing Line Advances made by the Swing Line Bank pursuant to Section 2.01(c) and outstanding at such time; provided, however, that for purposes of calculating the Unused Fee, prior to the date of an assignment by the Swing Line Bank to the other Lenders of their respective Pro Rata Shares of a Swing Line Advance pusuant Great Wolf Senior Secured Revolving Credit Facility 25 to Section 2.02(b), (1) the Pro Rata Share of each Lender (other than the Swing Line Bank) of the amount referred to in clause (C) with respect to such Swing Line Advance shall be deemed to be zero, and (2) the Pro Rata Share of the Swing Line Bank of the amount referred to in clause (C) with respect to such Swing Line Advance shall be deemed to be entire principal amount of such Swing Line Advance. "VOTING INTERESTS" means shares of capital stock issued by a corporation, or equivalent Equity Interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. "WELFARE PLAN" means a welfare plan, as defined in Section 3(1) of ERISA, that is maintained for employees of any Loan Party or in respect of which any Loan Party could have liability. "WILLIAMSBURG ASSET" means the Resort Asset owned by Great Wolf Lodge of Williamsburg, LLC located in Williamsburg, Virginia. "WISCONSIN DELLS ASSET" means the Resort Asset owned by Great Bear Lodge of Wisconsin Dells, LLC located in Wisconsin Dells, Wisconsin. "WITHDRAWAL LIABILITY" has the meaning specified in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Computation of Time Periods; Other Definitional Provisions. In this Agreement and the other Loan Documents in the computation of periods of time from a specified date to a later specified date, the word "FROM" means "from and including" and the words "TO" and "UNTIL" each mean "to but excluding". References in the Loan Documents to any agreement or contract "AS AMENDED" shall mean and be a reference to such agreement or contract as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with its terms. SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(g) ("GAAP"). ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT SECTION 2.01. The Advances and the Letters of Credit. (a) The Revolving Credit Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances (each, a "REVOLVING CREDIT ADVANCE") to the Borrower from time to time on any Business Day during the period from the date hereof until the Termination Date in an amount for each such Advance not to exceed such Lender's Unused Revolving Credit Commitment at such time. Each Borrowing shall be in an aggregate amount of $1,000,000 or an integral multiple of $250,000 in excess thereof and shall consist of Revolving Credit Advances made simultaneously by the Lenders ratably according to their Revolving Credit Commitments. Within the limits of each Lender's Unused Revolving Credit Commitment in effect from time to time and prior to the Termination Date, the Borrower may borrow under this Section 2.01(a), prepay pursuant to Section 2.06(a) and reborrow under this Section 2.01(a). Great Wolf Senior Secured Revolving Credit Facility 26 (b) Letters of Credit. Each Issuing Bank severally agrees, on the terms and conditions hereinafter set forth, to issue (or cause its Affiliate that is a commercial bank to issue on its behalf) letters of credit (the "LETTERS OF CREDIT"), for the account of the Borrower from time to time on any Business Day during the period from the date hereof until 60 days before the Termination Date in an aggregate Available Amount (i) for all Letters of Credit not to exceed at any time the Letter of Credit Facility at such time, (ii) for all Letters of Credit issued by such Issuing Bank not to exceed such Issuing Bank's Letter of Credit Commitment at such time, and (iii) for each such Letter of Credit not to exceed the Unused Revolving Credit Commitments of the Lenders at such time. No Letter of Credit shall have an expiration date (including all rights of the Borrower or the beneficiary to require renewal) later than the earlier of 60 days before the Termination Date and (A) in the case of a Standby Letter of Credit one year after the date of issuance thereof, but may by its terms be renewable annually upon notice (a "NOTICE OF RENEWAL") given to the Issuing Bank that issued such Standby Letter of Credit and the Administrative Agent on or prior to any date for notice of renewal set forth in such Letter of Credit but in any event at least three Business Days prior to the date of the proposed renewal of such Standby Letter of Credit and upon fulfillment of the applicable conditions set forth in Article III unless such Issuing Bank has notified the Borrower (with a copy to the Administrative Agent) on or prior to the date for notice of termination set forth in such Letter of Credit but in any event at least 30 Business Days prior to the date of automatic renewal of its election not to renew such Standby Letter of Credit (a "NOTICE OF TERMINATION") and (B) in the case of a Trade Letter of Credit, 60 days after the date of issuance thereof; provided, however, that the terms of each Standby Letter of Credit that is automatically renewable annually shall (x) require the Issuing Bank that issued such Standby Letter of Credit to give the beneficiary named in such Standby Letter of Credit notice of any Notice of Termination, (y) permit such beneficiary, upon receipt of such notice, to draw under such Standby Letter of Credit prior to the date such Standby Letter of Credit otherwise would have been automatically renewed and (z) not permit the expiration date (after giving effect to any renewal) of such Standby Letter of Credit in any event to be extended to a date later than 60 days before the Termination Date. If either a Notice of Renewal is not given by the Borrower or a Notice of Termination is given by the relevant Issuing Bank pursuant to the immediately preceding sentence, such Standby Letter of Credit shall expire on the date on which it otherwise would have been automatically renewed; provided, however, that even in the absence of receipt of a Notice of Renewal the relevant Issuing Bank may in its discretion, unless instructed to the contrary by the Administrative Agent or the Borrower, deem that a Notice of Renewal had been timely delivered and in such case, a Notice of Renewal shall be deemed to have been so delivered for all purposes under this Agreement. Each Standby Letter of Credit shall contain a provision authorizing the Issuing Bank that issued such Letter of Credit to deliver to the beneficiary of such Letter of Credit, upon the occurrence and during the continuance of an Event of Default, a notice (a "DEFAULT TERMINATION NOTICE") terminating such Letter of Credit and giving such beneficiary 15 days to draw such Letter of Credit. Within the limits of the Letter of Credit Facility, and subject to the limits referred to above, the Borrower may request the issuance of Letters of Credit under this Section 2.01(b) and request the issuance of additional Letters of Credit under this Section 2.01(b). (c) Swing Line Advances. The Borrower may request the Swing Line Bank to make, and the Swing Line Bank agrees to make, on the terms and conditions hereinafter set forth, Swing Line Advances to the Borrower from time to time on any Business Day during the period from the date hereof until the Termination Date (i) in an aggregate amount not to exceed at any time outstanding $5,000,000 (the "SWING LINE FACILITY") and (ii) in an amount for each such Swing Line Borrowing not to exceed the aggregate of the Unused Revolving Credit Commitments of the Lenders at such time. No Swing Line Advance shall be used for the purpose of funding the payment of principal of any other Swing Line Advance. Each Swing Line Borrowing shall be in an amount of $250,000 or an integral multiple of $250,000 in excess thereof and shall be made as a Base Rate Advance. Within the limits of the Swing Line Facility and within the limits referred to in clause (ii) above, the Borrower may borrow under this Great Wolf Senior Secured Revolving Credit Facility 27 Section 2.01(c), repay pursuant to Section 2.04(b) or prepay pursuant to Section 2.06(a) and reborrow under this Section 2.01(c). SECTION 2.02. Making the Advances. (a) Except as otherwise provided in Section 2.03, each Borrowing (other than a Swing Line Borrowing) shall be made on notice, given not later than 12:00 Noon (New York City time) on the third Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Eurodollar Rate Advances, or not later than 1:00 P.M. (New York City time) on the date one Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances, by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof by telex or telecopier. Each such notice of a Borrowing (a "NOTICE OF BORROWING") shall be by telephone, confirmed immediately in writing, or telex or telecopier or e-mail, in each case in substantially the form of Exhibit B hereto, specifying therein the requested (i) date of such Borrowing, (ii) Type of Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing and (iv) in the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for each such Advance. Each Lender shall, before 12:00 Noon (New York City time) on the date of such Borrowing in the case of a Borrowing consisting of Eurodollar Rate Advances and 1:00 P.M. (New York City time) on the date of such Borrowing in the case of a Borrowing consisting of Base Rate Advances, make available for the account of its Applicable Lending Office to the Administrative Agent at the Administrative Agent's Account, in same day funds, such Lender's ratable portion of such Borrowing in accordance with the respective Commitments of such Lender and the other Lenders. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower by crediting the Borrower's Account; provided, however, that the Administrative Agent shall first make a portion of such funds equal to the aggregate principal amount of any Swing Line Advances and Letter of Credit Advances made by the Swing Line Bank or any Issuing Bank, as the case may be, and by any other Lender and outstanding on the date of such Borrowing, plus interest accrued and unpaid thereon to and as of such date, available to the Swing Line Bank or such Issuing Bank, as the case may be, and such other Lenders for repayment of such Swing Line Advances and Letter of Credit Advances. (b) Each Swing Line Borrowing shall be made on notice, given not later than 12:00 Noon (New York City time) on the date of the proposed Swing Line Borrowing, by the Borrower to the Swing Line Bank and the Administrative Agent. Each such notice of a Swing Line Borrowing (a "NOTICE OF SWING LINE BORROWING") shall be by telephone, confirmed immediately in writing or by telecopier or e-mail, in each case specifying therein the requested (i) date of such Borrowing, (ii) amount of such Borrowing and (iii) maturity of such Borrowing (which maturity shall be no later than the earlier of (A) the seventh day after the requested date of such Borrowing and (B) the Termination Date). The Swing Line Bank shall, before 1:00 P.M. (New York City time) on the date of such Swing Line Borrowing, make the amount thereof available to the Administrative Agent at the Administrative Agent's Account, in same day funds. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower by crediting the Borrower's Account. Upon written demand by the Swing Line Bank, with a copy of such demand to the Administrative Agent, each other Lender shall purchase from the Swing Line Bank, and the Swing Line Bank shall sell and assign to each such other Lender, such other Lender's Pro Rata Share of such outstanding Swing Line Advance as of the date of such demand, by making available for the account of its Applicable Lending Office to the Administrative Agent for the account of the Swing Line Bank, by deposit to the Administrative Agent's Account, in same day funds, an amount equal to the portion of the outstanding principal amount of such Swing Line Advance to be purchased by such Lender. The Borrower hereby agrees to each such sale and assignment. Each Lender agrees to purchase its Pro Rata Share of an outstanding Swing Line Advance on (i) the Business Day on which demand therefor is made by the Swing Line Bank, provided that notice of such demand is given not later than 12:00 Noon (New York City time) on such Business Day or (ii) the first Business Day next Great Wolf Senior Secured Revolving Credit Facility 28 succeeding such demand if notice of such demand is given after such time. Upon any such assignment by the Swing Line Bank to any other Lender of a portion of a Swing Line Advance, the Swing Line Bank represents and warrants to such other Lender that the Swing Line Bank is the legal and beneficial owner of such interest being assigned by it, but makes no other representation or warranty and assumes no responsibility with respect to such Swing Line Advance, the Loan Documents or any Loan Party. If and to the extent that any Lender shall not have so made the amount of such Swing Line Advance available to the Administrative Agent, such Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by the Swing Line Bank until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate. If such Lender shall pay to the Administrative Agent such amount for the account of the Swing Line Bank on any Business Day, such amount so paid in respect of principal shall constitute a Swing Line Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Swing Line Advance made by the Swing Line Bank shall be reduced by such amount on such Business Day. (c) Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for the initial Borrowing hereunder or for any Borrowing if the aggregate amount of such Borrowing is less than $1,000,000 or if the obligation of the Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.07(d)(ii), 2.09 or 2.10 and (ii) there may not be more than 10 separate Borrowings outstanding at any time. (d) Each Notice of Borrowing and Notice of Swing Line Borrowing shall be irrevocable and binding on the Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date. (e) Unless the Administrative Agent shall have received notice from a Lender prior to (x) the date of any Borrowing consisting of Eurodollar Rate Advances or (y) 12:00 Noon (New York City time) on the date of any Borrowing consisting of Base Rate Advances that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with subsection (a) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay or pay to the Administrative Agent forthwith on demand such corresponding amount and to pay interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid or paid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at such time under Section 2.07 to Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall pay to the Administrative Agent such corresponding amount, such amount so paid shall constitute such Lender's Advance as part of such Borrowing for all purposes. (f) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on Great Wolf Senior Secured Revolving Credit Facility 29 the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. SECTION 2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit. (a) Request for Issuance. Each Letter of Credit shall be issued upon notice, given not later than 12:00 Noon (New York City time) on the fifth Business Day prior to the date of the proposed issuance of such Letter of Credit, by the Borrower to any Issuing Bank, which shall give to the Administrative Agent and each Lender prompt notice thereof by telex, telecopier or e-mail or by means of the Platform. Each such notice of issuance of a Letter of Credit (a "NOTICE OF ISSUANCE") shall be by telephone, confirmed immediately in writing, telex, telecopier or e-mail, in each case specifying therein the requested (i) date of such issuance (which shall be a Business Day), (ii) Available Amount of such Letter of Credit, (iii) expiration date of such Letter of Credit, (iv) name and address of the beneficiary of such Letter of Credit and (v) form of such Letter of Credit, and shall be accompanied by such application and agreement for letter of credit as such Issuing Bank may specify to the Borrower for use in connection with such requested Letter of Credit (a "LETTER OF CREDIT AGREEMENT"). If (y) the requested form of such Letter of Credit is acceptable to such Issuing Bank in its sole discretion and (z) it has not received notice of objection to such issuance from the Required Lenders, such Issuing Bank will, upon fulfillment of the applicable conditions set forth in Article III, make such Letter of Credit available to the Borrower at its office referred to in Section 9.02 or as otherwise agreed with the Borrower in connection with such issuance. In the event and to the extent that the provisions of any Letter of Credit Agreement shall conflict with this Agreement, the provisions of this Agreement shall govern. (b) Letter of Credit Reports. Each Issuing Bank shall furnish (i) to each Lender on the first Business Day of each month a written report summarizing issuance and expiration dates of Letters of Credit issued by such Issuing Bank during the preceding month and drawings during such month under all Letters of Credit issued by such Issuing Bank and (ii) to the Administrative Agent and each Lender on the first Business Day of each calendar quarter a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit issued by such Issuing Bank. (c) Letter of Credit Participations; Drawing and Reimbursement. (i) Immediately upon the issuance by the Issuing Bank of any Letter of Credit, the Issuing Bank shall be deemed to have sold and transferred to each Lender, and each Lender (in its capacity under this Section 2.03(c), a "PARTICIPANT") shall be deemed irrevocably and unconditionally to have purchased and received from the Issuing Bank, without recourse or warranty, an undivided interest and participation in such Letter of Credit, to the extent of such Participant's Pro Rata Share of the Available Amount of such Letter of Credit, each drawing or payment made thereunder and the obligations of the Borrower under this Agreement with respect thereto, and any security therefor or guaranty pertaining thereto. Upon any change in the Revolving Credit Commitments or the Lenders' respective Pro Rata Shares pursuant to Section 9.07, it is hereby agreed that, with respect to all outstanding Letters of Credit and unpaid drawings relating thereto, there shall be an automatic adjustment to the participations pursuant to this Section 2.03(c) to reflect the new Pro Rata Shares of the assignor and assignee Lenders, as the case may be. (ii) In determining whether to pay under any Letter of Credit, the Issuing Bank shall not have any obligation with respect to the other Revolving Credit Lenders other than to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to substantially comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by the Issuing Bank under or in connection with any Letter of Credit issued by it shall not create for the Issuing Bank any resulting liability to the Borrower, any other Loan Party, any Revolving Credit Lender or any other Person unless such action is taken or omitted to be taken Great Wolf Senior Secured Revolving Credit Facility 30 with gross negligence or willful misconduct on the part of the Issuing Bank (as determined by a court of competent jurisdiction in a final non-appealable judgment) (iii) The payment by any Issuing Bank of a draft drawn under any Letter of Credit shall constitute for all purposes of this Agreement the making by such Issuing Bank of a Letter of Credit Advance, which shall be a Base Rate Advance, in the amount of such draft. In the event that the Issuing Bank makes any payment under any Letter of Credit issued by it and the Borrower shall not have reimbursed such amount in full to the Issuing Bank pursuant to Section 2.04(b), the Issuing Bank shall promptly notify the Administrative Agent, which shall promptly notify each Participant of such failure, and each Participant shall promptly and unconditionally pay to the Administrative Agent for the account of the Issuing Bank the amount of such Participant's Pro Rata Share of such unreimbursed payment in U.S. dollars and in same day funds. Upon such notification by the Administrative Agent to any Participant required to fund a payment under a Letter of Credit, such Participant shall make available to the Administrative Agent for the account of the Issuing Bank its Pro Rata Share of an outstanding Letter of Credit Advance on (i) the Business Day on which demand therefor is made by the Issuing Bank which made such Advance, provided that notice of such demand is given not later than 11:00 A.M. (New York City time) on such Business Day, or (ii) the first Business Day next succeeding such demand if notice of such demand is given after such time. If such Lender shall pay to the Administrative Agent such amount for the account of such Issuing Bank on any Business Day, such amount so paid in respect of principal shall constitute a Letter of Credit Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Letter of Credit Advance made by such Issuing Bank shall be reduced by such amount on such Business Day. If and to the extent that any Lender shall not have so made the amount of such Letter of Credit Advance available to the Administrative Agent, such Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by such Issuing Bank until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate for its account or the account of such Issuing Bank, as applicable. (iv) Whenever the Issuing Bank receives a payment of a reimbursement obligation as to which it has received any payments from the Participants pursuant to clause (iii) above, the Issuing Bank shall pay to the Administrative Agent for the account of each such Participant that has paid its Pro Rata Share thereof, in same day funds, an amount equal to such Participant's share (based upon the proportionate aggregate amount originally funded by such Participant to the aggregate amount funded by all Participants) of the principal amount of such reimbursement obligation and interest thereon accruing after the purchase of the respective participations. (d) Failure to Make Letter of Credit Advances. The failure of any Lender to make the Letter of Credit Advance to be made by it on the date specified in Section 2.03(c) shall not relieve any other Lender of its obligation hereunder to make its Letter of Credit Advance on such date, but no Lender shall be responsible for the failure of any other Lender to make the Letter of Credit Advance to be made by such other Lender on such date. SECTION 2.04. Repayment of Advances. (a) Revolving Credit Advances. The Borrower shall repay to the Administrative Agent for the ratable account of the Lenders on the Termination Date the aggregate outstanding principal amount of the Revolving Credit Advances then outstanding. (b) Swing Line Advances. The Borrower shall repay to the Administrative Agent for the account of (i) the Swing Line Bank and (ii) each other Lender that has made a Swing Line Advance by purchase from the Swing Line Bank pursuant to Section 2.02(b), the outstanding principal amount of each Swing Line Advance made by each of them on the earlier of the maturity date specified in the applicable Great Wolf Senior Secured Revolving Credit Facility 31 Notice of Swing Line Borrowing (which maturity shall be no later than the seventh day after the requested date of such Swing Line Borrowing) and the Termination Date. (c) Letter of Credit Advances. (i) The Borrower shall repay to the Administrative Agent for the account of each Issuing Bank and each other Lender that has made a Letter of Credit Advance on the same day on which such Advance was made the outstanding principal amount of each Letter of Credit Advance made by each of them. (ii) The Obligations of the Borrower under this Agreement, any Letter of Credit Agreement and any other agreement or instrument relating to any Letter of Credit (and the obligations of each Lender to reimburse the Issuing Bank with respect thereto) shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement, such Letter of Credit Agreement and such other agreement or instrument under all circumstances, including, without limitation, the following circumstances: (A) any lack of validity or enforceability of any Loan Document, any Letter of Credit Agreement, any Letter of Credit or any other agreement or instrument relating thereto (all of the foregoing being, collectively, the "L/C RELATED DOCUMENTS"); (B) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower in respect of any L/C Related Document or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents; (C) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for which any such beneficiary or any such transferee may be acting), any Issuing Bank or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction; (D) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (E) payment by any Issuing Bank under a Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; (F) any exchange, release or non-perfection of any Collateral or other collateral, or any release or amendment or waiver of or consent to departure from the Guaranties or any other guarantee, for all or any of the Obligations of the Borrower in respect of the L/C Related Documents; or (G) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor. SECTION 2.05. Termination or Reduction of the Commitments. (a) Optional. The Borrower may, upon at least three Business Days' notice to the Administrative Agent, terminate in whole or reduce in part the unused portions of the Swing Line Facility, the Letter of Credit Facility and the Unused Revolving Credit Commitments; provided, however, that each partial reduction of a Facility (i) shall be in an aggregate amount of $1,000,000 (or, in the case of the Swing Line Facility, $250,000) or Great Wolf Senior Secured Revolving Credit Facility 32 an integral multiple of $250,000 in excess thereof and (ii) shall be made ratably among the Lenders in accordance with their Commitments with respect to such Facility. (b) Mandatory. (i) The Revolving Credit Facility shall be automatically and permanently reduced, on a pro rata basis, on each date on which prepayment thereof is required to be made pursuant to Section 2.06(b)(ii) in an amount equal to the aggregate principal amount of Revolving Credit Advances so required to be paid, provided that each such reduction of the Revolving Credit Facility shall be made ratably among the Lenders in accordance with their Commitments. (ii) The Letter of Credit Facility shall be permanently reduced from time to time on the date of each reduction in the Revolving Credit Facility by the amount, if any, by which the amount of the Letter of Credit Facility exceeds the Revolving Credit Facility after giving effect to such reduction of the Revolving Credit Facility. (iii) The Swing Line Facility shall be permanently reduced from time to time on the date of each reduction in the Revolving Credit Facility by the amount, if any, by which the amount of the Swing Line Facility exceeds the Revolving Credit Facility after giving effect to such reduction of the Revolving Credit Facility. SECTION 2.06. Prepayments. (a) Optional. The Borrower may, upon same day notice in the case of Base Rate Advances and two Business Days' notice in the case of Eurodollar Rate Advances, in each case to the Administrative Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding aggregate principal amount of the Advances comprising part of the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the aggregate principal amount prepaid; provided, however, that (i) each partial prepayment shall be in an aggregate principal amount of $1,000,000 or an integral multiple of $250,000 in excess thereof or, if less, the amount of the Advances outstanding and (ii) if any prepayment of a Eurodollar Rate Advance is made on a date other than the last day of an Interest Period for such Advance, the Borrower shall also pay any amounts owing pursuant to Section 9.04(c). (b) Mandatory. (i) The Borrower shall, on each Business Day, prepay an aggregate principal amount of the Revolving Credit Advances comprising part of the same Borrowings, the Swing Line Advance and the Letter of Credit Advances and, to the extent all Advances have been prepaid, make a deposit, to the extent necessary, in the L/C Cash Collateral Account in an amount equal to the amount by which (A) the sum of the aggregate principal amount of (1) the Revolving Credit Advances then outstanding, (2) the Swing Line Advances then outstanding and (3) the Letter of Credit Advances then outstanding plus the aggregate Available Amount of all Letters of Credit then outstanding exceeds (B) the lesser of the Revolving Credit Facility and the Total Loan Value on such Business Day. (ii) In accordance with Section 5.02(e), the Borrower shall, within 12 months following the date of receipt of any Net Asset Sales Proceeds by the Borrower or any of its Subsidiaries, prepay an aggregate principal amount of the Revolving Credit Advances comprising part of the same Borrowings and the Letter of Credit Advances and deposit an amount in the L/C Cash Collateral Account in an amount equal to the amount of such Net Asset Sales Proceeds that have not be reinvested as permitted under Section 5.02(f), provided that any amount of Net Asset Sales Proceeds remaining after the Facility Exposure has been reduced to zero may be retained by the Borrower or its Subsidiaries. (iii) The Borrower shall, on each Business Day, pay to the Administrative Agent for deposit in the L/C Cash Collateral Account an amount sufficient to cause the aggregate amount on deposit in the L/C Cash Collateral Account to equal the amount by which the aggregate Available Amount of all Great Wolf Senior Secured Revolving Credit Facility 33 Letters of Credit then outstanding exceeds the Letter of Credit Facility on such Business Day. To the extent the funds on deposit in the L/C Cash Collateral Account shall at any time exceed the total amount required to be deposited therein pursuant to the terms of this Agreement, the Administrative Agent shall, promptly upon request by the Borrower and provided that no Default or Event of Default shall then have occurred or be continuing or would result therefrom, return such excess amount to the Borrower. (iv) Prepayments of the Revolving Credit Facility made pursuant to clauses (i), (ii) and (iii) above shall be first applied to prepay Letter of Credit Advances then outstanding until such Advances are paid in full, second applied to prepay Swing Line Advances then outstanding until such Advances are paid in full, third applied to prepay Revolving Credit Advances then outstanding comprising part of the same Borrowings until such Advances are paid in full and fourth deposited in the L/C Cash Collateral Account to cash collateralize 100% of the Available Amount of the Letters of Credit then outstanding. Upon the drawing of any Letter of Credit for which funds are on deposit in the L/C Cash Collateral Account, such funds shall be applied to reimburse the relevant Issuing Bank or Lenders, as applicable. (v) All prepayments under this subsection (b) shall be made together with accrued interest to the date of such prepayment on the principal amount prepaid. SECTION 2.07. Interest. (a) Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of each Advance owing to each Lender from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum: (i) Base Rate Advances. During such periods as such Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (A) the Base Rate in effect from time to time plus (B) the Applicable Margin in effect from time to time, payable in arrears quarterly on the last day of each December, March, June and September during such periods and on the date such Base Rate Advance shall be Converted or paid in full. (ii) Eurodollar Rate Advances. During such periods as such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of (A) the Eurodollar Rate for such Interest Period for such Advance plus (B) the Applicable Margin in effect on the first day of such Interest Period, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full. (b) Default Interest. Upon the occurrence and during the continuance of any Event of Default, the Borrower shall pay interest on (i) the unpaid principal amount of each Advance owing to each Lender, payable in arrears on the dates referred to in clause (a)(i) or (a)(ii) above and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable under the Loan Documents that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid, in the case of interest, on the Type of Advance on which such interest has accrued pursuant to clause (a)(i) or (a)(ii) above and, in all other cases, on Base Rate Advances pursuant to clause (a)(i) above. Great Wolf Senior Secured Revolving Credit Facility 34 (c) Notice of Interest Period and Interest Rate. Promptly after receipt of a Notice of Borrowing pursuant to Section 2.02(a), a notice of Conversion pursuant to Section 2.09 or a notice of selection of an Interest Period pursuant to the terms of the definition of "Interest Period", the Administrative Agent shall give notice to the Borrower and each Lender of the applicable Interest Period and the applicable interest rate determined by the Administrative Agent for purposes of clause (a)(i) or (a)(ii) above, and the applicable rate, if any, furnished by each Reference Bank for the purpose of determining the applicable interest rate under clause (a)(ii) above. (d) Interest Rate Determination. (i) Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining each Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Administrative Agent for the purpose of determining any such interest rate, the Administrative Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. (ii) If Telerate Page 3750 (or a successor page) is unavailable and fewer than two Reference Banks are able to furnish timely information to the Administrative Agent for determining the Eurodollar Rate for any Eurodollar Rate Advances, (A) the Administrative Agent shall forthwith notify the Borrower and the Lenders that the interest rate cannot be determined for such Eurodollar Rate Advances, (B) each such Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and (C) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. SECTION 2.08. Fees. (a) Unused Fee. The Borrower shall pay to the Administrative Agent for the account of the Lenders an unused commitment fee (the "UNUSED FEE"), from the date hereof in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance, pursuant to which it became a Lender in the case of each other Lender until the Termination Date, payable in arrears quarterly on the last day of each December, March, June and September, commencing December 31, 2004, and on the Termination Date. The Unused Fee payable for the account of each Lender shall be calculated for each period for which the Unused Fee is payable on the average daily Unused Revolving Credit Commitment of such Lender during such period at the rate of 0.50% per annum. (b) Letter of Credit Fees, Etc. (i) The Borrower shall pay to the Administrative Agent for the account of each Lender a commission, payable in arrears, (a) quarterly on the last day of each December, March, June and September, commencing December 31, 2004, and (b) on the earliest to occur of the full drawing, expiration, termination or cancellation of any Letter of Credit, and (c) on the Termination Date, on such Lender's Pro Rata Share of the average daily aggregate Available Amount during such quarter of all Letters of Credit outstanding from time to time for the applicable period at the rate per annum equal to the Applicable Margin for Eurodollar Rate Advances in effect from time to time. (ii) The Borrower shall pay to each Issuing Bank, for its own account, (A) a fronting fee for each Letter of Credit issued by such Issuing Bank in an amount equal to 0.125% of the Available Amount of such Letter of Credit on the date of issuance of such Letter of Credit, payable on such date and Great Wolf Senior Secured Revolving Credit Facility 35 (B) such other commissions, issuance fees, transfer fees and other fees and charges in connection with the issuance or administration of each Letter of Credit as the Borrower and such Issuing Bank shall agree. (c) Agents' Fees. The Borrower shall pay to each Agent for its own account the fees, in the amounts and on the dates, set forth in the Fee Letter and such other fees as may from time to time be agreed between the Borrower and such Agent. SECTION 2.09. Conversion of Advances. (a) Optional. The Borrower may on any Business Day, upon notice given to the Administrative Agent not later than 12:00 Noon (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.07 and 2.10, Convert all or any portion of the Advances of one Type comprising the same Borrowing into Advances of the other Type; provided, however, that any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances, any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(c), no Conversion of any Advances shall result in more separate Borrowings than permitted under Section 2.02(c) and each Conversion of Advances comprising part of the same Borrowing under any Facility shall be made ratably among the Lenders in accordance with their Commitments under such Facility. Each such notice of Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Advances to be Converted and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for such Advances. Each notice of Conversion shall be irrevocable and binding on the Borrower. (b) Mandatory. (i) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $1,000,000, such Advances shall automatically Convert into Base Rate Advances. (ii) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance. (iii) Upon the occurrence and during the continuance of any Event of Default, (y) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (z) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended. SECTION 2.10. Increased Costs, Etc. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender Party of agreeing to make or of making, funding or maintaining Eurodollar Rate Advances or of agreeing to issue or of issuing or maintaining or participating in Letters of Credit or of agreeing to make or of making or maintaining Letter of Credit Advances (excluding, for purposes of this Section 2.10, any such increased costs resulting from (y) Taxes or Other Taxes (as to which Section 2.12 shall govern) and (z) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender Party is organized or has its Applicable Lending Office or any political subdivision thereof), then the Borrower shall from time to time, upon demand by such Lender Party (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender Party additional amounts sufficient to compensate such Lender Party for such increased Great Wolf Senior Secured Revolving Credit Facility 36 cost; provided, however, that a Lender Party claiming additional amounts under this Section 2.10(a) agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost that may thereafter accrue and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party. A certificate as to the amount of such increased cost, submitted to the Borrower by such Lender Party, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Lender Party determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender Party or any corporation controlling such Lender Party and that the amount of such capital is increased by or based upon the existence of such Lender Party's commitment to lend or to issue or participate in Letters of Credit hereunder and other commitments of such type or the issuance or maintenance of or participation in the Letters of Credit (or similar contingent obligations), then, upon demand by such Lender Party or such corporation (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender Party, from time to time as specified by such Lender Party, additional amounts sufficient to compensate such Lender Party in the light of such circumstances, to the extent that such Lender Party reasonably determines such increase in capital to be allocable to the existence of such Lender Party's commitment to lend or to issue or participate in Letters of Credit hereunder or to the issuance or maintenance of or participation in any Letters of Credit. A certificate as to such amounts submitted to the Borrower by such Lender Party shall be conclusive and binding for all purposes, absent manifest error. (c) If, with respect to any Eurodollar Rate Advances, the Required Lenders notify the Administrative Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Lenders of making, funding or maintaining their Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon (i) each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower that such Lenders have determined that the circumstances causing such suspension no longer exist. (d) Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder, then, on notice thereof and demand therefor by such Lender to the Borrower through the Administrative Agent, (i) each Eurodollar Rate Advance will automatically, upon such demand, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower that such Lender has determined that the circumstances causing such suspension no longer exist; provided, however, that, before making any such demand, such Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Eurodollar Lending Office if the making of such a designation would allow such Lender or its Eurodollar Lending Office to continue to perform its obligations to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances and would not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. Great Wolf Senior Secured Revolving Credit Facility 37 SECTION 2.11. Payments and Computations. (a) The Borrower shall make each payment hereunder and under the Notes, irrespective of any right of counterclaim or set-off (except as otherwise provided in Section 2.13), not later than 12:00 Noon (New York City time) on the day when due in U.S. dollars to the Administrative Agent at the Administrative Agent's Account in same day funds, with payments being received by the Administrative Agent after such time being deemed to have been received on the next succeeding Business Day. The Administrative Agent will promptly thereafter cause like funds to be distributed (i) if such payment by the Borrower is in respect of principal, interest, commitment fees or any other Obligation then payable hereunder and under the Notes to more than one Lender Party, to such Lender Parties for the account of their respective Applicable Lending Offices ratably in accordance with the amounts of such respective Obligations then payable to such Lender Parties and (ii) if such payment by the Borrower is in respect of any Obligation then payable hereunder to one Lender Party, to such Lender Party for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 9.07(d), from and after the effective date of such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender Party assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) The Borrower hereby authorizes each Lender Party and each of its Affiliates, if and to the extent payment owed to such Lender Party is not made when due hereunder or, in the case of a Lender, under the Note held by such Lender, to charge from time to time, to the fullest extent permitted by law, against any or all of the Borrower's accounts with such Lender Party any amount so due. (c) All computations of interest based on the Base Rate shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate or the Federal Funds Rate and of fees and Letter of Credit commissions shall be made by the Administrative Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, fees or commissions are payable. Each determination by the Administrative Agent of an interest rate, fee or commission hereunder shall be conclusive and binding for all purposes, absent manifest error. (d) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or commitment fee, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (e) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to any Lender Party hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each such Lender Party on such due date an amount equal to the amount then due such Lender Party. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each such Lender Party shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender Party together with interest thereon, for each day from the date such amount is distributed to such Lender Party until the date such Lender Party repays such amount to the Administrative Agent, at the Federal Funds Rate. Great Wolf Senior Secured Revolving Credit Facility 38 (f) Whenever any payment received by the Administrative Agent under this Agreement or any of the other Loan Documents is insufficient to pay in full all amounts due and payable to the Agents and the Lender Parties under or in respect of this Agreement and the other Loan Documents on any date, such payment shall be distributed by the Administrative Agent and applied by the Agents and the Lender Parties in the following order of priority: (i) first, to the payment of all of the fees, indemnification payments, costs and expenses that are due and payable to the Agents (solely in their respective capacities as Agents) under or in respect of this Agreement and the other Loan Documents on such date, ratably based upon the respective aggregate amounts of all such fees, indemnification payments, costs and expenses owing to the Agents on such date; (ii) second, to the payment of all of the fees, indemnification payments, costs and expenses that are due and payable to the Issuing Banks (solely in their respective capacities as such) under or in respect of this Agreement and the other Loan Documents on such date, ratably based upon the respective aggregate amounts of all such fees, indemnification payments, costs and expenses owing to the Issuing Banks on such date; (iii) third, to the payment of all of the indemnification payments, costs and expenses that are due and payable to the Lenders under Section 9.04, Section 21 of the Security Agreement and any similar section of any of the other Loan Documents on such date, ratably based upon the respective aggregate amounts of all such indemnification payments, costs and expenses owing to the Lenders on such date; (iv) fourth, to the payment of all of the amounts that are due and payable to the Administrative Agent and the Lender Parties under Sections 2.10 and 2.12 on such date, ratably based upon the respective aggregate amounts thereof owing to the Administrative Agent and the Lender Parties on such date; (v) fifth, to the payment of all of the fees that are due and payable to the Lenders under Section 2.08(a), (b)(i) and (d) on such date, ratably based upon the respective aggregate Commitments of the Lenders under the Facilities on such date; (vi) sixth, to the payment of all of the accrued and unpaid interest on the Obligations of the Borrower under or in respect of the Loan Documents that is due and payable to the Administrative Agent and the Lender Parties under Section 2.07(b) on such date, ratably based upon the respective aggregate amounts of all such interest owing to the Administrative Agent and the Lender Parties on such date; (vii) seventh, to the payment of all of the accrued and unpaid interest on the Advances that is due and payable to the Administrative Agent and the Lender Parties under Section 2.07(a) on such date, ratably based upon the respective aggregate amounts of all such interest owing to the Administrative Agent and the Lender Parties on such date; (viii) eighth, to the payment of the principal amount of all of the outstanding Advances and any reimbursement obligations that are due and payable to the Administrative Agent and the Lender Parties on such date, ratably based upon the respective aggregate amounts of all such principal and reimbursement obligations owing to the Administrative Agent and the Lender Parties on such date, and to deposit into the L/C Cash Collateral Account any contingent reimbursement obligations in respect of outstanding Letters of Credit to the extent required by Section 6.02; and Great Wolf Senior Secured Revolving Credit Facility 39 (ix) ninth, to the payment of all other Obligations of the Loan Parties owing under or in respect of the Loan Documents that are due and payable to the Administrative Agent and the other Secured Parties on such date, ratably based upon the respective aggregate amounts of all such Obligations owing to the Administrative Agent and the other Secured Parties on such date. SECTION 2.12. Taxes. (a) Any and all payments by the Borrower hereunder or under the Notes shall be made, in accordance with Section 2.11, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender Party and the Administrative Agent, taxes that are imposed on its overall net income by the United States and taxes that are imposed on its overall net income (and franchise or other similar taxes imposed in lieu thereof) by the state or foreign jurisdiction under the laws of which such Lender Party or the Administrative Agent, as the case may be, is organized or any political subdivision thereof and, in the case of each Lender Party, taxes that are imposed on its overall net income (and franchise or other similar taxes imposed in lieu thereof) by the state or foreign jurisdiction of such Lender Party's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder or under the Notes being hereinafter referred to as "TAXES"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender Party or the Administrative Agent, and unless such requirement arises from the failure of a Lender to furnish the documentation described in Section 2.12(e), (i) the sum payable by the Borrower shall be increased as may be necessary so that after the Borrower and the Administrative Agent have made all required deductions (including deductions applicable to additional sums payable under this Section 2.12) such Lender Party or the Administrative Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make all such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrower shall pay any present or future stamp, documentary, excise, property, intangible, mortgage recording or similar taxes, charges or levies that arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, performance under, or otherwise with respect to, this Agreement, or any other Loan Document (hereinafter referred to as "OTHER TAXES"). (c) The Borrower shall indemnify each Lender Party and the Administrative Agent for and hold them harmless against the full amount of Taxes and Other Taxes, and for the full amount of taxes of any kind imposed by any jurisdiction on amounts payable under this Section 2.12, imposed on or paid by such Lender Party or the Administrative Agent (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender Party or the Administrative Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes, the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 9.02, the original or a certified copy of a receipt evidencing such payment or, if such receipts are not obtainable, other evidence of such payments by the Borrower reasonably satisfactory to the Administrative Agent. In the case of any payment hereunder or under the Notes by or on behalf of the Borrower through an account or branch outside the United States or by or on behalf of the Borrower by a payor that is not a United States person, if the Borrower determines that no Taxes are payable in respect thereof, the Borrower shall furnish, or shall cause such payor to furnish, to the Administrative Agent, at such address, an opinion of counsel acceptable to the Administrative Agent stating that such payment is exempt from Taxes. For purposes of Great Wolf Senior Secured Revolving Credit Facility 40 subsections (d) and (e) of this Section 2.12, the terms "UNITED STATES" and "UNITED STATES PERSON" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Each Lender Party organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender Party, and on the date of the Assignment and Acceptance pursuant to which it becomes a Lender Party in the case of each other Lender Party, and from time to time thereafter as requested in writing by the Borrower (but only so long thereafter as such Lender Party remains lawfully able to do so), provide each of the Administrative Agent and the Borrower with two original Internal Revenue Service forms W8-ECI or W8-BEN, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that such Lender Party is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement or the Notes. If the forms provided by a Lender Party at the time such Lender Party first becomes a party to this Agreement indicate a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender Party provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such forms; provided, however, that if, at the effective date of the Assignment and Acceptance pursuant to which a Lender Party becomes a party to this Agreement, the Lender Party assignor was entitled to payments under subsection (a) of this Section 2.12 in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender Party assignee on such date. If any form or document referred to in this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form W8-ECI or W8-BEN, that the applicable Lender Party reasonably considers to be confidential, such Lender Party shall give notice thereof to the Borrower and shall not be obligated to include in such form or document such confidential information. Upon the request of the Borrower, any Lender that is a United States person and is not an exempt recipient for U.S. backup withholding purposes shall deliver to the Borrower two copies of Internal Revenue Service form W-9 (or any successor form). (f) For any period with respect to which a Lender Party has failed to provide the Borrower with the appropriate form described in subsection (e) above (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required under subsection (e) above), such Lender Party shall not be entitled to indemnification under subsection (a) or (c) of this Section 2.12 with respect to Taxes imposed by the United States by reason of such failure; provided, however, that should a Lender Party become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender Party shall reasonably request to assist such Lender Party to recover such Taxes. (g) Any Lender Party claiming any additional amounts payable pursuant to this Section 2.12 agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Eurodollar Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party. (h) If any Lender Party or the Administrative Agent receives a refund of Taxes or Other Taxes paid by the Borrower or for which the Borrower has indemnified any Lender Party or the Administrative Agent, as the case may be, pursuant to this Section 2.12, then such Lender Great Wolf Senior Secured Revolving Credit Facility 41 Party or the Administrative Agent, as applicable, shall pay such amount, net of any expenses incurred by such Lender Party or the Administrative Agent, to the Borrower within 30 days of the receipt of such Taxes or Other Taxes. Notwithstanding the foregoing, (i) the Borrower shall not be entitled to review the tax records or financial information of any Lender Party or the Administrative Agent and (ii) neither the Administrative Agent nor any Lender Party shall have any obligation to pursue (and no Loan Party shall have any right to assert) any refund of Taxes or Other Taxes that may be paid by the Borrower. SECTION 2.13. Sharing of Payments, Etc. If any Lender Party shall obtain at any time any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise, other than as a result of an assignment pursuant to Section 9.07) (a) on account of Obligations due and payable to such Lender Party hereunder and under the Notes at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations due and payable to such Lender Party at such time to (ii) the aggregate amount of the Obligations due and payable to all Lender Parties hereunder and under the Notes at such time) of payments on account of the Obligations due and payable to all Lender Parties hereunder and under the Notes at such time obtained by all the Lender Parties at such time or (b) on account of Obligations owing (but not due and payable) to such Lender Party hereunder and under the Notes at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations owing to such Lender Party at such time to (ii) the aggregate amount of the Obligations owing (but not due and payable) to all Lender Parties hereunder and under the Notes at such time) of payments on account of the Obligations owing (but not due and payable) to all Lender Parties hereunder and under the Notes at such time obtained by all of the Lender Parties at such time, such Lender Party shall forthwith purchase from the other Lender Parties such interests or participating interests in the Obligations due and payable or owing to them, as the case may be, as shall be necessary to cause such purchasing Lender Party to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender Party, such purchase from each other Lender Party shall be rescinded and such other Lender Party shall repay to the purchasing Lender Party the purchase price to the extent of such Lender Party's ratable share (according to the proportion of (i) the purchase price paid to such Lender Party to (ii) the aggregate purchase price paid to all Lender Parties) of such recovery together with an amount equal to such Lender Party's ratable share (according to the proportion of (i) the amount of such other Lender Party's required repayment to (ii) the total amount so recovered from the purchasing Lender Party) of any interest or other amount paid or payable by the purchasing Lender Party in respect of the total amount so recovered. The Borrower agrees that any Lender Party so purchasing an interest or participating interest from another Lender Party pursuant to this Section 2.13 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such interest or participating interest, as the case may be, as fully as if such Lender Party were the direct creditor of the Borrower in the amount of such interest or participating interest, as the case may be. SECTION 2.14. Use of Proceeds. The proceeds of the Advances and issuances of Letters of Credit shall be available (and the Borrower agrees that it shall use such proceeds and Letters of Credit) solely for (i) general corporate purposes of the Borrower and its Subsidiaries, (ii) the development of new, and the renovation and expansion of existing, resorts that feature indoor water parks, other family oriented facilities, and convention centers and the acquisition of such other assets and the making of such other Investments as are permitted by this Agreement; (iii) the acquisition of land and/or hotels and resorts for the sole purpose of converting such properties into resorts that feature indoor water parks, other family oriented facilities, and convention centers; (iv) the development of condominium and/or timeshare units at existing or newly developed resorts; (v) the repayment in full (or refinancing) of existing mortgage loans affecting Borrowing Base Assets, and (vi) to pay fees and expenses related to the Facilities and the other transactions contemplated by the Loan Documents. SECTION 2.15. Evidence of Debt. (a) Each Lender Party shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender Great Wolf Senior Secured Revolving Credit Facility 42 Party resulting from each Advance owing to such Lender Party from time to time, including the amounts of principal and interest payable and paid to such Lender Party from time to time hereunder. The Borrower agrees that upon notice by any Lender Party to the Borrower (with a copy of such notice to the Administrative Agent) to the effect that a promissory note or other evidence of indebtedness is required or appropriate in order for such Lender Party to evidence (whether for purposes of pledge, enforcement or otherwise) the Advances owing to, or to be made by, such Lender Party, the Borrower shall promptly execute and deliver to such Lender Party, with a copy to the Administrative Agent, a Note, in substantially the form of Exhibit A hereto, payable to the order of such Lender Party in a principal amount equal to the Revolving Credit Commitment of such Lender Party. All references to Notes in the Loan Documents shall mean Notes, if any, to the extent issued hereunder. (b) The Register maintained by the Administrative Agent pursuant to Section 9.07(d) shall include a control account, and a subsidiary account for each Lender Party, in which accounts (taken together) shall be recorded (i) the date and amount of each Borrowing made hereunder, the Type of Advances comprising such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the terms of each Assignment and Acceptance delivered to and accepted by it, (iii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender Party hereunder, and (iv) the amount of any sum received by the Administrative Agent from the Borrower hereunder and each Lender Party's share thereof. (c) Entries made in good faith by the Administrative Agent in the Register pursuant to subsection (b) above, and by each Lender Party in its account or accounts pursuant to subsection (a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender Party and, in the case of such account or accounts, such Lender Party, under this Agreement, absent manifest error; provided, however, that the failure of the Administrative Agent or such Lender Party to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement. ARTICLE III CONDITIONS OF LENDING AND ISSUANCES OF LETTERS OF CREDIT SECTION 3.01. Conditions Precedent to Initial Extension of Credit. The obligation of each Lender to make an Advance or of any Issuing Bank to issue a Letter of Credit on the occasion of the Initial Extension of Credit hereunder is subject to the satisfaction of the following conditions precedent before or concurrently with the Initial Extension of Credit: (a) The Administrative Agent shall have received on or before the day of the Initial Extension of Credit the following, each dated such day (unless otherwise specified), in form and substance satisfactory to the Administrative Agent (unless otherwise specified) and (except for the Notes) in sufficient copies for each Lender Party: (i) A Note payable to the order of each Lender. (ii) A security agreement in substantially the form of Exhibit F hereto (together with each other security agreement and security agreement supplement delivered pursuant to Section 5.01(j), in each case as amended, the "SECURITY AGREEMENT"), duly executed by each Loan Party that owns Borrowing Base Assets, together with: (A) acknowledgment copies of proper financing statements, duly filed on or before the day of the Initial Extension of Credit under the Uniform Great Wolf Senior Secured Revolving Credit Facility 43 Commercial Code of all jurisdictions that the Collateral Agent may deem necessary or desirable in order to perfect and protect the first priority liens and security interests created under the Collateral Documents, covering the Collateral described therein, (B) completed requests for information, dated on or before the date of the Initial Extension of Credit, listing all effective financing statements filed in the jurisdictions referred to in clause (A) above and in such other jurisdictions specified by the Administrative Agent that name any Loan Party as debtor, together with copies of such other financing statements, (C) evidence of the completion of all other recordings and filings of or with respect to the Security Agreement that the Collateral Agent may deem necessary or desirable in order to perfect and protect the Liens created thereby, (D) evidence of the insurance required by the terms of the Security Agreement, (E) copies of the Assigned Agreements referred to in the Security Agreement (which shall include, without limitation, the Management Agreement with respect to each Borrowing Base Asset), together with a consent to such assignment, in substantially the form of Exhibit C to the Security Agreement, duly executed by each party to such Assigned Agreements other than the Loan Parties; (F) certified copies of each management agreement and all amendments thereto, entered into on or before the Closing Date with respect to each Borrowing Base Asset, (G) a subordination agreement, in form and substance satisfactory to the Collateral Agent, executed and delivered by the manager of each Borrowing Base Asset, (H) a licensor's consent and subordination of license agreement with respect to each Borrowing Base Asset, in form and substance satisfactory to the Administrative Agent, executed and delivered by each of the parties thereto, (I) a recognition agreement with respect to each Borrowing Base Asset, in form and substance satisfactory to the Administrative Agent, executed and delivered by each of the parties thereto, and (J) evidence that all other action that the Collateral Agent may deem necessary or desirable in order to perfect and protect the first priority liens and security interests created under the Security Agreement has been taken (including, without limitation, receipt of duly executed payoff letters, UCC termination statements and landlords' and bailees' waiver and consent agreements). (iii) Deeds of trust, trust deeds and mortgages in substantially the form of Exhibit G hereto (together with each other deed of trust, trust deed and mortgage delivered pursuant to Section 5.01(j), in each case as amended, the "MORTGAGES") and assignments of leases and Great Wolf Senior Secured Revolving Credit Facility 44 rents in substantially the form of Exhibit H hereto (together with each other assignment of leases and rents delivered pursuant to Section 5.01(j), in each case as amended, the "ASSIGNMENTS OF LEASES") (in each case with such changes as may be required to account for local law matters and otherwise satisfactory in form and substance to the Collateral Agent) covering all Borrowing Base Assets, duly executed by the appropriate Loan Party, together with: (A) evidence that counterparts of the Mortgages and Assignments of Leases have been duly executed, acknowledged and delivered on or before the day of the Initial Extension of Credit and are in form suitable for filing or recording in all filing or recording offices that the Collateral Agent may deem necessary or desirable in order to create a valid first and subsisting Lien on the collateral described therein in favor of the Collateral Agent for the benefit of the Secured Parties and that all required affidavits, tax forms and filings pertaining to any applicable documentary stamp, intangible and mortgage recordation taxes have been executed and delivered by all appropriate parties and are in form suitable for filing with all applicable governmental authorities, (B) fully paid American Land Title Association Lender's Extended Coverage title insurance policies (the "MORTGAGE POLICIES") in form and substance, with endorsements (including zoning endorsements where available) and in amount acceptable to the Collateral Agent, issued, coinsured and reinsured by title insurers acceptable to the Collateral Agent, insuring the Mortgages to be valid first and subsisting Liens on the property described therein, free and clear of all defects (including, but not limited to, mechanics' and materialmen's Liens) and encumbrances, excepting only Permitted Encumbrances, and providing for such other affirmative insurance (including endorsements for future advances under the Loan Documents and for mechanics' and materialmen's Liens) and such coinsurance and direct access reinsurance as the Collateral Agent may deem necessary or desirable, and with respect to any such property located in a State in which a zoning endorsement is not available, a zoning compliance letter from the applicable municipality in a form reasonably acceptable to the Collateral Agent, (C) American Land Title Association/American Congress on Surveying and Mapping form surveys for which all necessary fees have been paid, dated no more than 30 days before the date of their delivery to the Collateral Agent, certified to the Collateral Agent and the issuer of the Mortgage Policies in a manner satisfactory to the Collateral Agent by a land surveyor duly registered and licensed in the States in which the property described in such surveys is located and acceptable to the Collateral Agent, showing all buildings and other improvements, any off-site improvements, the location of any easements, parking spaces, rights of way, building set-back lines and other dimensional regulations and the absence of encroachments, either by such improvements or on to such property, and other defects, other than encroachments and other defects acceptable to the Collateral Agent, (D) engineering, soils, environmental and other similar reports as to the properties described in the Mortgages, in form and substance and from professional firms acceptable to the Collateral Agent, Great Wolf Senior Secured Revolving Credit Facility 45 (E) estoppel and consent agreements, in form and substance satisfactory to the Administrative Agent, executed by each of the lessors of any leased Borrowing Base Assets listed on Schedule 4.01(r) hereto, along with (1) a memorandum of lease in recordable form with respect to such leasehold interest, executed and acknowledged by the owner of the affected Borrowing Base Asset, as lessor, or (2) evidence that the applicable lease with respect to such leasehold interest or memorandum thereof has been recorded in all places necessary or desirable, in the Administrative Agent's reasonable judgment, to give constructive notice to third-party purchasers of such leasehold interest or (3) if such leasehold interest was acquired or subleased from the holder of a recorded leasehold interest, the applicable assignment or sublease document, executed and acknowledged by such holder, in each case in form sufficient to give such constructive notice upon recordation and otherwise in form satisfactory to the Administrative Agent, (F) evidence of the insurance required by the terms of the Mortgages, (G) an Appraisal of each Borrowing Base Asset described in the Mortgages, and (H) such other consents, agreements, Affiliate lease subordination agreements and confirmations of lessors and third parties as the Administrative Agent may reasonably deem necessary or desirable and evidence that all other action that the Collateral Agent may deem necessary or desirable in order to create valid first and subsisting Liens on the property described in the Mortgages has been taken. (iv) Certified copies of the resolutions of the Board of Directors of the Parent Guarantor on its behalf and on behalf of each Loan Party for which it is the ultimate signatory approving the transactions contemplated by the Loan Documents and each Loan Document to which it or such Loan Party is or is to be a party, and of all documents evidencing other necessary corporate action and governmental and other third party approvals and consents, if any, with respect to the transactions under the Loan Documents and each Loan Document to which it or such Loan Party is or is to be a party. (v) A copy of a certificate of the Secretary of State (or equivalent authority) of the jurisdiction of incorporation, organization or formation of each Loan Party and of each general partner or managing member (if any) of each Loan Party, dated reasonably near the Closing Date, certifying, if and to the extent such certification is generally available for entities of the type of such Loan Party and to the extent and in the form such certificates are customarily issued, (A) as to a true and correct copy of the charter, certificate of limited partnership, limited liability company agreement or other organizational document of such Loan Party, general partner or managing member, as the case may be, and each amendment thereto on file in such Secretary's office and (B) that (1) such amendments are the only amendments to the charter, certificate of limited partnership, limited liability company agreement or other organizational document, as applicable, of such Loan Party, general partner or managing member, as the case may be, on file in such Secretary's office and (2) such Loan Party, general partner or managing member, as the case may be, has paid all franchise taxes to the date of such certificate and (C) such Loan Party, general partner or managing member, as the case may be, is duly incorporated, organized or formed and in good standing or presently subsisting under the laws of the jurisdiction of its incorporation, organization or formation. Great Wolf Senior Secured Revolving Credit Facility 46 (vi) A copy of a certificate of the Secretary of State (or equivalent authority) of each jurisdiction in which any Loan Party or any general partner or managing member of a Loan Party owns or leases property or in which the conduct of its business requires it to qualify or be licensed as a foreign corporation except where the failure to so qualify or be licensed would not be reasonably likely to have a Material Adverse Effect, dated reasonably near (but prior to) the Closing Date, stating, with respect to each such Loan Party, general partner or managing member, that such Loan Party, general partner or managing member, as the case may be, is duly qualified and in good standing as a foreign corporation, limited partnership or limited liability company in such State and has filed all annual reports required to be filed to the date of such certificate. (vii) A certificate of each Loan Party and of each general partner or managing member (if any) of each Loan Party, signed on behalf of such Loan Party, general partner or managing member, as applicable, by its President or Chief Financial Officer or a Vice President and its Secretary or any Assistant Secretary (or those of its general partner or managing member, if applicable), dated the Closing Date (the statements made in which certificate shall be true on and as of the date of the Initial Extension of Credit), certifying as to (A) the absence of any amendments to the constitutive documents of such Loan Party, general partner or managing member, as applicable, since the date of the certificate referred to in Section 3.01(a)(v), (B) a true and correct copy of the bylaws, operating agreement, partnership agreement or other governing document of such Loan Party, general partner or managing member, as applicable, as in effect on the date on which the resolutions referred to in Section 3.01(a)(iv) were adopted and on the date of the Initial Extension of Credit, (C) the due incorporation, organization or formation and good standing or valid existence of such Loan Party, general partner or managing member, as applicable, as a corporation, limited liability company or partnership organized under the laws of the jurisdiction of its incorporation, organization or formation and the absence of any proceeding for the dissolution or liquidation of such Loan Party, general partner or managing member, as applicable, (D) the truth of the representations and warranties contained in the Loan Documents as though made on and as of the date of the Initial Extension of Credit and (E) the absence of any event occurring and continuing, or resulting from the Initial Extension of Credit, that constitutes a Default. (viii) A certificate of the Secretary or an Assistant Secretary of each Loan Party (or Responsible Officer of the general partner or managing member of any Loan Party) or a Responsible Officer of the Parent Guarantor and of each general partner or managing member (if any) of each Loan Party certifying the names and true signatures of the officers of such Loan Party, or of the general partner or managing member of such Loan Party, authorized to sign each Loan Document to which it is or is to be a party and the other documents to be delivered hereunder and thereunder. (ix) Such financial, business and other information regarding each Loan Party and its Subsidiaries and the Predecessors as the Lender Parties shall have requested, including, without limitation, to the extent applicable, information as to possible contingent liabilities, tax matters, environmental matters, obligations under Plans, Multiemployer Plans and Welfare Plans, collective bargaining agreements and other arrangements with employees, audited annual financial statements for the year ending December 31, 2003 of the Predecessors, interim financial statements dated the end of the most recent fiscal quarter for which financial statements are available (or, in the event the Lender Parties' due diligence review reveals material changes since such financial statements, as of a later date within 45 days of the day of the Initial Extension of Credit). Great Wolf Senior Secured Revolving Credit Facility 47 (x) An opinion of DeCampo, Diamond & Ash, counsel for the Loan Parties, with respect to the matters (and in substantially the form) set forth in Exhibit E-1 hereto and as to such other matters as any Lender Party through the Administrative Agent may reasonably request. (xi) An opinion of King & Spaulding LLP, counsel for the Loan Parties, with respect to the matters (and in substantially the form) set forth in Exhibit E-2 hereto and as to such other matters as any Lender Party through the Administrative Agent may reasonably request. (xii) Opinions of local counsel for the Loan Parties in the states in which the Borrowing Base Assets are located, in substantially the form of Exhibit E-3 hereto and as to such other matters as any Lender Party through the Administrative Agent may reasonably request. (xiii) An opinion of Shearman & Sterling LLP, counsel for the Administrative Agent, in form and substance satisfactory to the Administrative Agent. (xiv) A Notice of Borrowing or Notice of Issuance, as applicable, and a Borrowing Base Certificate relating to the Initial Extension of Credit. (b) The Lender Parties shall be satisfied with the corporate and legal structure and capitalization of each Loan Party and its Subsidiaries, including the terms and conditions of the charter and bylaws, operating agreement, partnership agreement or other governing document of each of them. (c) The Lender Parties shall have received evidence reasonably satisfactory to the Administrative Agent that all Existing Debt, other than Surviving Debt, has been prepaid, redeemed or defeased in full or otherwise satisfied and extinguished. (d) (i) The Formation Transactions and the IPO shall have been, substantially concurrently with the execution of this Agreement, consummated in accordance with the Registration Statement, (ii) the Parent Guarantor shall have received gross cash proceeds from the IPO in an amount not less than $196,000,000, and (iii) the common shares of the Parent Guarantor shall have been listed on the New York Stock Exchange. (e) Before and after giving effect to the transactions contemplated by the Loan Documents, there shall have occurred no material adverse change in the business, condition (financial or otherwise) results of operations or prospects of the Loan Parties or the Predecessors since December 31, 2003. (f) There shall exist no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries pending or threatened before any court, governmental agency or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect other than the matters described on Schedule 4.01(f) hereto (the "DISCLOSED LITIGATION") or (ii) purports to affect the legality, validity or enforceability of any Loan Document or the consummation of the transactions contemplated thereby, and there shall have been no material adverse change in the status, or financial effect on any Loan Party or any of its Subsidiaries, of the Disclosed Litigation from that described on Schedule 4.01(f) hereto. (g) All governmental and third party consents and approvals necessary in connection with the transactions contemplated by the Loan Documents shall have been obtained (without the Great Wolf Senior Secured Revolving Credit Facility 48 imposition of any conditions that are not acceptable to the Lender Parties) and shall remain in effect, and no law or regulation shall be applicable in the reasonable judgment of the Lender Parties that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated by the Loan Documents. (h) The Borrower shall have entered into the Hedge Agreements required under Section 5.01(n) to the extent any are required by such Section. (i) The Borrower shall have paid all accrued fees of the Administrative Agent and the Lender Parties and all reasonable, out-of-pocket expenses of the Administrative Agent (including the reasonable fees and expenses of counsel to the Administrative Agent). SECTION 3.02. Conditions Precedent to Each Borrowing, Issuance and Renewal. The obligation of each Lender to make an Advance (other than a Letter of Credit Advance made by an Issuing Bank or a Lender pursuant to Section 2.03(c) and a Swing Line Advance made by a Lender pursuant to Section 2.02(b)) on the occasion of each Borrowing (including the initial Borrowing) and the obligation of each Issuing Bank to issue a Letter of Credit (including the initial issuance) or renew a Letter of Credit and the right of the Borrower to request a Swing Line Borrowing shall be subject to the further conditions precedent that on the date of such Borrowing, issuance or renewal (a) the following statements shall be true and the Administrative Agent shall have received for the account of such Lender, the Swing Line Bank or such Issuing Bank (x) a Borrowing Base Certificate dated the date of such Borrowing, issuance or renewal and (y) a certificate signed by a duly authorized officer of the Borrower, dated the date of such Borrowing, issuance or renewal, stating that: (i) the representations and warranties contained in each Loan Document (as such representations and warranties may change based upon events or activities not prohibited by the Loan Documents, provided that no such change shall constitute a Default or Event of Default or be reasonably likely to result in a Material Adverse Effect) are true and correct on and as of such date, before and after giving effect to (A) such Borrowing, issuance or renewal and (B) in the case of any Borrowing or issuance or renewal, the application of the proceeds therefrom, as though made on and as of such date; (ii) no Default or Event of Default has occurred and is continuing, or would result from (A) such Borrowing, issuance or renewal or (B) in the case of any Borrowing or issuance or renewal, from the application of the proceeds therefrom; and (iii) for each Revolving Credit Advance, or Swing Line Advance made by the Swing Line Bank or issuance or renewal of any Letter of Credit, (A) the Total Loan Value equals or exceeds the Facility Exposure that will be outstanding after giving effect to such Advance, issuance or renewal, respectively, and (B) before and after giving effect to such Advance, issuance or renewal, the Parent Guarantor shall be in compliance with the covenants contained in Section 5.04, together with supporting information in form satisfactory to the Administrative Agent showing the computations used in determining compliance with such covenants; and (b) the Administrative Agent shall have received such other approvals, opinions or documents as any Lender Party through the Administrative Agent may reasonably request. SECTION 3.03. Determinations Under Section 3.01. For purposes of determining compliance with the conditions specified in Section 3.01, each Lender Party shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required Great Wolf Senior Secured Revolving Credit Facility 49 thereunder to be consented to or approved by or acceptable or satisfactory to the Lender Parties unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender Party prior to the Initial Extension of Credit specifying its objection thereto and, if the Initial Extension of Credit consists of a Borrowing, such Lender Party shall not have made available to the Administrative Agent such Lender Party's ratable portion of such Borrowing. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Loan Parties. Each Loan Party represents and warrants as follows: (a) Organization and Powers; Qualifications and Good Standing. Each Loan Party and each of its Subsidiaries and each general partner or managing member, if any, of each Loan Party (i) is a corporation, limited liability company or partnership duly incorporated, organized or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation, organization or formation, (ii) is duly qualified and in good standing as a foreign corporation, limited liability company or partnership in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed would not be reasonably likely to have a Material Adverse Effect and (iii) has all requisite corporate, limited liability company or partnership power and authority (including, without limitation, all governmental licenses, permits and other approvals) to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. All of the outstanding Equity Interests in the Borrower have been validly issued, are fully paid and non-assessable. The Parent Guarantor and OP General Partner together directly own all Equity Interests in the Borrower. All Equity Interests in the Borrower that are owned by the Parent Guarantor and OP General Partner are owned free and clear of all Liens. All Equity Interests in OP General Partner that are owned by the Parent Guarantor are owned free and clear of all Liens. (b) Subsidiaries. Set forth on Schedule 4.01(b) hereto is a complete and accurate list of all Subsidiaries of each Loan Party, showing as of the date hereof (as to each such Subsidiary) the jurisdiction of its incorporation, organization or formation, the number of shares (or the equivalent thereof) of each class of its Equity Interests authorized, and the number outstanding, on the date hereof and the percentage of each such class of its Equity Interests owned (directly or indirectly) by such Loan Party and the number of shares (or the equivalent thereof) covered by all outstanding options, warrants, rights of conversion or purchase and similar rights at the date hereof. All of the outstanding Equity Interests in each Loan Party's Subsidiaries has been validly issued, are fully paid and non-assessable and are owned by such Loan Party or one or more of its Subsidiaries free and clear of all Liens (other than Permitted Liens). (c) Due Authorization; No Conflict. The execution and delivery by each Loan Party and of each general partner or managing member (if any) of each Loan Party of each Loan Document to which it is or is to be a party, and the performance of its obligations thereunder, and the consummation of the IPO, the Formation Transactions and the other transactions contemplated by the Loan Documents, are within the corporate, limited liability company or partnership powers of such Loan Party, general partner or managing member, have been duly authorized by all necessary corporate, limited liability company or partnership action, and do not (i) violate any of the provisions of the charter or bylaws, operating agreement, partnership agreement or other governing document of such Loan Party, general partner or managing member, (ii) violate any Great Wolf Senior Secured Revolving Credit Facility 50 law, rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, the violation of which would be reasonably likely to have a Material Adverse Effect, (iii) conflict with or result in the breach of, or constitute a default or require any payment to be made under, any Material Contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties, or any general partner or managing member of any Loan Party, the contravention or breach of which would be reasonably likely to have a Material Adverse Effect or (iv) except for the Liens created under the Loan Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. (d) Authorizations and Consents. