UNITED STATES
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FORM 10-K |
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended July 31, 2005 |
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or |
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¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
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Commission File Number: 1-9614 |
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Vail Resorts, Inc. |
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(Exact name of registrant as specified in its charter) |
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Delaware |
51-0291762 |
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(State or other jurisdiction of |
(I.R.S. Employer |
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incorporation or organization) |
Identification No.) |
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Post Office Box 7, Vail, Colorado |
81658 |
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(Address of principal executive offices) |
(Zip Code) |
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Registrant's telephone number, including area code: (970) 845-2500 |
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Securities registered pursuant to Section 12(b) of the Act: |
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Title of each class: |
Name of each exchange on which registered: |
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Common Stock, $0.01 par value |
New York Stock Exchange |
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Securities registered pursuant to Section 12(g) of the Act: |
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None. |
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(Title of class) |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing requirements for the past 90 days.
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K . x |
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Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
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The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the per share closing price on the New York Stock Exchange Composite Tape as of January 31, 2005 (the last business day of the registrant's most recently completed second fiscal quarter) was approximately $799.8 million. |
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As of September 26, 2005, 36,736,325 shares of Common Stock were issued and outstanding. |
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DOCUMENTS INCORPORATED BY REFERENCE |
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The Proxy Statement for the Annual Meeting of Shareholders is incorporated by reference herein into Part III, Items 10 through 14. |
Table of Contents |
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PART I |
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Item 1. |
Business. |
3 |
Item 2. |
Properties. |
14 |
Item 3. |
Legal Proceedings. |
15 |
Item 4. |
Submission of Matters to a Vote of Security Holders. |
17 |
PART II |
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Item 5. |
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
18 |
Item 6. |
Selected Financial Data. |
20 |
Item 7. |
Management's Discussion and Analysis of Financial Condition and Results of Operations. |
22 |
Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk. |
40 |
Item 8. |
Financial Statements and Supplementary Data. |
F-1 |
Item 9. |
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. |
41 |
Item 9A. |
Controls and Procedures. |
41 |
Item 9B. |
Other Information. |
41 |
PART III |
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Item 10. |
Directors and Executive Officers of the Registrant. |
41 |
Item 11. |
Executive Compensation. |
42 |
Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
42 |
Item 13. |
Certain Relationships and Related Transactions. |
42 |
Item 14. |
Principal Accountant Fees and Services. |
42 |
PART IV |
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Item 15. |
Exhibits, Financial Statements Schedules. |
42 |
Except for any historical information contained herein, the matters discussed in this Annual Report on Form 10-K contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information, which are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies.
These forward-looking statements are identified by their use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will" and similar terms and phrases, including references to assumptions.
Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that such plans, intentions or expectations will be achieved. Important factors that could cause actual results to differ materially from our forward-looking statements include, among others, economic downturns; terrorist acts upon the United States; threat of or actual war; our ability to obtain financing on terms acceptable to us to finance our capital expenditure and growth strategy; our ability to develop our resort and real estate operations; competition in our Mountain and Lodging businesses; failure to commence or complete the planned real estate development projects; failure to achieve the anticipated short and long-term financial benefits from the planned real estate development projects; implications arising from new Financial Accounting Standards Board ("FASB")/governmental legislation, rulings or interpretations; termination of existing hotel management contracts; our reliance on government permits or approval for our use of federal land or to make additional improvements; our ability to integrate and successfully operate future acquisitions; expenses or adverse consequences of current or future legal claims; shortages or rising costs in construction materials; adverse changes in the real estate market and unfavorable weather conditions.. All forward-looking statements attributable to us or any persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.
If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected. Given these uncertainties, users of the information included in this Annual Report on Form 10-K, including investors and prospective investors, are cautioned not to place undue reliance on such forward-looking statements. We might not update these forward-looking statements, even if new information, future events or other circumstances have made them incorrect or misleading.
PART I
General
Vail Resorts, Inc. was organized as a public holding company in 1997 and operates through various subsidiaries (collectively, the "Company"). The Company's operations are grouped into three segments: Mountain, Lodging, and Real Estate, which represented approximately 67%, 24%, and 9%, respectively, of the Company's revenues for the 2005 fiscal year. The Company's Mountain segment owns and operates five premier ski resort properties which provide a comprehensive resort experience throughout the year to a diverse clientele with an attractive demographic profile. The Company's Lodging segment owns and/or manages a collection of luxury hotels, a destination resort at Grand Teton National Park, and a series of strategic lodging properties located in proximity to the Company's ski resorts. Collectively, the Mountain and Lodging segments are considered the Resort segment. The Company's Real Estate segment holds, develops, buys and sells real estate in and around the Company's resort communities. Financial information by segment is presented in Note 14, Segment Information, of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report.
The Company's portfolio of ski resorts currently includes:
Vail, Beaver Creek, Breckenridge and Keystone, all located in the Colorado Rocky Mountains, and Heavenly, located in the Lake Tahoe area of California/Nevada, are year-round mountain resorts. Each offers a full complement of recreational activities, including skiing, snowboarding, snowshoeing, mountain biking, sight-seeing and other recreational activities.
The Company's Mountain segment derives revenue primarily through the sale of lift tickets and a comprehensive offering of amenities available to guests, including ski and snowboard lessons, retail and equipment rental, a variety of dining venues, private club operations and other recreational activities. In addition to providing extensive guest amenities, the Company also engages in real estate brokerage services, technology services and the leasing of restaurant, retail and other commercial space.
The following paragraphs discuss certain ski industry related statistics. Colorado ski statistics are derived from data published by Colorado Ski Country USA. Canadian ski statistics are from data published by the Canadian Ski Council. U.S. and California ski statistics are derived from the Kottke National End of Season Survey 2004/05.
There are approximately 750 ski areas in North America and approximately 490 in the United States, ranging from small ski area operations which service day skiers to large resorts which attract both day skiers and destination resort guests looking for a comprehensive vacation experience. One of the primary ski industry statistics for measuring performance is "skier visit", which represents a person utilizing a ticket or pass to access a mountain resort for any part of one day, and includes both paid and complimentary access. During the 2004/05 ski season, combined skier visits for all North American ski areas were approximately 75.1 million and U.S. skier visits approximated 56.9 million. The Company's ski resorts had 5.9 million skier visits during the 2004/05 ski season, or approximately 10.4% of U.S. skier visits, and an approximate 7.9% share of the North American market's skier visits.
The Company's Colorado ski resorts appeal to both day skiers and destination guests due to the resorts' proximity to Colorado's Front Range (Denver/Colorado Springs metropolitan areas), accessibility from several airports, including Denver International Airport and Eagle County Regional Airport, and the wide range of amenities available at each resort. Colorado has approximately 25 ski areas, six of which are classified as "Front Range Destination Resorts", including all of the Company's Colorado resorts, catering to both the Front Range and destination-skier markets. All Colorado ski resorts combined recorded approximately 11.8 million skier visits for the 2004/05 ski season, up 5.0% from the 2003/04 ski season. Skier visits at the Company's Colorado ski resorts totaled approximately 4.9 million, and accounted for 71% of Colorado's total Front Range Destination Resort skier visits and 42% of all Colorado skier visits for the 2004/05 ski season.
Lake Tahoe, which straddles the border of California and Nevada, is a major skiing destination less than 100 miles from Sacramento and Reno and approximately 200 miles from San Francisco, making it a convenient destination for both driving and destination guests. South Lake Tahoe, where Heavenly is located, is also a popular year-round vacation destination, featuring extensive summer attractions and casinos in addition to its winter sports offerings. Heavenly is proximate to both the Reno/Tahoe International Airport and the Sacramento International Airport. California and Nevada have approximately 22 ski resorts. Heavenly had approximately 1.1 million skier visits for the 2004/05 ski season, capturing approximately 13.3% of California's and Nevada's 8.3 million total skier visits for the ski season.
There are significant barriers to entry for new ski areas, due to the limited private lands on which ski areas could be built, the difficulty in getting the appropriate governmental approvals to build on public lands and the significant capital needed to construct the necessary infrastructure. While most North American ski areas are individually owned and operated, recent years have seen the emergence of several major corporations, including the Company, which own the leading ski areas. These other major corporations include the operators of Whistler Blackcomb, Copper Mountain, Mammoth Mountain, Winter Park, Killington, Steamboat and Northstar-at-Tahoe.
The ski industry is highly competitive. While the ski industry has performed well in recent years, with the four best seasons in history, in terms of visitation, occurring in the past five years, a particular ski area's growth is also largely dependent on either attracting skiers away from other resorts or generating more revenue per skier visit. This has spawned a trend of increased spending on resort improvements to ensure the newest and best technology and to create new attractions and has also resulted in intense competition in pricing. Larger ski resort owners, including the Company, generally have a competitive advantage over the individual operator, as the larger owners typically have better access to the capital markets and are also able to create synergies within their operations which enhance profitability. Attracting and retaining new participants to the sport will be the key to long-term sustainable growth for the industry. To this end, the Company has focused efforts in recent years on developing programs geared to entry-level participants as well as expanding attractions for non-skiers. The Company's primary competitors include the ski areas noted above, other ski areas in Colorado and Lake Tahoe, and other destination ski areas worldwide, as well as non-ski related vacation destinations.
There are a variety of factors which contribute to a skier's choice of ski resort, including terrain, challenge, grooming, service, lifts, accessibility, value, weather, snowfall and on- and off-mountain amenities. The Company's resorts consistently rank in the top 20 ski resorts in North America according to industry surveys, which the Company attributes to its resorts' ability to provide a high-quality experience in each of the above mentioned categories.
The Company's ski resorts compete effectively in all categories with respect to attracting day skiers and destination guests for the following reasons:
The Company promotes its resorts through an extensive marketing and sales program, which includes print media advertising in lifestyle and ski industry publications, direct marketing to a targeted audience, promotional programs, loyalty programs which reward frequent guests and sales and marketing directed at attracting groups, corporate meetings and convention business. Additionally, the Company markets directly to many of its guests through its websites and internet presence, which provide visitors with information regarding each of the Company's resorts, including services and amenities, reservations information and virtual tours (nothing contained on the websites shall be deemed incorporated herein). The Company also enters into strategic partnerships with selected "name brand" companies to increase its market exposure and create opportunities for cross-marketing.
Ski resort operations are highly seasonal in nature, with a typical ski season beginning in mid-November and running through mid-April. In an effort to counterbalance the concentration of revenues in the winter months, the Company offers non-ski season attractions, such as golf (included in the operations of the Lodging segment), hiking, sight-seeing and mountain biking. These activities also help attract destination convention business to the Company's resorts.
Lodging Segment
The Company's Lodging segment includes the following operations:
The Lodging segment includes approximately 4,700 owned and managed hotel and condominium rooms in seven states. All of the Company's resort hotels are mid-size and offer a wide range of services to guests.
The Company's portfolio of luxury and resort hotels currently includes:
Name |
Location |
Own/Manage |
Rooms |
RockResorts: |
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The Lodge at Rancho Mirage |
Rancho Mirage, CA |
Manage |
240 |
Cheeca Lodge & Spa |
Islamorada, FL |
Manage |
199 |
The Equinox |
Manchester Village, VT |
Manage |
183 |
The Lodge at Vail |
Vail, CO |
Own |
166 |
La Posada de Santa Fe |
Santa Fe, NM |
Manage |
157 |
The Keystone Lodge |
Keystone, CO |
Own |
152 |
Snake River Lodge & Spa |
Teton Village, WY |
Own |
138 |
Rosario Resort & Spa |
San Juan Islands, WA |
Manage |
116 |
The Pines Lodge |
Beaver Creek, CO |
Own |
66 |
The Lodge & Spa at Cordillera |
Edwards, CO |
Manage |
66 |
Other Hotels: |
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Jackson Lake Lodge |
Grand Teton Nat'l Pk., WY |
Concessionaire Contract |
385 |
Colter Bay Village |
Grand Teton Nat'l Pk., WY |
Concessionaire Contract |
166 |
Jenny Lake Lodge |
Grand Teton Nat'l Pk., WY |
Concessionaire Contract |
37 |
Vail Marriott Mountain Resort & Spa |
Vail, CO |
Manage |
346 |
The Great Divide Lodge |
Breckenridge, CO |
Own |
208 |
Inn at Keystone |
Keystone, CO |
Own |
103 |
Breckenridge Mountain Lodge |
Breckenridge, CO |
Own |
71 |
Village Hotel |
Breckenridge, CO |
Own |
60 |
Inn at Beaver Creek |
Beaver Creek, CO |
Own |
46 |
Ski Tip Lodge |
Keystone, CO |
Own |
10 |
The Company's Lodging strategy seeks to complement and enhance its ski resort operations through the ownership or management of lodging properties in proximity to its ski resorts. The Company initiated a strategy in fiscal 2005 to sell or optimize its owned hotel properties, obtaining management contracts where desirable. In addition, the Company will continue to seek additional hotel management opportunities through its RockResorts brand.
Hotels are categorized by Smith Travel Research, a leading lodging industry research firm, as luxury, upscale, mid-price and economy. The service quality and level of accommodations of the Company's resort hotels place them in the luxury segment of the hotel market, which represents hotels achieving the highest average daily rates ("ADR") in the industry, and includes such brands as the Ritz-Carlton, Four Seasons and Starwood's Luxury Collection hotels. The luxury segment consists of approximately 575,000 rooms at over 1,500 properties worldwide as of July 2005 During fiscal 2005, the Company's owned hotels had an overall average ADR of $166.34 and paid occupancy rate of 62.3%, while the luxury industry segment's average was an ADR of $147.72 and paid occupancy rate of 71.7%. The highly seasonal nature of the Company's hotel properties results in lower average occupancy as compared to general industry experience.
Competition in the hotel industry is generally based on quality and consistency of rooms, restaurant and meeting facilities and services, attractiveness of locations, availability of a global distribution system, price and other factors. The Company's properties compete within their geographic markets with hotels and resorts that include locally owned independent hotels as well as facilities owned or managed by national and international chains, including such brands as Ritz-Carlton, Four Seasons, Westin, Hyatt, Hilton, Marriott and Starwood's Luxury Collection. The Company's lodging strategy, through RockResorts, is focused on the resort hotel niche within the luxury market. The Company's properties also compete for convention and conference business across the national market. The Company believes it is highly competitive in this niche for the following reasons:
The Company promotes its luxury and resort hotels and seeks to maximize lodging revenues by using its marketing network initially established at the Company's ski resorts. The Company's marketing network includes local, national and international travel relationships which provide the Company's central reservation systems with a significant volume of transient customers. The hotels and the Company have active sales forces to generate conference and group business.
The Company also owns and operates GTLC, which was the Company's first resort with a predominantly summer operating season. GTLC is based in the Jackson Hole area in Wyoming and operates within Grand Teton National Park (the "Park") under a concessionaire contract with the National Park Service, which is currently up for bid as part of the required renewal process. For more information regarding the renewal process of the concessionaire contract, refer to the Regulation and Legislation section below. GTLC also owns the Jackson Hole Golf & Tennis Club ("JHG&TC"), which is located outside of the Park near Jackson, Wyoming. GTLC's operations within the Park and JHG&TC have operating seasons that generally run from mid-May to mid-October.
There are over 385 areas within the National Park System covering more than 84 million acres across the United States and its territories. Of the over 385 areas, approximately 57 are classified as National Parks. There are more than 500 National Park Service concessionaires, ranging from small privately-held businesses to large corporate conglomerates. The National Park Service uses "recreation visits" to measure visitation within the National Park System. In calendar 2004, areas designated as National Parks received approximately 88.8 million recreation visits. The Park, which spans approximately 310,000 acres, had 2.4 million recreation visits during calendar 2004, or approximately 3% of total National Park recreation visits. Four concessionaires provide accommodations within the Park, including GTLC. GTLC offers three lodging options within the Park: Jackson Lake Lodge, a full-service, 385-room resort with conference facilities which can accommodate up to 700 people; the Jenny Lake Lodge, a small, rustically elegant retreat with 37 cabins; and Colter Bay Village, a facility with 166 log cabins, 66 tent cabins, 350 campsites and a 112-space RV park. GTLC offers dining options as extensive as its lodging options, with cafeterias, casual eateries, and fine-dining establishments. GTLC's resorts provide a wide range of activities for guests to enjoy, including cruises on Jackson Lake, boat rentals, horseback riding, guided fishing, float trips, golf and guided park tours. Because of the extensive amenities offered as well as the tremendous popularity of the National Park System, GTLC's accommodations within the Park operate near full capacity during their operating season.
The Company's lodging business is highly seasonal in nature, with peak seasons primarily in the winter months (with the exception of GTLC, certain managed properties and golf operations). In recent years, the Company has grown its business to help offset the seasonality by offering more off-season activities for the Company's lodging business, including golf and group business. The Company owns and operates six golf courses: The Beaver Creek Golf Club, The Keystone Ranch Golf Course, The River Course at Keystone, The Jackson Hole Golf & Tennis Club, and the Tom Fazio and Greg Norman Courses at Red Sky Ranch. The Jackson Hole Golf & Tennis Club was ranked the second best course in Wyoming for 2005 by Golf Digest , the Tom Fazio course was ranked the fourth best course in Colorado and 90th in the U.S. in the 2004 "Top 100 You Can Play" by Golf Magazine , and the Greg Norman Course was ranked the top course in Colorado and 25th in the U.S. in the 2004 "Top 100 You Can Play" by Golf Magazine .
The Company has extensive holdings of real property at its resorts throughout Summit and Eagle Counties in Colorado and in Teton County, Wyoming. The Company's real estate operations, through Vail Resorts Development Company ("VRDC"), a wholly owned subsidiary of the Company, include the planning, oversight, marketing, infrastructure improvement and development of the Company's real property holdings. In addition to the substantial cash flow generated from real estate sales, these development activities benefit the Company's Mountain and Lodging operations through (1) the creation of additional resort lodging which is available to guests, (2) the ability to control the architectural themes of the Company's resorts, (3) the creation of unique facilities and venues (primarily restaurant, retail and private club operations) which provide the Company with the opportunity to create new sources of recurring revenue and (4) the expansion of the Company's property management and commercial leasing operations, which are the preferred providers of these services for all developments on the Company's land.
In order to facilitate the sale of real estate development projects, the projects often include the construction of amenities for the benefit of the development, such as chairlifts, ski trails or golf courses. While these mountain improvements enhance the value of the real estate held for sale (for example, by providing ski-in/ski-out accessibility), they also benefit mountain and lodging operations. VRDC often seeks to minimize the Company's exposure to development risks and maximize the long-term value of the Company's real property holdings by selling developed and entitled land to third party developers for cash payments prior to the commencement of construction, while retaining approval of the development plans as well as an interest in the developer's profit. The Company also typically retains the option to purchase, at cost, any retail/commercial space created in a development. The Company is able to secure these benefits from third party developers because of the high property values and strong demand associated with property in close proximity to the Company's mountain resort facilities. In instances where the Company determines the business model warrants, in a growing trend, the Company will undertake the risk of vertical development itself, as it is doing or proposes to do for certain of the projects in the Vail's New Dawn, JHG&TC and Breckenridge developments.
VRDC's principal activities include (1) the development of certain residential and mixed-use condominium projects which are integral to the Company's Mountain and Lodging operations (such as properties located at a main base facility), (2) the sale of single-family homesites to individual purchasers, (3) the sale of certain land parcels to third-party developers for condominium, townhome, cluster home, single family home, lodge and mixed use developments, (4) the zoning, planning and marketing of new resort communities (such as Red Sky Ranch, JHG&TC and Breckenridge Peaks 7 and 8), (5) arranging for the construction of the necessary roads, utilities and mountain infrastructure for new resort communities and (6) the purchase of selected strategic land parcels for future development.
VRDC's current development activities are focused on (1) the redevelopment of the LionsHead base area, including the development of the Arrabelle at Vail Square and the Gore Creek Place residences, (2) the planning and development of the Vail Front Door project in the Town of Vail, (3) the Jackson Hole area residential and golf development, (4) expansion of infrastructure at Red Sky Ranch to facilitate additional lot sales at the Red Sky residential development, (5) planning for the development and/or sale of land parcels at base areas of Breckenridge Peaks 7 and 8, (6) continued development of the Mountain Thunder project in Breckenridge and (7) additional planning and development projects in and around each of the Company's resorts.
Employees
The Company, through certain operating subsidiaries, currently employs approximately 3,700 year-round and 9,900 seasonal employees. In addition, the Company employs approximately 1,300 year-round and 200 seasonal employees on behalf of the managed hotel properties. As of the end of fiscal 2005, none of the Company's employees were unionized. The Company considers employee relations to be good.
Regulation and Legislation
Special Use Permits
The Company has been granted the right to use federal land as the site for ski lifts and trails and related activities, under the terms of Special Use Permits granted by the United States Forest Service (the "Forest Service"). The Forest Service has the right to review and approve the location, design and construction of improvements in the permit area and many operational matters. While virtually all of the skiable terrain on Vail, Breckenridge, Heavenly and Keystone is located on Forest Service land, a significant portion of the skiable terrain on Beaver Creek Mountain, primarily in the lower main mountain, Western Hillside, Bachelor Gulch and Arrowhead Mountain areas, is located on Company-owned land.
The permits originally granted by the Forest Service were (1) Term Special Use Permits granted for 30-year terms, but which may be terminated upon 30 days written notice by the Forest Service if it determines that the public interest requires such termination and (2) Special Use Permits that are terminable at will by the Forest Service. In November 1986, a new law was enacted providing that Term Special Use Permits and Special Use Permits may be combined into a unified single Term Special Use Permit that can be issued for up to 40 years. These unified Special Use Permits were amended in 2003 to reflect the permit boundary maps and acreage amounts set forth in the new White River National Forest Plan. Changes to the permit boundaries are not material to the Company's plans. Vail operates under a unified Term Special Use permit for the use of 12,226 acres that expires October 31, 2031. Breckenridge operates under a unified Term Special Use Permit for the use of 5,553 acres that expires on December 31, 2029. Keystone operates under a unified Term Special Use Permit for the use of 8,376 acres that expires on December 31, 2032. Beaver Creek operates under a unified Term Special Use Permit for the use of 3,801 acres that expires on December 31, 2038. Heavenly operates under a Term Special Use Permit for the use of 7,050 acres, is administered by the Lake Tahoe Basin Management Unit, and expires May 1, 2042. In addition, Heavenly operates four separate base areas, all of which are located on Company-owned lands.
For use of the Special Use Permits, the Company pays a fee to the Forest Service ranging from 1.5% to 4.0% of sales occurring on Forest Service land. Included in the calculation are sales from, among other things, lift tickets, ski school lessons, food and beverages, rental equipment and retail merchandise sales.
The Forest Service can terminate most of the Company's permits if it determines that termination is required in the public interest. However, to the Company's knowledge, no recreational Special Use Permit or Term Special Use Permit for any major ski resort then in operation has ever been terminated by the Forest Service over the opposition of the permitee.
Federal Regulations, Company Proposals and Related Approvals
Certain of the Company's resort and lodging operations require permits and approvals from certain federal, state, and local authorities, in addition to the Forest Service and U.S. Army Corps of Engineers approvals, discussed herein. In particular, the Company's operations are subject to environmental laws and regulations, and compliance with such laws and regulations may require expenditures or modifications of the Company's development plans and operations in a manner that could have a detrimental effect on it. There can be no assurance that new applications of existing laws, regulations and policies, or changes in such laws, regulations and policies, will not occur in a manner that could have a detrimental effect to the Company, or that material permits, licenses, or approvals will not be terminated, not be renewed or be renewed on terms or interpreted in ways that are materially less favorable to the Company. Although the Company believes that it will be successful in implementing its development plans and operations in ways satisfactory to it, no assurance can be given that any particular permits and approvals will be obtained or upheld on judicial review.
Breckenridge Regulatory Matters
In August 1998, the Company received the approval of the Forest Service to develop a chairlift, other skier facilities and associated skiing terrain on Peak 7 and a teaching chairlift, two new ski trails and additional snowmaking on Peak 9, all located at Breckenridge. Part of the trail and mountain improvements on Peak 7 have been completed and the new trails were open for skiing for the 2001/02 ski season and direct lift service for the trails was provided in the 2002/03 ski season. The Company has also received approval from the Forest Service to change the proposed location of a restaurant initially proposed for the top of Peak 7 to its midway point. To date, the Company has completed a small portion of the snowmaking improvements.
As part of the Peak 7 approval and development process, certain federal agencies expressed concern about the analysis of potential future development on private land that the Company owns at the base of Peak 7. In response to an administrative appeal of the Forest Service approval decision by certain individuals and groups, the Regional Forester upheld the approval of the Peak 7 and 9 projects in November 1998. The Forest Service subsequently reviewed the Company's proposed changes to develop gondola access to the Peak 7 base area and to move the lower terminal of the lift servicing the terrain and base area from public lands to private land owned by the Company. Based on an interdisciplinary review of the proposed changes, the Forest Service determined in September 2000 that the new information and changes to the proposal did not require an update or revision of the 1998 Environmental Assessment or decision notice.
The U.S. Army Corps of Engineers considered the development of the base facilities on private land and the ski area improvements on public land as combined actions and issued one permit for the combined projects. The permit contains strict conditions related to the permissible impact to wetlands connected with the real estate project. In May 2002, the Company signed a Preliminary Agreement with the Town of Breckenridge, which allows the Company to proceed with the review of the Master Plan with specified density. In September 2002, the town approved a Development Agreement which allowed the Planning Commission to review the Company's Master Plan amendment with certain components that would otherwise have varied from the town's Development Code. The amended Master Plan was approved by the Town of Breckenridge in June 2003. In the summer of 2005, the Company submitted a proposal to the Town of Breckenridge to further amend its Master Plan to transfer up to 60 units of density which were not constructed at Mountain Thunder up to the Peak 7 development. The Company expects to receive a response on this proposed amendment in the spring of 2006. While the Company cannot predict or guarantee the prospects for obtaining approval of this amendment, the Company is optimistic for a satisfactory outcome.
In August 2005, the Company received approval from the Forest Service for construction of a chairlift to the summit of Peak 8 of the Breckenridge Ski Area (the "Imperial Lift"). The Company expects the Imperial Lift to be completed in time for the start of the 2005/06 ski season. Finally, the Company will begin the process of preparing a programmatic update to the Breckenridge Ski Area Master Development Plan this fall. No environmental documentation will be required for this update, with project specific analysis occurring prior to project implementation.
Keystone Regulatory Matters
In March 2000, the Company announced that Keystone and the Forest Service would conduct a joint water quality study of possible impacts on four streams from snowmaking operations at Keystone. This study was completed in 2001 and concluded that the levels of tested metals were within applicable Colorado state water quality standards. Because this study only examined one calendar year of measurement, Keystone agreed to conduct ongoing water quality monitoring combined with a use attainability analysis for the Colorado Water Quality Control Commission (the "Commission") to further assess water quality conditions at Keystone. In March 2004, the Commission adopted a regulation which rejected a proposal to add four streams at Keystone to the list of Colorado streams which do not achieve water quality standards. Importantly, in June 2005, the U.S. Environmental Protection Agency then upheld the Commission's decision. Ongoing monitoring of water quality at Keystone indicates compliance with all applicable water quality standards.
In 2003, the Company submitted a proposal to conduct snowcat skiing on 861 additional skiable acres within the Keystone permit boundary on Little Bowl and Erickson Bowl. This proposal was approved and Keystone conducted snowcat skiing operations during the 2004/05 ski season and will continue to do so. In May 2005, Keystone submitted a proposal for additional snowcat skiing in an area north of Keystone but also within its permit boundaries. The Company expects to receive approval for 400 additional skiable acres of snowcat skiing at Keystone prior to the 2005/06 ski season. The Company is currently revising the Keystone Master Ski Area Development Plan and expects that process to be concluded in late 2005. Finally, the Company is preparing an environmental assessment for a proposed four mile pipeline to transport water from Keystone's Montezuma Shaft diversion point to the Keystone River snowmaking pumping station. When completed, this project will significantly increase the efficiency and quality of snowmaking at Keystone.
Vail and Beaver Creek Regulatory Matters
In the spring of 2000, the Company submitted a proposal to the Forest Service concerning additional snowmaking on Vail and a race facility expansion at Vail's Golden Peak. The Company withdrew this proposal and intends to submit a new proposal to combine these projects with a new master plan update for Vail. Also, the Company is in the process of a land exchange with the Forest Service involving land at the Vail Village base area in connection with the Company's Vail's Front Door development project. In 2003, the Company submitted a proposal to the Forest Service to install a new chair lift in Vail's Sundown Bowl and to upgrade the existing Chair 5 to a high-speed, detachable quad chair lift. This proposal has been put on hold temporarily. Finally, in 2004 the Company submitted a proposal to the Forest Service to replace Vail Chairs 10 and 14. This proposal was approved and Vail expects to complete this project in the next several years.
In 2001, the Company submitted a proposal to the Forest Service concerning the construction of a gondola connecting the Town of Avon with Beaver Creek (the "Gondola Proposal"), a portion of which would cross public lands on Beaver Creek within the Company's existing permit boundaries. The Gondola Proposal was approved by the Forest Service but was modified in 2003, whereby the gondola conveyance was replaced with the installation of two individual chairlifts prior to the 2004/05 ski season. These new chairlifts carry guests from the bottom of Bachelor Gulch to Beaver Creek. Contingent on the Company's sale of certain land located in the Town of Avon, and subject to various governmental and regulatory approvals, a gondola connection from lower Bachelor Gulch to the Town of Avon may still be constructed. In the event all contingencies are satisfied and approvals obtained, this gondola would likely be operated by the Company but owned by a quasi-governmental agency. However, no assurance can be given that any required approvals will be obtained.
Revision of Forest Plan
The Record of Decision (the "ROD") approving the new White River National Forest Land Resource Management Plan (the "Forest Plan") was issued by the Forest Service in April of 2002. The Forest Plan sets certain broad regulatory and planning requirements, as well as land use planning, that pertain to recreational, operational and development activities at the Company's four Colorado ski resorts. The ROD was appealed to the Chief of the Forest Service by the Company and several other interested parties, including environmental groups holding positions opposite to those of the Company. The Chief's decision on the appeals was issued on September 22, 2004, and was further modified by a Discretionary Review of the Deputy Undersecretary of Agriculture on December 2, 2004. The Company prevailed on several important issues in both the Chief's decision and the Discretionary Review.
To date, no appellant has filed an action for judicial review of the final decision in Federal Court. It is impossible at this time to predict whether an action for judicial review will be filed, and if so, whether the resolution of it would have a material adverse impact on the Company.
Heavenly Regulatory Matters
Prior to the Company's acquisition of Heavenly, the State of California Regional Water Quality Control Board, Lahontan Region, and the El Dorado County Department of Environmental Management required Heavenly's prior owner to conduct an environmental compliance cleanup at a vehicle maintenance facility at Heavenly. This requirement was imposed in response to an accidental release of waste oil at a vehicle maintenance shop in 1998. All cleanup work has been completed in accordance with the approved work plan and a new underground vault, piping and overflow protection system was installed to prevent any further releases. A final report was submitted on March 31, 2003 to the above two agencies. In late 2004, Heavenly was notified by the State of California that additional monitoring and reporting would be required following snowmelt in 2005 using the three existing monitoring wells. No new well was required to be installed. In 2005, the sampling and reporting was completed as prescribed by the State. The final report has been submitted as required. No response from the State has been provided.
In March 2005, Heavenly received a one year extension for the submittal of the final site development plan for the 120-unit Planned Development at Stagecoach Lodge in Douglas County, Nevada, which was originally approved in 2000. The extension was granted by the Douglas County Board of County Commissioners and is valid until February 2006.
Also in March 2003, Heavenly received an allocation of 55 water units (each water unit equals approximately 500 gallons/day) for the same Stagecoach Lodge Planned Development project from the Kingsbury General Improvement District ("KGID"). KGID is the water and sewer district that services the Stagecoach Lodge. Water allocation units for this service area are limited by the State of Nevada. However, based on KGID's gallons/day consumptive use formula, the 55 water allocation units are sufficient to serve the 120 units approved by Douglas County.
In July 2003, Heavenly received updated waste discharge requirements ("WDRs") for all lands and facilities within the resort which are located within the State of California. This includes National Forest lands as well as fee-owned lands. The approval was given by the State of California Water Resources Control Board, Lahontan Region. The approved WDRs will permit Heavenly to continue winter and summer operations and to continue with implementation of the approved Heavenly Ski Area Master Plan ("Master Plan"). WDRs are normally valid for ten years.
In 1996, the Master Plan was approved by the Forest Service, the Tahoe Regional Planning Agency and the underlying units of local government with jurisdiction. Heavenly updated the Master Plan which requests revisions to permit new and upgraded trails, lifts, snowmaking, lodges and other facilities ("Master Plan Update"). In 2005, Heavenly submitted this Master Plan Update to the agencies that approved the original Master Plan in 1996. The review and approval process has commenced and is scheduled to conclude in 2006. The Company expects to complete the first phase of the capital projects contained in the amended Master Plan in 2006, with the remainder proceeding in accordance with the implementation schedule contained therein.
In the spring of 2005, Heavenly requested approval from the Forest Service for construction of one high-speed four-passenger lift. While this lift was scheduled for completion prior to the start of the 2005/06 ski season, Heavenly has not yet received the required approval. Heavenly does expect to receive this approval in sufficient time to ensure construction during the summer of 2006 and completion prior to the start of the 2006/07 ski season.
GTLC Concession Contract Process
GTLC operates three lodging properties and a variety of food and beverage, retail, camping and other services within the Park under a concession contract with the National Park Service that expired on December 31, 2002. GTLC has been granted three (3) one-year extensions of this contract, with the current extension term scheduled to end December 31, 2005. On June 1, 2005, the National Park Service issued a prospectus soliciting offers to operate the Park concession (the "Prospectus") from interested parties with an original deadline of September 28, 2005, now extended to October 20, 2005. In the Prospectus, the National Park Service announced that a new contract will be awarded, negotiated and entered into on or before January 1, 2006. The award of a new contract is subject to a competitive bidding process and formal, independent evaluation of all submissions under the rules promulgated to implement the concession provisions of the National Park Omnibus Management Act of 1998. Both before and after issuance of the Prospectus, the Company has been diligently working on its comprehensive responses to the principal and secondary selection criteria set out in the Prospectus and will be timely submitting its formal offer on or before the October 20, 2005 deadline. After all interested parties have submitted their formal offers, the contract will be sent to Congress for a sixty (60) day review period. Previous congressional reviews show that Congress has generally confirmed the National Park Service's concessionaire selection. Nevertheless, in the event the National Park Service is unable to meet its January 1, 2006 deadline for award of a new contract, the Company has requested a fourth extension of its contract at least through the 2006 summer operating season and possibly until December 31, 2006. The Company cannot predict or guarantee the prospects for success in award of a new contract, although the Company believes GTLC is well positioned to obtain a new concession contract on satisfactory terms. In the event GTLC is not the successful bidder for the new concession contract, under the existing contract GTLC is required to sell to the new concessionaire its "possessory interest" in improvements and its other property used in connection with the concession operations. GTLC would then be entitled to receive compensation from the successful bidder for the value of its "possessory interest" in the assets as well as compensation for any personal property and inventories purchased by the new owner. Under an amendment to the contract, in the summer of 2003, GTLC and the National Park Service agreed upon the possessory interest value which is contained in the Prospectus soliciting bids for the contract.
Available Information
The Company's SEC information, including the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Act") are available free of charge on the Company's corporate website (www.vailresorts.com) as soon as reasonably practicable after the information is electronically filed with or furnished to the SEC. In addition, the Company's Code of Ethics is available on its website. No content of the Company's corporate website is incorporated by reference herein. Copies of any materials the Company files with the SEC can be obtained at www.sec.gov or at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of the public reference room is available by calling the SEC at 1-800-SEC-0330.
The following table sets forth the principal properties owned or leased by the Company for use in its operations:
Location |
Ownership |
Use |
||
Arrowhead Mountain, CO |
Owned |
Ski trails and ski resort operations, including ski lifts, buildings and other improvements, commercial space |
||
Avon, CO |
Owned |
Real estate held for sale or development |
||
BC Housing Riveredge, CO |
26% Owned |
Employee housing facilities |
||
Bachelor Gulch Village, CO |
Owned |
Ski resort operations, including ski lifts, ski trails, buildings and other improvements, commercial space |
||
Beaver Creek Mountain, CO |
Owned |
Ski resort operations, including ski lifts, buildings and other improvements, commercial space, real estate held for sale or development |
||
Beaver Creek Mountain, CO (3,801 acres) |
Special Use Permit |
Ski trails |
||
Beaver Creek Resort, CO |
Owned |
Golf course, commercial space and residential spaces |
||
Breckenridge Mountain, CO |
Owned |
Ski resort operations, including ski lifts, buildings and other improvements, commercial space, real estate held for sale or development |
||
Breckenridge Mountain, CO (5,553 acres) |
Special Use Permit |
Ski trails |
||
Breckenridge Terrace, CO |
50% Owned |
Employee housing facilities |
||
Colter Bay Village, WY |
Concessionaire contract |
Lodging, dining |
||
Great Divide Lodge, CO |
Owned |
Lodging, dining and conference facilities |
||
Heavenly Mountain Resort, CA |
Owned |
Ski resort operations, including ski lifts, buildings and other improvements, commercial space |
||
Heavenly Mountain, CA (7,050 acres) |
Special Use Permit |
Ski trails |
||
Inn at Beaver Creek, CO |
Owned |
Lodging, dining and conference facilities |
||
Inn at Keystone, CO |
Owned |
Lodging, dining and conference facilities |
||
Jackson Hole Golf and Tennis Club, WY |
Owned |
Golf course, tennis facilities, dining, real estate held for sale or development |
||
Jackson Lake Lodge, WY |
Concessionaire contract |
Lodging, dining, conference facilities |
||
Jenny Lake Lodge, WY |
Concessionaire contract |
Lodging, dining |
||
Keystone Conference Center, CO |
Owned |
Conference facility |
||
Keystone Lodge, CO |
Owned |
Lodging, dining and conference facilities |
||
Keystone Mountain, CO |
Owned |
Ski resort operations, including ski lifts, buildings and other improvements, commercial space |
||
Keystone Mountain, CO (8,376 acres) |
Special Use Permit |
Ski trails |
||
Keystone Ranch, CO |
Owned |
Golf course and restaurant facilities |
||
Keystone Resort, CO |
Owned |
Resort operations, dining, commercial space, conference facilities, real estate held for sale or development |
||
Red Sky Ranch, CO |
Owned |
Golf course and real estate held for sale and development |
||
River Course at Keystone, CO |
Owned |
Golf course |
||
RockResorts, CO |
Leased |
RockResorts offices |
||
Seasons at Avon, CO |
Leased/50% owned |
Corporate offices |
||
Ski Tip Lodge, CO |
Owned |
Lodging and dining facilities |
||
Snake River Lodge & Spa, WY |
Owned |
Lodging, dining, conference and spa facilities |
||
The Lodge at Vail, CO |
Owned |
Lodging, dining and conference facilities, real estate held for sale or development |
||
The Tarnes at Beaver Creek, CO |
31% Owned |
Employee housing facilities |
||
Tenderfoot Housing, CO |
50% Owned |
Employee housing facilities |
||
The Pines Lodge at Beaver Creek, CO |
Owned |
Lodging, dining, conference facilities |
||
Vail Mountain, CO |
Owned |
Ski resort operations, including ski lifts, buildings and other improvements, commercial space |
||
Vail Mountain, CO (12,226 acres) |
Special Use Permit |
Ski resort operations, including ski lifts, trails, buildings and other improvements |
||
Village at Breckenridge, CO |
Owned |
Lodging, dining, conference facilities and commercial space |
||
SSV Properties |
61.7%-owned |
Over 100 retail stores for recreational products |
The Forest Service permits of the Company's operating subsidiaries are encumbered under certain debt instruments of the Company. Many of the Company's properties are used across all segments in complementary and interdependent ways.
The Company is a party to various lawsuits arising in the ordinary course of business, including Resort related cases and contractual and commercial litigation that arises from time to time in connection with the Company's real estate and other business operations. Management believes the Company has adequate insurance coverage and accrued loss contingencies for all known matters and that, although the ultimate outcome of such claims cannot be ascertained, current pending and threatened claims are not expected to have a material adverse impact on the financial position, results of operations and cash flows of the Company.
SEC Investigation Terminated
In February 2003, the SEC issued a formal order of investigation with respect to the Company. On September 19, 2005, the Central Regional Office of the SEC informed the Company that its investigation has been terminated, and that no enforcement action has been recommended regarding the Company. The Company has also been informed that no enforcement action has been recommended with respect to any present or former directors, officers or employees of the Company in regard to the matters that had been under investigation.
Gilman Litigation Appeal
The Company appealed an adverse decision by the Eagle County District Court of Colorado, rendered on September 24, 2003, relating to the Company's interest in real property in Eagle County, Colorado commonly known as the "Gilman" property. The litigation commenced in November 1999 involving a dispute between a Company subsidiary, as the holder of an option to acquire a 50% interest in the entity that owned the property, and Turkey Creek LLC ("Turkey Creek"), the owner of the property. The property consists of approximately 6,000 acres of rugged, high altitude land in close proximity to Vail Mountain. Turkey Creek assembled the property over many years from various parcels, old mining claims and other property.
Vail Associates originally acquired the option in 1992 under an option agreement between Vail Associates and Turkey Creek. The option agreement was amended and extended several times over the years between 1992 and 1999. During those years, Vail Associates funded all of the acquisition costs to buy the parcels comprising the property and holding costs related to the property, such as real estate taxes and litigation costs to perfect title to the property. Between 1992 and 1999, Vail Associates invested approximately $4.8 million of such funds to maintain and preserve its 50% option interest.
In November 1999, a Company subsidiary (the successor to Vail Associates under the option) exercised the option to acquire the 50% interest in the entity that owned the property. Turkey Creek, however, refused the exercise, claiming that the Company's proposal to pursue a strategy to find a buyer who would put most of the property into conservation or open space uses was a breach of the option agreement, which contemplated "prompt and diligent development" of the property upon exercise of the option.
The Court found that the Company's subsidiary repudiated the option agreement in advance of the exercise of the option by not committing to prompt and diligent development and that "development" did not include selling the land to a buyer for conservation. The Court further found that Turkey Creek was entitled to terminate the contract and refuse the exercise and that the Company's subsidiary was not entitled to any interest in the property.
As a result of the Court's decision, the Company recorded a non-cash asset impairment charge of $4.8 million in fiscal 2003, the amount previously carried on the Company's consolidated balance sheet reflecting its investment. The Company appealed the adverse decision, primarily on the basis that the Court applied the wrong legal standard in deciding the issue. In August 2005, a three judge panel vacated the trial court's judgment and remanded the case back to the trial court to apply the correct legal standard and identify facts that meet the correct legal standard. The appellee's motion for reconsideration of the Court of Appeals decision was denied.
During the pendency of the appeal, Turkey Creek sold the property for approximately $33 million to an unrelated third party developer. Accordingly, the outcome of the case will relate only to an economic resolution between the parties and will not affect the real property now owned by the third party. The Company cannot predict the ultimate outcome of the matter.
Breckenridge Terrace Employee Housing Construction Defect/Water Intrusion Claims
During fiscal 2004, the Company became aware of water intrusion and condensation problems causing mold damage in the 17 building, employee housing facility owned by Breckenridge Terrace, LLC ("Breckenridge Terrace"), an employee housing entity in which the Company is a member and manager. As a result, the facility was not available for occupancy during the 2003/04 ski season. All buildings at the facility required mold remediation and reconstruction and this work began in fiscal 2004. Breckenridge Terrace recorded a $7.0 million liability in fiscal 2004 for the estimated cost of remediation and reconstruction efforts. These costs were funded by a loan to Breckenridge Terrace from the Company member of the LLC. As of July 31, 2005, Breckenridge Terrace had a remaining liability of $871,000 for future remaining remediation and reconstruction costs. With the exception of one building which has been kept in its original design and construction for evidentiary purposes (see discussion below), the remaining 16 buildings became available for occupancy in the second quarter of fiscal 2005. The Company anticipates it will incur the remaining amount of remediation and reconstruction costs during fiscal 2006.
Forensic construction experts retained by Breckenridge Terrace have determined that the water intrusion and condensation problems are the result of construction and design defects. In accordance with Colorado law, Breckenridge Terrace served separate notices of claims on the general contractor, architect and developer and initiated arbitration proceedings. In September 2005, Breckenridge Terrace agreed to settle its claims against the general contractor and the architect for an aggregate amount of $800,000 and will recognize the settlement amount as reduction of the remediation expense upon receipt. Claims against the developer were not settled and Breckenridge Terrace is reviewing its legal options in that regard.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
The Company's Common Stock is traded on the New York Stock Exchange under the symbol "MTN". As of September 26, 2005, 36,736,325 shares of common stock were issued and outstanding, held by approximately 475 holders of record.
Other than a rights distribution in October 1996 which gave each stockholder of record the right to receive $2.44 per share of Common Stock held, the Company has never paid nor declared a cash dividend on its Common Stock or Class A Common Stock. The declaration of cash dividends in the future will depend on the Company's earnings, financial condition, capital needs, restrictions under debt instruments and on other factors deemed relevant by the Board of Directors at that time. It is the current policy of the Company's Board of Directors to retain earnings to finance the operations and expansion of the Company's business.
The following table sets forth, for the fiscal years ended July 31, 2005 and 2004, and quarters indicated (ended October 31, January 31, April 30, and July 31) the range of high and low per share sales prices of Vail Resorts, Inc. Common Stock as reported on the New York Stock Exchange Composite Tape.
Vail Resorts |
||||
Common Stock |
||||
High |
Low |
|||
Year Ended July 31, 2005 |
||||
1st Quarter |
$ 20.21 |
$ 17.50 |
||
2nd Quarter |
23.97 |
19.00 |
||
3rd Quarter |
26.25 |
23.06 |
||
4th Quarter |
29.44 |
25.33 |
||
Year Ended July 31, 2004 |
||||
1st Quarter |
$ 16.10 |
$ 12.35 |
||
2nd Quarter |
18.30 |
12.97 |
||
3rd Quarter |
18.24 |
15.50 |
||
4th Quarter |
19.65 |
13.73 |
Securities authorized for issuance under equity compensation plans
The following table summarizes the Company's equity compensation plans as of July 31, 2005:
The Company's stock-based compensation plans are described in Note 18, Stock Compensation Plans, of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report.
ITEM 6. SELECTED FINANCIAL DATA.
The following table presents selected historical consolidated financial data of the Company derived from the Company's consolidated financial statements for the periods indicated. The financial data for the fiscal years ended July 31, 2005, 2004 and 2003 should be read in conjunction with the Consolidated Financial Statements, related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained elsewhere in this Annual Report on Form 10-K (the "Form 10-K"). The table presented below is unaudited. The data presented below are in thousands, except per share, effective ticket price ("ETP") and resort revenue per skier visit amounts.
Fiscal Year Ended July 31, |
||||||||||||
2005 (1) |
2004 (1) |
2003 (1) |
2002 (1) |
2001 (1) |
||||||||
Statement of Operations Data: |
||||||||||||
Revenue: |
||||||||||||
Mountain |
$ 540,855 |
$ 500,995 |
$ 460,568 |
$ 396,572 |
$ 391,373 |
|||||||
Lodging |
196,351 |
180,525 |
172,003 |
154,834 |
124,207 |
|||||||
Real estate |
72,781 |
45,123 |
80,401 |
63,854 |
28,200 |
|||||||
Total net revenue |
809,987 |
726,643 |
712,972 |
615,260 |
543,780 |
|||||||
Segment operating expense: |
||||||||||||
Mountain |
391,889 |
368,875 |
362,131 |
305,299 |
299,414 |
|||||||
Lodging |
177,469 |
165,983 |
161,846 |
140,856 |
109,664 |
|||||||
Real estate |
58,254 |
16,791 |
66,642 |
51,326 |
23,110 |
|||||||
Total segment operating expense |
627,612 |
551,649 |
590,619 |
497,481 |
432,188 |
|||||||
Gain on transfer of property, net |
-- |
2,147 |
-- |
-- |
-- |
|||||||
Mountain equity investment income, net |
2,303 |
1,376 |
1,009 |
1,748 |
1,084 |
|||||||
Lodging equity investment loss, net |
(2,679) |
(3,432) |
(5,995) |
(57) |
(1,352) |
|||||||
Real estate equity investment (loss) income, net |
(102) |
460 |
3,962 |
2,744 |
7,043 |
|||||||
Interest expense |
(40,298) |
(47,479) |
(50,001) |
(38,788) |
(31,735) |
|||||||
Depreciation and amortization |
(89,968) |
(86,377) |
(82,242) |
(68,480) |
(65,580) |
|||||||
Loss on extinguishment of debt |
(612) |
(37,084) |
-- |
-- |
-- |
|||||||
Mold remediation charge |
-- |
(5,500) |
-- |
-- |
-- |
|||||||
Loss from sale of businesses, net |
(7,353) |
-- |
-- |
-- |
-- |
|||||||
Income (loss) before cumulative effect of change in accounting principle (2) |
23,138 |
(5,959) |
(8,527) |
8,758 |
11,452 |
|||||||
Net income (loss) |
$ 23,138 |
$ (5,959) |
$ (8,527) |
$ 7,050 |
$ 11,452 |
|||||||
Diluted per share income (loss) before cumulative effect of change in accounting principle (2) |
$ 0.64 |
$ (0.17) |
$ (0.24) |
$ 0.25 |
$ 0.33 |
|||||||
Diluted per share net income (loss) |
$ 0.64 |
$ (0.17) |
$ (0.24) |
$ 0.20 |
$ 0.33 |
|||||||
Other Data: |
||||||||||||
Mountain |
||||||||||||
Skier visits (3) |
5,940 |
5,636 |
5,730 |
4,732 |
4,975 |
|||||||
ETP (4) |
$ 39.30 |
$ 37.67 |
$ 34.13 |
$ 34.22 |
$ 31.98 |
|||||||
Resort |
||||||||||||
Resort revenue per skier visit (5) |
$ 112.09 |
$ 109.72 |
$ 99.18 |
$ 106.53 |
$ 97.67 |
|||||||
Real Estate |
||||||||||||
Real estate held for sale and investment (6) |
$ 154,874 |
$ 134,548 |
$ 123,223 |
$ 161,778 |
$ 159,177 |
|||||||
Other Balance Sheet Data |
||||||||||||
Total assets |
$1,525,921 |
$1,533,957 |
$1,455,442 |
$1,449,026 |
$1,188,546 |
|||||||
Long-term debt (including current maturities) |
521,710 |
625,803 |
584,151 |
602,786 |
388,380 |
|||||||
Stockholders' equity |
$ 540,529 |
$ 491,163 |
$ 496,246 |
$ 504,004 |
$ 494,000 |
(footnotes to selected financial data appear on following page)
Footnotes to Selected Financial Data:
(1) |
The Company has made several acquisitions and dispositions which impact comparability between years during the past five years: Heavenly Ski Resort (acquired in May 2002), Vail Marriott (acquired in December 2001 and subsequently sold in June 2005), The Lodge at Rancho Mirage (acquired in November 2001 and subsequently sold in July 2005), RockResorts (acquired in November 2001), Resort Technology Partners, LLC (acquired in March 2001), investment in Ritz-Carlton, Bachelor Gulch (opened November 2002 and subsequently sold in December 2004) and SRL&S (acquired in December 2000). In addition, the Company consolidated several entities in fiscal 2004 as a result of the adoption of FASB Interpretation No. 46, "Consolidation of Variable Interest Entities-an Interpretation of ARB No. 51, Revised" ("FIN 46R"). See Note 7, Variable Interest Entities, of the Notes to Consolidated Financial Statements included in Item 8 of this report on Form 10-K for information regarding the entities consolidated under FIN 46R. A discussion of the impacts of consolidation of these entities is included in "Management's Discussion and Analysis" included in Item 7 of this report on Form 10-K. |
(2) |
In fiscal 2002, the Company recorded a goodwill impairment charge in connection with the implementation of Statement of Financial Accounting Standards No. 142, "Goodwill and Intangible Assets" associated with the Village at Breckenridge of $1.7 million, net of income taxes, which was recorded as "cumulative effect of a change in accounting principle" in the consolidated statements of operations. |
(3) |
A skier visit represents a person utilizing a ticket or pass to access a mountain resort for any part of one day, and includes both paid and complimentary access. |
(4) |
ETP is defined as lift ticket revenue divided by total skier visits. |
(5) |
Resort revenue per skier visit is defined as the sum of the Mountain and Lodging revenue (excluding revenue generated by GTLC, SRL&S, The Lodge at Rancho Mirage and RockResorts) divided by skier visits. |
(6) |
Real estate held for sale and investment includes all land, development costs and other improvements associated with real estate held for sale and investment, as well as investments in real estate joint ventures. |
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following is an analysis of the Company's results of operations, liquidity and capital resources and should be read in conjunction with the Consolidated Financial Statements and notes related thereto included in this Form 10-K. To the extent that the following Management's Discussion and Analysis contains statements which are not of a historical nature, such statements are forward-looking statements which involve risks and uncertainties. These risks include, but are not limited to, changes in the competitive environment of the mountain and lodging industries, general business and economic conditions, the weather and other factors discussed elsewhere herein and in the Company's other filings with the SEC. The following discussion and analysis should be read in conjunction with the Cautionary Statement included at the end of this section.
The following Management's Discussion and Analysis includes discussion of financial performance within each of the Company's segments. The Company has chosen to specifically address a non-GAAP measure, Reported EBITDA (defined as segment net revenues less segment specific operating expenses plus gain on transfer of property, as applicable, plus segment equity income), in the following discussion because management considers this measurement to be a significant indication of the Company's financial performance. The Company evaluates performance and allocates resources to its segments based on Reported EBITDA. In addition, because of the significant long-lived assets to the operations of the Company and the level of the Company's indebtedness, the Company believes that Reported EBITDA is useful in measuring the Company's ability to fund expenditures and service debt. The Company uses Reported EBITDA targets in determining management bonuses. Refer to the end of the Results of Operations section for a reconciliation of Reported EBITDA to net income (loss).
Reported EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States of America. Items excluded from Reported EBITDA are significant components in understanding and assessing financial performance. Reported EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated by operations, investing or financing activities or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Because Reported EBITDA is not a measurement determined in accordance with accounting principles generally accepted in the United States and is thus susceptible to varying calculations, Reported EBITDA as presented may not be comparable to other similarly titled measures of other companies.
Overview
The Company's operations are grouped into three integrated and interdependent segments: Mountain, Lodging and Real Estate, which represented 67%, 24% and 9%, respectively, of the Company's revenues for fiscal 2005. The Mountain segment is comprised of the operation of five ski resort properties and related amenities, primarily including ski school, dining, and retail/rental operations. Operations within the Lodging segment include 1) ownership/management of a group of ten luxury hotels through the RockResorts brand, including three proximate to the Company's ski resorts, 2) the operations of GTLC, 3) the ownership/management of non-RockResorts branded hotels and condominiums proximate to the Company's ski resorts and 4) golf course operations. The Real Estate segment is involved with the development of property in and around the Company's resort properties.
The Company's single largest source of revenue is the sale of lift tickets (including season passes), which represented approximately 29% of total fiscal 2005 net revenue. Lift ticket revenues are driven by volume (skier visits) and average pricing. Pricing is impacted by both absolute pricing as well as the demographic mix of guests, which impacts the price points at which various products are purchased. The demographic mix of guests is divided into two primary categories: 1) out-of-state and international guests ("Destination") and 2) in-state and local visitors ("In-State"). Destination guests comprise approximately 60% of the Company's skier visits, while the In-State market comprises approximately 40% of the Company's skier visits. Nearly 50% of total visitors and 79% of Destinations visitors fly to the Company's resorts. Destination guests generally purchase the Company's higher-priced lift ticket products and utilize more ancillary services like ski school and lodging. Destination guests are less likely to be impacted by changes in the weather, due to the advance planning required for their trip, but can be impacted by the economy (including the strength of the U.S. dollar) and the global geopolitical climate. In-State guests tend to be more weather-sensitive and value-oriented; to mitigate against this, approximately 20-25% of total lift revenue is generated from the sale of season passes, which are marketed primarily to In-State guests. The cost structure of ski resort operations is largely fixed; as such, incremental revenue generally has high associated profit margin.
Revenues of the Lodging properties at or around the Company's ski resorts are closely aligned with the performance of the Mountain segment, particularly with respect to visitation from Destination guests. Revenues from hotel management operations under the RockResorts brand not located around the Company's ski resorts are generated through management fees based upon the revenue of the individual hotel properties within the RockResorts portfolio, and are therefore subject to trends within the overall travel industry. GTLC, which is a National Park Service ("NPS") concession within Grand Teton National Park, benefits from the enormous popularity of the National Park system. GTLC's pricing is regulated by the NPS.
The Company's Real Estate segment engages in both 1) the sale of land to developers, which generally includes the retention of some control in the oversight and design of the projects and a contingent revenue structure based on the sale of the developed units and, 2) in a growing trend, vertical development of projects. The Company mitigates the risk of vertical development by utilizing fixed price contracts, pre-selling the project, requiring significant non-refundable deposits and the obtaining of non-recourse financing for certain projects. The Company's real estate projects generally are geared to provide additional benefit to the Mountain and Lodging segments.
Trends, Risks and Uncertainties
The Company's management has identified the following important factors (as well as risks and uncertainties associated with such factors) that could impact the Company's future financial performance:
The data provided in this section should be read in conjunction with the risk factors identified elsewhere in this document.
Results of Operations
Summary
The 2004/05 ski season was a record year in terms of both total revenue and skier visits for the Mountain segment, supported by overall increases in destination visitation and ETP. The record skier revenue and skier visitation also drove improvement in the Lodging segment for properties proximate to the Company's ski resorts. In addition, management believes that the cost cutting initiatives implemented in fiscal 2004 were sustained in fiscal 2005. The Company's net income of $23.1 million for fiscal 2005 improved significantly over fiscal 2004's net loss of $6.0 million driven primarily by an increase in Resort Reported EBITDA of $22.9 million, a $7.2 million decrease in interest expense, as well as a $36.5 million decrease in loss on extinguishment of debt and a $5.5 million decrease in mold remediation charges, partially offset by a $16.5 million decrease in Reported Real Estate EBITDA and the fiscal 2005 net loss from the sale of businesses of $7.4 million (all as discussed further below). In addition, Corporate selling, general and administrative expenses ("Corporate SG&A"), which are allocated between each of the three segments, increased significantly in fiscal 2005 versus fiscal 2004 due primarily to first year SOX 404 compliance costs which increased by $3.2 million and increased legal costs of $4.5 million.
Mountain Segment
Mountain segment operating results for the fiscal years ended July 31, 2005, 2004 and 2003 are presented by category as follows (in thousands, except ETP):
Percentage Change |
|||||||||
Fiscal Year Ended July 31, |
Increase/(Decrease) |
||||||||
2005 |
2004 |
2003 |
2005/2004 |
2004/2003 |
|||||
----------(unaudited)---------- |
|||||||||
Lift tickets |
$ 233,458 |
$ 212,329 |
$ 195,571 |
10.0% |
8.6% |
||||
Ski school |
63,915 |
58,526 |
55,392 |
9.2% |
5.7% |
||||
Dining |
53,688 |
51,511 |
48,333 |
4.2% |
6.6% |
||||
Retail/rental |
120,149 |
115,044 |
107,714 |
4.4% |
6.8% |
||||
Other |
69,645 |
63,585 |
53,558 |
9.5% |
18.7% |
||||
Total Mountain net revenue |
540,855 |
500,995 |
460,568 |
8.0% |
8.8% |
||||
Total Mountain operating expense |
391,889 |
368,875 |
362,131 |
6.2% |
1.9% |
||||
Mountain equity investment income, net |
2,303 |
1,376 |
1,009 |
67.4% |
36.4% |
||||
Total Mountain Reported EBITDA |
$ 151,269 |
$ 133,496 |
$ 99,446 |
13.3% |
34.2% |
||||
Total skier visits |
5,940 |
5,636 |
5,730 |
5.4% |
(1.6)% |
||||
ETP |
$ 39.30 |
$ 37.67 |
$ 34.13 |
4.3% |
10.4% |
Mountain segment revenues and Reported EBITDA have increased significantly since fiscal 2003. This increase is due primarily to increased lift revenues as a result of higher ETP and, for fiscal 2005, increased skier visits. The increases in ETP, which is lift revenue divided by skier visits, is a function of 1) increased absolute pricing for both lift tickets and season passes and 2) increased Destination guest visitation driving the purchase of higher-priced lift ticket products. The absolute price increases were supported by substantial new capital improvements, including expanded grooming and snowmaking efforts and new high-speed lifts. During fiscal 2004 and continuing in fiscal 2005, the U.S. travel industry began to recover from the effects of the terrorist attacks of September 11, 2001 and the Iraq War in fiscal 2003. As a result, the skier visit mix changed in fiscal 2004 and continued to change in fiscal 2005 compared to fiscal 2003 as the Company experienced a higher mix of Destination, including international visitors, favorably impacting skier visits and ETP. Ancillary business revenues including ski school, mountain dining and retail/rental increased consistent with the increase in lift ticket revenues for fiscal 2005 and 2004. Ski school also benefited from an increase in absolute pricing and increased market penetration. In addition to the impact from increased skier visits, retail/rental also experienced favorable results in fiscal 2005 due to additional retail locations and an increase in ecommerce. Other factors impacting revenue were: 1) the timing of Easter, which fell in March in the current fiscal year and April in fiscal 2004 and 2003, enabling the company to maximize pricing for Easter visitors in its peak month of March and 2) an unseasonably warm month of March in fiscal 2004, contributing to the decline in fiscal 2004 skier visits, partially offset by 3) the loss of an extra day of peak season operations due to the 2004 Leap Year, and the timing of the Christmas and New Year's holidays, which both fell on Saturday in fiscal 2005.
The increase in other revenue for fiscal 2005 versus fiscal 2004 is due primarily to: 1) increased private clubs revenue from dues increases, a full year of operations of the spa at The Ritz-Carlton, Bachelor Gulch and higher amortization of deferred club initiation fees due to increased memberships ($1.6 million), 2) increased allocated employee housing revenue due to the re-opening of a facility that closed in fiscal 2004 ($698,000), 3) increased commercial leasing revenue as a result of a full twelve months of increased available space and increased percentage rents ($894,000), 4) increased municipal services revenue due to expanded services in Beaver Creek and Bachelor Gulch villages ($583,000) and 5) a full year of consolidation of the Company's four employee housing entities, which were consolidated in the second quarter of fiscal 2004 ($381,000). The increases in other revenues in fiscal 2004 as compared to fiscal 2003 is primarily due to 1) consolidation of employee housing entities ($1.8 million), 2) increased revenues related to technology services ($1.7 million), 3) operations of the spa at the Ritz-Carlton, Bachelor Gulch, which opened in November 2002 ($1.5 million) and 4) increased summer visitation.
Mountain operating expense is generally not expected to increase commensurate with an increase in revenue due to the primarily fixed-cost nature of the business. However, new initiatives to expand grooming and snowmaking caused an increase in operating costs including labor, utilities and fuel for fiscal 2005. The Company also incurred incremental costs associated with the installation of additional chairlifts in fiscal 2005. In addition, fiscal 2005 allocated Corporate SG&A increased due to higher legal, first year SOX 404 compliance costs, operating costs associated with the re-opening of Breckenridge Terrace ($390,000), which was closed for the entire ski season last year and a full year of consolidation of the four employee housing entities of $513,000.
In fiscal 2004, the Company changed its cost structure by decreasing the amount of fixed costs in the Mountain segment through staffing changes, reduced marketing costs, changes in summer trail maintenance and more closely monitoring the hours of certain dining establishments. The Mountain segment also benefited from cost reductions realized in allocated Corporate SG&A expenses. These changes to the cost structure helped offset increased expenses due to the consolidation of four employee housing entities ($2.0 million), normal cost increases associated with inflation, payroll increases and energy prices as well as increased incentive compensation.
Mountain equity investment income primarily includes the Company's share of income or loss from the operations of a real estate brokerage; the increase in equity investment income is due primarily to increased commissions earned by the brokerage associated with increased real estate activity in Eagle County, including the Company's development activities in LionsHead.
Lodging Segment
Lodging segment operating results for the fiscal years ended July 31, 2005, 2004 and 2003 are presented by category as follows (dollars in thousands):
Percentage Change |
|||||||||
Fiscal Year Ended July 31, |
Increase/(Decrease) |
||||||||
2005 |
2004 |
2003 |
2005/2004 |
2004/2003 |
|||||
----------(unaudited)---------- |
|||||||||
Total Lodging net revenue |
$ 196,351 |
$ 180,525 |
$ 172,003 |
8.8% |
5.0% |
||||
Total Lodging operating expense |
177,469 |
165,983 |
161,846 |
6.9% |
2.6% |
||||
Lodging equity investment loss, net |
(2,679) |
(3,432) |
(5,995) |
(21.9)% |
(42.8)% |
||||
Total Lodging Reported EBITDA |
$ 16,203 |
$ 11,110 |
$ 4,162 |
45.8% |
166.9% |
||||
Average Daily Rate ("ADR") |
$ 196.26 |
$ 187.90 |
$ 184.25 |
4.4% |
2.0% |
Lodging segment revenues and Reported EBITDA have increased significantly since fiscal 2003 as a result of improved ADR while controlling related variable expenses. Additionally, paid occupancy increased 7.2% from fiscal 2004 to fiscal 2005 and 2.4% from fiscal 2003 to fiscal 2004. The Lodging segment's non-RockResorts branded properties, which are all proximate to the Company's ski resorts, and the Company's RockResorts properties located in close proximity to the Company's ski resorts have also benefited from the increase in skier visits and increased destination guests, and have experienced an increase in group business (primarily within the Vail, Beaver Creek and Keystone properties). Management believes the increase in group business is the result of an increased focus on this segment coupled with improvements in the overall lodging industry related to economic rebound and decreased travel-related concerns. The Company's RockResorts properties not located in close proximity to its ski resorts also performed favorably in fiscal 2005 along with the overall lodging industry related to economic rebound and decreased travel-related concerns. Particularly, SRL&S's contribution to Reported EBITDA has improved significantly compared to last year ($1.2 million), primarily as a result of increased room rates and expanded property management operations. In addition, RockResorts' revenues for fiscal 2005 include a $417,000 fee related to the termination of the Casa Madrona management agreement as well as $218,000 in marketing fee revenue reimbursements from the former owners of Cheeca Lodge & Spa. GTLC, which is only open from May to October, operating performance improved by approximately $370,000 as a result of reporting incremental days of operations.
In fiscal 2004, the Company implemented new measures to reduce the Lodging segment cost structure, such as closing seasonal properties during their off-seasons and furloughing employees during slower times. These cost reductions measurably improved operating margins from fiscal 2003 to fiscal 2004, and were maintained in fiscal 2005 despite the increase in allocated Corporate SG&A expenses.
In fiscal 2005, the Company sold its minority equity interest in BG Resort and the assets constituting the Vail Marriott and Rancho Mirage. Fiscal 2005 Lodging Reported EBITDA includes revenue of $40.2 million, operating expense of $34.9 million and equity investment loss of $2.7 million related to these entities, prior to their sale. Fiscal 2004 and 2003 Lodging Reported EBITDA includes, respectively, revenue of $40.2 million and $34.9 million, expense of $35.7 million and $33.5 million and equity investment loss of $3.3 million and $5.8 million related to these entities. Commencing with the sale of the Vail Marriott and Rancho Mirage, the Company is earning management fees of approximately 3% of the hotels' revenue. The impact to Lodging Reported EBITDA from these increased management fees was not significant in fiscal 2005 due to the timing of the sale of these businesses. See Note 8, Sale of Businesses, of the Notes to Consolidated Financial Statements, for more information regarding the Company's dispositions.
The consolidation of the Employee Housing Entities as of November 1, 2003 caused a $415,000 and a $473,000 increase in Lodging revenue and Lodging operating expense, respectively, in fiscal 2004.
Lodging equity loss consists primarily of the Company's share of losses from BG Resort. As the Company sold its investment in BG Resort in December 2004, the fiscal 2005 equity loss only reflects five months of operations. Fiscal 2003 was the first year of operations of the hotel, and therefore included significant start-up costs that did not recur in fiscal 2004 or 2005.
Real Estate Segment
Real Estate segment operating results for the fiscal years ended July 31, 2005, 2004 and 2003 are presented by major categories as follows (dollars in thousands):
Percentage Change |
|||||||||
Fiscal Year Ended July 31, |
Increase/(Decrease) |
||||||||
2005 |
2004 |
2003 |
2005/2004 |
2004/2003 |
|||||
----------(unaudited)---------- |
|||||||||
Single family land sales |
$ 26,922 |
$ 12,602 |
$ 27,496 |
113.6% |
(54.2)% |
||||
Land sales to developers |
12,751 |
20,617 |
4,987 |
(38.2)% |
313.4% |
||||
Residential and commercial condominiums |
16,835 |
5,844 |
39,647 |
188.1% |
(85.3)% |
||||
Parking unit sales |
11,684 |
-- |
-- |
100.0% |
--% |
||||
Other |
4,589 |
6,060 |
8,271 |
(24.3)% |
(26.7)% |
||||
Total Real Estate net revenue |
72,781 |
45,123 |
80,401 |
61.3% |
(43.9)% |
||||
Gain on transfer of property |
-- |
2,147 |
-- |
(100.0)% |
100.0% |
||||
Real Estate operating expense |
58,254 |
16,791 |
66,642 |
246.9% |
(74.8)% |
||||
Real Estate equity investment (loss) income, net |
(102) |
460 |
3,962 |
(122.2)% |
(88.4)% |
||||
Total Real Estate Reported EBITDA |
$ 14,425 |
$ 30,939 |
$ 17,721 |
(53.4)% |
74.6% |
Fluctuations in Real Estate Reported EBITDA from year to year generally are the result of changes in the product mix and number of units available for sale; land sales generally have much higher margins than condominiums. In fiscal 2004 however, a $15.1 million liability associated with capital improvement fees for Smith Creek Metropolitan District ("SCMD") was relieved (with a corresponding decrease to Real Estate operating expense) as a result of Bachelor Gulch Metropolitan District's bond issuance in fiscal 2004, the proceeds of which were used to completely pay off all of SCMD's outstanding bonds, resulting in the elimination of the capital improvement fee liability. Fiscal 2005 Real Estate revenue included revenue recognition associated with sales of single-family lots at JHG&TC, Vail, Bachelor Gulch and Red Sky Ranch, developer land sales in the Beaver Creek area, the sale of parking spaces in Vail's Founders' Garage and the sale of a warehouse facility in Avon as well as recognition of a previously deferred $2.5 million land gain associated with the sale of BG Resort in December 2004 and recognition of $2.3 million of contingent gains (included in Other) associated with a development parcel sold in fiscal 2004. Fiscal 2004 Real Estate revenue included revenue recognition associated with the sale of development parcels in Bachelor Gulch and Arrowhead, single-family lot sales at Breckenridge's Timber Trail and sales of Mountain Thunder Lodge condominiums. In addition, in fiscal 2004, the Company recorded a $2.1 million gain on the transfer of property related to executive non-cash deferred compensation (see Note 17, Non-Cash Deferred Compensation, of the Notes to Consolidated Financial Statements for more information). In fiscal 2003, Real Estate Reported EBITDA was primarily driven by the large volume of condominiums sold, primarily consisting of sales at the Mountain Thunder Lodge development and luxury condominiums at the Vail Marriott.
Real estate equity income/(loss) primarily includes the Company's share of income or loss from the operations of KRED as well as the Company's share of profit associated with the sale of condominiums at The Ritz-Carlton, Bachelor Gulch through the Company's investment in BG Resort. Of the 23 condominiums developed at The Ritz-Carlton, Bachelor Gulch, 22 were sold in fiscal 2003 and the final condominium was sold in fiscal 2004. In December 2003, KRED distributed substantially all of its assets to its members, resulting in a significant decrease in KRED's activities subsequent to the distribution.
Real Estate operating expense consists primarily of the cost of sales and related selling expenses associated with sales of real estate, and also include general and administrative expenses associated with real estate operations and an allocation of Corporate SG&A expenses. In addition to the relief of the $15.1 million SCMD liability in fiscal 2004, the Company has recorded changes in estimates that increased (decreased) reported real estate cost of sales by approximately $435,000, ($1.8 million) and $475,000 for the fiscal years ended July 31, 2005, 2004 and 2003, respectively. The changes in estimates were a result of 1) changes is the estimated percentage-of-completion on certain projects and 2) changes in the estimated costs to complete projects relating to the sale of individual parcels within a development project, including the reversal of $1.2 million of expense in fiscal 2004 relating to the remaining obligation for the construction of amenities that the Company deemed were not necessary to construct.
Other Items
In addition to segment operating results, the following material items contribute to the Company's overall financial position.
Depreciation and amortization . Depreciation and amortization expense has increased over the last two years primarily as a result of 1) the acceleration of depreciation of approximately $7.3 million for certain assets which are being retired in advance of their previously estimated useful lives as a result of fiscal 2005 decisions related to redevelopment and capital improvements, 2) an increased fixed asset base due to normal capital expenditures and 3) incremental depreciation expense of $533,000 in fiscal 2005 and $1.6 million in fiscal 2004 for the first full year associated with the consolidation of the Employee Housing Entities as of November 1, 2003, partially offset by 4) fixed asset retirements as well as assets which are still used in the Company's operations becoming fully depreciated. The average depreciation rate was 8.1%, 7.7% and 8.1% for fiscal years 2005, 2004 and 2003, respectively.
Asset impairment charges. The Company recorded a $1.6 million asset impairment charge in fiscal 2005 associated with an intangible asset related to the RockResorts call option (see Note 9, Put and Call Options, of the Notes to Consolidated Financial Statements), a $536,000 asset impairment charge associated with the termination of the Casa Madrona management agreement in May 2005 and a $440,000 asset impairment charge related to projects that were abandoned prior to completion. In fiscal 2004, the Company recorded a $1.1 million impairment charge after abandoning development of certain projects and the write-down of a warehouse facility. The Company recorded a $4.8 million impairment charge in fiscal 2003 related to an option held on certain development land near Vail due to an unexpected adverse court decision in connection with litigation involving the option. (See Note 10, Asset Impairment Charges, of the Notes to Consolidated Financial Statements.)
Mold remediation charge. In fiscal 2004, the Company expensed $5.5 million related to the estimated cost of remediation of water intrusion and condensation problems at its Breckenridge Terrace employee housing facility. See Note 13, Commitments and Contingencies, of the Notes to Consolidated Financial Statements, for more information regarding this charge.
Interest expense. The Company's primary sources of interest expense are the Credit Facility, the Industrial Development Bonds and the 6.75% Notes. The $7.2 million decrease in interest expense for fiscal 2005 compared to fiscal 2004 is due to 1) the replacement of the 8.75% Notes with the 6.75% Notes in January 2004, which resulted in a full year benefit versus six months in fiscal 2004, 2) extinguishment of the Credit Facility Term Loan in January 2005, 3) improved pricing and lower commitment fees relating to the Credit Facility refinancing in January 2005 as well as 4) an improved Funded Debt to Adjusted EBITDA ratio (as defined in the Credit Agreement) and lower average borrowings under the Credit Facility. These reductions are partially offset by the consolidation of the Employee Housing Entities under FIN 46R. Overall, interest expense decreased from fiscal 2003 to 2004 due to 1) the replacement of the 8.75% Notes with the 6.75% Notes in January 2004, 2) reduced pricing of the term loan portion of the Credit Facility and 3) lower average borrowings on the Credit Facility, partially offset by increased principal outstanding under the 6.75% Notes as compared to the 8.75% Notes and the consolidation of the Employee Housing Entities under FIN 46R. Average borrowings under the Credit Facility Revolver were $6.6 million, $22.9 million and $45.2 million in fiscal 2005, 2004 and 2003, respectively.
Loss on extinguishment of debt. The Company recorded a $612,000 debt extinguishment charge in January 2005 in connection with the refinancing of the Company's Credit Facility. The debt extinguishment charge is related to the write-off of unamortized issuance costs associated with the Credit Facility Term Loan, which was completely paid off.
The Company recorded a $37.1 million debt extinguishment charge in fiscal 2004 in connection with the tender for the 8.75% Notes. The charge included a tender premium of $65.06 per $1,000 principal amount of 8.75% Notes, which accounts for $23.8 million of the total charge. Other costs in the charge include transaction fees, the write-off of unamortized issuance costs and unamortized original issue discount on the 8.75% Notes, and other costs such as legal and printing fees. In connection with the tender for the 8.75% Notes, in January 2004 the Company issued the 6.75% Notes. The proceeds from the 6.75% Notes were used to repurchase the 8.75% Notes, and to pay associated premiums, fees and expenses. (See Note 4, Long-Term Debt, of the Notes to Consolidated Financial Statements.)
Loss on sale of businesses, net. The net $7.4 million loss consists of 1) a $10.9 million loss in the fourth quarter of fiscal 2005 associated with the sale of the assets constituting Rancho Mirage and 2) a $2.1 million loss in the fourth quarter of fiscal 2005 associated with the sale of the assets constituting the Vail Marriott offset by 3) a $5.7 million gain associated with the sale of the Company's interest in BG Resort (see Note 8, Sale of Businesses, of the Notes to Consolidated Financial Statements).
Gain/loss on put options. The value of put options fluctuates based on the estimated fair market value of the put options as of the end of each period. The net gain in fiscal 2005 was related to the decrease in the estimated fair value of the liabilities associated with the SSV and RTP put options. The net loss in fiscal 2004 was related to the increase in the estimated fair market value of the SSV and RTP put options. The net gain in fiscal 2003 was related to the decrease in the estimated fair market value of the put option that Olympus had to the Company with respect to RockResorts. See Note 9, Put and Call Options, of the Notes to Consolidated Financial Statements, for more information regarding the Company's put options.
Minority interest in income of consolidated subsidiaries. Minority interest in income of consolidated subsidiaries is a function of the performance of the Company's consolidated subsidiaries. Fiscal 2005 improvements in SSV's and SRL&S's net income is primarily responsible for the increase in minority interest in fiscal 2005. Improvement in SSV's fiscal 2004 net income is primarily responsible for the increase in minority interest in fiscal 2004.
Income taxes. The changes in the Company's effective tax rate are driven primarily by the amount of pre-tax income (loss), non-deductible executive compensation, and other non-deductible items and taxable income generated by state jurisdictions that varies from the consolidated pre-tax income (loss). The effective tax rate was 38.5%, (30.0)% and (39.1)% in fiscal 2005, 2004 and 2003, respectively. During fiscal year 2003, the Company entered into a closing agreement with the Internal Revenue Service, which successfully closed the audit of the 1995 - 1998 tax years. However, the Internal Revenue Service is currently examining the 2001 – 2003 tax years, the outcome of which is presently unknown.
The following table reconciles from segment Reported EBITDA to net income (loss):
Fiscal Year Ended |
||||||
July 31, |
||||||
2005 |
2004 |
2003 |
||||
Mountain Reported EBITDA |
$ 151,269 |
$ 133,496 |
$ 99,446 |
|||
Lodging Reported EBITDA |
16,203 |
11,110 |
4,162 |
|||
Resort Reported EBITDA |
167,472 |
144,606 |
103,608 |
|||
Real Estate Reported EBITDA |
14,425 |
30,939 |
17,721 |
|||
Total Reported EBITDA |
181,897 |
175,545 |
121,329 |
|||
Depreciation and amortization |
(89,968) |
(86,377) |
(82,242) |
|||
Asset impairment charges |
(2,550) |
(1,108) |
(4,830) |
|||
Mold remediation charge |
-- |
(5,500) |
-- |
|||
Loss on disposal of fixed assets, net |
(1,528) |
(2,345) |
(794) |
|||
Investment income, net |
2,066 |
1,886 |
2,011 |
|||
Interest expense |
(40,298) |
(47,479) |
(50,001) |
|||
Loss on extinguishment of debt |
(612) |
(37,084) |
-- |
|||
Loss from sale of businesses, net |
(7,353) |
-- |
-- |
|||
Gain (loss) on put options, net |
1,158 |
(1,875) |
1,569 |
|||
Other income (expense), net |
50 |
(179) |
17 |
|||
Minority interest in income of consolidated subsidiaries, net |
(5,239) |
(4,000) |
(1,064) |
|||
Income (loss) before (provision) benefit for income taxes |
37,623 |
(8,516) |
(14,005) |
|||
(Provision) benefit for income taxes |
(14,485) |
2,557 |
5,478 |
|||
Net income (loss) |
$ 23,138 |
$ (5,959) |
$ (8,527) |
SEC Investigation Terminated
In February 2003, the SEC issued a formal order of investigation with respect to the Company. On September 19, 2005, the Central Regional Office of the SEC informed the Company that its investigation has been terminated, and that no enforcement action has been recommended regarding the Company. The Company has also been informed that no enforcement action has been recommended with respect to any present or former directors, officers or employees of the Company in regard to the matters that had been under investigation.
Liquidity and Capital Resources
Significant Sources of Cash
The Company's liquidity profile improved substantially in fiscal 2005. The Company had no borrowings under its Credit Facility and had $136.6 million of non-restricted cash, including $82.5 million which was invested in overnight securities and short term commercial paper. The Company's Funded Debt to Adjusted EBITDA ratio (as defined under the Credit Facility), which the Company considers to be a key credit statistic, improved more than half a turn over fiscal 2004, and its leverage ratio (total debt to Reported EBITDA) and net leverage ratio (total debt less cash to Reported EBITDA) also each improved by more than half a turn. In addition, the Company reduced its total long-term debt outstanding by $104.1 million from July 31, 2004 to July 31, 2005 including the complete payoff of the Credit Facility Term Loan. Several factors contributed to the improvement: 1) improved free cash flow (Resort Reported EBITDA less resort capital expenditures and applicable interest expense) generated by the Resort segment, aided by improved Resort Reported EBITDA of $22.9 million in fiscal 2005 compared to fiscal 2004; 2) reduction of interest expense of $7.2 million, 3) the Company sold two hotel properties and its investment in BG Resort for total cash proceeds of $108.4 million; 4) the Company received $21.9 million cash from stock option exercises during fiscal 2005 and 5) the pre-sales process for the Arrabelle and Gore Creek Place developments generated $43.4 million in cash received for deposits on units, which the Company will use to offset related construction costs.