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Loan Party or any general partner or managing member of any Loan Party of any Loan Document to which it is or is to be a party or for the consummation of the IPO, the Formation Transactions or the other transactions contemplated by the Loan Documents, (ii) the grant by any Loan Party (or the general partner or managing member of such Loan Party) of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created under the Collateral Documents (including the first priority nature thereof) or, (iv) the exercise by the Administrative Agent, the Collateral Agent or any Lender Party of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents, except for the authorizations, approvals, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect. (e) Binding Obligation. This Agreement has been, and each other Loan Document when delivered hereunder will have been, duly executed and delivered by each Loan Party and general partner or managing member (if any) of each Loan Party party thereto. This Agreement is, and each other Loan Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party and general partner or managing member (if any) of each Loan Party party thereto, enforceable against such Loan Party, general partner or managing member, as the case may be, in accordance with its terms. (f) Litigation. There is no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries or any general partner or managing member (if any) of any Loan Party, including any Environmental Action, pending or, to the knowledge of any Loan Party or its Subsidiaries, threatened before any court, governmental agency or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect (other than the Disclosed Litigation) or (ii) purports to affect the legality, validity or enforceability of any Loan Document or the consummation of the IPO, the Formation Transactions or the other transactions contemplated by the Loan Documents, and there has been no material adverse change in the status, or financial effect on any Loan Party or any of its Subsidiaries or any general partner or managing member (if any) of any Loan Party, of the Disclosed Litigation from that described on Schedule 4.01(f) hereto. (g) Financial Condition. The Consolidated balance sheets of the Predecessors as at December 31, 2003 and the related Consolidated statements of income and Consolidated statements of cash flows of the Predecessors for the fiscal year then ended, accompanied by unqualified opinions of Deloitte & Touche LLP, independent public accountants, or Rubin, Brown, Gornstein & Co. LLP, independent accountants, as applicable, and the Consolidated balance sheets of the Predecessors as at September 30, 2004, and the related Consolidated Great Wolf Senior Secured Revolving Credit Facility 51 statements of income and Consolidated statements of cash flows of the Predecessors for the nine months then ended, duly certified by the Chief Financial Officer of the Parent Guarantor, copies of which have been furnished to each Lender Party, fairly present, subject, in the case of such balance sheets as at September 30, 2004, and such statements of income and cash flows for the nine months then ended, to year-end audit adjustments, the Consolidated financial condition of the Predecessors as at such dates and the Consolidated results of operations of the Predecessors for the periods ended on such dates, all in accordance with generally accepted accounting principles applied on a consistent basis. Since December 31, 2003, there has been (i) with respect to the period prior to the Closing Date, no material adverse change in the business, condition (financial or otherwise) results of operations or prospects of the Predecessors, and (ii) with respect to any period after the Closing Date, no Material Adverse Change. (h) Forecasts. The Consolidated forecasted balance sheets, statements of income and statements of cash flows of the Parent Guarantor and its Subsidiaries delivered to the Lender Parties pursuant to Section 3.01(a)(ix) or 5.03 were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Parent Guarantor's best estimate of its future financial performance, it being understood that such forecasts do not represent a guaranty or other assurance of the results forecasted therein. (i) Disclosure. Neither the Information Memorandum nor any other information, exhibit or report furnished by or on behalf of any Loan Party to the Administrative Agent or any Lender Party in connection with the negotiation and syndication of the Loan Documents or pursuant to the terms of the Loan Documents contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading. (j) Margin Regulations. No Loan Party is engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Advance or drawings under any Letter of Credit will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. (k) Certain Governmental Regulations. Neither any Loan Party nor any of its Subsidiaries nor any general partner or managing member of any Loan Party, as applicable, is an "investment company", or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended. Without limiting the generality of the foregoing, each Loan Party and each of its Subsidiaries and each general partner or managing member of any Loan Party, as applicable: (i) is primarily engaged, directly or through a wholly-owned subsidiary or subsidiaries, in a business or businesses other than that of (A) investing, reinvesting, owning, holding or trading in securities or (B) issuing face-amount certificates of the installment type; (ii) is not engaged in, does not propose to engage in and does not hold itself out as being engaged in the business of (A) investing, reinvesting, owning, holding or trading in securities or (B) issuing face-amount certificates of the installment type; (iii) does not own or propose to acquire investment securities (as defined in the Investment Company Act of 1940, as amended) having a value exceeding forty percent (40%) of the value of such company's total assets (exclusive of government securities and cash items) on an unconsolidated basis; (iv) has not in the past been engaged in the business of issuing face-amount certificates of the installment type; and (v) does not have any outstanding face-amount certificates of the installment type. Neither any Loan Party nor any of its Subsidiaries nor any general partner or managing member of any Loan Party or Subsidiary of a Loan Party that is a partnership or limited liability company, as applicable, is a "holding company", or a "subsidiary company" of a "holding Great Wolf Senior Secured Revolving Credit Facility 52 company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. Neither the making of any Advances, nor the issuance of any Letters of Credit, nor the application of the proceeds or repayment thereof by the Borrower, nor the consummation of the other transactions contemplated by the Loan Documents, will violate any provision of any such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder. (l) Materially Adverse Agreements. Neither any Loan Party nor any of its Subsidiaries is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any charter, corporate, partnership, membership or other governing restriction that would be reasonably likely to have a Material Adverse Effect (absent a material default under a Material Contract). (m) Perfection and Priority of Security Interests. All filings and other actions necessary to perfect and protect the security interest in the Collateral created under the Collateral Documents have been duly made or taken and are in full force and effect, and the Collateral Documents create in favor of the Administrative Agent for the benefit of the Secured Parties a valid and, together with such filings and other actions, perfected first priority security interest in the Collateral, securing the payment of the Secured Obligations, and all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken. The Loan Parties are the legal and beneficial owners of the Collateral free and clear of any Lien, except for Permitted Liens and the liens and security interests created under the Loan Documents. (n) Existing Debt. Set forth on Schedule 4.01(n) hereto is a complete and accurate list of all Existing Debt (other than Surviving Debt), showing as of the date hereof the obligor and the principal amount outstanding thereunder immediately prior to the Closing Date. (o) Surviving Debt. Set forth on Schedule 4.01(o) hereto is a complete and accurate list of all Surviving Debt, showing as of the date hereof the obligor and the principal amount outstanding thereunder, the maturity date thereof and the amortization schedule therefor. (p) Existing Liens. Set forth on Schedule 4.01(p) hereto is a complete and accurate list of all Liens securing Debt for Borrowed Money on the property or assets of any Loan Party or any of its Subsidiaries, showing as of the date hereof the lienholder thereof, the principal amount of the obligations secured thereby and the property or assets of such Loan Party or such Subsidiary subject thereto. (q) Real Property. Set forth on Schedule 4.01(q) hereto is a complete and accurate list of all Real Property owned by any Loan Party or any of its Subsidiaries, showing as of the date hereof, and as of each other date such Schedule 4.01(q) is required to be supplemented pursuant to Section 5.03(i), the street address, state, record owner and book value thereof. Each Loan Party or such Subsidiary has good, marketable and insurable fee simple title to such Real Property, free and clear of all Liens, other than Permitted Liens. (r) Leases of Real Property. Set forth on Schedule 4.01(r) hereto is a complete and accurate list of all leases of Real Property under which any Loan Party or any of its Subsidiaries is the lessee of Real Property, showing as of the date hereof, and as of each other date such Schedule 4.01(r) is required to be supplemented pursuant to Section 5.03(i), the street address, state, lessor, lessee, expiration date and annual rental cost thereof. Great Wolf Senior Secured Revolving Credit Facility 53 (s) Environmental Matters. (i) Except as otherwise set forth on Part I of Schedule 4.01(s) hereto, the operations and properties of each Loan Party and each of its Subsidiaries comply in all material respects with all applicable Environmental Laws and Environmental Permits, all past material non-compliance with such Environmental Laws and Environmental Permits has been resolved without ongoing material obligations or costs, and, to the knowledge of each Loan Party and its Subsidiaries, no circumstances exist that could be reasonably likely to (A) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any of their properties that could have a Material Adverse Effect or (B) cause any such property to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law. (ii) Except as otherwise set forth on Part II of Schedule 4.01(s) hereto, none of the properties currently or formerly owned or operated by any Loan Party or any of its Subsidiaries is listed or, to the knowledge of each Loan Party and its Subsidiaries, proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or is adjacent to any such listed property; there are no underground or above ground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials (other than household wastes in septic tanks) are being or have been treated, stored or disposed on any property currently owned or operated by any Loan Party or any of its Subsidiaries; there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party or any of its Subsidiaries except for any non-friable asbestos-containing material that is being managed pursuant to, and in compliance with, an operations and maintenance plan and that does not currently require removal, remediation, abatement or encapsulation under Environmental Law; and, to the knowledge of each Loan Party and its Subsidiaries, Hazardous Materials have not been released, discharged or disposed of in any material amount or in violation of any Environmental Law or Environmental Permit on any property currently owned or operated by any Loan Party or any of its Subsidiaries or, to the knowledge of each Loan Party and its Subsidiaries, during the period of their ownership or operation thereof, on any property formerly owned or operated by any Loan Party or any of its Subsidiaries. (iii) Except as otherwise set forth on Part III of Schedule 4.01(s) hereto, neither any Loan Party nor any of its Subsidiaries is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened material release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any governmental or regulatory authority or the requirements of any Environmental Law; all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries have been disposed of in a manner not reasonably expected to result in a Material Adverse Effect; and, with respect to any property formerly owned or operated by any Loan Party or any of its Subsidiaries, all Hazardous Materials generated, used, treated, handled, stored or transported by or, to the knowledge of each Loan Party and its Subsidiaries, on behalf of any Loan Party or any of its Subsidiaries have been disposed of in a manner not reasonably expected to result in a Material Adverse Effect. (t) Compliance with Laws. Each Loan Party and each Subsidiary is in compliance with the requirements of all Laws (including, without limitation, the Securities Act and the Securities Exchange Act, and the applicable rules and regulations thereunder, state securities law and "Blue Sky" laws) applicable to it and its business, where the failure to so comply could reasonably be expected to have a Material Adverse Effect. Great Wolf Senior Secured Revolving Credit Facility 54 (u) Force Majeure. Neither the business nor the properties of any Loan Party or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that could be reasonably likely to have a Material Adverse Effect. (v) Loan Parties' Credit Decisions. Each Loan Party has, independently and without reliance upon the Administrative Agent or any other Lender Party and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement (and in the case of the Guarantors, to give the guaranty under this Agreement) and each other Loan Document to which it is or is to be a party, and each Loan Party has established adequate means of obtaining from each other Loan Party on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties and prospects of such other Loan Party. (w) Solvency. Each Loan Party is, individually and together with its Subsidiaries, Solvent. (x) Sarbanes-Oxley. Except as set forth on Schedule 4.01(x), no Loan Party has made any extension of credit to any of its directors or executive officers in contravention of any applicable restrictions set forth in Section 402(a) of Sarbanes-Oxley. (y) Excluded Subsidiaries. Set forth on Schedule 4.01(y) hereto is a complete and accurate list of all Excluded Subsidiaries and their respective Excluded Subsidiary Agreements existing on the date hereof. (z) ERISA Matters. (i) Set forth on Schedule 4.01(z) hereto is a complete and accurate list of all Plans. (ii) No ERISA Event has occurred within the preceding five plan years or is reasonably expected to occur with respect to any Plan that has resulted in or is reasonably expected to result in a material liability of any Loan Party or any ERISA Affiliate. (iii) Schedule B (Actuarial Information) to the most recent annual report (Form 5500 Series) for each Plan, copies of which have been filed with the Internal Revenue Service and furnished to the Lender Parties, is complete and accurate and fairly presents the funding status of such Plan as of the date of such Schedule B, and since the date of such Schedule B there has been no material adverse change in such funding status. (iv) Neither any Loan Party nor any ERISA Affiliate has incurred or is reasonably expected to incur any Withdrawal Liability to any Multiemployer Plan. (v) Neither any Loan Party nor any ERISA Affiliate has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and no such Multiemployer Plan is reasonably expected to be in reorganization or to be terminated, within the meaning of Title IV of ERISA. Great Wolf Senior Secured Revolving Credit Facility 55 (aa) Borrowing Base Conditions. Each of the Borrowing Base Assets satisfies all Borrowing Base Conditions. ARTICLE V COVENANTS OF THE LOAN PARTIES SECTION 5.01. Affirmative Covenants. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, each Loan Party will: (a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, in all material respects, with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with ERISA and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970; provided, however, that the failure to comply with the provisions of this Section 5.01(a) shall not constitute a Default or Event of Default hereunder so long as such non-compliance would not reasonably be expected to have a Material Adverse Effect. (b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided, however, that neither the Loan Parties nor any of their Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that is the subject of a Good Faith Contest, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors. (c) Compliance with Environmental Laws. Comply, and cause each of its Subsidiaries to comply, and take all commercially reasonable efforts to cause all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all applicable Environmental Laws and Environmental Permits; obtain and renew and cause each of its Subsidiaries to obtain and renew all Environmental Permits necessary for its operations and properties; and conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action legally required to remove and clean up particular Hazardous Materials from any of its properties in material compliance with the requirements of all Environmental Laws; provided, however, that neither the Loan Parties nor any of their Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is the subject of a Good Faith Contest. (d) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to maintain, insurance (including, with respect to the Borrowing Base Assets, the insurance required by the terms of the Mortgages) with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which such Loan Party or such Subsidiaries operate. (e) Preservation of Partnership or Corporate Existence, Etc. Preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its existence (corporate or otherwise), rights (charter and statutory), permits, licenses, approvals and franchises, except in the case of Excluded Subsidiaries only, if in the reasonable business judgment of such Excluded Subsidiary it is in its best economic interest not to preserve and maintain such rights or franchises and such Great Wolf Senior Secured Revolving Credit Facility 56 failure to preserve such rights or franchises is not reasonably likely to result in a Material Adverse Effect (it being understood that the foregoing shall not prohibit, or be violated as a result of, any transactions by or involving any Loan Party or Subsidiary thereof otherwise permitted under Section 5.02(d) or (e) below). (f) Visitation Rights. At any reasonable time and from time to time, permit any of the Agents or Lender Parties, or any agent or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, any Loan Party and any of its Subsidiaries, and to discuss the affairs, finances and accounts of any Loan Party and any of its Subsidiaries with any of their general partners, managing members, officers or directors and with their independent certified public accountants. (g) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of such Loan Party and each such Subsidiary in accordance with GAAP. (h) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted and will from time to time make or cause to be made all appropriate repairs, renewals and replacement thereof except where failure to do so would not have a Material Adverse Effect. (i) Transactions with Affiliates and Excluded Subsidiaries. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of their Affiliates (other than transactions exclusively among or between the Borrower and/or one or more of the Guarantors) or with any Excluded Subsidiary on terms that are fair and reasonable and no less favorable to such Loan Party or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate. (j) Covenant to Guarantee Obligations and Give Security. (i) Upon the earlier to occur of (y) the Company Debt Service Coverage Ratio being less than or equal to 1.20:1.00 and (z) the occurrence of any Event of Default (either such event, a "COLLATERAL TRIGGER EVENT"), then each applicable Loan Party shall, in each case at its expense: (A) within 10 days after the request of the Collateral Agent (acting in its sole discretion or at the direction of the Required Lenders acting in their sole discretion) made at any time following the occurrence of such Collateral Trigger Event, furnish to the Collateral Agent account control agreements duly executed by each bank or other financial institution at which the Borrower or any of its Subsidiaries that hold a direct or indirect interest in any Borrowing Base Asset maintains an account (into which any rents, income, revenue or other receipts received in respect of each Borrowing Base Asset are deposited), in substantially the form attached to the Security Agreement as Exhibit B thereto or otherwise in form and substance satisfactory to the Collateral Agent and its counsel, and (B) within 10 days after the request of the Collateral Agent (acting in its sole discretion or at the direction of the Required Lenders acting in their sole discretion), establish and maintain, and cause each of its Subsidiaries that holds a direct or indirect interest in any Borrowing Base Asset to establish and maintain cash concentration and lockbox accounts with Citibank, N.A., in New York, New Great Wolf Senior Secured Revolving Credit Facility 57 York, in the name of the Collateral Agent and under the sole control and dominion of the Collateral Agent, into which all rents, income, revenue and other receipts received in respect of each Borrowing Base Asset (after deduction, in the reasonable discretion of the Administrative Agent, for the payment of operating expenses, taxes and insurance premiums due to any Person other than a Loan Party or an Affiliate of a Loan Party) are deposited, which sums shall be applied by the Administrative Agent to the Obligations of the Loan Parties under the Loan Documents in accordance with Section 2.11(f); provided, however, that in the event that the Facility Exposure shall be reduced to zero after application of such sums in accordance with Section 2.11(f), any excess amounts shall be promptly remitted to the Borrower. (ii) Within 10 days after any Excluded Subsidiary Agreement terminates or otherwise becomes ineffective as to the Excluded Subsidiary party to such agreement, cause such Excluded Subsidiary to duly execute and deliver to the Administrative Agent a Guaranty Supplement in substantially the form of Exhibit C hereto, or such other guaranty supplement in form and substance satisfactory to the Administrative Agent, guaranteeing the other Loan Parties' Obligations under the Loan Documents, unless such Excluded Subsidiary shall incur Non-Recourse Debt Permitted under Section 5.02(b)(iii)(E) within 30 days after the termination of such Excluded Subsidiary Agreement, and in such case the agreement in respect of such Non-Recourse Debt shall be deemed to be an Excluded Subsidiary Agreement and the Borrower shall, or cause such Excluded Subsidiary to, promptly deliver to the Administrative Agent (x) a copy of such agreement in respect of such Non-Recourse Debt and (y) an amended Schedule 4.01(y) that sets forth such agreement in respect of such Non-Recourse Debt opposite the name of such Excluded Subsidiary. If, at any time after a previously Excluded Subsidiary executes and delivers a Guaranty Supplement pursuant to this Section 5.01(j)(ii), such previously Excluded Subsidiary desires to incur Non-Recourse Debt permitted under Section 5.02(b)(iii)(E), the Administrative Agent shall, upon the request of the Borrower, release such Subsidiary from the Guaranty and thereafter such Subsidiary shall constitute an Excluded Subsidiary hereunder, and the Borrower shall, or cause such Excluded Subsidiary to, promptly deliver to the Administrative Agent (x) a copy of the agreement (and any documentation related thereto reasonably requested by the Administrative Agent) relating to such Non-Recourse Debt and (y) an amended Schedule 4.01(y) that sets forth such agreement in respect of such Non-Recourse Debt opposite the name of such Excluded Subsidiary. (iii) Within 10 days after the formation or acquisition of any new direct or indirect Subsidiary by any Loan Party, cause each such Subsidiary (other than a Limited Subsidiary), and cause each direct and indirect parent of such Subsidiary (if it has not already done so), to duly execute and deliver to the Administrative Agent a Guaranty Supplement in substantially the form of Exhibit C hereto, or such other guaranty supplement in form and substance satisfactory to the Administrative Agent, guaranteeing the other Loan Parties' Obligations under the Loan Documents, provided that upon the formation or acquisition of any Limited Subsidiary, each such Limited Subsidiary shall be deemed to be an Excluded Subsidiary and any loan agreement or indenture or other material agreement that restricts such Limited Subsidiary from providing guarantees of the Obligations of the Loan Parties under the Loan Documents shall be deemed to be an Excluded Subsidiary Agreement, and the Borrower shall, or cause such Limited Subsidiary to, promptly deliver to the Administrative Agent (1) copies of such agreements or indentures in respect of such Non-Recourse Debt and (2) an amended Great Wolf Senior Secured Revolving Credit Facility 58 Schedule 4.01(y) that sets forth such agreements or indentures in respect of such Non-Recourse Debt opposite the name of such Limited Subsidiary. (iv) Upon the request by the Borrower that any Resort Asset (a "PROPOSED BORROWING BASE ASSET") be added as a Borrowing Base Asset, in each case at the Borrower's expense: (A) within 10 days after such request, furnish to the Collateral Agent (with a copy to each Lender) the following items: (1) a description, in detail satisfactory to the Collateral Agent, of the Proposed Borrowing Base Asset, (2) an Appraisal of the Proposed Borrowing Base Asset, (3) a certificate of a Responsible Officer of the Borrower confirming that (x) such Proposed Borrowing Base Asset satisfies all Borrowing Base Conditions and (y) the addition of such Proposed Borrowing Base Asset as a Borrowing Base Asset shall not cause or result in a Default or Event of Default, (4) confirmation that the Loan Parties are in compliance with the covenants contained in Section 5.04 (both immediately before and on a pro forma basis immediately after the addition of such Proposed Borrowing Base Property as a Borrowing Base Asset), as evidenced by a certificate of a Responsible Officer of the Borrower delivered to the Administrative Agent prior to such addition demonstrating such compliance, (5) each of the items set forth in Sections 3.01(a)(ii), (iii), (x), (xi) and (xii) and, to the extent applicable, 5.01(j)(i), mutatis mutandis, in each case in respect of the Proposed Borrowing Base Asset, (6) financial information in respect of the Proposed Borrowing Base Asset, in form and detail satisfactory to the Administrative Agent, and (7) a revised Schedule II hereto reflecting the addition of such Proposed Borrowing Base Asset, provided that for purposes of the definition of the term Borrowing Base Assets (and subject to the proviso immediately following below), such revised Schedule II shall become effective only upon (x) satisfaction of each of the conditions set forth in this Section 5.01(j)(iv) and (y) approval of such Proposed Borrowing Base Asset as a "Borrowing Base Asset" pursuant to clause (c) of the definition thereof; provided, however, that the failure to comply with one or more of the Borrowing Base Conditions or clause (4) above shall not preclude the addition of any Proposed Borrowing Base Asset as a Borrowing Base Asset so long as the Required Lender Parties shall have expressly consented to the addition of such Great Wolf Senior Secured Revolving Credit Facility 59 Asset as a Borrowing Base Asset notwithstanding the failure to satisfy either or both of such conditions; and (B) as promptly as possible, furnish to the Collateral Agent (with a copy to each Lender) such other approvals, opinions or documents as any Lender Party through the Administration Agent may reasonably request; (v) At any time and from time to time, promptly execute and deliver any and all further instruments and documents and take all such other action as any Agent may deem necessary or desirable in obtaining the full benefits of, or in perfecting and preserving the Liens of, such guaranties, Mortgages, Assignments of Leases, pledges, assignments, security agreement supplements, intellectual property security agreement supplements and security agreements. (k) Further Assurances. (i) Promptly upon request by any Agent, or any Lender Party through the Administrative Agent, correct, and cause each Loan Party to promptly to correct, any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof. (ii) Promptly upon request by any Agent, or any Lender Party through the Administrative Agent, do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, conveyances, pledge agreements, mortgages, deeds of trust, trust deeds, assignments of leases and rents, assignments, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments as any Agent, or any Lender Party through the Administrative Agent, may reasonably require from time to time in order to (A) carry out more effectively the purposes of the Loan Documents, (B) to the fullest extent permitted by applicable law, subject any Loan Party's or any of its Subsidiaries' properties, assets, rights or interests to the Liens now or hereafter expressly intended to be covered by any of the Collateral Documents, (C) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens intended to be created thereunder and (D) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Secured Parties the rights granted or now or hereafter intended to be granted to the Secured Parties under any Loan Document or under any other instrument executed in connection with any Loan Document to which any Loan Party or any of its Subsidiaries is or is to be a party, and cause each of its Subsidiaries to do so. (iii) Promptly upon the request of the Administrative Agent, deliver to the Administrative Agent a recent Appraisal of each Borrowing Base Asset, provided that the Loan Parties shall be required to comply with only one such request by the Administrative Agent per calendar year. (l) Performance of Material Contracts. Perform and observe, and cause each of its Subsidiaries to perform and observe, all the terms and provisions of each Material Contract to be performed or observed by it, maintain each such Material Contract in full force and effect (except to the extent such Material Contract expires by its terms or is terminated by the Borrower or its Subsidiaries in a manner permitted pursuant to its terms), enforce each such Material Contract in accordance with its terms to the extent commercially reasonable, and, upon request of the Administrative Agent, make to each other party to each Material Contract relating to a Borrowing Base Asset such demands and requests for information and reports or for action as any Loan Party Great Wolf Senior Secured Revolving Credit Facility 60 or any of its Subsidiaries is entitled to make under such Material Contract, and cause each of its Subsidiaries to do so. (m) Compliance with Leases Affecting Borrowing Base Assets. Make all payments and otherwise perform all obligations in respect of all leases of real property affecting any Borrowing Base Asset to which the Borrower or any of its Subsidiaries is a party, keep such leases in full force and effect and not allow such leases to lapse or be terminated or any rights to renew such leases to be forfeited or cancelled, notify the Administrative Agent of any default by any party with respect to such leases and cooperate with the Administrative Agent in all respects to cure any such default, and cause each of its Subsidiaries to do so. (n) Interest Rate Hedging. Enter into within thirty (30) days after the Initial Extension of Credit, and maintain at all times thereafter, interest rate Hedge Agreements (i) with Persons acceptable to the Administrative Agent, (ii) providing either an interest-rate swap for a fixed rate of interest acceptable to the Administrative Agent or an interest-rate cap at an interest rate acceptable to the Administrative Agent, (iii) covering a notional amount equal to the amount, if any, by which (A) 66-2/3% of Consolidated Debt for Borrowed Money of the Parent Guarantor and its Subsidiaries exceeds (B) all Consolidated Debt for Borrowed Money of the Parent Guarantor and its Subsidiaries then accruing interest at a fixed rate acceptable to the Administrative Agent and (iv) otherwise on terms and conditions reasonably acceptable to the Administrative Agent. (o) Management of Borrowing Base Assets. At all times cause the Borrowing Base Assets to be managed and operated (i) by (A) by an Affiliate of the Parent Guarantor or (B) any other Approved Manager who has (1) entered into a management agreement with respect to such Borrowing Base Asset in form and substance reasonably satisfactory to the Administrative Agent, and (2) executed and delivered a management agreement subordination agreement in form and substance reasonably satisfactory to the Administrative Agent, provided that a formal management agreement shall be required hereunder only if a Borrowing Base Asset is managed and operated by an Approved Manager other than the Parent Guarantor. (p) Exchange Listing. In the case of the Parent Guarantor, at all times (i) cause its common shares to be duly listed on the New York Stock Exchange, the American Stock Exchange or NASDAQ and (ii) file all reports required to be filed by it in connection therewith in a timely manner. (q) Sarbanes-Oxley. Comply at all times with all applicable provisions of Section 402(a) of Sarbanes-Oxley. (r) Wisconsin Dells Subdivision. With respect to the Great Wolf Lodge Condominium, (i) obtain from the relevant governmental authority a separate tax lot number for the parcel of land on which the Great Wolf Lodge Condominium is situated and (ii) in connection therewith, cause the relevant title insurance company to issue to the Collateral Agent a tax lot endorsement to the Mortgage Policy delivered to the Collateral Agent pursuant to Section 3.01(a)(iii)(B), in each case on or before February 1, 2006. SECTION 5.02. Negative Covenants. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, no Loan Party will, at any time: (a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of Great Wolf Senior Secured Revolving Credit Facility 61 any character (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file or suffer to exist, or permit any of its Subsidiaries to sign or file or suffer to exist, under the Uniform Commercial Code of any jurisdiction, a financing statement that names such Loan Party or any of its Subsidiaries as debtor, or sign or suffer to exist, or permit any of its Subsidiaries to sign or suffer to exist, any security agreement authorizing any secured party thereunder to file such financing statement, or assign, or permit any of its Subsidiaries to assign, any accounts or other right to receive income, except, in the case of the Loan Parties (other than the Parent Guarantor) and their respective Subsidiaries: (i) Liens created under the Loan Documents; (ii) Permitted Liens; (iii) Liens described on Schedule 4.01(p) hereto; (iv) purchase money Liens upon or in equipment acquired or held by such Loan Party or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such equipment or to secure Debt incurred solely for the purpose of financing the acquisition of any such equipment to be subject to such Liens, or Liens existing on any such equipment at the time of acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; provided, however, that no such Lien shall extend to or cover any property other than the equipment being acquired, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced; provided, further, that the aggregate principal amount of the Debt secured by Liens permitted by this clause (iv) shall not exceed the amount permitted under Section 5.02(b)(iii)(A); (v) Liens arising in connection with Capitalized Leases permitted under Section 5.02(b)(iii)(B), provided that no such Lien shall extend to or cover any Collateral or assets other than the assets subject to such Capitalized Leases; (vi) Liens on property of a Person existing at the time such Person is acquired by, merged into or consolidated with any Loan Party or any Subsidiary of any Loan Party or becomes a Subsidiary of any Loan Party, provided that such Liens were not created in contemplation of such merger, consolidation or acquisition and do not extend to any assets other than those of the Person so merged into or consolidated with such Loan Party or such Subsidiary or acquired by such Loan Party or such Subsidiary; (vii) Liens securing Non-Recourse Debt permitted under Section 5.02(b)(iii)(E), provided that no such Lien shall extend to or cover any Borrowing Base Assets, Intellectual Property Asset or other Collateral; and (viii) the replacement, extension or renewal of any Lien permitted by clause (iii) above upon or in the same property theretofore subject thereto or the replacement, extension, refunding, refinancing or renewal (without increase in the amount or change in any direct or contingent obligor unless such increase in the Debt secured by such Lien or such change in the obligor is otherwise permitted under this Agreement) of the Debt secured thereby. Great Wolf Senior Secured Revolving Credit Facility 62 (b) Debt. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Debt, except: (i) Debt under the Loan Documents; (ii) in the case of any Loan Party or any Subsidiary of a Loan Party, Debt owed to any other Loan Party or any wholly-owned Subsidiary of any Loan Party (other than an Excluded Subsidiary), provided that, in each case, such Debt (y) shall be on terms reasonably acceptable to the Administrative Agent and (z) shall be evidenced by promissory notes in form and substance reasonably satisfactory to the Administrative Agent, which promissory notes shall (unless payable to the Borrower) by their terms be subordinated to the Obligations of the Loan Parties under the Loan Documents; (iii) in the case of each Loan Party (other than the Parent Guarantor) and its Subsidiaries, (A) Debt secured by Liens permitted by Section 5.02(a)(iv) not to exceed in the aggregate $5,000,000 at any time outstanding, (B) (1) Capitalized Leases not to exceed in the aggregate $10,000,000 at any time outstanding, and (2) in the case of Capitalized Leases to which any Subsidiary of a Loan Party is a party, Debt of such Loan Party of the type described in clause (i) of the definition of "DEBT" guaranteeing the Obligations of such Subsidiary under such Capitalized Leases, (C) the Surviving Debt described on Schedule 4.01(o) hereto and any Refinancing Debt with respect to such Surviving Debt, (D) Debt in respect of Hedge Agreements entered into by the Borrower and designed to hedge against fluctuations in interest rates or foreign exchange rates incurred as required by this Agreement or incurred in the ordinary course of business and consistent with prudent business practices, and (E) Non-Recourse Debt (including, without limitation, the JV Pro Rata Share of Non-Recourse Debt of any Joint Venture (other than an Excluded Joint Venture)) in respect of Assets other than Borrowing Base Assets, the incurrence of which would not result in a Default under Section 5.04 or any other provision of this Agreement; (iv) in the case of the Parent Guarantor and the applicable Property-Level Subsidiaries with respect to the Assets referred to, Debt incurred in connection with (A) the construction financing of the Williamsburg Asset in principal amount not to exceed $40,000,000, (B) the construction financing of the Scotrun Asset in principal amount not to exceed $63,600,000, (C) the construction financing of other Development Assets and (D) ground leases, provided that the present value of the lease payments due under all such leases (which present value shall be determined in accordance with GAAP) shall not at any time exceed $15,000,000 in the aggregate. (v) in the case of the Parent Guarantor and the Borrower, Debt under Customary Carve-Out Agreements; Great Wolf Senior Secured Revolving Credit Facility 63 (vi) in the case of the Parent Guarantor, a recourse guaranty of a $29,500,000 mortgage loan encumbering the Sheboygan Asset for a period not to exceed 270 days after the Closing Date; (vii) endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (viii) any other Debt not to exceed $5,000,000 which is not secured by a Lien on any Borrowing Base Asset. Without limitation of the foregoing provisions of this Section 5.02(b), no Loan Party shall at any time incur Debt for Borrowed Money for which the Borrower has personal or recourse liability (exclusive of liability under Customary Carve-Out Agreements) with respect to which such Loan Party shall be required to implement or maintain a cash management system, a so-called "cash sweep", or one or more cash concentration accounts or lockbox accounts with respect to the any rents, income, revenue or other receipts from any Assets prior to the Company Debt Service Ratio being less than or equal to 1.20:1.00. (c) Change in Nature of Business. Make, or permit any of its Subsidiaries to make, any material change in the nature of its business as carried on at the date hereof; or engage in, or permit any of its Subsidiaries to engage in, any business other than ownership, development, licensing and management of Resort Assets in the United States and Canada consistent in quality with the Resort Assets presently owned by the Borrower and its Subsidiaries, and other business activities incidental thereto, except to the extent such party may make Investments permitted under Section 5.02(f)(iv)(C) and operate such business as may be incidental thereto. (d) Mergers, Etc. Merge or consolidate with or into, or convey, transfer (except as permitted by Section 5.02(e)), lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to, any Person, or permit any of its Subsidiaries to do so; provided, however, that (i) any Subsidiary of a Loan Party may merge or consolidate with or into, or dispose of assets to, any other Subsidiary of such Loan Party (provided that if one or more of such Subsidiaries is also a Loan Party, a Loan Party shall be the surviving entity) or any other Loan Party other than the Parent Guarantor (provided that such Loan Party or, in the case of any Loan Party other than the Borrower, another Loan Party shall be the surviving entity), and (ii) any Loan Party may merge with any Person that is not a Loan Party so long as such Loan Party is the surviving entity or (except in the case of a merger with the Borrower, which shall always be the Surviving Entity) such other Person is the surviving party and shall promptly become a Loan Party, provided, in each case, that no Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom. Notwithstanding any other provision of this Agreement, (y) any Subsidiary of a Loan Party (other than the Borrower and any Subsidiary that is a direct owner of a Borrowing Base Asset) may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and the assets or proceeds from the liquidation or dissolution of such Subsidiary are transferred to the Borrower or a Guarantor, provided that no Default or Event of Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom, and (z) any Loan Party or Subsidiary of a Loan Party shall be permitted to effect any Transfer of Assets through the sale of direct or indirect Equity Interests in the Subsidiary of such Loan Party that owns such Assets so long as Section 5.02(e) would otherwise permit the Transfer of all Assets owned by such Subsidiary at the time of such sale of Equity Interests. Upon the sale or transfer of Equity Interests in any Subsidiary or Subsidiaries of a Loan Party permitted under clause (z) above, the Great Wolf Senior Secured Revolving Credit Facility 64 Administrative Agent shall, upon the request of the Borrower, release such Subsidiary or Subsidiaries from the Guaranty. (e) Sales, Etc. of Assets. (i) In the case of the Parent Guarantor, sell, lease, transfer or otherwise dispose of, or grant any option or other right to purchase, lease or otherwise acquire any assets and (ii) in the case of the Loan Parties (other than the Parent Guarantor), sell, lease (other than by entering into Tenancy Leases), transfer or otherwise dispose of, or grant any option or other right to purchase, lease (other than any option or other right to enter into Tenancy Leases) or otherwise acquire, or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of, or grant any option or other right to purchase, lease or otherwise acquire (each action described in clause (ii) of this subsection (e) being a "TRANSFER"), any Asset or Assets (or any direct or indirect Equity Interests in the owner thereof) other than the following Transfers, which shall be permitted hereunder only so long as no Default or Event of Default shall exist or would result therefrom: (A) the Transfer of any Asset or Assets that are not Borrowing Base Assets from any Loan Party to another Loan Party (other than the Parent Guarantor) or from a Subsidiary of a Loan Party to another Subsidiary of such Loan Party or any other Loan Party (other than the Parent Guarantor), (B) the Transfer of any Asset or Assets that are not Borrowing Base Assets to any Person that is not a Loan Party, provided that the Transfer satisfies the following requirements: (1) the purchase price paid to the applicable Loan Party for such Asset or Assets shall not be less than the fair market value of such Asset or Assets at the time of such sale, (2) at least 75% of the purchase price paid for such Asset or Assets shall be paid to the applicable Loan Party solely in cash, and (3) if the sales proceeds from any such Transfer are in excess of $1,000,000, net of expenses incurred and any Debt of the Parent Guarantor or any of its Subsidiaries required to be repaid in connection with such Transfer (the "NET ASSET SALES PROCEEDS"), and such Net Asset Sales Proceeds shall not be reinvested as permitted under Section 5.02(f) (including without limitation clauses (iii) and (iv) thereof) or used to repay Debt of the Parent Guarantor or any of its Subsidiaries within 12 months after the date of such Transfer, then the Borrower shall apply any such unreinvested Net Asset Sales Proceeds to prepay the Obligations, or (C) the Transfer of (1) obsolete or worn out FF&E in the ordinary course of business or (2) inventory in the ordinary course of business, which FF&E or inventory, as the case may be, is used or held in connection with a Borrowing Base Asset. (f) Investments. Make or hold, or permit any of its Subsidiaries to make or hold, any Investment other than: (i) Investments by the Loan Parties and their Subsidiaries in their Subsidiaries outstanding on the date hereof and additional Investments in wholly-owned Subsidiaries and, in the case of the Loan Parties (other than the Parent Guarantor) and their Subsidiaries (and Joint Ventures in which such Loan Parties and Subsidiaries hold any direct or indirect interest), Investments in Assets (including by asset or Equity Interest acquisitions or investments in Joint Ventures), in each case subject, where applicable, to the limitations set forth in Section 5.02(f)(iv); (ii) Investments in Cash Equivalents; Great Wolf Senior Secured Revolving Credit Facility 65 (iii) Investments consisting of intercompany Debt permitted or required under Section 5.02(b)(ii); (iv) Investments consisting of the following items so long as the aggregate amount of each of the following items of Investments does not exceed the specified percentage of Consolidated total assets of the Parent Guarantor and its Subsidiaries, as determined in accordance with GAAP, set forth below: (A) unimproved land, so long as the aggregate amount of such Investments, calculated on the basis of cost, does not at the time of the Investment exceed 10.0% of Consolidated total assets of the Parent Guarantor and its Subsidiaries, as determined in accordance with GAAP, at such time, (B) Development Assets that are being constructed or developed as Resort Assets, but are not yet completed (including such assets that such Person has contracted to purchase for development with or without options to terminate the purchase agreement), so long as: (1) the aggregate amount of such Investment, calculated on the basis of the actual cost as and when made shall not at the time of the Investment exceed 25.0% of Consolidated total assets of the Parent Guarantor and its Subsidiaries, as determined in accordance with GAAP, at such time, (2) total expenditures for construction or development work on all Development Assets (other than the Williamsburg Asset and the Scotrun Asset), calculated on the basis of budgeted cost, shall not exceed $200,000,000 during the 12 month period commencing on the first day of the calendar month immediately following the relevant date of determination, and (3) prior to commencement of any material construction or development work on any such Development Asset, the Borrower shall have provided the Administrative Agent with (x) for informational purposes only, a line-item construction budget in form and detail reasonably satisfactory to the Administrative Agent, and (y) evidence reasonably satisfactory to the Administrative Agent of the availability of funds sufficient to complete such construction or development (which evidence may consist of (I) a construction financing commitment letter executed and delivered by a third party construction lender or (II) the availability of Borrowings sufficient in amount under this Facility) or (III) the availability of other funds of the Loan Parties. (C) Investments unrelated to the acquisition, development or improvement of Resort Assets so long as the aggregate amount of such Investments outstanding does not, at any time, exceed 5.0% of Consolidated total assets of the Parent Guarantor and its Subsidiaries, calculated on the basis of cost, as determined in accordance with GAAP, at such time; and Great Wolf Senior Secured Revolving Credit Facility 66 (v) Investments outstanding on the date hereof in Subsidiaries that are Excluded Subsidiaries or Subsidiaries that are not wholly-owned Subsidiaries of any Loan Party; (vi) Investments by the Borrower in Hedge Agreements permitted under Section 5.02(b)(iii)(D); (vii) Investments consisting of loans (or other extensions of credit) to executive officers of the Borrower, which Investments shall not exceed, at any time, $1,000,000; and (viii) Investments consisting of purchase money loans to the extent permitted under Section 5.02(e)(ii)(B). (g) Restricted Payments. In the case of the Parent Guarantor, without the prior consent of the Required Lender Parties, declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Interests now or hereafter outstanding, return any capital to its stockholders, partners or members (or the equivalent Persons thereof) as such, make any distribution of assets, Equity Interests, obligations or securities to its stockholders, partners or members (or the equivalent Persons thereof) as such. (h) Amendments of Constitutive Documents. Amend, or permit any of its Subsidiaries to amend, in each case in any material respect, its limited liability company agreement, certificate of incorporation or bylaws or other constitutive documents, provided that any amendment to any such constitutive document that would be adverse to any of the Secured Parties shall be deemed "material" for purposes of this Section, provided further that any amendment to any such constitutive document shall be deemed "not material" for purposes of this Section if such amendment (i) would designate such Subsidiary as a "special purpose entity" or otherwise confirm such Subsidiary's status as a "special purpose entity" or (ii) was entered into for the sole purpose of admitting a limited partner and setting the terms of such limited partner's admission under the Borrower's partnership agreement and such admission would not constitute a Change of Control. (i) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in (i) accounting policies or reporting practices, except as required or permitted by generally accepted accounting principles, or (ii) Fiscal Year. (j) Speculative Transactions. Engage, or permit any of its Subsidiaries to engage, in any transaction involving commodity options or futures contracts or any similar speculative transactions. (k) Payment Restrictions Affecting Subsidiaries. Directly or indirectly, enter into or suffer to exist, or permit any of its Subsidiaries to enter into or suffer to exist, any agreement or arrangement limiting the ability of any of its Subsidiaries to declare or pay dividends or other distributions in respect of its Equity Interests or repay or prepay any Debt owed to, make loans or advances to, or otherwise transfer assets to or invest in, the Borrower or any Subsidiary of the Borrower (whether through a covenant restricting dividends, loans, asset transfers or investments, a financial covenant or otherwise), except (i) the Loan Documents, (ii) any agreement or instrument evidencing Surviving Debt or any Refinancing Debt in respect thereof, (iii) any agreement in effect at the time such Subsidiary becomes a Subsidiary of the Borrower, so long as Great Wolf Senior Secured Revolving Credit Facility 67 such agreement was not entered into solely in contemplation of such Person becoming a Subsidiary of the Borrower, and (iv) any Excluded Subsidiary Agreement. (l) Amendment, Etc. of Material Contracts. Cancel or terminate any Material Contract or consent to or accept any cancellation or termination thereof, amend or otherwise modify any Material Contract or give any consent, waiver or approval thereunder, waive any default under or breach of any Material Contract, agree in any manner to any other amendment, modification or change of any term or condition of any Material Contract or take any other action in connection with any Material Contract that would impair the value of the interest or rights of any Loan Party thereunder or that would impair or otherwise adversely affect the interest or rights of the Administrative Agent or any Lender Party, or permit any of its Subsidiaries to do any of the foregoing, in each case in a manner that could reasonably be expected to have a Material Adverse Effect, in each case taking into account the effect of any agreements that supplement or serve to substitute for, in whole or in part, such Material Contract. (m) Negative Pledge. Enter into or suffer to exist, or permit any of its Subsidiaries to enter into or suffer to exist, any agreement prohibiting or conditioning the creation or assumption of any Lien upon any of its property or assets (including, without limitation, any Borrowing Base Assets), except (i) pursuant to the Loan Documents, (ii) pursuant to any Excluded Subsidiary Agreement entered into in connection with any Non-Recourse Debt permitted under Section 5.02(b)(iii)(E) or (iii) in connection with (A) any Surviving Debt and any Refinancing Debt in respect thereof, provided that the terms of any such Debt, and of any agreement entered into and of any instrument issued in connection therewith, do not provide for any Lien on any Borrowing Base Assets and are otherwise permitted by the Loan Documents, (B) any purchase money Debt permitted under Section 5.02(b)(iii)(A) solely to the extent that the agreement or instrument governing such Debt prohibits a Lien on the property acquired with the proceeds of such Debt, (C) any Capitalized Lease permitted by Section 5.02(b)(iii)(B) solely to the extent that such Capitalized Lease prohibits a Lien on the property subject thereto, or (D) any Debt outstanding on the date any Subsidiary of the Borrower becomes such a Subsidiary (so long as such agreement was not entered into solely in contemplation of such Subsidiary becoming a Subsidiary of the Borrower). (n) Parent Guarantor as Holding Company. In the case of the Parent Guarantor, not enter into or conduct any business, or engage in any activity (including, without limitation, any action or transaction that is required or restricted with respect to the Borrower and its Subsidiaries under Sections 5.01 and 5.02 without regard to any of the enumerated exceptions to such covenants), other than (i) the holding of the Equity Interests of the Borrower; (ii) the performance of its duties as sole member of the OP General Partner; (iii) the performance of its Obligations (subject to the limitations set forth in the Loan Documents) under each Loan Document to which it is a party; (iv) the making of equity or subordinate debt Investments in the Borrower and its Subsidiaries; and (v) activities incidental to each of the foregoing. (o) Excluded Subsidiaries. Enter into or suffer to exist, or permit any Excluded Subsidiary to enter into or suffer to exist, any agreement prohibiting or conditioning (i) the guaranty by such Excluded Subsidiary of the Obligations of the Loan Parties under the Loan Documents or (ii) the creation or assumption of any Lien upon any of such Excluded Subsidiary's property or assets, except (x) as would be permitted under Section 5.02(m), (y) pursuant to an Excluded Subsidiary Agreement in effect on the later of the Effective Date and the date on which such Excluded Subsidiary becomes a Subsidiary of such Loan Party or (z) in connection with the incurrence by such Excluded Subsidiary of Non-Recourse Debt permitted under Section 5.02(b)(iii)(E). Great Wolf Senior Secured Revolving Credit Facility 68 SECTION 5.03. Reporting Requirements. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, the Borrower will furnish to the Administrative Agent for transmission to the Lender Parties in accordance with Section 9.02(b): (a) Default Notice. As soon as possible and in any event within two days after Borrower obtains knowledge of each Default or any event, development or occurrence reasonably likely to have a Material Adverse Effect continuing on the date of such statement, a statement of a Responsible Officer of the Parent Guarantor setting forth details of such Default or such event, development or occurrence and the action that the Parent Guarantor has taken and proposes to take with respect thereto. (b) Annual Financials. As soon as available and in any event within 90 days after the end of each Fiscal Year, a copy of the annual audit report for such year for the Parent Guarantor and its Subsidiaries, including therein Consolidated balance sheets of the Parent Guarantor and its Subsidiaries as of the end of such Fiscal Year and Consolidated statements of income and a Consolidated statement of cash flows of the Parent Guarantor and its Subsidiaries for such Fiscal Year (it being acknowledged that a copy of the annual audit report filed by the Parent Guarantor with the Securities and Exchange Commission shall satisfy the foregoing requirements), in each case accompanied by an opinion acceptable to the Required Lenders of Deloitte & Touche LLP or other independent public accountants of recognized standing acceptable to the Required Lenders, together with (i) a certificate of such accounting firm to the Lender Parties stating that in the course of the regular audit of the business of the Parent and its Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge of non-compliance with any of the covenants contained in Section 5.04, (ii) a schedule in form satisfactory to the Administrative Agent of the computations used by such accountants in determining, as of the end of such Fiscal Year, compliance with the covenants contained in Section 5.04, provided that in the event of any change in GAAP used in the preparation of such financial statements, the Parent shall also provide, if necessary for the determination of compliance with Section 5.04, a statement of reconciliation conforming such financial statements to GAAP and (iii) a certificate of a Responsible Officer of the Parent Guarantor stating that no Default has occurred and is continuing or, if a default has occurred and is continuing, a statement as to the nature thereof and the action that the Parent Guarantor has taken and proposes to take with respect thereto. (c) Quarterly Financials. As soon as available and in any event within 45 days after the end of each of the first three quarters of each Fiscal Year, Consolidated balance sheets of the Parent Guarantor and its Subsidiaries as of the end of such quarter and Consolidated statements of income and a Consolidated statement of cash flows of the Parent Guarantor and its Subsidiaries for the period commencing at the end of the previous fiscal quarter and ending with the end of such fiscal quarter and Consolidated statements of income and a Consolidated statement of cash flows of the Parent Guarantor and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding date or period of the preceding Fiscal Year, all in reasonable detail and duly certified (subject to normal year-end audit adjustments) by the Chief Executive Officer, Chief Financial Officer or Treasurer (or person performing similar functions) of the Parent Guarantor as having been prepared in accordance with GAAP (it being acknowledged that a copy of the quarterly financials filed by the Parent Guarantor with the Securities and Exchange Commission shall satisfy the foregoing requirements), together with (i) a certificate of said officer stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature Great Wolf Senior Secured Revolving Credit Facility 69 thereof and the action that the Parent Guarantor has taken and proposes to take with respect thereto and (ii) a schedule in form satisfactory to the Administrative Agent of the computations used by the Parent Guarantor in determining compliance with the covenants contained in Section 5.04, provided that in the event of any change in GAAP used in the preparation of such financial statements, the Parent Guarantor shall also provide, if necessary for the determination of compliance with Section 5.04, a statement of reconciliation conforming such financial statements to GAAP. (d) Borrowing Base Certificate. As soon as available and in any event within 25 days after the end of each calendar month, a Borrowing Base Certificate, as at the end of such month, certified by a Responsible Officer of the Parent Guarantor. (e) Borrowing Base Financials. As soon as available and in any event within 25 days after the end of each calendar month, financial information in respect of all Borrowing Base Assets, in form and detail satisfactory to the Administrative Agent. (f) Annual Budgets. As soon as available and in any event no later than 45 days after the end of each Fiscal Year, forecasts prepared by management of the Parent Guarantor, in form satisfactory to the Administrative Agent, of balance sheets, income statements and cash flow statements on a quarterly basis for the then current Fiscal Year and on an annual basis for each Fiscal Year thereafter until the Termination Date. (g) Material Litigation. Promptly after the commencement thereof, notice of all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Loan Party or any of its Subsidiaries of the type described in Section 4.01(f), and promptly after the occurrence thereof, notice of any material adverse change in the status or the financial effect on any Loan Party or any of its Subsidiaries of the Disclosed Litigation from that described on Schedule 4.01(f) hereto. (h) Securities Reports. Promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports that any Loan Party or any of its Subsidiaries sends to the holders of its Equity Interests, and copies of all regular, periodic and special reports, and all registration statements, that any Loan Party or any of its Subsidiaries files with the Securities and Exchange Commission or any governmental authority that may be substituted therefor, or with any national securities exchange. (i) Real Property. As soon as available and in any event within 90 days after the end of each Fiscal Year, a report (A) supplementing Schedules 4.01(q) and 4.01(r) hereto, including an identification of all owned and leased real property disposed of by any Loan Party or any of its Subsidiaries during such Fiscal Year, a list and description (including the street address, county or other relevant jurisdiction, state, record owner, book value thereof and, in the case of leases of property, lessor, lessee, expiration date and annual rental cost thereof) of all Real Property acquired or leased by any Loan Party or any of its Subsidiaries during such Fiscal Year and a description of such other changes in the information included in such Schedules as may be necessary for such Schedules to be accurate and complete and (B) listing and describing all Joint Venture Assets in which a direct or indirect Investment has been made by a Loan Party (which description shall include including the street address and state in which any real property owned or leased by the Joint Venture is located, record owner and book value of each such Joint Venture Asset, and such other information as the Administrative Agent shall reasonably require). Great Wolf Senior Secured Revolving Credit Facility 70 (j) Environmental Conditions. Give notice in writing to the Administrative Agent (i) promptly upon obtaining knowledge of any material violation of any Environmental Law affecting any Asset or the operations thereof or the operations of any of its Subsidiaries, (ii) promptly upon obtaining knowledge of any known release, discharge or disposal of any Hazardous Materials at, from, or into any Asset which it reports in writing or is legally required to report in writing to any governmental authority and which is material in amount or nature or which could materially adversely affect the value of such Asset, (iii) promptly upon its receipt of any written notice relating to any Asset or the operations thereof or the operations of any Loan Party of material violation of any Environmental Laws or of any material release, discharge or disposal of Hazardous Materials in violation of any Environmental Laws or any matter that could result in an Environmental Action, including a notice or claim of liability or potential responsibility from any third party (including without limitation any federal, state or local governmental officials) and including notice of any formal inquiry, proceeding, demand, investigation or other action with regard to (A) such Loan Party's or any other Person's operation of any Asset in compliance with Environmental Laws, (B) Hazardous Materials contamination on, from or into any Asset, or (C) investigation or remediation of off-site locations at which such Loan Party or any of its predecessors are alleged to have directly or indirectly disposed of Hazardous Materials, or (iv) upon such Loan Party's obtaining knowledge that any expense or loss has been incurred by such governmental authority in connection with the assessment, containment, removal or remediation of any Hazardous Materials with respect to which such Loan Party or any Joint Venture could reasonably be expected to incur material liability or for which a Lien may be imposed on any Asset, provided that notice is required only for any of the events described in clauses (i) through (iv) above that could reasonably be expected to have a Material Adverse Effect, could reasonably be expected to result in a material Environmental Action with respect to any Borrowing Base Asset or could reasonably be expected to result in a Lien against any Borrowing Base Asset. (k) Borrowing Base Asset Value. Promptly after discovery of any setoff, claim or withholdings asserted or effected against any Loan Party or assets of any Loan Party, which (i) would have a material adverse effect on the value of a Borrowing Base Asset, (ii) would have a Material Adverse Effect or (iii) with respect to any Borrowing Base Asset, would constitute a Lien which is not a Permitted Lien, provide the Administrative Agent with notice thereof. (l) Compliance with Borrowing Base Asset Conditions. Promptly after obtaining actual knowledge of any condition or event which causes any of the Borrowing Base Assets to no longer comply with the requirements set forth in the definition of Borrowing Base Conditions, provide the Administrative Agent with notice thereof. (m) Appraisals. With respect to each Borrowing Base Asset, promptly upon the written request of the Administrative Agent, but not more frequently that once annually, cause to be prepared and delivered to the Administrative Agent an Appraisal of the Borrowing Base Assets that are the subject to the Administrative Agent's request. (n) Other Information. Promptly, such other information respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of any Loan Party or any of its Subsidiaries as the Administrative Agent, or any Lender Party through the Administrative Agent, may from time to time reasonably request. SECTION 5.04. Financial Covenants. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be Great Wolf Senior Secured Revolving Credit Facility 71 outstanding or any Lender Party shall have, at any time after the Initial Extension of Credit, any Commitment hereunder, the Parent Guarantor will: (a) Parent Guarantor Financial Covenants. (i) Maximum Leverage Ratio: Maintain (A) at the end of each fiscal quarter of the Parent Guarantor ending during any of the periods set forth below and (B) on the date of each Advance (both before and after giving effect to such Advance) occurring during any of the periods indicated below, and (C) on the date of each issuance or renewal of any Letter of Credit occurring during any of the periods indicated below, a Leverage Ratio of less than the correlative ratio indicated:
PERIOD LEVERAGE RATIO - ------------------------ -------------- ~~9/30/04 through 12/31/05 5.75:1.00 1/1/06 through 12/31/06 5.50:1.00 1/1/07 and thereafter 5.25:1.00~~
(ii) Minimum Tangible Net Worth: Maintain at all times tangible net worth of the Parent Guarantor and its Subsidiaries, as determined in accordance with GAAP, of not less than the sum of $120,000,000.00 plus an amount equal to 75% times the net cash proceeds of all issuances and primary sales of Equity Interests of the Parent Guarantor or any of its Subsidiaries consummated following the Closing Date. (iii) Minimum Interest Coverage Ratio. Maintain (A) at the end of each fiscal quarter of the Parent Guarantor ending during any of the periods set forth below and (B) on the date of each Advance (both before and after giving effect to such Advance) occurring during any of the periods indicated below, and (C) on the date of each issuance or renewal of any Letter of Credit occurring during any of the periods indicated below, an Interest Coverage Ratio of not less than the correlative ratio indicated:
INTEREST PERIOD COVERAGE RATIO - ------------------------ -------------- ~~9/30/04 through 12/31/05 2.00:1.00 1/1/06 through 12/31/06 2.25:1.00 1/1/07 and thereafter 2.50:1.00~~
(iv) Minimum Fixed Charge Coverage Ratio. Maintain (A) at the end of each fiscal quarter of the Parent Guarantor ending during any of the periods set forth below and (B) on the date of each Advance (both before and after giving effect to such Advance) occurring during any of the periods indicated below, and (C) on the date of each issuance or renewal of any Letter of Credit occurring during any of the periods Great Wolf Senior Secured Revolving Credit Facility 72 indicated below, a Fixed Charge Coverage Ratio of not less than the correlative ratio indicated:
FIXED CHARGE PERIOD COVERAGE RATIO - ------------------------ -------------- ~~9/30/04 through 12/31/05 1.50:1.00 1/1/06 through 12/31/06 1.75:1.00 1/1/07 and thereafter 2.00:1.00~~
(b) Borrowing Base Financial Covenants. (i) Maximum Facility Exposure to Borrowing Base Asset Value: Not permit at any time the Facility Exposure at such time to exceed the Total Loan Value at such time. (ii) Minimum Borrowing Base Debt Service Coverage Ratio: Maintain (A) at the end of each fiscal quarter of the Parent Guarantor ending during any of the periods set forth below and (B) on the date of each Advance (both before and after giving effect to such Advance) and (C) on the date of each issuance or renewal of any Letter of Credit, a Borrowing Base Debt Service Coverage Ratio of not less than 2.00:1.00. (iii) Minimum Borrowing Base Net Operating Income. Maintain at all times, for the Borrowing Base Assets in the aggregate, Adjusted Net Operating Income of not less than $11,000,000. All calculations described above in Sections 5.04(a) and 5.04(b) which pertain to the fiscal quarters of the Parent Guarantor ending on or prior to December 31, 2004 shall be made on a pro forma basis, including to give effect to the IPO and the Formation Transactions. To the extent any calculations described in Sections 5.04(a) or 5.04(b) are required to be made on any date of determination other than the last day of a fiscal quarter of the Parent Guarantor, such calculations shall be made on a pro forma basis to account for any acquisitions or dispositions of Assets, and the incurrence or repayment of any Debt for Borrowed Money relating to such Assets, that have occurred since the last day of the fiscal quarter of the Parent Guarantor most recently ended. To the extent any calculations described in Sections 5.04(a)(i), (iii) or (iv) are required to be made on any date of determination that falls after a date on which the relevant correlative ratio changes value but prior to the date on which the relevant financial statements (relating to the fiscal quarter then most recently ended) have been delivered (or, if earlier, the date on which such financial statements are required to be delivered hereunder), the applicable ratio shall be the relevant correlative ratio immediately prior to its change in value. All such calculations shall be reasonably acceptable to the Administrative Agent. ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default. If any of the following events ("EVENTS OF DEFAULT") shall occur and be continuing: Great Wolf Senior Secured Revolving Credit Facility 73 (a) Failure to Make Payments When Due. (i) The Borrower shall fail to pay any principal of any Advance when the same shall become due and payable or (ii) the Borrower shall fail to pay any interest on any Advance, or any Loan Party shall fail to make any other payment under any Loan Document, in each case under this clause (ii) within three Business Days after the same becomes due and payable; or (b) Breach of Representations and Warranties. Any representation or warranty made by any Loan Party (or any of its officers or the officers of its general partner or managing member, as applicable) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or (c) Breach of Certain Covenants. The Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 2.14, 5.01(d), (e), (f), (i), (j), (n), (o), (p) or (q), 5.02, 5.03 or 5.04; or (d) Other Defaults under Loan Documents. Any Loan Party shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 30 days after the earlier of the date on which (i) a Responsible Officer becomes aware of such failure or (ii) written notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender Party; or (e) Cross Defaults. (i) Any Loan Party or any of its Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any Material Debt when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure continues beyond any applicable notice and grace period; or (ii) any other event shall occur or condition shall exist under any agreement or instrument relating to any such Material Debt, if (A) the effect of such event or condition is to permit the acceleration of the maturity of such Material Debt or otherwise permit the holders thereof to cause such Material Debt to mature, and (B) such event or condition shall remain unremedied or otherwise uncured for a period of 30 days or such longer notice or grace period as may be applicable; or (iii) the maturity of any such Material Debt shall be accelerated or any such Material Debt shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Material Debt shall be required to be made, in each case prior to the stated maturity thereof; or (f) Insolvency Events. Any Loan Party or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Loan Party or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 30 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or any substantial part of its property) Great Wolf Senior Secured Revolving Credit Facility 74 shall occur; or any Loan Party or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (f); or (g) Monetary Judgments. Any judgments or orders, either individually or in the aggregate, for the payment of money in excess of $10,000,000 (to the extent not covered by insurance) shall be rendered against any Loan Party or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; provided, however, that any such judgment or order shall not give rise to an Event of Default under this Section 6.01(g) if and so long as (A) the amount of such judgment or order which remains unsatisfied is covered by a valid and binding policy of insurance between the respective Loan Party and the insurer covering full payment of such unsatisfied amount and (B) such insurer, which shall be rated at least "A" by A.M. Best Company, has been notified, and has not disputed the claim made for payment, of the amount of such judgment or order; or (h) Non-Monetary Judgments. Any non-monetary judgment or order shall be rendered against any Loan Party or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect, and there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (i) Unenforceability of Loan Documents. Any provision of any Loan Document after delivery thereof pursuant to Section 3.01 or 5.01(j) shall for any reason (other than pursuant to the terms thereof) cease to be valid and binding on or enforceable against any Loan Party party to it, or any such Loan Party shall so state in writing; or (j) Security Failure. Any Collateral Document or financing statement after delivery thereof pursuant to Section 3.01 or 5.01(j) shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected first priority lien on and security interest in the Collateral purported to be covered thereby; or (k) Change of Control. A Change of Control shall occur; or (l) ERISA Events. (i) Any ERISA Event shall have occurred with respect to a Plan and the sum (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which an ERISA Event shall have occurred and then exist (or the liability of the Loan Parties and the ERISA Affiliates related to such ERISA Event) exceeds $10,000,000; (ii) any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Loan Parties and the ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), exceeds $10,000,000 or requires payments exceeding $2,000,000 per annum; or (iii) any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, and as a result of such reorganization or termination the aggregate annual contributions of the Loan Parties and Great Wolf Senior Secured Revolving Credit Facility 75 the ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer Plans immediately preceding the plan year in which such reorganization or termination occurs by an amount exceeding $2,000,000; then, and in any such event, the Administrative Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the Commitments of each Lender Party and the obligation of each Lender Party to make Advances (other than Letter of Credit Advances by an Issuing Bank or a Lender pursuant to Section 2.03(c) and Swing Line Advances by a Lender pursuant to Section 2.02(b)) and of each Issuing Bank to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, (A) by notice to the Borrower, declare the Notes, all interest thereon and all other amounts payable under this Agreement and the other Loan Documents to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower, (B) by notice to each party required under the terms of any agreement in support of which a Letter of Credit is issued, request that all Obligations under such agreement be declared to be due and payable and (C) by notice to each Issuing Bank, direct such Issuing Bank to deliver a Default Termination Notice to the beneficiary of each Letter of Credit issued by it, and each Issuing Bank shall deliver such Default Termination Notices; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under any Bankruptcy Law, (y) the Commitments of each Lender Party and the obligation of each Lender Party to make Advances (other than Letter of Credit Advances by an Issuing Bank or a Lender pursuant to Section 2.03(c) and Swing Line Advances by a Lender pursuant to Section 2.02(b)) and of each Issuing Bank to issue Letters of Credit shall automatically be terminated and (z) the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. SECTION 6.02. Actions in Respect of the Letters of Credit upon Default. If any Event of Default shall have occurred and be continuing, the Administrative Agent may, or shall at the request of the Required Lenders, irrespective of whether it is taking any of the actions described in Section 6.01 or otherwise, make demand upon the Borrower to, and forthwith upon such demand the Borrower will, pay to the Administrative Agent on behalf of the Lender Parties in same day funds at the Administrative Agent's office designated in such demand, for deposit in the L/C Cash Collateral Account, an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding. If at any time the Administrative Agent or the Issuing Bank determines that any funds held in the L/C Cash Collateral Account are subject to any right or claim of any Person other than the Administrative Agent and the Lender Parties with respect to the Obligations of the Loan Parties under the Loan Documents, or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrower will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited and held in the L/C Cash Collateral Account, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, then held in the L/C Cash Collateral Account that the Administrative Agent, as the case may be, determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit for which funds are on deposit in the L/C Cash Collateral Account, such funds shall be applied to reimburse the relevant Issuing Bank or Lenders, as applicable, to the extent permitted by applicable law. Great Wolf Senior Secured Revolving Credit Facility 76 ARTICLE VII GUARANTY SECTION 7.01. Guaranty; Limitation of Liability. (a) Each Guarantor hereby absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all Obligations of the Borrower and each other Loan Party now or hereafter existing under or in respect of the Loan Documents (including, without limitation, any extensions, modifications, substitutions, amendments or renewals of any or all of the foregoing Obligations), whether direct or indirect, absolute or contingent, and whether for principal, interest, premiums, fees, indemnities, contract causes of action, costs, expenses or otherwise (such Obligations being the "GUARANTEED OBLIGATIONS"), and agrees to pay any and all expenses (including, without limitation, fees and expenses of counsel) incurred by the Administrative Agent or any other Secured Party in enforcing any rights under this Agreement or any other Loan Document. Without limiting the generality of the foregoing, each Guarantor's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any other Loan Party to any Secured Party under or in respect of the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other Loan Party. This Guaranty is a guaranty of payment and not merely of collection. (b) Each Guarantor, the Administrative Agent and each other Lender Party and, by its acceptance of the benefits of this Guaranty, each other Secured Party, hereby confirms that it is the intention of all such Persons that this Guaranty and the Obligations of each Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this Guaranty and the Obligations of each Guarantor hereunder. To effectuate the foregoing intention, the Guarantors, the Administrative Agent, the other Lender Parties and, by their acceptance of the benefits of this Guaranty, the other Secured Parties hereby irrevocably agree that the Obligations of each Guarantor under this Guaranty at any time shall be limited to the maximum amount as will result in the Obligations of such Guarantor under this Guaranty not constituting a fraudulent transfer or conveyance. (c) Each Guarantor hereby unconditionally and irrevocably agrees that in the event any payment shall be required to be made to any Secured Party under this Guaranty or any other guaranty, such Guarantor will contribute, to the maximum extent permitted by law, such amounts to each other Guarantor and each other guarantor so as to maximize the aggregate amount paid to the Secured Parties under or in respect of the Loan Documents. SECTION 7.02. Guaranty Absolute. Each Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of this Agreement and the other Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Administrative Agent or any other Secured Party with respect thereto. The Obligations of each Guarantor under or in respect of this Guaranty are independent of the Guaranteed Obligations or any other Obligations of any other Loan Party under or in respect of this Agreement or the other the Loan Documents, and a separate action or actions may be brought and prosecuted against each Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Borrower or any other Loan Party or whether the Borrower or any other Loan Party is joined in any such action or actions. The liability of each Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following: Great Wolf Senior Secured Revolving Credit Facility 77 (a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other Obligations of any other Loan Party under or in respect of the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to the Borrower, any other Loan Party or any of their Subsidiaries or otherwise; (c) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations; (d) any manner of application of collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any collateral for all or any of the Guaranteed Obligations or any other Obligations of any Loan Party under the Loan Documents or any other assets of any Loan Party or any of its Subsidiaries; (e) any change, restructuring or termination of the corporate structure or existence of any Loan Party or any of its Subsidiaries; (f) any failure of the Administrative Agent or any other Secured Party to disclose to any Loan Party any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Loan Party now or hereafter known to the Administrative Agent or such other Secured Party (each Guarantor waiving any duty on the part of the Administrative Agent and each other Secured Party to disclose such information); (g) the failure of any other Person to execute or deliver this Agreement, any other Loan Document, any Guaranty Supplement or any other guaranty or agreement or the release or reduction of liability of any Guarantor or other guarantor or surety with respect to the Guaranteed Obligations; or (h) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Administrative Agent or any other Secured Party that might otherwise constitute a defense available to, or a discharge of, any Loan Party or any other guarantor or surety. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Secured Party or any other Person upon the insolvency, bankruptcy or reorganization of the Borrower or any other Loan Party or otherwise, all as though such payment had not been made. SECTION 7.03. Waivers and Acknowledgments. (a) Each Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that the Administrative Agent or any other Secured Party protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any Loan Party or any other Person or any collateral. Great Wolf Senior Secured Revolving Credit Facility 78 (b) Each Guarantor hereby unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. (c) Each Guarantor hereby unconditionally and irrevocably waives (i) any defense arising by reason of any claim or defense based upon an election of remedies by the Administrative Agent or any other Secured Party that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of such Guarantor or other rights of such Guarantor to proceed against any of the other Loan Parties, any other guarantor or any other Person or any collateral and (iii) any defense based on any right of set-off or counterclaim against or in respect of the Obligations of such Guarantor hereunder. (d) Each Guarantor acknowledges that the Administrative Agent may, without notice to or demand upon such Guarantor and without affecting the liability of such Guarantor under this Guaranty, foreclose under any mortgage by nonjudicial sale, and each Guarantor hereby waives any defense to the recovery by the Administrative Agent and the other Secured Parties against such Guarantor of any deficiency after such nonjudicial sale and any defense or benefits that may be afforded by applicable law. (e) Each Guarantor hereby unconditionally and irrevocably waives any duty on the part of the Administrative Agent or any other Secured Party to disclose to such Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower, any other Loan Party or any of their Subsidiaries now or hereafter known by the Administrative Agent or such other Secured Party. (f) Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by this Agreement and the other Loan Documents and that the waivers set forth in Section 7.02 and this Section 7.03 are knowingly made in contemplation of such benefits. SECTION 7.04. Subrogation. Each Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Borrower, any other Loan Party or any other insider guarantor that arise from the existence, payment, performance or enforcement of such Guarantor's Obligations under or in respect of this Guaranty, this Agreement or any other Loan Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Secured Party against the Borrower, any other Loan Party or any other insider guarantor or any collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Borrower, any other Loan Party or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, all Letters of Credit shall have expired or been terminated, all Secured Hedge Agreements shall have expired or been terminated and the Commitments shall have expired or been terminated. If any amount shall be paid to any Guarantor in violation of the immediately preceding sentence at any time prior to the latest of (a) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, (b) the Termination Date and (c) the latest date of expiration or termination of all Letters of Credit and all Secured Hedge Agreements, such amount shall be received and held in trust for the benefit of the Secured Parties, shall be segregated from other property and funds of such Guarantor and shall forthwith be paid or delivered to the Administrative Agent in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in Great Wolf Senior Secured Revolving Credit Facility 79 accordance with the terms of the Loan Documents. If (i) any Guarantor shall make payment to any Secured Party of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, (iii) the Termination Date shall have occurred and (iv) all Letters of Credit and all Secured Hedge Agreements shall have expired or been terminated, the Administrative Agent and the other Secured Parties will, at such Guarantor's request and expense, execute and deliver to such Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed Obligations resulting from such payment made by such Guarantor pursuant to this Guaranty. SECTION 7.05. Guaranty Supplements. Upon the execution and delivery by any Person of a Guaranty Supplement, (i) such Person shall be referred to as an "ADDITIONAL GUARANTOR" and shall become and be a Guarantor hereunder, and each reference in this Agreement to a "Guarantor" or a "Loan Party" shall also mean and be a reference to such Additional Guarantor, and each reference in any other Loan Document to a "Guarantor" shall also mean and be a reference to such Additional Guarantor, and (ii) each reference herein to "this Agreement", "this Guaranty", "hereunder", "hereof" or words of like import referring to this Agreement and this Guaranty, and each reference in any other Loan Document to the "Loan Agreement", "Guaranty", "thereunder", "thereof" or words of like import referring to this Agreement and this Guaranty, shall mean and be a reference to this Agreement and this Guaranty as supplemented by such Guaranty Supplement. SECTION 7.06. Indemnification by Guarantors. (a) Without limitation on any other Obligations of any Guarantor or remedies of the Administrative Agent or the Secured Parties under this Agreement, this Guaranty or the other Loan Documents, each Guarantor shall, to the fullest extent permitted by law, indemnify, defend and save and hold harmless the Administrative Agent, each other Secured Party and each of their Affiliates and their respective officers, directors, employees, agents and advisors (each, an "INDEMNIFIED PARTY") from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party in connection with or as a result of any failure of any Guaranteed Obligations to be the legal, valid and binding obligations of any Loan Party enforceable against such Loan Party in accordance with their terms. (b) Each Guarantor hereby also agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract, tort or otherwise) to any of the Guarantors or any of their respective Affiliates or any of their respective officers, directors, employees, agents and advisors (other than for actual damages caused by or resulting from the gross negligence or willful misconduct of such Indemnified Party), and each Guarantor hereby agrees not to assert any claim against any Indemnified Party on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Loan Documents or any of the transactions contemplated by the Loan Documents. SECTION 7.07. Subordination. Each Guarantor hereby subordinates any and all debts, liabilities and other Obligations owed to such Guarantor by each other Loan Party (the "SUBORDINATED OBLIGATIONS") to the Guaranteed Obligations to the extent and in the manner hereinafter set forth in this Section 7.07. (a) Prohibited Payments, Etc. Except during the continuance of an Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), each Guarantor may receive regularly scheduled payments from any other Loan Party on account of the Subordinated Obligations. After the occurrence and during the continuance of any Event of Default (including the commencement and continuation of any proceeding under any Great Wolf Senior Secured Revolving Credit Facility 80 Bankruptcy Law relating to any other Loan Party), however, unless the Administrative Agent otherwise agrees, no Guarantor shall demand, accept or take any action to collect any payment on account of the Subordinated Obligations. (b) Prior Payment of Guaranteed Obligations. In any proceeding under any Bankruptcy Law relating to any other Loan Party, each Guarantor agrees that the Secured Parties shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Bankruptcy Law, whether or not constituting an allowed claim in such proceeding ("POST PETITION INTEREST")) before such Guarantor receives payment of any Subordinated Obligations. (c) Turn-Over. After the occurrence and during the continuance of any Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), each Guarantor shall, if the Administrative Agent so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Secured Parties and deliver such payments to the Administrative Agent on account of the Guaranteed Obligations (including all Post Petition Interest), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of this Guaranty. (d) Administrative Agent Authorization. After the occurrence and during the continuance of any Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), the Administrative Agent is authorized and empowered (but without any obligation to so do), in its discretion, (i) in the name of each Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Post Petition Interest), and (ii) to require each Guarantor (A) to collect and enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to the Administrative Agent for application to the Guaranteed Obligations (including any and all Post Petition Interest). SECTION 7.08. Continuing Guaranty. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the latest of (i) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, (ii) the Termination Date and (iii) the latest date of expiration or termination of all Letters of Credit and all Secured Hedge Obligations, (b) be binding upon the Guarantors, their successors and assigns and (c) inure to the benefit of and be enforceable by the Administrative Agent and the other Secured Parties and their successors, transferees and assigns. ARTICLE VIII THE AGENTS SECTION 8.01. Authorization and Action; Appointment of Supplemental Collateral Agents. (a) Each Lender Party (in its capacities as a Lender, the Swing Line Bank (if applicable) and as an Issuing Bank (if applicable) and on behalf of itself and its Affiliates as potential Hedge Banks) hereby appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to such Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by the Loan Documents (including, without limitation, enforcement or collection of the Notes), no Agent shall be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be Great Wolf Senior Secured Revolving Credit Facility 81 binding upon all Lender Parties and all holders of Notes; provided, however, that no Agent shall be required to take any action that exposes such Agent to personal liability or that is contrary to this Agreement or applicable law. Each Agent agrees to give to each Lender Party prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. Notwithstanding anything to the contrary in any Loan Document, no Person identified as a syndication agent, documentation agent, senior manager, joint lead arranger or joint book running manager, in such Person's capacity as such, shall have any obligations or duties to any Loan Party, the Administrative Agent or any other Secured Party under any of such Loan Documents. (b) Anything contained herein or in the Collateral Documents to the contrary notwithstanding, the Collateral Agent may from time to time, when the Collateral Agent deems it to be necessary, appoint one or more trustees, co-trustees, collateral co-agents or collateral subagents (each, a "SUPPLEMENTAL COLLATERAL AGENT") with respect to all or any part of the Collateral. In the event that the Collateral Agent so appoints any Supplemental Collateral Agent with respect to any Collateral, (i) such Supplemental Collateral Agent shall automatically be vested, in addition to the Collateral Agent, with all rights, powers, privileges, interests and remedies of the Collateral Agent under the Collateral Documents with respect to such Collateral; (ii) such Supplemental Collateral Agent shall be deemed to be an "Agent" for purposes of this Agreement and the other Loan Documents, and the provisions of Section 21 of the Security Agreement, this Article and Section 9.04 hereof that refer to the Agents (or either of them) shall inure to the benefit of such Supplemental Collateral Agent, and all references therein and in the other Loan Documents to the Collateral Agent shall be deemed to be references to the Collateral Agent and/or such Supplemental Collateral Agent, as the context may require; and (iii) the term "Collateral Agent," when used herein or in any applicable Collateral Document in relation to the Liens on or security interests in such Collateral granted in favor of the Collateral Agent, and any rights, powers, privileges, interests and remedies of the Collateral Agent with respect to such Collateral, shall be deemed to include such Supplemental Collateral Agent; provided, however, that no such Supplemental Collateral Agent shall be authorized to take any action with respect to any such Collateral unless and except to the extent expressly authorized in writing by the Collateral Agent. Should any instrument in writing from the Borrower or any other Loan Party be required by any Supplemental Collateral Agent so appointed by the Collateral Agent to more fully or certainly vest in and confirming to such Supplemental Collateral Agent such rights, powers, privileges and duties, the Borrower shall, or shall cause such Loan Party to, execute, acknowledge and deliver any and all such instruments promptly upon request by the Collateral Agent. If any Supplemental Collateral Agent, or successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Collateral Agent, to the extent permitted by law, shall automatically vest in and be exercised by the Collateral Agent until the appointment of a new Supplemental Collateral Agent. SECTION 8.02. Agents' Reliance, Etc. Neither any Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with the Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, each Agent: (a) in the case of the Administrative Agent, may treat the payee of any Note as the holder thereof until the Administrative Agent receives and accepts an Assignment and Acceptance entered into by the Lender that is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, or, in the case of any other Agent, such Agent has received notice from the Administrative Agent that it has received and accepted such Assignment and Acceptance, as provided in Section 9.07; (b) may consult with legal counsel (including counsel for any Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Lender Party and shall not be responsible to any Lender Party for any statements, warranties or representations (whether written or oral) made in or in connection with the Loan Documents; (d) shall not have any duty to Great Wolf Senior Secured Revolving Credit Facility 82 ascertain or to inquire as to the performance, observance or satisfaction of any of the terms, covenants or conditions of any Loan Document on the part of any Loan Party or the existence at any time of any Default under the Loan Documents or to inspect the property (including the books and records) of any Loan Party; (e) shall not be responsible to any Lender Party for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; and (f) shall incur no liability under or in respect of any Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy or telex or other electronic communication) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 8.03. CNAI and Affiliates. With respect to its Commitments, the Advances made by it and the Notes issued to it, CNAI shall have the same rights and powers under the Loan Documents as any other Lender Party and may exercise the same as though it were not the Administrative Agent or the Collateral Agent; and the term "Lender Party" or "Lender Parties" shall, unless otherwise expressly indicated, include CNAI in its individual capacity. CNAI and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, any Loan Party, any Subsidiary of any Loan Party and any Person that may do business with or own securities of any Loan Party or any such Subsidiary, all as if CNAI were not the Administrative Agent or the Collateral Agent and without any duty to account therefor to the Lender Parties. SECTION 8.04. Lender Party Credit Decision. Each Lender Party acknowledges that it has, independently and without reliance upon any Agent or any other Lender Party and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender Party also acknowledges that it will, independently and without reliance upon any Agent or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 8.05. Indemnification by Lender Parties. (a) Each Lender Party severally agrees to indemnify each Agent (to the extent not promptly reimbursed by the Borrower) from and against such Lender Party's ratable share (determined as provided below) of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Agent in any way relating to or arising out of the Loan Documents or any action taken or omitted by such Agent under the Loan Documents (collectively, the "INDEMNIFIED COSTS"); provided, however, that no Lender Party shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from any Agent's gross negligence or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction. Without limitation of the foregoing, each Lender Party agrees to reimburse each Agent promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Borrower under Section 9.04, to the extent that such Agent is not promptly reimbursed for such costs and expenses by the Borrower. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Costs, this Section 8.05 applies whether any such investigation, litigation or proceeding is brought by any Lender Party or any other Person. (b) Each Lender Party severally agrees to indemnify each Issuing Bank (to the extent not promptly reimbursed by the Borrower) from and against such Lender Party's ratable share (determined as provided below) of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, Great Wolf Senior Secured Revolving Credit Facility 83 incurred by, or asserted against such Issuing Bank in any way relating to or arising out of the Loan Documents or any action taken or omitted by such Issuing Bank under the Loan Documents; provided, however, that no Lender Party shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Issuing Bank's gross negligence or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction. Without limitation of the foregoing, each Lender Party agrees to reimburse such Issuing Bank promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Borrower under Section 9.04, to the extent that such Issuing Bank is not promptly reimbursed for such costs and expenses by the Borrower. (c) For purposes of this Section 8.05, the Lender Parties' respective ratable shares of any amount shall be determined, at any time, according to their respective Revolving Credit Commitments at such time. The failure of any Lender Party to reimburse any Agent or any Issuing Bank, as the case may be, promptly upon demand for its ratable share of any amount required to be paid by the Lender Parties to such Agent or such Issuing Bank, as the case may be, as provided herein shall not relieve any other Lender Party of its obligation hereunder to reimburse such Agent or such Issuing Bank, as the case may be, for its ratable share of such amount, but no Lender Party shall be responsible for the failure of any other Lender Party to reimburse such Agent or such Issuing Bank, as the case may be, for such other Lender Party's ratable share of such amount. Without prejudice to the survival of any other agreement of any Lender Party hereunder, the agreement and obligations of each Lender Party contained in this Section 8.05 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the other Loan Documents. SECTION 8.06. Successor Agents. Any Agent may resign at any time by giving 30 days' prior written notice thereof to the Lender Parties and the Borrower and may be removed at any time with or without cause by the Required Lenders; provided, however, that any removal of the Administrative Agent will not be effective until it has been replaced as Collateral Agent and it (or its Affiliate) has been replaced as an Issuing Bank and released from all obligations in respect thereof. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation or the Required Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf of the Lender Parties, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States or of any State thereof and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as an Agent hereunder by a successor Agent, and, in the case of a successor Collateral Agent, upon the execution and filing or recording of such financing statements, or amendments thereto, and such amendments or supplements to the Mortgages and Assignments of Leases, and such other instruments or notices, as may be necessary or desirable, or as the Required Lenders may request, in order to continue the perfection of the Liens granted or purported to be granted by the Collateral Documents, such successor Agent shall succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. If within 45 days after written notice is given of the retiring Agent's resignation or removal under this Section 8.06 no successor Agent shall have been appointed and shall have accepted such appointment, then on such 45th day (i) the retiring Agent's resignation or removal shall become effective, (ii) the retiring Agent shall thereupon be discharged from its duties and obligations under the Loan Documents and (iii) the Required Lenders shall thereafter perform all duties of the retiring Agent under the Loan Documents until such time, if any, as the Required Lenders appoint a successor Agent as provided above. After any retiring Agent's resignation or removal hereunder as an Agent shall have become effective, the provisions of this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent under this Agreement. Great Wolf Senior Secured Revolving Credit Facility 84 ARTICLE IX MISCELLANEOUS SECTION 9.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement or the Notes or any other Loan Document, nor consent to any departure by any Loan Party therefrom, shall in any event be effective unless the same shall be in writing and signed (or, in the case of the Collateral Documents, consented to) by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that: (a) No amendment, waiver or consent shall, unless in writing and signed by the Required Lender Parties, do any of the following at any time: (i) except to the extent expressly permitted by Section 9.11(a) of this Agreement, release any individual Borrowing Base Asset or all or substantially all of the Collateral, in each case in any transaction or series of related transactions, or permit the creation, incurrence, assumption or existence of any Lien on any individual Borrowing Base Asset or all or substantially all of the Collateral, in each case in any transaction or series of related transactions, to secure any Obligations other than Obligations owing to the Secured Parties under the Loan Documents, (ii) amend, modify or waive the provisions of Section 5.02(g), (iii) amend, modify or waive Section 5.04(a) (x) to permit the Leverage Ratio to exceed 6.75:1.00, (y) permit the Interest Coverage Ratio to be less than 1.50:1.00, or (z) permit the Fixed Charge Coverage Ratio to be less than 1.25:1.00, or (iv) amend, modify or waive any of the provisions of Section 5.04(b) or any of the defined terms used in or related to such Section; and (b) No amendment, waiver or consent shall, unless in writing and signed by all of the Lenders, do any of the following at any time: (i) change the number of Lenders or the percentage of (x) the Commitments, (y) the aggregate unpaid principal amount of the Advances or (z) the aggregate Available Amount of outstanding Letters of Credit that, in each case, shall be required for the Lenders or any of them to take any action hereunder, (ii) release the Borrower with respect to the Obligations, or, except to the extent expressly permitted under this Agreement, reduce or limit the obligations of any Guarantor under Article VII or release such Guarantor or otherwise limit such Guarantor's liability with respect to the Guaranteed Obligations; (iii) amend this Section 9.01, (iv) increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (v) reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, (vi) postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder or amend Section 2.06, (vii) limit the liability of any Loan Party under any of the Loan Documents, or (viii) extend the Termination Date; provided further that no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Bank or each Issuing Bank, as the case may be, in addition to the Lenders required above to take such action, affect the rights or obligations of the Swing Line Bank or of the Issuing Banks, as the case may be, under this Agreement; and provided still further that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent or the Collateral Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent or the Collateral Agent under this Agreement or the other Loan Documents. SECTION 9.02. Notices, Etc. (a) All notices and other communications provided for hereunder shall be either (x) in writing (including telecopier or telegraphic communication) and mailed, telecopied, telegraphed or delivered, (y) as and to the extent set forth in Section 9.02(b) and in the proviso to this Section 9.02(a), in an electronic medium and delivered as set forth in Section 9.02(b) or (z) as and to the extent expressly permitted in this Agreement, transmitted by e-mail, provided that such e-mail shall Great Wolf Senior Secured Revolving Credit Facility 85 in all cases include an attachment (in PDF format or similar format) containing a legible signature of the person providing such notice, if to the Borrower, at its address at 122 West Washington Avenue, 6th floor, Madison, WI 53703, Attention: Chief Financial Officer or, if applicable, at jcalder@greatlakesco.com (and in the case of transmission by e-mail, with a copy by U.S. mail to the attention of General Counsel at 122 West Washington Avenue, 10th floor, Madison, WI 53703); if to any Initial Lender, at its Domestic Lending Office or, if applicable, at the e-mail address specified opposite its name on Schedule I hereto (and in the case of a transmission by e-mail, with a copy by U.S. mail to its Domestic Lending Office); if to any other Lender Party, at its Domestic Lending Office or, if applicable, at the e-mail address specified in the Assignment and Acceptance pursuant to which it became a Lender Party (and in the case of a transmission by e-mail, with a copy by U.S. mail to its Domestic Lending Office); if to the Initial Issuing Bank, at its address at Two Penns Way, New Castle, Delaware 19720, Attention: Bank Loan Syndications Department, or, if applicable, at rashan.robinson@citigroup.com (and in the case of a transmission by e-mail, with a copy by U.S. mail to Two Penns Way, New Castle, Delaware 19720, Attention: Bank Loan Syndications Department); and if to the Administrative Agent or the Collateral Agent, at its address at Two Penns Way, New Castle, Delaware 19720, Attention: Bank Loan Syndications Department, or, if applicable, at rashan.robinson@citigroup.com (and in the case of a transmission by e-mail, with a copy by U.S. mail to Two Penns Way, New Castle, Delaware 19720, Attention: Bank Loan Syndications Department) or, as to the Borrower or any Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Administrative Agent. All such notices and communications shall, when mailed, telecopied, telegraphed or e-mailed, be effective when deposited in the mails, telecopied, delivered to the telegraph company or confirmed by e-mail, respectively, except that notices and communications to the Administrative Agent pursuant to Article II, III or VIII or to the Collateral Agent under the Collateral Documents shall not be effective until received by the Administrative Agent or the Collateral Agent, as the case may be. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of an original executed counterpart thereof. (b) So long as CNAI is the Administrative Agent, materials required to be delivered pursuant to Section 5.03(a), (b), (c) and (g) shall be delivered to the Administrative Agent in an electronic medium in a format acceptable to the Administrative Agent and the Lender Parties by e-mail at oploanswebadmin@citigroup.com. The Borrower agrees that the Administrative Agent may make such materials, as well as any other written information, documents, instruments and other material relating to the Borrower, any Loan Party, any of their Subsidiaries or any other materials or matters relating to this Agreement, the Notes or any of the transactions contemplated hereby (collectively, the "COMMUNICATIONS") available to the Lender Parties by posting such notices on Intralinks or a substantially similar electronic transmission system (the "PLATFORM"). The Borrower acknowledges that (i) the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution, (ii) the Platform is provided "as is" and "as available" and (iii) neither the Administrative Agent nor any of its Affiliates warrants the accuracy, adequacy or completeness of the Communications or the Platform and each expressly disclaims liability for errors or omissions in the Communications or the Platform. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by the Administrative Agent or any of its Affiliates in connection with the Platform. (c) Each Lender Party agrees that notice to it (as provided in the next sentence) (a "NOTICE") specifying that any Communications have been posted to the Platform shall constitute effective delivery of such information, documents or other materials to such Lender Party for purposes of this Agreement, provided that if requested by any Lender Party, the Administrative Agent shall deliver a copy Great Wolf Senior Secured Revolving Credit Facility 86 of the Communications to such Lender Party by e-mail or telecopier. Each Lender Party agrees (i) to notify the Administrative Agent in writing of such Lender Party's e-mail address to which a Notice may be sent by electronic transmission (including by electronic communication) on or before the date such Lender Party becomes a party to this Agreement (and from time to time thereafter to ensure that the Administrative Agent has on record an effective e-mail address for such Lender Party) and (ii) that any Notice may be sent to such e-mail address. SECTION 9.03. No Waiver; Remedies. No failure on the part of any Lender Party or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 9.04. Costs and Expenses. (a) Each Loan Party agrees jointly and severally to pay on demand (i) all reasonable out-of-pocket costs and expenses of each Agent in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents (including, without limitation, (A) all due diligence, collateral review, syndication, transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees and expenses, (B) the reasonable fees and expenses of counsel for such Agent with respect thereto with respect to advising such Agent as to its rights and responsibilities (including, without limitation, with respect to reviewing and advising on any matters required to be completed by the Loan Parties on a post-closing basis), or the perfection, protection or preservation of rights or interests, under the Loan Documents, with respect to negotiations with any Loan Party or with other creditors of any Loan Party or any of its Subsidiaries arising out of any Default or any events or circumstances that may give rise to a Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors' rights generally and any proceeding ancillary thereto and (C) the reasonable fees and expenses of counsel for such Agent with respect to the preparation, execution, delivery and review of any documents and instruments at any time delivered pursuant to Section 5.01(j)) and (ii) all reasonable out-of-pocket costs and expenses of each Agent and each Lender Party in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of the Loan Documents, whether in any action, suit or litigation, or any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally (including, without limitation, the reasonable fees and expenses of counsel for such Agent and each Lender Party with respect thereto). (b) Each Loan Party agrees to indemnify, defend and save and hold harmless each Indemnified Party from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (i) the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Loan Documents or any of the transactions contemplated thereby or (ii) the actual or alleged presence of Hazardous Materials on any property of any Loan Party or any of its Subsidiaries or any Environmental Action relating in any way to any Loan Party or any of its Subsidiaries, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 9.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, shareholders or creditors or an Indemnified Party, whether or not any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated by the Loan Documents are Great Wolf Senior Secured Revolving Credit Facility 87 consummated. Each Loan Party also agrees not to assert any claim against any Agent, any Lender Party or any of their Affiliates, or any of their respective officers, directors, employees, agents and advisors, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Loan Documents or any of the transactions contemplated by the Loan Documents. (c) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender Party other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.06, 2.09(b)(i) or 2.10(d), acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason, or if the Borrower fails to make any payment or prepayment of an Advance for which a notice of prepayment has been given or that is otherwise required to be made, whether pursuant to Section 2.04, 2.06 or 6.01 or otherwise, the Borrower shall, upon demand by such Lender Party (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender Party any amounts required to compensate such Lender Party for any additional losses, costs or expenses that it may reasonably incur as a result of such payment or Conversion or such failure to pay or prepay, as the case may be, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender Party to fund or maintain such Advance. (d) If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Loan Party by any Agent or any Lender Party, in its sole discretion. (e) Without prejudice to the survival of any other agreement of any Loan Party hereunder or under any other Loan Document, the agreements and obligations of the Borrower and the other Loan Parties contained in Sections 2.10 and 2.12, Section 7.06 and this Section 9.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under any of the other Loan Documents. SECTION 9.05. Right of Set-off. Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Administrative Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, each Agent and each Lender Party and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and otherwise apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Agent, such Lender Party or such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the Obligations of the Borrower or such Loan Party now or hereafter existing under the Loan Documents, irrespective of whether such Agent or such Lender Party shall have made any demand under this Agreement or such Note or Notes and although such obligations may be unmatured. Each Agent and each Lender Party agrees promptly to notify the Borrower or such Loan Party after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Agent and each Lender Party and their respective Affiliates under this Section 9.05 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Agent, such Lender Party and their respective Affiliates may have. SECTION 9.06. Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower, each Guarantor named on the signature pages hereto and each Agent and the Administrative Agent shall have been notified by each Initial Lender and each Initial Issuing Bank that such Initial Lender or such Initial Issuing Bank, as the case may be, has executed it and Great Wolf Senior Secured Revolving Credit Facility 88 thereafter shall be binding upon and inure to the benefit of the Borrower, the Guarantors named on the signature pages hereto and each Agent and each Lender Party and their respective successors and assigns, except that neither the Borrower nor any other Loan Party shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender Parties. SECTION 9.07. Assignments and Participations; Replacement Notes. (a) Each Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment or Commitments, the Advances owing to it and the Note or Notes held by it); provided, however, that (i) each such assignment shall be of a uniform, and not a varying, percentage of all rights and obligations under and in respect of one or more of the Facilities, (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender, an Affiliate of any Lender or a Fund Affiliate of any Lender or an assignment of all of a Lender's rights and obligations under this Agreement, the aggregate amount of the Commitments being assigned to such Eligible Assignee pursuant to such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000 under such Facility or an integral multiple of $1,000,000 in excess thereof (or such lesser amount as shall be approved by the Administrative Agent and, so long as no Default shall have occurred and be continuing at the time of effectiveness of such assignment, the Borrower), (iii) each such assignment shall be to an Eligible Assignee, (iv) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender, an Affiliate of any Lender or a Fund Affiliate of any Lender and so long as no Default shall have occurred and be continuing, each assignment shall be made with the consent of the Borrower, which consent shall not be unreasonably withheld or delayed, (v) no such assignments shall be permitted (A) until the Administrative Agent shall have notified the Lender Parties that syndication of the Commitments hereunder has been completed, without the consent of the Administrative Agent, and (B) at any other time without the consent of the Administrative Agent (which consent shall not be unreasonably withheld) and (vi) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment and, except if such assignment is being made by a Lender to an Affiliate or Fund Affiliate of such Lender, a processing and recordation fee of $3,500. (b) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (i) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender or Issuing Bank, as the case may be, hereunder and (ii) the Lender or Issuing Bank assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (other than its rights under Sections 2.10, 2.12, 7.06, 8.05 and 9.04 to the extent any claim thereunder relates to an event arising prior to such assignment) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the remaining portion of an assigning Lender's or Issuing Bank's rights and obligations under this Agreement, such Lender or Issuing Bank shall cease to be a party hereto). (c) By executing and delivering an Assignment and Acceptance, each Lender Party assignor thereunder and each assignee thereunder confirm to and agree with each other and the other parties thereto and hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender Party makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; (ii) such assigning Great Wolf Senior Secured Revolving Credit Facility 89 Lender Party makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under any Loan Document or any other instrument or document furnished pursuant thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender Party or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to the Administrative Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender or Issuing Bank, as the case may be. (d) The Administrative Agent shall maintain at its address referred to in Section 9.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lender Parties and the Commitment under each Facility of, and principal amount of the Advances owing under each Facility to, each Lender Party from time to time (the "REGISTER"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lender Parties may treat each Person whose name is recorded in the Register as a Lender Party hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or the Administrative Agent or any Lender Party at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender Party and an assignee, together with any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit D hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower and each other Agent. In the case of any assignment by a Lender, within five Business Days after its receipt of such notice, the Borrower, at its own expense, shall, if requested by the applicable Lender, execute and deliver to the Administrative Agent in exchange for the surrendered Note or Notes a new Note to the order of such Eligible Assignee in an amount equal to the Commitment assumed by it under each Facility pursuant to such Assignment and Acceptance and, if any assigning Lender has retained a Commitment hereunder under such Facility, a new Note to the order of such assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes, if any, shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A hereto. (f) Each Issuing Bank may assign to one or more Eligible Assignees all or a portion of its rights and obligations under the undrawn portion of its Letter of Credit Commitment at any time; provided, however, that (i) except in the case of an assignment to a Person that immediately prior to such assignment was an Issuing Bank or an assignment of all of an Issuing Bank's rights and obligations under this Agreement, the amount of the Letter of Credit Commitment of the assigning Issuing Bank being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000 and shall be in an integral multiple of $1,000,000 in excess thereof, (ii) each such assignment shall be to an Eligible Assignee and Great Wolf Senior Secured Revolving Credit Facility 90 (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $3,500, provided that such fee shall not be payable if the assigning Issuing Bank is making such assignment simultaneously with the assignment in its capacity as a Lender of all or a portion of its Revolving Credit Commitment to the same Eligible Assignee. (g) Each Lender Party may sell participations to one or more Persons (other than any Loan Party or any of its Affiliates) in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the Advances owing to it and the Note or Notes (if any) held by it); provided, however, that (i) such Lender Party's obligations under this Agreement (including, without limitation, its Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender Party shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the other Lender Parties shall continue to deal solely and directly with such Lender Party in connection with such Lender Party's rights and obligations under this Agreement, (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or release all or substantially all of the Collateral and (vi) if, at the time of such sale, such Lender Party was entitled to payments under Section 2.12(a) in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to such participant on such date; provided that such participant complies with the requirements of Section 2.12(e). (h) Any Lender Party may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender Party by or on behalf of the Borrower; provided, however, that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any Confidential Information received by it from such Lender Party. (i) Notwithstanding any other provision set forth in this Agreement, any Lender Party may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. (j) Upon notice to the Borrower from the Administrative Agent or any Lender of the loss, theft, destruction or mutilation of any Lender's Note, the Borrower will execute and deliver, in lieu of such original Note, a replacement promissory note, identical in form and substance to, and dated as of the same date as, the Note so lost, stolen or mutilated, subject to delivery by such Lender to the Borrower of an affidavit of lost note and indemnity in customary form. Upon the execution and delivery of the replacement Note, all references herein or in any of the other Loan Documents to the lost, stolen or mutilated Note shall be deemed references to the replacement Note. SECTION 9.08. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so Great Wolf Senior Secured Revolving Credit Facility 91 executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Agreement. SECTION 9.09. No Liability of the Issuing Banks. The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither any Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the Borrower shall have a claim against such Issuing Bank, and such Issuing Bank shall be liable to the Borrower, to the extent of any direct, but not consequential, damages suffered by the Borrower that the Borrower proves were caused by (i) such Issuing Bank's willful misconduct or gross negligence as determined in a final, non-appealable judgment by a court of competent jurisdiction in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) such Issuing Bank's willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, such Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. SECTION 9.10. Confidentiality. Neither the Administrative Agent nor any Lender Party shall disclose any Confidential Information to any Person without the consent of the Borrower, other than (a) to such Administrative Agent's or such Lender Party's Affiliates and their officers, directors, employees, agents and advisors and to actual or prospective Eligible Assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process, (c) as requested or required by any state, Federal or foreign authority or examiner regulating such Lender Party and (d) to any rating agency when required by it, provided that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Confidential Information relating to the Loan Parties received by it from such Lender Party. SECTION 9.11. Release of Collateral. (a) Upon the sale, lease, transfer or other disposition of any item of Collateral of any Loan Party (including, without limitation, as a result of the sale, in accordance with the terms of the Loan Documents, of the Loan Party that owns such Collateral and any Transfers pursuant to Section 5.02(e)(ii)(B) or (C)) in accordance with the terms of the Loan Documents, the Collateral Agent will, at the Borrower's expense, execute and deliver to such Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Collateral Document in accordance with the terms of the Loan Documents. (b) Upon the latest of (i) the payment in full in cash of the Secured Obligations, (ii) the Termination Date and (iii) the termination or expiration of all Letters of Credit and all Secured Hedge Agreements, the Liens granted by the Collateral Documents shall terminate and all rights to the Collateral shall revert to the applicable Loan Party. Upon any such termination, the Collateral Agent will, at the Borrower's expense, execute and deliver to the applicable Loan Parties such documents as such Loan Parties shall reasonably request to evidence such termination. Great Wolf Senior Secured Revolving Credit Facility 92 SECTION 9.12. Patriot Act Notification. Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Loan Parties that pursuant to the requirements of the USA Patriot Act (Title III of Pub.L. 107-56 (signed into law October 26, 2001)) (the "PATRIOT ACT"), it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify such Loan Party in accordance with the Patriot Act. The Parent Guarantor and the Borrower shall, and shall cause each of their Subsidiaries to, provide, to the extent commercially reasonable, such information and take such actions as are reasonably requested by the Administrative Agent or any Lenders in order to assist the Administrative Agent and the Lenders in maintaining compliance with the Patriot Act. SECTION 9.13. Jurisdiction, Etc. (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or any of the other Loan Documents in the courts of any jurisdiction. (b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. SECTION 9.14. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 9.15. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE OTHER LOAN PARTIES, THE ADMINISTRATIVE AGENT AND THE LENDER PARTIES IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES, THE LETTERS OF CREDIT OR THE ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY LENDER PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. [Balance of page intentionally left blank] Great Wolf Senior Secured Revolving Credit Facility 93 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BORROWER: GWR OPERATING PARTNERSHIP, L.L.L.P. By: GWR OP GENERAL PARTNER, LLC, its general partner By: GREAT WOLF RESORTS, INC., its sole member By /s/ J. Michael Schroeder --------------------------- Name: J. Michael Schroeder Title: Corporate Secretary PARENT GUARANTOR: GREAT WOLF RESORTS, INC. By /s/ J. Michael Schroeder --------------------------- Name: J. Michael Schroeder Title: Corporate Secretary Signature Page Great Wolf Senior Secured Revolving Credit Facility SUBSIDIARY GUARANTORS: GREAT BEAR LODGE OF SANDUSKY, LLC By: GWR OPERATING PARTNERSHIP, L.L.L.P., its sole member By: GWR OP GENERAL PARTNER, LLC, its general partner By: GREAT WOLF RESORTS, INC., its sole member By /s/ J. Michael Schroeder --------------------------- Name: J. Michael Schroeder Title: Corporate Secretary GREAT BEAR LODGE OF WISCONSIN DELLS, LLC By: GWR OPERATING PARTNERSHIP, L.L.L.P., its sole member By: GWR OP GENERAL PARTNER, LLC, its general partner By: GREAT WOLF RESORTS, INC., its sole member By /s/ J. Michael Schroeder --------------------------- Name: J. Michael Schroeder Title: Corporate Secretary GREAT LAKES SERVICES, LLC By: GWR OPERATING PARTNERSHIP, L.L.L.P., its sole member By: GWR OP GENERAL PARTNER, LLC, its general partner By: GREAT WOLF RESORTS, INC., its sole member By /s/ J. Michael Schroeder --------------------------- Name: J. Michael Schroeder Title: Corporate Secretary Signature Page Great Wolf Senior Secured Revolving Credit Facility GREAT WOLF LODGE OF KANSAS CITY, LLC By: GWR OPERATING PARTNERSHIP, L.L.L.P., its sole member By: GWR OP GENERAL PARTNER, LLC, its general partner By: GREAT WOLF RESORTS, INC., its sole member By /s/ J. Michael Schroeder --------------------------- Name: J. Michael Schroeder Title: Corporate Secretary GREAT WOLF LODGE OF TRAVERSE CITY, LLC By: GWR OPERATING PARTNERSHIP, L.L.L.P., its sole member By: GWR OP GENERAL PARTNER, LLC, its general partner By: GREAT WOLF RESORTS, INC., its sole member By /s/ J. Michael Schroeder --------------------------- Name: J. Michael Schroeder Title: Corporate Secretary GLGB MANAGER III, LLC By: GWR OPERATING PARTNERSHIP, L.L.L.P., its sole member By: GWR OP GENERAL PARTNER, LLC, its general partner By: GREAT WOLF RESORTS, INC., its sole member By /s/ J. Michael Schroeder --------------------------- Name: J. Michael Schroeder Title: Corporate Secretary Signature Page Great Wolf Senior Secured Revolving Credit Facility GWR MICHIGAN, LLC By: GWR OPERATING PARTNERSHIP, L.L.L.P., its sole member By: GWR OP GENERAL PARTNER, LLC, its general partner By: GREAT WOLF RESORTS, INC., its sole member By /s/ J. Michael Schroeder --------------------------- Name: J. Michael Schroeder Title: Corporate Secretary NIAGARA GLENVIEW TENT & TRAILER PARK COMPANY By /s/ J. Michael Schroeder --------------------------- Name: J. Michael Schroeder Title: Corporate Secretary Signature Page Great Wolf Senior Secured Revolving Credit Facility ADMINISTRATIVE AGENT, COLLATERAL AGENT, SWING LINE BANK, INITIAL ISSUING BANK AND INITIAL LENDER: CITICORP NORTH AMERICA, INC. By /s/ David Bolton ----------------------------- Name: David Bolton Title: Vice President Signature Page Great Wolf Senior Secured Revolving Credit Facility INITIAL LENDERS: SOCIETE GENERALE By /s/ Thomas K. Day ----------------------------- Name: Thomas K. Day Title: Managing Director Signature Page Great Wolf Senior Secured Revolving Credit Facility CALYON NEW YORK BRANCH By /s/ Bruno DeFloor ---------------------------- Name: Bruno DeFloor Title: Director Signature Page Great Wolf Senior Secured Revolving Credit Facility SCHEDULE I COMMITMENTS AND APPLICABLE LENDING OFFICES
NAME OF INITIAL LENDER/ COMMITMENTS INITIAL ----------------------------------- ISSUING REVOLVING LETTER OF DOMESTIC LENDING EURODOLLAR LENDING BANK CREDIT CREDIT SWING LINE OFFICE OFFICE - ---------------- ----------- ---------- ---------- ----------------------------- --------------------------- Citicorp North $25,000,000 $5,000,000 $5,000,000 2 Penns Way, Suite 110 2 Penns Way, Suite 110 America, Inc. New Castle, DE 19720 New Castle, DE 19720 Attn: Rashan Robinson Attn: Rashan Robinson Tel: (302) 894-6028 Tel: (302) 894-6028 Fax: (212) 994-0849 Fax: (212) 994-0849 E-mail: rashan.robinson E-mail: rashan.robinson @citibgroup.com @citibgroup.com Societe Generale $25,000,000 560 Lexington Avenue, 560 Lexington Avenue, 4th Floor 4th Floor New York, NY 10022 New York, NY 10022 Attn: Arlene Tellerman Attn: Arlene Tellerman Tel: (212) 278-6086 Tel: (212) 278-6086 Fax: (212) 278-7490 Fax: (212) 278-7490 E-mail: arlene.tellerman E-mail: arlene.tellerman @sgcib.com @sgcib.com Calyon New York $25,000,000 1301 Avenue of the Americas 1301 Avenue of the Americas Branch New York, NY 10019 New York, NY 10019 Attn: Glenda Rajnauth Attn: Glenda Rajnauth Tel: (212) 261-7855 Tel: (212) 261-7855 Fax: (917) 849-5458 Fax: (917) 849-5458 E-mail: E-mail: glenda.rajnauth@us.calyon.com glenda.rajnauth@us.calyon.com TOTAL $75,000,000 $5,000,000 $5,000,000
Sch. I Great Wolf Senior Secured Revolving Credit Facility SCHEDULE II BORROWING BASE ASSETS 1. Great Wolf Lodge of Wisconsin Dells 1400 Great Wolf Lodge Drive Wisconsin Dells, Wisconsin 53965 (Other than the parcel of land on which the Great Wolf Lodge Condominium is situated.) 2. Great Wolf Lodge of Sandusky 4600 Milan Road Sandusky, Ohio 44870 Great Wolf Senior Secured Revolving Credit Facility Sch. II SCHEDULE III DESIGNATED JOINT VENTURES 1. A joint venture to be formed with the Confederated Tribes of the Chehalis Reservation or their affiliates to develop a Resort Asset on certain tribal land located in Thurston County, Washington. Great Wolf Senior Secured Revolving Credit Facility Sch. III EX-10.16 6 g92795exv10w16.txt LOAN AGREEMENT, DATED DECEMBER 20, 2004 Exhibit 10.16 LOAN AGREEMENT Dated as of December 20, 2004 by and among GREAT WOLF KANSAS SPE, LLC and GREAT WOLF TRAVERSE SPE, LLC as Borrower, and CITIGROUP GLOBAL MARKETS REALTY CORP. as Lender joined in the execution and delivery hereof by THE TRAVELERS INSURANCE COMPANY, as initial Note B Lender TABLE OF CONTENTS
PAGE ---- ARTICLE I. CERTAIN DEFINITIONS................................................................... 1 Section 1.1. Definitions........................................................................... 1 ARTICLE II. GENERAL TERMS......................................................................... 33 Section 2.1. The Loan.............................................................................. 33 Section 2.2. Use of Proceeds....................................................................... 33 Section 2.3. Security for the Loan................................................................. 34 Section 2.4. Borrower's Note....................................................................... 34 Section 2.5. Principal and Interest................................................................ 34 Section 2.6. Prepayment............................................................................ 35 Section 2.7. Defeasance............................................................................ 38 Section 2.8. Application of Payments............................................................... 42 Section 2.9. Method and Place of Payment........................................................... 42 Section 2.10. Taxes................................................................................. 43 Section 2.11. KC Release............................................................................ 43 Section 2.12. Central Cash Management............................................................... 45 Section 2.13. Reserve Accounts...................................................................... 49 Section 2.14. Additional Provisions Relating to the Pledged Accounts................................ 54 Section 2.15. Security Agreement.................................................................... 54 Section 2.16. Mortgage Recording Taxes; Release of Liens............................................ 57 Section 2.17. Release of Permitted Use Facility..................................................... 57 ARTICLE III. CONDITIONS PRECEDENT.................................................................. 61 Section 3.1. Conditions Precedent to Closing....................................................... 61 Section 3.2. Execution and Delivery of Agreement................................................... 66 ARTICLE IV. REPRESENTATIONS AND WARRANTIES........................................................ 66 Section 4.1. Representations and Warranties as to Borrower......................................... 66 Section 4.2. Representations and Warranties as to the Mortgaged Property........................... 70 Section 4.3. Survival of Representations........................................................... 75 ARTICLE V. AFFIRMATIVE COVENANTS................................................................. 75 Section 5.1. Affirmative Covenants................................................................. 75 ARTICLE VI. NEGATIVE COVENANTS.................................................................... 105 Section 6.1. Negative Covenants.................................................................... 105 ARTICLE VII. EVENT OF DEFAULT...................................................................... 108 Section 7.1. Event of Default...................................................................... 108 Section 7.2. Remedies.............................................................................. 110 Section 7.3. Remedies Cumulative................................................................... 111 Section 7.4. Intentionally Omitted................................................................. 111
i
PAGE ---- Section 7.5. Curative Advances..................................................................... 112 ARTICLE VIII. SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS........... 112 Section 8.1. Applicable to Borrower................................................................ 112 ARTICLE IX. MISCELLANEOUS......................................................................... 117 Section 9.1. Survival.............................................................................. 117 Section 9.2. Lender's Discretion................................................................... 117 Section 9.3. Governing Law......................................................................... 117 Section 9.4. Modification, Waiver in Writing....................................................... 118 Section 9.5. Delay Not a Waiver.................................................................... 118 Section 9.6. Notices............................................................................... 118 Section 9.7. TRIAL BY JURY......................................................................... 119 Section 9.8. Headings.............................................................................. 119 Section 9.9. Assignment............................................................................ 119 Section 9.10. Severability.......................................................................... 120 Section 9.11. Preferences........................................................................... 120 Section 9.12. Waiver of Notice...................................................................... 120 Section 9.13. Consents.............................................................................. 121 Section 9.14. Schedules Incorporated................................................................ 121 Section 9.15. Offsets, Counterclaims and Defenses................................................... 121 Section 9.16. No Joint Venture or Partnership....................................................... 121 Section 9.17. Waiver of Marshalling of Assets Defense............................................... 121 Section 9.18. Waiver of Counterclaim................................................................ 122 Section 9.19. Conflict; Construction of Documents................................................... 122 Section 9.20. Brokers and Financial Advisors........................................................ 122 Section 9.21. Counterparts.......................................................................... 122 Section 9.22. Estoppel Certificates................................................................. 122 Section 9.23. Payment of Expenses................................................................... 122 Section 9.24. Non-Recourse.......................................................................... 123 Section 9.25. Joint and Several Liability........................................................... 126
SCHEDULES 1 - Immediate Repairs Reserved for in Deferred Maintenance Escrow Account 2 - Organizational Chart 3 - Exceptions to Representations and Warranties 4 - Addresses for Notices 5 - Intellectual Property 6 - Mold Abatement O&M Program 7 - Release Parcel 8 - Qualified Transferee ii LOAN AGREEMENT THIS LOAN AGREEMENT, made as of December 20, 2004, is by and among GREAT WOLF KANSAS SPE, LLC, a Delaware limited liability company ("KC Borrower") and GREAT WOLF TRAVERSE SPE, LLC, a Delaware limited liability company ("TC Borrower"; KC Borrower and TC Borrower are collectively and individually referred to herein as "Borrower"; references herein to "Borrower", unless otherwise specifically stated, shall also mean and refer to each and every one of KC Borrower and TC Borrower, jointly and severally), each having an address at c/o Great Wolf Resorts, Inc., 122 West Washington Avenue, 10th Floor, Madison, Wisconsin 53703, and CITIGROUP GLOBAL MARKETS REALTY CORP., a New York corporation, having an address at 388 Greenwich Street, 11th Floor, New York, New York 10013 (together with its successors and assigns, and together with the Note A Lender and the Note B Lender, and their respective successors and assigns, whether one or more, "Lender"). THE TRAVELERS INSURANCE COMPANY, a Connecticut corporation, joins in the execution and delivery of this Loan Agreement as the initial Note B Lender hereunder. RECITALS WHEREAS, Borrower desires to obtain from Lender the Loan in an amount equal to the Loan Amount (each as hereinafter defined) to, with respect to the Mortgaged Property (as hereinafter defined), finance a portion of the acquisition cost of and/or refinance existing debt at such Mortgaged Property and to pay certain other fees and expenses; WHEREAS, Lender is unwilling to make the Loan unless Borrower executes and delivers this Agreement, the Note and the Loan Documents (each as hereinafter defined) to which it is a party which shall establish the terms and conditions of, and provide security for, the Loan; and WHEREAS, Borrower has agreed to establish certain accounts and to grant to Lender, a security interest therein upon the terms and conditions of the security agreement set forth in Section 2.15. NOW, THEREFORE, in consideration of the making of the Loan by Lender and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, the parties hereby covenant, agree, represent and warrant as follows: ARTICLE I. CERTAIN DEFINITIONS Section 1.1. Definitions. For all purposes of this Agreement: (1) the capitalized terms defined in this Article 1 have the meanings assigned to them in this Article 1 and include the plural as well as the singular; (2) all accounting terms have the meanings assigned to them in accordance with GAAP (as hereinafter defined) unless otherwise explicitly set forth herein; (3) the words "herein", "hereof", and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, or other subdivision; (4) the words "include," "includes" or "including" shall be deemed to be followed by the phrase "without limitation," if not already so drafted; and (5) the following terms have the following meanings: "Account Collateral" has the meaning set forth in Section 2.15(a) hereof. "Accounts" means all accounts (as defined in the relevant UCC), now owned or hereafter acquired by Borrower, and arising out of or in connection with, the operation of the Mortgaged Property and all other accounts described in the Management Agreement and all present and future accounts receivable, inventory accounts, chattel paper, notes, insurance policies, Instruments, Documents or other rights to payment and all forms of obligations owing at any time to Borrower thereunder, whether now existing or hereafter created or otherwise acquired by or on behalf of Borrower, and all Proceeds thereof and all liens, security interests, guaranties, remedies, privileges and other rights pertaining thereto, and all rights and remedies of any kind forming the subject matter of any of the foregoing. "Actual Knowledge" means the actual knowledge of the chief executive officer, the chief financial officer, the general counsel and the treasurer of Great Wolf after due inquiry of the general manager and the assistant general manager at each Mortgaged Property. "Additional Resort Test" means, as of any date of calculation from and after the occurrence of an Additional Resort Event, a test which shall be satisfied if the Underwritten Net Cash Flow, measured quarterly on a trailing twelve month basis as of the end of each of the immediately preceding eight (8) calendar quarters, is at least equal to the product of (i) 1.80 and (ii) an assumed loan debt service amount equal to the product of the then current Principal Indebtedness multiplied by a market constant of 0.085. "Additional Resort Coverage Test" means, as of any date of calculation from and after the occurrence of an Additional Resort Event, a test which shall be satisfied if the Underwritten Net Cash Flow, measured quarterly on a trailing twelve month basis is at least equal to the product of (i) 1.50 and (ii) an assumed loan debt service amount equal to the product of the then current Principal Indebtedness multiplied by a market constant of 0.085. "Additional Resort Event" means the event that shall be deemed to have occurred if, commencing in the twenty-fifth (25th) month of the loan term or thereafter, another hotel is opened or operated within 100 miles (with respect to the Great Lakes, however, measured, along the land routes, not across the water, of the Great Lakes) of either Mortgaged Property under the name "Great Wolf Lodge", "Great Bear Lodge", "Blue Harbor" or any other name or theme similar to any of the foregoing or to that under which the Mortgaged Property is operated, which such names or themes are owned or licensed by Great Wolf or its Affiliates. "Additional Resort Release Test" means, as of any date of calculation from and after the occurrence of an Additional Resort Event, a test which shall be satisfied if the Underwritten Net Cash Flow, measured quarterly on a trailing twelve month basis is at least equal to the product of (i) 1.80 and (ii) an assumed loan debt service amount equal to the product of the then current Principal Indebtedness multiplied by a market constant of 0.085. 2 "Advance Bookings" means all commitments, reservations and agreements regarding future use of guest rooms, banquet rooms, conference rooms and other facilities constituting part of the Mortgaged Property. "Advance Bookings Deposits" means all deposits, advance payments and similar items for Bookings. "Affiliate" of any specified Person means any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or other beneficial interests, by contract or otherwise; and the terms "controlling" and "controlled" have the meanings correlative to the foregoing. "Agreement" means this Loan Agreement, together with the Schedules and Exhibits hereto, as the same may from time to time hereafter be modified, supplemented or amended. "Applicable Interest Rate" means for Loan A and Loan B a rate per annum equal to (a) 5.8350% with respect to Loan A, and (b) 9.2100% with respect to Loan B. "Appraisal" means each appraisal with respect to an individual Mortgaged Property prepared by an Appraiser in accordance with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation, in compliance with the requirements of Title 11 of the Financial Institution Reform, Recovery and Enforcement Act and utilizing customary valuation methods such as the income, sales/market or cost approaches. "Appraiser" means a nationally recognized MAI appraiser selected by Borrower and reasonably approved by Lender. "Assignment of Profits and Leases" means each Assignment of Profits and Leases, dated as of the Closing Date, granted by each Borrower to Lender with respect to the Mortgaged Property owned by such Borrower, as the same may thereafter from time to time be supplemented, amended, modified or extended, and collectively, all of them. "Assumed Loan Debt Service" means the greater of (i) the product of the Monthly Debt Service Payment Amount multiplied by twelve (12) and (ii) the product of the Principal Indebtedness multiplied by a market constant of 0.085. "Bankruptcy Code" means Title 11 of the United States Code, as amended from time to time, and all rules and regulations promulgated thereunder. "Basic Carrying Costs" means the following costs with respect to the Mortgaged Property: (i) Impositions and (ii) insurance premiums for policies of insurance required to be maintained by Borrower pursuant to this Agreement or the other Loan Documents. "Borrower" has the meaning provided in the first paragraph of this Agreement. 3 "Business Day" means any day other than a Saturday, a Sunday or a day on which commercial banks in the State of New York are authorized or obligated by law, governmental decree or executive order to be closed. "Capital Improvement Costs" means costs incurred or to be incurred in connection with replacements and capital repairs made to the Mortgaged Property which would be capitalized in accordance with GAAP. "Case Goods" shall mean furniture and furnishings used in the Mortgaged Property, including, without limitation: chairs, beds, chests, headboards, desks, lamps, tables, television sets, mirrors, pictures, wall decorations and similar items. "Central Reservations Services Agreement" means the Central Reservations Services Agreement for each Mortgaged Property entered into between the Licensor and each Borrower, as such agreement(s) may be amended, modified or supplemented in accordance with the terms and conditions hereof from time to time. "CERCLA" has the meaning set forth in Section 5.1(d)(i) hereof. "Chattel Paper" means all "chattel paper" as defined in the UCC (whether tangible chattel paper or electronic chattel paper), in, to or under which Borrower has any right, title or interest, whether now owned or hereafter acquired. "Closing Date" means the date of the funding of the Loan. "Code" means the Internal Revenue Code of 1986, as amended, and as it may be further amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form. "Collateral" means, collectively, the Land, Improvements, Leases, Receipts, Receivables, Personalty, and all Proceeds, and (to the full extent assignable) Permits, which is or hereafter may become subject to a Lien in favor of Lender as security for the Loan (whether pursuant to the Mortgages, any other Loan Document or otherwise), all whether now owned or hereafter acquired and all other property which is or hereafter may become subject to a Lien in favor Lender as security for the Loan and including all property of any kind described as part of the Mortgaged Property under any of the Mortgages, including, without limitation, all Water Amenities. The Collateral shall not include Deposit Accounts which are not Pledged Accounts and cash and cash equivalents which this Agreement provides are free of Lender's Liens and security interests. "Collateral Agent" shall mean initially the Note A Lender, in its capacity as collateral agent for each Lender under this Agreement and the other Loan Documents, and its successors and assigns from time to time as such collateral agent. "Collateral Security Instrument" means any right, document or instrument, other than the Mortgage, given as security for the Loan, including, without limitation the Contract Assignment. 4 "Collection Account" has the meaning set forth in Section 2.12(a) hereof. "Collection Account Agreement" means the Collection Account Agreement, dated as of the applicable date and executed by Borrower, Lender and the Collection Account Bank, relating to the Collection Account and the Reserve Accounts and any other accounts maintained with the Collection Account Bank. "Collection Account Bank" means Wachovia Bank, N.A., or any successor financial institution appointed by Lender. "Condemnation Proceeds" means, in the event of a Taking with respect to the Mortgaged Property, the proceeds in respect of such Taking less any reasonable third party out-of-pocket expenses incurred in prosecuting the claim for and otherwise collecting such proceeds. "Consumer Price Index" means the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor, in the area where the Mortgaged Property is located; All Items (1982-84 = 100), or any successor index thereto, appropriately adjusted and if the Consumer Price Index ceases to be published and there is no successor thereto, such other index as Lender and Borrower shall mutually agree upon. "Contest" has the meaning set forth in Section 9.24 hereof. "Contingent Obligation" means, as used in the definition of Other Borrowings, without duplication, any obligation of Borrower guaranteeing any indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly. Without limiting the generality of the foregoing, the term "Contingent Obligation" shall include any obligation of Borrower: (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor; (ii) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor; (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming Borrower is required to perform thereunder) as determined by Lender in good faith. 5 "Contract Assignment" means, with respect to the Mortgaged Property, each Assignment of Contracts, Licenses, Permits, Agreements, Warranties and Approvals, dated as of the Closing Date and executed by each Borrower, and collectively, all of them.. "Contracts" means the Management Agreement, the License Agreement, the Central Reservations Services Agreement, the Tall Pines Agreement and all other agreements to which Borrower is a party or which are assigned to Borrower by the Manager in the Management Agreement and which are executed in connection with the construction, operation and management of the Mortgaged Property (including, without limitation, agreements for the sale, lease or exchange of goods or other property and/or the performance of services by it, in each case whether now in existence or hereafter arising or acquired) as any such agreements have been or may be from time to time amended, supplemented or otherwise modified. "Debt Service Coverage Ratio" at any time of determination thereof is equal to the ratio of Underwritten Net Cash Flow as determined by Lender for the most recently ended twelve month period divided by the Assumed Loan Debt Service. "Debt Service Coverage Test" means a test which shall be satisfied if the Underwritten Net Cash Flow, measured quarterly on a trailing twelve month basis as of the end of each calendar quarter beginning with the calendar quarter ending December 31, 2005, is at least equal to the product of 1.35 multiplied by the Assumed Loan Debt Service. "Deed of Trust Trustee" means the trustee under any Mortgage that constitutes a "deed of trust" under applicable law. "Default" means the occurrence of any event which, but for the giving of notice or the passage of time, or both, would be an Event of Default. "Default Rate" means the per annum interest rate equal to the lesser of (a) 5.0% per annum in excess of the rate otherwise applicable hereunder and (b) the maximum rate allowable by applicable law. "Defeasance" means any of a Total Defeasance or a Partial Defeasance. "Defeasance Collateral" shall mean the Partial Defeasance Collateral or Total Defeasance Collateral, as applicable. "Defeasance Collateral Account" has the meaning set forth in Section 2.7. "Defeasance Date" has the meaning set forth in Section 2.7(a)(i). "Defeased Note" has the meaning set forth in Section 2.7(b)(iv). "Defeased A Note" has the meaning set forth in Section 2.7(b)(iv). "Defeased B Note" has the meaning set forth in Section 2.7(b)(iv). 6 "Deferred Maintenance Escrow Account" has the meaning set forth in Section 2.13(a). "Deposit Account" means all "deposit accounts" as defined in the UCC, in which Borrower has any right, title or interest, whether now owned or hereafter acquired. "Direction Letter" has the meaning set forth in Section 2.12(a)(i). "Disclosure Certificate" has the meaning set forth in Section 5.1(w) hereof. "Disclosure Documents" has the meaning set forth in Section 5.1(w) hereof. "Documents" means all "documents" as defined in the UCC (whether negotiable or non-negotiable) or other receipts covering, evidencing or representing goods, in, to or under which Borrower has any right, title or interest, whether now owned or hereafter acquired. "EO13224" has the meaning set forth in Section 4.1(v) hereof. "Eligible Account" means a separate and identifiable account from all other funds held by the holding institution, which account is either (i) an account maintained with a federal or state chartered depository institution or trust company that (A) satisfies the Rating Criteria and (B) insures the deposits made to such account through the Federal Deposit Insurance Corporation, or (ii) a segregated trust account maintained with the corporate trust department of a federal or state chartered depository institution or trust company subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations Section 9.10(b) which, in either case, has corporate trust powers, acting in its fiduciary capacity and in either case having combined capital and surplus of at least $100,000,000 or otherwise acceptable to the Rating Agencies. An Eligible Account shall not be evidenced by a certificate of deposit, passbook, other instrument or any other physical indicia of ownership. Following a downgrade of such institution below the Rating Criteria, or a withdrawal, qualification or suspension of such institution's rating, each account must at Lender's request promptly (and in any case within not more than thirty (30) calendar days) be moved to a qualifying institution or to one or more segregated trust accounts in the trust department of such institution, if permitted. "Eligible Bank" shall mean a bank that (i) satisfies the Rating Criteria and (ii) insures the deposits hereunder through the Federal Deposit Insurance Corporation. "Engineer" means an Independent engineer selected by Borrower and reasonably approved by Lender. "Environmental Auditor" means an Independent environmental auditor selected by Borrower and reasonably approved by Lender. "Environmental Claim" means any written notice, written notification, written request for information, written claim, administrative, regulatory or judicial action, suit, judgment or written demand by any Person or Governmental Authority alleging or asserting liability with respect to Borrower or any Mortgaged Property (whether for damages, contribution, indemnification, cost recovery, compensation, injunctive relief, investigatory, 7 response, remedial or cleanup costs, damages to natural resources, personal injuries, fines or penalties) arising out of, based on or resulting from (i) the presence, Use or Release into the environment of any Hazardous Substance at any location (whether or not owned, managed or operated by Borrower) that affects Borrower or any Mortgaged Property, (ii) any fact, circumstance, condition or occurrence forming the basis of any violation, or alleged violation, of any applicable Environmental Law or (iii) any alleged injury or threat of injury on or about the Mortgaged Property to human health, safety or the environment arising out of (x) the presence, Use or Release into the environment of any Hazardous Substance at any location (whether or not owned, managed or operated by Borrower) that affects Borrower or any Mortgaged Property or (y) any fact, circumstance, condition or occurrence forming the basis of any violation, or alleged violation, of any applicable Environmental Law. "Environmental Indemnity Agreement" means the Environmental Indemnity Agreement dated as of the Closing Date, from Borrower and the Guarantor, collectively, as indemnitor, to Lender, as indemnitee, as the same may be amended, modified or supplemented from time to time. "Environmental Laws" means any and all present and future federal, state or local laws, statutes, ordinances, rules or regulations, or any judicial interpretation thereof, any judicial or administrative orders, decrees or judgments thereunder issued by a Governmental Authority, and any permits, approvals, licenses, registrations, filings and authorizations, in each case as now or hereafter in effect, relating to the environment, protection of human health or safety from Hazardous Substances, or the Release or threatened Release of Hazardous Substances or otherwise relating to the Use of Hazardous Substances. "Environmental Reports" means each and every "Phase I Environmental Site Assessment" (and, if applicable, "Phase II Environment Site Assessment") as referred to in the ASTM Standards on Environmental Site Assessments for Commercial Real Estate, E 1527-2000 and an asbestos survey, with respect to the Mortgaged Property, prepared by one or more Environmental Auditors and delivered to Lender and any amendments or supplements thereto delivered to Lender. "Equipment" means (i) all "equipment" as defined in the UCC, in which Borrower has any right, title or interest, whether now owned or hereafter acquired, including without limitation all such equipment included in or associated with Water Amenities, and (ii) all of the following (regardless of how classified under the UCC): all building materials, construction materials, personal property constituting furniture, fittings, appliances, apparatus, leasehold improvements, machinery, devices, interior improvements, appurtenances, equipment, plant, furnishings, fixtures, computers, electronic data processing equipment, telecommunications equipment and other fixed assets now owned or hereafter acquired by Borrower, and all Proceeds of (i) and (ii) as well as all additions to, substitutions for, replacements of or accessions to any of the items recited as aforesaid and all attachments, components, parts (including spare parts) and accessories, whether installed thereon or affixed thereto, all regardless of whether the same are located on any Mortgaged Property or are located elsewhere (including, without limitation, in warehouses or other storage facilities or in the possession of or on the premises of a bailee, vendor or manufacturer) for purposes of 8 manufacture, storage, fabrication or transportation and all extensions and replacements to, and proceeds of, any of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and, as of the relevant date, any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" means any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which Borrower is a member and (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which Borrower is a member. "Event Date" has the meaning set forth in Section 2.6(c) hereof. "Event of Default" has the meaning set forth in Section 7.1 hereof. "Excess Interest" has the meaning set forth in Section 2.5(e) hereof. "FF&E Costs" means, collectively, the costs of (i) replacement of and/or addition to Soft Goods and Case Goods at the Mortgaged Property, (ii) signage, audio-visual equipment, kitchen appliances, carpeting and all equipment, including front desk and back-of-the-house computer equipment and (iii) maintaining, repairing, replacing existing Equipment in, acquiring new Equipment for, and making improvements to, the water park including without limitation with respect to all Water Amenities; provided, that FF&E Costs shall not include costs of or associated with the repair or replacement or upgrade of Fixed Asset Supplies or Software. "FF&E Costs Reserve Account" has the meaning set forth in Section 2.13(a)(i). "FF&E Percentage" means 3.0% with respect to years 2-5 of the term of the Loan and 3.5% thereafter. "FF&E Suspension Condition" means the suspension of the requirement of monthly deposits into the FF&E Costs Reserve Account which shall apply at all times up to December 31, 2005, and, thereafter, if and for so long as Borrower demonstrates to Lender's reasonable satisfaction, and Lender reasonably determines based upon such information and any other information which Lender may obtain, that Borrower has made for the past twelve months, commencing with the twelve months ending December 31, 2005, and reasonably expects to continue to make expenditures for FF&E Costs which equal or exceed the FF&E Percentage of Gross Revenues for such period. "FF&E/DSCR Test" means a test which shall be satisfied if the Underwritten Net Cash Flow, measured quarterly on a trailing twelve month basis as of the end of each calendar quarter beginning with the calendar quarter ending December 31, 2005, is at least equal to the product of 1.40 multiplied by the Assumed Loan Debt Service. 9 "Fixed Asset Supplies" shall mean items included within "Property and Equipment" under the Uniform System of Accounts including, but not limited to, linen, china, glassware, tableware, uniforms, and similar items, whether used in connection with public space or guest rooms at the Mortgaged Property. "First Open Defeasance Date" shall mean the earlier of (i) the Payment Date in January, 2009, or (ii) the date that is two (2) years from the "start up day" (within the meaning of Section 860G(a)(9) of the IRC) of the REMIC Trust established in connection with the final Securitization involving the Loan. "First Open Prepayment Date" is the Payment Date which is in the second month preceding the month in which the Scheduled Maturity Date occurs. The First Open Prepayment Date is the Payment Date in the month of November, 2014. "First Payment Date" has the meaning set forth in Section 2.5(a) hereof. "Fiscal Year" means the 12-month period ending on December 31st of each year (or, in the case of the fiscal year in which the Closing Date occurs, such shorter period from the Closing Date through such date) or such other fiscal year of Borrower as Borrower may select from time to time with the prior consent of Lender. "Fitch" means Fitch, Inc. and its successors. "Fund" has the meaning set forth in the definition of "Permitted Investments". "GAAP" means generally accepted accounting principles in the United States of America as of the date of the applicable financial report, modified to reflect the Uniform System of Accounts, where applicable, and in all cases consistently applied. "General Intangibles" means all "general intangibles" as defined in the relevant UCC, now owned or hereafter acquired by Borrower, in, to or under which Borrower has any right, title or interest, whether now owned or hereafter acquired. "Governmental Authority" means any nation or government, any state, county, municipality or other political subdivision thereof or any governmental body, agency, authority, department or commission (including, without limitation, any taxing authority) or any instrumentality or officer of any of the foregoing (including, without limitation, any court or tribunal) exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any corporation, partnership or other entity directly or indirectly owned or controlled by the foregoing. "Great Lakes" means The Great Lakes Companies, Inc., a Wisconsin corporation. "Great Wolf" means Great Wolf Resorts, Inc., a Delaware corporation. "Gross Revenue" means, for any period, the total dollar amount of all income and receipts received by, or for the account of, Borrower in the ordinary course of business with respect to the Mortgaged Property, but excluding Loss Proceeds (other than the proceeds of 10 business interruption insurance or the proceeds of a temporary Taking in lieu of Receipts which shall be included in Gross Revenue). "Guarantor" means Great Wolf and GWR Operating Partnership, L.L.L.P., on a joint and several basis. "Guaranty of Nonrecourse Obligations" means, with respect to the Loan, the Guaranty of Nonrecourse Obligations guaranteeing the exceptions to the nonrecourse provisions of the Loan Documents for which liability is retained as described in Section 9.24 hereof from the Guarantor to Lender. "Hazardous Substance" means all or any of the following: (i) substances, materials, compounds, wastes, products, emissions and vapors that are defined or listed in, regulated by, or otherwise classified pursuant to, any applicable Environmental Law, as hazardous, toxic, deleterious, harmful or dangerous, including any so defined, listed, regulated or classified as "hazardous substances", "hazardous materials", "hazardous wastes", "toxic substances", "pollutants", or "contaminants"; (ii) waste oil, oil, petroleum or petroleum derived substances, natural gas, natural gas liquids or synthetic gas and drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (iii) any flammable substances or explosives or any radioactive materials; (iv) asbestos in any form (other than if properly contained in accordance with applicable Environmental Law); (v) electrical or hydraulic equipment which contains any oil or dielectric fluid containing at least 50 parts per million of polychlorinated biphenyls (PCBs); (vi) radon; (vii) urea formaldehyde; (viii) lead paint; or (ix) fungus, mold or mildew the presence of which is reasonably likely to materially adversely affect the health of average individuals or materially adversely affect the value or utility of the Mortgaged Property. Notwithstanding the foregoing, "Hazardous Substances" will not include ordinary cleaning solvents, fuels, lubricants, maintenance items, paints, disinfectants and other substances which are customarily used in the operation of a waterpark resort that includes a hotel, indoor water park, restaurants, spas and associated facilities and vehicles, provided such solvents and substances are stored and used in material compliance with applicable Environmental Law. "Immediate Repairs" has the meaning set forth in Section 2.13(a)(ii) hereof. "Impositions" means all taxes (including, without limitation, all real estate, ad valorem, sales (including those imposed on lease rentals), use, single business, gross receipts, value added, intangible transaction privilege, privilege or license or similar taxes), assessments (including, without limitation, all assessments for public improvements or benefits, whether or not commenced or completed within the term of the Loan), ground rents, water, sewer or other rents and charges, excises, levies, governmental fees (including, without limitation, license, permit, inspection, authorization and similar fees), and all other governmental charges, in each case whether general or special, ordinary or extraordinary, foreseen or unforeseen, in respect of each Mortgaged Property (including all interest and penalties thereon), accruing during or in respect of the term hereof and which may be assessed against or imposed on or in respect of or be a Lien upon (1) Borrower (including, without limitation, all income, franchise, single business or other taxes imposed on Borrower for the privilege of doing business in the jurisdiction in which each Mortgaged Property, or any other collateral delivered or pledged to Lender in 11 connection with the Loan, is located) or Lender, or (2) any Mortgaged Property, or any other collateral delivered or pledged to Lender in connection with the Loan, or any part thereof or any Receipts therefrom or any estate, right, title or interest therein, or (3) any occupancy, operation, use or possession of, or sales from, or activity conducted on, or in connection with any Mortgaged Property or the leasing or use of any Mortgaged Property or any part thereof, or the acquisition or financing of the acquisition of any Mortgaged Property by Borrower. Impositions shall exclude all income, franchise and corporate taxes with respect to Borrower (other than those referred to under clause (1) above). "Improvements" means all buildings, structures, fixtures and improvements now or hereafter owned by Borrower of every nature whatsoever situated on any Land constituting part of the Mortgaged Property (including, without limitation, all buildings, structures, fixtures and improvements now or hereafter owned by Borrower included in or associated with Water Amenities, and all gas and electric fixtures, radiators, heaters, engines and machinery, boilers, ranges, elevators and motors, plumbing and heating fixtures, carpeting and other floor coverings, water heaters, awnings and storm sashes, and cleaning apparatus which are or shall be affixed to the Land or said buildings, structures or improvements and including any additions, enlargements, extensions, modifications, repairs or replacements thereto). "Indebtedness" means the Principal Indebtedness, together with all other obligations and liabilities due or to become due to Lender pursuant hereto, under the Note or in accordance with any of the other Loan Documents, and all other amounts, sums and expenses paid by or payable to Lender hereunder or pursuant to the Note or any of the other Loan Documents. "Indemnified Parties" has the meaning set forth in Section 5.1(i). "Independent" means, when used with respect to any Person, a Person that (i) does not have any material direct financial interest or any material indirect financial interest in Borrower or in any Affiliate of Borrower, (ii) is not connected with Borrower or any Affiliate of Borrower as an officer, employee, trustee, partner, director or person performing similar functions, and (iii) is not a member of the immediate family of any Person described in clauses (i) or (ii). "Independent Director" has the meaning set forth in Section 8.1 hereof. "Instruments" means all "instruments" as defined in the UCC, in, to or under which Borrower has any right, title or interest, whether now owned or hereafter acquired. "Insurance Escrow Account" has the meaning set forth in Section 2.13(b). "Insurance Premiums" has the meaning set forth in Section 5.1(x)(iii). "Insurance Proceeds" means, in the event of a casualty with respect to the Mortgaged Property, the proceeds received under any insurance policy applicable thereto. "Insurance Requirements" means all material terms of any insurance policy required pursuant to this Agreement or any of the Mortgages and all material regulations, rules 12 and other requirements of the National Board of Fire Underwriters or such other body exercising similar functions applicable to or affecting the Mortgaged Property or any part thereof or any use or condition thereof. "Insured Casualty" has the meaning set forth in Section 5.1(x)(iv)(B). "Intellectual Property" means all trademark licenses, trademarks, rights in intellectual property, trade names, service marks and copyrights, copyright licenses, patents, patent licenses or the license to use intellectual property such as computer software (other than commercially available software), in each case owned or licensed for use (but if so licensed, only as to Borrower's interest as licensee therein) by Borrower and used at or in connection with the Mortgaged Property or its operation, and other proprietary business information belonging to Borrower relating to Borrower's policies, procedures, manuals and trade secrets. "Interested Parties" has the meaning set forth in Section 5.1(w) hereof. "Inventory" means all "inventory" as defined in the UCC and shall include all Documents representing the same, in which Borrower has any right, title or interest, whether now owned or hereafter acquired, including, without limitation, all such inventory included in or associated with Water Amenities. "Investment Property" means all "investment property" as defined in the UCC, in, to or under which Borrower has any right, title or interest, whether now owned or hereafter acquired. "IRS" has the meaning provided in Section 2.10(b) hereof. "KC Allocated Loan Amount" means an amount equal to 44% of the then outstanding Principal Indebtedness. "KC Property" means the Land and Improvements owned by the KC Borrower located on the parcel of real estate identified on Exhibit A attached to the Mortgage granted by the KC Borrower and recorded in Wyandotte County, Kansas. "KC Release" has the meaning set forth in Section 2.11. "KC Special Use Permit" means the current special use permit, if any, with respect to the KC Property, and any amendments thereto through the date hereof, with respect to the KC Property. "Land" means the parcels of real estate described on each Exhibit A attached to each of the Mortgages. "Leases" means all leases, subleases, lettings, occupancy agreements, tenancies and licenses for the use of space by Borrower as landlord of the Mortgaged Property or any part thereof now or hereafter entered into, and all amendments, extensions, renewals and guarantees thereof, and all security therefor. 