In the past two fiscal years, the Company has favorably restructured its key debt instruments. In fiscal 2004, the Company completed a tender offer for the outstanding 8.75% Notes and issued the 6.75% Notes, resulting in $5.2 million annual cash interest expense savings and extending the maturity of the 6.75% Notes to fiscal 2014. The Company paid a tender premium of $23.8 million associated with the 8.75% Notes in fiscal 2004. In January 2005, the Company refinanced its Credit Facility, and in the process completely paid off the $100 million Credit Facility Term Loan. Key modifications to the Credit Facility included, among other things, the expansion of the Credit Facility revolving credit commitments to $400 million from $325 million, extension of the maturity on the Credit Facility Revolver to January 2010 from June 2007, improved pricing for interest rate margins and commitment fees, and improved flexibility in the Company's ability to make investments and distributions. There were no borrowings outstanding under the Credit Facility as of July 31, 2005.
In addition, in July 2005, Gore Creek Place, LLC ("Gore Creek"), a wholly-owned subsidiary of the Company, obtained project-specific non-recourse financing (the "Gore Creek Facility") for the construction of the Gore Creek Place development. The Gore Creek Facility is non-revolving and provides for financing up to $30 million. The Gore Creek Facility matures on July 19, 2007, and principal payments are due at the earlier of closing of sales for the Gore Creek residences or maturity. Gore Creek is an Unrestricted Subsidiary (as defined in the Credit Agreement and the indenture governing the 6.75% Notes (the "Indenture")) of the Company and is therefore not included in the covenants of the Company's Credit Facility or 6.75% Notes. In connection with the Gore Creek Facility, The Vail Corporation, a wholly-owned subsidiary of the Company, entered into a Completion Guaranty Agreement, pursuant to which The Vail Corporation guarantees the completion of the construction of the project (but not the repayment of amounts borrowed under the Gore Creek Facility), provided the lender continues to fund the construction. The Gore Creek Facility contains non-recourse provisions to the Company with respect to repayment, and upon an event of default, the lender has recourse only against Gore Creek's assets and enforcement of the Completion Guaranty Agreement. The lender does not have recourse against the assets of The Vail Corporation or any other Company subsidiary. All assets of Gore Creek are provided as collateral under the Gore Creek Facility agreement, which includes the underlying land and the advance deposits. Borrowings under the Gore Creek Facility are expected to be repaid from funds received at closing on the units sold.
In addition to continued utilization of operating cash flows (including sales of real estate) and borrowings, if necessary, under the Credit Facility, the Company expects that its near-term (less than five years) liquidity needs will also be met through borrowings under the Gore Creek Facility, obtaining additional project-specific non-recourse financing for other real estate development projects, and the expected sale of the assets constituting SRL&S. The Company cannot predict whether cash generated from stock option exercises will continue at the level generated in fiscal 2005; however, as of July 31, 2005, there were 2.4 million exercisable options outstanding with a weighted-average exercise price of $19.58 per share.
The Company also anticipates that, for the near-term, it will continue to have excess cash. Management is currently evaluating how best to utilize its excess cash reserve, which is currently invested in overnight securities and short term commercial paper. The Credit Agreement and the Indenture contain restrictions that limit the Company's ability to make investments or distributions (including the payment of dividends). In addition, the Indenture restricts how the funds from sales of businesses can be used, generally requiring the net proceeds from such transactions to be invested in capital improvements or used to tender a portion of the 6.75% Notes outstanding. The Company will not be obligated to tender a portion of the 6.75% Notes outstanding with the proceeds on asset sales to date as a result of the reinvestment of such proceeds for capital expenditures.
Significant Uses of Cash
The Company's cash needs typically include providing for operating expenditures, debt service requirements and capital expenditures for both assets to be used in operations and real estate development projects. In addition, the Company expects that beginning with the 2006 fiscal year, it will incur significant cash income tax expense (generally expected to equal its statutory income tax rate). The consolidated statement of cash flows included in the accompanying financial statements provides information with respect to the Company's historical sources and uses of cash.
As indicated in the table of contractual obligations below, the Company has significant cash commitments in the near term. These commitments are primarily related to the completion of certain real estate development projects, most notably the construction of the Gore Creek Place townhomes for an estimated $26.0 million, the Arrabelle project for an estimated $42.4 million, the JHG&TC cabins and clubhouse for an estimated $6.5 million, and $4.3 million in other commitments related to the Company's development activities in LionsHead, all of which represent obligations in the next 12 months. In addition to these projects, the Company expects to spend approximately $45 million to $55 million in the remainder of calendar 2005 on capital expenditures related to real estate development projects. The real estate capital expenditures include approximately $25 million to $30 million of costs for assets which will ultimately be capitalized as fixed assets. The Company expects real estate capital expenditures will be higher than historical levels for the near term as the Company continues development associated with Vail's New Dawn. As noted above, the Company obtained non-recourse financing to fund construction of the Gore Creek Place project; the Company expects to utilize similar financing arrangements for certain other development projects, including Arrabelle. In addition to utilizing project-specific financing, the Company also pre-sells units requiring deposits in a proposed development prior to committing to the completion of the development, thereby helping to ensure sufficient funds are available to complete the project.
The Company has historically invested significant cash in capital expenditures for its Resort operations, and expects to continue to invest significant cash in the future. The Company believes that annual capital expenditures of approximately $30 million to $40 million are necessary to sustain the appearance and level of service appropriate to the Company's Resort operations. The Company evaluates additional capital improvements based on expected strategic impacts and/or expected return on investment. An estimated $45 million to $55 million is expected to be spent during the remainder of calendar 2005 under the Company's capital plan. Primary projects are expected to include two new high-speed chairlifts (one at Beaver Creek and one at Breckenridge), and dining facility upgrades at Heavenly and Vail. The Company has not finalized its capital plan for calendar 2006. The Company plans to utilize cash flow from operations, cash on hand and, as necessary, borrowings under long-term debt to provide the cash necessary to execute its capital plan.
Principal payments on the vast majority of the Company's long-term debt ($491.3 million of the total $521.7 million debt outstanding as of July 31, 2005) are not due until fiscal 2011 and beyond. Fiscal 2006 maturities, which total $2.0 million, include $1.1 million under the SSV Facility, which was refinanced in September 2005 (See Note 4, Long-Term Debt, of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report, for more information). Interest payments under the Company's fixed-rate debt will be approximately $31.2 million in fiscal 2006, assuming the debt remains at its current level.
The Company's debt service requirements can be impacted by changing interest rates as the Company had $62.0 million of variable-rate debt outstanding as of July 31, 2005. A 100-basis point change in LIBOR would cause the Company's annual interest expense to change by approximately $620,000. The fluctuation in the Company's debt service requirements, in addition to interest rate changes, may be impacted by future borrowings under its Credit Facility or other alternative financing arrangements it may enter into. The Company's long term liquidity needs are dependent upon operating results which impact the borrowing capacity under the Credit Facility, which can be mitigated by adjustments to capital expenditures, flexibility of investment activities and the ability to obtain favorable future financing. The Company manages changes in the business and economic environment by managing its capital expenditures and real estate development activities.
Covenants and Limitations
The Company must abide by certain restrictive financial covenants in relation to its bank credit facilities and the Indenture. The most restrictive of those covenants include the Funded Debt to Adjusted EBITDA ratio, Senior Debt to Adjusted EBITDA ratio, Minimum Fixed Charge Coverage ratio, Minimum Net Worth and the Interest Coverage ratio (each as defined in the underlying credit agreements). In addition, the Company's financing arrangements limit its ability to incur certain indebtedness, make certain restricted payments, make certain investments, make certain affiliate transfers and may limit its ability to enter into certain mergers, consolidations or sales of assets. The Company's borrowing availability under the Credit Facility is primarily determined by the Funded Debt to Adjusted EBITDA ratio, which is based on the Company's segment operating performance, as defined in the Credit Agreement.
The Company was in compliance with all relevant covenants in its debt instruments as of July 31, 2005. The Company expects it will meet all applicable quarterly financial tests in its debt instruments, including the Funded Debt to Adjusted EBITDA ratio, in fiscal 2006. However, there can be no assurance that the Company will meet its financial covenants. If such covenants are not met, the Company would be required to seek a waiver or amendment from the banks participating in the Credit Facility. While the Company anticipates that it would obtain such waiver or amendment, if any were necessary, there can be no assurance that such waiver or amendment would be granted, which could have a material adverse impact on the liquidity of the Company.
Capital Structure
In September 2004, the Company and Ski Partners, L.P. ("Apollo") entered into a Conversion and Registration Rights Agreement (the "Agreement"), pursuant to which Apollo converted all of its Class A common stock into the Company's common shares. Apollo distributed the shares to its partners in proportion to each partner's interest in the partnership. Apollo did not dissolve after this distribution and continues to exist as a partnership. The Company, pursuant to the Agreement, filed a shelf registration statement in November 2004 covering certain of the shares to be owned by the limited partners of Apollo. As a result of this agreement, the Company now has only one class of directors. Previously, the Class A common stock elected the Class 1 directors and the common stock elected the Class 2 directors.
Contractual Obligations
As part of its ongoing operations, the Company enters into arrangements that obligate the Company to make future payments under contracts such as lease agreements and debt agreements. Debt obligations, which total $521.7 million, are currently recognized as liabilities in the Company's consolidated balance sheet. Operating lease obligations, which total $33.5 million as of July 31, 2005, are not recognized as liabilities in the Company's consolidated balance sheet, which is in accordance with accounting principles generally accepted in the United States of America. A summary of the Company's contractual obligations at the end of fiscal 2005 is as follows:
Off Balance Sheet Arrangements
The Company does not have off balance sheet transactions that are expected to have a material effect on the Company's financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
The preparation of Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires the Company to select appropriate accounting policies and to make judgments and estimates affecting the application of those accounting policies. In applying the Company's accounting policies, different business conditions or the use of different assumptions may result in materially different amounts reported in the Consolidated Financial Statements.
The Company has identified the most critical accounting policies upon which its financial status depends. The critical principles were determined by considering accounting policies that involve the most complex or subjective decisions or assessments. The Company also has other policies considered key accounting policies; however, these policies do not meet the definition of critical accounting policies because they do not generally require us to make estimates or judgments that are complex or subjective.
Real Estate Held for Sale .
Description
The Company utilizes the relative sales value method to determine cost of sales for individual parcels of real estate or condominium units sold within a project. The determination of cost of sales under the relative sales value method utilizes significant estimates for both the ultimate total revenues to be generated and total costs to be incurred on a real estate development project. Real estate development projects generally span several years.
Additionally, the "percentage of completion" method is used for revenue recognition on real estate sales for which the Company has not completed its obligations to the buyer at the time of closing. This requires estimation of the total cost to complete the obligations to determine the amount of revenue and cost of sales to recognize on a periodic basis.
Judgments and Uncertainties
Changes to cost of sales percentages for a project based upon changes in the estimates are accounted for on a "cumulative catch-up" basis for past sales; other changes are accounted for on a prospective basis. As a result, changes in the estimates underlying the cost of sales calculation can cause significant variances in cost of sales as a percentage of revenue applied year-to-year throughout the life of a project
Effect if Actual Results Differ From Assumptions
A 10% change in the estimates for future revenues or costs yet to be incurred as of July 31, 2005 would have changed the profit margin recognized by approximately $325,000 for the fiscal year ended July 31, 2005. A 10% change in the cost to complete the projects accounted for under the percentage of completion method and recorded through fiscal 2005 would have changed cost of sales by approximately $350,000 for the fiscal year ended July 31, 2005.
Workers' Compensation .
Description
The Company is self-insured for workers' compensation for its operations in the states of Colorado and California. Workers' compensation claims are reserved based on actuarial estimates for the ultimate development of existing claims and claims incurred but not yet reported.
Judgments and Uncertainties
Variances in actual claims experience versus the actuarial reserve can affect the timing of workers' compensation expense between fiscal years.
Effect if Actual Results Differ From Assumptions
A 10% change in the estimated development factors for fiscal 2005 claims would have changed fiscal 2005 workers' compensation expense recognized by approximately $430,000.
Deferred Club Initiation Fees.
Description
Revenues from club initiation fees are initially deferred and recognized over the expected life of the club facilities.
Judgments and Uncertainties
The life of the club facilities is an estimate determined by management based on consideration of standard building life estimates. Changes in the estimates of the club facilities' lives do not impact the aggregate amount of club related revenues recognized; however, the changes would impact the timing of the revenue recognition. If an estimate is changed, the remaining club revenues would be recognized in a straight-line pattern over the new estimated remaining life of the club facilities.
Effect if Actual Results Differ From Assumptions
If the estimated remaining lives of all of the Company's private club facilities were shortened by five years as of August 1, 2004, fiscal 2005 revenue would have increased approximately $103,000. Similarly, if the estimated lives had been extended by five years as of August 1, 2004, fiscal 2005 revenue would have decreased approximately $97,000.
Intangible Assets.
Description
The Company frequently obtains intangible assets, including goodwill, primarily through business combinations. The assignment of value to individual intangible assets generally requires the assistance of a specialist, such as an appraiser. The assumptions used in the appraisal process are forward-looking, and thus are subject to significant interpretation. Because individual intangible assets (i) may be expensed immediately upon acquisition; (ii) amortized over their estimated useful life; or (iii) not amortized, the assigned values and lives, when applicable, could have a material effect on current and future period results of operations. Further, intangibles are subject to certain judgments when evaluating impairment pursuant to Statement of Financial Accounting Standards No. 142, "Goodwill and Intangible Assets", discussed further in Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements. The Company tests goodwill and indefinite lived intangible assets annually for impairment under SFAS No. 142 as of May 1, or whenever events may indicate a possible impairment exists. Future operating results could dictate significant future non-cash impairment charges.
Judgments and Uncertainties
The Company determines fair value using current market values and widely accepted valuation techniques, including discounted cash flows and a royalty rate model. These types of analyses require the Company to make certain assumptions and estimates regarding economic factors and the future operating results of certain business operations.
Effect if Actual Results Differ From Assumptions
The Company completed the annual impairment testing of intangible assets in the fourth quarter of fiscal 2005, which resulted in no impairment being recorded, using the methodology described herein. A 10% decrease in the estimated fair value of the goodwill and intangible assets tested would not have had a significant impact on the test results.
Income Taxes .
Description
The Company is required to estimate its income taxes in each jurisdiction in which it operates. This process requires the Company to estimate the actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These temporary differences result in deferred tax assets and liabilities on the Company's consolidated balance sheets. The Company must then assess the likelihood that the deferred tax assets will be recovered from future taxable income and, to the extent recovery is not likely, must establish a valuation allowance. This assessment is complicated by the fact that the Company files its tax return on a calendar year basis which is different from its fiscal year end. As of July 31, 2005, the Company had total deferred tax assets of $60.3 million (before valuation allowances) and total deferred tax liabilities of $118.5 million. The net deferred tax asset contains a valuation allowance representing the portion that management does not believe will be recovered from future taxable income. Management believes that sufficient taxable income will be generated in the future, primarily through the reversal of the deferred tax liabilities, to realize the benefit of the Company's deferred tax assets for which valuation allowances have not been recorded against.
Judgments and Uncertainties
The Company has approximately $15.5 million (tax-effected) of net operating loss and other carryforwards and credits as of July 31, 2005 for which it has not recorded a valuation allowance against. The Company is primarily relying on the reversal of deferred tax liabilities to utilize these carryforwards and credits.
Effect if Actual Results Differ From Assumptions
If the Company were to incur substantial tax losses for a number of years, the carryforwards and credits for which it has not recorded a valuation allowance against could expire without being utilized resulting in an increased tax expense in the period that the Company believes that it more likely than not the carryforwards or credits will not be realized.
Tax Contingencies.
Description
The Company is subject to periodic review by domestic tax authorities for audit of the Company's income tax returns. These audits generally include questions regarding the Company's tax filing positions, including the amount and timing of deductions and the allocation of income among various tax jurisdictions. In evaluating the exposures associated with the Company's various tax filing positions, including state and local taxes, the Company recorded reserves for probable exposure. A significant amount of time may pass before a particular matter, for which the Company may have established a reserve, is audited and fully resolved. As of the end of fiscal 2005, three open years (2001 – 2003) were undergoing examination by the Internal Revenue Service.
Judgments and Uncertainties
The estimates of the Company's tax contingencies reserve contains uncertainty because management must use judgment to estimate the potential exposure associated with the Company's various filing positions.
Effect if Actual Results Differ From Assumptions
Although management believes that the estimates and judgments discussed herein are reasonable and it has adequate reserves for its tax contingencies, actual results could differ, and the Company may be exposed to increases or decreases in those reserves that could be material.
To the extent the Company prevails in matters for which reserves have been established, or is required to pay amounts in excess of the Company's reserve, the Company's effective tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement would require the use of cash and could possibly result in an increased tax expense and effective tax rate in the year of resolution. A favorable tax settlement could possibly result in a reduction in the Company's tax expense and effective tax rate in the year of resolution.
New Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS 123R, which replaces SFAS No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation" and supersedes APB Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees". SFAS 123R requires the measurement of all employee share-based compensation arrangements to employees, including grants of employee stock options, using a fair-value-based method and the recording of such expense in the consolidated statements of operations. The accounting provisions of SFAS 123R are effective for fiscal years beginning after June 15, 2005, with early adoption permitted. The pro forma disclosures previously permitted under SFAS 123 no longer will be an alternative to financial statement recognition.
SFAS 123R permits public companies to adopt its requirements using one of two methods. Under the "modified prospective" method, compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS 123R for all share-based compensation arrangements granted after the effective date and (b) based on the requirements of SFAS 123 for all awards granted to employees prior to the effective date of SFAS 123R that remain unvested on the effective date. The "modified retrospective" method includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under SFAS 123 for purposes of pro forma disclosures for either (a) all prior periods presented or (b) prior interim periods of the year of adoption. The Company plans to adopt SFAS 123R using the modified prospective method.
As permitted by SFAS 123, the Company currently accounts for share-based compensation arrangements to employees using APB 25's intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. Accordingly, the adoption of SFAS 123R's fair value method will impact the Company's results of operations, although it will have no impact on the Company's overall financial position. The adoption of SFAS 123R will increase the Company's operating expenses by approximately $3.5 million, $2.2 million and $270,000 for the years ended July 31, 2006, 2007 and 2008, respectively, for options that remain unvested as of July 31, 2005. The full impact of adoption of SFAS 123R cannot be reasonably estimated at this time because it will depend on levels and type of share-based compensation arrangements in the future, along with the valuation model used and related assumptions. However, had the Company adopted SFAS 123R in prior periods, the impact of that standard would have approximated the impact of SFAS 123 as described in the disclosure of pro forma net income (loss) per share in Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements. In September 2005, the Company granted approximately 163,850 shares of restricted stock and options to purchase approximately 442,500 shares of common stock at an exercise price of $28.08 per share. The vesting period for the restricted stock ranges from one to three years, and the vesting period for the stock options is three years. The Company is currently evaluating the effect these share-based compensation arrangements will have on its future results of operations.
Inflation
Although the Company cannot accurately determine the precise effect of inflation on its operations, management does not believe inflation has had a material effect on the results of operations in the last three fiscal years. When the costs of operating resorts increase, the Company generally has been able to pass the increase on to its customers. However, there can be no assurance that increases in labor and other operating costs due to inflation will not have an impact on the Company's future profitability.
Seasonality and Quarterly Results
The Company's Mountain and Lodging operations are seasonal in nature. In particular, revenues and profits for the Company's Mountain and most of its Lodging operations are substantially lower and historically result in losses from late spring to late fall. Conversely, peak operating seasons for GTLC, certain managed hotel properties and the Company's owned golf courses occur during the summer months while the winter season generally results in operating losses. However, revenues and profits generated by GTLC's summer operations, management fees from those managed properties and golf operations are not sufficient to fully offset the Company's off-season losses from its Mountain and other Lodging operations. During the 2005 fiscal year, 77.3% of total combined Mountain and Lodging revenues were earned during the second and third fiscal quarters. Quarterly results may also be materially affected by the timing of snowfall and other unforeseen external factors. Therefore, the operating results for any three-month period are not necessarily indicative of the results that may be achieved for any subsequent fiscal quarter or for a full fiscal year. (See Note 15, Selected Quarterly Financial Data, of the Notes to Consolidated Financial Statements).
Economic Downturn
Skiing, travel and tourism are discretionary recreational activities that can be adversely affected by a significant economic slowdown, which, in turn, could reduce the Company's operating results. There can be no assurance that a continued or future decrease in the amount of discretionary spending by the public would not have an adverse effect on the Company.
Unfavorable Weather Conditions
The ability to attract visitors to ski resorts is influenced by weather conditions and by the amount and timing of snowfall during the ski season. Unfavorable weather conditions can adversely affect skier visits and the Company's revenues and profits. In the past 20 years, the Company's Colorado ski resorts have averaged between 20 and 30 feet of annual snowfall and Heavenly receives average yearly snowfall of between 25 and 35 feet, significantly in excess of the average for United States ski resorts. However, there is no assurance that the Company's resorts will receive seasonal snowfalls near the historical average in the future. Also, the early season snow conditions and skier perceptions of early season snow conditions influence the momentum and success of the overall season. In addition, a severe and prolonged drought could affect our otherwise adequate snowmaking water supplies. Unfavorable weather conditions such as drought, hurricanes, tropical storms and tornadoes can adversely affect the Company's other resorts and lodging properties as vacationers tend to delay or postpone vacations if weather conditions differ from those that typically prevail at such resorts for a given season. There is no way for the Company to predict future weather patterns or the impact that weather patterns may have on results of operations or visitation. To some extent, the Company mitigates against impacts from weather through the sales of season passes.
Labor Market
The Company's Mountain and Lodging operations are largely dependent on a seasonal workforce. The Company recruits worldwide to fill staffing needs each season and utilizes visas to enable the use of foreign workers. In addition, the Company manages seasonal wages and the timing of the hiring process to ensure the appropriate workforce is in place. While the Company does not currently foresee the need to increase seasonal wages to attract employees, the Company cannot guarantee that such an increase will not be necessary in the future. In addition, the Company cannot guarantee that it will be able to obtain the visas necessary to hire foreign workers who are an important source for the seasonal workforce. Increased seasonal wages or an inadequate workforce could have an adverse impact on the Company's results of operations; however, the Company is unable to predict with any certainty whether such situations will arise or the potential impact on results of operations.
Terrorist Acts upon the United States and Acts of War
The terrorist acts carried out against the United States on September 11, 2001 and the war with Iraq and its aftermath have had an adverse effect on the global travel and leisure industry. Additional terrorist acts against the United States and the threat of or actual war by or upon the United States could result in further degradation of discretionary travel, upon which the Company's operations are highly dependent. Such degradation could have a material adverse impact on the Company's results of operations.
Cautionary Statement
Statements in this Form 10-K, other than statements of historical information, are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as "may", "will", "expect", "plan", "intend", "anticipate", "believe", "estimate", and "continue" or similar words. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Such risks and uncertainties include, but are not limited to:
Readers are also referred to the uncertainties and risks identified elsewhere in this Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Interest Rate Risk. The Company's exposure to market risk is limited primarily to the fluctuating interest rates associated with variable rate indebtedness. At July 31, 2005, the Company had $62.0 million of variable rate indebtedness, representing 11.9% of the Company's total debt outstanding, at an average interest rate during fiscal 2005 of 9.3%. The Company's average interest rate includes letter of credit fees, unused fees and deferred financing charges (see Note 4, Long-Term Debt, of the Notes to Consolidated Financial Statements). Based on floating-rate borrowings outstanding as of July 31, 2005, a 100-basis point change in LIBOR would have caused the Company's annual interest expense to change by $620,000, respectively. The Company's market risk exposure fluctuates based on changes in underlying interest rates.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Vail Resorts, Inc.
Consolidated Financial Statements for the Years Ended July 31, 2005, 2004 and 2003
Management's Report on Internal Control Over Financial Reporting |
F-2 |
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Report of Independent Registered Public Accounting Firm |
F-3 |
|
Consolidated Financial Statements |
||
Consolidated Balance Sheets |
F-5 |
|
Consolidated Statements of Operations |
F-6 |
|
Consolidated Statements of Stockholders' Equity |
F-7 |
|
Consolidated Statements of Cash Flows |
F-8 |
|
Supplemental Schedule of Non-Cash Transactions |
F-9 |
|
Notes to Consolidated Financial Statements |
F-10 |
|
Financial Statement Schedule: |
||
The following consolidated financial statement schedule of the Company is filed as part of this Report on Form 10-K and should be read in conjunction with the Company's Consolidated Financial Statements: |
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Schedule II Valuation and Qualifying Accounts |
47 |
Management's Report on Internal Control over Financial Reporting
Management of Vail Resorts Inc. ("the Company") is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles of the United States of America.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management, including the Company's Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company's internal control over financial reporting as of July 31, 2005. In making this assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that, as of July 31, 2005, the Company's internal control over financial reporting was effective.
The Company's independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited management's assessment of the effectiveness of the Company's internal control over financial reporting as of July 31, 2005, as stated in their report which appears herein.
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
of Vail Resorts, Inc.:
We have completed an integrated audit of Vail Resorts, Inc.'s 2005 consolidated financial statements and of its internal control over financial reporting as of July 31, 2005 and audits of its 2004 and 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.
Consolidated financial statements and financial statement schedule
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Vail Resorts, Inc. and its subsidiaries at July 31, 2005 and 2004, and the results of
their operations and their cash flows for each of the three years in the period ended July 31, 2005 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in
the accompanying index
presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements 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 of financial statements includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
As discussed in Note 7 to the accompanying consolidated financial statements, the Company adopted FASB Interpretation No. 46 "Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51, Revised" during the year ended July 31, 2004.
Internal control over financial reporting
Also, in our opinion, management's assessment, included in the accompanying Management's Report on Internal Control Over Financial Reporting that the Company maintained effective internal control over financial reporting as of July 31, 2005 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 31, 2005, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management's assessment and on the effectiveness of the Company's internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting 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 effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers, LLP
Denver, Colorado
October 4, 2005
Vail Resorts, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
July 31, |
||||||
2005 |
2004 |
|||||
Assets |
||||||
Current assets: |
||||||
Cash and cash equivalents |
$ 136,580 |
$ 46,328 |
||||
Restricted cash |
18,253 |
16,031 |
||||
Trade receivables, net of allowances of $1,335 and $1,265, respectively |
33,136 |
31,915 |
||||
Income taxes receivable |
-- |
5,042 |
||||
Inventories, net of reserves of $719 and $738, respectively |
36,078 |
31,151 |
||||
Deferred income taxes (Note 11) |
11,405 |
12,077 |
||||
Other current assets |
20,697 |
13,193 |
||||
Assets held for sale (Note 2) |
26,735 |
-- |
||||
Total current assets |
282,884 |
155,737 |
||||
Property, plant and equipment, net (Note 5) |
843,047 |
968,772 |
||||
Real estate held for sale and investment |
154,874 |
134,548 |
||||
Deferred charges and other assets |
23,172 |
31,311 |
||||
Notes receivable |
9,463 |
13,296 |
||||
Goodwill, net (Note 5) |
135,507 |
145,090 |
||||
Intangible assets, net (Note 5) |
76,974 |
85,203 |
||||
Total assets |
$1,525,921 |
$1,533,957 |
||||
Liabilities and Stockholders' Equity |
||||||
Current liabilities: |
||||||
Accounts payable and accrued expenses (Note 5) |
$ 209,369 |
$ 198,868 |
||||
Income taxes payable |
12,979 |
-- |
||||
Long-term debt due within one year (Note 4) |
2,004 |
3,159 |
||||
Total current liabilities |
224,352 |
202,027 |
||||
Long-term debt (Note 4) |
519,706 |
622,644 |
||||
Other long-term liabilities (Note 5) |
140,421 |
97,616 |
||||
Deferred income taxes (Note 11) |
71,209 |
79,745 |
||||
Commitments and contingencies (Note 13) |
-- |
-- |
||||
Put option liabilities (Note 9) |
34 |
3,657 |
||||
Minority interest in net assets of consolidated subsidiaries |
29,670 |
37,105 |
||||
Stockholders' equity: |
||||||
Preferred stock, $0.01 par value, 25,000,000 shares authorized, no shares issued and outstanding |
-- |
-- |
||||
Common stock: |
||||||
Class A common stock, convertible to common stock, $0.01 par value, zero shares authorized and outstanding as of July 31, 2005, and 20,000,000 shares authorized and 6,114,834 shares issued and outstanding as of July 31, 2004 (Note 16) |
-- |
61 |
||||
Common stock, $0.01 par value, 100,000,000 and 80,000,000 shares authorized, respectively, and 36,596,193 and 29,222,828 shares issued and outstanding, respectively |
366 |
292 |
||||
Additional paid-in capital |
442,527 |
416,660 |
||||
Deferred compensation |
(329) |
(677) |
||||
Retained earnings |
97,965 |
74,827 |
||||
Total stockholders' equity |
540,529 |
491,163 |
||||
Total liabilities and stockholders' equity |
$1,525,921 |
$1,533,957 |
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Vail Resorts, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
Year Ended |
||||||||
July 31, |
||||||||
2005 |
2004 |
2003 |
||||||
Net revenue: |
||||||||
Mountain |
$ 540,855 |
$ 500,995 |
$ 460,568 |
|||||
Lodging |
196,351 |
180,525 |
172,003 |
|||||
Real estate |
72,781 |
45,123 |
80,401 |
|||||
Total net revenue |
809,987 |
726,643 |
712,972 |
|||||
Operating expense: |
||||||||
Mountain |
391,889 |
368,875 |
362,131 |
|||||
Lodging |
177,469 |
165,983 |
161,846 |
|||||
Real estate |
58,254 |
16,791 |
66,642 |
|||||
Total segment operating expense |
627,612 |
551,649 |
590,619 |
|||||
Other operating income (expense): |
||||||||
Gain on transfer of property, net |
-- |
2,147 |
-- |
|||||
Depreciation and amortization |
(89,968) |
(86,377) |
(82,242) |
|||||
Asset impairment charges (Note 10) |
(2,550) |
(1,108) |
(4,830) |
|||||
Mold remediation charge (Note 13) |
-- |
(5,500) |
-- |
|||||
Loss on disposal of fixed assets, net |
(1,528) |
(2,345) |
(794) |
|||||
Income from operations |
88,329 |
81,811 |
34,487 |
|||||
Mountain equity investment income, net |
2,303 |
1,376 |
1,009 |
|||||
Lodging equity investment loss, net |
(2,679) |
(3,432) |
(5,995) |
|||||
Real estate equity investment (loss) income, net |
(102) |
460 |
3,962 |
|||||
Investment income, net |
2,066 |
1,886 |
2,011 |
|||||
Interest expense |
(40,298) |
(47,479) |
(50,001) |
|||||
Loss on extinguishment of debt |
(612) |
(37,084) |
-- |
|||||
Loss from sale of businesses, net (Note 8) |
(7,353) |
-- |
-- |
|||||
Gain (loss) on put options, net (Note 9) |
1,158 |
(1,875) |
1,569 |
|||||
Other income (expense), net |
50 |
(179) |
17 |
|||||
Minority interest in income of consolidated subsidiaries, net |
(5,239) |
(4,000) |
(1,064) |
|||||
Income (loss) before (provision) benefit for income taxes |
37,623 |
(8,516) |
(14,005) |
|||||
(Provision) benefit for income taxes (Note 11) |
(14,485) |
2,557 |
5,478 |
|||||
Net income (loss) |
$ 23,138 |
$ (5,959) |
$ (8,527) |
|||||
Per share amounts (Note 3): |
||||||||
Basic net income (loss) per share |
$ 0.65 |
$ (0.17) |
$ (0.24) |
|||||
Diluted net income (loss) per share |
$ 0.64 |
$ (0.17) |
$ (0.24) |
|||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Vail Resorts, Inc.
Consolidated Statements of Stockholders' Equity
(In thousands, except share amounts)
Common Stock |
Additional Paid-in Capital |
Deferred Compensation |
Retained Earnings |
Total Stockholders' Equity |
||||||||||||
Shares |
||||||||||||||||
Class A |
Common |
Total |
Amount |
|||||||||||||
Balance, July 31, 2002 |
7,439,834 |
27,714,220 |
35,154,054 |
$ 351 |
$ 415,688 |
$ (1,348) |
$ 89,313 |
$ 504,004 |
||||||||
Net loss |
-- |
-- |
-- |
-- |
-- |
-- |
(8,527) |
(8,527) |
||||||||
Amortization of deferred compensation |
-- |
-- |
-- |
-- |
-- |
1,346 |
-- |
1,346 |
||||||||
Issuance of shares pursuant to options exercised (Note 18) |
-- |
30,727 |
30,727 |
-- |
498 |
-- |
-- |
498 |
||||||||
Purchase of stock pursuant to issuance of restricted shares, net |
-- |
90,095 |
90,095 |
1 |
(1,163) |
-- |
-- |
(1,162) |
||||||||
Tax effect of stock option exercises |
-- |
-- |
-- |
-- |
87 |
-- |
-- |
87 |
||||||||
Forfeiture of unvested restricted stock granted |
-- |
-- |
-- |
-- |
(58) |
58 |
-- |
-- |
||||||||
Restricted stock granted |
-- |
-- |
-- |
-- |
254 |
(254) |
-- |
-- |
||||||||
Balance, July 31, 2003 |
7,439,834 |
27,835,042 |
35,274,876 |
352 |
415,306 |
(198) |
80,786 |
496,246 |
||||||||
Net loss |
-- |
-- |
-- |
-- |
-- |
-- |
(5,959) |
(5,959) |
||||||||
Conversion of Class A shares to common shares |
(1,325,000) |
1,325,000 |
-- |
-- |
-- |
-- |
-- |
-- |
||||||||
Amortization of deferred compensation |
-- |
-- |
-- |
-- |
-- |
250 |
-- |
250 |
||||||||
Issuance of shares pursuant to options exercised (Note 18) |
-- |
62,786 |
62,786 |
1 |
561 |
-- |
-- |
562 |
||||||||
Tax effect of stock option exercises |
-- |
-- |
-- |
-- |
64 |
-- |
-- |
64 |
||||||||
Restricted stock granted |
-- |
-- |
-- |
-- |
729 |
(729) |
-- |
-- |
||||||||
Balance, July 31, 2004 |
6,114,834 |
29,222,828 |
35,337,662 |
353 |
416,660 |
(677) |
74,827 |
491,163 |
||||||||
Net income |
-- |
-- |
-- |
-- |
-- |
-- |
23,138 |
23,138 |
||||||||
Conversion of Class A shares to common shares (Note 16) |
(6,114,834) |
6,114,834 |
-- |
-- |
-- |
-- |
-- |
-- |
||||||||
Amortization of deferred compensation |
-- |
-- |
-- |
-- |
-- |
348 |
-- |
348 |
||||||||
Issuance of shares pursuant to options exercised and issuance of restricted shares (Note 18) |
-- |
1,258,531 |
1,258,531 |
13 |
21,928 |
-- |
-- |
21,941 |
||||||||
Tax effect of stock option exercises |
-- |
-- |
-- |
-- |
3,939 |
-- |
-- |
3,939 |
||||||||
Balance, July 31, 2005 |
-- |
36,596,193 |
36,596,193 |
$ 366 |
$ 442,527 |
$ (329) |
$ 97,965 |
$ 540,529 |
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Vail Resorts, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended July 31, |
||||||||
2005 |
2004 |
2003 |
||||||
Cash flows from operating activities: |
||||||||
Net income (loss) |
$ 23,138 |
$ (5,959) |
$ (8,527) |
|||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
89,968 |
86,377 |
82,242 |
|||||
Non-cash cost of real estate sales |
38,425 |
(1,654) |
45,473 |
|||||
Non-cash gain on transfer of property |
-- |
(2,147) |
-- |
|||||
Asset impairment charges |
2,550 |
1,108 |
4,830 |
|||||
Mold remediation charge |
-- |
5,500 |
-- |
|||||
Loss on sale of businesses, net |
7,353 |
-- |
-- |
|||||
Cash received from private club membership sales |
8,324 |
8,358 |
19,652 |
|||||
Loss on extinguishment of debt |
612 |
37,084 |
-- |
|||||
Deferred income taxes, net |
(7,514) |
(1,018) |
4,275 |
|||||
Minority interest in net income of consolidated subsidiaries |
5,239 |
4,000 |
1,064 |
|||||
Other non-cash (income) expense, net |
(2,996) |
5,956 |
7,545 |
|||||
Changes in assets and liabilities: |
||||||||
Restricted cash |
(2,222) |
(4,965) |
1,789 |
|||||
Accounts receivable |
(3,665) |
7,254 |
(83) |
|||||
Notes receivable |
4,052 |
1,685 |
3,928 |
|||||
Inventories |
(5,074) |
605 |
570 |
|||||
Accounts payable and accrued expenses |
26,443 |
20,512 |
5,974 |
|||||
Income taxes receivable/payable |
21,960 |
6,940 |
(17,201) |
|||||
Real estate deposits |
29,755 |
11,453 |
7,128 |
|||||
Other assets and liabilities, net |
(16,007) |
(152) |
(4,089) |
|||||
Net cash provided by operating activities |
220,341 |
180,937 |
154,570 |
|||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
(79,975) |
(62,960) |
(106,338) |
|||||
Investments in real estate |
(72,164) |
(27,802) |
(22,572) |
|||||
Distributions from joint ventures |
6,588 |
4,849 |
3,120 |
|||||
Cash received from disposal of fixed assets |
2,019 |
2,658 |
635 |
|||||
Cash received from sale of businesses |
108,399 |
-- |
-- |
|||||
Purchase of minority interests |
(9,748) |
-- |
-- |
|||||
Other investing |
-- |
(110) |
(5,568) |
|||||
Net cash used in investing activities |
(44,881) |
(83,365) |
(130,723) |
|||||
Cash flows from financing activities: |
||||||||
Proceeds from borrowings under 6.75% Notes |
-- |
390,000 |
-- |
|||||
Payment of tender and call of 8.75% Notes |
-- |
(360,000) |
-- |
|||||
Payment of tender premium |
-- |
(23,825) |
-- |
|||||
Payment of financing costs |
(1,774) |
(6,828) |
(3,854) |
|||||
Payment of Credit Facility Term Loan |
(98,750) |
(1,000) |
(250) |
|||||
Proceeds from borrowings under other long-term debt |
176,423 |
173,253 |
458,446 |
|||||
Payments of other long-term debt |
(181,239) |
(234,234) |
(482,997) |
|||||
Distributions from joint ventures to minority shareholders |
(1,807) |
(1,474) |
(926) |
|||||
Proceeds from the exercise of stock options |
21,939 |
562 |
498 |
|||||
Net cash used in financing activities |
(85,208) |
(63,546) |
(29,083) |
|||||
Net increase (decrease) in cash and cash equivalents |
90,252 |
34,026 |
(5,236) |
|||||
Net increase in cash due to adoption of FIN 46R |
-- |
4,428 |
-- |
|||||
Cash and cash equivalents: |
||||||||
Beginning of period |
46,328 |
7,874 |
13,110 |
|||||
End of period |
$ 136,580 |
$ 46,328 |
$ 7,874 |
|||||
Cash paid for interest, net of amounts capitalized |
$ 38,158 |
$ 38,578 |
$ 46,244 |
|||||
Taxes paid, net of refunds received |
-- |
(8,827) |
7,703 |
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Vail Resorts, Inc.
Supplemental Schedule of Non-Cash Transactions
(In thousands)
Year Ended |
||||||
July 31, |
||||||
2005 |
2004 |
2003 |
||||
Distributions (net of liabilities assumed) from KRED |
$ -- |
$ 25,600 |
$ -- |
|||
Capital leases entered into for operating fixed assets |
-- |
1,312 |
-- |
|||
Increase in assets due to adoption of FIN 46R |
-- |
49,860 |
-- |
|||
Increase in liabilities due to adoption of FIN 46R |
-- |
48,972 |
-- |
|||
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Notes to Consolidated Financial Statements
Vail Resorts, Inc. ("Vail Resorts") is organized as a holding company and operates through various subsidiaries. Vail Resorts and its subsidiaries (collectively, the "Company") currently operate in three business segments: Mountain, Lodging and Real Estate. In the Mountain segment, the Company owns and operates five world-class ski resorts and related amenities at Vail, Breckenridge, Keystone and Beaver Creek mountains in Colorado and the Heavenly Ski Resort ("Heavenly") in the Lake Tahoe area of California and Nevada. The Company also holds a 61.7% interest in SSI Venture LLC ("SSV"), a retail/rental company. In the Lodging segment, the Company owns and operates various hotels, RockResorts International LLC ("RockResorts"), a luxury hotel management company, and Grand Teton Lodge Company ("GTLC"), which operates three resorts within Grand Teton National Park (under a National Park Service concessionaire contract) and the Jackson Hole Golf & Tennis Club in Wyoming. Vail Resorts Development Company ("VRDC"), a wholly-owned subsidiary of the Company, conducts the operations of the Company's Real Estate segment. The Company's Mountain and Lodging businesses are seasonal in nature with peak operating seasons from mid-November through mid-April. The Company's operations at GTLC generally run from mid-May through mid-October. The Company also has non-majority owned investments in various other entities, some of which are consolidated (see Note 6, Investments in Affiliates and Note 7, Variable Interest Entities).
2. Summary of Significant Accounting Policies
Principles of Consolidation-- The accompanying Consolidated Financial Statements include the accounts of the Company, its majority-owned subsidiaries and all variable interest entities for which the Company is the primary beneficiary. Investments in which the Company does not have a controlling interest or is not the primary beneficiary are accounted for under the equity method. All significant intercompany transactions have been eliminated in consolidation.
Cash and Cash Equivalents-- The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Restricted Cash-- Restricted cash represents amounts held as state-regulated reserves for self-insured workers' compensation claims, owner and guest advance deposits held in escrow for lodging reservations and certain deposits received from real estate transactions. The workers' compensation reserve, which was $11.9 million at July 31, 2005, is invested in money market accounts, highly liquid U.S. Treasury and similar-grade obligations, in accordance with reserve restrictions.
Trade and Notes Receivable -- The Company records trade accounts receivable in the normal course of business related to the sale of products or services. The Company charges interest on past due accounts at a rate of 18% per annum. The allowance for doubtful accounts is based on a specific reserve analysis and on a percentage of accounts receivable, and takes into consideration such factors as historical write-offs, the economic climate and other factors that could affect collectibility. Write-offs are evaluated on a case by case basis. Delinquency status on accounts receivable is based on contractual terms.
Inventories-- The Company's inventories consist primarily of purchased retail goods, food and beverage items, and spare parts. Inventories are stated at the lower of cost or fair value, determined using primarily an average weighted cost method. The Company records a reserve for estimated shrinkage and obsolete or unusable inventory.
Property, Plant and Equipment-- Property, plant and equipment is carried at cost net of accumulated depreciation. Routine repairs and maintenance are expensed as incurred. Expenditures that improve the functionality of the related equipment or extend the useful life are capitalized. When property, plant and equipment is retired or otherwise disposed of, the related gain or loss is included in operating income. Depreciation is calculated on the straight-line method generally based on the following useful lives:
Estimated Life |
|
in Years |
|
Land improvements |
20 |
Buildings and building improvements |
15-30 |
Machinery and equipment |
3-30 |
Furniture and fixtures |
3-10 |
Vehicles |
3 |
In November 2002, after a review of the useful lives of the Company's assets, management changed the depreciable lives of buildings to 30 years from 40 years. The Company believes 30 years to be a more appropriate estimate. The change increased depreciation expense by approximately $450,000 per quarter.
The Company capitalizes interest on non-real estate construction projects expected to take longer than one year to complete and cost more than $1 million. The Company records capitalized interest once construction activities commence. The Company did not capitalize interest on projects during fiscal years 2005 and 2004. Interest capitalized on non-real estate projects during fiscal year 2003 totaled $405,000.
The Company has certain assets being used in resort operations that were constructed as amenities in conjunction with real estate development and included in project costs and expensed as the real estate was sold. Accordingly, there is no carrying value and no related depreciation expense related to these assets in the Company's Consolidated Financial Statements. These assets were primarily placed in service from 1995 to 1997 with an original cost of approximately $33 million and an average estimated useful life of 15 years.
Real Estate Held for Sale -- The Company capitalizes as land held for sale the original acquisition cost, direct construction and development costs, property taxes, interest incurred on costs related to land under development and other related costs (engineering, surveying, landscaping, etc.) until the property reaches its intended use. The cost of sales for individual parcels of real estate or condominium units within a project is determined using the relative sales value method. Sales and marketing expenses are charged against income in the period incurred. Sales commission expenses are charged against income in the period that the related revenues are recorded. The Company capitalizes interest on real estate projects expected to take longer than one year to complete and cost more than $1 million. The Company records capitalized interest once construction activities commence and real estate deposits have been used. Interest capitalized on real estate development projects during fiscal years 2005 and 2003 totaled approximately $14,000 and $849,000, respectively. No interest was capitalized on real estate development projects in fiscal 2004.
The Company is a member in KRED, which is a joint venture with Intrawest Resorts, Inc. formed to develop land at the base of Keystone Mountain. The Company contributed 500 acres of development land as well as certain other funds to the joint venture. The Company's investment in KRED, including the Company's equity earnings from the inception of KRED, is reported as "real estate held for sale and investment" in the accompanying consolidated balance sheets as of July 31, 2005 and 2004. In December 2003, KRED distributed a majority of its assets to its members. The Company received a non-cash distribution of $25.6 million (net of assumed liabilities of $14.0 million) under the distribution. The Company primarily received various parcels of developable land and approximately 91,000 square feet of commercial space in the distribution. There was no gain or loss recorded upon distribution. The Company recorded equity (loss)/income of ($102,000), $99,000 and $1.0 million for the fiscal years ended July 31, 2005, 2004 and 2003, respectively, related to KRED.
Assets Held for Sale-- During the fourth quarter of fiscal 2005, the Company entered into a process to market the assets constituting SRL&S for sale in accordance with the Company's strategy to reduce certain hotel ownership in favor of increasing its managed property portfolio. The Company expects to sell the assets constituting SRL&S during fiscal 2006. As a result, the Company has classified $26.7 million of long-term assets, including $26.5 million of net property, plant and equipment and $185,000 of goodwill, as "assets held for sale" in the accompanying consolidated balance sheet as of July 31, 2005.
Deferred Financing Costs-- Costs incurred with the issuance of debt securities are included in deferred charges and other assets, net of accumulated amortization. Amortization is charged to interest expense over the respective lives of the applicable debt issues.
Interest Rate Agreements-- In October 2000, the Company canceled certain interest-rate swap agreements in exchange for a cash payment of $1.1 million. The $1.1 million gain was deferred and recognized over the remaining life of the related debt, in accordance with Financial Accounting Standards Board ("FASB") Emerging Issues Task Force Issue No. 84-7, "Termination of Interest Rate Swaps". The Company had recognized the full $1.1 million gain related to the cancellation of the Swap Agreements as of July 31, 2003.
Goodwill and Intangible Assets -- The Company has classified as goodwill the cost in excess of fair value of the net assets of companies acquired in purchase transactions. The Company's major intangible asset classes are trademarks, water rights, customer lists, property management contracts, intellectual property, United States Forest Service permits, franchise agreements and excess reorganization value. As proscribed in Statement of Financial Accounting Standards No. 142, "Goodwill and Intangible Assets" goodwill and certain indefinite lived intangible assets, including excess reorganization value and certain trademarks, are no longer amortized, but are subject to annual impairment testing. The Company tests annually for impairment under SFAS No. 142 as of May 1; the Company determined that there was no impairment to goodwill and intangible assets during fiscal years 2005, 2004 and 2003.
Long-lived Assets-- The Company evaluates potential impairment of long-lived assets and long-lived assets to be disposed of in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 establishes procedures for the review of recoverability and measurement of impairment, if necessary, of long-lived assets held and used by an entity. SFAS No. 144 requires that those assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. SFAS No. 144 requires that long-lived assets to be disposed of be reported at the lower of carrying amount or fair value less estimated selling costs. See Note 10, Asset Impairment Charges, for more information related to impaired long-lived assets.
Revenue Recognition-- Mountain and Lodging revenues are derived from a wide variety of sources, including, among other things, sales of lift tickets, ski school tuition, food and beverage operations, retail sales, equipment rental, hotel operations, property management services, private club dues, technology services, and golf course greens fees, and are recognized as products are delivered or services are performed. Revenues from private club initiation fees are recognized over the estimated life of the club facilities. Revenues from arrangements with multiple deliverables are bifurcated into units of accounting based on relative fair values and revenue is separately recognized for each unit of accounting. If a fair market value cannot be established for an arrangement, revenue is deferred until all deliverables have been performed.
Revenues from real estate primarily involve the sale of single-family homesites, condominiums/townhomes, and undeveloped land parcels. Revenue is not recognized until a sale is fully consummated as evidenced by 1) a binding contract, 2) receipt of consideration (generally the Company receives full cash payment upon closing) and 3) transfer to the buyer the usual risks and rewards of ownership. Contingent future profits, if any, are recognized only when received. The Company generally applies the "full accrual" method of revenue recognition thereby recognizing revenue and the related profit upon transfer of title to the buyer. However, if the Company has an obligation to complete improvements of lots sold or to construct amenities or other facilities as contractually required by sales that have been consummated, the Company utilizes the "percentage-of-completion" method of revenue recognition. The Company recorded revenue under the percentage-of-completion method of approximately $11.2 million, $16.1 million and $8.1 million for the fiscal years ended July 31, 2005, 2004 and 2003, respectively. Additionally, the Company uses the "deposit" method for sales that have not been completed for which payments have been received from buyers, and as such no profit is recognized until the sale is consummated.
Real Estate Cost of Sales-- Costs of real estate transactions include direct project costs, common cost allocations (primarily determined on relative sales value) and may include accrued commitment liabilities for costs to be incurred subsequent to sales transaction. Estimates of project costs and cost allocations are reviewed at the end of each financial reporting period until a project is substantially completed and available for sale. Costs are revised and reallocated as necessary for material changes on the basis of current estimates and are reported as a change in estimate in the current period. The Company recorded changes in estimates that increased (decreased) reported real estate cost of sales by approximately $435,000, ($16.9 million) and $475,000 for the fiscal years ended July 31, 2005, 2004 and 2003, respectively (see Note 13, Commitments and Contingencies, for more information).
Deferred Revenue-- In addition to deferring certain revenues related to private club initiation fees and the real estate sales as noted above, the Company records deferred revenue related to the sale of season ski passes and certain daily lift ticket products. The number of season pass holder visits is estimated based on historical data, and the deferred revenue is recognized throughout the season based on this estimate. During the ski season the estimated visits are compared to the actual visits and adjustments are made if necessary.
Reserve Estimates-- The Company uses estimates to record reserves for certain liabilities, including medical claims, workers' compensation, third-party loss contingencies, liabilities for the completion of real estate sold by the Company, allowance for doubtful accounts, metropolitan district interest subsidies and mold remediation costs among other items. The Company estimates the potential costs related to these liabilities that will be incurred and records that amount as a liability in its financial statements. These estimates are reviewed and appropriately adjusted as the facts and circumstances related to the liabilities change.
Advertising Costs -- Advertising costs are expensed at the time such advertising commences. Advertising expense for the fiscal years ended July 31, 2005, 2004 and 2003 was $15.1 million, $14.6 million and $16.0 million, respectively. At July 31, 2005 and 2004, prepaid advertising costs of $885,000 and $451,000, respectively, are reported as "other current assets" in the Company's consolidated balance sheets.
Income Taxes-- The Company uses the liability method of accounting for income taxes as proscribed by SFAS No. 109, "Accounting for Income Taxes". Under SFAS No. 109, deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets and for operating loss and tax credit carryforwards. The change in deferred tax assets and liabilities for the period measures the deferred tax provision or benefit for the period. Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to the tax provision or benefit in the period of enactment. The Company's deferred tax assets have been reduced by a valuation allowance to the extent it is deemed to be more likely than not that some or all of the deferred tax assets will not be realized. (See Note 11, Income Taxes, for more information related to deferred tax assets and liabilities).
Net Income (Loss) Per Share -- In accordance with SFAS No. 128, "Earnings Per Share", the Company computes net income per share on both the basic and diluted basis (See Note 3, Net Income (Loss) Per Common Share).
Fair Value of Financial Instruments -- The recorded amounts for cash and cash equivalents, receivables, other current assets, and accounts payable and accrued expenses approximate fair value due to the short-term nature of these financial instruments. The fair value of amounts outstanding under the Company's credit facilities and Employee Housing Bonds approximate book value due to the variable nature of the interest rate associated with that debt. The fair values of the Company's Industrial Development Bonds and other long-term debt have been estimated using discounted cash flow analyses based on current borrowing rates for debt with similar remaining maturities and ratings. The fair value of the 6.75% Notes is based on quoted market price. The estimated fair values of the 6.75% Notes, Industrial Development Bonds and other long-term debt at July 31, 2005 and 2004 are presented below (in thousands):
July 31, 2005 |
July 31, 2004 |
||||||
Carrying |
Fair |
Carrying |
Fair |
||||
Value |
Value |
Value |
Value |
||||
6.75% Notes |
$390,000 |
$397,800 |
$390,000 |
$384,150 |
|||
Industrial Development Bonds |
61,700 |
71,266 |
61,700 |
67,061 |
|||
Other long-term debt |
8,006 |
9,074 |
9,354 |
11,044 |
Stock Compensation-- At July 31, 2005, the Company had four stock-based compensation plans. The Company applies Accounting Principles Board ("APB") Opinion No. 25 and related interpretations in accounting for stock-based compensation to employees. Accordingly, no compensation cost has been recognized for its fixed stock option plans. Had compensation cost for the Company's four stock-based compensation plans been determined consistent with SFAS No. 123, "Accounting for Stock Based Compensation", the Company's net income (loss) and earnings (loss) per share would have been the pro forma amounts indicated below (in thousands, except per share amounts):
Fiscal Year Ended |
||||||
July 31, |
||||||
2005 |
2004 |
2003 |
||||
Net income (loss) |
||||||
As reported |
$ 23,138 |
$ (5,959) |
$ (8,527) |
|||
Add: stock-based employee compensation expense included in reported net income (loss), net of related tax effects |
273 |
155 |
871 |
|||
Deduct: total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effects |
(2,987) |
(2,546) |
(3,177) |
|||
Pro forma |
$ 20,424 |
(8,350) |
$ (10,833) |
|||
Basic net income (loss) per common share |
||||||
As reported |
$ 0.65 |
$ (0.17) |
$ (0.24) |
|||
Pro forma |
$ 0.57 |
$ (0.24) |
$ (0.31) |
|||
Diluted net income (loss) per common share |
||||||
As reported |
$ 0.64 |
$ (0.17) |
$ (0.24) |
|||
Pro forma |
$ 0.56 |
$ (0.24) |
$ (0.31) |
As a result of changes to the calculation of forfeitures and the period over which pro forma expense would be taken if the fair value method was applied, the presentations of pro forma net loss and basic and diluted net loss per common share for fiscal years 2004 and 2003 have been changed, resulting in an increase in the pro forma net loss per common share of $0.06 and $0.02 for the fiscal years ended July 31, 2004 and 2003, respectively, as compared to the presentation in the Company's previously filed Annual Reports on Form 10-K for those periods.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2005, 2004 and 2003, respectively: dividend yield of 0% for each year, expected volatility of 35.3%, 38.7% and 32.2%; risk-free interest rates of 3.28%, 2.92% and 2.19%; and an expected life of five years for each year. The weighted-average grant-date fair value per share of stock options granted in the fiscal years ended July 31, 2005, 2004 and 2003 was $6.83, $5.63 and $5.17, respectively.
Concentration of Credit Risk-- The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments in high quality credit institutions. At times, such investments may be in excess of FDIC insurance limits. Concentration of credit risk with respect to trade receivables is limited due to the wide variety of customers and markets in which the Company transacts business, as well as their dispersion across many geographical areas. As a result, as of July 31, 2005, the Company did not consider itself to have any significant concentrations of credit risk. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains allowances for potential credit losses, but does require advance deposits on certain transactions, and historical losses have been within management's expectations. The Company does not enter into financial instruments for trading or speculative purposes.
Use of Estimates-- 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, the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications-- Certain reclassifications have been made to the accompanying Consolidated Financial Statements as of and for the years ended July 31, 2004 and 2003 to conform to the current period presentation.
New Accounting Pronouncements -- In December 2004, the FASB issued SFAS 123R which replaces SFAS 123 and supersedes APB 25. SFAS 123R requires the measurement of all employee share-based compensation arrangements to employees, including grants of employee stock options, using a fair-value-based method and the recording of such expense in the consolidated statements of operations. The accounting provisions of SFAS 123R are effective for fiscal years beginning after June 15, 2005, with early adoption permitted. The pro forma disclosures previously permitted under SFAS 123 no longer will be an alternative to financial statement recognition.
SFAS 123R permits public companies to adopt its requirements using one of two methods. Under the "modified prospective" method, compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS 123R for all share-based compensation arrangements granted after the effective date and (b) based on the requirements of SFAS 123 for all awards granted to employees prior to the effective date of SFAS 123R that remain unvested on the effective date. The "modified retrospective" method includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under SFAS 123 for purposes of pro forma disclosures for either (a) all prior periods presented or (b) prior interim periods of the year of adoption. The Company plans to adopt SFAS 123R using the modified prospective method.
As permitted by SFAS 123, the Company currently accounts for share-based compensation arrangements to employees using APB 25's intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. Accordingly, the adoption of SFAS 123R's fair value method will impact the Company's results of operations, although it will have no impact on the Company's overall financial position. The adoption of SFAS 123R will increase the Company's operating expenses by approximately $3.5 million, $2.2 million and $270,000 for the years ended July 31, 2006, 2007 and 2008, respectively, for options that remain unvested as of July 31, 2005. The full impact of adoption of SFAS 123R cannot be reasonably estimated at this time because it will depend on levels and type of share-based compensation arrangements in the future, along with the valuation model used and related assumptions. However, had the Company adopted SFAS 123R in prior periods, the impact of that standard would have approximated the impact of SFAS 123 as described in the disclosure of pro forma net income (loss) per share, as discussed above. In September 2005, the Company granted approximately 163,850 shares of restricted stock and options to purchase approximately 442,500 shares of common stock at an exercise price of $28.08 per share. The vesting period for the restricted stock ranges from one to three years, and the vesting period for the stock options is three years. The Company is currently evaluating the effect these share-based compensation arrangements will have on its future results of operations.
3. Net Income (Loss) Per Common Share
SFAS No. 128, "Earnings per Share" ("EPS"), establishes standards for computing and presenting EPS. SFAS No. 128 requires the dual presentation of basic and diluted EPS on the face of the income statement and requires a reconciliation of numerators (net income/loss) and denominators (weighted-average shares outstanding) for both basic and diluted EPS in the footnotes. Basic EPS excludes dilution and is computed by dividing net income/loss available to common shareholders by the weighted-average shares outstanding. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, resulting in the issuance of common shares that would then share in the earnings of the Company.
Fiscal Year Ended |
|||||||||||
July 31, |
|||||||||||
2005 |
2004 |
2003 |
|||||||||
(In thousands, except per share amounts) |
|||||||||||
Basic |
Diluted |
Basic |
Diluted |
Basic |
Diluted |
||||||
Net income (loss) per common share: |
|||||||||||
Net income (loss) |
$ 23,138 |
$ 23,138 |
$ (5,959) |
$ (5,959) |
$ (8,527) |
$ (8,527) |
|||||
Weighted-average shares outstanding |
35,712 |
35,712 |
35,294 |
35,294 |
35,170 |
35,170 |
|||||
Effect of dilutive securities |
-- |
648 |
-- |
-- |
-- |
-- |
|||||
Total shares |
35,712 |
36,360 |
35,294 |
35,294 |
35,170 |
35,170 |
|||||
Net income (loss) per common share |
$ 0.65 |
$ 0.64 |
$ (0.17) |
$ (0.17) |
$ (0.24) |
$ (0.24) |
The number of shares issuable on the exercise of common stock options that were excluded from the calculation of diluted net income (loss) per share because the effect of their inclusion would have been anti-dilutive totaled 631,000, 4.5 million and 3.9 million, in fiscal 2005, 2004 and 2003, respectively. In fiscal 2005, the shares were anti-dilutive because the exercise price exceeded the average share price for the year. In fiscal 2004 and 2003, the shares were anti-dilutive due to the Company's net loss position.
Long-term debt as of July 31, 2005 and July 31, 2004 is summarized as follows (in thousands):
Fiscal year |
July 31, |
July 31, |
|||
Maturity (i) |
2005 |
2004 |
|||
Credit Facility Revolver (a) |
2010 |
$ -- |
$ -- |
||
Credit Facility Term Loan (a) |
2011 |
-- |
98,750 |
||
SSV Facility (b) |
2006 |
9,429 |
13,424 |
||
Industrial Development Bonds (c) |
2007-2020 |
61,700 |
61,700 |
||
Employee Housing Bonds (d) |
2027-2039 |
52,575 |
52,575 |
||
Gore Creek Facility (e) |
2007 |
-- |
-- |
||
6.75% Notes(f) |
2014 |
390,000 |
390,000 |
||
Other (g) |
2006-2029 |
8,006 |
9,354 |
||
521,710 |
625,803 |
||||
Less: current maturities (h) |
2,004 |
3,159 |
|||
$ 519,706 |
$ 622,644 |
Aggregate maturities for debt outstanding as of July 31, 2005 are as follows (in thousands):
2006 |
$ 2,004 |
|
2007 |
12,662 |
|
2008 |
318 |
|
2009 |
15,203 |
|
2010 |
205 |
|
Thereafter |
491,318 |
|
Total debt |
$ 521,710 |
The Company incurred gross interest expense of $40.3 million, $47.5 million and $51.5 million for the fiscal years ended July 31, 2005, 2004 and 2003, respectively. The Company was in compliance with all of its financial and operating covenants required to be maintained under its debt instruments for all periods presented.
5. Supplementary Balance Sheet Information (in thousands)
The composition of property, plant and equipment follows:
July 31, |
|||
2005 |
2004 |
||
Land and land improvements |
$ 236,424 |
$ 245,540 |
|
Buildings and building improvements |
504,662 |
606,727 |
|
Machinery and equipment |
398,342 |
381,628 |
|
Vehicles |
24,449 |
22,738 |
|
Furniture and fixtures |
97,780 |
117,216 |
|
Construction in progress |
47,973 |
29,283 |
|
1,309,630 |
1,403,132 |
||
Accumulated depreciation |
(466,583) |
(434,360) |
|
Property, plant and equipment, net |
$ 843,047 |
$ 968,772 |
Depreciation expense for the fiscal years ended July 31, 2005, 2004 and 2003 totaled $87.6 million, $83.2 million and $78.4 million, respectively.
The composition of intangible assets follows:
July 31, |
|||
2005 |
2004 |
||
Indefinite lived intangible assets |
|||
Trademarks |
$ 58,142 |
$ 58,291 |
|
Water rights |
11,180 |
11,180 |
|
Other intangible assets |
6,143 |
8,007 |
|
Excess reorganization value |
14,145 |
14,145 |
|
89,610 |
91,623 |
||
Accumulated amortization |
(24,752) |
(24,752) |
|
Indefinite lived intangible assets, net |
64,858 |
66,871 |
|
Goodwill |
|||
Goodwill |
152,861 |
162,444 |
|
Accumulated amortization |
(17,354) |
(17,354) |
|
Goodwill, net |
135,507 |
145,090 |
|
Amortizable intangible assets |
|||
Trademarks |
176 |
293 |
|
Customer lists |
17,814 |
17,814 |
|
Property management contracts |
10,869 |
12,042 |
|
Intellectual property |
4,754 |
4,754 |
|
United States Forest Service permits |
5,010 |
5,010 |
|
Franchise agreement |
-- |
3,380 |
|
Other intangible assets |
15,278 |
15,313 |
|
53,901 |
58,606 |
||
Accumulated amortization |
(41,785) |
(40,274) |
|
Amortizable intangible assets, net |
12,116 |
18,332 |
|
Total intangible assets |
296,372 |
312,673 |
|
Total accumulated amortization |
(83,891) |
(82,380) |
|
$ 212,481 |
$ 230,293 |
Amortization expense for intangible assets subject to amortization for the fiscal years ended July 31, 2005, 2004 and 2003 totaled $2.3 million, $3.2 million and $3.8 million, respectively, and is estimated to be approximately $1.2 million annually, on average, for the next five fiscal years.
The weighted-average amortization period for intangible assets subject to amortization is as follows:
July 31, |
|||
2005 |
2004 |
||
Trademarks |
10 |
10 |
|
Customer lists |
8 |
8 |
|
Property management contracts |
14 |
9 |
|
Intellectual property |
6 |
6 |
|
United States Forest Service permits |
37 |
37 |
|
Franchise agreement |
20 |
20 |
|
Other intangible assets |
8 |
8 |
The changes in the net carrying amount of goodwill for the years ended July 31, 2005, 2004 and 2003 are as follows (in thousands):
Balance at July 31, 2002 |
$ 139,600 |
|
Purchase accounting adjustments |
5,449 |
|
Balance at July 31, 2003 |
$ 145,049 |
|
Put exercise adjustment |
41 |
|
Balance at July 31, 2004 |
$ 145,090 |
|
Sale of Rancho Mirage |
(6,396) |
|
Assets held for sale adjustment |
(185) |
|
Purchase of minority interest |
(1,775) |
|
Put exercise adjustment |
(1,227) |
|
Balance at July 31, 2005 |
$ 135,507 |
The purchase accounting adjustments to goodwill in fiscal 2003 primarily consist of adjustments to Heavenly in the amount of $5.3 million and to The Lodge at Rancho Mirage ("Rancho Mirage") in the amount of $0.2 million. In July 2005, the Company sold the assets constituting Rancho Mirage, resulting in a $6.4 million decrease of associated goodwill. The assets held for sale adjustment in fiscal 2005 relates to the goodwill associated with SRL&S which has been classified as held for sale (see Note 2, Summary of Significant Accounting Polices.) The purchase of minority interest in fiscal 2005 consists of an adjustment to reduce goodwill for the purchase of the remaining SRL&S minority interest at less than carrying value. The put exercise adjustment in fiscal 2005 consists of an adjustment to reduce goodwill for the purchase of the remaining RockResorts minority interest.
The composition of accounts payable and accrued expenses follows:
July 31, |
||||
2005 |
2004 |
|||
Trade payables |
$ 67,368 |
$ 55,858 |
||
Deferred revenue |
32,474 |
25,180 |
||
Deposits |
21,609 |
30,727 |
||
Accrued salaries, wages and deferred compensation |
26,571 |
23,591 |
||
Accrued benefits |
19,379 |
20,541 |
||
Accrued interest |
14,274 |
14,022 |
||
Liability to complete real estate projects, short term |
5,188 |
9,063 |
||
Other accruals |
22,506 |
19,886 |
||
Total accounts payable and accrued expenses |
$ 209,369 |
$ 198,868 |
The composition of other long-term liabilities follows:
July 31, |
||||
2005 |
2004 |
|||
Private club deferred initiation fee revenue |
$ 92,395 |
$ 82,921 |
||
Real estate deposits |
37,829 |
-- |
||
Other long-term liabilities |
10,197 |
14,695 |
||
Total other long-term liabilities |
$ 140,421 |
$ 97,616 |
The Company held the following investments in equity method affiliates as of July 31, 2005:
The Company's ownership interests in the Employee Housing Entities, Avon Partners II, LLC ("APII") and FFT Investment Partners ("FFT") were formerly accounted for under the equity method. In connection with the Company's implementation of FIN 46R in fiscal 2004, the Company determined it is the primary beneficiary of these six entities, which are VIEs, and therefore has consolidated them in its Consolidated Financial Statements as of July 31, 2005 and 2004 (see Note 7, Variable Interest Entities).
The Company had total net investments in equity method affiliates of $6.2 million and $16.5 million as of July 31, 2005 and 2004, respectively. Of this balance, as of July 31, 2005 and 2004, respectively, $844,000 and $4.3 million is classified as "real estate held for sale and investment" and $5.4 million and $12.2 million is classified as "deferred charges and other assets" in the accompanying consolidated balance sheets. The amount of retained earnings that represent undistributed earnings of 50-percent-or-less-owned entities accounted for by the equity method was $1.8 million and $9.0 million as of July 31, 2005 and 2004, respectively.
The Company's carrying amount of the equity method investment in KRED differs from the value of the underlying equity in net assets due to the difference in the book value and fair market value of the land contributed by the Company to the entities. The land basis difference for KRED was $58,000 as of July 31, 2005. The Company will recognize this difference in basis as revenue when the land is sold. In addition, the Company recorded an impairment charge of $850,000 on the KRED investment in fiscal 2003. In addition, the Company historically carried a basis difference related to its investment in BG Resort associated with the land beneath BG Resort's hotel facility. The Company recognized a $2.5 million gain in real estate revenue in fiscal 2005 as a result of the sale of the Company's investment in BG Resort.
Condensed financial data for SSF/VARE, BG Resort and all other affiliates is summarized below (in thousands). Fiscal 2005 results of operations for BG Resort are included for the period from August 1, 2004 through December 8, 2004, as BG Resort was sold on December 8, 2004.
SSF/VARE |
BG Resort |
All Other Affiliates |
|||||
Financial data for 2005: |
|||||||
Current assets |
$ 6,177 |
$ -- |
$ 1,655 |
||||
Other assets |
3,458 |
-- |
13,514 |
||||
Total assets |
$ 9,635 |
$ -- |
$ 15,169 |
||||
Current liabilities |
$ 4,686 |
$ -- |
$ 237 |
||||
Other liabilities |
-- |
-- |
502 |
||||
Shareholders' equity |
4,949 |
-- |
14,430 |
||||
Total liabilities and shareholders' equity |
$ 9,635 |
$ -- |
$ 15,169 |
||||
Net revenue |
$ 52,381 |
$ 8,006 |
$ 17,522 |
||||
Operating income (loss) |
4,462 |
(2,355) |
(42) |
||||
Net income (loss) |
4,496 |
(5,730) |
(88) |
||||
Financial data for 2004: |
|||||||
Current assets |
$ 5,969 |
$ 4,504 |
$ 4,938 |
||||
Other assets |
3,922 |
81,291 |
14,162 |
||||
Total assets |
$ 9,891 |
$ 85,795 |
$ 19,100 |
||||
Current liabilities |
$ 4,075 |
$ 9,465 |
$ 486 |
||||
Other liabilities |
576 |
57,804 |
4,758 |
||||
Shareholders' equity |
5,240 |
18,526 |
13,856 |
||||
Total liabilities and shareholders' equity |
$ 9,891 |
$ 85,795 |
$ 19,100 |
||||
Net revenue |
$ 38,276 |
$ 30,573 |
$ 26,912 |
||||
Operating income (loss) |
3,293 |
(2,482) |
961 |
||||
Net income (loss) |
3,224 |
(5,895) |
646 |
||||
Financial data for 2003: |
|||||||
Net revenue |
$ 22,960 |
$ 20,382 |
$ 34,463 |
||||
Operating income (loss) |
2,383 |
(587) |
1,911 |
||||
Net income (loss) |
2,371 |
(1,968) |
(1,778) |
7. Variable Interest Entities
The Company has determined that it is the primary beneficiary of the Employee Housing Entities, which are VIEs, and has consolidated them in its Consolidated Financial Statements as of November 1, 2003. In accordance with the guidance in FIN 46R, prior periods were not restated. As a group, as of July 31, 2005, the Employee Housing Entities had total assets of $45.3 million (primarily recorded in property, plant and equipment) and total liabilities of $64.2 million (primarily recorded in long-term debt). All of the assets of Tarnes serve as collateral for Tarnes' Tranche B obligations ($2.4 million as of July 31, 2005). The Company has issued under its credit facility $38.3 million letters of credit related to the Tranche A Employee Housing Bonds and $12.6 million letters of credit related to the Tranche B Employee Housing Bonds. The letters of credit would be triggered in the event that one of the entities defaults on required payments. The letters of credit have no default provisions.
The Company has determined that it is the primary beneficiary of APII, which is a VIE. APII owns commercial space and the Company currently leases substantially all of that space for its corporate headquarters. APII had total assets of $4.0 million (primarily recorded in property, and equipment) and no debt as of July 31, 2005. APII has been consolidated by the Company since February 1, 2004.
The Company has determined that it is the primary beneficiary of FFT, which is a VIE. FFT owns a private residence in Eagle County, Colorado. The entity had total assets of $5.6 million (primarily recorded in real estate held for sale) and no debt as of July 31, 2005. FFT has been consolidated by the Company since February 1, 2004.
The Company, through various lodging subsidiaries, manages the operations of several entities that own hotels in which the Company has no ownership interest. The Company also has extended a $1.5 million note receivable to one of these entities. These entities were formed to acquire, own, operate and realize the value in resort hotel properties. The Company has managed the day-to-day operations of four of the hotel properties since November 2001 and began managing three of the properties during the fourth quarter of fiscal 2005. The Company has determined that the entities that own the hotel properties are VIEs, and the management contracts are significant variable interests in these VIEs. The Company has also determined that it is not the primary beneficiary of these entities and, accordingly, is not required to consolidate any of these entities. These VIEs had total assets of approximately $183.9 million and total liabilities of approximately $103.0 million as of July 31, 2005. The Company's maximum exposure to loss as a result of its involvement with these VIEs is limited to the note receivable and accrued interest of approximately $1.5 million and the net book value of the intangible asset associated with the management agreements in the amount of $5.6 million at July 31, 2005.
8. Sale of Businesses
On December 8, 2004, the Company sold its 49% minority equity interest in BG Resort, the entity that owns The Ritz-Carlton, Bachelor Gulch, for $13.0 million, with net cash proceeds to the Company of $12.7 million. This transaction resulted in a $5.7 million gain on disposal of the investment, which is included in "loss from sale of businesses, net" in the accompanying statement of operations for fiscal 2005. In addition, the Company recognized $2.5 million of deferred Real Estate revenue associated with the recognition of the basis difference in land originally contributed to the entity and $369,000 of deferred interest income related to advances previously made to the entity. In conjunction with the sale, the Company has guaranteed payment, if any, of certain contingencies of BG Resort which have reduced the amount of the gain recognized. The Company's interest was acquired by GHR, LLC, a new joint venture between Gencom BG, LLC and Lehman BG, LLC.
On June 24, 2005, VAMHC, Inc., a subsidiary of the Company, sold the assets constituting the Vail Marriott Mountain Resort & Spa (the "Vail Marriott") to DiamondRock Hospitality Limited Partnership ("DiamondRock") for $62.0 million, the proceeds of which were adjusted for normal working capital prorations. An agreement to sell the hotel was reached in May 2005, after DiamondRock expressed its interest in acquiring the property. The carrying value of the assets sold (net of liabilities assumed) was $60.1 million. Additionally, the Company is required to complete certain capital projects that were part of the Company's 2005 capital plan as well as fund, in certain circumstances, certain other future improvements, the total of which is not expected to exceed $3.1 million. The Company recorded a $2.1 million loss in fiscal 2005 after consideration of all costs involved, which is included in "loss from sale of businesses, net" in the accompanying statement of operations for fiscal 2005. The Company will continue to manage the Vail Marriott pursuant to a 15-year management agreement with DiamondRock.
On July 28, 2005, VA Rancho Mirage Resort, L.P., a limited partnership owned by wholly-owned subsidiaries of the Company, sold the assets constituting Rancho Mirage to GENLB-Rancho LLC ("Gen LB"), a partnership led by the Gencom Group ("Gencom"), for $33.0 million, the proceeds of which were adjusted for normal working capital prorations. Gencom is an affiliate of GHR, LLC, the company which acquired the Company's interest in BG Resort earlier in fiscal 2005. An agreement to sell the hotel was reached in early July 2005, after Gencom expressed its interest in acquiring the property. The carrying value of the assets sold (net of liabilities assumed) was $43.3 million . Additionally, the Company is required to complete certain capital projects that were part of the Company's 2005 capital plan, the total of which is not expected to exceed $299,000. The Company recorded a $10.9 million loss in fiscal 2005 after consideration of all costs involved, which is included in "loss from sale of businesses, net" in the accompanying statement of operations for fiscal 2005. The Company will continue to manage Rancho Mirage pursuant to a multi-year management agreement with GenLB.
9. Put and Call Options
In November 2004, GSSI LLC ("GSSI"), the minority shareholder in SSV, notified the Company of its intent to exercise its put (the "2004 Put") for 20% of its ownership interest in SSV; in January 2005, the 2004 Put was exercised and settled for a price of $5.8 million. As a result, the Company now holds an approximate 61.7% ownership interest in SSV. The Company had determined that the price to settle the 2004 Put should be marked to fair value through earnings. During the year ended July 31, 2005, the Company recorded a gain of $612,000 related to the decrease in the estimated fair value of the liability associated with the 2004 Put. The Company recorded a loss of $1.8 million for the year ended July 31, 2004, representing the increase in the estimated fair value of the 2004 Put.
The Company and GSSI have remaining put and call rights with respect to SSV: a) beginning August 1, 2007 and each year thereafter, each of the Company and GSSI shall have the right to call or put 100% of GSSI's ownership interest in SSV during certain periods each year; b) GSSI has the right to put to the Company 100% of its ownership interest in SSV at any time after GSSI has been removed as manager of SSV or an involuntary transfer of the Company's ownership interest in SSV has occurred. The put and call pricing is generally based on the trailing twelve month EBITDA (as defined in the operating agreement) of SSV for the fiscal period ended prior to the commencement of the put period.
In November 2001, the Company entered into a written put option in conjunction with its purchase of an interest in RockResorts. The minority shareholder in RockResorts ("Olympus") had the option to put to the Company its equity interest in RockResorts at a price based on management fees generated by certain properties under RockResorts management on a trailing twelve month basis. The put option was exercisable between October 1, 2004 and September 30, 2005. If the put option was not exercised, then the Company had a call option on Olympus' equity interest which was valued at $1.6 million and recorded as an intangible asset at the time that the written option was entered into. The Company marked the put option to fair value through earnings each period. There was no impact on earnings related to changes in the fair market value of the put liability for the years ended July 31, 2005 and 2004 as the estimated fair market value of the put option did not exceed the book value of the minority shareholder's interest during those periods. The Company recorded a gain of $1.6 million representing a decrease in the estimated fair value of the put liability during the year ended July 31, 2003. Olympus notified the Company of its intent to exercise the put option for 100% of its interest in RockResorts in October 2004; however, due to a dispute over the settlement price of the put, the parties did not agree on a settlement price until April 2005. In May 2005, the put was settled for a price of $1.3 million. As a result, the Company now holds a 100% ownership interest in RockResorts. When the put price was settled, the call option no longer had value, and the Company recorded a $1.6 million charge in the year ended July 31, 2005 to write the value of the call option to zero.
In March 2001, in connection with the Company's acquisition of a 51% ownership interest in RTP, LLC ("RTP"), the Company and RTP's minority shareholder entered into a put agreement whereby the minority shareholder can put up to 33% of its interest in RTP to the Company during the period August 1 through October 31 annually. The put price is determined primarily by the trailing twelve month EBITDA (as defined in the underlying agreement) for the period ending prior to the beginning of each put period. The Company has determined that this put option should be marked to fair value through earnings. For the year ended July 31, 2005, the Company recorded a gain of $546,000 representing a decrease in the estimated fair value of the put option liability during the period. For the year ended July 31, 2004, the Company recorded a loss of $118,000 representing the increase in the estimated fair value of the put option liability during the period. There was no gain or loss related to changes in the estimated fair market value of the put liability for fiscal 2003 as the estimated fair value of the put option did not exceed the book value of the minority interest. As of July 31, 2004, the Company had a 52.1% ownership interest in RTP. In October 2004, the minority shareholder in RTP exercised a portion of its put option for approximately 5.1% of the minority shareholder's remaining ownership interest for a put price of approximately $324,000. As a result, the Company now holds an approximate 54.5% ownership interest in RTP.
10. Asset Impairment Charges
In fiscal 2005, the Company recorded $2.6 million of impairment losses on long-lived assets consisting of 1) $1.6 million to write off the value of the RockResorts call option intangible upon settlement of the Olympus put in May 2005 (see Note 9, Put and Call Options), 2) $536,000 to write off the intangible asset associated with the Casa Madrona property management contract which was terminated in May 2005, 3) $273,000 to write off construction in progress costs related to a water rights expansion project resulting from the termination of a cooperation agreement in June 2005 after failing to obtain a necessary permit and 4) $167,000 to write off construction in progress costs associated with a Keystone water reservoir project which management decided to abandon due to difficulty in obtaining necessary permits and the high cost of continuing the project.
In fiscal 2004, the Company recorded a $933,000 impairment charge related to costs previously capitalized for the proposed Beaver Creek gondola project which was replaced by a plan to install two high-speed chairlifts and the abandonment of a project to relocate Beaver Creek's maintenance facilities. The previously proposed gondola project and the new maintenance facilities were classified as construction in progress. Additionally, in fiscal 2004, the Company recorded a write-down on a warehouse facility in the amount of $175,000. The Company determined that the warehouse met the held for sale criteria of SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets". Accordingly, the carrying value of the warehouse was written down to its estimated fair value less costs to sell ($7.7 million), which was determined based on quoted market prices of similar assets. The warehouse was sold in fiscal 2005 for $7.7 million.