13 "Legal Requirements" means all governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities (including, without limitation, any of the foregoing relating to zoning, parking or land use, any and all Environmental Laws and the Americans with Disabilities Act) affecting Borrower or any Mortgaged Property or any part thereof or the construction, use, alteration or operation thereof, or any part thereof (whether now or hereafter enacted and in force), and all permits, licenses and authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments, at any time in force affecting the Mortgaged Property or any part thereof or any utility services or septic systems or other infrastructure serving any portion of the Mortgaged Property (including, without limitation, any which may (i) require repairs, modifications or alterations in or to the Mortgaged Property or any part thereof or any utility services or septic systems or other infrastructure serving any portion of the Mortgaged Property, or (ii) in any way limit the use and enjoyment thereof). "Lender" has the meaning provided in the first paragraph of this Agreement. "Letter of Credit Rights" means all "letter of credit rights" as defined in the UCC, in, to or under which Borrower has any right, title or interest, whether now owned or hereafter acquired. "License Agreement" means each License Agreement for each Mortgaged Property entered into between Licensor and each Borrower, as such agreement(s) may be amended, modified or supplemented in accordance with the terms and conditions hereof from time to time. "License Tri-Party Agreement" means those certain agreements relating to each Mortgaged Property, each among the Borrower owning such Mortgaged Property, Lender and Licensor, respecting each License Agreement for each Mortgaged Property, as such agreement(s) may be amended, modified or supplemented in accordance with the terms and conditions hereof from time to time. "Licensor" means Great Lakes Services, LLC, and its permitted successors and assigns under the License Agreement and License Tri-Party Agreement. "Lien" means any mortgage, deed of trust, lien (statutory or other), pledge, hypothecation, assignment, security interest, or any other encumbrance or charge on or affecting Borrower or any Mortgaged Property or any portion thereof, or any interest therein (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and mechanic's, materialmen's and other similar liens and encumbrances). "Loan" means the loan made by Lender to Borrower pursuant to the terms of this Agreement. "Loan Amount" means an amount equal to $75,000,000. "Loan A" means the loan in the principal amount of $50,000,000. 14 "Loan A Interest" means interest accrued or accruing on Loan A. "Loan B" means the loan in the principal amount of $25,000,000. "Loan B Interest" means interest accrued or accruing on Loan B. "Loan Documents" means this Agreement, the Note, each Contract Assignment, each Manager's Subordination, each Mortgage, each Assignment of Profits and Leases, each License Tri-Party Agreement, each Tall Pines Recognition Agreement, the Environmental Indemnity Agreement, the Guaranty of Non-Recourse Obligations and all other agreements, instruments, certificates and documents delivered by or on behalf of Borrower or an Affiliate of Borrower to evidence or secure the Loan as the same may be amended or modified from time to time. "Local Collection Account" and "Local Collection Account Bank" have the meanings set forth in Section 2.12(a). "Local Collection Account Agreement" means with respect to the Local Collection Account, the lockbox agreement, dated as of the applicable date and executed by Borrower, Lender and the Local Collection Account Bank. "Loss Proceeds" means Condemnation Proceeds and/or Insurance Proceeds. "Loss Proceeds Account" has the meaning set forth in Section 2.12 hereof. "Losses" has the meaning set forth in Section 5.1(j). "Management Agreement" means with respect to any Mortgaged Property, the property management agreement entered into between the Borrower owning such Mortgaged Property and the Manager (and all such property management agreements collectively), in such form as may be reasonably approved by Lender, as such agreement(s) may be amended, modified or supplemented in accordance with the terms and conditions hereof from time to time, and any management agreement which may hereafter be entered into with respect to any Mortgaged Property in accordance with the terms and conditions hereof, as the same may be amended, modified or supplemented in accordance with the terms and conditions hereof from time to time. "Manager" means Great Lakes Services, LLC, the current manager of the Mortgaged Property under the current Management Agreement, or such other Person as may hereafter be charged with management of any Mortgaged Property pursuant to a Management Agreement entered into in accordance with the terms and conditions hereof. "Manager's Subordination" means, with respect to each Mortgaged Property, initially each Manager's Consent and Subordination of Management Agreement, each executed by the Manager, the Borrower owning such Mortgaged Property and Lender, dated as of the Closing Date, and in the event a successor or assignee Manager is engaged at any Mortgaged Property, a subordination agreement executed by Manager, the Borrower owning such Mortgaged Property and Lender in form and substance satisfactory to Lender, whereby, among 15 other things, each Management Agreement is subordinated to the Indebtedness and to the Lien of each Mortgage so long as the Loan remains outstanding. "Material Adverse Effect" means a material adverse effect upon (i) the business operations, properties, assets or condition (financial or otherwise) of Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or (iii) the aggregate value of the Mortgaged Property. "Material Agreement" means (i) any lease of Equipment, Case Goods, Soft Goods, Fixed Asset Supplies or similar items at the Mortgaged Property which provide for annual aggregate lease payments under such lease by the Borrower in excess of $25,000 or (ii) any franchise agreement or other Contract entered into by the Borrower, which Contract would be binding on the Lender or the Mortgaged Property, upon the Lender foreclosing its Lien on the Mortgaged Property (or otherwise accepting a deed-in-lieu of foreclosure and which Contract runs with the Land or otherwise burdens Lender post-foreclosure). "Maturity Date" means the earlier of (a) the Scheduled Maturity Date or (b) such earlier date on which the entire Loan is required to be paid in full, by acceleration or otherwise under this Agreement or any of the other Loan Documents. "Maximum Rate" has the meaning set forth in Section 2.5(e) hereof. "Minimum Additional Parking Spaces" has the meaning set forth in Section 2.17. "Moody's" means Moody's Investors Services, Inc. and its successors. "Money" means (i) all "money" as defined in the UCC and (ii) all moneys, cash, or other items of legal tender generated from the use or operation of the Mortgaged Property, in, to or under which Borrower has any right, title or interest, whether now owned or hereafter acquired. "Monthly Debt Service Payment" has the meaning set forth in Section 2.5(a) hereof. "Monthly Debt Service Payment Amount" means the sum of the Monthly Loan A Debt Service Payment Amount and the Monthly Loan B Debt Service Payment Amount. "Monthly Loan A Debt Service Payment Amount" means $317,126.55. "Monthly Loan B Debt Service Payment Amount" means $213,405.85. "Monthly Property Expenses" means, with respect to any Payment Date after and for so long as the Debt Service Coverage Test has not been satisfied, an amount equal to not less than 100% and up to 110% of the monthly Property Expenses projected by Borrower to be incurred during the applicable period commencing on such Payment Date and ending on the next Payment Date as set forth in the Operating Budget for the applicable Fiscal Year; provided, however, that the Lender's prior written consent shall be required for any amount greater than 110% of the projected monthly amount in such Operating Budget for Property Expenses. 16 "Monthly Statement" has the meaning provided in Section 2.12(e). "Mortgage" means, with respect to the Mortgaged Property, a first priority Mortgage or Deed of Trust (as applicable), Assignment of Profits and Leases, Security Agreement and Fixture Filing, dated as of the Closing Date (and, if there are more than one, each and every one of them), each granted by the Borrower owing such Mortgaged Property to or for the benefit of Lender or Deed of Trust Trustee for the benefit of Lender, respectively, with respect to the Mortgaged Property as security for the Loan, as the same may thereafter from time to time be supplemented, amended, modified or extended by one or more agreements supplemental thereto. "Mortgaged Property" means, at any time, individually or collectively, as applicable, the Land, the Improvements, the Personalty, the Leases and the Receipts, and all rights, titles, interests and estates appurtenant thereto, encumbered by, and more particularly described in, each Mortgage. "Multiemployer Plan" means a multiemployer plan defined as such in Section 3(37) of ERISA and which is covered by Title IV of ERISA (i) to which contributions have been, or were required to have been made by Borrower or any ERISA Affiliate within the past six years or (ii) with respect to which Borrower could reasonably be expected to incur liability. "Net Proceeds" means either (x) the purchase price (at foreclosure or otherwise) actually received by Lender from a third party purchaser with respect to any Mortgaged Property, as a result of the exercise by Lender of its rights, powers, privileges and other remedies after the occurrence of an Event of Default or (y) in the event that Lender (or its nominee) is the purchaser at foreclosure of any Mortgaged Property, the higher of (i) the amount of Lender's credit bid or (ii) such amount as shall be determined in accordance with applicable law, and in either case minus all reasonable third party, out of pocket costs and expenses (including, without limitation, all attorneys' fees and disbursements and any brokerage fees, if applicable) incurred by Lender (and its nominee, if applicable) in connection with the exercise of such remedies; provided, however, that such costs and expenses shall not be deducted to the extent such amounts previously have been added to the Indebtedness in accordance with the terms of the Loan Documents or applicable law. "Note" means, collectively, Note A and Note B, each as the same may be modified, amended, supplemented, restated or extended, and any replacement notes therefor. "Note A" means that certain Promissory Note (Note A), dated of even date herewith, made by Borrower to the Note A Lender evidencing Loan A, as amended, modified, restated or split, and any replacement notes therefor. "Note A Lender" means the holder from time to time of Note A. The initial Note A Lender is Citigroup Global Markets Realty Corp. "Note B" means that certain Promissory Note (Note B), dated of even date herewith, made by Borrower to the Note B Lender evidencing Loan B, as amended, modified, restated or split, and any replacement notes therefor. 17 "Note B Lender" means the holder from time to time of Note B. The initial Note B Lender is The Travelers Insurance Company. "O&M Program" has the meaning set forth in Section 5.1(d)(iv) hereof. "OFAC" has the meaning set forth in Section 4.1(v) hereof. "Officer's Certificate" means a certificate delivered to Lender by Borrower which is signed by an authorized officer of Borrower. "Open Space Agreement" means the terms and provisions of Section 10 of that certain Agreement of Sale dated as of July 14, 2000, between G.D.O. Investments, as sellers, and The Great Lakes Companies, Inc, as purchaser, as amended June 1, 2001 and as further amended September 29, 2001. "Operating Budget" means, with respect to any Fiscal Year, the operating budget for the Mortgaged Property reflecting Borrower's projections of Gross Revenues, Property Expenses, Capital Improvements Costs and FF&E Costs for the Mortgaged Property for such Fiscal Year, prepared on an annual, quarterly and monthly basis and submitted by Borrower to Lender in accordance with the provisions of Section 5.1(r). "Operating Expense Account" has the meaning provided in Section 2.13(c). "Operating Expenses" means, for any period of calculation, all expenditures incurred and required to be expensed under GAAP during such period in connection with the ownership, operation, maintenance, repair and/or leasing of the Mortgaged Property, including without limitation (or duplication) Property Expenses. Notwithstanding the foregoing, Operating Expenses shall not include (a) Capital Improvement Costs, (b) any extraordinary items (unless Lender approves of the inclusion of such items as Operating Expenses), (c) depreciation, amortization and other non-cash charges or (d) any payments of principal or interest on the Indebtedness or otherwise payable to the holder of the Indebtedness. Operating Expenses shall be calculated on the accrual basis of accounting. "Operating Revenues" means, for any period, all regular ongoing income during such period from the operation of the Mortgaged Property that, in accordance with GAAP, is included in annual financial statements as revenue. Notwithstanding the foregoing, Operating Revenues shall not include (a) any Loss Proceeds (other than business interruption proceeds or Condemnation Proceeds in connection with a temporary Taking and, in either case, only to the extent allocable to such period or other applicable reporting period), (b) any proceeds resulting from the sale, exchange, transfer, financing or refinancing of the Mortgaged Property, (c) any Rent attributable to a Lease more than one month prior to the date on which the actual payment of Rent is required to be made thereunder, (d) any Advance Bookings revenues not attributable to actual occupancy of the Mortgaged Property during such period by the guest(s) making such Advance Bookings, (e) any interest income from any source, or (f) any other extraordinary items as determined by GAAP. Operating Revenues shall be calculated on the accrual basis of accounting. 18 "Organizational Agreements" means, individually or collectively, (i) the certificate of formation and operating agreement, (ii) the certificate of limited partnership and partnership agreement, (iii) the certificate of incorporation and by-laws or (iv) the trust agreement or other organizational documents, as applicable of any Person, each as amended or restated from time to time. "Origination Fee" means 1.0% of the Loan Amount, payable to Lender on the Closing Date. "Other Borrowings" means, with respect to Borrower, without duplication (but not including the Indebtedness) (i) all indebtedness of Borrower for borrowed money or for the deferred purchase price of property or services, (ii) all indebtedness of Borrower evidenced by a note, bond, debenture or similar instrument, (iii) the face amount of all letters of credit issued for the account of Borrower and, without duplication, all unreimbursed amounts drawn thereunder, and obligations evidenced by bankers' acceptances, (iv) all indebtedness of Borrower secured by a Lien on any property owned by Borrower (whether or not such indebtedness has been assumed), (v) all Contingent Obligations of Borrower, (vi) liabilities and obligations for the payment of money relating to a capitalized lease obligation or sale/leaseback obligation, and (vii) liabilities and obligations representing the balance deferred and unpaid of the purchase price of any property or services, except those incurred in the ordinary course of Borrower's business that would constitute ordinarily a trade payable to trade creditors; provided, that the liabilities and obligations referred to in clauses (vi) and (vii) shall not constitute Other Borrowings to the extent they are permitted under Section 8.1(e) and/or Section 5.1(t) below. "Partial Defeasance" and "Partial Defeasance Date" have the respective meanings set forth in Section 2.7(b). "Partial Defeasance Amount" has the meaning set forth in Section 2.11. "Partial Loan A Defeasance Amount" has the meaning set forth in Section 2.7. "Partial Loan B Defeasance Amount" has the meaning set forth in Section 2.7. "Partial Defeasance Collateral" shall mean U.S. Obligations, which provide payments (i) on or prior to, but as close as possible to, all Payment Dates and other scheduled payment dates, if any, under the Defeased Note after the Defeasance Date and up to and including the Scheduled Maturity Date, and (ii) in amounts equal to or greater than the respective Scheduled Defeasance Payments related to such Payment Dates. "Partial Release" has the meaning set forth in Section 2.17. "Patriot Act" means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56). "Payment Date" has the meaning provided in Section 2.5(a). 19 "Payment Intangibles" means all "payment intangibles" as defined in the UCC, in, to or under which Borrower has any right, title or interest, whether now owned or hereafter acquired. "PBGC" means the Pension Benefit Guaranty Corporation established under ERISA, or any successor thereto. "Permits" means all licenses, permits, variances and certificates required by Legal Requirements to be obtained by Borrower and used in connection with the ownership, operation, use or occupancy of the Mortgaged Property (including, without limitation, certificates of occupancy, building permits, business licenses, state health department licenses, licenses to conduct business and all such other permits, licenses and rights, obtained from any Governmental Authority concerning ownership, operation, use or occupancy of the Mortgaged Property). "Permitted Encumbrances" means, with respect to each Mortgaged Property, collectively, (i) the Lien created by the Mortgage on such Mortgaged Property, or any other Loan Documents of record encumbering such Mortgaged Property, (ii) all Liens and other matters disclosed on the Title Insurance Policy concerning such Mortgaged Property, (iii) the KC Special Use Permit, (iv) the TC Special Use Permit, (v) the Open Space Agreement, (vi) Liens, if any, for Impositions imposed by any Governmental Authority not yet delinquent or being contested in good faith and by appropriate proceedings in accordance with Section 5.1(b)(ii) hereof, provided that no foreclosure has been commenced by the lien claimant, (vii) mechanic's or materialmen's Liens, if any, being contested in good faith and by appropriate proceedings in accordance with Section 5.1(b)(ii) hereof, provided that no foreclosure has been commenced by the lien claimant, (viii) rights of existing and future tenants as tenants only pursuant to any Leases, (ix) Liens and other matters encumbering the Remaining Realty after giving effect to Section 2.17 hereof; (x) Liens for public utilities, (xi) Liens, if any, relating to financing leases, equipment leases and purchase money debt permitted under Section 8.1(e)(iii) and/or Section 5.1(t), in each case only on the applicable equipment or other personal property which is the subject of such financing lease or purchase money debt and (xii) Liens permitted under any specific provision of the Loan Agreement or other Loan Document, which Liens and encumbrances referred to in clauses (i)-(xii) above do not materially and adversely affect (1) the ability of Borrower to pay in full the Principal Indebtedness and interest thereon in a timely manner or (2) the use of any Mortgaged Property for the use currently being made thereof, the operation of any Mortgaged Property as currently being operated. "Permitted Great Wolf Pledge" means (x) any mortgaging, encumbrance, pledging, hypothecation, or granting of a security interest in, any of (1) the limited partnership interests of Great Wolf and its successors and assigns in GWR Operating Partnership, L.L.L.P., (2) the membership interests of Great Wolf and its successors and assigns in GWR, OP General Partner, LLC, (3) the general partnership interests of GWR OP General Partner, LLC in GWR Operating Partnership, L.L.L.P., in each of the foregoing cases to a Qualified Pledgee, or (4) the membership interests in Great Wolf Lodge of Traverse City, LLC, Great Wolf Lodge of Kansas City, LLC, or GLGB Manager III, LLC, and (y) any conveyance, assignment, sale or other disposition (and not a mortgaging, encumbrance, pledging, hypothecation, or granting of a security interest) (directly or indirectly) of ownership interests in KC Borrower and/or TC 20 Borrower in connection with the exercise of remedies pursuant thereto following which either (a) a Qualified Pledgee, through its ownership of the aforementioned ownership interests, owns not less than 51% of the ownership interests in Borrower (directly or indirectly) and controls the operations and management of Borrower or (b) clause(2) under the definition of "Permitted Transfer" is satisfied. "Permitted Great Wolf Transfer" means (i) any merger or reorganization of Great Wolf Lodge of Traverse City, LLC, Great Wolf Lodge of Kansas City, LLC, GLGB Manager III, LLC, GWR Operating Partnership, L.L.L.P., GWR OP General Partner, LLC and/or Great Wolf, and their respective successors and assigns; (ii) the issuance or sale of stock in Great Wolf, its successors and assigns; or (iii) the issuance or sale of limited partnership interests in GWR Operating Partnership, L.L.L.P., its successors and assigns. "Permitted Investments" means any one or more of the following obligations or securities acquired at a purchase price of not greater than par: (i) obligations of, or obligations fully guaranteed as to payment of principal and interest by, the United States or any agency or instrumentality thereof provided such obligations are backed by the full faith and credit of the United States of America; (ii) obligations of the following United States of America government sponsored agencies, provided such obligations are backed by the full faith and credit of the United States of America: Federal Home Loan Mortgage Corp. (debt obligations), the Farm Credit System (consolidated systemwide bonds and notes), the Federal Home Loan Banks (consolidated debt obligations), the Federal National Mortgage Association (debt obligations), the Financing Corp. (debt obligations), and the Resolution Funding Corp. (debt obligations); (iii) federal funds, unsecured certificates of deposit, time deposits, bankers' acceptances and repurchase agreements with maturities of not more than 365 days of any bank, the short-term obligations of which are rated in the highest short-term rating category by the Rating Agencies; (iv) certificates of deposit, time deposits, demand deposits or banker's acceptances issued by any depository institution or trust company incorporated under the laws of the United States or of any state thereof and subject to supervision and examination by federal and/or state banking authorities, the short-term obligations of which are rated in the highest short-term rating category by the Rating Agencies, which investments are fully insured by the Federal Deposit Insurance Corp.; (v) debt obligations with maturities of not more than 365 days and rated by the Rating Agencies in its highest long-term unsecured rating category; (vi) commercial paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date not more than one year after the date of issuance thereof) with maturities of not more than 270 days and that is rated by the Rating Agencies in their highest short-term unsecured debt rating; and 21 (vii) any other demand, money market or time deposit, demand obligation or any other obligation, security or investment, which Lender shall have approved in writing and for which Borrower shall have delivered a Rating Confirmation; provided, however, that (A) the investments described in clauses (i) through (vii) above must have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, (C) such investments must not be subject to liquidation prior to their maturity or have an "r" highlighter affixed to its rating by S&P, and (D) such investments must not be subject to liquidation prior to their maturity; and provided, further, that, in the judgment of Lender, such instrument continues to qualify as a "cash flow investment" pursuant to Code Section 860G(a)(6) earning a passive return in the nature of interest and that no instrument or security shall be a Permitted Investment if such instrument or security evidences (x) a right to receive only interest payments or (y) the right to receive principal and interest payments derived from an underlying investment at a yield to maturity in excess of 120% of the yield to maturity at par of such underlying investment. "Permitted Use Facility" has the meaning set forth in Section 2.17. "Permitted Transfer" means either of (1) a Permitted Great Wolf Pledge or (2) any conveyance, assignment, sale or other disposition (and not a mortgaging, encumbrance, pledging, hypothecation, or granting of a security interest) (directly or indirectly) of ownership interests in KC Borrower and/or TC Borrower (including, without limitation, a Permitted Great Wolf Transfer) following which in the case of this clause(2) (i) GWR Operating Partnership, L.L.L.P. owns (directly or indirectly) 51% or more of the voting and beneficial ownership interests in each of KC Borrower and TC Borrower and controls the operations and management of Borrower and (ii) Great Wolf owns (directly or indirectly) 51% or more of the voting and beneficial ownership interests in GWR Operating Partnership, L.L.L.P. and controls the operations and management of GWR Operating Partnership, L.L.L.P.; provided, that (a) under no circumstance shall any Transfer be a Permitted Transfer hereunder unless after giving effect to such Transfer each Borrower is under 100% common ownership (direct and indirect) and control (but acknowledging and agreeing that Great Wolf Lodge of Kansas City, LLC has no interest in TC Borrower and Great Wolf Lodge of Traverse City, LLC and GLGB Manager III, LLC have no interest in KC Borrower), (b) if after any conveyance, assignment, sale or other disposition of ownership interests in KC Borrower and/or TC Borrower, the aforementioned requirements of a 51% (direct or indirect) ownership percentage and control over operations and management by GWR Operating Partnership, L.L.L.P. shall not be satisfied, then such requirements shall not apply in the event Borrower obtains a Rating Confirmation with respect to the proposed conveyance, assignment, sale or other disposition of ownership interests, 22 (c) if after any conveyance, assignment, sale or other disposition of ownership interests in GWR Operating Partnership, L.L.L.P., the aforementioned requirements of a 51% (direct or indirect) ownership percentage and control over operations and management by Great Wolf shall not be satisfied, then such requirements shall not apply in the event Great Wolf obtains a Rating Confirmation with respect to the proposed conveyance, assignment, sale or other disposition of ownership interests in GWR Operating Partnership, L.L.L.P. (except that no Rating Confirmation shall be required in connection with a merger or reorganization of Great Wolf if the successor entity is a Qualified Transferee), (d) any such Transfer referred to above which takes the form of a Transfer of the equity ownership interests in KC Borrower and/or TC Borrower to a transferee which (collectively amongst itself and its Affiliates that own such equity ownership interests) acquires (directly or indirectly) a greater than 49% ownership interest in KC Borrower and/or TC Borrower, or which acquires control over the operations and management of KC Borrower and/or TC Borrower, shall not be permitted unless, in addition to satisfaction of the conditions set forth in clauses (a), (b), (c) and (e) of this definition above, Borrower delivers to Lender a substantive non-consolidation opinion in form and substance reasonably acceptable to Lender and the Rating Agencies, if required by Lender or the Rating Agencies, and (e) no Transfer of a (direct or indirect) ownership interest in KC Borrower or TC Borrower shall be made to a Prohibited Person or a Person that is owned or controlled by or acting for or on behalf of a Prohibited Person or a Person with whom Lender is prohibited from dealing or otherwise engaging in any transaction by any terrorism or money laundering or other Legal Requirements (including the Executive Order or the Patriot Act) (provided, however, that for the purposes of this clause (e), said prohibition shall not apply to securities in Great Wolf, its successors and assigns, traded on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale, other than such securities traded by Great Wolf or any Affiliate thereof). Notwithstanding the foregoing, in the event a Rating Confirmation is obtained (or a Qualified Transferee succeeds to the interests of Great Wolf) as contemplated by clauses (b) and (c) above, then from and after the applicable date, for purposes of a "Permitted Transfer" under this Agreement, the entity that is the successor or assign to GWR Operating Partnership, L.L.L.P. or Great Wolf as contemplated by such Rating Confirmation or merger transaction shall replace GWR Operating Partnership, L.L.L.P. or Great Wolf. "Person" means any individual, corporation, limited liability company, partnership, joint venture, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing. "Personalty" means all Equipment, Inventory,, General Intangibles, Supporting Obligations, Instruments, Receivables, Pledged Accounts, Contracts and Intellectual Property and all other personal property as defined in the relevant UCC, now owned or hereafter acquired 23 by Borrower, or in, to or under which Borrower has any right, title or interest, whether now owned or hereafter acquired, including all of the foregoing now or hereafter affixed to, placed upon, used in connection with, arising from or otherwise related to the Mortgaged Property or which may be used in or relating to the planning, development, financing or operation of such Mortgaged Property, and including, without limitation, all Case Goods, Soft Goods, Fixed Asset Supplies, personal property included in or associated with Water Amenities, furniture, furnishings, equipment, machinery, money in Pledged Accounts, insurance proceeds, contract rights, trademarks, goodwill, chattel paper, documents, trade names, licenses and/or franchise agreements, rights of Borrower under leases of fixtures or other personal property or equipment, inventory, all refundable, returnable or reimbursable fees, deposits or other funds or evidences of credit or indebtedness deposited by or on behalf of Borrower with any governmental authorities, boards, corporations, providers of utility services, public or private, including specifically, but without limitation, all refundable, returnable or reimbursable tap fees, utility deposits, commitment fees and development costs. "Plan" means an employee benefit or other plan, other than a Multiemployer Plan, that is covered by Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code, and (i) was established or maintained by Borrower or any ERISA Affiliate during the five year period ended prior to the date of this Agreement or to which Borrower or any ERISA Affiliate makes, is obligated to make or has, within the five year period ended prior to the date of this Agreement, been required to make contributions or (ii) with respect to which Borrower could reasonably be expected to incur liability. "Pledged Accounts" means the Local Collection Account, the Collection Account, the Reserve Accounts, and the Loss Proceeds Account and any successor accounts to any of the foregoing. "Policies" has the meaning provided in Section 5.1(x)(iii). "Pre-existing Condition" has the meaning set forth in Section 5.1(x)(iii)(B) hereof. "Prepayment Consideration" and "Present Value Yield Differential" have the respective meanings set forth in Section 2.6(c) hereof. "Principal Indebtedness" means the principal amount of the Loan outstanding as adjusted by each increase (including advances made by Lender to protect the Collateral), or decrease in such principal amount of the Loan outstanding, whether as a result of prepayment or otherwise, from time to time. "Principal Reserve Account" has the meaning set forth in Section 2.13(c). "Proceeds" shall have the meaning given in the UCC and, in any event, shall include, without limitation, all proceeds, products, offspring, rents, profits or receipts, in whatever form, arising from the Collateral. "Prohibited Person" has the meaning set forth in Section 4.1(v) hereof. 24 "Property Expenses" means, with respect to the Mortgaged Property, the following costs and expenses but only, in the case of costs and expenses in respect of goods and services, to the extent that they do not constitute Capital Improvement Costs: (i) Impositions; (ii) insurance premiums for policies of insurance required to be maintained by Borrower pursuant to this Agreement or the other Loan Documents or otherwise maintained by Borrower or an Affiliate of Borrower on behalf of Borrower in the ordinary course of business with respect to the Mortgaged Property; (iii) the cost of all electricity, oil, gas, water, steam, heat, ventilation, air conditioning and any other energy, utility or similar item and overtime services with respect to the Mortgaged Property; (iv) payments required under service contracts for any services or items used at the Mortgaged Property or otherwise used in the operation of the Mortgaged Property (including, without limitation, service contracts for heating, ventilation and air conditioning systems, elevators, landscape maintenance, pest extermination, security, furniture, trash removal, answering service and credit checks); (v) wages, benefits, payroll taxes, uniforms, the cost of cleaning supplies and all related expenses for on-site personnel directly involved in the day-to-day operation of the Mortgaged Property (including, without limitation, full time, part time or seasonal employees, housekeeping employees, porters and general repair, maintenance and security employees, and employees of Manager or others whose time is allocated among one or more properties), whether hired by Borrower, Manager or any other Person; (vi) costs incurred in connection with the enforcement of any Lease (including, without limitation, reasonable attorneys' fees, charges for lock changes and storage and moving expenses for furniture, fixtures and equipment); (vii) advertising and marketing expenses (including, without limitation, concessions, promotions, banners and signs); (viii) out-of-pocket cleaning, maintenance and repair expenses; (ix) any expense the total cost of which is passed through to tenants pursuant to executed Leases; (x) legal, accounting, auditing and other professional fees and expenses incurred in connection with the ownership and operation of the Mortgaged Property (including, without limitation, collection costs and expenses); (xi) permits, licenses and registration fees and costs; (xii) any expense necessary in order to prevent or cure a violation of any Legal Requirement (including Environmental Law), regulation, code or ordinance; 25 (xiii) costs and expenses of any appraisals, valuations, surveys, inspections, environmental assessments or market studies, zoning reports; (xiv) costs and expenses of security and security systems provided to and/or installed and maintained with respect to the Mortgaged Property; (xv) costs of title, UCC, litigation and other searches and costs of maintaining the Lien of the Mortgage thereon and the security interest in any related Collateral; (xvii) fees and expenses of property managers contracted with by Borrower to perform management, administrative, payroll or other services in connection with the operation of the Mortgaged Property (including, without limitation, the fees and expenses owed to Licensor under the License Agreement and Manager under the Management Agreement); (xviii) franchise and license fees of Licensor under the License Agreement, and royalties and other payments to Tall Pines under the Tall Pines Agreement, to the extent relating to the Mortgaged Property; (xix) any other costs and expenses contemplated by the Operating Budget and customarily incurred in connection with operating properties similar in type and character to the Mortgaged Property; (xx) allocations to the Mortgaged Property of expenses of the type set forth above under bulk purchase contracts or bulk services agreements; and (xxi) any other category of property expense that is customary for a property of the type and size as the Mortgaged Property and is reasonably approved by Lender, including (without duplication of the foregoing) all "costs and expenses" as such phrase is used on page 18 of the Uniform System of Accounts. "Qualified Pledgee" and "Qualified Transferee" have the respective meanings set forth on Schedule 8 attached hereto. "Quarterly Statement" has the meaning provided in Section 2.12(e). "Rating Agencies" means at least two of Fitch, Moody's and S&P (or, if a Secondary Market Transaction has occurred in which Securities have been issued, each of the foregoing that rated such Securities). "Rating Confirmation" with respect to any transaction, matter or action in question, means: (i) if all or any portion of the Loan, by itself or together with other loans, has been the subject of a Secondary Market Transaction in which the related Securities have themselves been rated, the written confirmation of the Rating Agencies that such transaction, matter or action shall not, in and of itself, result in the downgrading, withdrawal or qualification of the then-current ratings assigned to any of the Securities issued in connection with a Secondary Market Transaction; and (ii) if any portion of the Loan has not been the subject of a Secondary Market Transaction in which the related Securities have themselves been rated (or, if 26 any portion of the Loan was the subject of a Secondary Market Transaction in which the related Securities were rated but is no longer the subject of a Secondary Market Transaction in which the related Securities have been rated, and no portion of the Loan is then the subject of a Secondary Market Transaction in which the related Securities have been rated), Lender shall have determined in its reasonable discretion (taking into consideration such factors as Lender may determine, including the attributes of the loan pool in which any portion of the Loan reasonably be expected to be securitized) that no rating for any Securities that would be issued in connection with such Secondary Market Transaction involving any of such portion of the Loan would be downgraded, qualified, or withheld by reason of such transaction, matter or action. "Rating Criteria" with respect to any Person, means that (i) the short-term unsecured debt obligations of such Person are rated at least "A-1" by S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such Person for a period of less than one month, or (ii) the long-term unsecured debt obligations of such Person are rated at least "AA-" by S&P, "Aa3" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a period of one month or more. "Real Estate Taxes Escrow Account" has the meaning provided in Section 2.13(b). "Receipts" means all revenues, receipts and other payments of every kind arising from ownership or operation of the Mortgaged Property and received by Borrower or an Affiliate of Borrower on behalf of Borrower, including, without limitation, (a) all hotel receipts, revenues and credit card receipts collected from guest rooms, restaurants, bars, conference rooms, meeting rooms, banquet rooms, ball rooms, waterpark and other recreational facilities, incidental charges to hotel guests or other users or customers, any payments (and the right to receive payments) from credit card companies, travel agents or reservation systems or services relating to the Mortgaged Property, all receivables, customer obligations, installment payment obligations and other obligations now existing or hereafter arising or created out of the sale, lease, sublease, license, concession or other grant of the right of the use and occupancy of property or rendering of services by Borrower or any operator or manager of the Mortgaged Property or the commercial space located thereon or acquired from others (including, without limitation, from the rental of any office space, retail space, guest rooms or other space, halls, stores, and offices, and deposits securing reservations of such space), license, lease, sublease and concession fees and rentals, health club use and membership fees and other health club and personal care revenues, food and beverage wholesale and retail sales (including without limitation room service dining and mini bar sales), service charges, vending machine sales, telephone and telecommunications receipts (including without limitation DSL access fees), and any charges of any kind that appear on any bill or statement rendered to any guest or other user or customer of the Mortgaged Property (excluding any such items not subject to the Lien of Lender under Section 2.17 herein), and (b) all Rents received from any tenant, licensee or other Person occupying space at, or providing services related to or for the benefit of the Mortgaged Property and all payments in lieu of Rents (excluding any such items not subject to the Lien of Lender under Section 2.17 herein). "Receivables" means all of Borrower's right, title and interest, whether now owned or hereafter acquired, in, to and under income deriving from (i) any Accounts, Chattel 27 Paper, Instruments, Payment Intangibles, Letter of Credit Rights, Documents, insurance policies, drafts, bills of exchange, trade acceptances, notes or other indebtedness, owing to Borrower from whatever source arising (excluding any such items not subject to the Lien of Lender under Section 2.17 herein), (ii) to the extent not otherwise included above, and expressly excluding any such items not subject to the Lien of Lender under Section 2.17 herein, (a) all income, Receipts, issues, profits, revenues, deposits and other benefits from the Mortgaged Property and (b) all receivables and other obligations now existing or hereafter arising, or created out of the sale, lease, sublease, license, concession or other grant of the right of the use and occupancy of property or rendering of services by Borrower or any operator or manager of the Mortgaged Property or other commercial space located at the Mortgaged Property or acquired from others (including, without limiting the generality of the foregoing, from rental of space, halls, stores, and offices, and deposits securing reservations of such space, exhibit or sales space of every kind, license, lease, sublease and concession fees and rentals, health club membership fees, wholesale and retail sales of food and beverages, merchandise, service charges, vending machine sales and proceeds, if any, from business interruption or other loss of income insurance), (iii) all of the books and records (whether in tangible, electronic or other form) now or hereafter maintained by or on behalf of Borrower in connection with the operation of the Mortgaged Property or in connection with any of the foregoing and (iv) all Supporting Obligations and all liens and security interests securing any of the foregoing and all other rights, privileges and remedies relating to any of the foregoing. "Release" means any active or passive release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration of Hazardous Substances into the indoor or outdoor environment (including, without limitation, the movement of Hazardous Substances through ambient air, soil, surface water, ground water, wetlands, land or subsurface strata). "Release Parcel" and "Remaining Realty" have the respective meanings set forth in Section 2.17. "Remedial Work" has the meaning set forth in Section 5.1(d)(i). "REMIC" and "REMIC Pool" have the respective meanings set forth in Section 2.17(xiv). "Rents" means all income, rents (including base rent), issues, profits, revenues (including all oil and gas or other mineral royalties and bonuses), deposits (other than utility and security deposits) and other benefits from the Mortgaged Property (excluding any such items not subject to the Lien of Lender under Section 2.17 herein). "Reserve Account(s)" means the Deferred Maintenance Escrow Account, the FF&E Costs Reserve Account, the Real Estate Taxes Escrow Account, the Insurance Escrow Account, the Operating Expense Account and the Principal Reserve Account, collectively, and any successor accounts to any of the foregoing. "Restoration" has the meaning set forth in Section 5.1(x). 28 "Scheduled Defeasance Payments" shall mean scheduled payments of interest and principal under the Note in the case of a Total Defeasance and under the Defeased Note in the case of a Partial Defeasance for all Payment Dates occurring after the Defeasance Date and up to and including the Scheduled Maturity Date (including, in the case of a Total Defeasance, the outstanding principal balance of the Loan as of the Scheduled Maturity Date and, in the case of a Partial Defeasance, the outstanding principal balance of the Defeased Note as of the Scheduled Maturity Date), and all payments required after the Defeasance Date, if any, under the Loan Documents for servicing fees and other similar charges. "Scheduled Maturity Date" means January 11, 2015. "Scheduled Principal Payments" has the meaning set forth in Section 2.6(c) hereof. "S&P" shall mean Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc and its successors. "Secondary Market Transaction" has the meaning set forth in Section 5.1(w). "Security Agreement" shall mean a security agreement in form and substance that would be satisfactory to a prudent lender pursuant to which Borrower grants Lender a perfected, first priority security interest in the Defeasance Collateral Account and the Defeasance Collateral. "Securities" means mortgage pass-through certificates or other securities issued in a Secondary Market Transaction and evidencing a beneficial interest in or secured in whole or in part by the Loan in a rated or unrated public offering or private placement. "Soft Goods" shall mean all fabric, textile and flexible plastic products (not including items which are classified as "Fixed Asset Supplies" under the Uniform System of Accounts) which are used in furnishing the Mortgaged Property, including, without limitation: carpeting, drapes, bedspreads, wall and floor coverings, mats, shower curtains and similar items. "Software" shall mean all computer software and accompanying documentation (including all future upgrades, enhancements, additions, substitutions and modifications thereof), other than computer software which is commercially available, which are used by Manager, Borrower or other Persons in connection with the property management system, the reservation system and all future electronic systems developed or designated by Manager, Borrower or other Persons for use in the Mortgaged Property. "Successor Borrower" has the meaning set forth in Section 2.7(d). "Supporting Obligations" means all (i) all "supporting obligations" as defined in the UCC and (ii) any other guarantee, letter of credit, secondary obligation, right or privilege that supports or pertains to any of the Mortgaged Property, in, to or under which Borrower has any right, title or interest, whether now owned or hereafter acquired. 29 "Survey" means a certified ALTA/ACSM survey of the Mortgaged Property prepared by a registered Independent surveyor, containing the form of survey or certification provided to Borrower by Lender and in form and content reasonably satisfactory to Lender and the company issuing the Title Insurance Policy for the Mortgaged Property. "Tall Pines" means Tall Pines Development Corporation, a Wisconsin corporation, its successors and assigns. "Tall Pines Agreement" means that certain Tall Pines Exclusive License and Royalty Agreement executed as of July 25, 2004, by and among Tall Pines and Great Lakes, together with, and as modified with respect to the Mortgaged Property by, each Tall Pines Recognition Agreement. "Tall Pines Recognition Agreement" means each Recognition Agreement for each Mortgaged Property, each among the parties to the Tall Pines Agreement, the Borrower owing such Mortgaged Property and Lender, each dated as of the Closing Date. "Taking" means a taking or voluntary conveyance during the term hereof of all or part of any Mortgaged Property, or any interest therein or right accruing thereto or use thereof, as the result of, or in settlement of, any condemnation or other eminent domain proceeding by any Governmental Authority affecting the Mortgaged Property or any portion thereof whether or not the same shall have actually been commenced. "TC Allocated Loan Amount" means an amount equal to 56% of the then outstanding Principal Indebtedness. "TC Special Use Permit" means Special Use Permit #2001-02, Charter Township of Garfield, Great Buffalo Lodge, Approved January 25, 2001, as amended by Amendment #02-01 Bison Hollow, approved January 23, 2003. "Title Insurance Policy" means each mortgagee's title insurance policy or policies (i) issued by one or more title companies reasonably satisfactory to Lender which policy or policies shall (unless Lender otherwise requires or consents) be in form ALTA 1992, where available (with waiver of arbitration provisions), naming Lender as the insured party, (ii) insuring each Mortgage as being a first and prior lien upon the related Mortgaged Property, (iii) showing no encumbrances against any Mortgaged Property (whether junior or superior to the related Mortgage) other than Permitted Encumbrances, (iv) in the amount of the Loan Amount, and (v) otherwise in form and content reasonably acceptable to Lender. Each Title Insurance Policy shall include the following endorsements or affirmative coverages in form and substance reasonably acceptable to Lender, to the extent available in the jurisdiction in which the Land is located: variable rate endorsement; survey endorsement; comprehensive endorsement; zoning (ALTA 3.1 with parking added) endorsement; first loss, last dollar and tie-in endorsement; access coverage; separate tax parcel coverage; contiguity (if applicable) coverage; and such other endorsements as Lender shall reasonably require with respect to a particular Mortgaged Property in order to provide insurance against specific risks identified by Lender in connection with the Mortgaged Property. "Total Defeasance" has the meaning set forth in Section 2.7(a). 30 "Total Defeasance Collateral" shall mean U.S. Obligations, which provide payments (i) on or prior to, but as close as possible to, all Payment Dates and other scheduled payment dates, if any, under the Note and this Loan Agreement after the Defeasance Date and up to and including the Scheduled Maturity Date, and (ii) in amounts equal to or greater than the respective Scheduled Defeasance Payments related to such Payment Dates. "Transaction" means the transactions contemplated by the Loan Documents. "Transaction Costs" means all costs and expenses paid or payable by Borrower relating to the Transaction (including, without limitation, appraisal fees, legal fees and accounting fees and the costs and expenses described in Section 9.23). "Transfer" means the conveyance, assignment, sale, mortgaging, pledging, hypothecation, granting of a security interest in, granting of options with respect to, or other disposition of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) all or any portion of any direct or indirect (irrespective of the number of tiers of ownership) legal or beneficial interest (a) in all or any portion of the Mortgaged Property; or (b) any membership interests in, economic rights to distributions or dividends from, or other equity ownership interests in, Borrower or the constituent entities directly or indirectly (irrespective of the number of tiers of ownership) owning any such membership interests or other ownership interests in Borrower. A Transfer shall also include, without limitation to the foregoing, the following: an installment sales agreement wherein Borrower (or any Affiliate of Borrower) agrees to sell the Mortgaged Property or any part thereof or any interest therein for a price to be paid in installments; an agreement by Borrower (or any Affiliate of Borrower) leasing all or a substantial part of the Mortgaged Property to one or more Persons pursuant to a single or related transactions, or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower's right, title and interest in and to any Leases or any Rent; and except as permitted under Section 2.17 below, any instrument subjecting the Mortgaged Property to a condominium regime or transferring ownership to a cooperative corporation. A Permitted Encumbrance shall not be a Transfer. "Treasury Rate" means, on the date on which such rate is calculated, the yield on the ten year "on the run" U.S. Treasury issue (primary issue) with such yield being based on the bid price for such issue as reasonably determined by Lender. "UCC" means with respect to any Collateral, the Uniform Commercial Code as in effect from time to time in the State of New York; provided, that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection or priority of the security interest in any item or portion of the Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or priority. Wherever this agreement refers to terms as defined in the UCC, if such term is defined in more than one Article of the UCC, the definition in Article 9 of the UCC shall control. "UCC Searches" has the meaning set forth in Section 3.1(v) hereof. 31 "Undefeased Note" has the meaning set forth in Section 2.7(b)(iv). "Undefeased A Note" has the meaning set forth in Section 2.7(b)(iv). "Undefeased B Note" has the meaning set forth in Section 2.7(b)(iv). "Underwritten Net Cash Flow" means, as of any date of calculation with respect to the Mortgaged Property, (i) the Operating Revenues during the most recently ended twelve month period, minus (ii) the Operating Expenses with respect to the Mortgaged Property during such twelve month period, each as determined by Lender and after Lender makes adjustments, if necessary, for the following (and without duplication where such items are already included within Operating Expenses) (1) expenses for management fees equal to the greater of actual management fees or 3% of Gross Revenues for such period, (2) royalties and other fees attributable to the Mortgaged Property under the Tall Pines Agreement for such period, (3) a reduction in Operating Revenues to reflect a maximum occupancy percentage of 75% (regardless of actual occupancy in excess thereof), (4) an annual minimum reserve for FF&E Costs equal to the greater of actual FF&E Costs and the FF&E Percentage of Gross Revenues for such period, (5) exclusion of any other revenue items deemed nonrecurring under GAAP, and (6) inclusion of increases in future operating costs as determined by Lender, based on operating costs increases which have been identified and quantified and are not hypothetical or subjectively determined, so that, assuming current occupancy, the annualized underwritten Operating Expenses fully reflect the operating costs expected to be incurred over the next twelve month period. "Uniform System of Accounts" shall mean the Uniform System of Accounts for the Lodging Industry, Ninth Revised Edition, 1996, as published by the American Hotel & Motel Association. "U.S. Obligations" shall mean securities that are (i) direct obligations of the United States of America for the full and timely payment of which its full faith and credit is pledged or (ii) obligations of an entity controlled or supervised by and acting as an agency or instrumentality and guaranteed as a full faith and credit obligation which shall be fully and timely paid by the United States of America, which in either case are (a) not subject to prepayment, call or early redemption at the option of the issuer thereof, and (b) constitute "government securities" within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended. 32 "Use" means, with respect to any Hazardous Substance, the generation, manufacture, processing, distribution, handling, use, treatment, recycling or storage of such Hazardous Substance or transportation of such Hazardous Substance in connection with or affecting Borrower or the Mortgaged Property. "Water Amenities" the water-based attractions, including, without limitation, pools, water slides, fountains, lockers, food and beverage service areas, saunas, hot tubs, showers, water amusement structures and all associated buildings, structures, equipment, inventory and other personal property located at or used or useful in connection with such water-based attractions or the operation, maintenance, repair and replacement thereof. "Weighted Amortization Product" and "Weighted Average Life to Maturity" have the respective meanings set forth in Section 2.6(c) hereof. "Welfare Plan" means an employee welfare benefit plan as defined in Section 3(1) of ERISA established or maintained by Borrower or any ERISA Affiliate or with respect to which Borrower or any ERISA Affiliate has an obligation to make contributions and covers any current or former employee of Borrower or any ERISA Affiliate. "Yield Determination Date", "Yield Differential", "Yield Rate" and "Yield Rate Determination Date" have the respective meanings set forth in Section 2.6(c) hereof. ARTICLE II. GENERAL TERMS Section 2.1. The Loan. (a) Subject to the terms and conditions of this Agreement, Lender shall lend to Borrower on the Closing Date the Loan Amount, consisting of Loan A and Loan B. The proceeds of the Loan shall be used solely for the purposes identified in Section 2.2 hereof. Lender is hereby authorized to fund directly from the proceeds of the Loan advanced on the Closing Date (net of any deposits or payments made by Borrower or its Affiliates prior to the Closing Date) (i) the Origination Fee, (ii) the deposits to the Deferred Maintenance Escrow Account, the Real Estate Taxes Escrow Account and the Insurance Escrow Account required to be funded from Loan proceeds pursuant to Section 2.13, (iii) the out-of-pocket expenses incurred by Lender in connection with the origination and funding of the Loan (to the extent not previously paid) and (iv) the reasonable fees and expenses of Lender's and Borrower's counsel. (b) The Loan shall constitute one general obligation of Borrower to Lender and shall be secured by the security interest in and Liens granted upon all of the Collateral, and by all other security interests and Liens at any time or times hereafter granted by Borrower to Lender as security for the Loan. Section 2.2. Use of Proceeds. Proceeds of the Loan shall be used only for the following purposes: (a) to refinance existing mortgage debt at the Mortgaged Property, (b) to make the required deposits to the Deferred Maintenance Escrow Account, the Real Estate Taxes Escrow Account and the Insurance Escrow Account, (c) to pay to Lender the Origination Fee, (d) to pay Transaction Costs (including the reasonable out-of-pocket expenses incurred by Lender in 33 connection with the origination and funding of the Loan) and (e) to pay reasonable fees, expenses and disbursements of Lender's and Borrower's counsel. Any proceeds of the Loan in excess of the amounts applied in accordance with Sections 2.1(a) and 2.2(a)-(e) may be used by the Borrower for its general purposes. Section 2.3. Security for the Loan. The Note and Borrower's obligations hereunder and under all other Loan Documents shall be secured by (a) Liens upon the Mortgaged Property pursuant to the Mortgage, (b) the Contract Assignment, (c) the Manager's Subordination, (d) the Assignment of Profits and Leases, and (e) all other security interests and Liens granted in this Agreement and in the other Loan Documents. Section 2.4. Borrower's Note. Borrower's obligation to pay the principal of and interest on the Loan and all other amounts due under the Loan Documents shall be evidenced initially by the Note, duly executed and delivered by Borrower on the Closing Date. The Note shall be payable as to principal, interest and all other amounts due under the Loan Documents, as specified in this Agreement, with a final maturity on the Maturity Date. Subject to the provisions of Section 5.1(w), Lender shall have the right to have the Note subdivided, by exchange for promissory notes of lesser denominations in the form of the initial Note, upon written request to Borrower and the delivery to Borrower by Lender of the predecessor note(s) marked "Cancelled" and, in such event, Borrower shall promptly execute additional or replacement Notes. At no time shall the aggregate original principal amount of the Note (or of such replacement Notes) exceed the Loan Amount. Section 2.5. Principal and Interest. (a) Interest on the Loan shall accrue at the rate set forth in Section 2.5(b) below commencing on the Closing Date. Borrower shall make a payment to Lender of interest only on the Closing Date for the period from the Closing Date through the tenth (10th) day of January, 2005. Commencing on the eleventh (11th) day of February, 2005 (the "First Payment Date") and on the eleventh (11th) day of each calendar month thereafter (each, with the First Payment Date, a "Payment Date"), Borrower shall make equal monthly payments (each, a "Monthly Debt Service Payment") of principal and interest in the amount of the Monthly Debt Service Payment Amount. The entire outstanding Principal Indebtedness of the Loan and the Note, together with all accrued but unpaid interest thereon and all other amounts due under the Loan Documents, shall be due and payable by Borrower to Lender on the Maturity Date. Interest shall be computed on the basis of a 360 day year and the actual number of days elapsed during any month or other accrual period. (b) The Loan shall bear interest at a rate per annum equal to the Applicable Interest Rate, increasing, however, to the Default Rate while an Event of Default has occurred and is continuing, as provided in Section 2.5(c) below. (c) While an Event of Default has occurred and is continuing, Borrower shall pay to Lender interest at the Default Rate on the outstanding Indebtedness until such amount is paid in full. 34 (d) If any payment of principal, interest or other sums shall not be made to Lender on the date the same is due hereunder or under any of the other Loan Documents, then Borrower shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder (other than the entire principal balance of the Loan due upon acceleration of the Loan or upon Maturity) or under any other Loan Document (or, in the case of a partial payment, the unpaid portion thereof), such late charge to be immediately due and payable without demand by Lender. (e) Notwithstanding any provision to the contrary contained in this Agreement or the other Loan Documents, Borrower shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("Excess Interest"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this paragraph shall govern and control; (2) Borrower shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the Principal Indebtedness of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "Maximum Rate"), and this Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) Borrower shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Indebtedness is calculated at the Maximum Rate rather than the applicable rate under this Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Indebtedness shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Indebtedness had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Maximum Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater than the applicable interest rate, then the foregoing provisions of this paragraph shall apply. Section 2.6. Prepayment. (a) Limitation on Prepayment; Prepayment Consideration Due on Acceleration. Borrower shall have no right to prepay the Loan in whole or part at any time, except as expressly set forth in this Section 2.6(a). Commencing on and at any time after the First Open Prepayment Date, Borrower may prepay the Loan in whole, but not in part, without payment of Prepayment Consideration, provided that (i) Borrower shall provide to Lender not less than thirty (30) days' prior written notice of such prepayment, (ii) together with such prepayment Borrower also shall pay all accrued and unpaid interest and all other Obligations and (iii) if such prepayment occurs on any day other than a Payment Date, then together therewith Borrower also shall pay to Lender the amount of interest that would have accrued on the amount being prepaid from and including the date of such prepayment to (but excluding) the Payment 35 Date following such date of prepayment. Borrower shall not be required to pay any Prepayment Consideration with respect to an application of insurance proceeds or condemnation awards by Lender pursuant to this Agreement or the Mortgage in the absence of an Event of Default. In addition, in the event the Lender elects to apply insurance proceeds or condemnation proceeds to the payment of the Indebtedness pursuant to this Agreement, then, so long as an Event of Default has not occurred and is not continuing, the Borrower may prepay the Loan in part and simultaneously obtain a release of the affected Mortgaged Property and all Collateral related thereto from the Lien of the Mortgage and the Loan Documents, provided that on the date of the release, (i) the Borrower prepays the Principal Indebtedness in an amount equal to 125% of the KC Allocated Loan Amount (in the case of a Release of the Mortgaged Property owned by the KC Borrower) or 125% of the TC Allocated Loan Amount (in the case of a Release of the Mortgaged Property owned by the TC Borrower) TC Borrower and (ii) the Borrower makes the payments provided for in clauses (i) and (ii) of the second preceding sentence. (b) Prepayment Consideration Due. If the Maturity Date shall be accelerated to a date prior to the Scheduled Maturity Date, or if any prepayment of all or any portion of the Principal Indebtedness hereunder occurs, whether in connection with Lender's acceleration of the unpaid Principal Indebtedness of the Loan or in any other circumstances whatsoever, or if the Mortgage is satisfied or released by foreclosure (whether by power of sale or judicial proceeding), deed in lieu of foreclosure or by any other means, then the Prepayment Consideration shall become immediately due and owing and Borrower shall forthwith pay the Prepayment Consideration to Lender. The foregoing shall not create any right of prepayment. Borrower shall have no right whatsoever to prepay all or any portion of the Principal Indebtedness of the Note, except as set forth in Section 2.6(a) above. (c) Definitions. The following terms shall have the meanings indicated: The "Prepayment Consideration" shall be the amount equal to the sum of (i) an amount equal to the interest which would have accrued on the Principal Indebtedness for the period from and including (A) the date (the "Event Date") which is the earlier of (x) the date of prepayment of the Loan or (y) such earlier date upon which the entire remaining Principal Indebtedness shall become due and payable, whether as a result of acceleration of the maturity of the Loan or otherwise, to but excluding (B) the next Payment Date following the Event Date, plus (ii) the sum of two percent of the Principal Indebtedness on the Event Date plus an amount equal to the "Present Value Yield Differential", calculated as the excess, if any, of (A) the amount of the monthly interest which would otherwise be payable on the principal balance of the Loan from (1) the date (the "Yield Determination Date") which is the Payment Date following the Event Date through and including (2) the Scheduled Maturity Date, over (B) the amount of the monthly interest Lender would earn if an amount equal to the Principal Balance of the Loan as of the Event Date were invested for the period from the Yield Determination Date through the Scheduled Maturity Date at the Yield Rate (as hereinafter defined), such difference (the "Yield Differential") to be discounted to present value at the Yield Rate using the following formula: Yield Differential x [1-(1+r)-(n)] ---------------------------------- Present Value Yield Differential = r where: 36 r = Yield Rate, and n = the remaining Weighted Average Life to Maturity (as defined below) from the Yield Determination Date. The "Yield Rate" shall be the annualized yield on securities issued by the United States Treasury having a maturity corresponding to the then remaining Weighted Average Life to Maturity (as defined below) of the Loan as determined by Lender, as quoted in Federal Reserve Statistical Release [H. 15(519)] under the heading "U.S. Government Securities - Treasury Constant Maturities" for the Yield Rate Determination Date (as defined below), converted to a monthly equivalent yield. If yields for such securities of such maturity are not shown in such publication, then the Yield Rate shall be determined by Lender by linear interpolation between the yields of securities of the next longer and next shorter maturities. If said Federal Reserve Statistical Release or any other information necessary for determination of the Yield Rate in accordance with the foregoing is no longer published or is otherwise unavailable, then the Yield Rate shall be determined by Lender based on comparable data. The term "Yield Rate Determination Date" shall mean the date which is five (5) Business Days prior to the Yield Determination Date. The term "Weighted Average Life to Maturity" shall mean, at any date, the number of years (including fractional years, expressed as a decimal (e.g., three years and three moths = 3.25 years)) obtained by dividing (x) the outstanding Principal Indebtedness on the Event Date into (y) the sum total of the Weighted Amortization Products (as defined below) for each Scheduled Principal Payment (as defined below). The "Scheduled Principal Payment(s)" shall mean each then remaining scheduled principal payment (assuming no prepayment or Loan acceleration), including payment of the outstanding principal balance of the Loan on the Scheduled Maturity Date, in respect of the Loan. The "Weighted Amortization Product" for each Scheduled Principal Payment shall mean the product of (A) the amount of such Scheduled Principal Payment multiplied by (B) the number of years (including fractional years, expressed as a decimal) which will elapse between the Yield Determination Date and the date on which such Scheduled Principal Payment is to be made under this Agreement. Borrower agrees that the Prepayment Consideration required hereunder is reasonable. Borrower has given individual weight to the consideration in this transaction for this waiver and agreement. (d) Prepayment Allocations. All proceeds of a prepayment made in accordance with this Section 2.6 shall be applied by Lender in the following order of priority, unless Lender elects an alternate priority of application in Lender's discretion: (i) first, to the payment of all accrued and unpaid interest on Loan A; (ii) second, to the payment of the outstanding principal amount of Loan A until the full principal amount of Loan A is paid in full; (iii) third, to the payment of all accrued and unpaid interest on Loan B; and (iv) fourth, to the payment of the outstanding principal amount of Loan B, until such principal amount is paid in full. 37 In the absence of an Event of Default any Prepayment Consideration shall be allocated by Lender between Loan A and Loan B in an amount equal to the relative principal balances of Loan A and Loan B prepaid. Section 2.7. Defeasance. (a) Total Defeasance. Borrower shall have the right at any time after the First Open Defeasance Date and prior to the First Open Prepayment Date to obtain a release of the Lien of the Mortgage encumbering the Mortgaged Property (a "Total Defeasance") upon satisfaction of the following conditions: (i) Borrower shall provide Lender at least thirty (30) days' prior written notice (or such shorter period of time if permitted by Lender) specifying a date (the "Defeasance Date") on which Borrower shall have satisfied the conditions in this Section 2.7(a) and on which it shall effect the Total Defeasance; (ii) Borrower shall pay to Lender (A) all payments of interest due on the Loan to and including the Defeasance Date and (B) all other sums, then due under the Note, this Loan Agreement, the Mortgage and the other Loan Documents; (iii) Borrower shall irrevocably deposit the Total Defeasance Collateral into the Defeasance Collateral Account and otherwise comply with the provisions of this Section 2.7(a) and Sections 2.7(c) and (d) hereof; (iv) Borrower shall execute and deliver to Lender a Security Agreement in respect of the Defeasance Collateral Account and the Total Defeasance Collateral; (v) Borrower shall deliver to Lender an opinion of counsel for Borrower that is customary in commercial lending transactions and subject only to normal qualifications, assumptions and exceptions opining to any matter as then required by the Rating Agencies in connection with similar transactions and including, among other things, that (w) Lender has a legal and valid perfected first priority security interest in the Defeasance Collateral Account and the Total Defeasance Collateral, and (x) if a Securitization has occurred, the REMIC Trust formed pursuant to such Securitization will not fail to maintain its status as a "real estate mortgage investment conduit" within the meaning of Section 860D of the Code as a result of the Total Defeasance pursuant to this Section 2.7(a); (vi) If and to the extent required by the Rating Agencies, a non-consolidation opinion with respect to the Successor Borrower; (vii) Borrower shall deliver to Lender a confirmation in writing from the applicable Rating Agencies to the effect that the release of the Mortgaged Property from the Lien of the Mortgage as contemplated by this Section 2.7(a) and the substitution of the Total Defeasance Collateral will not result in a downgrading, withdrawal or qualification of the respective ratings in effect immediately prior to such defeasance for the Certificates issued in connection with the Securitization which are then outstanding; 38 (viii) Borrower shall deliver an officer's certificate certifying that the requirements set forth in this Section 2.7 have been satisfied; (ix) Borrower shall deliver a certificate of a nationally recognized public accounting firm reasonably acceptable to Lender certifying that the Total Defeasance Collateral will generate monthly amounts equal to or greater than the Scheduled Defeasance Payments; (x) Borrower shall deliver such other certificates, opinions, documents and instruments as Lender may reasonably request, provided the same do not materially increase Borrower's obligations or decrease Borrower's rights hereunder; and (xi) Borrower shall pay all costs and expenses of Lender incurred in connection with the defeasance, including Lender's reasonable attorneys' fees and expenses and Rating Agency fees and expenses. If a Total Defeasance occurs and all of the requirements of this Section 2.7 have been satisfied, (i) Lender shall execute any and all documents required to release the Mortgaged Property, all Account Collateral and all other Collateral from the Lien of the Mortgage and the Assignment of Profits and Leases, and to terminate the Local Collection Account Agreements, the Collection Account Agreement and all Direction Letters, and cause all Account Collateral held by or on behalf of Lender to be released to Borrower, and the Total Defeasance Collateral, pledged pursuant to the Security Agreement, shall be the sole source of collateral securing the Loan. In connection with any such release of the Lien, Borrower shall submit to Lender, not less than thirty (30) days prior to the Defeasance Date (or such shorter time as permitted by Lender), a release of Lien (and related Loan Documents) for execution by Lender. Such release shall be in a form appropriate in the jurisdiction in which the Mortgaged Property is located and contain standard provisions protecting the rights of a releasing lender. In addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in connection with such release. Borrower shall pay all costs, taxes and expenses associated with the release of the Lien of the Mortgage and the Assignment of Leases, including Lender's reasonable attorneys' fees. (b) Partial Defeasance. Borrower shall, as a condition to and only in connection with a KC Release of the KC Property after the First Open Defeasance Date and prior to the First Open Prepayment Date as provided in Section 2.11 below, have the right to defease a portion of the Loan in the amount of the Partial Defeasance Amount (a "Partial Defeasance") upon satisfaction of the following conditions: (i) Borrower shall provide Lender at least thirty (30) days' prior written notice (or such shorter period of time if permitted by Lender) specifying a date (the "Partial Defeasance Date") on which Borrower shall have satisfied the conditions in this Section 2.7(b) and on which it shall effect the Partial Defeasance; (ii) Borrower shall pay to Lender (A) all payments of interest due on the Loan to and including the Partial Defeasance Date and (B) all other sums, then due under the Note, this Loan Agreement, the Mortgage and the other Loan Documents; 39 (iii) Borrower shall irrevocably deposit the Partial Defeasance Collateral into the Defeasance Collateral Account and otherwise comply with the provisions of this Section 2.7(b) and Sections 2.7(c) and (d) hereof; (iv) Lender shall prepare (at Borrower's expense) all necessary documents to modify this Loan Agreement and to amend and restate each Note and issue four substitute notes, two of which notes (collectively, the "Defeased Note") shall have an aggregate principal balance equal to the Partial Defeasance Amount, with one such Defeased Note payable to the Note A Lender and having a principal balance equal to the Partial Loan A Defeasance Amount (the "Defeased A Note"), and the other such Defeased Note payable to the Note B Lender and having a principal balance equal to the Partial Loan B Defeasance Amount (the "Defeased B Note"), and the other two of which notes (collectively, the "Undefeased Note") having an aggregate principal balance equal to the excess of (A) the then-outstanding principal amount of the Loan, over (B) the aggregate amount of the Defeased Note, with one such Undefeased Note (the "Undefeased A Note") payable to the Note A Lender and having a principal balance equal to the excess of (1) the then-outstanding principal amount of Loan A, over (2) the aggregate amount of the Defeased A Note, and the other such Defeased Note the "Undefeased B Note") payable to the Note B Lender and having a principal balance equal to the excess of (X) the then-outstanding principal amount of Loan B, over (Y) the aggregate amount of the Defeased B Note. The Defeased A Note and Undefeased A Note shall have identical terms as Note A except for the principal balance and monthly payments. The Defeased B Note and Undefeased B Note shall have identical terms as Note B except for the principal balance and monthly payments. The "Partial Loan A Defeasance Amount" shall be equal to the product of the Partial Defeasance Amount multiplied by a fraction, the numerator of which is the then-outstanding Principal Indebtedness of Loan A and the denominator of which is the aggregate then-outstanding Principal Indebtedness of Loan A and Loan B. The "Partial Loan B Defeasance Amount" shall be equal to the product of the Partial Defeasance Amount multiplied by a fraction, the numerator of which is the then-outstanding Principal Indebtedness of Loan B and the denominator of which is the aggregate then-outstanding Principal Indebtedness of Loan A and Loan B. The Defeased Note and the Undefeased Note shall be cross defaulted and cross collateralized. A Defeased Note may not be the subject of any further defeasance; (v) Borrower shall execute and deliver to Lender a Security Agreement in respect of the Defeasance Collateral Account and the Partial Defeasance Collateral; (vi) Borrower shall deliver to Lender an opinion of counsel for Borrower that is customary in commercial lending transactions and subject only to normal qualifications, assumptions and exceptions opining to any matter as then required by the Rating Agencies in connection with similar transactions and including, among other things, that (w) Lender has a legal and valid perfected first priority security interest in the Defeasance Collateral Account and the Partial Defeasance Collateral and (x) if a Securitization has occurred, the REMIC Trust formed pursuant to such Securitization will not fail to maintain its status as a "real estate mortgage investment conduit" within the meaning of Section 860D of the Code as a result of the Partial Defeasance pursuant to this Section 2.7(b); 40 (vii) If and to the extent required by the Rating Agencies, a non-consolidation opinion with respect to the Successor Borrower; (viii) Borrower shall deliver to Lender a confirmation in writing from the applicable Rating Agencies to the effect that the release of the KC Property from the Lien of the Mortgage as contemplated by this Section 2.7(b) and the substitution of the Partial Defeasance Collateral will not result in a downgrading, withdrawal or qualification of the respective ratings in effect immediately prior to such defeasance for the Certificates issued in connection with the Securitization which are then outstanding; (ix) Borrower shall deliver an officer's certificate certifying that the requirements set forth in this Section 2.7 have been satisfied; (x) Borrower shall deliver a certificate of a nationally recognized public accounting firm reasonably acceptable to Lender certifying that the Partial Defeasance Collateral will generate monthly amounts equal to or greater than the Scheduled Defeasance Payments; (xi) Borrower shall deliver such other certificates, opinions, documents and instruments as Lender may reasonably request; and (xii) Borrower shall pay all costs and expenses of Lender incurred in connection with the defeasance, including Lender's reasonable attorneys' fees and expenses and Rating Agency fees and expenses. (c) Defeasance Collateral Account. On or before the date on which Borrower delivers the Defeasance Collateral, Borrower or Successor Borrower (as applicable) shall open at any Eligible Bank the defeasance collateral account (the "Defeasance Collateral Account") which shall at all times be an Eligible Account. The Defeasance Collateral Account shall contain only (i) Defeasance Collateral and (ii) cash from interest and principal paid on the Defeasance Collateral. All cash from interest and principal payments paid on the Defeasance Collateral shall be paid over to Lender on each Payment Date and applied to the monthly installments of principal and interest on the Loan (or in the case of a Partial Defeasance, the portion thereof evidenced by the Defeased Note) and, upon Maturity, to accrued interest and the Principal Balance of the Loan (or in the case of a Partial Defeasance, the portion thereof evidenced by the Defeased Note) Borrower shall cause the Eligible Bank at which the Defeasance Collateral is deposited to enter an agreement with Borrower and Lender, satisfactory to Lender, pursuant to which such Eligible Bank shall agree to hold and distribute the Defeasance Collateral in accordance with this Loan Agreement. Borrower (or Successor Borrower, as applicable) shall be the owner of the Defeasance Collateral Account and shall report all income accrued on Defeasance Collateral for federal, state and local income tax purposes in its income tax return. Borrower shall prepay all costs and expenses associated with opening and maintaining the Defeasance Collateral Account. Lender shall not in any way be liable by reason of any insufficiency in the Defeasance Collateral Account. (d) Successor Borrower. In connection with a Defeasance under this Section 2.7, Borrower shall, if required by the Rating Agencies or if Borrower so elects or Lender 41 requires, establish or designate a successor entity (the "Successor Borrower") which shall be a single purpose bankruptcy remote entity and which shall be approved by the Rating Agencies. Any such Successor Borrower may, at Borrower's option, be an Affiliate of Borrower unless the Rating Agencies or Lender shall require otherwise. Borrower shall transfer and assign all obligations, rights and duties under and to the Note (or the Defeased Note, as applicable), together with the Defeasance Collateral, to such Successor Borrower. Such Successor Borrower shall assume the obligations under the Note (or the Defeased Note, as applicable) and the Security Agreement. Borrower shall pay $1,000 to any such Successor Borrower as consideration for assuming the obligations under the Note (or the Defeased Note, as applicable) and the Security Agreement. Borrower shall pay all reasonable costs and expenses incurred by Lender, including Lender's attorney's fees and expenses incurred in connection therewith, and all fees, expenses and other charges of the Rating Agencies. Section 2.8. Application of Payments. In the absence of an Event of Default, each payment of principal and/or interest on the Loan shall be applied first (a) in the amount of the Monthly Loan A Debt Service Amount, first to accrued and unpaid Loan A Interest and the balance of the Monthly Loan A Debt Service Amount to the payment of principal on Loan A, then (b) in the amount of the Monthly Loan B Debt Service Amount, first to accrued and unpaid Loan B Interest and the balance of the Monthly Loan B Debt Service Amount to the payment of principal on Loan B. After the occurrence and during the continuance of an Event of Default, Borrower irrevocably waives the right to direct the application of any and all payments at any time hereafter received by Lender from or on behalf of Borrower, and Borrower irrevocably agrees that Lender shall have the continuing exclusive right to apply any and all such payments and any and all proceeds and recoveries from the Pledged Accounts, the Mortgaged Property or Borrower after the occurrence and during the continuance of an Event of Default, in Lender's discretion, to the Indebtedness and other amounts then outstanding under this Agreement in such order and manner as Lender may determine, including, without limitation, (i) reasonable out-of-pocket costs and expenses of Lender reimbursable pursuant to the terms of this Agreement arising as a result of such repayment, any accrued and unpaid interest then