In fiscal 2003, the Company recorded an asset impairment charge of $4.8 million related to an option to acquire a 50% interest in real property in Eagle County, Colorado commonly known as the "Gilman" property. The property consists of approximately 6,000 acres of rugged, high altitude land in close proximity to Vail Mountain. The Eagle County District Court of Colorado found that the Company had repudiated the terms of the option agreement. The Court further found that the owner of the property was entitled to terminate the contract and refuse the exercise and that the Company was not entitled to any interest in the property. The Company is appealing the decision, primarily on the basis that the Court applied the wrong legal standard in deciding the issue (see Note 13, Commitments and Contingencies).
At July 31, 2005, the Company has total federal net operating loss ("NOL") carryovers of approximately $138.8 million for income tax purposes, all of which expire in fiscal 2008 and are limited in deductibility each year under Section 382 of the Internal Revenue Code. The Company will only be able to use these NOLs to the extent of approximately $8.0 million per year through December 31, 2007 (the "Section 382 Amount"). However, during fiscal 2005 the Company amended previously filed tax returns (for tax years 1997-2002) in an effort to remove the restrictions under Section 382 of the Internal Revenue Code on approximately $73.8 million of the above NOLs to reduce future taxable income. These NOLs relate to fresh start accounting from the Company's reorganization in 1992. To the extent that the Company reduces future taxable income from the utilization of these NOLs, it will result in a corresponding reduction in intangible assets existing at the date of fresh start. The Internal Revenue Service is currently examining the Company's filing position in these amended returns. Consequently, the accompanying financial statements and table of deferred items have only recognized benefits related to the NOLs to the extent of the Section 382 Amount reported in its tax returns prior to its amendments. Additionally, the Company has state NOLs (primarily California) totaling $25.1 million. The state NOLs primarily expire by fiscal 2015.
At July 31, 2005, the Company has approximately $3.1 million in unused general business credit carryovers that expire in the years 2010 through 2025 and approximately $5.1 million in unused minimum tax credit carryovers that do not expire. Additionally, at July 31, 2005, the Company has $1.5 million of charitable contribution carryforwards that may be carried forward to future years' tax returns for the next five years.
The Internal Revenue Service is currently examining the Company's tax returns for tax years 2001 through 2003. Management believes that the ultimate resolution of this examination will not result in a material adverse effect to the Company's financial position or results of operations, however, no guarantee can be as to the ultimate outcome.
In fiscal 2005, the valuation allowance increased by approximately $919,000 due to the increase in the California NOLs generated in the current year. Management has determined that it is more likely than not that a portion of its deferred tax assets, those primarily generated from California NOL carryovers, will not be realized.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of July 31, 2005 and July 31, 2004 are as follows (in thousands):
July 31, |
|||||
2005 |
2004 |
||||
Deferred income tax liabilities: |
|||||
Fixed assets and investments |
$ 97,307 |
$ 109,313 |
|||
Intangible assets |
19,309 |
21,280 |
|||
Other, net |
1,893 |
1,366 |
|||
Total |
118,509 |
131,959 |
|||
Deferred income tax assets: |
|||||
Accrued expenses |
11,675 |
14,021 |
|||
Net operating loss carryforwards and minimum and other tax credits |
17,106 |
21,122 |
|||
Deferred membership revenue |
29,284 |
26,215 |
|||
Other, net |
2,245 |
3,619 |
|||
Total |
60,310 |
64,977 |
|||
Valuation allowance for deferred income taxes |
(1,605) |
(686) |
|||
Deferred income tax assets, net of valuation allowance |
58,705 |
64,291 |
|||
Net deferred income tax liability |
$ 59,804 |
$ 67,668 |
The net current and non-current components of deferred income taxes recognized in the consolidated balance sheets are as follows (in thousands):
July 31, |
||||
2005 |
2004 |
|||
Net current deferred income tax asset |
$ 11,405 |
$ 12,077 |
||
Net non-current deferred income tax liability |
71,209 |
79,745 |
||
Net deferred income tax liability |
$ 59,804 |
$ 67,668 |
Significant components of the provision (benefit) for income taxes are as follows (in thousands):
A reconciliation of the income tax provision (benefit) from continuing operations and the amount computed by applying the U.S. federal statutory income tax rate to income (loss) before income taxes is as follows:
Fiscal Year Ended |
|||||
July 31, |
|||||
2005 |
2004 |
2003 |
|||
At U.S. federal income tax rate |
35.0% |
(35.0)% |
(35.0)% |
||
State income tax, net of federal benefit |
3.3% |
--% |
(2.6)% |
||
Benefit of state tax reduction |
--% |
--% |
(4.1)% |
||
Nondeductible compensation |
0.7% |
6.0% |
8.0% |
||
Nondeductible meals or entertainment |
0.6% |
2.5% |
2.2% |
||
General business credits |
(1.2)% |
(4.5)% |
(3.9)% |
||
Other |
0.1% |
1.0% |
(3.7)% |
||
38.5% |
(30.0)% |
(39.1)% |
12. Related Party Transactions
Historically, the Company has paid a fee to Apollo Advisors for management services and expenses related thereto. In fiscal 2004, this fee was $500,000. In connection with the conversion by Apollo Ski Partners, L.P. ("Apollo") of its Class A Common Stock into shares of Common Stock, this arrangement was terminated effective October 1, 2004. The Company recorded $83,000 of expense related to this fee in the year ended July 31, 2005 (see Note 16, Class A Common Stock Conversion, for more information regarding this matter).
The Company has the right to appoint 4 of 9 directors of the Beaver Creek Resort Company of Colorado ("BCRC"), a non-profit entity formed for the benefit of property owners and certain others in Beaver Creek. The Company has a management agreement with the BCRC, renewable for one-year periods, to provide management services on a fixed fee basis. Management fees and reimbursement of operating expenses paid to the Company under its agreement with the BCRC during the years ended July 31, 2005, 2004 and 2003 totaled $6.3 million, $6.9 million and $6.2 million, respectively. The Company had a receivable with respect to this arrangement of $50,000 and $230,000 as of July 31, 2005 and 2004, respectively.
The Company previously had a 49% ownership interest in BG Resort, which it sold in December 2004. In August 2004, BG Resort repaid the $4.9 million principal balance note receivable which was outstanding to the Company as of July 31, 2004 from funds obtained by BG Resort in a debt refinancing.
In August 2003, the Company became the bookkeeper for BG Resort. The Company's responsibilities include maintaining the books and records of BG Resort and overseeing the annual financial statement audit. The Company recorded revenues of $85,000 and $108,000 in fiscal 2005 and 2004, respectively, related to this agreement.
In November 2002, the Company purchased an approximately 20,000 square foot spa and skier services area and 30 parking spaces from BG Resort for $13.3 million. The Company recorded revenues of $2.5 million, $2.3 million and $1.1 million during fiscal years 2005, 2004 and 2003, respectively, related to use of the spa by guests of the Ritz-Carlton, Bachelor Gulch (the "Ritz").
On December 7, 2000, the Company and BG Resort entered into a Golf Course Access Agreement (the "Golf Agreement") which gave Ritz guests preferential tee times at Red Sky Ranch Golf Course (the "Course"). For this privilege, BG Resort paid a one-time access fee of $3.0 million to the Company. The term of the Golf Agreement commenced with the opening date of the Course and will expire on the later of (1) 50 years after the opening date of the Course or (2) the date on which the Operating Agreement expires or is terminated. The Company recognized approximately $60,000, $60,000 and $30,000 in revenues related to the Golf Agreement in fiscal 2005, 2004 and 2003, respectively.
As of July 31, 2005, the Company has outstanding a $500,000 long-term note receivable from KRED, an entity in which the Company has a 50% interest. This note is related to the fair market value of the land originally contributed to the partnership, and is repaid as the underlying land is sold to third parties. KRED made principal payments totaling $2.0 million in fiscal 2005 related to this note. In addition, the Company previously had a receivable from KRED in the amount of $355,000 related to advances used for development project funding. In the fourth quarter of fiscal 2005, this receivable, including accrued interest, was converted to equity in KRED in lieu of payment of the receivable by KRED. The Company received interest payment from KRED of $49,000, $59,000 and $229,000 during fiscal years 2005, 2004 and 2003, respectively.
SSF/VARE is a real estate brokerage with multiple locations in Eagle and Summit counties, Colorado in which the Company has a 50% interest. SSF/VARE is the broker for several of the Company's developments. The Company paid real estate commissions of approximately $695,000, $1.0 million and $2.4 million to SSF/VARE in fiscal 2005, 2004 and 2003, respectively. SSF leases several spaces for real estate offices from the Company. The Company recognized approximately $370,000, $330,000 and $464,000 in revenues related to these leases in fiscal 2005, 2004 and 2003, respectively.
The Company, through various lodging subsidiaries, serves as the management company for seven hotels not owned by the Company. Receivables from management fees and other items from these seven properties were $345,000 and $380,000 at July 31, 2005 and 2004, respectively, which is included in "trade receivables" in the accompanying consolidated balance sheets. The Company recorded management fee revenue of $2.7 million, $2.3 million and $2.3 million in fiscal 2005, 2004 and 2003, respectively, with regards to these agreements. The Company received reimbursements of $1.5 million, $1.5 million and $3.7 million in fiscal 2005, 2004 and 2003, respectively, for out-of-pocket expenses from the managed hotels. Although the employees of the managed hotels are employees of the Company, their payroll is paid by the hotel owners. Payroll costs for these employees of $18.8 million, $18.8 million and $23.7 million were paid by the hotel owners in fiscal 2005, 2004 and 2003, respectively.
In September 2004, James P. Thompson, former President of VRDC, repaid the $350,000 principal balance note receivable and associated accrued interest which was outstanding to the Company as of July 31, 2004 under a note originally extended to Mr. Thompson and his wife in 1995. Mr. Thompson ceased to be an employee on May 31, 2005.
In October 2003, Andrew P. Daly, the Company's former President, repaid the $300,000 principal balance note receivable and associated accrued interest under a note extended to Mr. Daly in 1991. Effective October 31, 2002, Mr. Daly ceased to be an employee of the Company. The Company recorded $1.3 million of compensation expense in its first fiscal quarter of 2003 in relation to Mr. Daly's severance agreement.
In 1999, the Company entered into an agreement with William A. Jensen, Senior Vice President and Chief Operating Officer for Vail Mountain, whereby the Company invested in the purchase of a primary residence for Mr. and Mrs. Jensen in Vail, Colorado. The Company contributed $1.0 million towards the purchase price of the residence and thereby obtained an approximate 49% undivided ownership interest in such residence. The Company shall be entitled to receive its proportionate share of the fair value of the residence, less certain deductions, upon the earlier of the resale of the residence or within approximately 18 months after Mr. Jensen's termination of employment from the Company.
In February 2001, the Company invested in the purchase of a primary residence in the Vail Valley for Martin White, former Senior Vice President of marketing for the Company. The Company contributed $600,000 towards the purchase price of the residence and thereby obtained an approximate 37.5% undivided ownership interest in such residence. In July 2003, Mr. White ceased to be an employee of the Company. In June 2004, Mr. White's former residence was sold for $1.8 million. The net proceeds to the Company for its 37.5% ownership interest were approximately $644,000, $44,000 in excess of the Company's investment.
In February 2001, the Company invested in the purchase of a primary residence in Breckenridge, Colorado for Roger McCarthy, Senior Vice President and Chief Operating Officer for Breckenridge. The Company contributed $400,000 towards the purchase price of the residence and thereby obtained an approximate 40% undivided ownership interest in such residence. The Company shall be entitled to receive its proportionate share of the fair value of the residence, less certain deductions, upon the earlier of the resale of the residence or within approximately 18 months after Mr. McCarthy's termination of employment from the Company.
In July 2002, RockResorts entered into an agreement with Edward E. Mace, President of RockResorts and of Vail Resorts Lodging Company, whereby RockResorts invested in the purchase of a residence for Mr. Mace and his family in Eagle County, Colorado. RockResorts contributed $900,000 towards the purchase price of the residence and thereby obtained an approximate 47% undivided ownership in such residence. RockResorts shall be entitled to receive its proportionate share of the fair value of the residence, less certain deductions, upon the earlier of the resale of the residence or within approximately 18 months after Mr. Mace's termination of employment from RockResorts.
In July 2002, the Company purchased from Richard Lesman, former Vice President of Sales for the Company, and his spouse, Mary Lesman, his former residence located in Carmel, Indiana, for a price of $511,250, which approximated the appraised value at the time. The purchase was made to facilitate Mr. Lesman's move in connection with his employment by the Company. In June 2003, the Company sold the home for $476,000. In July 2003, Mr. Lesman ceased to be an employee of the Company.
In November 2002, Heavenly Valley Limited Partnership ("Heavenly LP"), a wholly owned subsidiary of the Company, invested in the purchase of a residence in the greater Lake Tahoe area for Blaise Carrig, Chief Operating Officer for Heavenly. Heavenly LP contributed $449,500 toward the purchase price of the residence and thereby obtained a 50% undivided ownership interest in such residence. Heavenly LP shall be entitled to receive its proportionate share of the fair value of the residence, less certain deductions, upon the earlier of the resale of the residence or within approximately 18 months after Mr. Carrig's termination of employment from Heavenly LP.
In September 2003, the Company invested in the purchase of a residence in Eagle County, Colorado for Jeffrey W. Jones, the Company's Senior Vice President and Chief Financial Officer, and his family. The Company contributed $650,000 toward the purchase price of the residence and thereby obtained a 46.1% undivided ownership interest in such residence. The Company shall be entitled to receive its proportionate share of the fair value of the residence, less certain deductions, upon the earlier of the resale of the residence or within approximately 18 months after Mr. Jones' termination of employment from the Company.
In February 2003, Marc J. Rowan, a director of the Company and a founding principal of Apollo Advisors, and Michael Gross (also a founding principal of Apollo Advisors) each purchased a homesite at Bachelor Gulch Village. The purchases occurred pursuant to the September 1999 contracts between the Company and the purchasers, as previously disclosed in the Company's annual proxy statements since 1999. The purchase price for each site was $378,000, which the Company believed at the time to be the approximate fair market value of the sites at the time of the original contracts, less a credit of $132,300 for certain infrastructure costs, such as architectural plans, necessary to develop the sites. The Company determined the sales price at the time of discussions with Mr. Rowan about a possible purchase more than a year prior to the September 1999 execution of the contracts based on a formula used by VRDC for establishing the base land price of a development parcel for multiple homesites under contract at the time to a third party developer, and the assumed square footage of the residence expected to be built on the sites as indicated by Messrs. Rowan and Gross. Also, as previously stated in the Company's proxy statements, the contracts were amended to extend the original closing dates on each property from January 2001 to January 2003. As previously disclosed in the Company's Form 10-Q for the third quarter of 2003, the Company believes that, at the time of the closing of the purchases by Messrs. Rowan and Gross in February 2003, the fair market value of each site was approximately $1.6-$1.7 million, based generally on the Company's familiarity with appreciated values of Bachelor Gulch real estate. Additionally, the Company has been advised by Mr. Rowan and Mr. Gross that each has sold the properties for approximately that amount. Upon further review of the transactions, the Company has determined that, due to differences between the expected sizes of the residences to be built on the properties contracted to be sold to Mr. Rowan and Mr. Gross, as compared to properties under contract with the third party developer, and in light of the actual sales prices of homesites in excess of the base land prices as sold by the third party developer, the market value of the two sites at the time of execution of the contracts with Mr. Rowan and Mr. Gross should have been approximately $601,000 each. The infrastructure credit corresponded to an estimate by VRDC of the amount the Company would have had to spend on infrastructure had the properties been sold to the third party developer. Mr. Rowan and Mr. Gross have each made a supplemental payment of $223,000 (reflecting the difference between $601,000 and the stated purchase price), plus an additional payment equal to the amount of the infrastructure credit and any additional amounts that the Company paid for infrastructure in connection with the lots, plus interest on these amounts from the date of closing of the properties to receipt of the payments.
In December 2004, Adam Aron, Chairman of the Board of Directors and Chief Executive Officer of the Company, and Ronald Baron, a significant shareholder in the Company, reserved the purchase of condominium units at the planned "Arrabelle" project located in the core of LionsHead. In April 2005, Mr. Aron executed a purchase and sale agreement for the purchase of a condominium unit for a total purchase price of $4.6 million. Mr. Aron provided earnest money deposits totaling $690,000. In May 2005, Mr. Baron and his wife executed a purchase and sale agreement for the purchase of a condominium unit for a total purchase price of $14.0 million. Mr. and Mrs. Baron provided earnest money deposits totaling $2.1 million. The earnest money deposits will be used to fund the construction of the Arrabelle project, which began in May 2005. The earnest money deposits are only refundable at the Company's discretion or if the Company fails to complete the project. Closing on the condominiums is expected in late fiscal 2007. The sale of the condominiums has been approved by the Board of Directors of the Company, in accordance with the Company's related party transactions policy.
13. Commitments and Contingencies
Metropolitan Districts
The Company credit-enhances $8.5 million of bonds issued by Holland Creek Metropolitan District ("HCMD") through an $8.6 million letter of credit issued against the Company's bank credit facility. HCMD's bonds were issued and used to build infrastructure associated with the Company's Red Sky Ranch residential development. The Company has agreed to pay capital improvement fees to Red Sky Ranch Metropolitan District ("RSRMD") until RSRMD's revenue streams from property taxes are sufficient to meet debt service requirements under HCMD's bonds, and the Company has recorded a liability of $1.7 million and $1.9 million, primarily within "other long-term liabilities" in the accompanying consolidated balance sheets, at July 31, 2005 and 2004, respectively, with respect to the estimated present value of future RSRMD capital improvement fees. The Company estimates that it will make capital improvement fee payments under this arrangement through fiscal 2008.
The Company previously had a $15.1 million liability for capital improvements fees payable to Bachelor Gulch Metropolitan District ("BGMD") in connection with bonds issued by Smith Creek Metropolitan District ("SCMD"), the proceeds of which were used to build infrastructure associated with development of Bachelor Gulch Village. In March 2004, BGMD issued bonds and the proceeds were used to retire the SCMD bonds. As a result, the Company no longer has an obligation to pay capital improvement fees to BGMD, and in fiscal 2004 the associated liability was relieved with the offset a reduction to Real Estate segment operating expense.
Guarantees
As of July 31, 2005, the Company had various other letters of credit outstanding in the amount of $71.1 million, a portion of which are not issued against the Credit Facility, consisting primarily of $51.0 million in support of the Employee Housing Bonds, $6.1 million related to workers' compensation for Heavenly and Rancho Mirage, a $4.2 million letter of credit issued in support of the SSV Facility, $6.9 million of construction performance guarantees and $2.3 million for workers' compensation and general liability deductibles related to the construction of Gore Creek Place and Arrabelle at Vail Square.
In addition to the guarantees noted above, the Company has entered into contracts in the normal course of business which include certain indemnifications within the scope of FIN No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" under which it could be required to make payments to third parties upon the occurrence or non-occurrence of certain future events. These indemnities include indemnities to licensees in connection with the licensees' use of the Company's trademarks and logos, indemnities for liabilities associated with the infringement of other parties' technology based upon the Company's software products, indemnities related to liabilities associated with the use of easements, indemnities related to employment of contract workers, the Company's use of trustees, indemnities related to the Company's use of public lands and environmental indemnifications. The duration of these indemnities generally is indefinite and generally do not limit the future payments the Company could be obligated to make.
As permitted under applicable law, the Company and certain of its subsidiaries indemnifies its directors and officers over their lifetimes for certain events or occurrences while the officer or director is, or was, serving the Company in such a capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that limits exposure and should enable the Company to recover a portion of any future amounts paid. The Company has not recorded a liability associated with this indemnification as of July 31, 2005 because the Company has assessed the fair market value associated with potential payment obligations under the indemnification to be immaterial or because the indemnifications were entered into prior to January 1, 2004.
The Company guarantees the revenue streams associated with selected routes flown by certain airlines into Eagle County Regional Airport; these guarantees are generally capped at certain levels. As of July 31, 2005, the Company has recorded a liability related to the airline guarantees of $700,000, which also represents the maximum amount the Company would be required to pay. Payments, if any, under these guarantees are expected to be made in fiscal 2006.
In conjunction with the Company's sale of its ownership interest in BG Resort (See Note 8, Sale of Businesses), the Company has guaranteed payment, if any, of certain contingencies of BG Resort upon settlement. As of July 31, 2005, the Company has recorded a liability related to these contingencies in the amount of $130,000. The maximum amount that the Company would be required to pay under this agreement is approximately $424,000.
Unless otherwise noted, the Company has not recorded a liability for the letters of credit, indemnities and other guarantees noted above in the accompanying Consolidated Financial Statements, either because the Company has recorded on its consolidated balance sheet the underlying liability associated with the guarantee, the guarantee or indemnification existed prior to January 1, 2003 and is therefore not subject to the measurement requirements of FIN 45, or because the Company has calculated the fair value of the indemnification or guarantee to be de minimus based upon the current facts and circumstances that would trigger a payment under the indemnification clause. In addition, with respect to certain indemnifications it is not possible to determine the maximum potential amount of liability under these guarantees due to the unique set of facts and circumstances that are likely to be involved in each particular claim and indemnification provision. Historically, payments made by the Company under these obligations have not been material.
As noted above, the Company makes certain indemnifications to licensees in connection with their use of the Company's trademarks and logos. The Company does not record any product warranty liability with respect to these indemnifications.
Commitments
In the ordinary course of obtaining necessary zoning and other approvals for the Company's potential real estate development projects, the Company may contingently commit to the completion of certain infrastructure, improvements and other costs related to the projects. Fulfillment of such commitments is required only if the Company moves forward with the development project. The determination of whether the Company ultimately completes a development project is entirely at the Company's discretion, and is generally contingent upon, among other considerations, receipt of satisfactory zoning and other approvals and the current status of the Company's analysis of the economic viability of the project, including the costs associated with the contingent commitments. The Company currently has obligations, recorded as liabilities in the accompanying consolidated balance sheets, to complete or fund certain improvements with respect to real estate developments; the Company has estimated such costs to be approximately $8.0 million as of July 31, 2005, and anticipates completion of the majority of these commitments within the next two years.
In connection with the Arrowhead real estate development, the Company recorded certain obligations for the construction of amenities benefiting the real estate development. In fiscal 2004, in connection with the consummation of the sale of the last parcel at Arrowhead, the Company recorded a $1.2 million reduction to real estate cost of sales, representing the remaining obligations for the construction of amenities that the Company deemed were not necessary to construct with the closing of the last parcel sale.
The Company agreed to install two new chairlifts and related infrastructure at Beaver Creek for the 2004/05 ski season and one chairlift and related infrastructure by the 2005/06 ski season pursuant to agreements with Bachelor Gulch Village Association ("BGVA"), BCRC and Beaver Creek Property Owner Association. In connection with these agreements, BGVA had deposited $5 million, BCRC had deposited $4 million and the Company had deposited $1 million into an escrow account to be used by the Company to fund the construction of the chairlifts. As of July 31, 2005, all of the escrowed funds have been remitted to the Company as reimbursement for construction costs of the chairlifts and related infrastructure. The funds received from BGVA and BCRC reduced the book value of the chairlifts and related infrastructure. The Company completed the chairlifts and related infrastructure as required for the 2004/05 ski season. The estimated net cost to the Company to complete the remaining lift and related infrastructure as of July 31, 2005 is $4.1 million.
The Company has executed as lessee operating leases for the rental of office and commercial space, employee residential units and office equipment through fiscal 2011. Certain of these leases have renewal terms at the Company's option and/or escalation clauses (primarily based on the Consumer Price Index). For the fiscal years ended July 31, 2005, 2004 and 2003, the Company recorded lease expense related to these agreements of $13.7 million, $16.3 million and $22.5 million, respectively, which is included in the accompanying consolidated statements of operations.
Future minimum lease payments under these leases as of July 31, 2005 are as follows (in thousands):
2006 |
$ 10,354 |
2007 |
7,896 |
2008 |
6,497 |
2009 |
3,657 |
2010 |
2,699 |
Thereafter |
2,388 |
Total |
$ 33,491 |
Self Insurance
The Company is self-insured for medical and workers' compensation under a stop loss arrangement. The self-insurance liability related to workers' compensation is determined actuarially based on claims filed. The self-insurance liability related to medical claims is determined based on internal and external analysis of actual claims. The amounts related to these claims are included as a component of accrued benefits in accounts payable and accrued expenses (see Note 5, Supplementary Balance Sheet Information).
Legal
The Company is a party to various lawsuits arising in the ordinary course of business, including Resort related cases and contractual and commercial litigation that arises from time to time in connection with the Company's real estate and other business operations. Management believes the Company has adequate insurance coverage or has accrued for loss contingencies for all known matters that are deemed to be probable losses and estimable.
Gilman Litigation Appeal
The Company appealed an adverse decision by the Eagle County District Court of Colorado, rendered on September 24, 2003, relating to the Company's interest in real property in Eagle County, Colorado commonly known as the "Gilman" property. The litigation commenced in November 1999 involving a dispute between a Company subsidiary, as the holder of an option to acquire a 50% interest in the entity that owned the property, and Turkey Creek LLC ("Turkey Creek"), the owner of the property. The property consists of approximately 6,000 acres of rugged, high altitude land in close proximity to Vail Mountain. Turkey Creek assembled the property over many years from various parcels, old mining claims and other property.
Vail Associates originally acquired the option in 1992 under an option agreement between Vail Associates and Turkey Creek. The option agreement was amended and extended several times over the years between 1992 and 1999. During those years, Vail Associates funded all of the acquisition costs to buy the parcels comprising the property and holding costs related to the property, such as real estate taxes and litigation costs to perfect title to the property. Between 1992 and 1999, Vail Associates invested approximately $4.8 million of such funds to maintain and preserve its 50% option interest.
In November 1999, a Company subsidiary (the successor to Vail Associates under the option) exercised the option to acquire the 50% interest in the entity that owned the property. Turkey Creek, however, refused the exercise, claiming that the Company's proposal to pursue a strategy to find a buyer who would put most of the property into conservation or open space uses was a breach of the option agreement, which contemplated "prompt and diligent development" of the property upon exercise of the option.
The Court found that the Company's subsidiary repudiated the option agreement in advance of the exercise of the option by not committing to prompt and diligent development and that "development" did not include selling the land to a buyer for conservation. The Court further found that Turkey Creek was entitled to terminate the contract and refuse the exercise and that the Company's subsidiary was not entitled to any interest in the property.
As a result of the Court's decision, the Company recorded a non-cash asset impairment charge of $4.8 million in fiscal 2003, the amount previously carried on the Company's consolidated balance sheet reflecting its investment. The Company appealed the adverse decision, primarily on the basis that the Court applied the wrong legal standard in deciding the issue. In August 2005, a three judge panel vacated the trial court's judgment and remanded the case back to the trial court to apply the correct legal standard and identify facts that meet the correct legal standard. The appellee's motion for reconsideration of the Court of Appeals decision was denied.
During the pendency of the appeal, Turkey Creek sold the property for approximately $33 million to an unrelated third party developer. Accordingly, the outcome of the case will relate only to an economic resolution between the parties and will not affect the real property now owned by the third party. The Company cannot predict the ultimate outcome of the matter.
Breckenridge Terrace Employee Housing Construction Defect/Water Intrusion Claims
During fiscal 2004, the Company became aware of water intrusion and condensation problems causing mold damage in the 17 building, employee housing facility owned by Breckenridge Terrace, LLC ("Breckenridge Terrace"), an employee housing entity in which the Company is a member and manager. As a result, the facility was not available for occupancy during the 2003/04 ski season. All buildings at the facility required mold remediation and reconstruction (the "reconstruction") and this work began in fiscal 2004. Breckenridge Terrace recorded a $7.0 million liability in fiscal 2004 for the estimated cost of remediation and reconstruction efforts. These costs were funded by a loan to Breckenridge Terrace from the Company member of the LLC. As of July 31, 2005, Breckenridge Terrace had a remaining liability of $871,000 for future remaining remediation and reconstruction costs. With the exception of one building which has been kept in its original design and construction for evidentiary purposes (see discussion below), the remaining 16 buildings became available for occupancy in the second quarter of fiscal 2005. The Company anticipates it will incur the remaining amount of remediation and reconstruction costs before the end of fiscal 2006.
Forensic construction experts retained by Breckenridge Terrace have determined that the water intrusion and condensation problems are the result of construction and design defects. In accordance with Colorado law, Breckenridge Terrace served separate notices of claims on the general contractor, architect and developer and initiated arbitration proceedings. In September 2005, Breckenridge Terrace agreed to settle its claims against the general contractor and the architect for an aggregate amount of $800,000 and will recognize the settlement amount as reduction of the remediation expense upon receipt. Claims against the developer were not settled and Breckenridge Terrace is reviewing its legal options in that regard.
SEC Investigation Terminated
In February 2003, the SEC issued a formal order of investigation with respect to the Company. On September 19, 2005, the Central Regional Office of the SEC informed the Company that its investigation has been terminated, and that no enforcement action has been recommended regarding the Company. The Company has also been informed that no enforcement action has been recommended with respect to any present or former directors, officers or employees of the Company in regard to the matters that had been under investigation.
The Company has three reportable segments: Mountain, Lodging and Real Estate operations. The Mountain segment includes the operations of the Company's ski resorts and related ancillary activities. The Lodging segment includes the operations of all of the Company's owned hotels, RockResorts, GTLC, condominium management and golf operations. The Resort segment is the combination of the Mountain and Lodging segments. The Real Estate segment develops, buys and sells real estate in and around the Company's mountain resort communities. The Company's reportable segments, although integral to the success of the others, offer distinctly different products and services and require different types of management focus. As such, these segments are managed separately.
The Company reports its segment results using Reported EBITDA which is a non-GAAP financial measure, defined as segment net revenues less segment specific operating expenses plus segment specific gains on transfer of property plus segment equity income. SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information" requires the Company to report segment results in a manner consistent with management's internal reporting of operating results to the chief operating decision maker (as defined in SFAS No. 131) for purposes of evaluating segment performance. Therefore, since the Company uses Reported EBITDA to measure performance of segments for internal reporting purposes, the Company will continue to use Reported EBITDA to report segment results.
Reported EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States of America. Items excluded from Reported EBITDA are significant components in understanding and assessing financial performance. Reported EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated by operations, investing or financing activities or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Because Reported EBITDA is not a measurement determined in accordance with accounting principles generally accepted in the United States of America and is thus susceptible to varying calculations, Reported EBITDA as presented may not be comparable to other similarly titled measures of other companies.
The Company evaluates performance and allocates resources to its segments based on Reported EBITDA, as previously defined. Mountain Reported EBITDA consists of net mountain revenue plus mountain equity investment income less mountain operating expense. Lodging Reported EBITDA consists of net lodging revenue plus lodging equity investment income less lodging operating expense. Real Estate Reported EBITDA consists of net real estate revenue plus real estate equity investment income (loss) plus gains on transfers of property less real estate operating expense. All segment expenses include an allocation of corporate administrative expense. Assets are not allocated between segments, or used to evaluate performance, except as shown in the table below. The accounting policies specific to each segment are the same as those described in Note 2, Summary of Significant Accounting Policies.
Following is key financial information by reportable segment which is used by management in evaluating performance and allocating resources (in thousands):
Fiscal Year Ended |
||||||
July 31, |
||||||
2005 |
2004 |
2003 |
||||
Net revenue: |
||||||
Mountain |
$ 540,855 |
$ 500,995 |
$ 460,568 |
|||
Lodging |
196,351 |
180,525 |
172,003 |
|||
Resort |
737,206 |
681,520 |
632,571 |
|||
Real estate |
72,781 |
45,123 |
80,401 |
|||
$ 809,987 |
$ 726,643 |
$ 712,972 |
||||
Equity investment income (loss): |
||||||
Mountain |
$ 2,303 |
$ 1,376 |
$ 1,009 |
|||
Lodging |
(2,679) |
(3,432) |
(5,995) |
|||
Resort |
(376) |
(2,056) |
(4,986) |
|||
Real estate |
(102) |
460 |
3,962 |
|||
$ (478) |
$ (1,596) |
$ (1,024) |
||||
Reported EBITDA: |
||||||
Mountain |
$ 151, 269 |
$ 133,496 |
$ 99,446 |
|||
Lodging |
16,203 |
11,110 |
4,162 |
|||
Resort |
167,472 |
144,606 |
103,608 |
|||
Real estate |
14,425 |
30,939 |
17,721 |
|||
$ 181,897 |
$ 175,545 |
$ 121,329 |
||||
Investments in real estate |
$ 72,164 |
$ 27,802 |
$ 22,572 |
|||
Real estate held for sale and investment |
$ 154,874 |
$ 134,548 |
$ 123,223 |
|||
Long-term real estate deposits |
$ 37,829 |
$ -- |
$ -- |
|||
Reconciliation to consolidated income (loss) before provision for income taxes: |
||||||
Mountain Reported EBITDA |
$ 151,269 |
$ 133,496 |
$ 99,446 |
|||
Lodging Reported EBITDA |
16,203 |
11,110 |
4,162 |
|||
Resort Reported EBITDA |
167,472 |
144,606 |
103,608 |
|||
Real Estate Reported EBITDA |
14,425 |
30,939 |
17,721 |
|||
Total Reported EBITDA |
181,897 |
175,545 |
121,329 |
|||
Depreciation and amortization |
(89,968) |
(86,377) |
(82,242) |
|||
Asset impairment charges |
(2,550) |
(1,108) |
(4,830) |
|||
Mold remediation charge |
-- |
(5,500) |
-- |
|||
Loss on disposal of fixed assets, net |
(1,528) |
(2,345) |
(794) |
|||
Investment income, net |
2,066 |
1,886 |
2,011 |
|||
Interest expense |
(40,298) |
(47,479) |
(50,001) |
|||
Loss on extinguishment of debt |
(612) |
(37,084) |
-- |
|||
Loss from sale of businesses, net |
(7,353) |
-- |
-- |
|||
Gain (loss) on put options, net |
1,158 |
(1,875) |
1,569 |
|||
Other income (expense), net |
50 |
(179) |
17 |
|||
Minority interest in income of consolidated subsidiaries, net |
(5,239) |
(4,000) |
(1,064) |
|||
Income (loss) before (provision) benefit for income taxes |
$ 37,623 |
$ (8,516) |
$ (14,005) |
|||
In fiscal 2005, the Company changed the way certain club dues revenues were assigned between segments. Conforming reclassification were made to fiscal years 2004 and 2003.
15. Selected Quarterly Financial Data (Unaudited--in thousands, except per share amounts)
Fiscal 2005 |
||||||||||
Year |
Quarter |
Quarter |
Quarter |
Quarter |
||||||
Ended |
Ended |
Ended |
Ended |
Ended |
||||||
July 31, |
July 31, |
April 30, |
January 31, |
October 31, |
||||||
2005 |
2005 |
2005 |
2005 |
2004 |
||||||
Mountain revenue |
$ 540,855 |
$ 35,371 |
$ 256,825 |
$ 214,166 |
$ 34,493 |
|||||
Lodging revenue |
196,351 |
51,202 |
56,285 |
42,589 |
46,275 |
|||||
Real estate revenue |
72,781 |
33,452 |
14,341 |
7,873 |
17,115 |
|||||
Total net revenue |
809,987 |
120,025 |
327,451 |
264,628 |
97,883 |
|||||
Income (loss) from operations |
88,329 |
(39,722) |
109,073 |
60,599 |
(41,621) |
|||||
(Loss) gain from sale of businesses, net |
(7,353) |
(13,043) |
(3) |
5,693 |
-- |
|||||
Net income (loss) |
23,138 |
(36,435) |
58,788 |
32,241 |
(31,456) |
|||||
Basic net income (loss) per common share |
0.65 |
(1.00) |
1.64 |
0.91 |
(0.89) |
|||||
Diluted net income (loss) per common share |
$ 0.64 |
$ (1.00) |
$ 1.61 |
$ 0.89 |
$ (0.89) |
|||||
Fiscal 2004 |
||||||||||
Year |
Quarter |
Quarter |
Quarter |
Quarter |
||||||
Ended |
Ended |
Ended |
Ended |
Ended |
||||||
July 31, |
July 31, |
April 30, |
January 31, |
October 31, |
||||||
2004 |
2004 |
2004 |
2004 |
2003 |
||||||
Mountain revenue |
$ 500,995 |
$ 33,980 |
$ 233,400 |
$ 200,149 |
$ 33,466 |
|||||
Lodging revenue |
180,525 |
46,582 |
50,910 |
39,243 |
43,790 |
|||||
Real estate revenue |
45,123 |
6,570 |
4,165 |
7,496 |
26,892 |
|||||
Total net revenue |
726,643 |
87,132 |
288,475 |
246,888 |
104,148 |
|||||
Income (loss) from operations |
81,811 |
(43,590) |
109,166 |
46,631 |
(30,396) |
|||||
Net income (loss) |
(5,959) |
(36,304) |
62,485 |
(6,737) |
(25,403) |
|||||
Basic net income (loss) per common share |
(0.17) |
(1.03) |
1.77 |
(0.19) |
(0.72) |
|||||
Diluted net income (loss) per common share |
$ (0.17) |
$ (1.03) |
$ 1.77 |
$ (0.19) |
$ (0.72) |
16. Class A Common Stock Conversion
In September 2004, the Company and Apollo entered into a Conversion and Registration Rights Agreement (the "Agreement"). Pursuant to the Agreement, Apollo converted all of its Class A common stock into shares of the Company's Common Stock. Apollo distributed the shares to its partners in proportion to each partner's interest in the partnership. Apollo did not dissolve after this distribution and continues to exist as a partnership. The Company, pursuant to the Agreement, filed a shelf registration statement in November 2004, covering certain of the shares owned by the limited partners of Apollo. Before the conversion, Apollo owned 6.1 million Class A Common shares or 99.9% of the Company's Class A Common Stock.
As a result of the above Agreement, the Company no longer has any Class A Common Stock outstanding and therefore has only one class of directors. Previously, the Class A Common Stock elected the Class 1 directors and the Common Stock elected the Class 2 directors. Additionally, as a result of the above Agreement, as of the date of the agreement, the Company's consolidated balance sheet no longer presents any Class A Common Stock and the full balance of the Company's common shares outstanding is presented under "common stock".
17. Non-Cash Deferred Compensation
Pursuant to the employment agreement of Adam Aron, Chairman of the Board of Directors and Chief Executive Officer of the Company, entered into May 2001 and the amendment thereto entered into July 2003, Mr. Aron became fully vested in the following components of non-cash compensation as of August 3, 2003:
The Bachelor Gulch homesite transaction was originally structured as the forgiveness of a loan in the amount of $645,750. The July 2003 amendment to Mr. Aron's employment agreement changed the structure of the agreement from loan forgiveness to a one-time bonus to comply with the provisions of the Sarbanes-Oxley Act of 2002. In addition, Mr. Aron's purchase contract and purchase price for the Bachelor Gulch homesite were not contingent upon any future service or performance; therefore, Mr. Aron was fully vested in this benefit in May 2001.
In fiscal years 2003 the Company recorded $1.8 million in compensation expense related to the previously non-vested portion of the non-cash compensation. The amount of compensation expense recorded was based on the estimated fair market values of the underlying real property and related memberships and was marked to market as necessary. In July 2003, the Company obtained various third-party valuations upon which to base the fair market value of the Red Sky Ranch and Beaver Creek transactions. The Company based the value of the Bachelor Gulch transaction on the assessed property tax value and comparable sales at the vesting date.
In addition, pursuant to the terms of the employment agreement, Mr. Aron vested in 165,000 shares of restricted stock in July 2003, which had a grant-date fair market value of $13.80 per share. The Company recorded compensation expense of $1.2 million in the fiscal 2003 related to this grant. Separately, Mr. Aron also vested in 7,500 shares of restricted stock in July 2003 pursuant to a grant made in September 2000. These shares had a grant-date fair value of $19.13 per share. The Company recorded compensation expense of $143,000 in fiscal 2003 related to these shares.
In March 2001, the Compensation Committee of the Company's Board of Directors granted James P. Thompson, former President of VRDC, a one-time bonus in the amount of $600,000 which Mr. Thompson was required to use to purchase a Red Sky Ranch homesite and related Red Sky Golf Club membership from the Company for a purchase price of $600,000; Mr. Thompson vested in this bonus as of July 1, 2003 and took title of the property and related membership in fiscal 2004. The Company recorded compensation expense of $388,000 during fiscal 2003 related to this transaction. The amount of compensation expense recorded was based on the appraised fair market value of the underlying real property and membership.
In fiscal 2004, Messrs. Aron and Thompson took title to the real property and related club memberships. The Company recognized a net gain of $2.1 million related to the transfer of the properties as "gain on transfer of property, net" in the accompanying consolidated statement of operations for fiscal 2004.
18. Stock Compensation Plans
The Company has four fixed option plans: the 1993 Stock Option Plan ("1993 Plan"), the 1996 Long Term Incentive and Share Award Plan ("1996 Plan"), the 1999 Long Term Incentive and Share Award Plan ("1999 Plan") and the 2002 Long Term Incentive and Share Award Plan ("2002 Plan"). Under the 1993 Plan, incentive stock options (as defined under Section 422 of the Internal Revenue Code of 1986) or non-incentive stock options covering an aggregate of 2,045,510 shares of Common Stock may be issued to key employees, directors, consultants, and advisors of the Company or its subsidiaries. Exercise prices and vesting dates for options granted under the 1993 Plan are set by the Compensation Committee of the Company's Board of Directors ("Compensation Committee"), except that the vesting period must be at least six months and exercise prices for incentive stock options may not be less than the stock's market price on the date of grant. The terms of the options granted under the 1993 Plan are determined by the Compensation Committee, provided that all incentive stock options granted have a maximum life of ten years. 1,500,000, 2,500,000, and 2,500,000 shares of Common Stock may be issued in the form of options, stock appreciation rights ("SARs"), restricted shares, restricted share units, performance shares, performance share units, dividend equivalents or other share-based awards under the 1996 Plan, the 1999 Plan and the 2002 Plan, respectively. Under the 1996 Plan, the 1999 Plan and the 2002 Plan, awards may be granted to employees, directors or consultants of the Company or its subsidiaries or affiliates. The terms of awards granted under the 1996 Plan, the 1999 Plan and the 2002 Plan, including exercise price, vesting period and life, are set by the Compensation Committee. To date, no options have been granted to non-employees (except those granted to non-employee members of the board of directors of the Company and of a consolidated subsidiary) under any of the three plans. At July 31, 2005, approximately 98,000, 255,000, 549,000 and 449,000 options were available under the 1993 Plan, 1996 Plan, 1999 Plan and 2002 Plan, respectively.
A summary of the status of the Company's four fixed option plans as of July 31, 2005, 2004 and 2003 and changes during the years ended July 31, 2005, 2004 and 2003 is presented below (in thousands, except per share amounts):
Shares Subject to |
Weighted Average Exercise Price |
|||
Fixed Options |
Option |
Per Share |
||
Balance at July 31, 2002 |
3,810 |
$ 19.67 |
||
Granted |
878 |
16.80 |
||
Exercised |
(33) |
7.73 |
||
Forfeited |
(715) |
19.18 |
||
Balance at July 31, 2003 |
3,940 |
$ 19.07 |
||
Granted |
864 |
13.93 |
||
Exercised |
(54) |
12.96 |
||
Forfeited |
(297) |
18.75 |
||
Balance at July 31, 2004 |
4,453 |
$ 18.32 |
||
Granted |
790 |
18.76 |
||
Exercised |
(1,244) |
17.70 |
||
Forfeited |
(119) |
17.21 |
||
Balance at July 31, 2005 |
3,880 |
$ 18.64 |
The following table summarizes information about fixed options outstanding at July 31, 2005, 2004 and 2003 (in thousands, except per share and life amounts):
Options Outstanding |
Options Exercisable |
|||||||||
Exercise Price Range Per |
Shares |
Weighted-Average Remaining Contractual Life Per |
Weighted-Average Exercise Price Per |
Shares |
Weighted-Average Exercise Price Per |
|||||
Share |
Outstanding |
Share |
Share |
Exercisable |
Share |
|||||
July 31, 2005: |
||||||||||
$ 11-15 |
959 |
7.7 |
$ 14.33 |
471 |
$ 14.08 |
|||||
>15-20 |
2,192 |
6.4 |
18.53 |
1,208 |
18.67 |
|||||
>20-25 |
619 |
2.7 |
24.16 |
619 |
24.16 |
|||||
>25-29 |
110 |
2.8 |
27.23 |
110 |
27.23 |
|||||
$ 12-29 |
3,880 |
6.1 |
$ 18.64 |
2,408 |
$ 19.58 |
|||||
July 31, 2004: |
||||||||||
$ 9-13 |
76 |
6.2 |
$ 11.43 |
38 |
$ 11.09 |
|||||
>13-19 |
2,305 |
8.2 |
15.59 |
813 |
15.90 |
|||||
>19-25 |
1,955 |
4.3 |
21.28 |
1,955 |
21.28 |
|||||
>25-29 |
117 |
3.8 |
27.31 |
117 |
27.31 |
|||||
$ 9-29 |
4,453 |
6.3 |
$ 18.32 |
2,923 |
$ 19.89 |
|||||
July 31, 2003: |
||||||||||
$ 9-13 |
117 |
6.7 |
$ 11.53 |
47 |
$ 10.75 |
|||||
>13-19 |
1,585 |
8.6 |
16.03 |
371 |
15.67 |
|||||
>19-25 |
2,122 |
5.3 |
21.31 |
1,960 |
21.49 |
|||||
>25-29 |
117 |
4.8 |
27.31 |
117 |
27.31 |
|||||
$ 9-29 |
3,941 |
6.7 |
$ 19.07 |
2,495 |
$ 20.70 |
During fiscal 2004 and 2003, the Company granted restricted stock awards to certain executives under the 1993 Plan, the 1999 Plan and the 2002 Plan. The Company granted 49,500 shares of restricted stock awards with a weighted-average grant-date fair value of $14.73 per share in fiscal 2004 and 15,000 shares of restricted stock awards with a weighted-average grant-date fair value of $16.95 per share in fiscal 2003. The Company did not grant restricted stock awards in fiscal 2005. The awards vest and are issued in equal increments over periods ranging from 32 months to three years. Compensation expense related to these restricted stock awards is charged ratably over the respective vesting periods and was $348,000, $250,000 and $1.3 million for the years ended July 31, 2005, 2004 and 2003, respectively. During fiscal 2005, 2004 and 2003, the Company issued 14,813, 8,619 and 90,095 shares of common stock under vested restricted stock awards, respectively. Stock options are issued at the stock closing price on the day prior to the date of grant.
19. Retirement and Profit Sharing Plans
The Company maintains a defined contribution retirement plan (the "plan"), qualified under Section 401(k) of the Internal Revenue Code, for its employees. Under this plan, employees are eligible to make before-tax contributions on the first day of the calendar month following the later of: (1) their employment commencement date or (2) the date they turn 21. Participants may contribute up to 100% of their qualifying annual compensation up to the annual maximum specified by the Internal Revenue Code. The Company matches an amount equal to 50% of each participant's contribution up to 6% of a participant's bi-weekly qualifying compensation upon obtaining the later of: (1) 12 consecutive months of employment and 1,000 service hours or (2) 1,500 service hours since the employment commencement date. The Company's matching contribution is entirely discretionary and may be reduced or eliminated at any time.
Total retirement plan expense recognized by the Company for the fiscal years ended July 31, 2005, 2004 and 2003 was $2.6 million, $2.7 million and $2.0 million, respectively.
In October 2002, the Company's president, Andy Daly, ceased to be an employee of the Company. The Company recorded $1.3 million of compensation expense in fiscal 2003 in relation to Mr. Daly's severance agreement, which was recorded as operating expense in the consolidated statement of operations. The final cash portion of Mr. Daly's severance benefits was paid in fiscal 2004.
In July 2003, the Company announced the restructuring of its sales and marketing focus and organization. The workforce reduction included the termination of three employees effective July 31, 2003 resulting in severance expense of approximately $505,000 including an incremental amount of associated benefits. The Company paid the full amount of the severance during fiscal 2004.
21. Guarantor Subsidiaries and Non-Guarantor Subsidiaries
The Company's payment obligations under the 6.75% Notes (see Note 4, Long-Term Debt) are fully and unconditionally guaranteed on a joint and several, senior subordinated basis by substantially all of the Company's consolidated subsidiaries (collectively, and excluding Non-Guarantor Subsidiaries (as defined below), the "Guarantor Subsidiaries") except for Boulder/Beaver LLC, Colter Bay Corporation, Eagle Park Reservoir Company, Forest Ridge Holdings, Inc., Gros Ventre Utility Company, Jackson Lake Lodge Corporation, Jenny Lake Lodge, Inc., Mountain Thunder, Inc., RT Partners, Inc and RTP LLC ("RTP"), SSV, Larkspur Restaurant & Bar, LLC, Vail Associates Investments, Inc., Arrabelle at Vail Square, LLC, Gore Creek, Timber Trail, Inc. and VR Holdings, Inc. (together, the "Non-Guarantor Subsidiaries"). APII, FFT and the Employee Housing Entities are included with the Non-Guarantor Subsidiaries for purposes of the consolidated financial information, but are not considered subsidiaries under the indentures governing the 6.75% Notes.
Presented below is the consolidated financial information of Vail Resorts, Inc. (the "Parent Company"), the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries. Financial information for Larkspur Restaurant & Bar, LLC ("Larkspur") is presented separately as the Company owns less than 100% of this Guarantor Subsidiary. Financial information for RockResorts and JHL&S, LLC is no longer presented separately as the Company acquired the remaining minority interest in these Guarantor Subsidiaries during fiscal 2005, and reclassifications have been made to the financial information as of and for the years ended July 31, 2004 and 2003 to conform to the current period presentation. Financial information for the Non-Guarantor subsidiaries is presented in the column titled "Other Subsidiaries". Balance sheet data is presented as of July 31, 2005 and 2004. Statement of operations and statement of cash flows data are presented for the years ended July 31, 2005, 2004 and 2003.
Investments in subsidiaries are accounted for by the Parent Company and Guarantor Subsidiaries using the equity method of accounting. Net income of Guarantor and Non-Guarantor Subsidiaries is, therefore, reflected in the Parent Company's and Guarantor Subsidiaries' investments in and advances to (from) subsidiaries. Net income of the Guarantor and Non-Guarantor Subsidiaries is reflected in Guarantor Subsidiaries and Parent Company as equity in consolidated subsidiaries. The elimination entries eliminate investments in Other Subsidiaries and intercompany balances and transactions for consolidated reporting purposes.
Supplemental Condensed Consolidating Balance Sheet |
||||||||||||||
As of July 31, 2005 |
||||||||||||||
(in thousands) |
||||||||||||||
100% Owned |
||||||||||||||
Parent |
Guarantor |
Other |
Eliminating |
|||||||||||
Company |
Subsidiaries |
Larkspur |
Subsidiaries |
Entries |
Consolidated |
|||||||||
Current assets: |
||||||||||||||
Cash and cash equivalents |
$ -- |
$ 92,879 |
$ 105 |
$ 43,596 |
$ -- |
$ 136,580 |
||||||||
Restricted cash |
-- |
7,390 |
-- |
10,863 |
-- |
18,253 |
||||||||
Trade receivables, net |
-- |
27,867 |
103 |
5,166 |
-- |
33,136 |
||||||||
Income taxes receivable |
-- |
-- |
-- |
-- |
-- |
-- |
||||||||
Inventories, net |
-- |
8,491 |
157 |
27,430 |
-- |
36,078 |
||||||||
Other current assets |
11,418 |
15,109 |
40 |
5,535 |
-- |
32,102 |
||||||||
Assets held for sale |
-- |
26,735 |
-- |
-- |
-- |
26,735 |
||||||||
Total current assets |
11,418 |
178,471 |
405 |
92,590 |
-- |
282,884 |
||||||||
Property, plant and equipment, net |
-- |
776,425 |
530 |
66,092 |
-- |
843,047 |
||||||||
Real estate held for sale and investment |
-- |
106,777 |
-- |
48,097 |
-- |
154,874 |
||||||||
Deferred charges and other assets |
6,067 |
16,320 |
-- |
10,248 |
-- |
32,635 |
||||||||
Goodwill, net |
-- |
118,475 |
-- |
17,032 |
-- |
135,507 |
||||||||
Other intangibles, net |
-- |
60,482 |
-- |
16,492 |
-- |
76,974 |
||||||||
Investments in subsidiaries and advances to (from) parent |
942,888 |
(424,752) |
(202) |
(58,036) |
(459,898) |
-- |
||||||||
Total assets |
$ 960,373 |
$ 832,198 |
$ 733 |
$ 192,515 |
$ (459,898) |
$ 1,525,921 |
||||||||
Current liabilities: |
||||||||||||||
Accounts payable and accrued expenses |
$ 16,600 |
$ 161,452 |
$ 273 |
$ 31,044 |
$ -- |
$ 209,369 |
||||||||
Income taxes payable |
12,979 |
-- |
-- |
-- |
-- |
12,979 |
||||||||
Long-term debt due within one year |
-- |
467 |
-- |
1,537 |
-- |
2,004 |
||||||||
Total current liabilities |
29,579 |
161,919 |
273 |
32,581 |
-- |
224,352 |
||||||||
Long-term debt |
390,000 |
61,789 |
-- |
67,917 |
-- |
519,706 |
||||||||
Other long-term liabilities |
267 |
102,226 |
-- |
37,928 |
-- |
140,421 |
||||||||
Deferred income taxes |
-- |
70,819 |
-- |
390 |
-- |
71,209 |
||||||||
Put option liabilities |
-- |
34 |
-- |
-- |
-- |
34 |
||||||||
Minority interest in net assets of consolidated subsidiaries |
-- |
-- |
100 |
29,570 |
-- |
29,670 |
||||||||
Total stockholders' equity |
540,527 |
435,411 |
360 |
24,129 |
(459,898) |
540,529 |
||||||||
Total liabilities and stockholders' equity |
$ 960,373 |
$ 832,198 |
$ 733 |
$ 192,515 |
$ (459,898) |
$ 1,525,921 |
Supplemental Condensed Consolidating Balance Sheet |
||||||||||
As of July 31, 2004 |
||||||||||
(in thousands) |
||||||||||
Parent Company |
100% Owned Guarantor Subsidiaries |
Larkspur |
Other Subsidiaries |
Eliminating Entries |
Consolidated |
|||||
Current assets: |
||||||||||
Cash and cash equivalents |
$ -- |
$ 41,075 |
$ 171 |
$ 5,082 |
$ -- |
$ 46,328 |
||||
Restricted cash |
16,031 |
-- |
16,031 |
|||||||
Receivables, net |
-- |
25,486 |
167 |
6,262 |
-- |
31,915 |
||||
Income taxes receivable |
5,042 |
-- |
-- |
-- |
-- |
5,042 |
||||
Inventories, net |
-- |
8,494 |
155 |
22,502 |
-- |
31,151 |
||||
Other current assets |
12,082 |
11,765 |
35 |
1,388 |
-- |
25,270 |
||||
Total current assets |
17,124 |
102,851 |
528 |
35,234 |
-- |
155,737 |
||||
Property, plant and equipment, net |
-- |
901,822 |
583 |
66,367 |
-- |
968,772 |
||||
Real estate held for sale and investment |
-- |
129,030 |
-- |
5,518 |
-- |
134,548 |
||||
Deferred charges and other assets |
6,773 |
27,194 |
-- |
10,640 |
-- |
44,607 |
||||
Goodwill, net |
-- |
128,342 |
-- |
16,748 |
-- |
145,090 |
||||
Other intangibles, net |
-- |
67,671 |
-- |
17,532 |
-- |
85,203 |
||||
Investments in subsidiaries and advances to (from) parent |
875,877 |
(414,455) |
(359) |
(1,165) |
(459,898) |
-- |
||||
Total assets |
$ 899,774 |
$ 942,455 |
$ 752 |
$ 150,874 |
$ (459,898) |
$ 1,533,957 |
||||
Current liabilities: |
||||||||||
Accounts payable and accrued expenses |
$ 18,298 |
$ 154,083 |
$ 322 |
$ 26,165 |
$ -- |
$ 198,868 |
||||
Long-term debt due within one year |
-- |
1,548 |
-- |
1,611 |
-- |
3,159 |
||||
Total current liabilities |
18,298 |
155,631 |
322 |
27,776 |
-- |
202,027 |
||||
Long-term debt |
390,000 |
160,180 |
-- |
72,464 |
-- |
622,644 |
||||
Other long-term liabilities |
313 |
96,982 |
-- |
321 |
-- |
97,616 |
||||
Deferred income taxes |
-- |
79,156 |
-- |
589 |
-- |
79,745 |
||||
Put option liabilities |
-- |
3,657 |
-- |
-- |
-- |
3,657 |
||||
Minority interest in net assets of consolidated subsidiaries |
-- |
7,882 |
100 |
29,123 |
-- |
37,105 |
||||
Total stockholders' equity |
491,163 |
438,967 |
330 |
20,601 |
(459,898) |
491,163 |
||||
Total liabilities and stockholders' equity |
$ 899,774 |
$ 942,455 |
$ 752 |
$ 150,874 |
$ (459,898) |
$ 1,533,957 |
Supplemental Condensed Consolidating Statement of Operations |
||||||||||||
For the year ended July 31, 2005 |
||||||||||||
(in thousands) |
||||||||||||
100% Owned |
||||||||||||
Parent |
Guarantor |
Other |
Eliminating |
|||||||||
Company |
Subsidiaries |
Larkspur |
Subsidiaries |
Entries |
Consolidated |
|||||||
Total revenue |
$ 48 |
$ 675,176 |
$ 3,291 |
$ 140,288 |
$ (8,816) |
$ 809,987 |
||||||
Total operating expense |
15,515 |
581,632 |
3,415 |
129,912 |
(8,816) |
721,658 |
||||||
(Loss) income from operations |
(15,467) |
93,544 |
(124) |
10,376 |
-- |
88,329 |
||||||
Other income (expense) |
(27,706) |
(15,274) |
(21) |
(3,146) |
-- |
(46,147) |
||||||
Equity investment income (loss), net |
-- |
(478) |
-- |
-- |
-- |
(478) |
||||||
Gain on put options, net |
-- |
1,158 |
-- |
-- |
-- |
1,158 |
||||||
Minority interest in income of consolidated subsidiaries, net |
-- |
476 |
-- |
(5,715) |
-- |
(5,239) |
||||||
Income (loss) before income taxes |
(43,173) |
79,426 |
(145) |
1,515 |
-- |
37,623 |
||||||
Benefit (provision) for income taxes |
16,622 |
(31,291) |
-- |
184 |
-- |
(14,485) |
||||||
Net income (loss) before equity in income of consolidated subsidiaries |
(26,551) |
48,135 |
(145) |
1,699 |
-- |
23,138 |
||||||
Equity in income (loss) of consolidated subsidiaries |
49,689 |
-- |
-- |
-- |
(49,689) |
-- |
||||||
Net income (loss) |
$ 23,138 |
$ 48,135 |
$ (145) |
$ 1,699 |
$ (49,689) |
$ 23,138 |
Supplemental Condensed Consolidating Statement of Operations |
|||||||||||
For the year ended July 31, 2004 |
|||||||||||
(in thousands) |
|||||||||||
100% Owned |
|||||||||||
Parent |
Guarantor |
Other |
Eliminating |
||||||||
Company |
Subsidiaries |
Larkspur |
Subsidiaries |
Entries |
Consolidated |
||||||
Total net revenue |
$ 50 |
$ 551,759 |
$ 2,859 |
$ 159,935 |
$ 12,040 |
$ 726,643 |
|||||
Total operating expense |
11,158 |
484,784 |
3,107 |
133,743 |
12,040 |
644,832 |
|||||
(Loss) income from operations |
(11,108) |
66,975 |
(248) |
26,192 |
-- |
81,811 |
|||||
Other income (expense) |
(67,759) |
(12,780) |
(19) |
(2,298) |
-- |
(82,856) |
|||||
Equity investment income (loss), net |
-- |
(1,596) |
-- |
-- |
-- |
(1,596) |
|||||
Loss on put options, net |
-- |
(1,875) |
-- |
-- |
-- |
(1,875) |
|||||
Minority interest in income of consolidated subsidiaries, net |
-- |
939 |
-- |
(4,939) |
-- |
(4,000) |
|||||
Income (loss) before income taxes |
(78,867) |
51,663 |
(267) |
18,955 |
-- |
(8,516) |
|||||
Benefit (provision) for income taxes |
23,660 |
(15,937) |
-- |
(5,166) |
-- |
2,557 |
|||||
Net income (loss) before equity in |
|||||||||||
income of consolidated subsidiaries |
(55,207) |
35,726 |
(267) |
13,789 |
-- |
(5,959) |
|||||
Equity in income (loss) of consolidated subsidiaries |
49,248 |
10,085 |
-- |
-- |
(59,333) |
-- |
|||||
Net income (loss) |
$ (5,959) |
$ 45,811 |
$ (267) |
$ 13,789 |
$ (59,333) |
$ (5,959) |
Supplemental Condensed Consolidating Statement of Operations |
|||||||||||
For the year ended July 31, 2003 |
|||||||||||
(in thousands) |
|||||||||||
100% Owned |
|||||||||||
Parent |
Guarantor |
Other |
Eliminating |
||||||||
Company |
Subsidiaries |
Larkspur |
Subsidiaries |
Entries |
Consolidated |
||||||
Total net revenue |
$ -- |
$ 510,967 |
$ 2,576 |
$ 173,984 |
$ 25,445 |
$ 712,972 |
|||||
Total operating expense |
17,178 |
479,433 |
3,049 |
153,380 |
25,445 |
678,485 |
|||||
Income (loss) from operations |
(17,178) |
31,534 |
(473) |
20,604 |
-- |
34,487 |
|||||
Other income (expense) |
(33,795) |
(13,446) |
(26) |
(706) |
-- |
(47,973) |
|||||
Equity investment income (loss), net |
-- |
(1,024) |
-- |
-- |
-- |
(1,024) |
|||||
Gain on put options, net |
-- |
1,569 |
-- |
-- |
-- |
1,569 |
|||||
Minority interest in income of consolidated subsidiaries, net |
-- |
1,660 |
-- |
(2,724) |
-- |
(1,064) |
|||||
Income (loss) before income taxes |
(50,973) |
20,293 |
(499) |
17,174 |
-- |
(14,005) |
|||||
Benefit (provision) for income taxes |
19,370 |
(9,200) |
-- |
(4,692) |
-- |
5,478 |
|||||
Net income (loss) before equity in |
|||||||||||
income of consolidated subsidiaries |
(31,603) |
11,093 |
(499) |
12,482 |
-- |
(8,527) |
|||||
Equity in income of consolidated subsidiaries |
23,076 |
8,706 |
-- |
-- |
(31,782) |
-- |
|||||
Net (loss) income |
$ (8,527 ) |
$ 19,799 |
$ (499) |
$ 12,482 |
$ (31,782) |
$ (8,527) |
Supplemental Condensed Consolidating Statement of Cash Flows |
|||||||||
For the year ended July 31, 2005 |
|||||||||
(in thousands of dollars) |
|||||||||
100% Owned |
|||||||||
Parent |
Guarantor |
Other |
|||||||
Company |
Subsidiaries |
Larkspur |
Subsidiaries |
Consolidated |
|||||
Cash flows from operating activities |
$ (4,690) |
$ 177,513 |
$ (53) |
$ 47,571 |
$ 220,341 |
||||
Cash flows from investing activities |
|||||||||
Capital expenditures |
-- |
(71,532) |
(30) |
(8,413) |
(79,975) |
||||
Investments in real estate |
-- |
(29,585) |
-- |
(42,579) |
(72,164) |
||||
Cash received from sale of businesses |
-- |
108,399 |
-- |
-- |
108,399 |
||||
Other investing activities, net |
-- |
(1,511) |
-- |
370 |
(1,141) |
||||
Net cash provided by (used in) investing activities |
-- |
5,771 |
(30) |
(50,622) |
(44,881) |
||||
Cash flows from financing activities: |
|||||||||
Proceeds from exercise of stock options |
21,939 |
-- |
-- |
-- |
21,939 |
||||
Payments on long-term debt |
-- |
(98,945) |
-- |
(4,621) |
(103,566) |
||||
Advances to (from) affiliates |
(17,249) |
(30,562) |
18 |
47,793 |
-- |
||||
Other financing activities, net |
-- |
(1,973) |
-- |
(1,608) |
(3,581) |
||||
Net cash provided by financing activities |
4,690 |
(131,480) |
18 |
41,564 |
(85,208) |
||||
Net increase (decrease) in cash and cash equivalents |
-- |
51,804 |
(65) |
38,513 |
90,252 |
||||
Cash and cash equivalents: |
|||||||||
Beginning of period |
-- |
41,075 |
171 |
5,082 |
46,328 |
||||
End of period |
$ -- |
$ 92,879 |
$ 106 |
$ 43,595 |
$ 136,580 |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
Management of the Company, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), have evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report on Form 10-K. The term "disclosure controls and procedures" means controls and other procedures established by the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to the Company's management, including its CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Based upon their evaluation of the Company's disclosure controls and procedures, the CEO and the CFO concluded that the disclosure controls are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms.
The Company, including its CEO and CFO, does not expect that the Company's internal controls and procedures will prevent or detect all error and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
Management's Annual Report on Internal Control Over Financial Reporting
The report of management required under this ITEM 9A is contained in ITEM 8 of this Form 10-K under the caption "Management's Report on Internal Control over Financial Reporting".
Attestation Report of Registered Public Accounting Firm
The attestation report required under this ITEM 9A is contained in ITEM 8 of this Form 10-K under the caption "Report of Independent Registered Public Accounting Firm".
Changes in Internal Control Over Financial Reporting
There were no changes in the Company's internal control over financial reporting during the quarter ended July 31, 2005 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Code of Ethics. The Company has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The code of ethics is posted in the corporate governance section of the Company's website at www.vailresorts.com. The Company will post any waiver to the code of ethics granted to any of its officers on its website.
The additional information required by this item is incorporated herein by reference from the Company's proxy statement for the fiscal 2005 annual meeting of shareholders.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated herein by reference from the Company's proxy statement for the fiscal 2005 annual meeting of shareholders.
The information required by this item is incorporated herein by reference from the Company's proxy statement for the fiscal 2005 annual meeting of shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated herein by reference from the Company's proxy statement for the fiscal 2005 annual meeting of shareholders.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required by this item is incorporated herein by reference from the Company's proxy statement for the fiscal 2005 annual meeting of shareholders.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES.
a) |
Index to Financial Statements and Financial Statement Schedules. |
|
(1) |
See "Item 8. Financial Statements and Supplementary Data" for the index to the Financial Statements. |
|
(2) |
All other schedules have been omitted because the required information is not applicable or because the information required has been included in the financial statements or notes thereto. |
|
(3) |
Index to Exhibits |
The following exhibits are either filed herewith or, if so indicated, incorporated by reference to the documents indicated in parentheses, which have previously been filed with the Securities and Exchange Commission.
Exhibit Number |
Description |
Sequentially Numbered Page |
3.1 |
Amended and Restated Certificate of Incorporation of Vail Resorts, Inc. dated January 5, 2005. (Incorporated by reference to Exhibit 3.1 on Form 10-Q of Vail Resorts, Inc. dated as of January 31, 2005.) |
|
3.2 |
Amended and Restated By-Laws. (Incorporated by reference to Exhibit 3.1 on Form 8-K of Vail Resorts, Inc. filed September 30, 2004.) |
|
4.1(a) |
Purchase Agreement, dated as of January 15, 2004 among Vail Resorts, Inc., the guarantors named on Schedule I thereto, Banc of America Securities LLC, Deutsche Banc Securities, Inc., Bear, Stearns & Co. Inc., Lehman Brothers Inc., Piper Jaffray & Co. and Wells Fargo Securities LLC. (Incorporated by reference to Exhibit 4.2(c) on Form 10-Q of Vail Resorts, Inc. dated as of January 31, 2004.) |
|
4.1(b) |
Supplemental Purchase Agreement, dated as of January 22, 2004 among Vail Resorts, Inc., the guarantors named thereto, Banc of America Securities LLC, Deutsche Banc Securities, Inc., Bear, Stearns & Co. Inc., Lehman Brothers Inc., Piper Jaffray & Co. and Wells Fargo Securities LLC. (Incorporated by reference to Exhibit 4.2(d) on Form 10-Q of Vail Resorts, Inc. dated as of January 31, 2004.) |
|
4.2(a) |
Indenture, dated as of January 29, 2004, among Vail Resorts, Inc., the guarantors therein and the Bank of New York as Trustee. (Incorporated by reference to Exhibit 4.1 on Form 8-K of Vail Resorts, Inc. dated as of February 2, 2004.) |
|
4.3(b) |
Form of Global Note (Included in Exhibit 4.2(c) by reference to Exhibit 4.1 on Form 8-K of Vail Resorts, Inc. dated as of February 2, 2004.) |
|
4.4 |
Registration Rights Agreement dated as of January 29, 2004 among Vail Resorts, Inc., the guarantors signatory thereto, Banc of America Securities LLC, Deutsche Banc Securities, Inc., Bear, Stearns & Co. Inc., Lehman Brothers Inc., Piper Jaffray & Co. and Wells Fargo Securities LLC. (Incorporated by reference to Exhibit 4.5(c) on Form 10-Q of Vail Resorts, Inc. dated as of January 31, 2004.) |
|
10.1 |
Management Agreement by and between Beaver Creek Resort Company of Colorado and Vail Associates, Inc. (Incorporated by reference to Exhibit 10.1 of the Registration Statement on Form S-4 of Gillett Holdings, Inc. (Registration No. 33-52854) including all amendments thereto.) |
|
10.2 |
Forest Service Unified Permit for Heavenly ski area. (Incorporated by reference to Exhibit 99.13 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2002.) |
|
10.3(a) |
Forest Service Unified Permit for Keystone ski area. (Incorporated by reference to Exhibit 99.2(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) |
|
10.3(b) |
Amendment No. 2 to Forest Service Unified Permit for Keystone ski area. (Incorporated by reference to Exhibit 99.2(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) |
|
10.3(c) |
Amendment No. 3 to Forest Service Unified Permit for Keystone ski area. |
49 |
10.3(d) |
Amendment No. 4 to Forest Service Unified Permit for Keystone ski area. |
50 |
10.3(e) |
Amendment No. 5 to Forest Service Unified Permit for Keystone ski area. |
53 |
10.4(a) |
Forest Service Unified Permit for Breckenridge ski area. (Incorporated by reference to Exhibit 99.3(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) |
|
10.4(b) |
Amendment No. 1 to Forest Service Unified Permit for Breckenridge ski area. (Incorporated by reference to Exhibit 99.3(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) |
|
10.4(c) |
Amendment No. 2 to Forest Service Unified Permit for Breckenridge ski area. |
54 |
10.4(d) |
Amendment No. 3 to Forest Service Unified Permit for Breckenridge ski area. |
55 |
10.4(e) |
Amendment No. 4 to Forest Service Unified Permit for Breckenridge ski area. |
58 |
10.5(a) |
Forest Service Unified Permit for Beaver Creek ski area. (Incorporated by reference to Exhibit 99.4(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) |
|
10.5(b) |
Exhibits to Forest Service Unified Permit for Beaver Creek ski area. (Incorporated by reference to Exhibit 99.4(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) |
|
10.5(c) |
Amendment No. 1 to Forest Service Unified Permit for Beaver Creek ski area. |
59 |
10.5(d) |
Amendment No. 2 to Forest Service Unified Permit for Beaver Creek ski area. |
60 |
10.5(e) |
Amendment to Forest Service Unified Permit for Beaver Creek ski area. |
63 |
10.6(a) |
Forest Service Unified Permit for Vail ski area. (Incorporated by reference to Exhibit 99.5(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) |
|
10.6(b) |
Exhibits to Forest Service Unified Permit for Vail ski area. (Incorporated by reference to Exhibit 99.5(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) |
|
10.6(c) |
Amendment No. 2 to Forest Service Unified Permit for Vail ski area. (Incorporated by reference to Exhibit 99.5(c) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) |
|
10.6(d) |
Amendment No. 3 to Forest Service Unified Permit for Vail ski area. |
64 |
10.6(e) |
Amendment No. 4 to Forest Service Unified Permit for Vail ski area. |
65 |
10.7 |
1993 Stock Option Plan of Gillett Holdings, Inc. (Incorporated by reference to Exhibit 10.20 of the report on Form 10-K of Gillett Holdings, Inc. for the period from October 9, 1992 through September 30, 1993.) |
|
10.8(a)* |
Employment Agreement dated October 30, 2001 by and between RockResorts International, LLC and Edward Mace. (Incorporated by reference to Exhibit 10.21 of the report on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2002.) |
|
10.8(b)* |
Addendum to the Employment Agreement dated October 30, 2001 by and between RockResorts International, LLC and Edward Mace. (Incorporated by reference to Exhibit 10.21 of the report on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2002.) |
|
10.9(a)* |
Employment Agreement dated July 29, 1996 between Vail Resorts, Inc. and Adam M. Aron. (Incorporated by reference to Exhibit 10.21 of the report on Form S-2/A of Vail Resorts, Inc. (Registration # 333-5341) including all amendments thereto.) |
|
10.9(b)* |
Amendment to the Employment Agreement dated May 1, 2001 between Vail Resorts, Inc. and Adam M. Aron. (Incorporated by reference to Exhibit 10.14(b) of the report on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2001.) |
|
10.9(c)* |
Second Amendment to Employment Agreement of Adam M. Aron, as Chairman of the Board and Chief Executive Officer of Vail Resorts, Inc. dated July 29, 2003. (Incorporated by reference to Exhibit 10.14(c) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2003.) |
|
10.10* |
Amended and Restated Employment Agreement of Jeffrey W. Jones, as Chief Financial Officer of Vail Resorts, Inc. dated September 29, 2004. (Incorporated by reference to Exhibit 10.9 of Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2004.) |
|
10.11(a)* |
Employment Agreement of William A. Jensen as Senior Vice President and Chief Operating Officer - Breckenridge Ski Resort dated May 1, 1997. (Incorporated by reference to Exhibit 10.9(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2004.) |
|
10.11(b)* |
First Amendment to the Employment Agreement of William A. Jensen as Senior Vice President and Chief Operating Officer - Vail Ski Resort dated August 1, 1999. (Incorporated by reference to Exhibit 10.9(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2004.) |
|
10.11(c)* |
Second Amendment to the Employment Agreement of William A. Jensen as Senior Vice President and Chief Operating Officer - Vail Ski Resort dated July 22, 1999. (Incorporated by reference to Exhibit 10.9(c) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2004.) |
|
10.12* |
Employment Agreement and Addendum of Roger McCarthy as Senior Vice President and Chief Operating Officer - Breckenridge Ski Resort dated July 17, 2000. (Incorporated by reference to Exhibit 10.10 on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2004.) |
|
10.13* |
1996 Stock Option Plan (Incorporated by reference from the Company's Registration Statement on Form S-3, File No. 333-5341). |
|
10.14* |
2002 Long Term Incentive and Share Award Plan. (Incorporated by reference to Exhibit 10.17 on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) |
|
10.15(a) |
Sports and Housing Facilities Financing Agreement between the Vail Corporation (d/b/a "Vail Associates, Inc.") and Eagle County, Colorado, dated April 1, 1998. (Incorporated by reference to Exhibit 10 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 1998.) |
|
10.15(b) |
Trust Indenture dated as of April 1, 1998 securing Sports and Housing Facilities Revenue Refunding Bonds by and between Eagle County, Colorado and U.S. Bank, N.A., as Trustee. (Incorporated by reference to Exhibit 10.1 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 1998.) |
|
10.16(a) |
Fourth Amended and Restated Credit Agreement dated as of January 28, 2005 among The Vail Corporation (d/b/a Vail Associates, Inc.), as borrower, Bank of America, N.A., as Administrative Agent, U.S. Bank National Association and Wells Fargo Bank, National Association as Co-Syndication Agents, Deutsche Bank Trust Company Americas and LaSalle Bank National Association as Co-Documentation Agents and the Lenders party thereto. (Incorporated by reference to Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. dated January 28, 2004.) |
|
10.16(b) |
First Amendment to Fourth Amended and Restated Credit Agreement dated as of June 29, 2005 among The Vail Corporation (d/b/a Vail Associates, Inc.), as borrower and Bank of America, N.A., as Administrative Agent. |
68 |
10.17* |
Vail Resorts, Inc. 1999 Long Term Incentive and Share Award Plan. (Incorporated by reference to the Company's registration statement on Form S-8, File No. 333-32320.) |
|
10.18* |
Vail Resorts Deferred Compensation Plan effective as of October 1, 2000. (Incorporated by reference to Exhibit 10.23 of the report on Form 10-K of Vail Resorts, Inc. for the fiscal year ended July 31, 2000). |
|
10.19 |
Conversion and Registration Rights Agreement between Vail Resorts, Inc. and Apollo Ski Partners, L.P. dated as of September 30, 2004. (Incorporated by reference to Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. dated as of September 30, 2004.) |
|
10.20(a) |
Purchase and Sale Agreement by and between VAHMC, Inc. and DiamondRock Hospitality Limited Partnership, dated May 3, 2005. (Incorporated by reference to Exhibit 10.18(a) of the Company's Quarterly Report on Form 10-Q for the period ending April 30, 2005.) |
|
10.20(b) |
First Amendment to Purchase and Sale Agreement by and between VAHMC, Inc. and DiamondRock Hospitality Limited Partnership, dated May 10, 2005. (Incorporated by reference to Exhibit 10.18(b) of the Company's Quarterly Report on Form 10-Q for the period ending April 30, 2005.) |
|
10.21 |
Purchase and Sale Agreement by and between VA Rancho Mirage Resort L.P., Rancho Mirage Concessions, Inc. and GENLB-Rancho, LLC, dated July 1, 2005. |
78 |
10.22(a) |
Construction Loan Agreement by and between Gore Creek Place, LLC and U.S. Bank National Association dated July 19, 2005. |
124 |
10.22(b) |
Completion Guaranty Agreement by and between The Vail Corporation and U.S. Bank National Association dated July 19, 2005. |
264 |
10.23 |
Amended and Restated Revolving Credit and Security Agreement between SSI Venture, LLC and U.S. Bank National Association dated September 23, 2005 (Incorporated by reference to Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. dated September 29, 2005.) |
|
10.24(a)* |
Employment Agreement of Martha D. Rehm as Senior Vice President and General Counsel of Vail Resorts, Inc. dated May 10, 1999. |
273 |
10.24(b)* |
First Amendment to Employment Agreement of Martha D. Rehm as Senior Vice President and General Counsel of Vail Resorts, Inc. dated April 8, 2004. |
285 |
21 |
Subsidiaries of Vail Resorts, Inc. |
286 |
22 |
Consent of Independent Registered Public Accounting Firm. |
289 |
23 |
Power of Attorney. Included on signature pages hereto. |
|
31 |
Certifications of Adam M. Aron and Jeffrey W. Jones Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
290 |
32 |
Certifications of Adam M. Aron and Jeffrey W. Jones Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
292 |
99.1 |
Termination Agreement, dated as of October 5, 2004, by and among Vail Resorts, Inc., Ralcorp Holdings, Inc. and Apollo Ski Partners, L.P. (Incorporated by reference to Exhibit 99.6 on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2004.) |
|
99.2 |
Purchase and Sale Agreement between VR Holdings, Inc. as Seller and GHR, LLC as Purchaser dated December 8, 2004. (Incorporated by reference to Exhibit 99.2 on Form 8-K of Vail Resorts, Inc. dated December 8, 2004). |
|
*Management contracts and compensatory plans and arrangements. |
||
b) |
Exhibits |
The exhibits filed herewith as indicated in the exhibit listed above following the Signatures section of this report. |
c) |
Financial Statement Schedules |
Consolidated Financial Statement Schedule |
|||||||||
Schedule II - Valuation and Qualifying Accounts and Reserves |
|||||||||
(in thousands) |
|||||||||
For the Fiscal Years Ended July 31 |
|||||||||
Balance at beginning of period |
Charged to costs and expenses |
Deductions |
Balance at end of period |
||||||
Fiscal 2003 |
|||||||||
Inventory Reserves |
$1,242 |
$1,662 |
$ (1,627) |
$1,277 |
|||||
Valuation Allowance on Income Taxes |
464 |
29 |
-- |
493 |
|||||
Trade Receivable Allowances |
367 |
2,709 |
(1,985) |
1,091 |
|||||
Fiscal 2004 |
|||||||||
Inventory Reserves |
1,277 |
1,510 |
(2,049) |
738 |
|||||
Valuation Allowance on Income Taxes |
493 |
193 |
-- |
686 |
|||||
Trade Receivable Allowances |
1,091 |
729 |
(555) |
1,265 |
|||||
Fiscal 2005 |
|||||||||
Inventory Reserves |
738 |
1,754 |
(1,773) |
719 |
|||||
Valuation Allowance on Income Taxes |
686 |
919 |
-- |
1,605 |
|||||
Trade Receivable Allowances |
$1,265 |
$ 766 |
$ (696) |
$1,335 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Vail Resorts, Inc. |
|
By: |
/s/ Jeffrey w. Jones |
Jeffrey W. Jones |
|
Senior Vice President, |
|
Chief Financial Officer and
|
|
Dated: |
October 5, 2005 |
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Jeffrey W. Jones or Martha D. Rehm his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments or supplements to this Form 10-K and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing necessary or appropriate to be done with this Form 10-K and any amendments or supplements hereto, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on October 5, 2005.