payable with respect to the Loan or the portion thereof being repaid, the Principal Indebtedness, any accrued and unpaid Prepayment Consideration in respect of any such Principal Indebtedness or the portion thereof being repaid, any other sums then due and payable to or for the benefit of Lender pursuant to this Agreement or any other Loan Document(s), or to Property Expenses and Capital Improvement Costs for the Mortgaged Property, or to fund Reserve Accounts, and (ii) application of payments to principal and interest under Loan A under circumstances where interest or other amounts remain accrued and unpaid on Loan B. Section 2.9. Method and Place of Payment. Except as otherwise specifically provided herein, all payments and prepayments under this Agreement and the Note shall be made to Lender not later than 2:00 p.m., Eastern time, on the date when due and shall be made in lawful money of the United States of America by wire transfer in federal or other immediately available funds to its account at such bank(s) as Lender may from time to time designate. Any funds received by Lender after such time shall, for all purposes hereof, be deemed to have been paid on the next succeeding Business Day. Lender shall notify Borrower in writing of any changes in the account to which payments are to be made. All payments made by Borrower hereunder, or by Borrower under the other Loan Documents, shall be made irrespective of, and without any deduction for, any defenses, set-offs or counterclaims. Whenever any payment to be 42 made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day. Section 2.10. Taxes. All payments made by or on behalf of Borrower under the Note and this Agreement shall be made without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority. Section 2.11. KC Release. After the First Open Defeasance Date and prior to the First Open Payment Date, and provided no Default or Event of Default exists, Borrower may obtain a release of the KC Property, the Account Collateral with respect to the KC Property and/or KC Borrower and all collateral with respect to the KC Property and/or KC Borrower (the "KC Release") from the lien of the Mortgage and the Loan Documents, provided that all of the following conditions precedent have been satisfied: (a) No KC Release will be permitted until after the First Open Defeasance Date or if any Default or Event of Default has occurred and is continuing. No KC Release will be permitted on or after the First Open Payment Date. (b) No KC Release will be permitted unless Borrower establishes to Lender's satisfaction that the Debt Service Coverage Ratio for the remainder of the Mortgaged Property (i.e., exclusive of any income from the KC Property) is and shall continue to be equal to or greater than the greater of (i) the Debt Service Coverage Ratio for the Mortgaged Property calculated immediately prior to the KC Release (i.e., inclusive of the income from the KC Property), and (ii) 1.50:1.00. If the foregoing condition would not be satisfied by defeasance of the Partial Defeasance Amount indicated in subparagraph (e) below, Borrower may by written notice to Lender given not less than fifteen (15) days prior to the Partial Defeasance increase the Partial Defeasance Amount to an amount which would result in the foregoing condition being satisfied upon completion of the Partial Defeasance of such larger Partial Defeasance Amount. (c) No KC Release will be permitted unless Borrower establishes to Lender's satisfaction that the value of the remainder of the Mortgaged Property (as determined by then-current Appraisals prepared by Appraisers approved by Lender, the fees and expenses of which shall be paid by Borrower) is sufficient to satisfy a loan-to-value ratio (based on the outstanding principal balance of the Loan immediately prior to the KC Release, less the Partial Defeasance Amount) which is the lesser of (i) 60% and (ii) the loan-to-value ratio for the Mortgaged Property (inclusive of the KC Property, and based on the outstanding principal balance of the Loan immediately prior to the KC Release) calculated immediately prior to the KC Release. If the foregoing condition would not be satisfied by defeasance of the Partial Defeasance Amount indicated in subparagraph (e) below, Borrower may by written notice to Lender given not less than fifteen (15) days prior to the Partial Defeasance increase the Partial Defeasance Amount to an amount which would result in the foregoing condition being satisfied upon completion of the Partial Defeasance of such larger Partial Defeasance Amount. (d) The KC Release shall be allowed only in connection with a bona fide all-cash sale of the KC Property to an unaffiliated third party on arms-length terms and conditions, 43 and upon closing of such sale (and thereafter) shall not be owned, purchased or acquired by Borrower or any Affiliate of Borrower. (e) Borrower will on the date of the KC Release (the "KC Release Date") complete a Partial Defeasance, pursuant to Section 2.7 hereof, of a portion of the Loan (the "Partial Defeasance Amount" for such KC Property) equal to 125% of the KC Allocated Loan Amount; provided, that if Borrower elects in connection with a Partial Defeasance of a KC Property to increase the Partial Defeasance Amount for such KC Property pursuant to the provisions of paragraphs (b) and/or (c) above, the Partial Defeasance Amount for such KC Property shall be such higher amount for purposes of such Partial Defeasance. (f) Borrower will execute (and Guarantor will consent in writing thereto and reaffirm their obligations under the Loan Documents to which they are a party notwithstanding the KC Release) and deliver all such amendments to the Loan Documents and other instruments or documents as may be required by Lender (using commercial standards customarily applied with respect to mortgage loans such as the Loan) in order to continue to fully protect Lender's lien and security interest in the remainder of the Mortgaged Property. (g) Borrower, at its sole cost and expense, shall obtain endorsements (to the extent legally obtainable) to Lender's loan policy of title insurance satisfactory in form and content to Lender, which endorsements will insure that the lien created by the Loan Documents remains a valid first lien on the remainder of the Mortgaged Property. (h) Borrower shall pay Lender's reasonable costs and expenses in connection with the KC Release, including, without limitation, all costs and expenses incurred in the preparation, negotiation and review of any and all materials required to be provided in connection with the KC Release, the costs and expenses of preparing and recording KC Releases, UCC-3 releases, and any loan modification documents required by Lender (provided such modification documents do not increase Borrower's obligations or decrease Borrower's rights under the Loan Documents), Lender's reasonable attorneys' fees and costs, all survey charges and costs, all title premiums and costs, documentary stamps incurred in connection with the release of the KC Property in accordance with the requirements contained herein, and all other reasonable out-of-pocket costs, fees, and expenses incurred by Lender in connection with the requested release of the KC Property. Borrower shall pay or reimburse Lender for such costs and expenses upon Lender's demand regardless of whether a KC Release occurs or is permitted to occur. (i) If a KC Release occurs and all of the requirements of this Section 2.11 have been satisfied, (i) Lender shall execute any and all documents required to release the KC Property, all related Account Collateral and all other Collateral related to the KC Property from the Lien of the applicable Mortgage and the applicable Assignment of Profits and Leases, and to terminate the related Local Collection Account Agreements, Collection Account Agreement and Direction Letters, and cause all related Account Collateral held by or on behalf of Lender to be released to Borrower. In connection with any such release of the Lien, Borrower shall submit to Lender, not less than thirty (30) days prior to the KC Release Date (or such shorter time as permitted by Lender), a release of Lien (and related Loan Documents) for execution by Lender. Such release shall be in a form appropriate in the jurisdiction in which the KC Property is located 44 and contain standard provisions protecting the rights of a releasing lender. In addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in connection with such release. Borrower shall pay all costs, taxes and expenses associated with the release of the Lien of the applicable Mortgage and the applicable Assignment of Leases, including Lender's reasonable attorneys' fees. Section 2.12. Central Cash Management. (a) Local Collection Account; Collection Account; Deposits to and Withdrawals from the Collection Account. (i) On or before the Closing Date, Lender shall (1) establish on behalf of the Borrower and maintain with the Collection Account Bank a collection account for each Mortgaged Property (collectively, the "Collection Account"), each of which shall be an Eligible Account with a separate and unique identification number in the name of Lender, as secured party, or, at Lender's option, in the name of Borrower for the benefit of Lender, as secured party, and (2) cause the Collection Account Bank to deliver to Lender the Collection Account Agreement in form and substance reasonably acceptable to Lender acknowledging Lender's security interest in and "control" of Lender within the meaning of Sections 9-104 and 9-106 of the UCC over the Collection Account. On or before the Closing Date, Borrower shall (x) establish and maintain with one or more financial institutions acceptable to Lender in its sole reasonable discretion (individually each, and collectively, the "Local Collection Account Bank"), one or more local collection accounts for each Mortgaged Property (the "Local Collection Account"), each of which shall be an Eligible Account with a separate and unique identification number and entitled in the same name as the Collection Account and (y) cause each Local Collection Account Bank to deliver to Lender a Local Collection Account Agreement in form and substance reasonably acceptable to Lender acknowledging Lender's security interest in and "control" of Lender within the meaning of Sections 9-104 and 9-106 of the UCC over the Local Collection Account. Not later than the Closing Date, Borrower shall and shall cause Manager, if any, to (A) direct all tenants under the Leases (if any) to pay all Rents thereunder directly into the Local Collection Account, and deliver irrevocable (without Lender's written consent) letters of direction to such effect to such tenants in Lender's reasonable form, (B) instruct each of the credit card banks, credit card companies or other credit card receipt intermediaries with which Borrower has entered into merchant, clearing or other agreements with respect to the Mortgaged Property that all credit card receipts with respect to the Mortgaged Property cleared by such credit card banks, credit card companies or other intermediaries shall be transferred by such credit card banks, credit card companies or other intermediaries by wire transfer or the ACH system to the Collection Account, and deliver irrevocable (without Lender's prior written consent) instruction letters to such effect to such Persons (and obtain each such Person's acknowledgment and agreement thereto) in Lender's reasonable form, 45 (C) instruct all Persons that maintain open accounts with Borrower or Manager or with whom Borrower or Manager does business on an "accounts receivable" basis with respect to the Mortgaged Property to deliver all payments due under such accounts to the Local Collection Account, and deliver to such Persons irrevocable (without Lender's written consent) letters of instruction in Lender's reasonable form, and (D) cause (and cause Manager to) deposit any and all other Receipts to be deposited promptly into the Local Collection Account and in no event later than one Business Day after the same are paid to or for the benefit of Borrower or Manager. Neither Borrower nor Manager shall (x) terminate, amend, revoke or modify any tenant direction letter or instruction letter provided pursuant to clauses (A), (B) and (C) above to a credit card bank, credit card company or other intermediary or other Person (each a "Direction Letter") in any manner whatsoever, or (y) direct or cause any Person receiving or bound by a Direction Letter, or purportedly or intended or required to receive or be bound or instructed by a Direction Letter, to pay any amount in any manner other than as provided in the related Direction Letter. To the extent that Borrower, Manager or any Person on Borrower's or Manager's behalf holds any Receipts or Advance Bookings Deposits, whether in accordance with this Agreement or otherwise, (1) such amounts shall be deemed to be Collateral and shall be held in trust for the benefit, and as the property, of Lender, and (2) such amounts shall not be commingled with any other funds or property of Manager. Subject to the following proviso, on each Business Day during the term of this Agreement, the Borrower may withdraw the funds deposited in the Local Collection Account and the Collection Account pursuant to clauses (A) through (D) above in whole or in part and remit same to an operating or concentration account of Borrower free of Lender's Liens and security interest; provided, that the foregoing right of the Borrower shall be immediately suspended (i) if Lender notifies the Borrower in writing that an Event of Default has occurred and is continuing, or (ii) if, commencing in January, 2006, based upon the Monthly Statement and Quarterly Statement delivered during such month, and thereafter, Lender notifies Borrower in writing that as of the most recent quarterly test date the Debt Service Coverage Test was not satisfied, or (iii) if, after an Additional Resort Event has occurred, based upon the Monthly Statement and Quarterly Statement delivered during any month, Lender notifies Borrower in writing that as of the most recent quarterly test date the Additional Resort Coverage Test was not satisfied, or (iv) if Borrower fails to cause to be on deposit in the Collection Account by not later than the close of business on the Business Day immediately preceding each Payment Date an amount of funds sufficient to make the payments required pursuant to clauses first through third of Section 2.12(b) of this Agreement. 46 Subject to Section 2.12(a)(ii), on each Business Day during a calendar month following the delivery of a notification by Lender in writing that as of the most recent quarterly test date the Debt Service Coverage Test or the Additional Resort Coverage Test was not satisfied (and until Lender notifies Borrower in writing as of a subsequent quarterly test date that the Debt Service Coverage Test or the Additional Resort Coverage Test was satisfied), Borrower shall sweep or cause to be swept all Money on deposit in the Local Collection Account (in excess of $20,000 which may be retained in the Local Collection Account and applied by Borrower to pay Operating Expenses) to the Collection Account. Except as described above or elsewhere in this Agreement, Borrower shall not have any right to withdraw Money from the Local Collection Account or the Collection Account, which shall be under the "control" of Lender within the meaning of Sections 9-104 and 9-106 of the UCC. Borrower shall be responsible for the payment of all costs and expenses in connection with establishing and maintaining the Collection Account, the Local Collection Account and the Reserve Accounts (including, without limitation, Collection Account Bank's and Local Collection Account Bank's fees and charges) and shall reimburse Lender upon demand for any such costs or expenses incurred by Lender. (ii) In the event that any Event of Default has occurred and is continuing, (A) all Receipts and Money received from Accounts or derived from the Mortgaged Property and all Proceeds thereof shall be payable to Lender or as otherwise directed by Lender, (B) Lender shall make deposits, or cause deposits to be made, of such Receipts, Money and Proceeds directly to the Collection Account, and Borrower shall cooperate (and shall cause the Manager to cooperate) with Lender in the making of such deposits or causing such deposits to be made, (C) Borrower shall not have any right to make or direct any withdrawals from the Local Collection Account, the Collection Account or the Reserve Accounts without the prior written consent of Lender, and (D) proceeds on deposit in the Collection Account and the Reserve Accounts may be applied by Lender for the payment of the Indebtedness pursuant to Section 2.8 of this Agreement. (b) Distribution of Cash. So long as an Event of Default has not occurred and is not continuing (and thereafter at Lender's option and discretion), on each Payment Date, Lender shall, prior to the time required therefor under Section 2.9, apply funds on deposit as of such Payment Date to the extent of such funds in the Collection Account (with the exception of Loss Proceeds, which shall be applied as provided in Section 2.12(e) and Section 5.1(x) of this Agreement) as follows: (i) first, to the Real Estate Taxes Escrow Account and the Insurance Escrow Account, in that order, in the respective amounts required to be deposited therein as described in Section 2.13(b); 47 (ii) second, to the Note A Lender and the Note B Lender in the amount of the Monthly Loan A Debt Service Payment Amount and the Monthly Loan B Debt Service Payment Amount, respectively, then due and payable; (iii) third, to the FF&E Costs Reserve Account in the amount (if any), but only if the same is required to be deposited therein as described in Section 2.13(a); (iv) fourth, if the Operating Expense Account is required to be funded pursuant to Section 2.13(c), to the Operating Expense Account in the amount required, or permitted, to be deposited therein as described in Section 2.13(c); and (v) fifth, to the payment to Lender of any expenses or other amounts (other than the Monthly Debt Service Payment due on the next Payment Date) then due and payable to Lender or its servicer(s) pursuant to this Agreement or the other Loan Documents, including to the payment of any outstanding indemnification payment to which an Indemnified Party is then entitled pursuant to Sections 5.1(i) and 5.1(j); and (vi) sixth, either (x) at any time commencing on and after the February 2006 Payment Date if the Debt Service Coverage Test has not been satisfied, to the Principal Reserve Account or (y) at any time prior to the February 2006 Payment Date and commencing on and after the February 2006 Payment Date if the Debt Service Coverage Test has been satisfied in each case, to Borrower, free and clear of Lender's Lien and security interest, in each case, in an amount equal to remaining available funds. (c) Permitted Investments. So long as no Event of Default has occurred and is continuing, Borrower shall direct Lender in writing to invest and reinvest any balance in the Collection Account, from time to time in Permitted Investments (subject to the availability of such Permitted Investments with the Collection Account Bank); provided, however, that (i) the maturity of the Permitted Investments on deposit therein shall be at the discretion of Borrower, but in any event no later than the Business Day immediately preceding the date on which such funds are required to be withdrawn therefrom pursuant to Section 2.12(a) or 2.12(b) of this Agreement, (ii) after an Event of Default has occurred and for so long as such Event of Default is continuing Borrower shall not have any right to direct investment of the balance in the Collection Account, (iii) all such Permitted Investments shall be held in the name of Lender, as secured party, or at Lender's option in the name of Borrower for the benefit of Lender, as secured party or its servicer and shall be credited to the Collection Account, and (iv) if no written investment direction is provided to Lender by Borrower, Lender may at Lender's option invest any balance in the Collection Account in such Permitted Investments as may be selected by Lender. Lender shall have no liability for any loss in investments of funds in the Collection Account that are invested in Permitted Investments and no such loss shall affect Borrower's obligation to 48 fund, or liability for funding, the Collection Account. All interest paid or other earnings on funds deposited into the Collection Account made hereunder shall be deposited into the Collection Account. Borrower shall include all earnings on the Collection Account as income of Borrower for federal and applicable state tax purposes. (d) Intentionally Omitted. (e) Loss Proceeds. In the event of a casualty or Taking with respect to the Mortgaged Property, all Loss Proceeds shall be paid directly to the Collection Account and, if notwithstanding the foregoing, Borrower or any of its Affiliates receive any Loss Proceeds, Borrower shall deposit or cause such Loss Proceeds to be deposited in the Collection Account upon such receipt. Subject to the provisions of Section 5.1(x) of this Agreement, whereby Loss Proceeds may in certain cases and upon satisfaction of the terms and conditions set forth in Section 5.1(x) be made available for Restoration, Loss Proceeds may, at Lender's option, be applied to the Indebtedness in accordance with the provisions of Section 2.6(a) above, and, upon payment in full of the Indebtedness or, if an Event of Default exists, in any manner determined by Lender in accordance with Section 2.8 hereof. If the Loss Proceeds are to be made available for Restoration pursuant to Section 5.1(x) of this Agreement, such Loss Proceeds shall be held by Lender in a segregated interest-bearing Eligible Account in the name of Lender and under the "control" of Lender within the meaning of Sections 9-104 and 9-106 of the UCC to be opened (if not previously opened and maintained by the Collection Account Bank under the Collection Account Agreement by the Lender) by Lender at a financial institution selected by Lender (the "Loss Proceeds Account"). Funds on deposit in the Loss Proceeds Account shall be invested in Permitted Investments (subject to the availability of such Permitted Investments with the Collection Account Bank) in the same manner and subject to the same restrictions as set forth in Section 2.12(c) with respect to the Collection Account (except that the maturity shall be not later than as necessary to satisfy any schedule of distributions for Restoration required or approved by Lender). If any Loss Proceeds are received by Borrower, such Loss Proceeds shall be received in trust for Lender, shall be segregated from other funds of Borrower, and shall be forthwith paid to Lender to the extent necessary to comply with this Agreement. Section 2.13. Reserve Accounts. (a) Deferred Maintenance Escrow Account, FF&E Costs Reserve Account. (i) On or before the Closing Date, Lender shall establish on behalf of Borrower and maintain with the Collection Account Bank two separate accounts for deferred maintenance and FF&E Costs, each of which shall be an Eligible Account and shall have the same title as the Collection Account, for the benefit of Lender until the Loan is paid in full. The two accounts shall be designated the "Deferred Maintenance Escrow Account" (the "Deferred Maintenance Escrow Account") and the "FF&E Costs Reserve Account" (the "FF&E Costs Reserve Account"). On the Closing Date, Lender shall deposit out of the Loan proceeds $62,350 in the Deferred Maintenance Escrow Account. (ii) Any and all Moneys remitted to the Deferred Maintenance Escrow Account, together with any interest, earnings or income earned thereon, shall be held in 49 the Deferred Maintenance Escrow Account to be withdrawn by Lender upon written request of Borrower made not more than once each month in an amount not less than $10,000 (except in the case of a final disbursement), and applied to pay directly or reimburse Borrower for repairs set forth on Schedule 1 attached hereto (the "Immediate Repairs"). Within the applicable time period(s) for completion set forth on Schedule 1, Borrower shall complete such Immediate Repairs and shall provide to Lender such documentation, and other evidence of compliance with law as Lender may reasonably require. The funds contained in the Deferred Maintenance Escrow Account shall be utilized by Borrower solely for performance of the Immediate Repairs in accordance with the engineering reports and Environmental Reports delivered at closing of the Loan, and shall not be used by Borrower for purposes for which any other Reserve Account is established. Upon written application of Borrower (which may be done by electronic mail or e-mail), Borrower shall be entitled to obtain disbursements by Lender from the Deferred Maintenance Escrow Account to pay costs incurred by Borrower for such Immediate Repairs, provided that (a) no Event of Default has occurred and is continuing, (b) Borrower shall provide to Lender (including electronic mail or e-mail) such documentation and certifications as Lender may reasonably request to substantiate the requirement for and entitlement to such disbursement, (c) Borrower shall provide to Lender (including by electronic mail or e-mail) with all invoices, receipts, lien waivers and other documentation of lawful and workmanlike progress or completion, lien-free status, and availability of sufficient funds, all as may be reasonably requested by Lender, and (d) Borrower shall provide Lender such evidence as may be reasonably satisfactory to Lender that after payment of any draw for Immediate Repairs, the funds remaining in the Deferred Maintenance Escrow Account shall be sufficient to pay for the remainder of such Immediate Repairs. In the event Borrower completes the repairs for which funds were reserved in the Deferred Maintenance Escrow Account to the reasonable satisfaction of Lender, Lender shall disburse any and all amounts then on deposit in the Deferred Maintenance Escrow Account to the Collection Account. (iii) On (x) each Payment Date after the Lender notifies the Borrower in writing that the FF&E/DSCR Test or the Additional Resort Coverage Test has not been satisfied (and until such test is satisfied on a subsequent quarterly test date), (y) any Payment Date following the delivery of written notice from the Lender to the Borrower that the FF&E Suspension Condition has not been satisfied (and until the FF&E Suspension Condition is satisfied) or (z) any Payment Date following the occurrence of an Event of Default (and continuing until such Event of Default has been cured and Lender has waived Borrower's obligation to make deposits hereunder as a result of such Event of Default), Borrower shall deposit from the Collection Account (or if the funds for such deposit are not sufficient to make such deposit after giving effect to Section 2.12(b), Borrower shall make an additional deposit of Borrower's funds in the amount of such deficiency sourced from equity capital contributions) into the FF&E Costs Reserve Account an amount equal the FF&E Percentage of Gross Revenues at the Mortgaged Property during the penultimate calendar month preceding the calendar month in which such Payment Date occurs (for example, the deposit required for the Payment Date in July would be based upon the Gross Revenues for May). Any and all Moneys remitted to the FF&E Costs Reserve Account, together with any Permitted Investments in which such Moneys are or will be invested or reinvested during the term of this Agreement, 50 shall be held in the FF&E Costs Reserve Account to be withdrawn by Lender upon written request by Borrower made not more than once each month in an amount not less than $10,000, and applied to pay directly or reimburse Borrower for FF&E Costs shown on the Operating Budget currently due to be paid; provided, that Borrower shall not (absent Lender's written consent) be entitled to reimbursement from the FF&E Costs Reserve Account for FF&E Costs incurred prior to the Closing Date, or for FF&E Costs incurred more than ninety (90) days prior to the date of Borrower's written request for reimbursement. Not less than five (5) Business Days prior to Borrower's delivery of a request to Lender to withdraw the funds on deposit in the FF&E Costs Reserve Account, in whole or in part, Borrower shall provide Lender with written notice of such request (including therein a statement of the purpose for the withdrawal and in the case of a reimbursement of the Borrower, evidence that the related costs have been paid). Following the determination by the Lender that the FF&E Suspension Condition or the FF&E/DSCR Test which was previously not satisfied has been satisfied, Lender shall release any and all amounts on deposit in the FF&E Costs Reserve Account to Borrower free and clear of Lender's Lien and security interest, by not later than the Business Day following the Business Day on which such determination is made. (b) Real Estate Taxes Escrow Account and Insurance Escrow Account. On or before the Closing Date, Lender shall on behalf of the Borrower establish and maintain with the Collection Account Bank two separate accounts for Basic Carrying Costs, each of which shall be an Eligible Account and shall have the same title as the Collection Account for the benefit of Lender until the Loan is paid in full. The two accounts shall be designated the "Real Estate Taxes Escrow Account" (the "Real Estate Taxes Escrow Account") and the "Insurance Escrow Account" (the "Insurance Escrow Account"). On the Closing Date, the Lender shall deposit out of the Loan proceeds $532,534.95 in the Real Estate Taxes Escrow Account and $1,221,423.50 in the Insurance Escrow Account (i.e. the amount necessary to meet the first bill with credit for existing monthly escrow payments made prior to the applicable due date). With respect to each Payment Date, Borrower shall deposit from the Collection Account (or, if the funds for such deposit are not available pursuant to Section 2.12(b), shall make an additional deposit of Borrower's funds sourced from equity capital contributions), (1) an amount equal to (1/12th) one-twelfth of the annual real estate taxes and any governmental real property assessments or other charges that if not paid in a timely manner will result in a Lien on a Mortgaged Property in the Real Estate Taxes Escrow Account, (2) an amount equal to one-twelfth (1/12th) of the annual insurance premiums for policies of insurance required to be maintained by Borrower with respect to the Mortgaged Property pursuant to this Agreement, and any additional insurance required under any of the other Loan Documents, in the Insurance Escrow Account. Any and all Moneys remitted to the Real Estate Taxes Escrow Account or Insurance Escrow Account shall be held in the Real Estate Taxes Escrow Account or Insurance Escrow Account to be withdrawn from the Real Estate Taxes Escrow Account or Insurance Escrow Account, as applicable, by Lender or its servicer upon written request of Borrower delivered to Lender and its servicer together with documentation and other evidence (including invoices and in the case of a 51 reimbursement of Borrower, evidence that the related costs have been paid) with respect to the respective Basic Carrying Costs towards which such funds are to be applied, and applied to pay directly (or reimburse Borrower, in the case of insurance premiums only) for (x) any Impositions (in the case of the Real Estate Taxes Escrow Account) or (y) any insurance premiums for policies of insurance required to be maintained by Borrower with respect to the Mortgaged Property pursuant to this Agreement, and any additional insurance required under any of the other Loan Documents (in the case of the Insurance Escrow Account). Borrower shall provide Lender or its servicer with bills and other documents necessary for payment of Impositions and insurance premiums at least ten (10) Business Days prior to the due dates therefor. In the event the amount on deposit in the Real Estate Taxes Escrow Account or the Insurance Escrow Account exceeds the amount due for Impositions by more than one-twelfth (1/12th) of the annual real estate taxes (in the case of the Real Estate Taxes Escrow Account) or the amount due for insurance premiums (in the case of the Insurance Escrow Account), respectively, Lender or its servicer shall in its discretion credit such excess against future payment obligations to the Real Estate Taxes Escrow Account or the Insurance Escrow Account, as applicable. (c) Operating Expense Account and Principal Reserve Account. On or before the Closing Date, Lender shall on behalf of the Borrower establish and maintain with the Collection Account Bank two accounts for the remittance of funds by Lender or its servicer after and for so long as, commencing in January 2006 and thereafter, the Debt Service Coverage Test has not been satisfied (or after the Additional Resort Coverage Test has not been satisfied, if applicable), each of which shall be an Eligible Account and shall have the same title as the Collection Account for the benefit of Lender, as secured party until the Loan is paid in full. The two accounts shall be designated the "Operating Expense Account" (the "Operating Expense Account") and the "Principal Reserve Account" (the "Principal Reserve Account"). On any Payment Date after and for so long as the Debt Service Coverage Test or the Additional Resort Coverage Test, if applicable, has not been satisfied, Lender or its servicer shall deposit, to the extent of available funds pursuant to Section 2.12(b), into the Operating Expense Account an amount equal to Monthly Property Expenses and into the Principal Reserve Account any remaining available funds then on deposit in the Collection Account pursuant to clause sixth of Section 2.12(b). Any and all Moneys remitted to the Operating Expense Account or the Principal Reserve Account shall be held in the Operating Expense Account or Principal Reserve Account, as applicable, and applied, (x) with respect to the Operating Expense Account only, to pay Property Expenses up to 110% of those provided for in the then applicable Operating Budget, as directed in writing by Borrower, and/or for other Property Expenses approved by Lender, upon Borrower's written request for disbursement therefor from time to time (but no more frequently than once every two weeks without Lender's consent), and (y) with respect to the Operating Expense Account and the Principal Reserve Account, the balance thereof shall be disbursed to Borrower free and clear of Lender's Lien and security interest, promptly upon Borrower's request upon the Debt Service Coverage Test or the Additional Resort Release Test, if applicable, becoming satisfied, as determined by Lender; 52 provided, that notwithstanding the foregoing, Lender may at any time, at its option, elect to apply the funds on deposit in the Operating Expense Account and the Principal Reserve Account to pay the Indebtedness (including without limitation any Prepayment Consideration and other amounts due Lender in connection with such prepayment) while any Event of Default exists. Following the determination by Lender that the Debt Service Coverage Test or the Additional Resort Release Test which was previously not satisfied has been satisfied, Lender shall release any and all amounts on deposit in the Operating Expense Account and the Principal Reserve Account to Borrower free and clear of Lender's Lien and security interest, by not later than the Business Day following the Business Day on which such determination is made. (d) Intentionally Omitted. (e) Investment of Funds. All or a portion of any Moneys in the Reserve Accounts (other than the Real Estate Tax Escrow Account and the Insurance Escrow Account, neither of which shall bear interest for the benefit of Borrower) shall, so long as no Event of Default has occurred and is continuing, be invested and reinvested by Lender in accordance with written instructions delivered by Borrower, or after an Event of Default has occurred and is continuing, by Lender, in one or more Permitted Investments (subject to the availability of such Permitted Investments with the Collection Account Bank). If no written investment direction is provided to Lender by Borrower, Lender may at its option invest such Moneys in a Permitted Investment selected by Lender. All interest paid or other earnings on funds deposited into the Reserve Accounts made hereunder shall be deposited into the Reserve Accounts (other than with respect to the Real Estate Taxes Escrow Account and the Insurance Escrow Account, for which Lender and its servicer shall not have any obligation to deposit such interest or earnings into such accounts). Lender shall have no liability for any loss in investments of funds in any Reserve Account that are invested in Permitted Investments and no such loss shall affect Borrower's obligation to fund, or liability for funding, the Reserve Accounts. Unless and until title to the funds therein shall have vested in any Person other than Borrower, Borrower shall include all such income or gain on any account of the Reserve Account as income of Borrower for federal and applicable state tax purposes. (f) Event of Default. After an Event of Default has occurred and is continuing, Lender may liquidate any Permitted Investments of the amount on deposit in such account, withdraw and use such amount on deposit in the Pledged Accounts to make payments on account of the Indebtedness or otherwise as provided in Section 2.8. Without in any way limiting the foregoing or Lender's rights and remedies upon an Event of Default, and subject to Lender's direction otherwise from time to time, in whole or in part, in Lender's discretion, after and during the continuance of an Event of Default Lender may direct the Collection Account Bank or the Local Collection Account Bank to disburse to Lender or allocate all available funds on deposit in the Pledged Accounts to: (a) any debt service or other Indebtedness due under this Loan Agreement or the other Loan Documents; (b) any Reserve Account established under this Loan Agreement; (c) otherwise as a reserve for Property Expenses, Capital Improvement Costs, Impositions and other expenditures relating to the use, management, operation or leasing of the Mortgaged Property; and/or (d) any costs and expenses incurred by Lender in connection with such Event of Default, or expended by Lender to protect or preserve the value of the Mortgaged Property. 53 Section 2.14. Additional Provisions Relating to the Pledged Accounts. (a) Borrower covenants and agrees that: (i) all securities or other property underlying any financial assets credited to any Pledged Account shall be registered in the name of Lender, indorsed to Lender or indorsed in blank or credited to another securities account maintained in the name of Lender as secured party under this Agreement and in no case will any financial asset credited to any Pledged Account be registered in the name of Borrower, payable to the order of Borrower or specially indorsed to Borrower except to the extent the foregoing have been specially indorsed to Lender or in blank; and (ii) all Permitted Investments and all other property delivered to Lender pursuant to this Agreement will be promptly credited to one of the Pledged Accounts. (b) Borrower hereby agrees that each item of property (whether investment property, financial asset, security, instrument, cash or otherwise) credited to any Pledged Account shall be treated as a "financial asset" within the meaning of Section 8-102(a)(9) of the UCC. (c) Borrower acknowledges and agrees that the Collection Account Bank and Local Collection Account Bank shall comply with all "entitlement orders" (i.e. an order directing transfer or redemption of any financial asset relating to a Pledged Account, and any "entitlement order" as defined in Section 8-102(a)(8) of the UCC) and instructions (including any "instruction" within the meaning of Section 9-104 of the UCC) originated by Lender without further action or consent by Borrower, Manager or any other Person. (d) Regardless of any provision in any other agreement, for purposes of the UCC, with respect to each Pledged Account, New York shall be deemed to be the bank's jurisdiction (within the meaning of Section 9-304 of the UCC) and the securities intermediary's jurisdiction (within the meaning of Section 8-110 of the UCC). The Pledged Accounts shall be governed by the laws of the State of New York. (e) Except for the claims and interest of Lender and of Borrower in the Pledged Accounts, Borrower represents and warrants that it does not know of any Lien on or claim to, or interest in, any Pledged Account or in any "financial asset" (as defined in Section 8-102(a) of the UCC) credited thereto. If any Person asserts any Lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Pledged Accounts or in any financial asset carried therein, Borrower will promptly notify Lender thereof and shall indemnify, defend and hold Lender and each of the Indemnified Parties harmless from and against any such Lien, encumbrance or claim. Section 2.15. Security Agreement. (a) Pledge of Pledged Accounts. To secure the full and punctual payment and performance of all of the Indebtedness, Borrower hereby assigns, conveys, pledges and transfers to Lender, as secured party, and grants Lender a first priority and continuing security interest in and to, the following property, whether now owned or existing or hereafter acquired or arising and regardless of where located (collectively, the "Account Collateral"): 54 (i) all of Borrower's right, title and interest in the Pledged Accounts and all Money and Permitted Investments, if any, from time to time deposited or held in the Pledged Accounts or purchased with funds or assets on deposit in the Pledged Accounts; (ii) all of Borrower's right, title and interest in interest, dividends, Money, Instruments and other property from time to time received, receivable or otherwise payable in respect of, or in exchange for, any of the foregoing until such time as such items are disbursed from the Pledged Accounts; and (iii) to the extent not covered by clause (i) or (ii) above, all Proceeds of any or all of the foregoing until such time as such items are disbursed from the Pledged Accounts. Lender and Collection Account Bank and Local Collection Account Bank, each as agent for Lender, shall have with respect to the foregoing collateral, in addition to the rights and remedies herein set forth, all of the rights and remedies available to a secured party under the UCC, as if such rights and remedies were fully set forth herein. (b) Covenants; Control. Except as set forth in this Agreement, Borrower shall not have any right to withdraw Money from the Pledged Accounts. Borrower acknowledges and agrees that the Pledged Accounts are and shall at all times continue to be subject to and under the "control" of Lender within the meaning of Sections 9-104 and 9-106 of the UCC. Except as expressly permitted herein, neither Borrower nor Manager nor any other person or entity, through or under Borrower, shall have any control over the use of, or any right to withdraw any amount from, any Pledged Accounts, and Borrower acknowledges that the Collection Account Bank and the Local Collection Account Bank shall comply with all instructions originated by Lender without further consent by Borrower. Borrower acknowledges and agrees that the Collection Account Bank and Local Collection Account Bank shall be entitled to comply with the instructions of Lender with respect to the Pledged Accounts without the further consent of Borrower or Manager. The Account Collateral shall be subject to such applicable laws, and such applicable regulations of the Board of Governors of the Federal Reserve System and of any other banking authority or Governmental Authority, as may now or hereafter be in effect, and to the rules, regulations and procedures of the financial institution where the Account Collateral is maintained relating to demand deposit accounts generally from time to time in effect. (c) Financing Statements; Further Assurances. Borrower hereby irrevocably authorizes Lender at any time and from time to time to file any financing statements or continuation statements, and amendments to financing statements, in any jurisdictions and with any filing offices as Lender may determine, in its discretion, are necessary or advisable to perfect the security interests granted to Lender in connection herewith. Such financing statements may describe the collateral in the same manner as described in any security agreement or pledge agreement entered into by the parties in connection herewith or may contain an indication or description of collateral that describes such property in any other manner as Lender may determine, in its discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the collateral granted to Lender in connection herewith whether now owned or hereafter acquired. From time to time, at the expense of Borrower, Borrower shall promptly execute and deliver all further instruments, and take all further action, that Lender may 55 reasonably request, in order to continue the perfection and protection of the pledge and security interest granted or purported to be granted hereby. (d) Transfers and Other Liens. Borrower shall not sell or otherwise dispose of any of the Account Collateral other than pursuant to the terms of this Agreement and the other Loan Documents, or create or permit to exist any Lien upon or with respect to all or any of the Account Collateral, except for the Lien granted to Lender under or as contemplated by this Agreement. (e) No Waiver. Every right and remedy granted to Lender under this Agreement or by law may be exercised by Lender at any time and from time to time, and as often as Lender may deem it expedient. Any and all of Lender's rights with respect to the pledge of and security interest in the Account Collateral granted hereunder shall continue unimpaired, and to the extent permitted by law, Borrower shall be and remain obligated in accordance with the terms hereof, notwithstanding (i) any proceeding of Borrower under the Bankruptcy Code or any bankruptcy, insolvency or reorganization laws or statutes of any state, (ii) the release or substitution of Account Collateral at any time, or of any rights or interests therein or (iii) any delay, extension of time, renewal, compromise or other indulgence granted by Lender in the event of any Default with respect to the Account Collateral or otherwise hereunder. No delay or extension of time by Lender in exercising any power of sale, option or other right or remedy hereunder, and no notice or demand which may be given to or made upon Borrower by Lender, shall constitute a waiver thereof, or limit, impair or prejudice Lender's right, without notice or demand, to take any action against Borrower or to exercise any other power of sale, option or any other right or remedy. (f) Lender Appointed Attorney-In-Fact. Borrower hereby irrevocably constitutes and appoints Lender as Borrower's true and lawful attorney-in-fact, with full power of substitution, at any time after the occurrence and during the continuation of an Event of Default, to execute, acknowledge and deliver any instruments and to exercise and enforce every right, power, remedy, option and privilege of Borrower with respect to the Account Collateral, and do in the name, place and stead of Borrower, all such acts, things and deeds for and on behalf of and in the name of Borrower with respect to the Account Collateral, which Borrower could or might do or which Lender may deem necessary or desirable to more fully vest in Lender the rights and remedies provided for herein with respect to the Account Collateral and to accomplish the purposes of this Agreement. The foregoing powers of attorney are irrevocable and coupled with an interest and shall terminate upon (i) repayment of the Indebtedness in full, or (ii) the occurrence of either a Total Defeasance or, with respect to the related portion of the Account Collateral in the event of a KC Release, a Partial Defeasance. (g) Continuing Security Interest; Termination. This Section 2.15 shall create a continuing pledge of and security interest in the Account Collateral and shall remain in full force and effect until payment in full (or Total Defeasance or, with respect to the related portion of the Account Collateral in the event of a KC Release of the KC Property (i.e. Local Collection Account and Collection Account), Partial Defeasance) by Borrower of the Indebtedness. Upon payment in full (or Total Defeasance or, with respect to the related portion of the Account Collateral in the event of a KC Release of the KC Property (i.e. Local Collection Account and Collection Account), Partial Defeasance) by Borrower of the Indebtedness, Lender shall return to 56 Borrower such of the Account Collateral as shall not have been applied pursuant to the terms hereof, and shall execute such instruments and documents as may be reasonably requested by Borrower to evidence such termination and the release of the pledge and lien hereof. Section 2.16. Mortgage Recording Taxes; Release of Liens. (a) The Lien to be created by the Mortgage is intended to encumber the Mortgaged Property to the full extent of the Indebtedness. On the Closing Date, Borrower shall have paid all state, county and municipal recording and all other taxes imposed upon the execution and recordation of the Mortgage, if any. (b) Upon repayment of the Loan and all other amounts due hereunder and under the Loan Documents in full (or upon a Total Defeasance, or with respect to the related portion of the Collateral in the event of a KC Release of the KC Property, a Partial Defeasance) in accordance with the terms hereof and thereof, the Lender shall, promptly after such payment, release or cause to be released all Liens with respect to all Account Collateral and Collateral (including, without limitation, terminating the Local Collection Account Agreements, the Collection Account Agreement, the tenant direction letters and other Direction Letters delivered pursuant to Section 2.12(a)) or, to the extent necessary to facilitate future savings of mortgage tax in states that impose mortgage taxes, assign such Liens to Borrower's new lender(s), provided that any such assignments shall be without recourse, representation, or warranty of any kind, except that Lender and each Lender shall represent and warrant (1) the then outstanding amount of the Principal Indebtedness and (2) that such Liens have not been previously assigned by Lender. Section 2.17. Release of Permitted Use Facility. Borrower has represented to Lender that it may wish to subdivide the Mortgaged Property for purposes of construction of a Permitted Use Facility on the parcel generally identified as the "Release Parcel" on Schedule 7 (together with the easements and other rights appurtenant thereto, the "Release Parcel"), subject to alterations in the boundaries of such Release Parcel which do not adversely affect the Lender, provided that the conditions to the release (the "Partial Release") of the Release Parcel set forth herein are satisfied. As used herein, the term "Permitted Use Facility" means a first class condominium development architecturally harmonious with, of at least equal quality of construction with, and adjacent to (and, at Borrower's option, connecting to) the main building on the Mortgaged Property which would include approximately 35 condominium units, ancillary common areas, at least that number of parking spaces as would be required by applicable zoning laws or any special use permit governing the Release Parcel for the number of units contained within the Permitted Use Facility (which may, to the extent permitted by applicable zoning laws or any special use permit governing the Release Parcel and/or the Remaining Realty (as hereinafter defined), include parking spaces on the Remaining Realty) (the "Minimum Additional Parking Spaces") and an approximately 80,000 square foot (or less) building footprint. Lender agrees to release the Release Parcel from the encumbrance of the Mortgage and the other Loan Documents upon satisfaction of all the following conditions: (i) No Default or Event of Default shall then exist. 57 (ii) Borrower will obtain a separation upon all public taxing and assessment rolls so that the remainder of the Mortgaged Property (the "Remaining Realty") then covered by the Lien of the Loan Documents will be separately assessed. (iii) Any request by Borrower to release the Release Parcel must be in writing and must be delivered to Lender not fewer than forty-five (45) days prior to the date of the proposed release. (iv) No current parking spaces at the Mortgaged Property shall be included in the Release Parcel or otherwise eliminated or rendered unusable as a result of the Partial Release unless, to the extent required by applicable zoning laws or any special use permit governing the Mortgaged Property, such spaces are replaced with new parking spaces. (v) Borrower will execute (and each Guarantor will consent in writing thereto and reaffirm their obligations under the Loan Documents to which they are a party notwithstanding the Partial Release), and cause the owner of the Release Parcel, to execute and deliver all such instruments or documents as may be deemed by Borrower necessary or desirable in order to (a) provide for the construction of the Minimum Additional Parking Spaces on the Release Parcel, the relocation of the roadway presently located on the Release Parcel, the construction of the Permitted Use Facility and other improvements required or desirable in connection therewith and the connection between the Permitted Use Facility and the main building on the Mortgaged Property (including, without limitation, a party wall agreement in connection therewith), and the landscaping of the Mortgaged Property and the Release Parcel (all at no cost to Borrower and in a manner reasonably acceptable to Lender), (b) provide for necessary or desirable easements burdening the Remaining Realty and serving the Release Parcel, (c) provide for owners, lessors and other users of the Release Parcel and the condominium units to be erected thereon to have use rights and/or privileges with respect to the Remaining Realty, (d) provide for amendments to Permitted Encumbrances, material agreements and the special use permit necessary or desirable for the development of the Release Parcel (including, if applicable, a new special use permit with respect to the Remaining Realty), (e) provide for management agreements between Borrower and (x) condominium unit owners and (y) the condominium association, (f) govern the integrated use and operation of the Remaining Realty and the Release Parcel, 58 (g) restrict the development and use of the Release Parcel to the Permitted Use Facility to insure that use of the Release Parcel will not violate the provisions of the Mortgage or any Leases or material agreements, (h) continue to fully protect Lender's Lien and security interest in the Remaining Realty, and create Lender's Lien and security interest in the covenants, rights and easements contemplated herein, and (i) preserve the independence (subject to the reciprocal rights, easements and other agreements described herein) of the Remaining Realty, including, without limitation, amendments to the Loan Documents, perpetual easements for ingress-egress, access, parking, drainage, utilities, support, encroachments, and other purposes on, over, under, across, and through the Release Parcel, and declarations, covenants, and restrictions concerning the use, occupancy, repair, maintenance and operation of the Release Parcel and the Remaining Realty (without limitation, such covenants, and restrictions may provide for contributions by the owner of the Release Parcel and the Remaining Realty to the cost of maintenance, repair, operation, insurance, and replacement of facilities commonly used by the owners of the Release Parcel and the Remaining Realty. Lender shall use commercially reasonable efforts to cooperate with respect to the determinations made by Borrower in connection with the foregoing. Lender's consent shall be required for Borrower's execution of any of the documents described in subsection (a) through (i) herein, which consent shall not be unreasonably withheld or delayed. Additionally, Borrower shall execute and cause the owner of the Release Parcel to execute and deliver all such other instruments or documents as Lender may reasonably require (using commercial standards customarily applied with respect to mortgage loans such as the Loan), including, without limitation, any agreement requiring contributions by the owner of the Release Parcel and the Remaining Realty to the cost of maintenance, repair, operation, insurance, and replacement of facilities commonly used by the owners of the Release Parcel and the Remaining Realty. (vi) Borrower shall provide evidence reasonably satisfactory to the Lender demonstrating that (a) subject to this Section 2.17, the Remaining Realty will continue to be in compliance with the terms of the Mortgage and the Loan Documents, and remain in compliance with all Legal Requirements in all material respects and with the terms of all Leases and material agreements relating to the Remaining Realty; and (b) the proposed use of the Release Parcel will not violate the provisions of any Lease or material agreement affecting the Remaining Realty. (vii) Borrower shall obtain all required consents to the Partial Release under any of the Permitted Encumbrances. (viii) Borrower shall furnish to Lender, at Borrower's sole expense, an updated as-built survey of the Mortgaged Property at the time of the Partial Release, showing all buildings, improvements, utilities, and drainage facilities thereon and including an 59 accurate legal description of the Release Parcel. The actual dimensions and legal description of the Release Parcel must be acceptable to Lender in its sole but reasonable discretion. (ix) Borrower shall affirmatively represent to Lender that it has fully complied with all applicable laws, ordinances, rules and regulations pertaining to the subdivision or platting of the Land prior to the time of the Partial Release. (x) Upon request by Lender, Borrower, at Borrower's sole cost and expense, shall obtain endorsements (to the extent legally obtainable) to Lender's Title Insurance Policy satisfactory in form and content to Lender, which endorsements will (a) insure that the Lien created by the Loan Documents remains a valid first Lien on the Remaining Realty, and (b) insure any covenants, restrictions and easements created over, under, across, and through the Release Parcel and benefiting the Remaining Realty, and the Lien of the Loan Documents thereon, as Lender requires. (xi) Lender acknowledges and agrees that, in connection with the Partial Release, the existing TC Special Use Permit will be amended, and Lender agrees that it will reasonably consider joining in the application for the amendment, if such joinder is required by law or by any governmental authority. (xii) Borrower shall pay for the reasonable costs of preparing and recording partial releases, UCC-3 releases, and any Loan modification documents, easements, declarations, and/or restrictive covenants reasonably required by Lender, reasonable Lender's attorneys' fees and costs, all survey charges and costs, all title premiums and costs, documentary stamps incurred in connection with the Partial Release of the Release Parcel, and all other reasonable out-of-pocket costs, fees, and expenses incurred by Lender in connection with the requested release of the Release Parcel. (xiii) Following the Partial Release, the Remaining Realty shall be provided and maintained with separate utility metering and service from the Release Parcel. (xiv) In connection with the Partial Release, the Release Parcel shall have been or be conveyed to a Person other than Borrower; provided, that all times during the term of the Loan, the Release Parcel and the Mortgaged Property shall have 100% common ownership (direct and indirect) and control. (xv) If the Loan has been involved in a Secondary Market Transaction, Borrower shall provide Lender with a legal opinion to the effect that, if the Loan were in a real estate mortgage investment conduit ("REMIC") (as such term is defined in Section 860D(a) of the Code) pool ("REMIC Pool"), the partial release shall not cause (i) the Loan to fail to be a "qualified mortgage" within the meaning of Section 860G(a)(3) of the Code, (ii) any failure of any REMIC Pool to qualify as a REMIC for federal income tax purposes, or (iii) the imposition of any tax upon any REMIC Pool or any of such REMIC Pool's assets, including without limitation any tax on prohibited "transactions" imposed under Section 860F(a)(2) of the Code. 60 (xvi) Borrower shall have provided Lender with a Rating Confirmation with respect to the Partial Release and the above-described related transactions and documentation. (xvii) The owner of the Release Parcel, Borrower and Manager shall have provided to Lender evidence of an arrangement satisfactory to Lender for the administration of payments from condominium unit owners and renters from condominium unit owners and the allocation of such payments between Borrower and the condominium unit owner. In furtherance of the foregoing and notwithstanding anything to the contrary in this Agreement and/or the other Loan Documents, Lender acknowledges and agrees that (x) all references in this Agreement and the other Loan Documents to Accounts, Pledged Accounts, Receipts, Receivables, Account Collateral, Profits and Rents (and any other terms used herein which include such amounts) shall be deemed to refer solely to the portion of such payments to which Borrower is entitled and (y) Lender's security interest shall not apply to any portion of such payments to which the condominium unit owner (and not Borrower) is entitled. (xviii) Giving effect to the Partial Release, the Debt Service Coverage Test will be satisfied. (xix) The Release Parcel shall be governed by condominium documents reasonably acceptable to Lender. All reasonable costs and expenses incurred by Lender in connection with such request for a Partial Release, including, but not limited to, the preparation, negotiation and review of any and all materials required to be provided in connection therewith (including Lender's reasonable attorneys' fees and expenses) shall be paid or reimbursed by Borrower promptly upon demand. ARTICLE III. CONDITIONS PRECEDENT Section 3.1. Conditions Precedent to Closing. The obligation of the Lender to make the Loan is subject to the satisfaction by Borrower (and Guarantor, where applicable) or waiver by Lender in writing of the following conditions no later than the Closing Date: (a) Loan Agreement. Borrower and Lender shall have executed and delivered this Agreement. (b) Note. Borrower shall have executed and delivered to Lender the Note. (c) Environmental Indemnity Agreement; Guaranty of Non-Recourse Obligations. Borrower and Guarantor shall have executed and delivered the Environmental Indemnity Agreement to Lender. Guarantor shall have executed and delivered the Guaranty of Non-Recourse Obligations. (d) Opinions of Counsel. Lender shall have received from counsel to Borrower and the Guarantor, legal opinions in form and substance acceptable to Lender, with respect to corporate matters and with respect to substantive non-consolidation of either 61 Guarantor, the Manager or certain other Affiliates, on the one hand, and either Borrower, on the other, in the event of the bankruptcy of either Guarantor or the Manager or such other Affiliates. Such legal opinions shall be addressed to Lender and its successors and assigns, dated the Closing Date, and in form and substance reasonably satisfactory to Lender and its counsel. (e) Organizational Documents. Lender shall have received with respect to each of Borrower and the Guarantor its certificate of formation, certificate of limited partnership or certificate of incorporation, as applicable, as amended, modified or supplemented to the Closing Date, as filed with the Secretary of State in the jurisdiction of organization and in effect on the Closing Date and certified to be true, correct and complete by the appropriate Secretary of State as of a date not more than thirty (30) days prior to the Closing Date, together with a good standing certificate from such Secretary of State dated not more than thirty (30) days prior to the Closing Date and, for Borrower to the extent required by applicable law, a good standing certificate from the Secretaries of State (or the equivalent thereof) of each other State in which Borrower is required to be qualified to transact business, each dated not more than thirty (30) days prior to the Closing Date. (f) Certified Resolutions, etc. Lender shall have received a certificate of each of Borrower and the Guarantor dated the Closing Date, certifying (i) the names and true signatures of its incumbent officers authorized to sign the Loan Documents to which Borrower or the Guarantor is a party, (ii) the Organizational Agreement of each of Borrower and Guarantor, in each case as in effect on the Closing Date, (iii) the resolutions of each of Borrower and the Guarantor, approving and authorizing the execution, delivery and performance of the Loan Documents to which it is a party, and (iv) that there have been no changes in any Organizational Agreement since the date of execution or preparation thereof. (g) Additional Matters. Lender shall have received such other certificates, opinions, documents and instruments relating to the Loan as may have been reasonably requested by Lender. All corporate and other organizational proceedings, all other documents (including, without limitation, all documents referred to herein and not appearing as exhibits hereto) and all legal matters in connection with the Loan shall be reasonably satisfactory in form and substance to Lender in its discretion. (h) Transaction Costs. Borrower shall have paid all Transaction Costs for which bills have been submitted in accordance with the provisions of Section 8.23. (i) No Default or Event of Default. No event which would constitute either a Default or Event of Default under this Agreement or the other Loan Documents shall have occurred and be continuing on the Closing Date. (j) No Injunction. No law or regulation shall have been adopted, no order, judgment or decree of any Governmental Authority shall have been issued, and no litigation shall be pending or threatened, which in the good faith judgment of Lender would enjoin, prohibit or restrain, or impose or result in the imposition of any material adverse condition upon, the making or repayment of the Loan or the consummation of the Transaction. 62 (k) Representations and Warranties. The representations and warranties herein and in the other Loan Documents shall be true and correct in all material respects on the Closing Date. (l) Survey; Appraisal. Lender shall have received the Survey and the Appraisal with respect to the Mortgaged Property, which shall be in form and substance satisfactory to Lender. (m) Engineering Reports. Lender shall have received the engineering reports with respect to the Mortgaged Property prepared by the Engineer or another Person acceptable to the Lender, which engineering reports shall be acceptable to Lender. (n) Environmental Matters. Lender shall have received an Environmental Report prepared by an Environmental Auditor with respect to the Mortgaged Property, which Environmental Report shall be acceptable to Lender. (o) Financial Information. Lender shall have received financial information relating to the Guarantor, Borrower and the Mortgaged Property satisfactory to Lender. Such information shall include, without limitation, the following, to the extent reasonably available: (i) operating statements for the current year (including actual to date information, an annual budget and trailing twelve month data in hard copy and on diskette) and for not less than the three preceding years (including capital reserves, major repairs, replacement items and occupancy rates in hard copy and on diskette); (ii) current real estate tax bills and historical real estate tax bills of record for the Mortgaged Property for not less than the three preceding years; (iii) the most recent annual financial statements and unaudited quarterly financial statements; and (iv) such other financial information as is customarily required by institutional lenders for loans similar in size and type as the Loan. The annual financial statements relating to the Mortgaged Property and Borrower shall be either (x) audited by a "Big Four" accounting firm or another firm of certified public accountants reasonably acceptable to Lender or (y) prepared in accordance with agreed upon procedures reasonably acceptable to Lender to be performed by a "Big Four" accounting firm or another firm of certified public accountants reasonably acceptable to Lender to create similar information. (p) Pro-Forma Financial Statement; Operating Budget. Lender shall have received (i) the initial pro-forma financial statement and Operating Budget for the Mortgaged Property for the following twelve months (including on an annual and monthly basis a break-down of projected Gross Revenues, Property Expenses, Capital Improvement Costs, FF&E Costs, Advance Bookings and average occupancy level (expressed as a percentage)), (ii) a financial statement that forecasts projected revenues and operating expenses for not less than 63 three years (including the assumptions used in such forecast), and (iii) any local market study and/or research and demographics report prepared for Borrower and/or commercially available. (q) Site Inspection. Borrower shall have provided to Lender the opportunity to perform, or cause to be performed on its behalf, an on-site due diligence review of the Mortgaged Property, which inspection is satisfactory to Lender. (r) Mortgaged Property Documents. (i) Mortgage; Assignment of Profits and Leases. Borrower shall have executed and delivered to Lender the Mortgage and the Assignment of Profits and Leases with respect to the Mortgaged Property and such Mortgage and Assignment of Profits and Leases shall have been filed of record in the appropriate filing office in the jurisdiction in which the Mortgaged Property is located or irrevocably delivered to a title agent for such recordation. (ii) Financing Statements. Borrower shall have executed and delivered to Lender all financing statements required by Lender pursuant hereto and such financing statements shall have been filed of record in the appropriate filing offices in each of the appropriate jurisdictions or irrevocably delivered to a title agent for such recordation. (iii) Management Agreement and Manager's Subordination. Lender shall have received the executed Management Agreement for the Mortgaged Property and the Manager shall have executed and delivered the Manager's Subordination to Lender. (iv) License Agreement and License Tri-Party Agreement. Lender shall have received the executed License Agreement for the Mortgaged Property and the Borrower and Licensor shall have executed and delivered the License Tri-Party Agreement to Lender. (v) Tall Pines Agreement and Tall Pines Recognition Agreement. Lender shall have received the executed Tall Pines Agreement, including the Tall Pines Recognition Agreement, for the Mortgaged Property. (vi) Contract Assignment. With respect to the Mortgaged Property, Borrower shall have executed and delivered to Lender a Contract Assignment with respect to the Mortgaged Property. (s) Opinions of Counsel. Lender shall have received from counsel to Borrower reasonably acceptable to Lender in each state in which any Mortgaged Property is located its legal opinion in form and substance satisfactory to Lender, as to (i) the enforceability of each Mortgage, each Assignment of Profits and Leases and any other Loan Documents governed by the law of such jurisdiction, (ii) perfection of Liens and security interests and (iii) other matters referred to therein with respect to each Mortgaged Property. The legal opinions will be addressed to Lender and its successors and assigns, dated the Closing Date, and in form and substance reasonably satisfactory to Lender and its counsel. 64 (t) Insurance. Lender shall have received certificates of insurance demonstrating insurance coverage in respect of the Mortgaged Property of types, in amounts, with insurers and otherwise in compliance with the terms, provisions and conditions set forth in this Agreement. Such certificates shall indicate that Lender is a named additional insured and shall contain a loss payee endorsement in favor of Lender with respect to the property policies required to be maintained under this Agreement. (u) Title Insurance Policy. Lender shall have received countersigned pro forma title policies or marked binders constituting the unconditional commitment (in form and substance reasonably satisfactory to Lender) to issue the Title Insurance Policy covering the Mortgaged Property with an aggregate amount at least equal to the Loan Amount. (v) Lien Search Reports. Lender shall have received satisfactory reports of UCC (collectively, the "UCC Searches"), tax lien, judgment and litigation searches and title updates conducted by the companies issuing the Title Insurance Policy with respect to the Collateral, Guarantor and Borrower, such searches to be conducted in each of the locations required by Lender. (w) Consents, Licenses, Approvals, etc. Lender shall have received copies of all consents, licenses and approvals, if any, required in connection with the execution, delivery and performance by Borrower and Guarantor and the validity and enforceability, of the Loan Documents, and such consents, licenses and approvals shall be in full force and effect. (x) Additional Real Estate Matters. Lender shall have received such other real estate related certificates and documentation relating to the Mortgaged Property as Lender may have reasonably requested. Such documentation shall include the following as requested by Lender and to the extent reasonably available: (i) certificates of occupancy issued by the appropriate Governmental Authority of the jurisdiction in which the Mortgaged Property is located reflecting, and consistent with, the use of the Mortgaged Property as of the Closing Date; (ii) letters from the appropriate local Governmental Authorities of the jurisdiction in which each Mortgaged Property is located, certifying that the Mortgaged Property is in compliance with all applicable zoning laws, rules and regulations, and a zoning endorsement to the applicable Title Insurance Policy with respect to each Mortgaged Property or any opinion of zoning counsel to such effect; (iii) a certified copy of the License Agreement; and (iv) a certified copy of the Tall Pines Agreement. (y) Closing Statement. Lender and Borrower shall have agreed upon a detailed closing statement in a form reasonably acceptable to Lender, which includes a complete description of Borrower's sources and uses of funds on the Closing Date. (z) Loan to Value Ratio; Debt Service Coverage Ratio. Lender shall have determined that (i) the Loan Amount is not greater than 66% of the aggregate value of the 65 Mortgaged Property as set forth in the Appraisals delivered on or prior to the Closing Date, and (ii) the Debt Service Coverage Ratio is at least 1.50 as of the Closing Date. (aa) Origination Fee. Lender shall have received its Origination Fee, which may be retained by Lender from the proceeds of the Loan. Section 3.2. Execution and Delivery of Agreement. The execution and delivery of this Agreement by each party to this Agreement shall be deemed to constitute the satisfaction or waiver of the conditions set forth in Section 3.1; provided, that any such deemed satisfaction or waiver shall be solely for the purposes of Section 3.1 and shall not be deemed or construed to constitute a waiver of any other provision of this Agreement or of any provisions of any of the other Loan Documents, including, without limitation, any undelivered items undertaking or agreement or other post-closing agreement or undertaking entered into by Borrower and/or Guarantor. ARTICLE IV. REPRESENTATIONS AND WARRANTIES Section 4.1. Representations and Warranties as to Borrower. Borrower represents and warrants that, as of the Closing Date: (a) Organization. Borrower (i) is a duly organized and validly existing limited liability company in good standing under the laws of the State of Delaware, (ii) has the requisite power and authority to own its properties (including, without limitation, the Mortgaged Property) and to carry on its business as now being conducted and is qualified to do business in the jurisdiction in which the Mortgaged Property is located, and (iii) has the requisite power to execute and deliver, and perform its obligations under, this Agreement, the Note and all of the other Loan Documents to which it is a party. (b) Authorization; No Conflict; Consents and Approvals. The execution and delivery by Borrower of this Agreement, the Note and each of the other Loan Documents, Borrower's performance of its obligations hereunder and under the other Loan Documents and the creation of the security interests and liens provided for in this Agreement and the other Loan Documents to which it is a party (i) have been duly authorized by all requisite action on the part of Borrower, (ii) will not violate any provision of any Legal Requirements, any order of any court or other Governmental Authority, the Organizational Agreement or any indenture or, except for any violations which would not reasonably be expected to have a Material Adverse Effect on Borrower or the Mortgaged Property, agreement or other instrument to which Borrower is a party or by which Borrower is bound, and (iii) will not be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or result in the creation or imposition of any Lien of any nature whatsoever upon the Mortgaged Property pursuant to, any such indenture or agreement or material instrument other than the Loan Documents. Other than those obtained or filed on or prior to the Closing Date, Borrower is not required to obtain any consent, approval or authorization from, or to file any declaration or statement with, any Governmental Authority or other agency in connection with or as a condition to the execution, delivery or performance of this Agreement, the Note or the other Loan Documents executed and delivered by Borrower. 66 (c) Enforceability. This Agreement, the Note and each other Loan Document executed by Borrower in connection with the Loan (including, without limitation, any Collateral Security Instrument), is the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, subject to bankruptcy, insolvency, and other limitations on creditors' rights generally and to equitable principles. This Agreement, the Note and such other Loan Documents are not subject to any right of rescission, set-off, counterclaim or defense by Borrower (including the defense of usury), and Borrower has not asserted any right of rescission, set-off, counterclaim or defense with respect thereto. (d) Litigation. Except as set forth on Schedule 3, there are no actions, suits or proceedings at law or in equity by or before any Governmental Authority or other agency now pending and served or, to the Actual Knowledge of Borrower, threatened against Borrower or any Collateral, which actions, suits or proceedings are reasonably likely to result in a Material Adverse Effect. (e) Agreements. Borrower is not in default in the performance, observance or fulfillment of any of the material obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which Borrower or any Collateral is bound which default is reasonably likely to have a Material Adverse Effect. Other than the Permitted Encumbrances, Borrower is not a party to any agreement or instrument or subject to any restriction which restricts such Person's ability to conduct its business in the ordinary course and is reasonably likely to have a Material Adverse Effect. (f) No Bankruptcy Filing. Neither Borrower nor Guarantor is contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a material portion of its assets or property. To the Actual Knowledge of Borrower, no Person is contemplating the filing of any such petition against Borrower. (g) Solvency. Giving effect to the transactions contemplated hereby, the fair market value of Borrower's assets exceeds and will, immediately following the making of the Loan, exceed Borrower's total liabilities (including, without limitation, subordinated, unliquidated, disputed and contingent liabilities). The fair market value of Borrower's assets is and will, immediately following the making of the Loan, be greater than Borrower's probable liabilities (including the maximum amount of its contingent liabilities on its debts as such debts become absolute and matured). Borrower's assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. Borrower does not intend to, and does not believe that it will, incur debts and liabilities (including, without limitation, contingent liabilities and other commitments) beyond its ability to pay such debts as they mature (taking into account the timing and amounts to be payable on or in respect of obligations of Borrower). (h) Other Debt. Borrower has not borrowed or received other debt financing whether unsecured or secured by the Mortgaged Property or any part thereof which is outstanding as of the Closing Date, other than as permitted under the Loan Agreement. As of the Closing Date, Borrower has no Other Borrowings other than trade debt expressly permitted under Article VIII of this Agreement. 67 (i) Full and Accurate Disclosure. No statement of fact made by or on behalf of Borrower in this Agreement or in any of the other Loan Documents contains any untrue statement of material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading. To the Actual Knowledge of Borrower, no financial statements or any other document, certificate or written statement furnished to Lender by Borrower or Guarantor, or by any third party on behalf of Borrower or Guarantor, for use in connection with the Loan contains any untrue representation, warranty or statement of a fact, and none omits or will omit to state a fact necessary in order to make the statements contained herein or therein not misleading in any material respect. To the Actual Knowledge of Borrower, there is no fact that has not been disclosed to Lender that is reasonably likely to result in a Material Adverse Effect. (j) Financial Information. All financial statements and other data concerning Borrower, Guarantor and the Mortgaged Property that has been delivered by or on behalf of Borrower or Guarantor to Lender is true, complete and correct in all material respects as of the respective dates thereof and, except as disclosed on Schedule 3 attached hereto, has been prepared in accordance with GAAP. Since the delivery of such data, except as otherwise disclosed in writing to Lender, there has been no change in the financial position of Borrower, Guarantor or the Mortgaged Property, or in the results of operations of Borrower or Guarantor, which change results or is reasonably likely to result in a Material Adverse Effect. Neither Borrower nor Guarantor has incurred any obligation or liability, contingent or otherwise, not reflected in such financial data, which is likely to have a Material Adverse Effect upon its business operations or the Mortgaged Property. (k) Investment Company Act; Public Utility Holding Company Act. Borrower is not (i) an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended, (ii) a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of either a "holding company" or a "subsidiary company" within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money in accordance with this Agreement. (l) Compliance. Borrower is in compliance with all applicable Legal Requirements, except for noncompliance that is not reasonably likely to have a Material Adverse Effect. Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority except for defaults or violations which are not reasonably likely to have a Material Adverse Effect. (m) Use of Proceeds; Margin Regulations. Borrower will use the proceeds of the Loan for the purposes described in Section 2.2. No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements. 68 (n) Organizational Chart. The organizational chart set forth as Schedule 2 accurately sets forth the direct and indirect ownership structure of Borrower. (o) No Defaults. No Event of Default or, to the Actual Knowledge of Borrower, Default, exists under or with respect to any Loan Document. (p) Plans and Welfare Plans. The assets of Borrower are not treated as "plan assets" under regulations currently promulgated under ERISA. Except to the extent it would not have a Material Adverse Effect, neither Borrower nor any ERISA Affiliate sponsors, maintains, contributes to or is required to contribute to any Plan or Multiemployer Plan nor has the Borrower or any ERISA Affiliate sponsored, maintained, contributed to or been required to contribute to any Plan or Multiemployer Plan within the past six years. Except to the extent it would not have a Material Adverse Effect, (i) there are no pending issues or claims before the Internal Revenue Service, the United States Department of Labor or any court of competent jurisdiction related to any Plan or Welfare Plan, (ii) no event has occurred, and there exists no condition or set of circumstances, in connection with any Plan or Welfare Plan which will subject Borrower directly or indirectly (through an indemnification agreement or otherwise), to any liability under Section 409 or 502(i) of ERISA or Section 4975 of the Code, and (iii) no Welfare Plan provides or will provide benefits, including, without limitation, death or medical benefits (whether or not insured) with respect to any current or former employee of Borrower beyond his or her retirement or other termination of service other than (A) coverage mandated by applicable law, (B) death or disability benefits that have been fully provided for by fully paid up insurance or (C) severance benefits. (q) Additional Borrower UCC Information. Borrower's organizational identification numbers are 20-2015934 for the KC Borrower and 20-2015927 for the TC Borrower, and the full legal name of each Borrower is as set forth on the signature pages hereof, and Borrower has not done in the last five (5) years, and does not do, business under any other name (including any trade-name or fictitious business name). (r) Not Foreign Person. Borrower is not a "foreign person" within the meaning of Section 1445(f)(3) of the Code. (s) Labor Matters. Borrower is not a party to any collective bargaining agreements. (t) Pre-Closing Date Activities. Borrower has not conducted any business or other activity on or prior to the Closing Date, other than in connection with the acquisition, development, management and ownership of the Mortgaged Property. (u) No Bankruptcies or Criminal Proceedings Involving Borrower or Related Parties. No bankruptcy, insolvency, reorganization or comparable proceedings have ever been instituted by or against Borrower, any Affiliate of Borrower, any Guarantor or any individual or entity owning, with his, her or its family members, 20% or more of the direct, or indirect beneficial ownership interests in Borrower (each such Guarantor, individual, or entity being herein referred to as a "Principal"), and no such proceeding is now pending or contemplated. None of Borrower or any Principal have been charged, indicted or convicted, or are currently 69 under the threat of charge, indictment or conviction, for (i) any felony or (ii) any crime which involves fraud or which involves any act that is reasonably likely to have a Material Adverse Effect on the business operations or condition (financial or otherwise) of Borrower or the value of the Mortgaged Property. (v) No Prohibited Persons. Neither Borrower, Guarantor nor any of their respective officers, directors, members or Affiliates is or will be an entity or person: (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 ("EO13224"); (ii) whose name appears on the United States Treasury Department's Office of Foreign Assets Control ("OFAC") most current list of "Specifically Designated National and Blocked Persons" (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf) (the "OFAC List"); (iii) who commits, threatens to commit or supports "terrorism", as that term is defined in EO 13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a "Prohibited Person"). To the Actual Knowledge of the Borrower, no tenant at the Property currently is identified on the OFAC List or otherwise qualifies as a Prohibited Person and no tenant at the Property is owned by or an Affiliate of a Prohibited Person. Borrower and Manager have implemented and will continue to follow procedures to ensure that no tenant at the Property is a Prohibited Person or owned by or an Affiliate of a Prohibited Person. Section 4.2. Representations and Warranties as to the Mortgaged Property. Borrower hereby represents and warrants to Lender that, as to the Mortgaged Property and each Mortgage, as of the Closing Date: (a) Title to the Mortgaged Property. Borrower owns good, marketable and insurable fee simple title to the Land and Improvements, free and clear of all Liens, other than the Permitted Encumbrances and except as disclosed on Schedule 3. Borrower owns the Personalty free and clear of any and all Liens, other than Permitted Encumbrances. There are no outstanding options to purchase or rights of first refusal affecting any Mortgaged Property or any portion thereof or interest therein. (b) Utilities and Public Access. Except as disclosed on Schedule 3, (i) the Mortgaged Property has adequate rights of access to public ways and is served by public water, electric, sewer, sanitary sewer and storm drain facilities; (ii) all public utilities necessary to the continued use and enjoyment of the Mortgaged Property as presently used and enjoyed are located in valid easements or in the public right-of-way abutting the premises; and (iii) all roads necessary for the full utilization of the Mortgaged Property for its current purpose have been completed and dedicated to public use and accepted by all Governmental Authorities or are the subject of access easements for the benefit of the Mortgaged Property. (c) Condemnation. No Taking has been commenced or, to the best of Borrower's knowledge, is contemplated with respect to all or any portion of any Mortgaged Property or for the relocation of roadways providing access to any Mortgaged Property. 