Signature |
Title |
/s/ Adam M. Aron |
Chairman of the Board and Chief Executive Officer |
Adam M. Aron |
(Principal Executive Officer) |
/s/ Jeffrey W. Jones |
Senior Vice President and Chief Financial Officer |
Jeffrey W. Jones |
(Principal Financial and Accounting Officer) |
/s/ John S. Hannan |
|
John S. Hannan |
Director |
/s/ Roland A. Hernandez |
|
Roland A. Hernandez |
Director |
/s/ Robert A. Katz |
|
Robert A. Katz |
Director |
/s/ Joe R. Micheletto |
|
Joe R. Micheletto |
Director |
/S/ John F. Sorte |
|
John F. Sorte |
Director |
/s/ William P. Stiritz |
|
William P. Stiritz |
Director |
Exhibit 10.3(c)
Authorization ID: DIL528901 Page 1 of 1
Contact ID: KEYSTONE FS-2700-23 (4/97)
Use Code: 161 OMB No. 0596-0082
U.S. DEPARTMENT OF AGRICULTURE
Forest Service
AMENDMENT
FOR
SPECIAL USE AUTHORIZATION
AMENDMENT NUMBER: 3
This amendment is attached to and made a part of the special use authorization (indicated above) issued to RALSTON RESORTS, INC. on 12/31/1996 which is hereby amended as follows:
This amendment removes the old map dated October 1, 1991, and replaces it with a new map covering 8,376 acres, prepared by Erik J. Martin on June 11, 2002.
This Amendment is accepted subject to the conditions set forth herein, and to conditions ____N/A ___ to ____N/A ___ attached hereto and made a part of this Amendment.
------------------------------------------------------------------------------------------------------------
Holder: Keystone Ski Area Authorized Officer _________ //s// ________
Roger McCarthy
Holder: _____N/A_______________ Title: Senior Vice President /COO
Date: _______May 9, 2003________ Date: ________May 9, 2003____________
Authorized Officer: _______ //s// _______ Title: _____ For: Forest Supervisor _______
Exhibit 10.3(d)
Authorization ID: DIL528901 Page 1 of 3
Contact ID: KEYSTONE FS-2700-23 (4/97)
Use Code: 161 OMB No. 0596-0082
U.S. DEPARTMENT OF AGRICULTURE
Forest Service
AMENDMENT
FOR
SPECIAL USE AUTHORIZATION
AMENDMENT NUMBER: 4
This amendment is attached to and made a part of the special use authorization (identified above) issued to RALSTON RESORTS, INC. on 12/31/1996 which is hereby amended as follows:
Remove the following clauses:
111.F. Temporary Suspension
VIII.A. Termination for Higher Public Purpose
VIII.B. Termination, Revocation and Suspension
XI.F. Water Rights.
Revise the heading of Section VII.TERMINATION to read REVOCATION AND SUSPENSION. In Section VIII, add clauses A. Revocation and Suspension, B. Opportunity Take Corrective Action, C. Revocation or Reasons in the Public Interest, and D. Suspension below:
Under section XI MISCELLANEOUS PROVISIONS, revise the heading for clause F Water Rights to read Water Use Facilities. Replace the existing clause with the clause below:
State ID# Owner Type or Basis Purpose of Use
(decree, license, certificate)
This Amendment is accepted subject to the conditions set forth herein, and to conditions N/A to N/A attached hereto and made part of this Amendment.
___ //s// Martha D. Rehm__________ __________ //s// _________________________
(Holder Signature) (Authorized Officer Signature)
____ ________ ___________________ ______________________________________
(Holder Signature) DON G. CARROLL, Acting Forest Supervisor
Date:_______ 9/13/04 ______________ Date:___ 9/20/04_ _______________________
Exhibit 10.3(e)
Authorization ID: DIL528901 FS-2700-23 (4/97)
Contact ID: KEYSTONE OMB 0596-0082
Use Code: 161
U.S. DEPARTMENT OF AGRICULTURE
Forest Service
AMENDMENT
FOR
SPECIAL USE AUTHORIZATION
AMENDMENT NUMBER: 5
This amendment is attached to and made a part of the special use authorization (identified above) issued to RALSTON RESORTS, INC on 12/31/1996 which is hereby amended as follows:
Change the holder name to "Vail Summit Resorts, Inc. dba Keystone Resort, Inc."
This Amendment is accepted subject to the conditions set forth herein, and to conditions __ N/A __ to __ N/A __ attached hereto and made a part of this Amendment.
(Holder Signature) (Authorized Officer Signature)
MARIBETH GUSTAFSON, Forest Supervisor
(Holder Signature) (Name and Title)
Date: Date:
According to the Paperwork Reduction Act of 1995, no persons are required to respond to a collection of information unless it displays a valid OMB control number. The valid OMB control number for this information collection is 0596-0082.
This information is needed by the Forest Service to evaluate requests to use National Forest System lands and manage those lands to protect natural resources, administer the use, and ensure public health and safety. This information is required to obtain or retain a benefit. The authority for that requirement is provided by the Organic Act of 1897 and the Federal Land Policy and Management Act of 1976, which authorize the Secretary of Agriculture to promulgate rules and regulations for authorizing and managing National Forest System lands. These statutes, along with the Term Permit Act, National Forest Ski Area Permit Act, Granger-Thye Act, Mineral Leasing Act, Alaska Term Permit Act, Act of September 3, 1954, Wilderness Act, National Forest Roads and Trails Act, Act of November 16, 1973, Archaeological Resources Protection Act, and Alaska National Interest Lands Conservation Act, authorize the Secretary of Agriculture to issue authorizations for the use and occupancy of National Forest System lands. The Secretary of Agriculture's regulations at 36 CFR Part 251, Subpart B, establish procedures for issuing those authorizations.
The Privacy Act of 1974 (5 U.S.C. 552a) and the Freedom of Information Act (5 U.S.C. 552) govern the confidentiality to be provided for information received by the Forest Service Public reporting burden for collection of information, if requested , is estimated to average 1 hour per response for annual financial information; average 1 hour per response to prepare or update operation and/or maintenance plan; average 1 hour per response for inspection reports; and an average of 1 hour for each request that may include such things as reports, logs, facility and user information, sublease information, and other similar miscellaneous information requests. This includes the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information.
Exhibit 10.4(c)
Authorization ID: DIL528904 Page 1 of 1
Contact ID: BRECKENRIDGE FS-2700-23 (4/97)
Use Code: 161 OMB No. 0596-0082
U.S. DEPARTMENT OF AGRICULTURE
Forest Service
AMENDMENT
FOR
SPECIAL USE AUTHORIZATION
AMENDMENT NUMBER: 2
This amendment is attached to and made a part of the special use authorization (indicated above) issued to VAIL RESORTS, INC. which is hereby amended as follows:
This amendment removes the old map dated October 5, 1995, and replaces it with a new map covering 5,553 acres, prepared by Erik J. Martin on June 11, 2002.
This Amendment is accepted subject to the conditions set forth herein, and to conditions ____N/A ___ to ____N/A ___ attached hereto and made a part of this Amendment.
------------------------------------------------------------------------------------------------------------
Holder:__ //s// ___________________ Authorized Officer __ //s// _ Martha J. Ketelle
Holder: __ VP Mtn Ops ___________ Title: Forest Supervisor
Date: _______ 10/3/02____ ________ Date: ________ 6/2/03_____ ____________
Authorized Officer: _______ //s// _______ Title: _____ For: Forest Supervisor _______
Exhibit 10.4(d)
Authorization ID: DIL528904 Page 1 of 3
Contact ID: BRECKENRIDGE FS-2700-23 (4/97)
Use Code: 161 OMB No. 0596-0082
U.S. DEPARTMENT OF AGRICULTURE
Forest Service
AMENDMENT
FOR
SPECIAL USE AUTHORIZATION
AMENDMENT NUMBER: 3
This amendment is attached to and made a part of the special use authorization (identified above) issued to RALSTON RESORTS, INC. on 12/31/1996 which is hereby amended as follows:
Remove the following clauses:
111.F. Temporary Suspension
VIII.A. Termination for Higher Public Purpose
VIII.B. Termination, Revocation and Suspension
XI.F. Water Rights.
Revise the heading of Section VII.TERMINATION to read REVOCATION AND SUSPENSION. In Section VIII, add clauses A. Revocation and Suspension, B. Opportunity Take Corrective Action, C. Revocation or Reasons in the Public Interest, and D. Suspension below:
Under section XI MISCELLANEOUS PROVISIONS, revise the heading for clause F Water Rights to read Water Use Facilities. Replace the existing clause with the clause below:
State ID# Owner Type or Basis Purpose of Use
(decree, license, certificate)
This Amendment is accepted subject to the conditions set forth herein, and to conditions N/A to N/A attached hereto and made part of this Amendment.
___ //s// Martha D. Rehm__________ __________ //s// _________________________
(Holder Signature) (Authorized Officer Signature)
____ ________ ___________________ ______________________________________
(Holder Signature) DON G. CARROLL, Acting Forest Supervisor
Date:_______ 9/13/04 ______________ Date:___ 9/20/04_ _______________________
Exhibit 10.4(e)
Authorization ID: DIL528904 FS-2700-23 (4/97)
Contact ID: BRECKENRIDGE OMB 0596-0082
Use Code: 161
U.S. DEPARTMENT OF AGRICULTURE
Forest Service
AMENDMENT
FOR
SPECIAL USE AUTHORIZATION
AMENDMENT NUMBER: 4
This amendment is attached to and made a part of the special use authorization (identified above) issued to RALSTON RESORTS, INC on 12/31/1996 which is hereby amended as follows:
Change the holder name to "Vail Summit Resorts, Inc. dba Breckenridge Ski Resort, Inc."
This Amendment is accepted subject to the conditions set forth herein, and to conditions __ N/A __ to __ N/A __ attached hereto and made a part of this Amendment.
(Holder Signature) (Authorized Officer Signature)
MARIBETH GUSTAFSON, Forest Supervisor
(Holder Signature) (Name and Title)
Date: Date:
According to the Paperwork Reduction Act of 1995, no persons are required to respond to a collection of information unless it displays a valid OMB control number. The valid OMB control number for this information collection is 0596-0082.
This information is needed by the Forest Service to evaluate requests to use National Forest System lands and manage those lands to protect natural resources, administer the use, and ensure public health and safety. This information is required to obtain or retain a benefit. The authority for that requirement is provided by the Organic Act of 1897 and the Federal Land Policy and Management Act of 1976, which authorize the Secretary of Agriculture to promulgate rules and regulations for authorizing and managing National Forest System lands. These statutes, along with the Term Permit Act, National Forest Ski Area Permit Act, Granger-Thye Act, Mineral Leasing Act, Alaska Term Permit Act, Act of September 3, 1954, Wilderness Act, National Forest Roads and Trails Act, Act of November 16, 1973, Archaeological Resources Protection Act, and Alaska National Interest Lands Conservation Act, authorize the Secretary of Agriculture to issue authorizations for the use and occupancy of National Forest System lands. The Secretary of Agriculture's regulations at 36 CFR Part 251, Subpart B, establish procedures for issuing those authorizations.
The Privacy Act of 1974 (5 U.S.C. 552a) and the Freedom of Information Act (5 U.S.C. 552) govern the confidentiality to be provided for information received by the Forest Service Public reporting burden for collection of information, if requested , is estimated to average 1 hour per response for annual financial information; average 1 hour per response to prepare or update operation and/or maintenance plan; average 1 hour per response for inspection reports; and an average of 1 hour for each request that may include such things as reports, logs, facility and user information, sublease information, and other similar miscellaneous information requests. This includes the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information.
Exhibit 10.5(c)
Authorization ID: HOL419101 Page 1 of 1
Contact ID: BEAVER_CREEK FS-2700-23 (4/97)
Use Code: 161 OMB No. 0596-0082
U.S. DEPARTMENT OF AGRICULTURE
Forest Service
AMENDMENT
FOR
SPECIAL USE AUTHORIZATION
AMENDMENT NUMBER: 1
This amendment is attached to and made a part of the special use authorization (indicated above) issued to BEAVER CREEK ASSOCIATES, INC. on 11/17/1999 which is hereby amended as follows:
This amendment removes the old map dated April 17, 1997, and replaces it with a new map covering 3,801 acres, prepared by Erik J. Martin on June 11, 2002.
This Amendment is accepted subject to the conditions set forth herein, and to conditions ____N/A ___ to ____N/A ___ attached hereto and made a part of this Amendment.
------------------------------------------------------------------------------------------------------------
Holder: __ //s// William A. Jensen ___ Authorized Officer _ //s// Martha J. Ketelle _
Holder: _________________________ Title: Forest Supervisor
Date: _______ 5/21/03_____ ________ Date: ________ 5/23/03____ ____________
Exhibit 10.5(d)
Authorization ID: HOL419101 Page 1 of 3
Contact ID: BEAVER_CREEK FS-2700-23 (4/97)
Use Code: 161 OMB No. 0596-0082
U.S. DEPARTMENT OF AGRICULTURE
Forest Service
AMENDMENT
FOR
SPECIAL USE AUTHORIZATION
AMENDMENT NUMBER: 3
This amendment is attached to and made a part of the special use authorization (identified above) issued to BEAVER CREEK ASSOCIATES, INC. on 11/17/1999 which is hereby amended as follows:
Remove the following clauses:
111.F. Temporary Suspension
VIII.A. Termination for Higher Public Purpose
VIII.B. Termination, Revocation and Suspension
XI.F. Water Rights.
Revise the heading of Section VII.TERMINATION to read REVOCATION AND SUSPENSION. In Section VIII, add clauses A. Revocation and Suspension, B. Opportunity Take Corrective Action, C. Revocation or Reasons in the Public Interest, and D. Suspension below:
Under section XI MISCELLANEOUS PROVISIONS, revise the heading for clause F Water Rights to read Water Use Facilities. Replace the existing clause with the clause below:
State ID# Owner Type or Basis Purpose of Use
(decree, license, certificate)
This Amendment is accepted subject to the conditions set forth herein, and to conditions N/A to N/A attached hereto and made part of this Amendment.
___ //s// Martha D. Rehm__________ __________ //s// _________________________
(Holder Signature) (Authorized Officer Signature)
____ ________ ___________________ ______________________________________
(Holder Signature) DON G. CARROLL, Acting Forest Supervisor
Date:_______ 9/13/04 ______________ Date:___ 9/20/04_ _______________________
Exhibit 10.5(e)
United States Department of Agriculture Forest Service AMENDMENT FOR SPECIAL USE PERMIT Ref: FSM 2714 THIS AMENDMENT IS ATTACHED TO AND MADE A PART OF THE ___ /X/ TERM________/ / ANNUAL PERMIT |
a. Record no. ____ |
b. Region 02 |
c. Forest 15 |
d. District 07 |
e. User No. |
f. Kind of Use 153 |
|
g. State 08 |
h. County 037 |
k. Card no. 1 |
Vail Associates, Inc. dba Vail & Beaver Creek Ski School of PO Box 7, Vail, CO 81658
(hereinafter called the Holder) is hereby authorized to use or occupy National Forest System lands, to use subject to the conditions set out below, on the White River National Forest, Holy Cross Ranger District.
This permit amendment authorizes use of the McCoy Park area on the Holy Cross Ranger District, as shown on the location map attached to and made a part of this permit and is issued for the purpose of: Operating a Nordic Ski Area, which includes approximately 30 km of set-track nordic trails, snowshoe trails, warming facility at McCoy Patrol, warming tent and public biathlon course .
PERMITTEE |
Name of Permittee CHRIS RYMAN |
Signature of Authorized Officer Title: Exec. Vice President |
Date |
ISSUING OFFICER |
Name and Signature WILLIAM A. WOOP |
Title: District Ranger |
Exhibit 10.6(d)
Authorization ID: HOL405601 Page 1 of 1
Contact ID: VAIL_ASSOCIATES FS-2700-23 (4/97)
Use Code: 161 OMB No. 0596-0082
U.S. DEPARTMENT OF AGRICULTURE
Forest Service
AMENDMENT
FOR
SPECIAL USE AUTHORIZATION
AMENDMENT NUMBER: 3
This amendment is attached to and made a part of the special use authorization (indicated above) issued to VAIL CORPORATION on 11/23/1993 which is hereby amended as follows:
This amendment removes the old map dated October 1, 1991, and replaces it with a new map covering 12,226 acres, prepared by Erik J. Martin on June 11, 2002.
This Amendment is accepted subject to the conditions set forth herein, and to conditions ____N/A ___ to ____N/A ___ attached hereto and made a part of this Amendment.
------------------------------------------------------------------------------------------------------------
Authorized Officer: _ /s/ Martha Ketelle ______ Holder: __ /s/ William A. Jensen _______
Title: Forest Supervisor Title: SVP & COO - Vail
Date: 5-23-03 Date: 5-21-03
Exhibit 10.6(e)
Authorization ID: HOL405601 Page 1 of 3
Contact ID: VAIL_ASSOCIATES FS-2700-23 (4/97)
Use Code: 161 OMB No. 0596-0082
U.S. DEPARTMENT OF AGRICULTURE
Forest Service
AMENDMENT
FOR
SPECIAL USE AUTHORIZATION
AMENDMENT NUMBER: 4
This amendment is attached to and made a part of the special use authorization (identified above) issued to THE VAIL CORPORATION on 11/23/1993 which is hereby amended as follows:
Remove the following clauses:
111.F. Temporary Suspension
VIII.A. Termination for Higher Public Purpose
VIII.B. Termination, Revocation and Suspension
XI.F. Water Rights.
Revise the heading of Section VII.TERMINATION to read REVOCATION AND SUSPENSION. In Section VIII, add clauses A. Revocation and Suspension, B. Opportunity Take Corrective Action, C. Revocation or Reasons in the Public Interest, and D. Suspension below:
Under section XI MISCELLANEOUS PROVISIONS, revise the heading for clause F Water Rights to read Water Use Facilities. Replace the existing clause with the clause below:
State ID# Owner Type or Basis Purpose of Use
(decree, license, certificate)
This Amendment is accepted subject to the conditions set forth herein, and to conditions N/A to N/A attached hereto and made part of this Amendment.
___ //s// Martha D. Rehm__________ __________ //s// _________________________
(Holder Signature) (Authorized Officer Signature)
____ ________ ___________________ ______________________________________
(Holder Signature) DON G. CARROLL, Acting Forest Supervisor
Date:_______ 9/13/04 ______________ Date:___ 9/20/04_ _______________________
Exhibit 10.16(b)
FIRST AMENDMENT TO FOURTH AMENDED AND
RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO FOURTH AMENDED AND RESTATED CREDIT AGREEMENT (this " Amendment ") is dated as of June 29, 2005, among THE VAIL CORPORATION, a Colorado corporation doing business as "Vail Associates, Inc." (the " Company "), the Required Lenders (as defined in the Credit Agreement referenced below) party hereto, and BANK OF AMERICA, N.A., as Administrative Agent (hereinafter defined).
R E C I T A L S
A. The Company has entered into that certain Fourth Amended and Restated Credit Agreement dated as of January 28, 2005 (as amended, the " Credit Agreement "), with Bank of America, N.A., as Administrative Agent (in such capacity, the " Administrative Agent "), and certain other agents and lenders party thereto, providing for revolving credit loans, letters of credit, and swing line loans in the aggregate principal amount of up to $400,000,000. Unless otherwise indicated herein, all capitalized terms used herein shall have the meanings set forth in the Credit Agreement, and all Section references herein shall be references to sections in the Credit Agreement.
B. The Company has requested certain clarifications with respect to the non-recourse Debt which may be incurred by the Unrestricted Subsidiaries and the limited recourse to the Restricted Subsidiaries permitted with respect to such non-recourse Debt of the Unrestricted Subsidiaries.
C. The Required Lenders have agreed to amend the Credit Agreement to provide for such clarifications as set forth herein.
In consideration of the foregoing and the mutual covenants contained herein, the Company, the Required Lenders, the Guarantors (by execution of the attached Guarantors' Consent and Agreement), and the Administrative Agent agree as follows:
1. Amendments .
(a) New Definitions . Section 1.1 is hereby amended by inserting the following new definitions, as follows:
(i) The definition of " Completion Guaranty " is added alphabetically to read as follows:
" Completion Guaranty means, with respect to any Real Estate Project of an Unrestricted Subsidiary, a completion guaranty or similar agreement entered into by a Restricted Company pursuant to which such Restricted Company (a) guarantees the timely completion of construction of such construction project in accordance with applicable plans and specifications, the payment of all costs incurred in connection with the construction of such construction project, the payment of the premiums of all insurance required to be maintained in connection with the Real Estate Project, or such other matters customarily included by institutional lenders in a completion guaranty, or (b) otherwise indemnifies a construction lender or other party from loss resulting from a failure to timely complete and pay all costs incurred in connection with construction of any project financed by such lender or other party in accordance with the applicable plans and specifications."
(ii) The definition of " Customary Recourse Exceptions " is added alphabetically to read as follows:
" Customary Recourse Exceptions means, with respect to any Non-Recourse Debt of an Unrestricted Subsidiary, exclusions from the exculpation provisions with respect to such Non-Recourse Debt for the bankruptcy of such Unrestricted Subsidiary, fraud, misapplication of cash, environmental claims, waste, willful destruction, and other circumstances customarily excluded by institutional lenders from exculpation provisions and/or included in separate indemnification agreements in non-recourse financings of real estate."
(iii) The definition of " Non-Recourse Debt " is added alphabetically to read as follows :
" Non-Recourse Debt means, for any Unrestricted Subsidiary, any Debt of such Unrestricted Subsidiary with respect to which the holder of such Debt (a) may not look to such Unrestricted Subsidiary directly for repayment, other than to the extent of any security therefor, or (b) may look to such Unrestricted Subsidiary directly for repayment (but not to any direct or indirect constituent equity holder of such Unrestricted Subsidiary, other than with respect to Permitted Recourse Obligations entered into by such direct or indirect constituent equity holder)."
(iv) The definition of " Permitted Recourse Obligations " is added alphabetically to read as follows:
" Permitted Recourse Obligations means, collectively, for any Restricted Company, obligations or liabilities arising with respect to Customary Recourse Exceptions, Completion Guaranties, and letters of credit or similar arrangements entered into in support of obligations of an Unrestricted Subsidiary with respect to its Real Estate Project."
(v) The definition of " Real Estate Project " is added alphabetically to read as follows:
" Real Estate Project means the acquisition, development, and operation or resale of any real estate asset or group of related real estate assets (and directly related activities) by any Unrestricted Subsidiary."
(b) Modifications of Existing Definitions . Section 1.1 is further amended by modifying the following existing definitions as indicated:
(i) The definition of " Debt " is amended to address Permitted Recourse Obligations, by replacing the period at the end of clause (d) therein with a semi-colon (;) and adding the following proviso thereafter:
" provided , that repayment or reimbursement obligations of any Restricted Company with respect to Permitted Recourse Obligations shall not be considered Debt unless and until an event or circumstance occurs that triggers such Restricted Company's direct payment liability or reimbursement obligation (as opposed to contingent or performance obligations) to the lender or other party to whom such Permitted Recourse Obligation is actually owed, in which case the amount of such direct payment liability to such lender or other party shall constitute Debt; provided , that the satisfaction of performance obligations on behalf of the Unrestricted Subsidiary under a Completion Guaranty shall not constitute Debt."
(ii) The definition of " Funded Debt " is amended to address Permitted Recourse Obligations as follows:
(A) the following is added after " instrument, " in the parenthetical set forth in clause (a) :
"as a direct (as opposed to contingent) payment obligation arising under a guaranty,";
(B) existing clause (d) is changed to clause (e) ; and
(C) the following is added as clause (d) before the phrase " but expressly excluding ":
"(d) payment obligations with respect to Permitted Recourse Obligations which constitutes Debt hereunder,".
(iii) The definition of " Permitted Debt " is amended to conform with the new definitions added by this Amendment, as follows:
(A) Clause (e)(i) is deleted in its entirety and the following is substituted therefor:
"(i) (A) Non-Recourse Debt of Unrestricted Subsidiaries, and (B) other Debt of Unrestricted Subsidiaries which is recourse to the Restricted Companies (1) to the extent permitted by clause (iii) hereof or clauses (f) or (g) of the definition of " Permitted Debt ," or (2) with respect to reimbursement obligations under the L/C described on Schedule 2.3 issued in support of certain SSI obligations;"; and
(B) Clause (g) is amended by adding the following parenthetical after the word "Debt":
"(including, without limitation, payment obligations with respect to Permitted Recourse Obligations which constitutes Debt hereunder)".
(iv) Clause (d) of the definition of " Permitted Liens " is amended to conform with the new definition of " Non-Recourse Debt " by modifying clause (d) to read as follows:
"(d) Liens on assets of Unrestricted Subsidiaries securing Debt of Unrestricted Subsidiaries permitted by clause (e)(i) of the definition of " Permitted Debt ";".
(v) The definition of " Unrestricted Subsidiary " is amended to conform with the new definition of " Permitted Recourse Obligations " by modifying the second parenthetical provision in clause (b) of the definition to read as follow:
"( other than (i) pursuant to Permitted Recourse Obligations and (ii) as otherwise permitted in clause (e)(i) of the definition of " Permitted Debt "),".
(c) Modifications to Covenants .
(i) Affiliate Transactions . Section 10.6 is amended to address the Permitted Recourse Obligations between the Restricted Companies and the Unrestricted Companies by replacing the period at the end of clause (d) thereof with a semi-colon, and adding the following thereafter:
"provided, that any Restricted Company may enter into Permitted Recourse Obligations in support of obligations of Unrestricted Subsidiaries, so long as no Default or Potential Default then exists or arises."
(ii) Loan, Advances, and Investments . Section 10.8(m) is amended by adding the following parenthetical after the phrase " investments in Unrestricted Subsidiaries " in the first and second lines thereof:
"(including, without limitation, the amount of any Permitted Recourse Obligations which constitutes Debt hereunder)".
2. Representations and Warranties . As a material inducement to the Required Lenders and the Administrative Agent to execute and deliver this Amendment, the Company represents and warrants to the Required Lenders and the Administrative Agent (with the knowledge and intent that Required Lenders are relying upon the same in entering into this Amendment) that (a) the Company and the Guarantors have all requisite authority and power to execute, deliver, and perform their respective obligations under this Amendment and the Guarantor Consent and Agreement, as the case may be, which execution, delivery, and performance have been duly authorized by all necessary action, require no Governmental Approvals, and do not violate the respective certificates of incorporation or its bylaws, or other documents of such Companies; (b) upon execution and delivery by the Company, the Guarantors, the Administrative Agent, and the Required Lenders, this Amendment will constitute the legal and binding obligation of the Company and each Guarantor, enforceable against such entities in accordance with this Amendment's terms, except as that enforceability may be limited by general principles of equity or by bankruptcy or insolvency laws or similar laws affecting creditors' rights generally, (c) all representations and warranties in the Loan Papers are true and correct in all material respects as though made on the date hereof, except to the extent that any of them speak to a specific date or the facts on which any of them are based have been changed by transactions contemplated or permitted by the Credit Agreement, and (d) no Default or Potential Default has occurred and is continuing.
3. Conditions Precedent to Effectiveness . This Amendment shall be effective on the date (the " Effective Date ") upon which Administrative Agent receives (i) counterparts of this Amendment executed by the Company, Administrative Agent, and Required Lenders, and (ii) the Guarantors' Consent and Agreement executed by each Guarantor
4. Expenses . The Company shall pay all reasonable costs, fees, and expenses paid or incurred by the Administrative Agent incident to this Amendment, including, without limitation, the reasonable fees and expenses of the Administrative Agent's counsel in connection with the negotiation, preparation, delivery, and execution of this Amendment and any related documents.
5. Miscellaneous . Unless stated otherwise herein, (a) the singular number includes the plural, and vice versa , and words of any gender include each other gender, in each case, as appropriate, (b) headings and captions shall not be construed in interpreting provisions of this Amendment, (c) this Amendment shall be governed by and construed in accordance with the laws of the State of New York, (d) if any part of this Amendment is for any reason found to be unenforceable, all other portions of it shall nevertheless remain enforceable, (e) this Amendment may be executed in any number of counterparts with the same effect as if all signatories had signed the same document, and all of those counterparts shall be construed together to constitute the same document, (f) this Amendment is a " Loan Paper " referred to in the Credit Agreement, and the provisions relating to Loan Papers in Section 14 of the Credit Agreement are incorporated herein by reference, (g) this Amendment, the Credit Agreement, as amended by this Amendment, and the other Loan Papers constitute the entire agreement and understanding among the parties hereto and supercede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof, and (h) except as provided in this Amendment, the Credit Agreement, the Notes, and the other Loan Papers are unchanged and are ratified and confirmed.
6. Parties . This Amendment binds and inures to the benefit of the Company, the Guarantors, the Administrative Agent, the Lenders, and their respective successors and assigns.
The parties hereto have executed this Amendment in multiple counterparts as of the date first above written.
Remainder of Page Intentionally Blank.
Signature Pages to Follow.
Signature Page to that certain First Amendment to Fourth Amended and Restated Credit Agreement dated as of June 29, 2005, among The Vail Corporation (d/b/a "Vail Associates, Inc."), the other agents and Lenders party thereto, and Bank of America, N.A., as Administrative Agent for the Lenders.
|
THE VAIL CORPORATION (D/B/A "VAIL ASSOCIATES, INC.") , as the Company
By: Name: Title:
|
BANK OF AMERICA, N.A. , as Administrative Agent
By:
Name:
Title:
BANK OF AMERICA, N.A. ,
as an L/C Issuer, a Swing Line Lender, and a Lender
By:
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION ,
as Co-Syndication Agent, a Swing Line Lender, and a Lender
By:
Name:
Title:
WELLS FARGO BANK, NATIONAL ASSOCIATION , as Co-Syndication Agent, an L/C Issuer, and a Lender
By:
Name:
Title:
DEUTSCHE BANK TRUST COMPANY AMERICAS , as Co-Documentation Agent and a Lender
By:
Name:
Title:
By:
Name:
Title:
LASALLE BANK NATIONAL ASSOCIATION
,
as Co-Documentation Agent and a Lender
By:
Name:
Title:
CALYON NEW YORK BRANCH
,
as a Lender
By:
Name:
Title:
JPMORGAN CHASE BANK, NA
,
as a Lender
By:
Name:
Title:
COMPASS BANK
,
as a Lender
By:
Name:
Title:
GUARANTY BANK
,
as a Lender
By:
Name:
Title:
COMERICA WEST INCORPORATED
,
as a Lender
By:
Name:
Title:
GUARANTORS' CONSENT AND AGREEMENT
As an inducement to Administrative Agent and Required Lenders to execute, and in consideration of Administrative Agent's and Required Lenders' execution of the foregoing First Amendment to Fourth Amended and Restated Credit Agreement, the undersigned hereby consent thereto and agree that the same shall in no way release, diminish, impair, reduce or otherwise adversely affect the respective obligations and liabilities of each of the undersigned under each Guaranty described in the Credit Agreement, or any agreements, documents or instruments executed by any of the undersigned to create liens, security interests or charges to secure any of the indebtedness under the Loan Papers, all of which obligations and liabilities are, and shall continue to be, in full force and effect. This consent and agreement shall be binding upon the undersigned, and the respective successors and assigns of each, and shall inure to the benefit of Administrative Agent and Lenders, and the respective successors and assigns of each.
Vail Resorts, Inc.
Vail Holdings, Inc.
Beaver Creek Associates, Inc.
Beaver Creek Consultants, Inc.
Beaver Creek Food Services, Inc.
Breckenridge Resort Properties, Inc.
Complete Telecommunications, Inc.
Gillett Broadcasting, Inc.
Grand Teton Lodge Company
Heavenly Valley, Limited Partnership
Jackson Hole Golf and Tennis Club, Inc.
JHL&S LLC
Keystone Conference Services, Inc.
Keystone Development Sales, Inc.
Keystone Food & Beverage Company
Keystone Resort Property Management Company
Larkspur Restaurant & Bar, LLC
Lodge Properties, Inc.
Lodge Realty, Inc.
Mountain Thunder, Inc.
Property Management Acquisition Corp., Inc.
Rockresorts International, LLC
Rockresorts LLC
Rockresorts Cheeca, LLC
Rockresorts Equinox, Inc.
Rockresorts LaPosada, LLC
Rockresorts Wyoming, LLC
Rockresorts Casa Madrona, LLC
Rockresorts Rosario, LLC
Teton Hospitality Services, Inc.
The Village at Breckenridge Acquisition Corp., Inc.
Timber Trail, Inc.
VA Rancho Mirage I, Inc.
VA Rancho Mirage II, Inc.
VA Rancho Mirage Resort, L.P.
Vail/Arrowhead, Inc.
Vail Associates Holdings, Ltd.
Vail Associates Investments, Inc.
Vail Associates Real Estate, Inc.
Vail/Beaver Creek Resort Properties, Inc.
Vail Food Services, Inc.
Vail Resorts Development Company
Vail RR, Inc.
Vail Summit Resorts, Inc.
Vail Trademarks, Inc.
VAMHC, Inc.
VR Heavenly I, Inc.
VR Heavenly II, Inc.
VR Holdings, Inc.
By:
Name:________________________________________
Title:_________________________________________
TABLE OF CONTENTS
1. |
Sale of Premises, Liquor License and Liquor Inventory |
2 |
Purchase Price |
4 |
|
Adjustments And Prorations |
4 |
|
Closing |
8 |
|
Title, Survey, Permitted Encumbrances |
8 |
|
Buyer's Due Diligence |
9 |
|
Representations and Warranties |
10 |
|
Dispute Resolution |
19 |
|
Conditions Precedent to Closing |
20 |
|
Documents to be Delivered by Seller at Closing |
21 |
|
Documents to be Delivered by Buyer at Closing |
22 |
|
Costs and Adjustments |
22 |
|
Operation of the Premises prior to the Closing Date |
23 |
|
As Is |
24 |
|
No Brokerage Commission |
25 |
|
Casualty; Condemnation |
25 |
|
Remedies |
26 |
|
Liquor License |
28 |
|
Indemnity |
30 |
|
Escrow |
34 |
|
Assignment |
36 |
|
Access to Records |
36 |
|
Notices |
37 |
|
Property Information and Confidentiality |
38 |
|
Antitrust Notification |
39 |
|
Tennis Court Land Development |
39 |
|
Miscellaneous |
40 |
VA RANCHO MIRAGE RESORT, L.P., a Delaware limited partnership
RANCHO MIRAGE CONCESSIONS, INC., a Delaware corporation
GENLB-RANCHO LLC, a Delaware limited liability company
This SALE-PURCHASE AGREEMENT (this " Agreement "), is made as of July 1, 2005 (the " Execution Date "), by and among VA RANCHO MIRAGE RESORT, L.P., a Delaware limited partnership (" Seller "), and OLYMPUS RANCHO MIRAGE CONCESSIONS, INC., a Delaware corporation (" Liquor License Seller "), all of whom having an office address of 137 Benchmark Road, Avon, Colorado 81620, and GENLB-RANCHO LLC, a Delaware limited liability company having an office address at 1221 Brickell Avenue, Suite 900, Miami, Florida 33131 (" Buyer ").
WHEREAS, Seller owns the real property and improvements commonly known as the " The Lodge at Rancho Mirage " and located at 68-900 Frank Sinatra Drive, Rancho Mirage, California 92270 (which also includes the Tennis Court Land (as defined in Section 26 hereinafter) (collectively, the " Hotel Property ") and operates a hotel business thereon (the " Hotel "). The Seller also owns or leases the Personal Property and the Other Property (both as hereinafter defined). The Seller's right, title and interest in the Hotel Property, Personal Property and Other Property is herein collectively referred to as the " Premises. " The real property included within the Hotel Property is more particularly described on Schedule 1 hereto, and is sometimes referred to herein as the " Real Property. " Seller is the owner of the Premises.
WHEREAS, Seller and Buyer desire to enter into this Agreement whereby, subject to the terms and conditions contained herein, Seller shall sell the Premises to Buyer, and Buyer shall purchase the Premises from Seller.
WHEREAS, Liquor License Seller is the holder of the licenses listed on Schedule A and issued by the State of California for the sale of alcoholic beverages at or from the Premises (collectively referred to hereinafter as the " Liquor License ").
WHEREAS, Liquor License Seller and Buyer desire to enter into this Agreement whereby, subject to the terms and conditions contained herein, and provided that Buyer completes the purchase of the Premises as described herein, Liquor License Seller shall sell the Liquor License to an assignee of Buyer, and such assignee shall purchase the Liquor License from Liquor License Seller.
WHEREAS, Buyer may develop that certain portion of the Real Property described on Schedule 26(a) for resale or lease as a commercial or residential development. In the event of such development, the parties intend that Seller receive additional consideration as a part of the transaction set forth herein.
NOW THEREFORE, for and in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, (i) Seller agrees to sell to Buyer and Buyer agrees to purchase from Seller, the Premises subject to and in accordance with the terms and conditions set forth in this Agreement, and (ii) Liquor License Seller agrees to sell to Buyer's assignee and Buyer agrees to cause its assignee to purchase from Liquor License Seller, the Liquor License subject to and in accordance with the terms and conditions set forth in this Agreement. The foregoing recitals shall be deemed to be a part of this Agreement for all purposes.
Subject to the foregoing, and unless otherwise indicated below, Buyer shall receive a credit against the Purchase Price for any of the following items to the extent they are accrued but unpaid as of the Apportionment Time (whether or not due, owing or delinquent as of the Apportionment Time) and to the extent Buyer has assumed the obligations for them, and Seller shall receive a credit (and thereby be entitled to a payment from Buyer) with respect to any of the following items which shall have been paid prior to the Closing Date to the extent the payment thereof relates to any period of time after the Apportionment Time:
The consummation of the purchase and sale of the Premises contemplated by this Agreement (the " Closing ") shall take place on or before July 27, 2005 (the " Closing Date "). The Closing shall occur at 10:00 a.m. on the Closing Date at the offices of the Escrow Company or such other location as is mutually acceptable to the parties.
The consummation of the purchase and sale of the Liquor License contemplated by this Agreement (the " Liquor License Closing ") shall take place concurrently with or as soon as possible after the Closing for the purchase and sale of the Premises as described above.
If, solely as a result of Buyer not having deposited the Purchase Price as and when required hereunder, the Escrow Company has not transmitted the Purchase Price to Seller sufficiently early on the Closing Date to allow Seller to invest such funds for interest credit on the day of receipt, or to pay off any existing encumbrances such that interest thereon ceases on the Closing Date, then any and all adjustments to be made as of the day of Closing shall be made as of the next business day. In all other events, all adjustments shall be made on the day of Closing.
On the Closing Date, the Seller's title to the Premises shall be free and clear of all liens, claims and encumbrances except (i) non-delinquent real property taxes and assessments, (ii) the special assessment (improvement lien) related to the construction of Frank Sinatra Drive adjacent to the Real Property, (iii) matters that are disclosed by the Title Policy (as hereinafter defined) and that are approved or deemed approved by Buyer as set forth herein, and (iv) matters that are disclosed by that ALTA Survey prepared by The Keith Companies dated September 14, 2001, as updated and revised (the " Survey ") and are approved or deemed approved by Buyer, or that would be disclosed by a current survey or physical inspection of the Real Property (collectively, the " Permitted Encumbrances "). Seller shall order the updated and revised Survey. Seller has delivered to Buyer: (i) a current preliminary title report (for an ALTA Owner's Policy of Title Insurance (Form B, Rev. 10/17/70)) (" Title Report "); (ii) copies of all recorded documents referred to on Schedule B of the Title Report as exceptions to coverage (collectively, the " Title Documents "), and (iii) the Survey. Buyer has approved the Title Report, Title Documents and Survey.
If additional title documents, updates to the Title Report and/or updates to the Survey received after the Execution Date disclose any new defect, exception, or other matter affecting the Real Property (a " Title Defect ") following the Execution Date, Buyer shall have five (5) business days following its receipt of written disclosure in which to object to any such additional Title Defect. If no objection is made during such period, the Title Defect shall be deemed a Permitted Encumbrance. Seller may, at its sole option, elect to cure or remove the objections made by Buyer; provided, however, Seller shall have no obligation to cure such Title Defect other than removing or causing to be released the following (collectively, the " Mandatory Removal Items "): (1) all mechanics' liens; (2) monetary liens encumbering the Property created by Seller's acts; and (3) liens of any financing obtained by Seller which are secured by the Premises. If Seller fails to remove any Mandatory Removal Items, such amounts as are necessary to remove them shall be held back from Seller's proceeds at Closing and not disbursed to Seller until they are removed and at Seller's election, the amounts held back shall be utilized either to "bond over" them through the Title Company or pay them at Closing. Should Seller elect to attempt to cure or remove the objections, Seller shall have thirty (30) days from the date of Buyer's written notice of objections (the " Cure Period ") in which to accomplish the cure (other than for Mandatory Removal Items for which there shall be no Cure Period). In the event Seller either elects not to cure or remove the objections or is unable to accomplish the cure prior to the expiration of the Cure Period, then Seller shall so notify Buyer in writing specifying which objections Seller does not intend to cure, and then Buyer shall be entitled, as Buyer's sole and exclusive remedies, either to (i) terminate this Agreement and obtain a refund of the Deposit by providing written notice of termination to Seller within five (5) business days from the date on which Buyer receives Seller's notice that it does not intend to cure or (ii) waive the objections and close this transaction as otherwise contemplated herein, and the Closing Date shall be extended by the portion of the Cure Period that extends beyond the original Closing Date.