70 (d) Compliance. The Mortgaged Property and the current use thereof is in compliance with all applicable Legal Requirements (including, without limitation, building, parking, subdivision, land use, health, fire, safety and zoning ordinances and codes) and all applicable Insurance Requirements, except for noncompliance which is not reasonably likely to result in a Material Adverse Effect. The Mortgaged Property is zoned for its current use or subject to a special use permit which permits its current use, which zoning designation or, subject to the terms thereof, special use permit, is unconditional, in full force and effect, and is beyond all applicable appeal periods. In the event that all or any part of the Improvements located on any Mortgaged Property are destroyed or damaged, said Improvements can be legally reconstructed to their condition prior to such damage or destruction, and thereafter exist for the same use without violating (after taking into account the effect of any special use permit) any zoning or other ordinances applicable thereto and without the necessity of obtaining any variances or special permits (other than any special use permits now in effect), other than customary demolition, building and other construction related permits. No legal proceedings are pending or, to the Actual Knowledge of Borrower, threatened with respect to the zoning of the Mortgaged Property. Except as set forth in the Permitted Encumbrances and/or any permit for a planned unit development affecting the Mortgaged Property, neither the zoning nor any other right to construct, use or operate the Mortgaged Property is in any way dependent upon or related to any real estate other than the Mortgaged Property. Subject to Section 2.17, no tract map, parcel map, condominium plan, condominium declaration, or plat of subdivision will be recorded by Borrower with respect to the Mortgaged Property without Lender's prior written consent. (e) Environmental Compliance. Except for matters set forth in the Environmental Reports delivered to Lender in connection with the Loan (true, correct and complete copies of which have been provided to Lender by Borrower): (i) The Mortgaged Property is in full compliance with all applicable Environmental Laws except for noncompliance which would not reasonably be expected to result in a Material Adverse Effect. (ii) There is no material Environmental Claim pending or, to the Actual Knowledge of Borrower, threatened, and no unpaid, material penalties arising under Environmental Laws have been assessed against Borrower, the Manager or any Mortgaged Property, or, to the Actual Knowledge of Borrower, against any Person whose liability for any material Environmental Claim Borrower or the Manager has retained or assumed either contractually or to the Actual Knowledge of Borrower, by operation of law, and to the Actual Knowledge of Borrower, no material investigation or review is pending or threatened by any Governmental Authority, citizens group, employee or other Person with respect to any alleged failure by Borrower or the Manager or any Mortgaged Property to have any material permit, license or other authorization required under, or to otherwise comply with, any applicable Environmental Law or with respect to any alleged material liability of Borrower or the Manager for any Use or Release of any Hazardous Substances. (iii) To the Actual Knowledge of the Borrower, there are no present and there have been no past material Releases of any Hazardous Substances that are reasonably 71 likely to form the basis of any material Environmental Claim against Borrower, the Manager, any Mortgaged Property or against any Person whose liability for any material Environmental Claim Borrower or the Manager has retained or assumed either contractually or to the Actual Knowledge of Borrower, by operation of law (other than Hazardous Substances present or otherwise being used in amounts that are customary for properties such as the Mortgaged Property and for purposes that are typical for properties such as the Mortgaged Property and in all cases are utilized in compliance with applicable Environmental Law in all material respects). (iv) Without limiting the generality of the foregoing, to the Actual Knowledge of the Borrower, there is not present at, on, in or under any Mortgaged Property, any Hazardous Substances (including, without limitation, PCB-containing (at least 50 parts per million) equipment, friable asbestos or friable asbestos containing materials, underground storage tanks or surface impoundments for Hazardous Substances, lead based paint or, to the extent reasonably likely to materially adversely affect the value or utility of such Mortgaged Property, lead in drinking water) (other than Hazardous Substances present or otherwise being used in amounts that are customary for properties such as the Mortgaged Property and for purposes that are typical for properties such as the Mortgaged Property and in all cases are utilized in compliance with applicable Environmental Law in all material respects) or any fungus, mold, mildew or biological agent, except, for the purposes of this Section 4.2(e)(iv) in amounts which are not, and under circumstances which are not, reasonably likely to materially adversely affect the value or utility of such Mortgaged Property. (v) No liens are presently recorded with the appropriate land records under or pursuant to any applicable Environmental Law with respect to the Mortgaged Property and to the Actual Knowledge of Borrower, no Governmental Authority has been taking or, is in the process of taking any action that could subject the Mortgaged Property to Liens under any applicable Environmental Law. (vi) There have been no potentially material reports of environmental investigations, studies, audits, reviews or other analyses conducted by or that are in the possession of Borrower in relation to any Mortgaged Property which have not been made available to Lender. (f) Mortgage and Other Liens. Each Mortgage creates a valid and enforceable first priority Lien on the applicable Mortgaged Property described therein, as security for the repayment of the Indebtedness, subject only to the Permitted Encumbrances applicable to such Mortgaged Property, subject to bankruptcy, insolvency, and other limitations on creditors' rights generally and to equitable principles. This Agreement and the other Loan Documents create a valid and enforceable first priority Lien on all Account Collateral, subject to bankruptcy, insolvency, and other limitations on creditors' rights generally and to equitable principles. Each Collateral Security Instrument establishes and creates a valid, subsisting and enforceable Lien on and a security interest in, or claim to, the rights and property described therein, subject to bankruptcy, insolvency, and other limitations on creditors' rights generally and to equitable principles. All property covered by any Collateral Security Instrument in which a security interest can be perfected by the filing of a financing statement is subject to a UCC 72 financing statement filed and/or recorded, as appropriate (or irrevocably delivered to an agent for such recordation or filing) in all places necessary to perfect a valid first priority Lien with respect to the rights and property that are the subject of such Collateral Security Instrument to the extent governed by the UCC. (g) Assessments. Except as contemplated under the Permitted Encumbrances, there are no pending or, to the Actual Knowledge of Borrower, proposed special or other assessments for public improvements or otherwise affecting any Mortgaged Property, nor, except as set forth on Schedule 3 or as contemplated by Section 2.17, are there any contemplated improvements to any Mortgaged Property that may result in such special or other assessments. (h) No Joint Assessment; Separate Lots. Borrower has not suffered, permitted or initiated the joint assessment of the Land and Improvements with any other real property constituting a separate tax lot. The Land and Improvements are comprised of one or more parcels, each of which constitutes a separate tax lot or lots and none of which constitutes a portion of any other tax lot. (i) No Prior Assignment. Lender is the collateral assignee of Borrower's interest as licensee under the License Agreement, pursuant to the License Tri-Party Agreement. There are no prior assignments of the License Agreement or any portion of the Rent due and payable or to become due and payable which are presently effective. (j) Permits; Certificate of Occupancy. Borrower has obtained all Permits necessary to the use and operation of the Mortgaged Property, except for noncompliance which is not reasonably expected to result in a Material Adverse Effect. The use being made of the Mortgaged Property is in conformity with the certificate of occupancy and/or such Permits for such Mortgaged Property and any other restrictions, covenants or conditions affecting such Mortgaged Property, except for noncompliance which is not reasonably likely to result in a Material Adverse Effect. (k) Flood Zone. Except as shown on the Survey, no Mortgaged Property or any portion thereof is located in a flood hazard area as defined by the Federal Insurance Administration. (l) Physical Condition. Except as set forth in the Property Condition Assessment, to the Actual Knowledge of Borrower, the Mortgaged Property is free of structural defects which would reasonably be expected to have a Material Adverse Effect and all Improvements, including the building systems contained therein are in good working order subject to ordinary wear and tear. (m) Advance Bookings Deposits. Borrower and the Manager are in compliance in all material respects with all Legal Requirements relating to all Advance Bookings Deposits with respect to the Mortgaged Property, except for non-compliance which is not reasonably expected to have a Material Adverse Effect on Borrower or the Mortgaged Property. (n) Intellectual Property. Attached hereto as Schedule 5 is a true, correct and complete listing of all material Intellectual Property. All material Intellectual Property is in good standing and uncontested. Other than those conferred under the License Agreement or the 73 Central Reservations Services Agreement and those which may be conferred under the Tall Pines Agreement, there is no right under any Intellectual Property necessary to the business of Borrower as presently conducted or as Borrower contemplates conducting its business which Borrower does not have. Except as set forth on Schedule 3, Borrower has not infringed, is not infringing, and has not received notice of infringement with respect to asserted Intellectual Property of others. To the Actual Knowledge of Borrower, there is no infringement by others of material Intellectual Property of Borrower. (o) No Encroachments. Except as shown on the Survey and except to the extent the same is not likely to have a Material Adverse Effect, to the Actual Knowledge of Borrower, (i) all of the Improvements which were included in determining the appraised value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of the Mortgaged Property, (ii) no improvements on adjoining properties encroach upon any Mortgaged Property, and (iii) no Improvements encroach upon any easements or other encumbrances affecting the Mortgaged Property except in conformity with the terms or such easements or such other encumbrances. (p) Management Agreement. The Management Agreement is in full force and effect. There is no default, breach or violation existing thereunder by Borrower or Manager. (q) Leases. No Mortgaged Property is subject to any Leases (other than the License Lease and Services Agreement between KC Borrower and GWR KC Beverage, Inc., an Affiliate of the Borrower, which is the holder of the liquor license with respect to the KC Property). No portion of the Mortgaged Property is occupied by any Affiliate of Borrower. (r) No Other Real Property. Except for the Land and Improvements and public streets and sidewalks, and except to the extent set forth in any Permitted Encumbrance, neither Borrower nor Manager uses or occupies any other material real property in connection with the operation, occupancy and management of the Mortgaged Property and all amenities (including parking and any recreational facilities) made available to guests and other users of the Mortgaged Property. The Land and Improvements include all of the interests in real property used or proposed to be used for the Mortgaged Property, except to the extent set forth in any Permitted Encumbrance. (s) Personal Property. Except for the Equipment, the Inventory, Case Goods, Soft Goods, Fixed Asset Supplies, furnishings, cash on hand in the Mortgaged Property, and property of transient hotel guests and tenants, no material tangible personal property is located within the Mortgaged Property, or used or proposed to be used in the Mortgaged Property. Borrower has good title to all Equipment (except for permitted Equipment leased under Equipment Leases and Financing Leases in accordance with Sections 8.1(e) and/or 5.1(t)) and Inventory free and clear of all Liens, except the Permitted Encumbrances. (t) Fees, Royalties, Commissions and Compensation. Except as provided under the License Agreement, the Central Reservations Services Agreement and the Management Agreement, the Permitted Encumbrances disclosed on the Title Insurance Policy, neither the Manager nor Licensor has any right or claim to any fees, commissions, royalties, compensation or other remuneration in connection with or arising out of the use, occupancy, 74 management, and operation of the Mortgaged Property and no brokerage commissions or similar compensation are or will become due to any Person in connection with the operation or management of the Mortgaged Property. (u) License Agreement. The License Agreement is in full force and effect, has not been modified or amended, and there is no default, breach or violation existing thereunder by Borrower or Licensor. (v) Tall Pines Agreement. The Tall Pines Agreement is in full force and effect, has not been modified or amended, and there is no default, breach or violation existing thereunder by Great Lakes or, to the Actual Knowledge of Borrower, Tall Pines. Section 4.3. Survival of Representations. Borrower agrees that (i) all of the representations and warranties of Borrower set forth in Section 4.1 and 4.2 and in the other Loan Documents delivered on the Closing Date are made as of the Closing Date, and (ii) all representations and warranties made by Borrower shall survive the delivery of the Note and making of the Loan and continue for so long as any amount remains owing to Lender under this Agreement, the Note or any of the other Loan Documents; provided, however, that the representations set forth in Section 4.2(e) shall survive in perpetuity. All representations, warranties, covenants and agreements made in this Agreement or in the other Loan Documents shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on Lender's behalf. ARTICLE V. AFFIRMATIVE COVENANTS Section 5.1. Affirmative Covenants. Borrower covenants and agrees that, from the date hereof and until payment in full of the Indebtedness: (a) Existence; Compliance with Legal Requirements: Insurance. Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence as a limited liability company, and any rights, licenses, Permits and franchises necessary for the conduct of its business, except those not reasonably likely to cause a Material Adverse Effect, and will comply, except for noncompliance not reasonably likely to cause a Material Adverse Effect, with all Legal Requirements and Insurance Requirements applicable to it and to the Mortgaged Property. Borrower shall at all times maintain, preserve and protect all franchises and trade names and preserve all the remainder of its property necessary for the continued conduct of its business and keep the Mortgaged Property in good repair, working order and condition, except for reasonable wear and use (and except for casualty losses as to which other provisions hereof shall govern), and from time to time make, or cause to be made, all reasonably necessary repairs, renewals, replacements, betterments and improvements thereto. (b) Basic Carrying Costs and Other Claims; Contest. (i) Subject to Borrower's contest rights set forth in Section 5.1(b)(ii) below, Borrower will pay when due (A) all Basic Carrying Costs with respect to Borrower and the Mortgaged Property; (B) all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may 75 become a Lien upon any of the Mortgaged Property or its other properties or assets (hereinafter referred to as the "Lien Claims"); and (C) all federal, state and local income taxes, sales taxes, excise taxes and all other taxes and assessments of Borrower on its business, income or assets; in each instance before any penalty or fine is incurred with respect thereto. Borrower's obligation to pay Basic Carrying Costs pursuant to this Agreement shall include, to the extent permitted by applicable law, Impositions resulting from future changes in law which impose upon Lender an obligation to pay any property taxes on the Mortgaged Property or other Impositions. (ii) Borrower shall not be required to pay, discharge or remove any Imposition or Lien Claim (the Lender acknowledging the existence of the Lien Claims as of the Closing Date referenced on Exhibit 3 attached hereto) and agreeing that the bonding of such Lien Claims are sufficient security by Borrower with respect thereto), so long as Borrower contests in good faith such Imposition or Lien Claim or the validity, applicability or amount thereof by an appropriate legal proceeding which operates to prevent the collection of such amounts and the sale of the applicable Mortgaged Property or any portion thereof, so long as: (A) the Indebtedness shall not have been accelerated, if an Event of Default shall have occurred and be continuing; (B) prior to the date on which such Imposition or Lien Claim would otherwise have become delinquent, Borrower shall have given Lender prior written notice of its intent to contest said Imposition or Lien Claim and deposited with Lender (or with a court of competent jurisdiction or other appropriate body approved by Lender) such additional amounts as are necessary to keep on deposit at all times (taking into account any funds on deposit in the Operating Expense Account), an amount equal to at least one hundred twenty five percent (125%) (or such higher amount as may be required by applicable law) of the total of (x) the balance of such Imposition or Lien Claim then remaining unpaid, and (y) all interest, penalties, costs and charges accrued or accumulated thereon, together with such other security as may be required in the proceeding, or as may be required by Lender, to insure the payment of any such Imposition or Lien Claim and all interest and penalties thereon; provided, that notwithstanding the foregoing, with respect to Impositions or Lien Claims in an amount not in excess of $200,000, Borrower shall not be required to deposit such amounts with the Lender, so long as Borrower demonstrates to the reasonable satisfaction of the Lender that Borrower has otherwise reserved such funds or such funds are otherwise available to the Borrower; (C) no risk of sale, forfeiture or loss of any interest in the Mortgaged Property or any part thereof arises, in Lender's judgment, during the pendency of such contest; (D) such contest does not, in Lender's determination, have a Material Adverse Effect; 76 (E) such contest is based on bona fide, material, and reasonable claims or defenses; (F) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; and (G) Borrower shall have obtained such endorsements to the Title Insurance Policy with respect to such Imposition or Lien Claim as Lender may reasonably require (or escrowed with a title insurance company funds sufficient to obtain such endorsements pursuant to escrow arrangements reasonably satisfactory to Lender). Any such contest shall be prosecuted with due diligence, and Borrower shall promptly pay the amount of such Imposition or Lien Claim as finally determined, together with all interest and penalties payable in connection therewith. Lender shall have full power and authority, but no obligation, to apply any amount deposited with Lender under this subsection to the payment of any unpaid Imposition or Lien Claim to prevent the sale or forfeiture of the Mortgaged Property for non-payment thereof, if Lender reasonably believes that such sale or forfeiture is threatened. Any surplus retained by Lender after payment of the Imposition or Lien Claim for which a deposit was made shall be promptly repaid to Borrower unless an Event of Default shall have occurred, in which case said surplus may be retained by Lender to be applied as Lender, in its discretion, may elect. (c) Litigation. Borrower shall give prompt written notice to Lender of any material litigation or governmental proceedings pending or threatened (in writing) against Borrower, or the Mortgaged Property, other than personal injury or other litigation which is covered by insurance, eviction matters with respect to tenants or occupants (in which no counterclaims for material damages or liabilities are made against Borrower), and matters related to enforcement of building or zoning codes (as long as the Mortgaged Property is in material compliance with such building and zoning codes). (d) Environmental Remediation. (i) If any investigation, site monitoring, cleanup, removal, restoration or other remedial work of any kind or nature is required pursuant to an order or directive of any Governmental Authority or under any applicable Environmental Law, because of or in connection with the current or future presence, suspected presence, Release or suspected Release of a Hazardous Substance on, under or from any Mortgaged Property or any portion thereof (collectively, the "Remedial Work"), Borrower shall promptly commence and diligently prosecute to completion all such Remedial Work, and shall conduct such Remedial Work in accordance with all applicable Environmental Laws that impose legally binding obligations governing such Remedial Work, including without limitation the National Contingency Plan promulgated under the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. ("CERCLA"), if 77 applicable. In all events, such Remedial Work shall be commenced within such period of time as required under any applicable Environmental Law. If any fungus, mold, mildew or other biological agent is present at any Mortgaged Property in a manner or at a level that is reasonably likely to materially adversely affect the value or utility of such Mortgaged Property or that poses a significant adverse health risk to an average person, the Borrower shall promptly commence and diligently prosecute to completion the remediation of such condition so as to eliminate the reasonable likelihood of a material adverse effect or a significant adverse health risk to an average person to the reasonable satisfaction of the Lender or its servicer, which shall also constitute Remedial Work. In all events, such Remedial Work shall be commenced within such period of time as required under any applicable Environmental Law; provided, however, that Borrower shall not be required to commence such Remedial Work within the above specified time periods: (x) if prevented from doing so by any Governmental Authority, (y) if commencing such Remedial Work within such time periods would result in Borrower or such Remedial Work violating any applicable Environmental Law or (z) if Borrower, at its expense and after prior notice to Lender, is contesting by appropriate legal, administrative or other proceedings conducted in good faith and with due diligence the need to perform Remedial Work, the scope of any Remedial Work, or any other legally contestable aspect of any Remedial Work, as long as (1) Borrower is permitted by the applicable Environmental Laws to delay performance of the Remedial Work pending such proceedings, (2) neither the Mortgaged Property nor any part thereof or interest therein shall be sold, forfeited or lost during such delay if Borrower does not perform the Remedial Work being contested, and Borrower would have the opportunity to do so, in the event of Borrower's failure to prevail in the contest, (3) the Lenders would not, by virtue of such permitted contest, be exposed to any risk of any civil liability for which Borrower has not furnished additional security as provided in clause (4) below, or to any risk of criminal liability, and neither the Mortgaged Property nor any interest therein would be subject to the imposition of any lien for which Borrower has not furnished additional security as provided in clause (4) below, as a result of the failure to perform such Remedial Work and (4) Borrower shall have furnished to the Lender additional security in respect of the Remedial Work being contested and the loss or damage that may result from Borrower's failure to prevail in such contest in such amount as may be reasonably requested by the Lender. (ii) Except for immediate response situations described in clause (iii) below, if requested by Lender, all Remedial Work under clause (i) above shall be performed by contractors, and under the supervision of a consulting Engineer, each approved in advance by Lender which approval shall not be unreasonably withheld or delayed. Borrower shall pay all costs and expenses reasonably incurred in connection with such Remedial Work. If Borrower does not timely commence and diligently prosecute to completion the Remedial Work as provided in clause (i) above, Lender may (but shall not be obligated to), upon 30 days prior written notice to Borrower of its intention to do so, cause such Remedial Work to be performed. Borrower shall pay or reimburse Lender on demand for all reasonable expenses (including reasonable attorneys' fees and disbursements, but excluding internal overhead, administrative and similar costs of Lender) reasonably relating to and incurred by Lender in connection with monitoring, reviewing or performing any Remedial Work in accordance herewith. 78 (iii) Borrower shall not commence any Remedial Work under clause (i) above, nor enter into any settlement agreement, consent decree or other legally binding obligation to resolve a material adverse claim without providing notice to Lender as provided in Section 5.1(f). Notwithstanding the foregoing, if the presence or threatened presence of Hazardous Substances on, under, about or emanating from the Mortgaged Property poses an immediate threat to the health, safety or welfare of any Person or the environment, or is of such a nature that an immediate response is necessary or required under applicable Environmental Law, Borrower may initiate and perform such activities without providing advance notice to Lender and complete all necessary Remedial Work. In such events, Borrower shall notify Lender as soon as practicable and, in any event, within three (3) Business Days, of any action taken. (iv) In the event the Environmental Report recommends the development of any operation and maintenance program(s) for any recognized environmental condition at a Mortgaged Property (including, without limitation, mold abatement and preventative maintenance and measures, underground storage tanks asbestos and asbestos containing materials, lead-based paints and lead in water supplies) (each individually, and collectively, the "O & M Program"), Borrower shall develop each O & M Program, as reasonably approved by Lender, and shall, during the term of the Loan, comply in all material respects with the terms and conditions of each O & M Program. Without limiting the foregoing, Borrower shall continue the O&M Program currently in place at the Mortgaged Property relating to mold abatement and preventative maintenance and measures, and shall comply in all material respects therewith; Borrower represents, warrants and covenants that a true, correct and complete copy of such mold abatement and prevention O&M Program is attached hereto as Schedule 7. (e) Environmental Matters: Inspection. (i) Borrower shall not cause and shall use commercially reasonable measures to prevent any other Person from causing any Hazardous Substances to be present on or under or to emanate from the Mortgaged Property, except under conditions permitted by applicable Environmental Laws (such as cleaning and operating materials, fuels and lubricants, and other items used in the ordinary course of business at the Mortgaged Property in material compliance with and in amounts not in excess of that permitted under applicable Environmental Laws) and, in the event that such prohibited Hazardous Substances are present on, under or emanate from the Mortgaged Property, or migrate onto or into the Mortgaged Property, Borrower shall to the extent required by applicable Environmental Law cause the removal or remediation of such Hazardous Substances, in accordance with this Agreement and as required by applicable Environmental Laws, either on its own behalf or by causing a tenant or other party legally responsible therefor to perform such removal and remediation. Borrower shall use commercially reasonable efforts to prevent, and to seek the remediation of, any migration of Hazardous Substances onto or into the Mortgaged Property from any adjoining property. (ii) Upon reasonable prior written notice identifying the time, place and scope of a proposed inspection, Lender shall have the right at all reasonable times during normal business hours to enter upon and inspect environmental conditions with respect to 79 all or any portion of any Mortgaged Property, provided that such inspections shall not unreasonably interfere with the operation or the tenants, customers, residents, occupants or other authorized users of any Mortgaged Property and shall be appropriate in scope and location to the proposed inspection. If Lender has reasonable grounds to suspect that Remedial Work may be required, Lender shall notify Borrower and, thereafter, may select a consulting Engineer to conduct and prepare reports of such inspections (with reasonable prior written notice to Borrower of the scope and location of such inspection prior to the commencement of such inspection). Borrower shall be given a reasonable opportunity to review any reports, data and other documents or materials reviewed or prepared by the Engineer, and to submit comments and suggested revisions or rebuttals to same before they are issued in final form. The inspection rights granted to Lender in this Section 5.1(e) shall be in addition to, and not in limitation of, any other inspection rights granted to Lender in this Agreement, and shall expressly include the right (if Lender reasonably suspects that Remedial Work may be required) to conduct soil borings, establish ground water monitoring wells and conduct other customary environmental tests, assessments and audits to the extent such activities are reasonably related to the scope of the suspected Remedial Work. (iii) Borrower agrees to bear and shall pay or reimburse Lender on demand for all sums reasonably advanced and reasonable expenses incurred (including reasonable attorneys' fees and disbursements, but excluding internal overhead, administrative and similar costs of Lender) reasonably relating to and incurred by Lender in connection with, the inspections and reports described in this Section 5.1(e) (to the extent such inspections and reports relate to any Mortgaged Property) in the following situations: (x) If Lender has reasonable grounds to believe, at the time any such inspection is ordered, that there exists an occurrence or condition that could reasonably be expected to lead to a material Environmental Claim; (y) If any such inspection reveals an occurrence or condition that is reasonably likely to lead to a material Environmental Claim with respect to such Mortgaged Property; or (z) If an Event of Default with respect to such Mortgaged Property exists at the time any such inspection is ordered, and such Event of Default relates to any representation, covenant or other obligation pertaining to Hazardous Substances, Environmental Laws or any other environmental matter. (f) Environmental Notices. To the extent Borrower has actual notice of any of the following, Borrower shall promptly provide notice to Lender of: (i) a material Environmental Claim asserted by any Governmental Authority against Borrower, any Affiliate or Borrower or with respect to the Mortgaged Property with respect to any Hazardous Substance on, in, under or emanating from any Mortgaged Property; 80 (ii) any proceeding, investigation or inquiry commenced or threatened in writing by any Governmental Authority, against Borrower, any Affiliate of Borrower or with respect to any Mortgaged Property concerning the presence, suspected presence, Release or threatened Release of Hazardous Substances from or onto, in or under any property not owned by Borrower (including, without limitation, proceedings under the CERCLA); (iii) a material Environmental Claim asserted or threatened against Borrower, against any other party occupying any Mortgaged Property or any portion thereof which become known to Borrower or against any Mortgaged Property; (iv) the discovery by Borrower of a material occurrence or condition involving Hazardous Substances and on any Mortgaged Property or on any real property adjoining or in the vicinity of any Mortgaged Property giving rise to an obligation of the Borrower to the Lender hereunder; and (v) the commencement or completion of any Remedial Work required pursuant to clause (d) above. (g) Copies of Notices. Borrower shall transmit to Lender copies of any citations, orders, notices or other material written communications received from any Person and any notices, reports or other written communications submitted to any Governmental Authority with respect to the matters described in Section 5.1(f). (h) Environmental Claims. Lender may join and participate in, as a party with separate counsel, any legal or administrative proceeding or action concerning the Mortgaged Property or any portion thereof under any applicable Environmental Law, if, in Lender's reasonable judgment, such action or proceeding would expose Lender to a material liability and a conflict of interest exists which makes representation by counsel chosen by Borrower not advisable; provided, however, that Lender shall not participate in day-to-day decision making with respect to environmental compliance. Borrower shall pay or reimburse Lender on demand for all reasonable sums advanced and reasonable expenses incurred (including reasonable attorneys' fees and disbursements, but excluding internal overhead, administrative and similar costs of Lender) by Lender in connection with any such action or proceeding. (i) Environmental Indemnification. Borrower shall indemnify, reimburse, defend, and hold harmless Lender, and each of its respective parents, subsidiaries, Affiliates, shareholders, directors, officers, employees, representatives, agents, successors, assigns and attorneys (collectively, the "Indemnified Parties") for, from, and against all demands, claims, actions or causes of action, assessments, losses, damages, liabilities, costs and expenses (including, without limitation, interest, penalties, reasonable attorneys' fees, disbursements and expenses, and reasonable consultants' fees, disbursements and expenses (but excluding internal overhead, administrative, lost opportunity and similar costs of Lender)), asserted against, resulting to, imposed on, or incurred by any Indemnified Party, directly or indirectly, in connection with any of the following (except to the extent same are directly and solely caused by the gross negligence or willful misconduct of any Indemnified Party and except that any Indemnified Party shall not be indemnified against claims resulting from actions taken or events 81 occurring with respect to the Mortgaged Property after Lender forecloses its Lien or security interest upon the Mortgaged Property or accepts a deed in lieu of foreclosure or is a so-called "mortgagee-in-possession" unless and to the extent such indemnification relates to any of the following which occurred while Borrower owned the Mortgaged Property): (i) events, circumstances, or conditions which form the reasonable basis for an Environmental Claim; (ii) any pollution or threat to human health or the environment involving Hazardous Substances that is related in any way to Borrower's or any previous owner's or operator's management, use, control, ownership or operation of any Mortgaged Property, and whether occurring, existing or arising prior to or from and after the date hereof, and whether or not the pollution or threat to human health or the environment involving Hazardous Substances is described in the Environmental Reports; (iii) any Environmental Claim against any Person whose liability for such Environmental Claim Borrower has assumed or retained either contractually or by operation of law; or (iv) the breach of any representation, warranty or covenant set forth in Section 4.2(e) and Sections 5.1(d) through 5.1(i), inclusive. The provisions of and undertakings and indemnification set forth in this Section 5.1(i) shall survive the satisfaction and payment of the Indebtedness and termination of this Agreement. (j) General Indemnity. (i) Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties for, from and against any and all claims, suits, liabilities (including, without limitation, strict liabilities), administrative and judicial actions and proceedings, obligations, debts, damages, losses, costs, expenses, fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in settlement, and litigation costs, of whatever kind or nature and whether or not incurred in connection with any judicial or administrative proceedings (including, but not limited to, reasonable attorneys' fees and other reasonable costs of defense) (the "Losses") imposed upon or incurred by or asserted against any Indemnified Parties (except as to any Indemnified Party to the extent same are directly and solely caused by the gross negligence or willful misconduct of such Indemnified Party) and directly or indirectly arising out of or in any way relating to any one or more of the following: (A) any breach by Borrower of obligations under, or material misrepresentation contained in, this Agreement, the Note or any of the other Loan Documents; (B) any and all claims and demands whatsoever which may be asserted against Lender by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants, or agreements contained in the 82 License Agreement or the Tall Pines Agreement prior to entry on the Mortgaged Property by Lender after an Event of Default; (C) any and all lawful action that may be taken and is taken by the Lender in connection with the enforcement of the provisions of this Agreement, the Note or any of the other Loan Documents, whether or not suit is filed in connection with same, or in connection with Borrower or any Affiliate of Borrower becoming a party to a voluntary or involuntary federal or state bankruptcy, insolvency or similar proceeding; (D) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about any Mortgaged Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (E) any use, nonuse or condition in, on or about the Mortgaged Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (F) any failure of the Mortgaged Property to be in compliance with any Legal Requirement; (G) performance of any labor or services or the furnishing of any materials or other property in respect of the Mortgaged Property or any part thereof pursuant to provisions of this Agreement; and (H) the failure of Borrower to file timely with the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be required in connection with this Agreement. Any amounts payable to an Indemnified Party by reason of the application of this Section 5.1(j)(i) shall become due and payable ten (10) days after written demand and shall bear interest at the Default Rate from the tenth (10th) day after demand until paid. (ii) Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses imposed upon or incurred by or asserted against any of the Indemnified Parties and directly or indirectly arising out of or in any way relating to any tax on the making and/or recording of this Agreement, the Note or any of the other Loan Documents. (iii) Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses (including, without limitation, reasonable attorneys' fees and costs) that the Indemnified Parties may incur, directly or indirectly, as a result of a default under Borrower's covenants with respect to ERISA and employee benefits plans contained herein, including, without limitation, any costs or expenses incurred in the investigation, defense, and settlement of Losses incurred in correcting any prohibited transaction or in the sale of 83 a prohibited loan, and in obtaining any individual prohibited transaction exemption under ERISA that may be required, in the Lender's reasonable discretion). (iv) Promptly after receipt by an Indemnified Party under this Section 5.1(j) of notice of the making of any claim or the commencement of any action, such Indemnified Party shall, if a claim in respect thereof is to be made by such Indemnified Party against Borrower under this Section 5.1(j), notify Borrower in writing. In case any such claim is made or action is brought against any Indemnified Party and such Indemnified Party seeks or intends to seek indemnity from Borrower, Borrower will be entitled to participate in, and, to the extent that it may wish, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Party; and, upon receipt of notice from Borrower to such Indemnified Party of its election so to assume the defense of such claim or action and only upon approval by the Indemnified Party of such counsel (such approval not to be unreasonably withheld or delayed), Borrower will not be liable to such Indemnified Party under this Section 5.1(j) for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof. Notwithstanding the preceding sentence, each Indemnified Party will be entitled to employ counsel separate from such counsel for Borrower and from any other party in such action if such Indemnified Party reasonably determines that a conflict of interest exists which makes representation by counsel chosen by Borrower not advisable. In such event, Borrower shall pay the reasonable fees and disbursements of such separate counsel. Borrower shall not, without the prior written consent of an Indemnified Party, which consent shall not be unreasonably withheld or delayed, voluntarily settle or consent to the entry of any judgment or otherwise enter into any legally binding obligation to resolve a material adverse claim with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not such Indemnified Party is an actual or potential party to such claim or action) unless such settlement or consent includes an unconditional release of each Indemnified Party from all liability arising out of such claim, action, suit or proceeding. Each Indemnified Party shall not enter into a settlement of or consent to the entry of any judgment with respect to any action, claim, suit or proceeding as to which an Indemnified Party would be entitled to indemnification hereunder without the prior written consent of Borrower. The provisions of and undertakings and indemnification set forth in this Section 5.1(j) shall survive the satisfaction and payment of the Indebtedness and termination of this Agreement. (k) Access to Mortgaged Property. Borrower shall permit agents, representatives and employees of Lender to inspect the Mortgaged Property or any part thereof at such reasonable times as may be requested by Lender upon reasonable advance written notice (except during an Event of Default), subject, however, to the rights of Borrower, of the tenants and of other authorized users of the Mortgaged Property. (l) Notice of Default. Borrower shall promptly advise Lender in writing of any change in Borrower's condition, financial or otherwise, of which Borrower is aware, that is reasonably likely to have a Material Adverse Effect, or of the occurrence of any Default or Event of Default. 84 (m) Cooperate in Legal Proceedings. Except with respect to any claim by Borrower or the Guarantor against Lender, Borrower shall reasonably cooperate with Lender with respect to any proceedings before any Governmental Authority that are reasonably likely to in any way materially affect the rights of Lender hereunder or any rights obtained by Lender under any of the Loan Documents and, in connection therewith, shall not prohibit Lender, at its election, from participating in any such proceedings. (n) Perform Loan Documents. Borrower shall observe, perform and satisfy all the terms, provisions, covenants and conditions required to be observed, performed or satisfied by it, and shall pay when due all costs, fees and expenses required to be paid by it, under the Loan Documents. (o) Insurance Benefits. Borrower shall reasonably cooperate with Lender in obtaining for Lender the benefits of any Insurance Proceeds lawfully or equitably payable to Borrower or Lender in connection with any Mortgaged Property. Lender shall be reimbursed for any expenses reasonably incurred in connection therewith (including reasonable attorneys' fees and disbursements, but excluding internal overhead, administrative and similar costs of Lender) out of such Insurance Proceeds, all as more specifically provided in this Agreement. (p) Further Assurances. Borrower shall, at Borrower's sole cost and expense: (i) upon Lender's reasonable request therefor given from time to time, pay for (a) reports of UCC, tax lien, judgment and litigation searches with respect to Borrower, and (b) searches of title to the Mortgaged Property, each such search to be conducted by search firms designated by Lender in each of the locations designated by Lender; (ii) furnish to Lender all instruments, documents, certificates, title and other insurance reports and agreements, and each and every other document, certificate, agreement and instrument required to be furnished by Borrower pursuant to the terms of the Loan Documents; (iii) execute and deliver to Lender such documents, instruments, certificates, assignments and other writings, and do such other acts necessary, to evidence, preserve and/or protect the Collateral at any time securing or intended to secure the Note, as Lender may reasonably require (including, without limitation, tenant estoppel certificates, an amended or replacement Mortgage, UCC financing statements or Collateral Security Instruments), provided that none of the foregoing shall materially increase Borrower's obligations or material reduce Borrower's rights under this Agreement or any other Loan Document; and (iv) do and execute all and such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement and the other Loan Documents, as Lender shall reasonably require from time to time. 85 (q) Management of Mortgaged Property. (i) The Mortgaged Property shall be managed at all times by the current Manager or another manager reasonably satisfactory to Lender, pursuant to a Management Agreement reasonably approved in writing by Lender. Manager may be an Affiliate of Borrower, provided that: (a) the terms and conditions of such Manager's engagement are at arm's length, reasonable, competitive and customary in the applicable marketplace; and (b) Lender has approved such Manager and such terms and the related Management Agreement. Both the Manager and the Management Agreement, dated as of the date hereof, between the Borrower and the Manager are approved by Lender. Borrower shall cause the Manager of the Mortgaged Property to agree that such Manager's Management Agreement is subject and subordinate in all respects to the Indebtedness and to the Lien of the Mortgage as and to the extent set forth in the Subordination of Management Agreement. A Management Agreement may be terminated or assigned (1) by Borrower at any time in accordance with the provisions of such Management Agreement or otherwise so long as a successor or assignee Manager approved by Lender shall have been appointed and such successor Manager has (i) entered into (or assumed) a Management Agreement in form and substance approved by Lender, and (ii) has executed and delivered a Manager's Subordination to Lender, and (2) with respect to a termination only, by Lender upon thirty (30) days' prior written notice to Borrower and the Manager upon the occurrence and continuation of an Event of Default. Notwithstanding the foregoing, any successor manager selected hereunder by Lender or Borrower to manage the Mortgaged Property shall be a reputable management company having substantial experience in the management of real property of a similar type, size and quality in the state in which the Mortgaged Property is located. Borrower acknowledges and agrees that any consent or approval requested of Lender under this Section may be conditioned by Lender, at Lender's discretion, upon Borrower first obtaining a Rating Confirmation with respect to such change in management, and Lender shall not be deemed to be acting unreasonably in requiring such a Rating Confirmation. Borrower further covenants and agrees that any manager of Mortgaged Property shall at all times while any Indebtedness is outstanding maintain worker's compensation insurance as required by Governmental Authorities. (ii) Borrower further covenants and agrees that the Mortgaged Property shall be operated pursuant to the Management Agreement and that Borrower shall: (w) promptly perform and/or observe all of the material covenants and agreements required to be performed and observed by it under the Management Agreement and do all things reasonably necessary to preserve and to keep unimpaired its material rights thereunder; (x) promptly notify Lender of any material default under the Management Agreement of which it is aware; (y) promptly deliver to Lender a copy of each financial statement, business plan, capital expenditures plan, notice and report received by it under the Management Agreement, including, but not limited to, financial statements; and (z) promptly enforce the performance and observance of the material covenants and agreements required to be performed and/or observed by the Manager under the Management Agreement. 86 (r) Financial Reporting. (i) Borrower shall keep and maintain or shall cause to be kept and maintained on a Fiscal Year basis in accordance with GAAP consistently applied, books, records and accounts reflecting in reasonable detail all of the financial affairs of Borrower and all items of income and expense in connection with the operation of the Mortgaged Property and ownership of the Mortgaged Property and in connection with any services, equipment or furnishings provided in connection with the operation of the Mortgaged Property, whether such income or expense may be realized by Borrower or by any other Person whatsoever. Lender shall have the right from time to time at all times during normal business hours upon reasonable prior written notice to Borrower to examine such books, records and accounts at the office of Borrower or other Person maintaining such books, records and accounts and to make such copies or extracts thereof as Lender shall desire. Borrower shall pay any reasonable costs and expenses incurred by Lender to examine Borrower's accounting records, as Lender shall reasonably determine to be necessary or appropriate in the protection of Lender's interest. (ii) Borrower shall furnish to Lender annually, within ninety (90) days following the end of each Fiscal Year, a complete copy of Borrower's and Guarantor's financial statements, each audited by a "Big Four" accounting firm or such other Independent certified public accountant acceptable to Lender in accordance with GAAP consistently applied covering Borrower's and Guarantor's respective financial position and results of operations, for such Fiscal Year and containing a statement of revenues and expenses, a statement of assets and liabilities and a statement of Borrower's or Guarantor's (as applicable) equity, all of which shall be in form and substance reasonably acceptable to Lender. Lender shall have the right from time to time to review and consult with respect to the auditing procedures used in the preparation of such annual financial statements. Together with Borrower's and Guarantors' annual financial statements, Borrower shall furnish, and cause Guarantor to furnish, to Lender an Officer's Certificate certifying as of the date thereof (x) to Borrower's Actual Knowledge, that the annual financial statements present fairly in all material respects the results of operations and financial condition of Borrower or Guarantor, as applicable, all in accordance with GAAP consistently applied, and (y) whether there exists an Event of Default or Default, and if such Event of Default or Default exists, the nature thereof, the period of time it has existed and the action then being taken to remedy same. Lender acknowledges that KC Borrower and TC Borrower may furnish a single financial statement and that Great Wolf and GWR Operating Partnership, L.L.L.P. may file financial statements on a consolidated basis, provided, however, that any such consolidated financial statement filed by Great Wolf and GWR Operating Partnership, L.L.L.P. shall contain a note indicating that the separate assets and liabilities of the Borrower are neither available to pay the debts of the consolidated entity nor constitute obligations of the consolidated entity. (iii) Borrower shall furnish to Lender, within forty-five (45) days following the end of each Fiscal Year quarter true, complete and correct copies of quarterly unaudited financial statements (including statements of cash flow) prepared in accordance with GAAP with respect to Borrower and Guarantor for the portion of the Fiscal Year then ended. 87 (iv) No later than thirty-five (35) days following the end of each calendar month, Borrower shall prepare and deliver to Lender and its servicer a statement (each a "Monthly Statement") in form and substance reasonably satisfactory to Lender, setting forth with respect to the Mortgaged Property (which shall be prepared for each individual Mortgaged Property and, on a consolidated basis, for all the Mortgaged Property), (A) a cash flow report detailing Gross Revenues, Operating Revenues and the Operating Expenses, in each case on a trailing twelve month basis; (B) revenue reports, an occupancy report including the occupancy percentage, an average daily room rate, and RevPar for the applicable month and an advance booking report, and, in all cases, any other information as is reasonably required by Lender; and (C) monthly and year-to-date operating statements prepared for such calendar month, each of which shall include an itemization of actual (not pro forma) capital expenditures and FF&E Costs during the applicable period, and a comparison on a year-to-date basis to budget and prior year, for each Mortgaged Property and Borrower. (v) No later than forty-five (45) days following the end of each of the months of December, March, June, and September, Borrower shall prepare and deliver to Lender and its servicer a statement (each a "Quarterly Statement") in form and substance reasonably satisfactory to Lender, setting forth with respect to the Mortgaged Property (which shall be prepared for each individual Mortgaged Property and, on a consolidated basis, for all the Mortgaged Property), (A) a property balance sheet for such month; (B) quarterly and year-to-date operating statements, each of which shall include an itemization of budgeted and actual (not pro forma) capital expenditures and FF&E Costs during the applicable period; and (C) a quarterly and year-to-date comparison of the budgeted income and expenses with the actual income and expenses for such quarter and year to date, together with if requested by Lender, a detailed explanation of any variances between budgeted and actual amounts that are in excess of five percent (5%) for each line item therein. (vi) Borrower shall furnish to Lender, within fifteen (15) Business Days after request, such further information with respect to the operation of the Mortgaged Property and the financial affairs of Borrower as may be reasonably requested by Lender, including all business plans prepared for Borrower. (vii) Borrower shall furnish to Lender, within ten (10) Business Days after request, such further information regarding any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA as may be reasonably requested by Lender in writing. 88 (viii) At least fifteen (15) days prior to the end of each of Borrower's Fiscal Years, Borrower shall submit or cause to be submitted to Lender an Operating Budget for Gross Revenues, Property Expenses, Capital Improvement Costs and FF&E Costs for the next Fiscal Year for the Mortgaged Property. If at the time such Operating Budget is submitted to Lender the Debt Service Coverage Test is applicable and is not satisfied, such Operating Budget shall be subject to the Lender's approval, such approval not to be unreasonably withheld or delayed. Such Operating Budget may allow for a five percent (5%) line item variance. If the Lender has the right to approve a proposed Operating Budget as described above, then until so approved by Lender for the subsequent Fiscal Year, the Operating Budget approved by Lender for the preceding Fiscal Year shall remain in effect for purposes of Section 2.12 and Section 2.13; provided, that for so long as such prior Operating Budget remains in effect, amounts set forth in the prior Operating Budget with respect to Property Expenses shall be deemed increased with respect to actual increases in Basic Carrying Costs and non-discretionary utility expenditures and shall be deemed increased with regard to discretionary items on a percentage basis by an amount equal to the greater of (x) actual increases then known to Borrower and (y) the increase in the Consumer Price Index (expressed as percentage) as measured over the calendar year that the prior Operating Budget was in effect. (ix) Together with the financial statements, operating statements and other documents and information provided to Lender by or on behalf of Borrower under this Section, Borrower also shall deliver to Lender a certification in form and substance reasonably satisfactory to Lender, executed on behalf of Borrower by its chief executive officer or chief financial officer or treasurer (provided that all non-monthly financial statements shall be executed by Borrower's chief executive officer or chief financial officer) stating that, to such officer's knowledge, such financial statements, operating statements and other documents and information are true and complete in all material respects. (s) Operation of Mortgaged Property. Borrower shall cause the operation of the Mortgaged Property to be conducted at all times in a manner consistent with at least the level of operation of such Mortgaged Property as of the Closing Date, including, without limitation, the following: (i) to maintain or cause to be maintained the standard of the Mortgaged Property at all times at a level not lower than that maintained by prudent managers of similar facilities or land in the region where the Mortgaged Property is located; (ii) to operate or cause to be operated the Mortgaged Property in a prudent manner in compliance, other than compliance which is not reasonably likely to result in a Material Adverse Effect, with applicable Legal Requirements and Insurance Requirements relating thereto and, except to the extent failure to maintain the same is not reasonably likely to result in a Material Adverse Effect, maintain or cause to be maintained all licenses, Permits and any other agreements necessary for the continued use and operation of the Mortgaged Property (other than liquor permits, which Borrower shall not be obligated to maintain or cause to be maintained); and 89 (iii) to maintain or cause to be maintained sufficient Inventory and Equipment of types and quantities at the Mortgaged Property to enable Borrower to operate the Mortgaged Property. (t) Material Agreements. Borrower shall not enter into or become obligated under any Material Agreement pertaining to the Mortgaged Property, without the prior written consent of Lender, which consent shall not be unreasonably withheld or delayed. Borrower shall not amend or modify in any material respect or terminate, or cause or permit to be amended or modified in any material respect or terminated, the License Agreement or the Tall Pines Agreement (as such Tall Pines Agreement relates to or benefits the Mortgaged Property) without the prior written consent of Lender, which consent shall not be unreasonably withheld or delayed. Borrower shall keep and maintain the License Agreement and the Tall Pines Agreement in full force and effect, and enforce or cause to be enforced the obligations of the Licensor under the License Agreement and Tall Pines under the Tall Pines Agreement, to the end that Borrower, and Lender as its assignee, may enjoy all the rights granted under the License Agreement and the Tall Pines Agreement. (u) ERISA. Borrower shall deliver to Lender as soon as possible, and in any event within ten days after Borrower knows or has reason to know that any of the events or conditions specified below with respect to any Plan or Multiemployer Plan has occurred or exists, an Officer's Certificate setting forth details respecting such event or condition and the action, if any, that Borrower or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by Borrower or an ERISA Affiliate with respect to such event or condition): (i) any reportable event, as defined in Section 4043(b) of ERISA and the regulations issued thereunder, with respect to a Plan, as to which PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code or Section 302(e) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code); and any request for a waiver under Section 412(d) of the Code for any Plan; (ii) the distribution under Section 4041(c) of ERISA of a notice of intent to terminate any Plan; (iii) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by Borrower or any ERISA Affiliate of Borrower of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan; (iv) the complete or partial withdrawal from a Multiemployer Plan by Borrower or any ERISA Affiliate of Borrower that results in material liability under 90 Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt by Borrower or any ERISA Affiliate of Borrower of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA; (v) the institution of a proceeding by a fiduciary of any Multiemployer Plan against Borrower or any ERISA Affiliate of Borrower to enforce Section 515 of ERISA, which proceeding is not dismissed within thirty (30) days; (vi) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of tax-exempt status of the trust of which such Plan is a part if Borrower or an ERISA Affiliate of Borrower fails to timely provide security to the Plan in accordance with the provisions of said Sections; and (vii) the imposition of a lien or a security interest on Borrower in connection with a Plan. (v) Intentionally Omitted. (w) Secondary Market Transaction. Borrower acknowledges that Lender and its successors and assigns may (i) sell the Loan to one or more investors as a whole loan, (ii) participate the Loan to one or more investors, (iii) deposit the Loan with a trust, which trust may sell certificates to investors evidencing an ownership interest in the trust assets, or (iv) otherwise sell the Loan or interests therein to investors (the transactions referred to in clauses (i) through (iv) above are hereinafter each referred to as a "Secondary Market Transaction"). Borrower shall cooperate with Lender in attempting to effect or effecting any such Secondary Market Transaction and shall cooperate in attempting to implement or implementing all requirements imposed by any Rating Agency involved in any Secondary Market Transaction, including but not limited to, (i) providing Lender an estoppel certificate and such information, legal opinions and documents (including updated non-consolidation opinions) relating to Borrower, the Guarantor, the Mortgaged Property and any tenants of the Mortgaged Property as Lender or the Rating Agencies or other Interested Parties (as defined below), may reasonably request in connection with such Secondary Market Transaction, including, without limitation, updated financial information, appraisals, market studies, environmental reviews (Phase I's and, if appropriate, Phase II's), Mortgaged Property condition reports and other due diligence investigations together with appropriate verification of such updated information and reports through letters of auditors and consultants, as of the closing date of the Secondary Market Transaction, (ii) amending the Loan Documents and Organizational Agreement of Borrower, updating and/or restating officer's certificates, title insurance and other closing items, and providing updated certificates, representations and warranties in Loan Documents and such additional representations and warranties as may be required by 91 Lender or the Rating Agencies (provided, however, that Borrower shall only be required to provide such updated or additional certificates, representations and warranties to the extent the same are then true and correct), (iii) participating in bank, investors and Rating Agencies' meetings if requested by Lender, (iv) upon Lender's request, amending the Loan Documents (and updating and/or restating officer's certificates (to the extent the same are then true and correct), title insurance and other closing items in connection therewith) to divide the Loan into a first and a second mortgage loan, or into a one or more loans secured by mortgages and by ownership interests in Borrower in whatever proportion Lender determines, which separated loans may have different interest rates and amortization schedules (but with aggregated financial terms which are equivalent to that of the Loan prior to such separation) and thereafter to engage in separate Secondary Market Transactions with respect to all or any part of the indebtedness and loan documentation, and (v) reviewing the offering documents relating to any Secondary Market Transaction to ensure that all information concerning Borrower, the Guarantor, the Mortgaged Property, and the Loan is correct, and certifying to the accuracy thereof. Lender shall be permitted to share all such information with the investment banking firms, Rating Agencies, accounting firms, law firms and other third-party advisory firms and trustees, purchasers, transferees, assignees, trustees, servicers and actual or potential investors involved with the Loan and the Loan Documents or the applicable Secondary Market Transaction (collectively, "Interested Parties"). Lender and all of the aforesaid Interested Parties shall be entitled to rely on the information supplied by, or on behalf of, Borrower. Lender may publicize the existence of the Loan in connection with its marketing for a Secondary Market Transaction or otherwise as part of its business development. Borrower shall provide such reasonable access to the Mortgaged Property and personnel of the Manager and of Borrower's constituent members and the business and operations of all of the foregoing as Lender or other Interested Parties may request in connection with any such Secondary Market Transaction, provided that such access shall not unreasonably interfere with the operation or the tenants, customers, residents, occupants or other authorized users of any Mortgaged Property. Borrower understands that any such information may be incorporated into any offering circular, prospectus, prospectus supplement, private placement memorandum or other offering documents for any Secondary Market Transaction. Without limiting the foregoing, Borrower and Guarantor shall provide in connection with each of (i) a preliminary and a final private placement memorandum or (ii) a preliminary and final prospectus or prospectus supplement, as applicable (the documents referred to in the foregoing clauses (i) and (ii), collectively, the "Disclosure Documents"), an agreement certifying that Borrower and Guarantor have examined such Disclosure Documents specified by Lender and that each such Disclosure Document, as it relates to Borrower, Guarantor, any Affiliates, the Mortgaged Property and Manager, does not, to the knowledge of Borrower and Guarantor, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading (a "Disclosure Certificate"), provided, that Borrower and Guarantor shall be given a five (5) Business Day period to review and comment on each 92 Disclosure Document prior to the delivery of any such Disclosure Certificate. Borrower and Guarantor shall indemnify, defend, protect and hold harmless Lender, its Affiliates, directors, employees, agents and each Person, if any, who controls Lender or any such Affiliate within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, and any other placement agent or underwriter with respect to any Securitization or Secondary Market Transaction from and against any losses, claims, damages, liabilities, costs and expenses (including, without limitation, reasonable attorneys' fees and disbursements) that arise out of or are based upon any untrue statement of any material fact contained in any Disclosure Certificate or other information or documents so furnished by Borrower, Guarantor or their Affiliates or in any representation or warranty of any Borrower contained herein or in the other Loan Documents or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information not materially misleading, provided Borrower, Guarantor or their Affiliates had Actual Knowledge of such untrue statement or omission. In any Secondary Market Transaction, Lender may transfer its obligations under this Loan Agreement and under the other Loan Documents (or may transfer the portion thereof corresponding to the transferred portion of the Indebtedness), and thereafter Lender shall be relieved of any obligations hereunder and under the other Loan Documents arising after the date of said transfer with respect to the transferred interest. Each transferee investor shall become a "Lender" hereunder. The holders from time to time of the Loan and/or any other interest of the "Lender" under this Loan Agreement and the other Loan Documents may from time to time enter into one or more co-lender or similar agreements in their discretion. Borrower acknowledges and agrees that such agreements, as the same may from time to time be amended, modified or restated, may govern the exercise of the powers and discretionary authority of the Lender hereunder and under the other Loan Documents, but Borrower shall be entitled to rely upon any actions taken by Lender or the designated servicer(s) or agent(s) for Lender, whether or not within the scope of its power and authority under such other agreements. All costs and expenses in connection with any Secondary Market Transaction shall be borne by Lender, including without limitation any costs and expenses incurred by Borrower or any Guarantor in cooperating with Lender in connection with any Secondary Market Transaction or performing any of their respective undertakings and covenants (other than any indemnification obligation) under this Agreement or any other Loan Document in connection with any Secondary Market Transaction. No agreement or other document required from Borrower in connection with any Secondary Market Transaction shall serve to materially increase Borrower's obligations under this Agreement or any other Loan Document or materially reduce Borrower's rights under this Agreement or any other Loan Document; provided, however, that Borrower shall pay the costs and expenses of Borrower's counsel in the event Borrower engages counsel in connection with any Secondary Market Transaction or in responding to Lender's requests for cooperation hereunder. Notwithstanding any provision of this Agreement to the contrary, Borrower shall not be obligated to agree to any modification of a Loan Document or any Borrower Organizational Agreements that would materially and adversely affect Borrower or Guarantor or that would increase the interest rate or interest payments (including any changes in the calculation of yield maintenance premiums or instances in which such yield maintenance premiums are payable), increase the rate of amortization, shorten the Maturity Date, increase the amounts of escrows and 93 reserves, increase the defeasance amounts, alter in any material way the transfer restrictions relating to direct or indirect interests in Borrower or the Mortgaged Property or affect the limitations on recourse against Borrower, Guarantor or their Affiliates set forth in this Agreement or the other Loan Documents, change the outstanding principal balance of the Loan (provided the Loan may be divided into components as set forth in this Agreement), modify the frequency of deposits into or distributions from any reserves or escrows, expand the scope of authority of any independent directors or managers of Borrower or any of its Affiliates, or alter Borrower's rights to make distributions to its partners or members, materially alter Borrower's rights with respect to prepayments or defeasance of the Notes, confer additional rights on the Lender in respect of management and license agreements or otherwise result in a material adverse change to Borrower or Guarantor in the terms of the transaction. (x) Insurance. (i) Borrower, at its sole cost and expense, shall keep the Improvements and Equipment insured (including, but not limited to, any period of renovation, alteration and/or construction) during the term of the Loan with the coverage and in the amounts required under this Agreement for the mutual benefit of Borrower and Lender against loss or damage by fire, lightning, wind and such other perils as are customarily included in a standard "all-risk" or "special cause of loss" form and against loss or damage by other risks and hazards covered by a standard extended coverage insurance policy (including, without limitation, fire, lightning, hail, hurricane, windstorm, tidal wave, explosion, acts of terrorism, riot and civil commotion, vandalism, malicious mischief, strike, water damage, sprinkler leakage, collapse, burglary, theft, mold and microbial matter coverage arising as a result of covered perils under the standard "all risk" policy and such other coverages as may be reasonably required by Lender on the special form (formerly known as an all risk form)). Such insurance shall be in an amount (i) equal to at least the greater of then full replacement cost of the Improvements and Equipment (exclusive of the cost of foundations and footings), without deduction for physical depreciation and the outstanding Principal Indebtedness, and (ii) such that the insurer would not deem Borrower a co-insurer under said policies. The policies of insurance carried in accordance with this Section 5.1(x) shall be paid on or prior to not less than ten (10) days in advance of the due date thereof and shall contain the "Replacement Cost Endorsement" with a waiver of depreciation. If terrorism coverage is excluded on an "all-risk" basis, then Borrower shall obtain coverage for terrorism and similar acts in the stand alone terrorism market. (ii) Borrower, at its sole cost and expense, for the mutual benefit of Borrower and Lender, shall also obtain and maintain or cause to be obtained and maintained during the entire term of the Loan the following policies of insurance: (A) flood insurance, if any part of the Mortgaged Property is located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994 (and any amendment or successor act thereto) in an amount at least equal to the 94 maximum limit of coverage available with respect to the Improvements and Equipment under said Act; (B) Comprehensive General Liability or Commercial General Liability insurance, including a broad form comprehensive general liability endorsement and coverage for broad form property damage, contractual damages, personal injuries (including death resulting therefrom), a liquor liability endorsement, and (i) so-called "dramshop" insurance or other liability insurance required in connection with the sale of alcoholic beverages and (ii) motor vehicle liability coverage for all owned and non-owned vehicles, including rented and leased vehicles, each containing minimum limits of liability of $500,000 for both injury to or death of a person and for property damage per occurrence and $2 million in the aggregate for the Mortgaged Property and all other property owned by Affiliates of Borrower, and such other liability insurance reasonably requested by Lender; in addition, at least $50 million excess and/or umbrella liability insurance shall be obtained and maintained for any and all claims, including all legal liability imposed upon Borrower and all court costs and attorneys' fees incurred in connection with the ownership, operation and maintenance of the Mortgaged Property and at the option of Borrower one or more other properties owned by Affiliates of Borrower; (C) business interruption insurance in an amount equal to the estimated gross revenues from operations at the Mortgaged Property, such insurance to cover losses for a period of the longer of (x) eighteen (18) months after the date of the fire or casualty in question, or (y) the period from the time of loss until all repairs are fully completed with reasonable diligence and dispatch, plus an extended period of indemnity commencing at the time repairs are completed for a period of not less than 365 days and to be increased from time to time during the term of the Loan if, and when, the gross revenues from the Mortgaged Property materially increase or decrease, as applicable; (D) insurance against loss or damage from (x) leakage of sprinkler systems and (y) explosion of steam boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure vessels or similar apparatus now or hereafter installed in the Improvements (without exclusion for explosions), covering all boilers or other pressure vessels, machinery and equipment located in, on, or about the Improvements; coverage is required in an amount at least equal to the full replacement cost of such equipment and the building or buildings housing same and shall extend to electrical equipment, sprinkler systems, heating and air conditioning equipment, refrigeration equipment and piping; (E) worker's compensation insurance coverage (in amounts not less than the statutory minimums for all persons employed by Borrower or its tenants at the Mortgaged Property and in compliance with all other requirements of applicable local, state and federal law) and "Employers Liability" insurance in amounts not less than required by statute; 95 (F) blanket crime and fidelity bond insurance coverage and insurance against dishonest or fraudulent acts committed by Borrower's or Manager's personnel, in amounts and deductibles reasonably satisfactory to Lender and in no event less than similar insurance maintained or required by prudent institutional owners of properties similar in type, location and quality as the Mortgaged Property; (G) during any period of repair or restoration, builder's "all risk" insurance in an amount equal to not less than the full insurable value of the Mortgaged Property against such risks (including, without limitation, fire and extended coverage and collapse of the Improvements to agreed limits) as Lender may request, in form and substance acceptable to Lender; (H) ordinance or law coverage to compensate for the cost of demolition, increased cost of construction, and loss to any undamaged portions of the Improvements, if the current use of the Mortgaged Property or the Improvements themselves are or become "nonconforming" pursuant to the applicable zoning regulations or full rebuildability following casualty is not otherwise permitted under such zoning regulations; (I) if required by Lender as a result of any Mortgaged Property being located in an area with a high degree of seismic activity, earthquake damage insurance in an amount and form acceptable to Lender; (J) such other insurance as may from time to time be reasonably required by Lender in order to protect its interests with respect to the Loan and the Mortgaged Property and to conform such requirements to then current standards for a Secondary Market Transaction. (iii) All policies of insurance (the "Policies") required pursuant to this Section 5.1(x): (A) shall be issued by (1) an insurer approved by Lender which has a claims paying ability rating of not less than "A" (or the equivalent) by Rating Agencies satisfactory to Lender (one of which shall be Standard & Poor's Ratings Group) and A:VIII or better as to claims paying ability by AM Best, (B) shall name Lender as an additional insured and contain a standard noncontributory mortgagee clause and a Lender's Loss Payable Endorsement, or their equivalents, naming Lender (and/or such other party as may be designated by Lender) as the party to which all payments made by such insurance company shall be paid, (C) shall be maintained throughout the term of the Loan without cost to Lender, (D) shall contain such provisions as Lender deems reasonably necessary or desirable to protect its interest (including, without limitation, 96 endorsements providing that neither Borrower, Lender nor any other party shall be a co-insurer under said Policies and that Lender shall receive at least thirty (30) days prior written notice of any modification, reduction or cancellation), (E) shall contain a waiver of subrogation against Lender, (F) shall be for a term of not less than one year, (G) shall provide for claims to be made on an occurrence basis, (H) shall contain an agreed value clause updated annually (if the amount of coverage under such policy is based upon the replacement cost of the Mortgaged Property), (I) shall designate Lender as "mortgagee and loss payee" (except general public liability and excess liability, as to which Lender shall be named as additional insured), (J) shall be issued by an insurer licensed in the state in which the Mortgaged Property is located, (K) shall provide that Lender may, but shall not be obligated to, make premium payments to prevent any cancellation, endorsement, alteration or reissuance, and such payments shall be accepted by the insurer to prevent same, and (L) shall be reasonably satisfactory in form and substance to Lender and reasonably approved by Lender as to amounts, form, risk coverage, deductibles, loss payees and insureds to the extent not otherwise specified in this Section 5.1(x). All property damage insurance policies (except for flood and earthquake policies) must automatically reinstate after each loss. Copies of said Policies, certified as true and correct by Borrower, or insurance certificates thereof, shall be delivered to Lender. Not later than ten (10) days prior to the expiration date of each of the Policies, Borrower shall deliver to Lender satisfactory evidence of the renewal of each Policy. The insurance coverage required under this Section 5.1(x) may be effected under a blanket policy or policies covering the Mortgaged Property and other property and assets not constituting a part of the Collateral; provided that any such blanket policy shall provide at least the same amount and form of protection as would a separate policy insuring the Mortgaged Property individually, which amount shall not be less than the amount required pursuant to this Section 5.1(x) and which shall in any case comply in all other respects with the requirements of this Section 5.1(x). Upon demand therefor, Borrower shall reimburse Lender for all of Lender's or its designee's reasonable costs and expenses incurred in obtaining any or all of the Policies or otherwise causing the compliance with the terms and provisions of this Section 5.1(x), including (without limitation) obtaining updated flood hazard certificates and replacement of any so-called "forced placed" insurance coverages to the extent Borrower was required to obtain and maintain any such Policy or Policies hereunder and failed to do so. Borrower shall pay 97 the premiums for such Policies (the "Insurance Premiums") as the same become due and payable and shall furnish to Lender evidence of the renewal of each of the Policies with receipts for the payment of the Insurance Premiums or other evidence of such payment reasonably satisfactory to Lender (provided, however, that Borrower is not required to furnish such evidence of payment to Lender in the event that such Insurance Premiums have been paid by Lender). If Borrower does not furnish such evidence and receipts at least ten (10) days prior to the expiration of any expiring Policy, then Lender may procure, but shall not be obligated to procure, such insurance and pay the Insurance Premiums therefor, and Borrower agrees to reimburse Lender for the cost of such Insurance Premiums promptly on demand. Within thirty (30) days after request by Lender, Borrower shall obtain such increases in the amounts of coverage required hereunder as may be reasonably requested by Lender, based on then industry-standard amounts of coverage then being obtained by prudent owners of properties similar to the Mortgaged Property in the same applicable market region as the Mortgaged Property. Borrower shall give Lender prompt written notice if Borrower (or any Affiliate) receives from any insurer any written notification or threat of any actions or proceedings regarding the non-compliance or non-conformity of the Mortgaged Property with any insurance requirements. (iv) If the Mortgaged Property shall be damaged or destroyed, in whole or in part, by fire or other casualty, Borrower shall give prompt notice thereof to Lender. (A) In case of loss covered by Policies, Lender may either (a) jointly with Borrower settle and adjust any claim and agree with the insurance company or companies on the amount to be paid on the loss or (b) allow Borrower to agree with the insurance company or companies on the amount to be paid upon the loss; provided, that Borrower may settle and adjust losses without participation by Lender aggregating not in excess of $250,000, agree with the insurance company or companies on the amount to be paid upon the loss and collect and receive any such Insurance Proceeds; provided, further, that if at the time of the settlement of such claim an Event of Default has occurred and is continuing, then Lender shall settle and adjust such claim without the consent of Borrower, and for such purpose is hereby irrevocably appointed as Borrower's attorney-in-fact coupled with an interest from, after and during the continuance of an Event of Default. Lender shall use commercially reasonable efforts to respond promptly to any request from Borrower for approval of an insurance settlement. In such case Lender shall and is hereby authorized to collect and receipt for any such Insurance Proceeds subject to and to the extent provided for in this Agreement. The reasonable out-of-pocket expenses incurred by Lender in the adjustment and collection of Insurance Proceeds shall become part of the Indebtedness and be secured by the Mortgage and shall be reimbursed by Borrower to Lender upon demand therefor. (B) In the event of any insured damage to or destruction of the Mortgaged Property or any part thereof (herein called an "Insured Casualty") where (1) the aggregate amount of the loss, as reasonably determined by an Independent insurance adjuster, is less than thirty percent (30%) of the Lender's 98 reasonable estimate of the fair market value of the individual Mortgaged Property affected by the damage or destruction, (2) in the reasonable judgment of Lender, the Mortgaged Property can be restored, replaced and/or rebuilt (collectively, the "Restoration") by not later than the first to occur of (a) twelve (12) months after the date of casualty and (b) the expiration of the business interruption insurance and, in any case, not later than six (6) months prior to the Maturity Date to an economic unit in substantially the condition it was in immediately prior to the Insured Casualty and in compliance with all zoning, building and other applicable Legal Requirements (the "Pre-Existing Condition") not less materially valuable and not less useful than the same was prior to the Insured Casualty, and (3) Lender reasonably determines that the income of the Mortgaged Property, after the Restoration thereof to the Pre-Existing Condition, will be sufficient to meet all Operating Expenses, payments for Reserves and payments of principal and interest under the Loan and satisfy a Debt Service Coverage Ratio of 1.50, or if Lender otherwise elects to allow a Borrower to restore the Mortgaged Property, then, if no Event of Default shall have occurred and be continuing, the Insurance Proceeds (after reimbursement of any reasonable out-of-pocket expenses incurred by Lender in connection with the collection of any applicable Insurance Proceeds) shall be made available to reimburse Borrower for the cost of restoring, repairing, replacing or rebuilding the Mortgaged Property or part thereof subject to the Insured Casualty, as provided for below. Borrower hereby covenants and agrees to commence and diligently to prosecute such Restoration of the affected Mortgaged Property as nearly as possible to the Pre-Existing Condition. Borrower shall pay all out-of-pocket costs (and if required by Lender, Borrower shall deposit the total thereof with Lender in advance) of such Restoration in excess of the Insurance Proceeds made available pursuant to the terms hereof. (C) Except as provided above, the Insurance Proceeds collected upon any Insured Casualty shall, at the option of Lender in its discretion, be applied to the payment of the Indebtedness, subject to the provisions of Section 2.6(a), or applied to the cost of Restoration of the affected Mortgaged Property or part thereof subject to the Insured Casualty, in the manner set forth below. (D) Regardless of whether Insurance Proceeds, if any, are sufficient or are made available to Borrower for the Restoration of any portion of the affected Mortgaged Property, Borrower covenants to complete such Restoration of the affected Mortgaged Property to be of at least comparable value as prior to such damage or destruction, all to be effected in accordance with Legal Requirements and plans and specifications approved in advance by Lender, such approval not to be unreasonably withheld or delayed. (E) In the event Borrower is entitled to reimbursement out of Insurance Proceeds, such proceeds shall be held by Lender in the Loss Proceeds Account and disbursed from time to time as the Restoration progresses upon Lender being furnished with (1) evidence reasonably satisfactory to it (which evidence may include inspection(s) of the work performed) that the Restoration covered by the disbursement has been completed in accordance with plans and specifications 99 approved by Lender, (2) evidence reasonably satisfactory to it of the estimated cost of completion of the Restoration, (3) funds, or, at Lender's option, assurances reasonably satisfactory to Lender that such funds are available and sufficient in addition to the Insurance Proceeds to complete the proposed Restoration, and (4) such architect's certificates, waivers of lien, contractor's sworn statements, title insurance endorsements, bonds and other evidences of cost, payment and performance of the foregoing Restoration as Lender may reasonably require and approve. Lender may, in any event, require that all plans and specifications for such Restoration be submitted to and reasonably approved by Lender prior to commencement of work. Lender may retain a construction consultant to inspect such work and review Borrower's request for payments and Borrower shall, on demand by Lender, reimburse Lender for the reasonable fees and disbursements of such consultant. No payment made prior to the final completion of the Restoration shall exceed ninety percent (90%) of the hard construction costs value of the work performed from time to time (except for restoration work on a trade by trade basis or on an hourly basis for professional services in which event, payment may be made in full upon the completion of such work). No funds other than Insurance Proceeds shall be disbursed prior to disbursement of such proceeds; and, at all times, the undisbursed balance of such Insurance Proceeds remaining in the Loss Proceeds Account, together with funds deposited therein to pay the costs of the Restoration by or on behalf of Borrower, shall be at least sufficient in the reasonable judgment of Lender to pay for the cost of completion of the Restoration free and clear of all liens or claims for lien, except for Permitted Encumbrances. Any surplus which may remain out of Insurance Proceeds held by Lender after payment of such costs of restoration, repair, replacement or rebuilding shall, at the option of Lender in its discretion, be applied to the payment of the Indebtedness or be paid to Borrower so long as no Event of Default has occurred and is continuing. (v) Borrower shall not carry separate insurance, concurrent in kind or form or contributing in the event of loss, with any insurance required under this Agreement that would be considered "co-insurance" or adversely affect the ability to collect under a policy of insurance required hereunder. (y) Condemnation. (i) Borrower shall promptly give Lender written notice of the actual or threatened commencement of any proceeding for a Taking and shall deliver to Lender copies of any and all papers served in connection with such proceedings. Lender is hereby irrevocably appointed, effective upon the occurrence and during the continuance of an Event of Default, as Borrower's attorney-in-fact, coupled with an interest, with exclusive power to collect, receive and retain any Condemnation Proceeds for said Taking. With respect to any compromise or settlement in connection with such proceeding, Lender shall jointly with Borrower compromise and reach settlement unless at the time of such Taking an Event of Default has occurred and is continuing and the Indebtedness has been accelerated, in which event Lender shall compromise and reach settlement without the consent of Borrower. Notwithstanding the foregoing provisions of 100 this Section 5.1(y), Borrower is authorized to negotiate, compromise and settle, without participation by Lender, Condemnation Proceeds of up to 750,000 in connection with any Taking. Notwithstanding any Taking, Borrower shall continue to pay the Indebtedness at the time and in the manner provided for in this Agreement and the other Loan Documents and the Indebtedness shall not be reduced except in accordance herewith. (ii) Borrower shall cause the Condemnation Proceeds to be paid directly to Lender. Lender may, in its discretion but subject to the provisions of Section 2.6(a), apply any such Condemnation Proceeds to the reduction or discharge of the Indebtedness (whether or not then due and payable). (iii) With respect to a Taking in part, which shall mean any Taking which does not render the affected Mortgaged Property physically or economically unsuitable in the reasonable judgment of Lender for the use to which it was devoted prior to the Taking, Borrower shall cause the Condemnation Proceeds to be paid to Lender as described above, and if Lender does not elect to apply the same to the Indebtedness as provided in Section 5.1(y)(ii) above, Lender shall deposit such Condemnation Proceeds in the Loss Proceeds Account and the same shall be made available for application to the cost of Restoration of the affected Mortgaged Property and disbursed from time to time as the Restoration progresses upon Lender being furnished with (1) evidence reasonably satisfactory to it (which evidence may include inspection(s) of the work performed) that the Restoration covered by the disbursement has been completed in accordance with plans and specifications approved by Lender, (2) evidence reasonably satisfactory to it of the estimated cost of completion of the Restoration, (3) funds, or, at Lender's option, assurances satisfactory to Lender that such funds are available and sufficient in addition to the Condemnation Proceeds to complete the proposed Restoration, and (4) such architect's certificates, waivers of lien, contractor's sworn statements, title insurance endorsements, bonds and other evidences of cost, payment and performance of the foregoing repair, restoration, replacement or rebuilding as Lender may reasonably require and approve. (iv) Regardless of whether Condemnation Proceeds are sufficient or made available for such purpose, Borrower hereby covenants to complete the Restoration of the affected Mortgaged Property as nearly as possible to the Pre-Existing Condition and to be of at least comparable value and, to the extent commercially practicable, of substantially the same character as prior to the Taking, all to be effected in accordance with applicable law and plans and specifications reasonably approved in advance by Lender. Borrower shall pay all costs (and if required by Lender, Borrower shall deposit the total thereof with Lender in advance) of such Restoration in excess of the Condemnation Proceeds made available pursuant to the terms hereof. Lender may, in any event, require that all plans and specifications for such Restoration be submitted to and reasonably approved by Lender prior to commencement of work. Lender may retain a construction consultant to inspect such work and review any request by Borrower for payments and Borrower shall, on demand by Lender, reimburse Lender for the reasonable fees and disbursements of such consultant. No payment made prior to the final completion of the Restoration shall exceed ninety percent (90%) of the hard construction costs value of the construction work performed from time to time (except for restoration work on a trade by trade basis or on 101 an hourly basis for professional services in which event, payment may be made in full upon the completion of such work); funds other than Condemnation Proceeds shall be disbursed prior to disbursement of such proceeds; and at all times, the undisbursed balance of such proceeds remaining in the hands of Lender, together with funds deposited for that purpose or irrevocably committed to the repayment of Lender by or on behalf of Borrower for that purpose, shall be at least sufficient in the reasonable judgment of Lender to pay for the cost of completion of the restoration, repair, replacement or rebuilding, free and clear of all liens or claims for lien. Any surplus which may remain out of Condemnation Proceeds held by Lender after payment of such costs of restoration, repair, replacement or rebuilding shall, at the option of Lender in its discretion, be applied to the payment of the Indebtedness or be paid to Borrower so long as no Event of Default has occurred and is continuing. (v) If the affected Mortgaged Property is sold, through foreclosure or otherwise, prior to the receipt by Lender of any such Condemnation Proceeds to which it is entitled hereunder, Lender shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to have reserved in any foreclosure decree a right to receive said award or payment, or a portion thereof sufficient to pay the Indebtedness. In no case shall any such application reduce or postpone any payments otherwise required pursuant to this Agreement, other than the final payment on the Note. (z) Leases and Receipts. (i) Borrower absolutely and unconditionally assigns to Lender, Borrower's right, title and interest in all current and future Leases and Receipts as collateral for the Loan, it being intended by Borrower that this assignment constitutes a present, absolute assignment and not an assignment for additional security only. Such assignment to Lender shall not be construed to bind Lender to the performance of any of the covenants, conditions or provisions contained in any such Lease or otherwise impose any obligation upon Lender. Borrower shall execute and deliver to Lender such additional instruments, in form and substance reasonably satisfactory to Lender, as may hereafter be reasonably requested in writing by Lender to further evidence and confirm such assignment. Nevertheless, subject to the terms of this Section 5.1(z), Lender grants to Borrower a license to maintain, operate and manage the Mortgaged Property and to collect, use and apply the Receipts in accordance with the terms hereof, which license shall be deemed automatically revoked upon the occurrence and during the continuance of an Event of Default under this Agreement. Any portion of the Receipts held by Borrower in breach of the provisions hereof shall be held in trust for the benefit of Lender for use in the payment of the Indebtedness. Upon the occurrence of an Event of Default and during the continuance thereof, the license granted to Borrower herein shall automatically be revoked, and Lender shall immediately be entitled to possession of all Receipts, whether or not Lender enters upon or takes control of the Mortgaged Property. Lender is hereby granted and assigned by Borrower the right, at its option, upon revocation of the license granted herein, to enter upon the Mortgaged Property in person, by agent or by court-appointed receiver to collect the Receipts. Any Receipts collected after the revocation of 102 the license may be applied toward payment of the Indebtedness as set forth in Section 2.8 hereof. (ii) All Leases entered into by Borrower shall provide for rental rates comparable to then-existing local market rates and terms and conditions commercially reasonable and consistent with then-prevailing local market terms and conditions for similar type properties. With respect to any Lease for space at the Mortgaged Property over 5,000 square feet or for an annual rental payment in excess of $100,000, Borrower shall not enter into such Lease, without the prior written consent of Lender. Borrower shall furnish Lender with (1) detailed term sheets in advance in the case of any Leases, modifications, amendments or renewals for which Lender's consent is required and (2) in the case of any other Leases, executed copies of such Leases upon written request. All renewals or amendments or modifications of Leases that do not satisfy the requirements of the first sentence of this Section 5.1(z)(ii) shall be subject to the prior approval of Lender. All Leases executed after the date hereof shall provide that they are subordinate to the Mortgage, and that the lessee agrees to attorn to Lender. If Borrower enters into any Leases, Borrower, (A) shall observe and perform all of the material obligations imposed upon the lessor under the Leases and shall not do or permit to be done anything to materially impair the value of the Leases as security for the Indebtedness; (B) shall promptly send copies to Lender of all written notices of default which Borrower shall send or receive thereunder; (C) shall enforce all of the material terms, covenants and conditions contained in the Leases upon the part of the lessee thereunder to be observed or performed and shall effect a termination or diminution of the obligations of tenants under leases, only in a manner that a prudent owner of a similar property to the Mortgaged Property would enforce such terms covenants and conditions or effect such termination or diminution in the ordinary course of business; (D) shall not collect any of the Rents more than one (1) month in advance; (E) shall not execute any other assignment of lessor's interest in Leases or Rents; and (F) shall not convey or transfer or suffer or permit a conveyance or transfer of the Mortgaged Property or of any interest therein so as to effect a merger of the estates and rights of, or a termination or diminution of the obligations of, lessees thereunder. (aa) Maintenance of Mortgaged Property. Borrower shall cause the Mortgaged Property to be maintained in a good and safe condition and repair, subject to wear and tear and damage caused by casualty or condemnation. The Improvements and the Equipment shall not be removed, demolished or altered (except for (1) normal replacement of the Equipment, (2) Improvements and replacement of the Equipment contemplated in an Operating Budget, or 103 (3) removals, demolition or alterations of Equipment that do not cost more than $250,000 with respect to the threshold value of the related Equipment, all of which activities in (1), (2) and (3) may be performed without Lender's consent) without the consent of Lender which consent shall not be unreasonably withheld or delayed. Notwithstanding anything set forth herein or in the other Loan Documents to the contrary, Borrower may make such additions, substitutions and/or replacements to the Water Amenities and associated Improvements as provided for in an Operating Budget (except in the case of a removal and replacement, in which event such removal and replacement is associated with new Water Amenities and the removal and replacement does not diminish the over-all value of a Mortgaged Property). Except with respect to an Insured Casualty which shall be governed by the terms and conditions provided herein, Borrower shall promptly repair, replace or rebuild any part of the Mortgaged Property that becomes damaged, worn or dilapidated. Borrower shall complete and pay for any structure at any time in the process of construction or repair on the Land. Except with respect to the Release Parcel, in which event the provisions of Section 2.17 shall govern, Borrower shall not initiate, voluntarily join in, or voluntarily consent to any change in any private restrictive covenant, zoning law or other public or private restriction, limiting in any material respect the uses which may be made of any Mortgaged Property or any part thereof, except to the extent Borrower is obligated to do so pursuant to law or any Permitted Encumbrance, without the written consent of Lender. If under applicable zoning provisions the use of all or any portion of the Mortgaged Property is or shall become a nonconforming use, Borrower will not cause or permit such nonconforming use to be discontinued or abandoned if such discontinuance of abandonment would cause such nonconforming use to no longer be permitted without the express written consent of Lender, which consent shall not be unreasonably withheld or delayed. Borrower shall not (i) change the over-all use of any of the Land or Improvements in any material respect, (ii) permit or suffer to occur any physical waste on or to any Mortgaged Property or to any portion thereof or (iii) take any steps whatsoever to convert any Mortgaged Property, or any portion thereof, to a condominium or cooperative form of management except as set forth in Section 2.17 hereof. (bb) Prohibited Persons. Borrower covenants and agrees to deliver (from time to time) to Lender any certification or other evidence as may be requested by Lender in its discretion, confirming that: (i) neither Borrower, Guarantor nor their respective officers, directors, partners, members or majority-owned Affiliates is a Prohibited Person; and (ii) neither Borrower nor Guarantor nor their respective officers, directors, partners, members or majority-owned Affiliates has engaged in any business, transaction or dealings with a Person known to Borrower to be a Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Person known to Borrower to be a Prohibited Person. (cc) Taxes on Security. Borrower shall pay all taxes, charges, filing, registration and recording fees, excises and levies payable with respect to the Note or the Lien created or secured by the Loan Documents, other than income, franchise and doing business taxes imposed on Lender. If there shall be enacted any law (1) deducting the Loan from the value of the Collateral for the purpose of taxation, (2) affecting Lender's Lien on the Collateral or (3) changing existing laws of taxation of mortgages, deeds of trust, security deeds, or debts secured by realty, or changing the manner of collecting any such taxes, Borrower shall promptly pay to Lender, on demand, all taxes, costs and charges for which Lender is or may be liable as a result thereof in excess of those for which Lender would otherwise have been liable had such law 104 not been enacted; provided, however, if such payment would be prohibited by law or would render the Loan usurious, then instead of collecting such payment, Lender may declare all amounts owing under the Loan Documents to be immediately due and payable. ARTICLE VI. NEGATIVE COVENANTS Section 6.1. Negative Covenants. Borrower covenants and agrees that, until payment in full of the Indebtedness, it will not do, directly or indirectly, any of the following unless Lender consents thereto in writing: (a) Liens on the Mortgaged Property. Incur, create, assume, become or be liable in any manner with respect to, or permit to exist, except as permitted by Section 5.1(b) above, any Lien with respect to any Mortgaged Property or any portion thereof, except: (i) Liens in favor of Lender, (ii) Liens permitted under Section 2.17 and (iii) the Permitted Encumbrances. (b) Ownership. Except as expressly permitted by or pursuant to this Agreement or the other Loan Documents, own any property of any kind other than the Mortgaged Property. (c) Other Borrowings. Incur, create, assume, become or be liable in any manner with respect to Other Borrowings. (d) Dissolution; Merger or Consolidation. Dissolve, terminate, liquidate, merge with or consolidate into another Person. (e) Change In Business. Make any material change in the scope or nature of its business objectives, purposes or operations, or undertake or participate in activities other than the continuance of its present business. (f) Debt Cancellation. Cancel or otherwise forgive or release any material claim or debt owed to Borrower by any Person, except for adequate consideration or in the ordinary course of Borrower's business. (g) Affiliate Transactions. Except for fees payable to Manager under the Management Agreement and fees payable to the Licensor under the License Agreement and the Central Reservations Services Agreement, (i) pay any management, consulting, director or similar fees to any Affiliate of Borrower or to any director or manager (other than any customary fees of the Independent Director), officer or employee of Borrower, (ii) directly or indirectly enter into any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of Borrower or with any director, officer or employee of any Affiliate of Borrower, except transactions in the ordinary course of and pursuant to the reasonable requirements of the business of Borrower and upon fair and reasonable terms which are no less favorable to Borrower than would be obtained in a comparable arm's length transaction with a Person that is not an Affiliate of Borrower, or (iii) except as permitted under the Manager's Subordination or under the License Tri-Party Agreement, make any payment or permit any payment to be made to any Affiliate of Borrower when or as to any time when any Event of Default shall exist. 105 (h) Creation of Easements. Except as expressly permitted by or pursuant to the Mortgage or this Agreement, create, or permit any Mortgaged Property or any part thereof to become subject to, any easement or restrictive covenant, other than a Permitted Encumbrance, provided, that the consent of Lender shall not be unreasonably withheld or delayed to the extent that any such easement or restrictive covenant is reasonably necessary or beneficial with respect to the continued use, enjoyment, access to or operation of the applicable Mortgaged Property. (i) Misapplication of Funds. Distribute any Receipts or Moneys received from Accounts in violation of the provisions of Section 2.12, or fail to pay over the Lender, if an Event of Default exists, any and all Advance Bookings Deposits, or misappropriate any Advance Bookings Deposit or portion thereof. (j) Certain Restrictions. Enter into any agreement that expressly restricts the ability of Borrower to enter into amendments, modifications or waivers of any of the Loan Documents. (k) Assignment of Licenses and Permits. Assign or transfer any of its interest in any Permits pertaining to any Mortgaged Property, or assign, transfer or remove or permit any other Person to assign, transfer or remove any records pertaining to any Mortgaged Property. (l) Place of Organization. Change its jurisdiction of organization, creation or formation, as applicable, without giving Lender at least fifteen (15) days' prior written notice thereof and promptly providing Lender such information as Lender may reasonably request in connection therewith. (m) License Agreement and Tall Pines Agreement. Amend or modify in any material respect or cancel (or cause or permit the same to occur) the License Agreement or to the extent it relates to the Mortgaged Property in any material manner the Tall Pines Agreement. (n) Management Agreement. Except in accordance with this Agreement or in connection with Section 2.17, (i) terminate or cancel the Management Agreement, (ii) consent to either the reduction of the term of or the assignment of the Management Agreement, (iii) increase or consent to the increase of the amount of any charges under the Management Agreement, or (iv) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, the Management Agreement in any material respect. (o) Plans and Welfare Plans. Knowingly engage in or permit any transaction in connection with which Borrower or any ERISA Affiliate could be subject to either a material civil penalty or tax assessed pursuant to Section 502(i) or 502(1) of ERISA or Section 4975 of the Code, permit any Welfare Plan to provide benefits, including without limitation, medical benefits (whether or not insured), with respect to any current or former employee of Borrower beyond his or her retirement or other termination of service other than (i) coverage mandated by applicable law, (ii) death or disability benefits that have been fully provided for by paid up insurance or otherwise or (iii) severance benefits, permit the assets of Borrower to become "plan assets", whether by operation of law or under regulations promulgated under ERISA or adopt, materially amend (except as may be required by applicable law) or materially increase the amount of any benefit or amount payable under, or permit any ERISA Affiliate to adopt, 106 materially amend (except as may be required by applicable law) or materially increase the amount of any benefit or amount payable under, any Plan or Welfare Plan, except for adoptions, amendments or increases in the ordinary course of business that, in the aggregate, do not result in a Material Adverse Effect. (p) Transfer of Mortgaged Property or Ownership Interests. Permit any Transfer to occur, other than a Permitted Transfer. (q) Equipment and Inventory. Except pursuant to the Management Agreement or as otherwise permitted under Section 5.1(aa), permit any Equipment owned by Borrower or any of its Affiliates to be removed at any time from any Mortgaged Property unless the removed item is consumed or sold in the usual and customary course of business, removed temporarily for maintenance and repair or, if removed permanently, replaced by an article of equivalent suitability and not materially less value, owned by Borrower free and clear of any Lien (other than Permitted Encumbrances). (r) Management Fees. Pay Borrower or any Affiliate of Borrower any management fees with respect to the Mortgaged Property except for management fees paid to Manager under the Management Agreement. (s) Prohibited Persons. With respect to Borrower, Guarantor and any of their respective officers, directors, partners, members or majority-owned Affiliates: (i) conduct any business, or engage in any transaction or dealing, with any Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person; or (ii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in EO13224. (t) Name; Non-Competition. (i) Change the name under which the Mortgaged Property is operated from "Great Wolf Lodge" or another name consistent with the names then currently utilized by Great Wolf in its family of other lodges (except Lender shall not unreasonably withhold or delay its approval of a name change which Great Wolf deems necessary or desirable for the continued operation of its business), or (ii) make, suffer or permit any change in franchise of "flag" or brand or other affiliation of the Mortgaged Property, or (iii) suffer or permit, by its Affiliates, Manager or Licensor or any Guarantor or any of their respective Affiliates, under any license, franchise, concession or permission of any kind granted by any of its Affiliates, Manager or Licensor or any Guarantor or any of their respective Affiliates, an Additional Resort Event to occur; provided, that, not withstanding the foregoing, commencing in the twenty fifth (25th) month of the Loan term and thereafter, the Borrower shall be permitted to engage in an Additional Resort Event on the following terms and conditions: (1) at any such time, the Borrower may notify the Lender in writing that an Affiliate desires to commence construction on another property which would qualify as an Additional Resort Event; (2) if as of the date of such notice, the Additional Resort Test has been satisfied, than at any time during the six month period immediately following the date of such notice, such Affiliate shall be free to commence construction on and complete building of such property contemplated to be the proposed Additional Resort Event (irrespective of whether the Additional Resort Test ceases to be satisfied during such time period or after construction is commenced and prior to 107 completion of building); and (3) if at any time during the six month period or during construction or thereafter but prior to completion the Additional Resort Test ceases to be satisfied, the Borrower shall not be in Default and such Affiliate may proceed to complete building such property and thereafter to open for business and operate such property (but after the giving of such notice the Borrower shall be subject in all cases to the provisions of Sections 2.12 and 2.13 hereof with respect to any failure to satisfy the Additional Resort Coverage Test). ARTICLE VII. EVENT OF DEFAULT Section 7.1. Event of Default. The occurrence of one or more of the following events shall be an "Event of Default" hereunder: (a) if on any Payment Date Borrower fails to pay any Monthly Debt Service Payment due and payable on such Payment Date, or if Borrower fails to make any scheduled deposits into the Reserve Accounts when due and payable in accordance with the provisions hereof; (b) if Borrower fails to pay the outstanding Indebtedness on the Maturity Date; (c) if Borrower fails to pay or deposit any other amount payable or required to be deposited pursuant to this Agreement or any other Loan Document when due and payable in accordance with the provisions hereof or thereof, as the case may be, and such failure continues for ten (10) days after Lender delivers written notice thereof to Borrower; (d) if any representation or warranty made herein or in any other Loan Document, or in any report, certificate, financial statement or other Instrument, agreement or document furnished by Borrower or Guarantor in connection with this Agreement, the Note or any other Loan Document executed and delivered by Borrower or Guarantor shall be materially false or materially misleading as of the date such representation or warranty was made (or if such representation or warranty relates to an earlier date, then as of such earlier date); (e) if any Borrower or Guarantor makes an assignment for the benefit of creditors; (f) if a receiver, liquidator or trustee shall be appointed for any Borrower or Guarantor or if any Borrower or Guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by any Borrower or Guarantor, or if any proceeding for the dissolution or liquidation of any Borrower or Guarantor shall be instituted; provided, however, that if such appointment, adjudication, petition or proceeding was involuntary and not consented to by any Borrower or Guarantor, upon the same not being discharged, stayed or dismissed within ninety (90) days, or if any Borrower or Guarantor shall generally not be paying its debts as they become due; (g) if Borrower defaults beyond any applicable notice and cure period under the License Agreement, or Great Lakes defaults beyond any applicable notice and cure period 108 under the Tall Pines Agreement (as it related to the Mortgaged Property), or, without Lender's prior written consent: (i) there is any material change in or amendment to the License Agreement or the Tall Pines Agreement (as it related to the Mortgaged Property) without the prior written consent of Lender; or (ii) there is a cancellation, expiration, surrender or termination, for any reason, of the License Agreement or the Tall Pines Agreement (as it related to the Mortgaged Property); (h) if Borrower ceases to operate a hotel and water park resort on the Mortgaged Property or terminates such business for any reason whatsoever (other than cessation in connection with any casualty or any renovations to the Mortgaged Property or restoration of the Mortgaged Property after fire or other casualty, or force majeure causes, or taking by a governmental authority having jurisdiction over the Mortgaged Property); (i) If (A) Borrower fails to provide Lender (to the extent not previously provided to Lender) with written evidence of receipt of all required permits and licenses (including, without limitation, food and other beverage licenses) in connection with Borrower's ownership and operation of the Property within thirty (30) days after Lender's written request therefor, or (B) any required permit(s) and licenses (other than any liquor licenses) for the operation of the Mortgaged Property as a full service first class hotel and water park resort shall be revoked or terminated or expire, or food can no longer be legally sold at the Mortgaged Property, in any such case, for a period of longer than sixty (60) days; or (j) if any Borrower attempts to delegate its obligations or assign its rights under this Agreement, any of the other Loan Documents or any interest herein or therein, or if any Transfer occurs, other than a Permitted Transfer or otherwise in accordance with or as permitted under this Agreement; (k) if any provision of the Organizational Agreement affecting the purpose for which Borrower is formed is amended or modified in any material respect which is reasonably likely to adversely affect the Lender, or if Borrower fails to perform or enforce the provisions of the Organizational Agreement and such failure has a Material Adverse Effect or attempts to dissolve Borrower without Lender's consent; (l) if an Event of Default as defined or described in the Note or any other Loan Document occurs, whether as to Borrower or the Mortgaged Property or any portion thereof; (m) if any of the assumptions made with respect to Borrower and its Affiliates in that certain substantive non-consolidation opinion letter dated as of (or on or about) the Closing Date and delivered in connection with the Loan is not true and correct in all respects; (n) if Borrower fails to maintain any insurance required to be maintained pursuant to Section 5.1(x) hereof; and (o) if Borrower shall fail to perform any of the terms, covenants or conditions of this Agreement, the Note, the Mortgage or the other Loan Documents, other than as specifically otherwise referred to above in this definition of "Event of Default," for ten (10) days after notice to Borrower from Lender or its successors or assigns, in the case of any Default 109 which can be cured by the payment of a sum of money (other than Events of Default pursuant to Sections 7.1(a) and 7.1(b) above, as to which the grace period, if any, set forth therein is applicable), or for thirty (30) days after notice from Lender or its successors or assigns, in the case of any other Default (unless a longer notice period is otherwise provided herein or in such other Loan Document); provided, however, that if such non-monetary Default is susceptible of cure but cannot reasonably be cured within such thirty (30) day period and such Borrower shall have commenced to cure such Default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for an additional sixty (60) days; then, upon the occurrence of any such Event of Default and at any time thereafter, Lender or its successors or assigns, may, in addition to any other rights or remedies available to it pursuant to this Agreement and the other Loan Documents, or at law or in equity, take such action, without further notice or demand, as Lender or its successors or assigns, deems advisable to protect and enforce its rights against Borrower and in and to all or any portion of the Collateral, and may enforce or avail itself of any or all rights or remedies provided in the Loan Documents against Borrower and/or the Collateral (including, without limitation, all rights or remedies available at law or in equity). In addition to and without limiting the foregoing, upon the occurrence of any Event of Default described in any of Sections 7.1(e), (f), or (g), the unpaid principal amount of and accrued interest and fees on the Loan and all other Indebtedness shall automatically become immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other requirements of any kind, all of which are hereby expressly waived by Borrower. Upon and at any time after the occurrence of any other Event of Default, at the option of Lender, which may be exercised without notice or demand to anyone, all or any portion of the Loan and other Indebtedness shall immediately become due and payable. Section 7.2. Remedies. (a) Upon the occurrence of an Event of Default, all or any one or more of the rights, powers, other remedies available to Lender against Borrower under this Agreement or any of the other Loan Documents executed by or with respect to Borrower, or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any portion of the Indebtedness shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to all or any portion of the Collateral. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents. (b) In the event of the foreclosure or other action by Lender to enforce Lender's remedies in connection with all or any portion of the Collateral, Lender shall apply all Net Proceeds received to repay the Indebtedness in accordance with Section 2.8, the Indebtedness (as selected by Lender in its discretion) shall be reduced to the extent of such Net Proceeds and the remaining portion of the Indebtedness shall remain outstanding and secured by the Loan Documents, it being understood and agreed by Borrower that Borrower is liable for the 110 repayment of all the Indebtedness; provided, however, that the Loan shall be deemed to have been repaid only to the extent of the Net Proceeds actually received by Lender with respect to the Collateral and applied in reduction of the Indebtedness evidenced by the Note in accordance with the provisions of this Agreement after payment by Borrower of all Transaction Costs and costs of enforcement. (c) Upon and during the continuation of an Event of Default, Lender shall have the right, but not the obligation, with respect to any and all bankruptcy proceedings that are now or hereafter commenced in connection with the Mortgaged Property, to (i) vote to accept or reject any plans of reorganization, (ii) vote in any election of a trustee, (iii) elect the treatment of secured claims as specified in Section 1111(b) of the Bankruptcy Code, and (iv) make any other decisions requested of holders of claims or interests that Borrower would have had the right to do in such bankruptcy proceedings in the absence of an Event of Default. (d) Upon the request of Lender (or its nominees and successors and assigns) in connection with a foreclosure, deed in lieu of foreclosure of other acquisition of the Mortgaged Property or any part thereof resulting from an Event of Default, Borrower shall, and shall cause Licensor and Manager to, cooperate with Lender (and its nominees and successors and assigns) in (i) the transfer to Lender (or such nominee, successor or assign) of any licenses and permits (including, without limitation, but only to the extent permitted by law, liquor licenses and subject to the provisions of the License Tri-Party Agreement the licenses under the License Agreement) necessary or appropriate for the operation of the Mortgaged Property; (ii) the obtaining by Lender (or such nominee, successor or assign) of any licenses and permits (including without limitation liquor licenses and licenses under the License Agreement) necessary or appropriate for the operation of the Mortgaged Property; and (iii) the continuation by Borrower, Manager and Licensor, as applicable, of any existing licenses and permits (including without limitation liquor licenses and the licenses under the License Agreement) and/or arrangements for liquor sales and service to be conducted by third party venders, under catering licenses or otherwise, until new licenses and permits are obtained. Section 7.3. Remedies Cumulative. The rights, powers and remedies of Lender under this Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against Borrower pursuant to this Agreement or the other Loan Documents executed by or with respect to Borrower, or existing at law or in equity or otherwise. Lender's rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of any Default or Event of Default shall not be construed to be a waiver of any subsequent Default or Event of Default or to impair any remedy, right or power consequent thereon. Subject to Section 9.24, Lender reserves the right to seek a deficiency judgment or preserve a deficiency claim, in connection with the foreclosure of any Mortgage on the Mortgaged Property, to the extent necessary to foreclose on other parts of the Collateral. Section 7.4. Intentionally Omitted. 111 Section 7.5. Curative Advances. If any Event of Default occurs, then Lender may expend such sums as either shall reasonably deem appropriate in connection with the matters giving rise to such Event of Default. Borrower shall immediately repay all such sums so advanced, which sums shall immediately become part of the Indebtedness, bear interest at the Default Rate from the date advanced until the date repaid, and be secured by all Collateral. ARTICLE VIII. SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS Section 8.1. Applicable to Borrower. Borrower hereby acknowledges that, as a condition of Lender's agreements and performance of its obligations hereunder, Lender is relying on the status of Borrower as a legal entity separate and apart from any Affiliate or other entity and has required that Borrower maintain such status, and Lender hereby acknowledges such reliance and requirement. Accordingly, each Borrower hereby represents, warrants and covenants as of the Closing Date and until such time as the Loan is paid in full, that absent express advance written waiver from Lender, which may be withheld at Lender's discretion, each Borrower (it being understood and agreed that these provisions shall not apply to the member(s) of each Borrower or any owner of a direct or indirect interest in the Borrower): (a) was and will be organized solely for the purpose of owning and operating the Mortgaged Property; (b) has not owned, does not own and will not own any assets other than the Mortgaged Property (including incidental personal property necessary for the operation thereof and proceeds therefrom); (c) was not engaged, is not engaged and will not engage in any business, directly or indirectly, other than the ownership, development, management and operation of the Mortgaged Property (including expansions or renovations to the Mortgaged Property, and as otherwise permitted in Section 2.17 herein); (d) has not entered into and will not enter into any contract or agreement with any partner, member, shareholder, trustee, beneficiary, principal, joint venturer or Affiliate of Borrower, except in the ordinary course of its business pursuant to written agreements upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than such Affiliate; (e) has not incurred and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (i) the Loan, (ii) trade payables not evidenced by a promissory note incurred in the ordinary course of business with trade creditors in connection with owning, operating and maintaining the Mortgaged Property, and customarily paid by Borrower within 60 days of incurrence and in fact not more than 60 days outstanding, and (iii) equipment financing leases and purchase money debt for equipment, in each case incurred in the ordinary course of business in connection with the use, financing or purchase of equipment used on the Mortgaged Property, the payments upon which are made currently and in any event prior to delinquency, provided, that (a) the aggregate capitalized 112 amount of all such permitted financing leases plus the aggregate amount of all such permitted purchase money debt shall not exceed $100,000 at any time or require payments aggregating in excess of $300,000 (except such amounts may be increased to reflect the increases in the Consumer Price Index (expressed as percentage) as measured over the calendar year that the Loan closed), and (b) the aggregate outstanding amount of (1) all trade payables described in clause (ii) above, plus (2) the aggregate capitalized amount of all permitted financing leases plus the aggregate amount of all permitted purchase money debt described in clause (iii) above, shall not at any time be in excess of two percent (2%) of the Principal Indebtedness. (f) has not made and will not make any loan or advances to any Person (including any of its Affiliates), or pledge its assets for the benefit of any other Person, or seek or obtain credit or incur any obligation to any third party based upon the assets of any other Person, or induce any third party to rely on the creditworthiness of any other Person; (g) has remained and as of the Closing Date reasonably expects to remain, solvent, and has maintained, and as of the Closing Date reasonably expects to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (h) has not acquired and will not acquire obligations or securities of any Person, other than, with respect to obligations only, KC Borrower or TC Borrower, as the case may be, to the extent provided under this Agreement, the other Loan Documents and the Contribution Agreement; (i) has not failed and will not fail to correct any known misunderstanding or misrepresentation regarding its separate identity; (j) has done or caused to be done and will do all things necessary to preserve its existence; (k) shall continuously maintain its existence and good standing and be qualified to do business in all states necessary to carry on its business, including the state in which the Mortgaged Property is located; (l) has conducted and operated and will conduct and operate its business solely in its own name, with all oral and written communications from Borrower, including, without limitation, correspondence, invoices, purchase orders, billing statements, applications and business forms, made solely in the name of Borrower; (m) has accurately maintained and will continue to accurately maintain books, records, bank accounts, accounting records, financial statements and other entity documents separate from those of its partners, members, shareholders, trustees, beneficiaries, principals, Affiliates, and any other Person, with such accounting records and financial statements having been prepared and kept in accordance with reasonable accounting practices applied on a consistent basis, and such financial statements of Borrower shall be prepared in a manner that indicates (through appropriate footnotes if necessary) the existence of Borrower and its assets and liabilities separate and apart from any other Person; moreover, Borrower shall indicate in its financial statements that the assets of Borrower are not available to satisfy the claims of creditors 113 of any Affiliate of Borrower and that the assets of any Affiliate of Borrower are not available to satisfy the claims of creditors of Borrower and, except with appropriate designation as set forth above, Borrower shall not authorize its assets or liabilities to be listed on the financial statement of any other Person (other than the other legal entity constituting Borrower); (n) has been and will be, and at all times has held and will hold itself out to the public as, a legal entity separate and distinct from any other Person (including any of its partners, members, shareholders, trustees, beneficiaries, principals and Affiliates, and any Affiliates of any of the same), and not as a department or division of any Person; (o) has filed and will file such tax returns with respect to itself as may be required under applicable law and has prepared and will prepare separate tax returns and financial statements, or if part of a consolidated group, is shown as a separate member of such group; (p) has paid and shall pay its own liabilities, indebtedness, and obligations of any kind, as the same shall become due, from its own separate assets, rather than from those of other Persons, and Borrower shall not consent to any Person operating the Mortgaged Property to incur expenses as agent or on behalf of Borrower, unless such Person agrees, prior to incurring such expense, to clearly indicate that such expenses are the sole responsibility of, and any payment will come from, Borrower; (q) other than in connection with Borrower's formation transactions, has not and will not enter into any transaction of merger or consolidation, or acquire by purchase or otherwise all or substantially all of the business or assets of, or any stock or beneficial ownership of, any Person; (r) has not commingled and will not commingle or permit to be commingled its funds or other assets with those of any other Person; and has held and will hold title to all of its real and personal property in its own name and not in the name of any other Person; (s) has maintained and will maintain its assets in such a manner that it is not costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; (t) has not, does not and will not hold itself out to be responsible for the debts or obligations of any other Person (other than the other legal entity constituting Borrower) and, except for the Loan Documents to which other Persons are party, shall not consent to any other Person holding itself out as being responsible for the debts or obligations of Borrower; (u) has not and will not assume, guarantee or otherwise become liable on or in connection with any obligation of any other Person (other than the other legal entity constituting Borrower) and, except for the Loan Documents to which other Persons are party, shall not consent to any other Person guaranteeing, assuming or otherwise becoming liable for any obligation of Borrower (it being understood that notwithstanding anything to the contrary contained in this Agreement Borrower's members and any owner of any direct or indirect interest in Borrower shall not be prohibited from giving any guarantee of obligations of Persons other than Borrower); 114 (v) except for funds deposited into the Local Collection Account, the Collection Account, the concentration account in accordance with Section 2.12(a)(i) or the Reserve Accounts in accordance with the Loan Documents, has not and shall not hold title to its assets other than in its name; (w) complies and shall at all times hereafter comply with all of the assumptions, certifications, representations, warranties and covenants regarding or made by it contained in or appended to the nonconsolidation opinion delivered pursuant hereto; (x) has paid and will pay its own liabilities and expenses, out of its own funds and shall not consent to any other Person paying Borrower's obligations except to the extent that timely reimbursement is made for the same; (y) has observed at all times and will observe all limited liability company formalities and record keeping; (z) has allocated and will allocate to Borrower reasonably and on the basis of fair market value determined on an arms-length basis all general overhead and administrative expenses, including all costs associated with common employees and shared office space, any such allocation shall be specifically and reasonably documented and substantiated, any such allocation of expenses to Borrower shall be paid solely by Borrower from Borrower's own funds, and Borrower shall at all times use separate stationary, letterhead, invoices and checks; (aa) has not and will not identify its members or partners, Independent Director (as defined below) or any other member or partner of any Affiliate of Borrower, or any other Person, as a division or part of it; (bb) has paid and will pay the salaries of its own employees and has maintained and will maintain a sufficient number of employees in light of its contemplated business operations; (cc) has maintained, currently maintains, and will continue to maintain, its own cash, cash positions and bank accounts separate from any other Person; (dd) shall not (i) liquidate or dissolve, in whole or in part; (ii) consolidate, merge or enter into any form of consolidation with or into any other Person, nor convey, transfer or lease its assets substantially as an entirety to any Person nor permit any Person to consolidate, merge or enter into any form of consolidation with or into itself, nor convey, transfer or lease its assets substantially as an entirety to any Person; (iii) engage in any business other than the ownership and operation of the Mortgaged Property; or (iv) amend any provisions of its organizational documents containing provisions similar to those contained in this Article VIII; (ee) Borrower shall be a limited liability company formed under the laws of the State of Delaware, and Borrower's certificate of formation and operating agreement ("Borrower's Organizational Documents") shall be in form and substance reasonably satisfactory to Lender; 115 (ff) Borrower's Organizational Agreements shall contain each of the representations, covenants and warranties set forth in this Article VIII and require Borrower to at all times cause there to be at least one (1) duly appointed independent manager of Borrower who is also a non-economic member of Borrower and an Independent Director whose affirmative vote will be required in order for Borrower to institute proceedings to have Borrower adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings against Borrower or file a petition seeking or consent to, reorganization or relief with respect to Borrower under any applicable federal or state law relating to bankruptcy, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of Borrower or a substantial part of Borrower's property, or make any assignment for the benefit of creditors of Borrower, or admit in writing Borrower's inability to pay its debts generally as they become due, or any similar action, or take action in furtherance of any of the foregoing actions. Borrower's Organizational Documents shall further require that upon the occurrence of any event that causes any member of Borrower to cease to be a member in Borrower, the Independent Director shall, without action of any person and simultaneously with such member ceasing to be a member of Borrower, automatically be admitted to Borrower as a member and shall continue Borrower without dissolution; (gg) Borrower shall cause reputable Delaware counsel reasonably acceptable to Lender (the "Law Firm") to deliver to Lender an opinion letter reasonably satisfactory to Lender whereby the Law Firm opines (which opinion may be subject to standard assumptions, qualifications, limitations and exceptions reasonably acceptable to Lender), among other requirements of Lender, that: (1) the unanimous consent of the member(s) of Borrower and the Independent Director is required in order for Borrower to file a voluntary bankruptcy petition; (2) the provision in Borrower's Organizational Documents that requires unanimous consent as a condition to filing a voluntary bankruptcy petition is enforceable against the member(s) of Borrower; (3) the bankruptcy of the Borrower's member(s) will not cause Borrower to be dissolved; (4) no creditor of any member of Borrower shall have the right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, Borrower's property; and (5) Delaware law, not federal law, governs the determination of what persons or entities have the authority to file a voluntary bankruptcy petition on behalf of Borrower; (hh) Borrower shall not cause or permit the board of directors or managers of Borrower to take any action which, under the terms of Borrower's Organizational Documents, requires the vote of the board of directors or managers of Borrower, unless at the time of such action there shall be at least one (1) member of such board of directors or managers who is an Independent Director; (ii) Borrower has complied and will comply with the separateness provisions of the Borrower's Organizational Documents since such Borrower's Organizational Documents were executed and delivered, and with the laws of the state of its formation relating to limited liability companies; and (jj) Borrower's Organizational Documents shall at all times continue to provide that Borrower shall not cause, permit, or empower any Person to consolidate or merge Borrower. 116 ARTICLE IX. MISCELLANEOUS Section 9.1. Survival. This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the execution and delivery of this Agreement, the making the Loan hereunder and the execution and delivery by Borrower to Lender of the Loan Documents, and shall continue in full force and effect so long as any portion of the Indebtedness is outstanding and unpaid. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party. All covenants, promises and agreements in this Agreement contained, by or on behalf of Borrower, shall inure to the benefit of the respective successors and assigns of Lender. Nothing in this Agreement or in any other Loan Document, express or implied, shall give to any Person other than the parties and the holder of the Note and the other Loan Documents, and their legal representatives, successors and assigns, any benefit or any legal or equitable right, remedy or claim hereunder. Section 9.2. Lender's Discretion. Whenever pursuant to this Agreement, Lender is entitled to permit, approve or disapprove any action or matter, or any action or matter is to be satisfactory to Lender, or any action or matter is subject to Lender's determination, option or discretion, the decision of Lender to permit, approve or disapprove, and any such determination by Lender or exercise by Lender of any discretion or option with respect to any action or matter, or to decide whether any action or matter is satisfactory or not satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion of Lender and shall be final and conclusive. Section 9.3. Governing Law. (a) This Agreement was negotiated in New York and made by Lender and accepted by Borrower in the State of New York, and the proceeds of the Note delivered pursuant hereto were disbursed from New York, which State the parties agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and in all respects (including, without limitation, matters of construction, validity, performance, and maximum permissible rates of interest), this Agreement and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of America, except that at all times the provisions for the creation, perfection and enforcement of the liens and security interests created pursuant to each Mortgage and Assignment of Profits and Leases shall be governed by the laws of each State where the Mortgaged Property is located, except that the security interests in Account Collateral shall be governed by the laws of the State of New York or the State where the Account Collateral is held, at the option of Lender. (b) Borrower hereby consents to the jurisdiction of any federal court or state court in New York, New York or within the county and state in which any Mortgaged Property is located and irrevocably agrees that, subject to Lender's election, any legal suit, action or proceeding against Lender or Borrower arising out of or relating to this Agreement or the other Loan Documents may be instituted and litigated in such courts. Borrower hereby (i) irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or 117 hereafter have to the laying of venue of any such suit, action or proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum, and (ii) irrevocably submits to the jurisdiction of any such court in any such suit, action or proceeding. Borrower does hereby designate and appoint William H. Diamond, Esq., having an office at DeCampo, Diamond & Ash, 747 Third Avenue, New York, New York 10017, as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any such suit, action or proceeding in any federal or state court in New York, New York, and agrees that service of process upon said agent at said address (or at such other office in New York, New York as may be designated by Borrower from time to time in accordance with the terms hereof) with a copy to Borrower at its principal executive offices, and written notice of said service of Borrower mailed or delivered to Borrower in the manner provided herein shall be deemed in every respect effective service of process upon Borrower, in any such suit, action or proceeding in the State of New York. Borrower (i) shall give prompt notice to Lender of any change in address of its authorized agent hereunder, (ii) may at any time and from time to time designate a substitute authorized agent with an office in New York, New York (which office shall be designated as the address for service of process), and (iii) shall promptly designate such a substitute if its authorized agent ceases to have an office in New York, New York or is dissolved without leaving a successor. Section 9.4. Modification, Waiver in Writing. No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement or any other Loan Document, or consent or waiver referred to in any Loan Document or consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to or demand on Borrower shall entitle Borrower to any other or future notice or demand in the same, similar or other circumstances. Section 9.5. Delay Not a Waiver. Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under any other Loan Document, or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount. Section 9.6. Notices. All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document shall be given in writing and shall be effective for all purposes if delivered or sent by: (a) hand delivery, (b) certified or registered United States mail, postage prepaid, (c) nationally recognized overnight delivery service, (d) by facsimile transmission, addressed if to Lender or to Borrower at its applicable address set forth on Schedule 4 hereto, or at such other address and Person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the 118 manner provided for in this Section 8.6, or (e) other than with respect to an amendment or modification, an electronic medium. A notice shall be deemed to have been given: in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or three Business Days after mailing; in the case of overnight delivery and facsimile transmission, on the Business Day after the same was sent; or in the case of electronic medium, when confirmed by e-mail. A party receiving a notice which does not comply with the technical requirements for notice under this Section 9.6 may elect to waive any deficiencies and treat the notice as having been properly given. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of an original executed counterpart thereof. Section 9.7. TRIAL BY JURY. BORROWER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS. Section 9.8. Headings. The Article and Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Section 9.9. Assignment. (a) Borrower may not sell, assign or transfer any interest in the Loan Documents, or any portion of the foregoing (including, without limitation, Borrower's rights, title, interests, remedies, powers and duties hereunder and thereunder) without Lender's prior written consent; provided, however, that a Permitted Transfer shall not be deemed a breach of this provision. (b) Lender shall have the right to assign or participate this Agreement and/or its interest in any of the other Loan Documents and the obligations hereunder to any Person, subject to the other applicable provisions of this Agreement. In the event of an assignment by Lender, the assignee shall have, to the extent of such assignment, the same rights, benefits and obligations as it would have if it were an original "Lender" hereunder. The holders from time to time of the Loan and/or any other interest of the "Lender" under this Agreement and the other Loan Documents may from time to time enter into one or more co-lender or similar agreements in their discretion. Borrower acknowledges and agrees that such agreements, as the same may from time to time be amended, modified or restated, may govern the exercise of the powers and discretionary authority of Lender hereunder and under the other Loan Documents. Liens granted and created in favor of the "Lender" under this Agreement, the Mortgage and the other Loan Documents shall be held, and shall be deemed for all purposes under this Agreement, the Mortgage and the other Loan Documents to be held, by the designated "Lender" as Collateral Agent for itself as a Lender and as Collateral Agent for each and every other Lender hereunder and under the other Loan Documents. Without limiting the foregoing, Liens granted and created in favor of Citigroup Global Markets Realty Corp. under the Loan Documents shall be held, and be deemed for all purposes under the Loan Documents to be held by Citigroup Global Markets 119 Realty Corp., its successors and assigns, as Collateral Agent for itself as a Lender and for each and every other Lender hereunder and under the Loan Documents. (c) Lender may from time to time elect to enter into a servicing agreement with a servicer, pursuant to which the servicer shall be appointed to service and administer the Loan and the Account Collateral in accordance with the terms hereof and to exercise any and all other rights of Lender with respect to the Loan as set forth in such servicing agreement. Lender shall promptly notify Borrower if Lender shall elect to appoint or change the servicer, and all notices and other communications from Borrower to Lender shall be delivered to the servicer with a copy concurrently delivered to the Lender, and any notice, direction or other communication from the servicer to Borrower shall have the same force and effect as a notice, direction or communication from Lender. The servicer shall be entitled to be reimbursed for any reasonable cost, expense or liability which is incurred by the servicer pursuant to such servicing and administrative duties and which would otherwise be reimbursable to Lender under this Agreement or any other Loan Document in the same manner and to the same extent as if Lender incurred such cost, expense or liability in the first place. The parties hereto acknowledge and agree that the servicer shall be a third party beneficiary to this Agreement and the other Loan Documents. Section 9.10. Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. Section 9.11. Preferences. Lender shall have no obligation to marshal any assets in favor of Borrower or any other party or against or in payment of any or all of the obligations of Borrower pursuant to this Agreement, the Note or any other Loan Document. Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Borrower to any portion of the obligations of Borrower hereunder, provided that such application or reapplication is performed by Lender in accordance with the terms of this Agreement or any other applicable Loan Document. To the extent Borrower makes a payment or payments to Lender for Borrower's benefit, which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the obligations hereunder or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Lender. Section 9.12. Waiver of Notice. Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement or another Loan Document specifically and expressly provides for the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice. Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Agreement or the other Loan Documents does not specifically and expressly provide for the giving of notice by Lender to Borrower. 120 Section 9.13. Consents. In all cases Lender shall conclusively be deemed to be acting reasonably when implementing any applicable appropriate standard or requirement imposed by any applicable Rating Agency in connection with a Securitization, or in refusing or delaying any consent due to the existence of any Event of Default. In no event shall references herein or in the other Loan Documents to the "existence" or "continuance" of an Event of Default imply that any Event of Default, or any Default, once maturing into an Event of Default due to the expiration of any applicable cure period or by operation of this Agreement in the event no cure period is provided hereunder, shall be further susceptible of cure by Borrower or otherwise cease to be an Event of Default in the absence of a written waiver of such Event of Default by the Lender. In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where, by law or under this Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, neither Lender nor its agents shall be liable for any monetary damages, it being intended that Borrower's sole remedy shall be to bring an action for an injunction or specific performance. Section 9.14. Schedules Incorporated. The information set forth on the cover, heading and recitals hereof, and the Schedules attached hereto, are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof. Section 9.15. Offsets, Counterclaims and Defenses. Any assignee of any of Lender's interest in and to this Agreement and the other Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to this Agreement and the other Loan Documents which Borrower may otherwise have against any assignor or this Agreement and the other Loan Documents. No such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon this Agreement or upon any other Loan Document. Any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower. Section 9.16. No Joint Venture or Partnership. Borrower and Lender intend that the relationship created hereunder be solely that of borrower and lender. Nothing herein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Borrower (or any Affiliate of Borrower) and Lender nor to grant Lender any interest in the Collateral other than that of secured party, mortgagee or lender. Section 9.17. Waiver of Marshalling of Assets Defense. To the fullest extent Borrower may legally do so, Borrower waives all rights to a marshalling of the assets of Borrower, and others with interests in Borrower, and of the Collateral, or to a sale in inverse order of alienation in the event of foreclosure of the interests hereby created, and agrees not to assert any right under any laws pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead exemption, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Lender under the Loan Documents to a sale of any Collateral for the collection of the Indebtedness without any prior or different resort for collection, or the right of Lender to the payment of the Indebtedness out of the Net Proceeds of the Collateral in preference to every other claimant whatsoever. 121 Section 9.18. Waiver of Counterclaim. To the extent permitted by applicable law, Borrower hereby waives the right to assert a counterclaim, other than compulsory counterclaim, in any action or proceeding brought against it by Lender or its agents. Section 9.19. Conflict; Construction of Documents. In the event of any conflict between the provisions of this Agreement and the provisions of any of the other Loan Documents, the provisions of this Agreement shall prevail. The parties hereto acknowledge that they were represented by counsel in connection with the negotiation and drafting of the Loan Documents and that the Loan Documents shall not be subject to the principle of construing their meaning against the party that drafted same. Section 9.20. Brokers and Financial Advisors. Borrower hereby represents that it has dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Agreement. Borrower hereby agrees to indemnify and hold Lender harmless from and against any and all claims, liabilities, costs and expenses of any kind in any way relating to or arising from a claim by any Person that such Person acted on behalf of Borrower in connection with the transactions contemplated herein. The provisions of this Section 9.20 shall survive the expiration and termination of this Agreement and the repayment of the Indebtedness. Section 9.21. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Section 9.22. Estoppel Certificates. Borrower and Lender hereby agree at any time and from time to time (but not more than four times per year) upon not less than fifteen (15) days prior written notice by Borrower or Lender to execute, acknowledge and deliver to the party specified in such notice, a statement, in writing, certifying that this Agreement is unmodified and in full force and effect (or if there have been modifications, that the same, as modified, is in full force and effect and stating the modifications hereto), and stating whether or not, to the knowledge of such certifying party, any Default or Event of Default has occurred and is then continuing, and, if so, specifying each such Default or Event of Default; provided, however, that it shall be a condition precedent to Lender's obligation to deliver the statement pursuant to this Section 9.22, that Lender shall have received, together with Borrower's request for such statement, an Officer's Certificate stating that, to the knowledge of Borrower, no Default or Event of Default exists as of the date of such certificate (or specifying such Default or Event of Default). Section 9.23. Payment of Expenses. Borrower shall pay all Transaction Costs, which shall include, without limitation, (a) reasonable out-of-pocket costs and expenses of Lender in connection with (i) the negotiation, preparation, execution and delivery of the Loan Documents and the documents and instruments referred to therein; (ii) the creation, perfection or protection of Lender's Liens in the Collateral (including, without limitation, fees and expenses for title and lien searches or amended or replacement Mortgage, UCC financing statements or Collateral Security Instruments, title insurance premiums and filing and recording fees, third party due diligence expenses for the Mortgaged Property plus reasonable travel expenses, accounting firm fees, costs of the Appraisals, Environmental Reports (and an environmental 122 consultant), and the Property Condition Assessments and earthquake "maximum probable loss" report and costs and fees incurred in connection with arranging, setting up, servicing and maintaining the Account Collateral); (iii) response to any requests by Borrower (or its Affiliates) for Lender consent or approval of any matter; (iv) except as set forth in this Agreement with respect to any Secondary Market Transaction, the negotiation, preparation, execution and delivery of any amendment, waiver, restructuring or consent relating to any of the Loan Documents, and (v) the preservation of rights under and enforcement of the Loan Documents and the documents and instruments referred to therein, including any communications or discussions relating to any action that Borrower shall from time to time request Lender to take, as well as any restructuring or rescheduling of the Indebtedness, (b) the reasonable fees, expenses and other charges of counsel to Lender or its servicer in connection with all of the foregoing, and (c) Lender's reasonable out-of-pocket travel expenses in connection with site visits to the Mortgaged Property. Section 9.24. Non-Recourse. Anything contained herein, in the Note or in any other Loan Document to the contrary notwithstanding, but subject in all respects to provisions set forth below, Lender shall not enforce the liability and obligation of the Borrower to perform and observe any of its obligations that may be contained in the Note, this Agreement, the Mortgage or any other Loan Document by any action or proceeding wherein a money judgment shall be sought against Borrower, except that Lender may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Lender to enforce and realize upon its interest under the Note, this Agreement, the Mortgage and the other Loan Documents, or in the Mortgaged Property, or any other Collateral pursuant to the Loan Documents; provided, however, that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against Borrower only to the extent of Borrower's interest in the Mortgaged Property and in any other Collateral. NOTWITHSTANDING ANYTHING TO THE CONTRARY ABOVE OR ELSEWHERE IN THIS AGREEMENT, THE MORTGAGE OR ANY OF THE LOAN DOCUMENTS, however, (a) the provisions of this Section 9.24 and the other provisions of the Loan Documents shall not: (i) constitute a waiver of any right which Lender may have under Sections 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Indebtedness or to require that all Collateral shall continue to secure all of the Indebtedness owing to Lender in accordance with the Loan Documents; (ii) constitute a waiver, release or impairment of any obligation evidenced or secured by any of the Loan Documents; (iii) impair the right of Lender to name Borrower as a party defendant in any action or suit for foreclosure and sale under the Mortgage or other Loan Documents; (iv) impair the right of Lender to obtain the appointment of a receiver; (v) impair the enforcement of the Assignment of Profits and Leases; (vi) constitute a prohibition against Lender to seek a deficiency judgment against Borrower (but only to the extent such deficiency judgment is required) in order to fully realize the security granted by the Mortgage and other Loan Documents or to commence any other appropriate action or proceeding in order for Lender to exercise its remedies against the Mortgaged Property or any other Collateral (provided that any such deficiency judgment shall only be enforceable against Borrower to the extent of Borrower's interest in the Mortgaged Property and other Collateral); (vii) have any applicability whatsoever to or limit the liability of the Borrower, Guarantor or other parties under the Guaranty of 123 Non-Recourse Obligations or the Environmental Indemnity Agreement; or (viii) constitute a waiver, release or discharge of any Indebtedness or obligation evidenced by the Note or this Agreement or secured by the Loan Documents, and the same shall continue until paid or discharged in full, and (b) the provisions of this Section 9.24 and the other provisions of the Loan Documents shall not (A) prevent recourse to Borrower and Guarantor, jointly and severally, and their respective assets for repayment of the Indebtedness, and Lender's agreement not to pursue personal liability of Borrower as set forth above SHALL BECOME NULL AND VOID and shall be of no further force or effect, and the Indebtedness shall be fully recourse not only to Borrower but also to Guarantor, in the event Borrower shall file or commence any voluntary bankruptcy, insolvency or similar proceeding, including any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, or Borrower shall make an assignment for the benefit of creditors or institute receivership proceedings or similar proceedings with respect to the Mortgaged Property, Borrower or Borrower's assets, or (X) any such proceedings or petition shall be filed or commenced against Borrower by Guarantor or Guarantor's or Borrower's Affiliates or agents or (Y) Borrower, Guarantor or their respective Affiliates aid, solicit, support or otherwise cooperate or collude to bring about the filing or commencement of any such proceedings or petition against Borrower or acquiesce in or fail to contest, any such proceedings or petition; (B) prevent recourse to Borrower and Guarantor, jointly and severally, and their respective assets, and Borrower and Guarantor shall be fully and personally liable, for any loss, costs, liability, damage or expense (including, without limitation, reasonable attorneys' fees and disbursements) suffered or incurred by Lender or any Indemnified Party related to or arising from any of the following acts committed by or on behalf of Borrower, Guarantor or any of their respective Affiliates: (1) any fraud on the part of Borrower, Guarantor or their respective Affiliates in connection with the Loan (2) any intentional or willful misrepresentation by Borrower, Guarantor or their respective Affiliates in connection with the Loan or under any of the Loan Documents or in any reports or certificates furnished pursuant to any Loan Document; (3) any misappropriation or misapplication of funds (including Loss Proceeds, Advance Bookings Deposits, Receipts, including Receipts collected in advance, or other Receivables), including any use or application of any thereof in contravention of the Loan Documents; 124 (4) additional financing obtained by Borrower (whether secured or unsecured) in violation of the terms of the Loan Documents; (5) physical waste to the Mortgaged Property or material damage to the Mortgaged Property resulting from gross negligence or willful misconduct, or removal of material Equipment or other Personalty from the Property in violation of the Loan Documents; (6) any Transfer occurs in violation of the terms of the Loan Documents; (7) any material breach of the provisions of Article VIII of this Agreement occurs; (8) all costs and expenses, including reasonable attorneys' fees and expenses, incurred in enforcing any obligation or liability or in collecting any amount due under this Section 9.24(b), the Environmental Indemnity and the Guaranty of Non-Recourse Obligations, which, as to Borrower, is a recourse obligation of Borrower as described in this Section 9.24(b), the Environmental Indemnity and the Guaranty of Non-Recourse Obligations, or, as to Guarantor, is a recourse obligation of Guarantor under the Guaranty of Non-Recourse Obligations or the Environmental Indemnity; (9) the failure to pay Impositions assessed against the Mortgaged Property to the extent there was sufficient funds available to pay and Lender allows Borrower to apply the same, or the failure to maintain insurance as required under the Loan Documents, or the failure to pay any deductible amount in respect of any insurance maintained in respect of the Mortgaged Property, or the failure to pay and discharge any mechanic's or materialman's Liens against the Mortgaged Property to the extent there was sufficient funds available to pay and discharge and Lender allows Borrower to apply the same; (10) If an Event of Default has occurred, and Borrower or any Affiliate contests or in any way interferes with, directly or indirectly (collectively, a "Contest"), any foreclosure action or sale commenced by Lender or with any other enforcement of Lender's rights, powers or remedies under any of the Loan Documents or under any document evidencing, securing or otherwise relating to any of the Collateral (whether by making any motion, bringing any counterclaim, claiming any defense, seeking any injunction or other restraint, commencing any action seeking to consolidate any such foreclosure or other enforcement with any other action, or otherwise) (except this clause (11) shall not apply if Borrower 125 successfully asserts a Contest and obtain a final non-appealable court order as to the same); (11) any Legal Requirement mandating the forfeiture by Borrower of the Collateral or any portion thereof because of the conduct or purported conduct of criminal activity by Borrower or any Affiliate in connection therewith; or (12) for as long as Licensor is an Affiliate of Borrower, any material change in or amendment to, or cancellation, expiration, surrender or termination of, the License Agreement without Lender's prior written approval. Section 9.25. Joint and Several Liability. All representations, warranties, covenants (both affirmative and negative) and all other obligations hereunder and under the Loan Documents shall be the joint and several obligation of KC Borrower and TC Borrower and any default hereunder or under the Loan Documents by any such person or entity shall be deemed a default by all such entities comprising Borrower. The representations, covenants and warranties contained herein and in the Loan Documents shall be read to apply to each of the individual persons and entities comprising Borrower when the context so requires, but a breach of any such representation, covenant or warranty shall be deemed a breach by all such persons and entities and Borrower, entitling Lender to exercise all of its rights and remedies hereunder and under applicable law. 126 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written. LENDER: CITIGROUP GLOBAL MARKETS REALTY CORP., a New York corporation By: /s/ Michael Fallin ------------------------------ Name: Michael Fallin Title: Authorized Agent BORROWER: GREAT WOLF KANSAS SPE, LLC, a Delaware limited liability company By: /s/ J. Michael Schroeder ------------------------------ Name: J. Michael Schroeder Title: Secretary GREAT WOLF TRAVERSE SPE, LLC, a Delaware limited liability company By: /s/ J. Michael Schroeder ------------------------------ Name: J. Michael Schroeder Title: Secretary INITIAL NOTE B LENDER: THE TRAVELERS INSURANCE COMPANY, a Connecticut corporation By: /s/ David Colangelo ------------------------------ Name: David Colangelo Title: Vice President EX-23.2 7 g92795exv23w2.txt CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the use in this Registration Statement of Great Wolf Resorts, Inc. on Form S-1 of our report on the combined financial statements of Great Lakes Predecessor dated November 24, 2004 (December 20, 2004 as to Note 12)(which report expresses an unqualified opinion and includes an explanatory paragraph relating to (1) the adoption of SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity," and (2) the adoption of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," and an explanatory paragraph relating to the restatement described in Note 11), and of our report on the balance sheet of Great Wolf Resorts, Inc. dated July 25, 2004 (December 20, 2004 as to Note 2), appearing in the Prospectus, which is part of such Registration Statement and to the reference to us under the headings "Summary Financial and Other Data," "Selected Financial and Other Data" and "Experts" in such Prospectus. /s/ Deloitte & Touche LLP Milwaukee, Wisconsin January 20, 2005 EX-23.3 8 g92795exv23w3.txt CONSENT OF RUBIN, BROWN, GORNSTEIN AND CO. LLP EXHIBIT 23.3 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S CONSENT We hereby consent to the use in this Registration Statement Form S-1 (as filed on January 21, 2005) of our report dated January 30, 2004, except for Note 4, dated May 10, 2004, relating to the combined financial statements of Great Bear Lodge of Wisconsin Dells, LLC and Great Bear Lodge of Sandusky, LLC, which appear in such Registration Statement of Great Wolf Resorts, Inc. We also consent to the reference to us under the headings "Experts," "Selected Financial And Other Data" and "Summary Financial and Other Data" in such Registration Statement. /s/ Rubin, Brown, Gornstein & Co. LLP Rubin, Brown, Gornstein & Co. LLP St. Louis, Missouri January 21, 2005 GRAPHIC 9 g92795g9279501.jpg GRAPHIC begin 644 g92795g9279501.jpg M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````,@``_^X`#D%D M;V)E`&3``````?_;`(0`"`8&!@8&"`8&"`P(!P@,#@H("`H.$`T-#@T-$!$, M#@T-#@P1#Q(3%!,2#Q@8&AH8&",B(B(C)RQQZ4<+X/[0!B:/7L5>V^=;V4\TAV6X$D1/MMZK?[75]:M:"-I MF2P#*=BW-,B@9*\GMFP_#M:YSW?>:G!NE@&UQJ#LK2O,IZS6O;.P()(V0B(I M+"(B1"(B1"(B1"(B1"(B1"(B1"(B1"(B1"(B1"(B1"(B1"(B1"(B1"(B1"(B M1,WC+R5L,>LZI&TGM;EC::1O?(]Q+8V^LT M74Z**D6=6/QGE4`@KF*>5-))M:(V'Q$X18%[GM*M=LYN MB%!M.'+[MHWY>\$]K;G6R)HH'%NXOV#B#7UK=Q1B*)D3=S&AH^@"BCBO#=&0W-9TBL;%:3.:(BQ.$B)$(B)$(B) M$(B)$(B)$(B)$(B)$(B)$(B)$(B)$(B)$(B)$(B)$(B)$(B)$^&@Z1_*LO'E M8=^96&7FR+)V"S@DG9H?-&:S#D`I3I#:`=A!TX2/+<- MDD)>]H<=S:AV7`G]"C#A& MQM[F,S7LCX&?>"V=4U#"-^W=6BT&2Q=ULK&B=+@=X.]=BXSV"$1$B$1$B$1$B$1$B$1$B$1$B M$1$B$1$B$4.^R=IC]#)W.=-+7L;>)KI)7TWZ8V`NH/2=P])57=<766.TORMG M>V%NZ@^*F@U1`G<'N@=)IKSK2Y;M@";P[=TRSHN)`K'LWS0(HF+OFY/'V^08 MS0RY8)&-K7HNVM-:#>-JEJ$$$@XC1*""`1@81$4EA$1(A$1(A$1(A%6YG.6> M"M_B[]DHM1WD\<9D;'4AHUZ=HJ3R*%=<7XJS;:.FCN1\>YL=G]P_[QSZ:0TD M`;:\JV,MR`0I(.'"8.8@)!8"O&7Z*GFXDL[?(18R:"Y;=3L,L+!"Y^IK0"ZA M9JZM=JY6G$-E>Y&;%V\5P;FW#3CMF`P<,",#1OLD/'V#[6^1]*DT`V!M`!0*8LI@KO-<07 M<'$,%\(<&Y]Q&S&]F*R1QET,(J6/BC%F^BQMT)K&[N-EO'=Q.B$IY(WD:"=N[5572C*RUS`B$596P(-8 MPB(I+"(B1"(B1"(B1"(B1"+X2&@N<:`;23N`4?\`F./T"3XN'026AW:,I4;2 M*UYTJ+E%P=.,K#>Y^7I3WMS+&PG?';P.,<4(Y`*%QYS5761O,7:PZ,K<0003 MUBTW3V,8^HVL^$#MGH6&X>R#."LU?\`#.;=\/870"QS]PV4 MW[C7E"UW$-[:1X*^+YXP)[:6.#I#[Q[V.:UL?M$DT`"]&:G]HJRK5RD?3JK= M//E/_4;H,M\P/U:[WSLX??9_RBTMK*Z@O([2*.V,ML\2,K$P-I5I/H"DR9+' MPW+;.6[A9=/!+8'2-$A#6F1QT$UH&BJK.#(9K?A;%P7$3X9HX0U\4C2Q[2"= MA:X`A4G%ME;7?%W"D$K6AD[KTW%:#M&MACZ#_:#FMTT.\;%D(K9KJ2:'.;\H M)$HNRY2,`+/(*\Q`\9L+.^LLC#\387$=S!4M[6%P>VK=A%6DA=5YE\7CW!E M]>0V[R-6F61K2&UIJ()V-KZ=R[+''V.,A-MC[=EM"7.D,<30UNIVTF@6'P%R MY^1XEL;_`"$-I?/OIC-#<1MZ3M8^L12/8?6JF4&=A9*J:O`XT-$CYI5%-`, MPNL1A9TST-CV2,;)&X/8\!S'M-00=H((W@K*9?/16W%^'L_YC'#:=G=?'1&5 M@:'M8.S$M3L-3LJIO!-U;W'#.,CAE;*^"VA9,UA#M#M`Z+J;CS*NS+[*#CG" M&[$441M;LB232UKGG3O+ME:!7+0#,=2":5_V!D=R-LT$ MC98GBK)&$.:1R@C85S73:2VL]M'+9.8^V>*Q.CIH(KO;391=RXG&=AA(N2L( MA"&BG+59/$V=SBLC?\!$OEMKQ\=Y#.1_I) M!_G`ZFX.;P]A(8KV_@MY!0N9)(UK@#N+@3L'.5-CDCFC;+$\21O`QGX19<3O:Y\AF=EGS$5,I<[M3/J]WE^RN?X=P3P<-,$@ M<+=\\TEBU]:BW<_[O?MH=I',5E\H*'TFT8+IUXX?":3,+%-`IU+:-6&/QBX_ M^C6?_B9?\<+37%S;6D?;74S((@0#)*X,;4[A5Q`66NI&-_$BQ:3M?BY6M'/V MNK]#5JIA#V;G3M:8V#6=0J!0;U,S_._H'>9 MWLL3AY&7=T+N*8W$!$D=NQE=EJTO$DET[AS)28QVJX-M*871FIZIJ6%OVJ;J>E7,4 MVF6.G%6V\^N3+84^8>K!EV3:LYF6%(`)NR#8V329A8$D"J!%';.J+B#!W%T+*# M(V\MT7:1!'*USR=M:-:232FWD5DO/;%W$,.0PC,E)CT M/:!I;H#*EP:"K_CRYOK7A/)38\N;.&-!>SK-C<]K9'"G(PGZ-ZTV2.=$4CYZ M%W8QKLD7./([L.BS54<+[99.S^#9<"T=D;83N=H$9E977[&_K'Q&0XYX@MKN"*6WCM M[0-M"!V>LQZ=>C=K:VH!WBI6Y;!"V%MNV-HA8`UD5!I#6]4`;ME%6MFU?9<=GIZ5%K-0'/*UR@ ML?T)G+![1:UI]2ZN&99^0D]"6&S7FE_\L_9\?XGJ#Q/U M'[IG@O#;OW'N>SS+(\7>=6GR_N;YMXG>? M^#V>=$6LGU3QDSO2'";B/J-W;AU>KN]',L7>_,UY\O\`<.[_`,=W1[WW?:]Q M$6<*>1VW@?3Y7X;U>][7.JWC;=CO)^]=YUN^SW/[7J1%I/R M#O,C?C\!-3#W,?5ZK>[ZF[[/-R+FB+SF=Q"K\EW^-\/XK_4=;N9?#_Q/JJB+ M2X\#W3+8<1WP?/&^'\([_==XW=_"_:5@B(VK="Z]\\ZOOF&Z^6^\'?=[O/B? MXO(O1!N'U;D1=L_#+W3ED8OOF$G\UG^5_&_O/%=X.\_[C]I:;B7R>;P&]GFW MA.N.\Y_9YT15^K*X>$RG3F\?&5'#?FLGD/AW>4^*Z[.M_"Y?>HM:B+GG=?`3 MID]'$PO.KC?=?*/>2=[^L>^][VN=$6O;XMPF?<8+QEGQMY;CO)NM_5.ZZH\- MSXZH[GW/9YD11_13>TJ>J^Y9C,'\V3_`"]O?X+QVX[O M>]M:S/>1Y/\`VD_^&Y$6LWU4W+,Y7IOO:93@KS.Z^7^K_1N^]'_3^M;B;N9. MKU7=YU-WVN;E1%/<>KP$OM_2XF8#AKS=GR]UW^![WT^&Y_:7H2(GN>L;H]MT M'?//;/O[/Y3[]G<=?K_N/XGL\Z]"1$]QB.,>WP/"9#A_YERGDO7?X#QO6_?_ M`+?O*3QOY;;>!\2/-?"=S-WO[/O41%H^NFX=TR/0?>>^?."/*W^5]?\`HW=[ 3OWOOK3HBRWY'\Q-+^/\`P,__V3\_ ` end -----END PRIVACY-ENHANCED MESSAGE-----






		Proposed Maximum	Proposed Maximum
Title Of Each Class Of Securities	Amount To Be	Offering Price	Aggregate	Amount of
To Be Registered	Registered	Per Share(1)	Offering Price(1)	Registration Fee


Common Stock, par value $0.01 per share	14,032,896 Shares	$21.34	$299,462,001	$35,247


Period	High		Low

2005
First Quarter*	$	22.50	$	20.07
2004
Fourth Quarter	$	23.00	$	18.65



		September 30, 2004

		Predecessor			Company
		Historical			Pro Forma


		(in thousands)
Short-term debt		$	6,921		$	462
Long-term debt			131,956			122,593	(1)
Minority interests			2,594			—
Stockholders’ equity (Company pro forma):
	Preferred stock, $0.01 par value, 10,000,000 shares authorized; no shares issued and outstanding					—
	Common stock, $0.01 par value, 250,000,000 shares authorized; 30,262,308 shares issued and outstanding					303
	Additional paid-in capital					387,927
Members’ equity (Predecessor historical):
	Accumulated deficit		(2,876	)
	Treasury stock		(824	)
	Members’ equity of combined entities		42,970

Total members’/stockholders’ equity			39,270			388,230

Total capitalization		$	180,741		$	511,285


Delaware (State or other jurisdiction of incorporation or organization)		7011 (Primary Standard Industrial Classification Code Number)		51-0510250 (I.R.S. Employer Identification No.)


(1)	Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) of the Securities Act, based upon the average of the high and low sales prices of the Registrant’s common stock on the Nasdaq National Market on January 14, 2005.


	Page

Summary		1
Risk Factors		13
Forward-Looking Statements		24
Structure and Formation of Our Company		24
Use of Proceeds		29
Market Price Information		29
Dividend Policy		29
Capitalization		30
Selected Financial and Other Data		31
Management’s Discussion and Analysis of Financial Condition and Results of Operations		35
Business		59
Management		82
Certain Relationships and Related Transactions		92
Principal Stockholders		95
Selling Stockholders		97
Plan of Distribution		110
Description of Securities		111
Legal Matters		115
Experts		115
Where You Can Find More Information About Us		115
Index to Financial Statements		F-1
OPINION OF KING & SPALDIN LLP
FORM OF EMPLOYMENT AGREEMENT
FORM OF NON-COMPETE, TRADE SECRET AND CONFIDENTIALITY AGREEMENT
REVOLVING CREDIT AGREEMENT
LOAN AGREEMENT, DATED DECEMBER 20, 2004
CONSENT OF DELOITTE & TOUCHE LLP
CONSENT OF RUBIN, BROWN, GORNSTEIN AND CO. LLP


	•	$211.30 average daily room rate, or ADR;

	•	$90.45 average non-room revenue per occupied room, or RevPOR;

	•	$301.75 total revenue per occupied room, or Total RevPOR;

	•	65.1% occupancy;

	•	$137.61 revenue per available room, or RevPAR; and

	•	$196.51 total revenue per available room, or Total RevPAR.


	•	Unforgettable Family Resort Experience. Our indoor waterpark resorts provide activities that the entire family can enjoy, including themed restaurants, an Aveda concept spa, a game arcade, ice cream shop and confectionery, gift shop, animated clocktower and fireside bedtime stories.

	•	Value, Comfort and Convenience. On average, a two-night stay for a family of four in one of our conveniently located resorts costs approximately $600.

	•	Favorable Market Trends. We believe recent vacation trends favor our Great Wolf Lodge concept as the number of families choosing to take shorter, more frequent vacations that they can drive to has increased over the past several years.

	•	Market Presence and Barriers to Entry.We believe that we benefit from the significant barriers to entry, including operational complexity, substantial capital requirements, availability of suitable sites in desirable markets and a difficult, multi-year permitting process.

	•	Focus on Safety. We invest heavily in safety measures in the design and operation of our resorts, including our state-of-the-art air quality and water treatment systems.

	•	Experienced Management Team. Our senior management team has an average of approximately 16 years of experience in the hospitality, family resort and real estate development industries and has significant expertise in operating complex, themed resorts featuring indoor waterparks.


	•	Increase Total Resort Revenue. We intend to increase total resort revenue by increasing our average room rate, average occupancy and other revenue.

	•	Leverage Our Economies of Scale. We intend to take advantage of our economies of scale by capitalizing on our increased purchasing power and centralizing certain of our services.

	•	Build Upon Brand Awareness and Loyalty. Our Great Wolf Lodge brand is symbolized by our distinctive and easily identifiable theming and recognizable logos and merchandise, which have fostered strong customer and brand loyalty, as evidenced by our high levels of repeat and referral guests.


	•	our ability to develop new resorts or further develop existing resorts on a timely or cost efficient basis;

	•	our ability to compete with other family vacation travel destinations and resorts;

	•	our ability to manage our expected growth;

	•	potential accidents or injuries in our resorts and competing resorts;

	•	our ability to achieve or sustain profitability;

	•	changes in family vacation patterns and consumer spending habits, downturns in our industry segment and extreme weather conditions;

	•	our ability to attract a significant number of guests from our target markets;

	•	increases in operating costs and other expense items and costs;

	•	uninsured losses or losses in excess of our insurance coverage; and

	•	our ability to protect our intellectual property and the value of our brands.


John Emery	—	Chief Executive Officer and Director
Eric S. Lund	—	Executive Vice President of Sales and Marketing
Bruce D. Neviaser	—	Chairman of the Board
Kimberly K. Schaefer	—	Chief Brand Officer
Craig A. Stark	—	President and Director
Marc B. Vaccaro	—	Director
Thomas W. Sather	—	Mr. Sather does not hold a position with us, but holds approximately 2.6% of our shares.


(1)	Includes the operations of three resorts that opened in March 2003, May 2003 and June 2004, respectively.
(2)	Reflects reimbursement of payroll, benefits and costs related to the operations of properties managed by Predecessor.
(3)	Pro forma basic and diluted earnings (loss) per share are computed assuming the initial public offering was consummated as of the first day of the period presented and equals pro forma net income (loss) divided by the number of shares of our common stock outstanding after the initial public offering.
(4)	See reconciliation to net income (loss) in “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Non-GAAP Financial Measures.”
(5)	As restated—see Note 11 to Predecessor’s combined financial statements.


	•	Occupancy is the average daily percentage of available rooms that are sold.


Buildings and improvements			40 years
Land improvements			15 years
Fixtures and equipment, including waterpark equipment			3-10 years


	2004			2003			Change

Occupancy		70.5	%		69.8	%		0.7	%
ADR	$	210.54		$	205.78		$	4.76
RevPAR	$	148.49		$	143.55		$	4.94
Total RevPAR	$	214.87		$	214.52		$	0.35
Total RevPOR	$	304.65		$	307.51		$	(2.86	)


			Less than						More than
	Total		1 year(1)		1-3 Years		4-5 Years		5 Years

Long-Term Debt Obligations	$	138,877	$	4,726	$	7,669	$	104,997	$	21,485
Operating Lease Obligations		7,166		114		847		804		5,401
Construction Contracts		50,646		13,873		36,773		—		—
Mandatorily Redeemable Ownership Interests		21,482		—		—		21,482		—

Total	$	218,171	$	18,713	$	45,289	$	127,283	$	26,886


(1)	Amounts are for the period October 1, 2004 to December 31, 2004.


(1)	Includes $8,063 of fixed rate debt recognized as a liability related to certain bonds issued by the City of Sheboygan and $3,985 of fixed rate debt recognized as a liability related to a loan from the City of Sheboygan. These liabilities will be satisfied by certain future minimum guaranteed amounts of real and personal property tax payments and room tax payments to be made by our Sheboygan resort.

(2)	These obligations will be funded through our existing construction facilities on our Williamsburg and Poconos resorts.

(3)	Amounts are for the period October 1, 2004 to December 31, 2004.



									For the Twelve Months Ended
									September 30, 2004

	For the Year Ended				For the Year Ended												Average		Adjusted
	December 31, 2002				December 31, 2003										Adjusted		Gross		EBITDA
													Total Resort		EBITDA		Book		Asset
Resort	Occupancy		RevPAR		Occupancy		RevPAR		Occupancy		RevPAR		Revenues		Margin		Value		Yield

	(%)		($)		(%)		($)		(%)		($)		($ million)		(%)		($ million)		(%)
Sandusky		67.0		146.82		70.0		157.11		68.4		158.34		22.0		34.7		39.2		19.4
Traverse City		—		—		70.4		148.47		68.9		153.47		22.8		36.1		50.3		16.3
Kansas City		—		—		52.6		103.49		61.8		120.50		18.0		24.1		48.3		9.0


Name	Age		Position

Bruce D. Neviaser		49	Chairman of the Board
John Emery		40	Chief Executive Officer and Director
Craig A. Stark		53	President and Director
Elan Blutinger		49	Director(1)
Randy Churchey		44	Director(2)(3)
Michael M. Knetter		44	Director(1)(2)
Alissa N. Nolan		42	Director(1)(3)
Howard Silver		50	Director(2)(3)
Marc B. Vaccaro		41	Director
James A. Calder		42	Chief Financial Officer
Eric S. Lund		38	Executive Vice President of Sales and Marketing
Hernan R. Martinez		52	Executive Vice President of Development
Kimberly K. Schaefer		38	Chief Brand Officer
J. Michael Schroeder		37	General Counsel and Corporate Secretary
Alexander P. Lombardo		36	Treasurer


				Annual Compensation		Long-Term Compensation

						Securities Underlying
Name and Principal Position		Year		Base Salary($)		Options(#)

John Emery
	Chief Executive Officer		2004		400,000		350,000
Craig A. Stark
	President		2004		300,000		200,000
Hernan R. Martinez
	Executive Vice President of Development		2004		320,000		150,000
James A. Calder
	Chief Financial Officer		2004		250,000		100,000
J. Michael Schroeder
	General Counsel and Corporate Secretary		2004		250,000		75,000



	Shares Beneficially Owned

Name of Beneficial Owner	Number		Percentage

Bruce D. Neviaser(1)		1,821,443		6.0	%
John Emery(2)		483,077		1.6
Craig A. Stark		1,681,767		5.6
Elan Blutinger(3)		5,000		*
Randy Churchey(4)		10,000		*
Michael M. Knetter(5)		1,500		*
Alissa N. Nolan(6)		—		—
Howard Silver(7)		—		—
Marc B. Vaccaro(8)		1,650,339		5.5
James A. Calder(9)		4,379		*
Eric S. Lund(10)		838,581		2.8
Hernan R. Martinez		4,379		*
Kimberly K. Schaefer(11)		821,457		2.7
J. Michael Schroeder		90,367		*
Alexander P. Lombardo		—		—
All directors and executive officers as a group (15 persons)		7,412,289		24.5	%


*	Less than one percent of the outstanding shares of common stock.



	Common Stock						Common Stock
	Beneficially Owned						Beneficially Owned
	Prior to this Offering				Common Stock		After this Offering
					to be Sold in
Name and Address of Beneficial Owner	Shares		Percentage		this Offering		Shares		Percentage

780 Partners		44,580		*		44,580		0		*
A.W. Real Estate, LLC		2,925		*		2,925		0		*
Ahrens, D.J.		8,878		*		8,878		0		*
Ahrens, Peter J., Revocable Trust		8,878		*		8,878		0		*
Allen, Barry and Cecelia		4,775		*		4,775		0		*
Andersen, Danny L. and Linda G.		4,767		*		4,767		0		*
Andersen, Patrick C.		13,311		*		13,311		0		*
Anderson, Jeff		9,520		*		9,520		0		*
Anderson, Patrick C.		6,642		*		6,642		0		*
Arkema, Milo and Jentine		2,383		*		2,383		0		*
Arrow Parts Corp.		3,786		*		3,786		0		*
Artus, Randal J.		1,462		*		1,462		0		*
Ashworth, Michael F.		9,535		*		9,535		0		*
ATFAB, LLC		9,535		*		9,535		0		*
Aubrey, Ronald J. and Maryann G.		7,140		*		7,140		0		*
Ayala, Ronald J.		6,745		*		6,745		0		*
Ayala, Ronald J. and Mary K.		4,760		*		4,760		0		*
Bachman, Mark		15,146		*		15,146		0		*
Badyna, Paul J.		4,760		*		4,760		0		*
Baker, John D. Living Trust dated 2/23/2000		11,749		*		11,749		0		*


			Page

Great Wolf Resorts, Inc. and Subsidiaries:
	Unaudited Pro Forma Condensed Consolidated Financial Statements:
		Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2004		F-3
		Pro Forma Condensed Consolidated Statement of Operations for the nine months ended September 30, 2004		F-7
		Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2003		F-8
	Historical Financial Statements:
		Report of Independent Registered Public Accounting Firm		F-12
		Balance Sheets as of September 30, 2004 (unaudited) and June 30, 2004		F-13
		Note to Balance Sheets		F-14
Great Lakes Predecessor Historical Information:
	Report of Independent Registered Public Accounting Firm			F-15
	Combined Balance Sheets as of September 30, 2004, December 31, 2003 (as restated) and 2002			F-16
	Combined Statements of Operations for the nine months ended September 30, 2004 and 2003 (unaudited) and the years ended December 31, 2003 (as restated), 2002 and 2001			F-17
	Combined Statements of Equity for the nine months ended September 30, 2004 and the years ended December 31, 2003 (as restated), 2002 and 2001			F-18
	Combined Statements of Cash Flows for the nine months ended September 30, 2004 and 2003 (unaudited) and the years ended December 31, 2003 (as restated), 2002 and 2001			F-19
	Notes to Combined Financial Statements			F-20
Dells/ Sandusky Historical Information:
	Report of Independent Registered Public Accounting Firm			F-35
	Combined Balance Sheets as of September 30, 2004 (unaudited) and December 31, 2003 and 2002			F-36
	Combined Statements of Operations for the nine months ended September 30, 2004 and 2003 (unaudited) and the years ended December 31, 2003, 2002 and 2001			F-37
	Combined Statements of Members’ Equity for the nine months ended September 30, 2004 (unaudited) and the years ended December 31, 2003, 2002 and 2001			F-38
	Combined Statements of Cash Flows for the nine months ended September 30, 2004 and 2003 (unaudited) and the years ended December 31, 2003, 2002 and 2001			F-39
	Notes to Combined Financial Statements			F-40


			Predecessor		Dells/Sandusky					Transaction			Pro
			Historical		Historical		Spin-Off			Adjustments			Forma

			(A)		(B)		(C)
ASSETS
Current assets:
	Cash and cash equivalents		$	2,401	$	3,161	$	(685	)	$	249,541	(D)	$	79,841
														(98,111	)(E)
														(73,466	)(F)
														(3,000	)(G)
	Other current assets			3,984		1,834		(1,424	)		(600	)(H)		3,794

		Total current assets		6,385		4,995		(2,109	)		74,364			83,635

Property and equipment, net				184,082		54,011		(16,533	)		4,519	(E)		226,079
Equity escrow and other assets				16,105		2,537		(3,725	)		3,000	(G)		16,448
											(1,469	)(I)
Goodwill				1,391		24,457		(1,391	)		188,482	(E)		212,939

		Total assets	$	207,963	$	86,000	$	(23,758	)	$	268,896		$	539,101


LIABILITIES, MINORITY INTERESTS AND EQUITY
Current liabilities:
	Current portion of long-term debt		$	6,921	$	1,729	$	(6,459	)	$	(1,729	)(F)	$	462
	Accounts payable and accrued expenses			15,620		6,088		(969	)		(600	)(H)		20,139

		Total current liabilities		22,541		7,817		(7,428	)		(2,329	)		20,601
Long-term debt				131,956		74,306		(11,932	)		(71,737	)(F)		122,593
Deferred tax liability				—		—		—			7,677	(E)		7,677
Mandatorily redeemable ownership interests				11,602		—		(333	)		(11,269	)(E)		—

		Total liabilities		166,099		82,123		(19,693	)		(77,658	)		150,871
Minority interests				2,594		—		(2,594	)		—			—
Equity				39,270		3,877		(1,471	)		249,541	(D)		388,230
											98,482	(E)
											(1,469	)(I)

	Total liabilities, minority interests and equity		$	207,963	$	86,000	$	(23,758	)	$	268,896		$	539,101


Proceeds from the Offering	$	273,700
Less costs associated with the Offering ($19,159 of underwriters’ discounts and commissions, $5,000 of other costs)		(24,159	)

Increase to owners’ equity and cash	$	249,541


			Wisconsin						Traverse			Kansas									Pocono
			Dells			Sandusky			City			City			Sheboygan			Williamsburg			Mountains			Total

Purchase Price:
	Number of shares issued			—			1,319,543			1,906,529			816,238			713,008			1,715,073			2,653,428			9,123,819
	Fair value per share		$	17.00		$	17.00		$	17.00		$	17.00		$	17.00		$	17.00		$	17.00		$	17.00

		Total fair value of shares issued	$	—		$	22,432		$	32,411		$	13,876		$	12,121		$	29,156		$	45,108		$	155,104
	Cash paid			12,950			25,988			15,571			13,532			5,497			12,524			12,049			98,111

Total purchase price				12,950			48,420			47,982			27,408			17,618			41,680			57,157			253,215
Long-term debt				50,254			25,782			36,475			35,956			33,460			5,009			1,523			188,459
Fair value of property and equipment based on estimated replacement cost				(28,207	)		(27,976	)		(43,959	)		(43,245	)		(36,415	)		(25,435	)		(19,224	)		(224,461	)
Fair value of other assets and liabilities				(1,068	)		(377	)		(868	)		436			(2,125	)		(257	)		(7,692	)		(11,951	)

Goodwill from asset acquisition			$	33,929		$	45,849		$	39,630		$	20,555		$	12,538		$	20,997		$	31,764		$	205,262


Cost basis of property and equipment			$	27,313		$	26,699		$	42,571		$	42,285		$	36,415		$	25,435		$	19,224		$	219,942
Step-up				894			1,277			1,388			960			—			—			—			4,519

Fair value of property and equipment based on estimated replacement cost			$	28,207		$	27,976		$	43,959		$	43,245		$	36,415		$	25,435		$	19,224		$	224,461


Purchase price			$	12,950		$	48,420		$	47,982		$	27,408		$	17,618		$	41,680		$	57,157		$	253,215
Goodwill from asset acquisition				33,929			45,849			39,630			20,555			12,538			20,997			31,764			205,262

Purchase price excluding goodwill				(20,979	)		2,571			8,352			6,853			5,080			20,683			25,393			47,953
Estimated tax basis				(5,895	)		(949	)		(2,352	)		(13,199	)		5,080			20,683			25,393			28,761

Difference				(15,084	)		3,520			10,704			20,052			—			—			—			19,192
Assumed tax rate				40	%		40	%		40	%		40	%		40	%		40	%		40	%		40	%


Cash	$	(98,111	)
Property and Equipment, net		4,519
Goodwill		188,482
Deferred tax liability		7,677
Mandatorily redeemable equity interests		(11,269	)
Owners’ equity		98,482


Repayment of mortgage notes payable	$	(148,466	)
Proceeds from new secured mortgage financing		75,000

Net adjustment to long-term debt	$	(73,466	)


				Year Ended
	Nine Months Ended			December 31,
	September 30, 2004			2003

Elimination of amortization expense relating to existing mortgage notes payable	$	(411	)	$	(1,453	)
Amortization expense on new credit facility		375			500
Amortization expense on new secured mortgage financing		113			150

Net adjustment to amortization expense	$	77		$	(803	)


Shares issued in the Offering			16,100,000
Shares issued as consideration in the Formation Transactions			13,901,947
Shares issued to the holder of a tenant in common interest in our Poconos resort			63,746
Shares issued to the holder of a tenant in common interest in our Williamsburg resort			67,203
Shares issued to a trust that will hold assets to pay obligations under our deferred compensation plan in connection with the payment of cash bonuses at the closing of the Offering			129,412

			30,262,308


			September 30, 2004		June 30, 2004

			(Unaudited)
ASSETS
Cash			$	1,000	$	1,000

		Total assets	$	1,000	$	1,000


LIABILITIES AND STOCKHOLDER’S EQUITY
Liabilities			$	—	$	—
Stockholder’s equity
	Common stock, $0.01 par value, 100 shares authorized, 100 shares issued and outstanding			1		1
	Additional paid-in capital			999		999
	Retained earnings			—		—

		Total stockholder’s equity		1,000		1,000

		Total liabilities and stockholder’s equity	$	1,000	$	1,000