Notwithstanding anything to the contrary contained herein, in the event this Agreement is terminated for any reason, then Buyer shall promptly and at its sole expense return to Seller all Due Diligence Materials which have been delivered by Seller to Buyer in connection with Buyer's inspection of the Premises, along with copies of all reports, drawings, plans, studies, summaries, surveys, maps and other data prepared by or for Buyer in its investigation and inspection of the Real Property (collectively, " Buyer's Reports "), subject, however to any limitations on Buyer's right to make any such materials available to Seller that are imposed in any agreement with a third party consultant preparing any such reports or materials, and subject to Buyer's disclaimer that Buyer's Reports are provided without representation or warranty made by Buyer as to their accuracy or completeness. Buyer shall cooperate with Seller at no expense to Buyer in order to obtain a waiver of any such limitation.
Except to the extent of any representation or warranty made by Seller hereunder, Buyer acknowledges that Seller is not representing or warranting that any of the Due Diligence Materials are accurate or complete, and that Seller has advised Buyer to independently verify the facts and conclusions set forth therein.
As used in this Agreement, the words " Seller's knowledge " or " Liquor License Seller's knowledge " or words of similar import shall be deemed to mean, and shall be limited to, the actual (as distinguished from implied, imputed or constructive) knowledge of Seller's representatives, Herbert Speigel, general manager of the Hotel Property and Marla Steele and Ed Mace without such individuals having any obligation to make an independent inquiry or investigation and without imputation to such individuals of the knowledge of others, whether or not any such others would be deemed agents of Seller or of the named individuals. The named individuals are mentioned solely for establishing an objective reference for measuring Seller's knowledge, and are not making such representations and warranties in their individual capacities. Accordingly, only Seller (and not the named individuals) shall be liable in the event any such representations or warranties are breached. Seller and Liquor License Seller represent and warrant that the aforementioned individuals are the individuals currently in the employ of Seller, Liquor License Seller and/or their affiliates with sufficient knowledge concerning the matters that Seller and Liquor License Seller have made such representations and warranties and each such individual has asset management responsibility with respect to the Premises within its respective organization.
As used in this Agreement, the words " Buyer's knowledge " or words of similar import shall be deemed to mean, and shall be limited to, the actual (and, to the extent of the information set forth in the Due Diligence Materials, imputed) knowledge of Greg Denton, an individual charged with responsibility for acquiring the Premises, without such individual having any obligation to make an independent inquiry or investigation and without imputation to such individual of the knowledge of others, whether or not any such others would be deemed agents of Buyer or of the named individual. The named individual is mentioned solely for establishing an objective reference for measuring Buyer's knowledge, and is not making such representations and warranties in its individual capacities. Accordingly, only Buyer (and not the named individual) shall be liable in the event any such representations or warranties are breached.
The foregoing requirements are for the benefit of Buyer and any condition may be waived by Buyer in its sole and absolute discretion.
The foregoing requirements are for the benefit of Seller and any condition may be waived by Seller in its sole and absolute discretion.
At the Closing, the Seller shall execute, acknowledge and/or deliver, as applicable, the following, to Escrow Company:
At the Closing, Buyer shall execute, acknowledge and/or deliver, as applicable, the following, to Escrow Company:
At Closing, the following items shall be paid or allocated:
Except to the extent of the representations and warranties made by Seller in Section 7 and in any documents executed and delivered by Seller at Closing, Buyer, for itself and its successors and assigns, releases Seller and its agents, employees, partners, officers, directors, managers, members, contractors, consultants and representatives from, and waives any and all causes of action or claims, known or unknown, against any of such persons for (a) any and all liability attributable to any physical condition of or at the Premises, including, without limitation, the presence on, under or about the Premises of any Hazardous Substances; (b) any and all liability resulting from the failure of the Premises to comply with any applicable laws, and (c) any liabilities, damages or injury arising from, connected with or otherwise caused by statements, opinions or information obtained from any of such persons with respect to the Premises.
This release includes claims of which Buyer is presently unaware or which Buyer does not presently suspect to exist which, if known by Buyer, would materially affect Buyer's release of Seller. Buyer specifically waives the provision of California Civil Code Section 1542, which provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN TO HIM MUST HAVE MATERIALLY AFFECTED THE SETTLEMENT WITH THE DEBTOR." THE PARTIES CONFIRM THAT THEY ARE EXECUTING THE FOREGOING WAIVER WITH THE ADVICE OF COUNSEL WHO HAS EXPLAINED TO THEM ITS LEGAL EFFECT.
__________________________ ________________________
Buyer and Seller represent to each other that such representing party has not dealt with any broker in connection with Buyer's purchase of the Premises or the transactions described herein.
__________________________ ________________________
Buyer shall not be required to assume any lease between Liquor License Seller and any concessionaire that exists prior to or on the date of the Liquor License Closing.
Upon transfer of the Liquor License and closing of the Liquor License Escrow, Escrow Company shall deliver to Buyer the Liquor Inventory Bill of Sale and shall deliver to Liquor License Seller the Liquor License Purchase Price less the amount of any creditor claims paid as provided herein and less Liquor License Seller's share of any Liquor License Escrow fees as provided herein.
Buyer shall have the right to direct Heritage Bank of San Jose, California to assume the obligations of the Escrow Company under this Section 18 , provided that if Heritage Bank will not prepare notices required to complete the Liquor License Closing, Buyer will do so. Such assumption shall become effective upon execution by the parties hereto and by Heritage Bank of an acceptable assumption agreement.
Nothing in this Section 18 shall operate or be construed to mean that Buyer's ability to obtain a hotel liquor license from the Department is a condition to the Closing, nor shall Buyer's failure to obtain a hotel liquor license from such authority give Buyer the right to terminate this Agreement.
Any claim for indemnification that may be made under more than one subsection under this Section 19 may be made under the subsection that the claiming party may elect in its sole discretion, notwithstanding that such claim may be made under more than one subsection. If the Indemnitor disputes its responsibility for such Loss by written notice to the Indemnitee given within such 30-day period, then either the Indemnitor or the Indemnitee may demand arbitration.
All notices and claims must be given in accordance with Section 23 to be effective. Except for any matter relating to a Cap Exclusion with regard to Buyer, each of Seller and Buyer hereby expressly waives and relinquishes all other rights or remedies available to it at law, in equity or otherwise (including, without limitation, the right to seek damages or equitable relief from the other) with respect to any Losses (including, without limitation, defense costs) incurred by such party for which such party is indemnified by the other party under Section 19 . This Section 19(e) shall not limit or impair Buyer's or Seller's right to object to the final closing statement or the adjustments made thereunder in accordance with Section 3(c) above.
The Escrow Company shall hold the Deposit and all documents in escrow and shall dispose of them in accordance with the following provisions:
Upon delivery of the Deposit, the Escrow Company shall be relieved of all liability hereunder and with respect to the Deposit. The Escrow Company shall deliver the Deposit, at the election of the party entitled to receive the same, by (i) a good, unendorsed certified check of the Escrow Company payable to the order of such party, (ii) an unendorsed official bank or cashier's check payable to the order of such party, or (iii) a bank wire transfer of immediately available funds to an account designated by such party.
Except as stated in the next succeeding sentence, Buyer shall not have the right to assign any of its rights under this Agreement without the express written consent of Seller, which consent Seller shall have the right to withhold or grant in its sole and absolute discretion. Buyer may assign this Agreement to one or more persons or entities controlled by Buyer, under common control with Buyer, or controlling Buyer, provided that such assignees expressly assume all Buyer's obligations hereunder, Buyer remains fully liable for such obligations, and Buyer contemporaneously furnishes a copy of any such assignment to Seller. Upon such assignment, Buyer's assignees shall assume all Buyer's obligations hereunder but Buyer shall remain liable therefor.
For a period of three (3) years subsequent to the Closing Date, Buyer and its affiliates shall be entitled to access during business hours to all documents, books and records of Seller relating to the income and expenses of the Hotel Property for tax and audit purposes, regulatory compliance, and cooperation with governmental investigations; and provided that Buyer gives reasonable prior notice to Seller. Buyer shall also have the right, at its sole cost and expense, to make copies of such documents, books and records.
If to Seller or Liquor License Seller:
Olympus Rancho Mirage Concessions, Inc.
Attention: Martha D. Rehm, Senior Vice President and General Counsel
Brownstein Hyatt & Farber, P.C.
Attention: Edward N. Barad, Esq.
1221 Brickell Avenue, Suite 900
Herrick, Feinstein LLP
2 Park Avenue
New York, NY 10016
Phone: (212) 592-1400
Fax: (212) 545-3443
Seller and Buyer have been advised that the transactions contemplated by this Agreement are exempt from the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
In the event that the entirety, any phase, or any portion of the land described on Schedule 26(a) hereof (the " Tennis Court Land ") is developed for any purpose other than a Hotel Expansion (the " Project "), Buyer shall pay to Seller such amounts in the manner and to the extent set forth in the covenants attached hereto as Schedule 26(b) (the " Covenants ") and incorporated herein by reference. All capitalized terms in this Section 26 that are not defined herein shall have the meaning set forth in Schedule 26(b) .
At Closing, the parties shall execute the Covenants and record them against the Tennis Court Land . Buyer shall also modify the distribution covenants of its charter or operating agreement to ensure that Seller is paid any amounts due to it hereunder prior to distributions made to any other Person except to Buyer's lender if an uncured event of default is then existing. Seller shall have no obligation as a partner, member or joint venturor of Buyer and no obligation to disgorge any payments made in accordance with its rights hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the day and year first above written.
VA RANCHO MIRAGE RESORT, L.P., a Delaware limited partnership
By: VA RANCHO MIRAGE I, INC., its General Partner
OLYMPUS RANCHO MIRAGE CONCESSIONS, INC., a Delaware corporation
The undersigned does hereby guarantee the obligations of Seller under Section 19(a) , but only to the extent that Seller would be liable under the terms of the Agreement.
THE VAIL CORPORATION, a Colorado corporation
BUYER:
GENLB-RANCHO LLC, a Delaware limited liability company
The undersigned does hereby accept and agree to perform the obligations set forth in Sections 18 & 20 hereunder:
CHICAGO TITLE COMPANY, the Escrow Company
LIST OF SCHEDULES
Schedule A - List of All Liquor Licenses
Schedule 1 - Description of Real Property
Schedule 1(b) - List of Material Personal Property
Schedule 1(c)(vii) - List of Permits
Schedule 6(a) - List of Due Diligence Materials
Schedule 7(a)(i)(F) - Litigation
Schedule 7(a)(i)(G) - Environmental Matters
Schedule 7(a)(i)(H) - Occupancy Agreements
Schedule 7(a)(i)(I) - Equipment Leases
Schedule 7(a)(i)(J) - Violations of Laws
Schedule 7(a)(i)(K) - Intellectual Property
Schedule 7(a)(i)(L) - Contracts
Schedule 10(a) - Form of Grant Deed
Schedule 10(b) - Bill of Sale Transferring Personal Property and Other Property
Schedule 10(c) - Assignment and Assumption of Contracts, Permits and Occupancy Agreements
Schedule 10(g) - Seller's FIRPTA Certificate
Schedule 10(l) - Management Agreement
Schedule 13 (c) - Improvements and Repairs in Progress
Schedule 18(c)(i) - Liquor Inventory Bill of Sale
Exhibit 10.22(a)
CONSTRUCTION LOAN AGREEMENT
dated as of
July 19, 2005
among
GORE CREEK PLACE, LLC,
The LENDERS Party Hereto,
and
U.S. BANK NATIONAL ASSOCIATION,
as Administrative Agent,
$30,000,000
TABLE OF CONTENTS
Page |
||
ARTICLE I |
DEFINITIONS AND ACCOUNTING MATTERS |
1 |
1.01 |
Certain Defined Terms |
1 |
1.02 |
Accounting Terms and Determinations |
21 |
1.03 |
Terms Generally |
21 |
1.04 |
Additional Defined Terms |
21 |
ARTICLE II |
THE LOAN FACILITY |
22 |
2.01 |
Loans |
22 |
2.02 |
Borrowings; Certain Notices |
22 |
2.03 |
Changes to Commitments |
26 |
2.04 |
Lending Offices |
27 |
2.05 |
Several Obligations; Remedies Independent |
27 |
2.06 |
Notes |
27 |
2.07 |
Conversion and Continuations of Loans |
27 |
ARTICLE III |
PAYMENTS OF INTEREST AND PRINCIPAL |
28 |
3.01 |
Interest |
28 |
3.02 |
Repayment of Loans |
29 |
3.03 |
Late Charge |
29 |
3.04 |
Optional Prepayments |
29 |
3.05 |
Mandatory Prepayments |
29 |
3.06 |
Interest and Other Charges on Prepayment |
30 |
3.07 |
Lender's Records as to Sums Owing |
31 |
3.08 |
Application of Payments Received |
31 |
3.09 |
Sharing of Payments, Etc |
31 |
ARTICLE IV |
EXTENSION OF THE MATURITY DATE |
32 |
4.01 |
Extension of Scheduled Maturity Date |
32 |
ARTICLE V |
INCREASED COSTS, LIBOR AVAILABILITY, ILLEGALITY, ETC |
33 |
5.01 |
Costs of Making or Maintaining LIBOR Rate Loans |
33 |
5.02 |
Limitation on LIBOR Rate Loans; LIBOR Not Available |
34 |
5.03 |
Illegality |
34 |
5.04 |
Treatment of Affected Loans |
34 |
5.05 |
Compensation |
35 |
5.06 |
Additional Waivers |
36 |
TABLE OF CONTENTS
(continued)
Page |
||
5.07 |
Taxes |
36 |
ARTICLE VI |
CONDITIONS PRECEDENT |
37 |
6.01 |
Conditions Precedent to Closing and the Effectiveness of Commitments |
37 |
6.02 |
Conditions Precedent to the making of any Loans |
38 |
6.03 |
Conditions Precedent to the Final Loans |
40 |
ARTICLE VII |
DISBURSEMENT OF THE LOANS; LOAN BALANCING |
40 |
7.01 |
General Conditions |
40 |
7.02 |
Loan Balancing |
42 |
7.03 |
Project Budget Line-Items; Loans to be Used for Specific Line-Items |
42 |
7.04 |
Project Budget Contingencies |
43 |
7.05 |
Interest; Fees; and Expenses |
44 |
7.06 |
Retainage |
44 |
7.07 |
Unsatisfactory Work |
45 |
7.08 |
[Intentionally Omitted] |
45 |
7.09 |
No Waiver or Approval by Reason of Loan Advances |
46 |
7.10 |
Construction Consultant |
46 |
7.11 |
Authorization to Make Loan Advances to Cure Borrower's Defaults |
46 |
7.12 |
Administrative Agent's Right to Make Loan Advances in Compliance |
46 |
with the Completion Guaranty |
||
7.13 |
No Third-Party Benefit |
47 |
ARTICLE VIII |
REPRESENTATIONS AND WARRANTIES |
47 |
8.01 |
Organization; Powers |
47 |
8.05 |
Authorization; Enforceability |
47 |
8.03 |
Government Approvals; No Conflicts |
47 |
8.04 |
Financial Condition |
48 |
8.05 |
Litigation |
48 |
8.06 |
ERISA |
48 |
8.07 |
Taxes |
48 |
8.08 |
Investment and Holding Company Status |
48 |
8.09 |
Environmental Matters |
48 |
8.10 |
Organizational Structure |
49 |
TABLE OF CONTENTS
(continued)
Page |
||
8.11 |
Title |
50 |
8.12 |
No Bankruptcy Filing |
50 |
8.13 |
Executive Offices; Places of Organization |
50 |
8.14 |
Compliance; Government Approvals |
50 |
8.15 |
Condemnation; Casualty |
51 |
8.16 |
Utilities and Public Access; No Shared Facilities |
51 |
8.17 |
Solvency |
51 |
8.18 |
Governmental Regulations |
51 |
8.19 |
No Joint Assessment; Separate Lots |
51 |
8.20 |
Security Documents and Liens |
52 |
8.21 |
Project Documents |
52 |
8.22 |
Material Agreements |
52 |
8.23 |
Project Budget |
52 |
8.24 |
[Intentionally Omitted] |
52 |
8.25 |
[Intentionally Omitted] |
52 |
8.26 |
Insurance |
53 |
8.27 |
Flood Zone |
53 |
8.28 |
[Intentionally Omitted] |
53 |
8.29 |
Boundaries |
53 |
8.30 |
Illegal Activity |
53 |
8.31 |
Permitted Liens |
53 |
8.32 |
Anti-Terrorism Laws |
53 |
8.33 |
Defaults |
54 |
8.34 |
[Intentionally Omitted] |
54 |
8.35 |
[Intentionally Omitted] |
54 |
8.36 |
Design Professionals' Certificates |
54 |
8.37 |
Other Representations |
54 |
8.38 |
Loan In Balance |
54 |
8.39 |
Employee Benefit Plans |
54 |
8.40 |
No Construction |
54 |
8.41 |
[Intentionally Omitted] |
54 |
TABLE OF CONTENTS
(continued)
Page |
||
8.42 |
Appraisal |
54 |
8.43 |
Labor Controversies |
54 |
8.44 |
Insider |
54 |
8.45 |
True and Complete Disclosure |
54 |
8.46 |
Survival of Representations |
55 |
ARTICLE IX |
AFFIRMATIVE COVENANTS OF BORROWER |
55 |
9.01 |
Information |
55 |
9.02 |
Notices of Material Events |
56 |
9.03 |
Existence, Etc |
56 |
9.04 |
Compliance with Laws; Adverse Regulatory Changes |
56 |
9.05 |
Insurance |
57 |
9.06 |
Real Estate Taxes and Other Charges |
58 |
9.07 |
[Intentionally Omitted] |
58 |
9.08 |
Further Assurances |
58 |
9.09 |
Performance of Project Documents, Material Agreements, and Easements |
59 |
9.10 |
Performance of the Loan Documents |
59 |
9.11 |
Books and Records; Inspection Rights |
59 |
9.12 |
Environmental Compliance |
60 |
9.13 |
[Intentionally Omitted] |
60 |
9.14 |
Reserves |
61 |
9.15 |
Accessibility Laws |
61 |
9.16 |
[Intentionally Omitted] |
62 |
9.17 |
[Intentionally Omitted] |
62 |
9.18 |
[Intentionally Omitted] |
62 |
9.19 |
Use of Proceeds; Margin Regulations |
62 |
9.20 |
[Intentionally Omitted] |
62 |
9.21 |
Inspection |
62 |
9.22 |
Project Construction |
62 |
9.23 |
[Intentionally Omitted] |
63 |
9.24 |
Proceedings to Enjoin or Prevent Construction |
64 |
9.25 |
Administrative Agent's, Lenders' and Construction Consultant's Actions |
64 |
TABLE OF CONTENTS
(continued)
Page |
||
for their Own Protection Only |
||
9.26 |
Sign and Publicity |
65 |
ARTICLE X |
NEGATIVE COVENANTS OF BORROWER |
65 |
10.01 |
Fundamental Change |
65 |
10.02 |
Limitation on Liens |
65 |
10.03 |
Transfer; Pledge |
65 |
10.04 |
Indebtedness |
67 |
10.05 |
Investments |
67 |
10.06 |
Restricted Payments |
67 |
10.07 |
Change of Organization Structure; Location of Principal Office |
67 |
10.08 |
Transactions with Affiliates |
67 |
10.09 |
[Intentionally Omitted] |
67 |
10.10 |
No Joint Assessment; Separate Lots |
67 |
10.11 |
Zoning |
67 |
10.12 |
ERISA |
68 |
10.13 |
Amendment of Contracts and Government Approvals |
68 |
10.14 |
Change Orders |
68 |
10.15 |
Sales Tax Increment Financing |
69 |
10.16 |
[Intentionally Omitted] |
69 |
10.17 |
Anti-Terrorism Law |
69 |
ARTICLE XI |
INSURANCE OR CONDEMNATION AWARDS |
69 |
11.01 |
Casualties and Condemnations |
69 |
11.02 |
Insurance Proceeds and Condemnation Awards |
70 |
11.03 |
Application of Insurance Proceeds and Condemnation Awards |
71 |
ARTICLE XII |
EVENTS OF DEFAULT |
73 |
12.01 |
Events of Default |
73 |
12.02 |
Remedies |
76 |
ARTICLE XIII |
ADMINISTRATIVE AGENT |
78 |
13.01 |
Appointment, Powers and Immunities |
78 |
13.02 |
Reliance by Administrative Agent |
78 |
TABLE OF CONTENTS
(continued)
Page |
||
13.03 |
Borrower Defaults |
80 |
13.04 |
Rights as a Lender |
82 |
13.05 |
Indemnification |
82 |
13.06 |
Non-Reliance on Administrative Agent and Other Lenders |
83 |
13.07 |
Failure to Act |
83 |
13.08 |
Resignation of Administrative Agent |
83 |
13.09 |
Consents and Certain Actions under, and Modifications of, Loan |
84 |
Documents |
||
13.10 |
Authorization |
86 |
13.11 |
Defaulting Lenders |
86 |
13.12 |
Amendments Concerning Agency Functions |
89 |
13.13 |
Liability of Administrative Agent |
89 |
13.14 |
Transfer of Agency Function |
90 |
13.15 |
Sharing of Payments, Etc |
90 |
13.16 |
Bankruptcy of Borrower |
90 |
13.17 |
Termination |
90 |
ARTICLE XIV |
MISCELLANEOUS |
91 |
14.01 |
Non-Waiver; Remedies Cumulative |
91 |
14.02 |
Notices |
91 |
14.03 |
Expenses, Etc |
92 |
14.04 |
Indemnification |
93 |
14.05 |
Amendments, Etc |
93 |
14.06 |
Successors and Assigns |
94 |
14.07 |
Assignments and Participations |
94 |
14.08 |
Survival |
95 |
14.09 |
Multiple Copies |
95 |
14.10 |
Right of Set-off |
95 |
14.11 |
[Intentionally Omitted] |
96 |
14.12 |
Brokers |
96 |
14.13 |
Estoppel Certificates |
96 |
14.14 |
Preferences |
96 |
TABLE OF CONTENTS
(continued)
Page |
||
14.15 |
Certain Waivers |
97 |
14.16 |
Entire Agreement |
97 |
14.17 |
Severability |
97 |
14.18 |
Captions |
97 |
14.19 |
Counterparts |
97 |
14.20 |
GOVERNING LAW |
97 |
14.21 |
SUBMISSION TO JURISDICTION |
97 |
14.22 |
WAIVER OF JURY TRIAL; COUNTERCLAIM |
98 |
14.23 |
Confidentiality |
98 |
14.24 |
Usury Savings Clause |
99 |
14.25 |
Controlled Accounts |
100 |
14.26 |
Financing Statements |
101 |
14.27 |
Unavoidable Delay |
101 |
CONSTRUCTION LOAN AGREEMENT
This CONSTRUCTION LOAN AGREEMENT is dated as of July 19, 2005 by and among GORE CREEK PLACE, LLC, a Colorado limited liability company (the "Borrower"); each of the lenders that is a signatory hereto identified under the caption "LENDERS" on the signature pages hereto (individually, a "Lender" and, collectively, the "Lenders"); and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the "Administrative Agent").
RECITALS
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
1.01 Certain Defined Terms. As used herein, the following terms shall have the following meanings (all terms defined in this Section 1.01 or in other provisions of this Agreement in the singular shall have the same meanings when used in the plural and vice versa):
"Accessibility Laws" shall mean the Americans with Disabilities Act of 1990, as amended from time to time, and any similar state or local laws, rules or regulations relating to the accessibility of buildings or facilities.
"Administrative Agent" shall have the meaning assigned to such term in the preamble.
"Administrative Agent's Account" shall mean the account maintained by Administrative Agent with such bank as may from time to time be specified by Administrative Agent.
"Affiliate" shall mean, with respect to any Person, another Person that directly or indirectly controls, or is under common control with, or is controlled by, such Person and, if such Person is an individual, any member of the immediate family (including parents, spouse, children and siblings) of such individual and any trust whose principal beneficiary is such individual or one or more members of such immediate family and any Person who is controlled by any such member or trust.
"Agency Fee" shall mean any agency fees agreed to by Borrower and Administrative Agent pursuant to a Fee Letter.
"Agreement" shall mean this Construction Loan Agreement, as the same may be Modified from time to time.
"Anti-Terrorism Laws" shall mean any Applicable Laws relating to terrorism or money laundering, including, but not limited to, the Anti-Terrorism Order and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56.
"Anti-Terrorism Order" shall mean Executive Order No. 13,224, 66 Fed. Reg. 49,079 (2001), issued by the President of the United States of America (Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism).
"Applicable Law" shall mean any statute, law, regulation, ordinance, rule, judgment, rule of common law, order, decree, Government Approval, approval, concession, grant, franchise, license, agreement, directive, guideline, policy, requirement, or other governmental restriction or any similar form of decision of, or determination by, or any interpretation or administration of any of the foregoing by, any Governmental Authority, whether now or hereinafter in effect and, in each case, as amended (including any thereof pertaining to land use, zoning and building ordinances and codes).
"Applicable Interest Rate" shall mean, subject to Section 14.24 below, with respect to any Loan, (a) the LIBOR-Based Rate, or (b) during the existing of any Event of Default, the Default Rate.
"Applicable Lending Office" shall mean, for each Lender, the "Lending Office" of such Lender (or of an Affiliate of such Lender) designated by such Lender from time to time in writing to Administrative Agent.
"Applicable Margin" shall mean 150 basis points.
"Appraisal" shall mean the appraisal report of the Project from National Valuation Consultants dated December 3, 2004, and any future appraisal of the Project prepared by an Appraiser, which Appraisal must comply in all respects with the standards for real estate appraisal established pursuant to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, and otherwise in form and substance satisfactory to Administrative Agent.
"Appraised Bulk Value" shall mean the bulk discounted value to a single user "upon completion" of the Project as determined by the Appraisal.
"Appraised Land Value" shall mean the "as-is" appraised value of the Land only as determined by the Appraisal.
"Appraiser" shall mean National Valuation Consultants or any other "state certified general appraiser" as such term is defined and construed under applicable regulations and guidelines issued pursuant to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, which appraiser must have been licensed and certified by the applicable Governmental Authority having jurisdiction in the state where the Project is located, and which appraiser shall have been selected by Administrative Agent.
"Architecture Agreement" shall mean that certain agreement entitled Architectural Work Release Agreement, dated as of May 1, 2003, and Project Work Release No. 2A dated May 1, 2004, between Borrower, as owner, and Borrower's Architect, as architect.
"Assignment and Assumption" shall mean an Assignment and Assumption, duly executed by the parties thereto and consented to by Borrower and Administrative Agent in accordance with Section 14.07(b).
"Assignment of Architectural Agreements" shall mean that certain Assignment of Architectural Agreements and Plans and Specifications of even date herewith, and the "Architect's Consent" dated July 12, 2005 attached thereto, executed by Borrower, and the Borrower's Architect, in favor of Administrative Agent, as the same may be Modified.
"Assignment of 1orrower's Rights in Purchase Contracts" shall mean that certain Assignment of Borrower's Rights in Purchase Contracts of even date herewith, executed by the Borrower in favor of the Administrative Agent, as the same may be Modified.
"Assignment of Construction Agreements" shall mean that certain Assignment of Construction Agreements, and the "Contractor's Consent" attached thereto, of even date herewith executed by Borrower, and the Borrower's Architect, in favor of Administrative Agent, as the same may be Modified.
"Authorized Officer" shall mean, (a) with respect to any Person, any authorized officer of such Person whose name appears on a certificate of incumbency delivered concurrently with the execution of this Agreement, as such certificate of incumbency may be amended from time to time to identify the names of the individuals then holding such offices, and (b) with respect to Borrower, its Managing Member.
"Bankruptcy Action" shall mean, as to any Person, (a) an involuntary proceeding shall be commenced or an involuntary petition shall be filed, seeking (i) liquidation, reorganization or other relief in respect of such Person or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for such Person or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for a period of sixty (60) days or an order or decree approving or ordering any of the foregoing shall be entered; or (b) any Person shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (a) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official of such Person or for a substantial part of any of their assets, (iv) file an answer admitting the allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as amended from time to time.
"Base Building Work" shall mean all of that certain work to be performed by Borrower and/or its contractors constituting construction of the Improvements as more particularly described in the Plans and Specifications.
"Base Rate" shall mean, for any day, a rate per annum equal to the Prime Rate for such day. Each change in any interest rate provided for herein based upon the Base Rate resulting from a change in the Base Rate shall take effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean the portions of the Outstanding Principal Amount that bear interest at the Base Rate.
"Borrower" shall have the meaning assigned to such term in the preamble. "Borrower Party" shall mean each of Borrower, and Guarantor.
"Borrower's Account" shall mean an account maintained by Borrower with U.S. Bank, National Association as may from time to time be specified by or approved by Administrative Agent to accept the deposit of loan advances in accordance in this Agreement.
"Borrower's Architect" shall mean 42140 Architecture, Inc., or any replacement thereof approved by Administrative Agent.
"Business Day" shall mean any day that is not a Saturday, Sunday or other day on which commercial banks in Colorado are authorized or required by law to remain closed; provided that, when used in connection with a borrowing, or Continuation of, or Conversion into, a payment or prepayment of principal of or interest on, or an Interest Period for, a LIBOR Rate Loan, or a notice by Borrower with respect to any such borrowing, Continuation, Conversion, payment, prepayment or Interest Period, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.
"Casualty" shall mean any loss of or damage to, any portion of the Project by fire or other casualty.
"CCR Agreement" shall mean any agreement regarding conditions, covenants and restrictions which may be entered into by Borrower which are related to all or any portion of the Project.
"Change of Control" shall mean any transaction that results in, directly or indirectly, (i) any Person other than the Vail Corporation or a wholly-owned subsidiary thereof, whether directly or indirectly, owning 51% or more of the Equity Interests in Borrower or (ii) any Person other than The Vail Corporation or a wholly-owned subsidiary thereof having the responsibility for managing and administering the day-to-day business and affairs of Borrower or (iii) in any other respects, any Person other than The Vail Corporation directly or indirectly Controlling Borrower.
"Change Order" shall mean any Modification to (a) the Plans and Specifications, (b) the Project Budget, (c) the Construction Schedule, or (d) the General Contract, a Major Subcontract or any subcontract, which increases the cost of Construction Work above the budgeted cost therefor previously approved by Administrative Agent but specifically excluding any Purchaser Upgrades.
"Closing Date" shall mean the date of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
"Collateral" shall mean, collectively, (a) all construction materials and equipment and all furniture, furnishings, fixtures, machinery, equipment, inventory and any other item of personal property in which Borrower now or hereafter owns or acquires any interest or right, including any of the foregoing that are leased, which are used or useful in the construction, operation, use, sale or occupancy of the Project (or any portion thereof); (b) all of Borrower's accounts receivable in connection with the Project (or any portion thereof); (c) all of Borrower's documents, instruments, contract rights (including any rights under any development agreement) and general intangibles relating to the present or future construction, use, sale, operation or occupancy of the Project (or any portion thereof), including the right to use the name "Gore Creek Place" or any such name given the Project, but excluding any rights to the Vail Resorts name and any tradenames or trademarks associated therewith; (d) all insurance proceeds from any policies of insurance covering any of the aforesaid; and (e) such other collateral as may be described in the Security Documents.
"Commitment" shall mean, as to each Lender, the obligation of such Lender to make Loans in an aggregate amount up to but not exceeding the amount set opposite the name of such Lender on Exhibit C attached hereto under the caption "Commitment" or, in the case of a Person that becomes a Lender pursuant to an assignment permitted under Section 14.07(b), as specified in the respective Assignment and Assumption (consented to by Borrower and Administrative Agent in accordance with Section 14.07(b)) pursuant to which such assignment is effected, in either case, as such percentage may be modified by any Assignment and Assumption.
"Completion Date" shall mean, subject to Section 14.27, the first to occur of (i) the date that is twenty-four (24) months after the initial funding, (ii) the Maturity Date, or (iii) solely as to the portion of the Improvements subject to a Qualified Purchase Contract, such earlier date required pursuant to the terms of such Qualified Purchase Contract.
"Completion Guaranty" shall mean that certain Guaranty of Completion executed by Guarantor in favor of Administrative Agent substantially concurrently herewith, as the same may be Modified from time to time.
"Condemnation" shall mean a taking or voluntary conveyance during the term hereof of all or part of the Project, 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 (including but not limited to any transfer made in lieu of or in anticipation of the exercise of such taking) by any Governmental Authority affecting the Project or any portion thereof whether or not the same shall have actually been commenced.
"Condemnation Awards" shall mean all compensation, awards, damages, rights of action and proceeds awarded to Borrower by reason of a Condemnation.
"Consents" shall mean the written consents of the Borrower's Architect and the General Contractor attached to the Assignment of Architecture Agreement and the Assignment of Construction Agreements, respectively.
"Construction Consultant" shall mean RE Tech + and/or such other consultant as Administrative Agent may engage on behalf of the Lenders in connection herewith.
"Construction Schedule" shall mean the schedule prepared and certified by Borrower and verified by the Construction Consultant establishing a timetable for commencement and completion of the Construction Work, showing, on a monthly basis, the anticipated progress of the Construction Work and showing that all of the Construction Work will be completed on or before the Completion Date, as the same may from time to time hereafter be Modified in accordance with the terms of this Agreement.
"Construction Work" shall mean all work and materials (including all labor, equipment and fixtures with respect thereto) necessary to construct the Improvements, all of which shall be performed and completed in accordance with and as contemplated by the Plans and Specifications and all Applicable Laws.
"Consumer Price Index" shall mean the consumer price index for the Denver area for all Urban Consumers-All Items, published monthly by the Bureau of Labor Statistics of the United States Department of Labor.
"Continue", "Continuation" and "Continued" shall refer to the continuation pursuant to Section 2.07 of (a) a LIBOR Rate Loan from one Interest Period to the next Interest Period or (b) a Base Rate Loan at the Base Rate.
"Controlled Account" shall mean one or more deposit accounts established by Administrative Agent (for the benefit of the Lenders) at a depository bank or financial institution that is acceptable to Administrative Agent, and which is established and maintained in accordance with Section 14.25 herewith.
"Convert", "Conversion" and "Converted" shall refer to a conversion pursuant to Section 2.07 of one Type of Loans into another Type of Loans.
"Cost and Plan Review" shall mean a report of the Construction Consultant in form and substance reasonably satisfactory to Administrative Agent, as to the Project Budget, the Plans and Specifications, the Pro Forma Draw Schedule, the Construction Schedule, equipment selection, expected performance, operating costs and as to such other matters as Administrative Agent may reasonably request, including, without limitation, a detailed plan and cost review.
"Date Down Endorsement" shall mean any date down endorsements to the Title Policy or other evidence of date down of title acceptable to Administrative Agent in its reasonable discretion covering disbursements of loan proceeds made or to be made subsequent to the date of the Title Insurance Policy.
"Default" shall mean an event that with notice, lapse of time, or both would become an Event of Default.
"Default Rate" shall mean, as applicable, a rate per annum equal to the greater of (a) the LIBOR-Based Rate plus three and one-half percent (3.5%) or (b) the Base Rate as in effect from time to time plus three and one-half percent (3.5%); provided, however, that in no event shall the Default Rate exceed the Maximum Rate.
"Depository Bank" shall mean any bank or financial institution in which a Controlled Account is established in accordance with Section 14.25 hereof.
"Design Professional" shall mean, collectively, Borrower's Architect, structural engineer, mechanical engineer and other design professionals relating to the Construction Work, as approved by Administrative Agent, and any reference in this Agreement to a certification or other document to be executed by the applicable Design Professional shall mean one or more of such Design Professionals designated by Administrative Agent as the Design Professionals to execute such certification or document, depending on the areas of expertise covered by such certification or document.
"Discretionary Approvals" shall mean all discretionary governmental approvals, authorizations, permits and entitlements which have been or will be issued with respect to the Improvements, including, without limitation, all applicable building, land use and zoning approvals, annexation agreements, plot plan approvals, subdivision approvals (including the approval and recordation of any required subdivision map), environmental approvals (including a negative declaration or an environmental impact report if required under applicable law), and sewer and water permits.
"Distribution" shall mean a payment of cash, assets, or proceeds of any kind by a Person (the "Distributor") to any other Person (a "Distributee") that owns a direct or indirect Equity Interest in such Distributor, including, without limitation, repayment of any loans made by such Distributee to such Distributor, or a return of any capital contribution made by such Distributee, distributions upon termination, liquidation or dissolution of such Distributor.
"Dollars" and "$" shall mean lawful money of the United States of America.
"Earnest Money Deposits" shall mean any security deposits, letters of credit, or other cash or non-cash collateral or security paid or given as security for obligations of purchasers under any Qualified Purchase Contract.
"Eligible Assignee" shall mean any of the following, in each case acceptable to Administrative Agent and Borrower: (a) a commercial bank organized under the Laws of the United States, or any State thereof, and having (i) total assets in excess of $50 billion and (ii) the senior debt obligations of which for such bank's parents senior unsecured debt obligations are rated not less than Baa-2 by Moody's Investors Service, Inc.
"Environmental Claim" shall mean, with respect to any Person, any written request for information by a Governmental Authority, or any written notice, notification, claim, administrative, regulatory or judicial action, suit, judgment, demand or other written communication by any Person or Governmental Authority alleging or asserting liability with respect to Borrower or the Project, whether for damages, contribution, indemnification, cost recovery, compensation, injunctive relief, investigatory, response, Remediation, 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 originating at or from, or otherwise affecting, the Project, (ii) any fact, circumstance, condition or occurrence forming the basis of any violation, or alleged violation, of any Environmental Law by Borrower or otherwise affecting the health, safety or environmental condition of the Project or (iii) any alleged injury or threat of injury to health, safety or the environment by Borrower or otherwise affecting the Project.
"Environmental Indemnity" shall mean that certain Environmental Indemnity Agreement by executed by Borrower substantially concurrently herewith, in favor of Administrative Agent, as the same may be Modified from time to time.
"Environmental Laws" shall mean any and all present and future federal, state and local laws, rules or regulations, and any orders or decrees, in each case as now or hereafter in effect, relating to the regulation or protection of health, safety or the environment or the Release or threatened Release of Hazardous Substances into the indoor or outdoor environment, including ambient air, soil, surface water, ground water, wetlands, land or subsurface strata, or otherwise relating to the use of Hazardous Substances.
"Environmental Losses" shall mean any losses, damages, costs, fees, expenses, claims, suits, judgments, awards, liabilities (including but not limited to strict liabilities), obligations, debts, diminutions in value, fines, penalties, charges, costs of Remediation (whether or not performed voluntarily), amounts paid in settlement, foreseeable and unforeseeable consequential damages, litigation costs, reasonable attorneys' fees and expenses, engineers' fees, environmental consultants' fees, and investigation costs (including, but not limited to, costs for sampling, testing and analysis of soil, water, air, building materials, and other materials and substances whether solid, liquid or gas), of whatever kind or nature, and whether or not incurred in connection with any judicial or administrative proceedings, actions, claims, suits, judgments or awards relating to Hazardous Substances, Environmental Claims, Environmental Liens and violation of Environmental Laws.
"Environmental Reports" shall mean, collectively, (a) the Environmental Site Assessment (Phase I) prepared by Corn and Associates and dated February 8, 2005, and (b) any environmental surveys and assessments Administrative Agent in its reasonable discretion may require.
"Equity Interests" shall mean shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.
"Equity Rights" shall mean, with respect to any Person, any subscriptions, options, warrants, commitments, preemptive rights or agreements of any kind (including any `shareholders' or voting trust agreements) for the issuance, sale, registration or voting of, or securities convertible into, any additional shares of capital stock of any class, or partnership, membership or other ownership interests of any type in, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not incorporated) that, together with any Borrower Party, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
"ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an
"accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by a Borrower Party or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by any Borrower Party or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by a Borrower Party or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by a Borrower Party or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from a Borrower Party or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.
"Excluded Taxes" shall mean, with respect to Administrative Agent, any Lender, or any other recipient of any payment to be made by or on account of any obligation of Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its Applicable Lending Office is located, or (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which Borrower is located.
"Facility Amount" shall mean the lesser of (a) $30,000,000, (b) eighty percent (80%) of the total Project Costs approved by Administrative Agent and (c) seventy-five percent (75%) of the Appraised Bulk Value.
"Fee Letter" shall mean one or more letter agreements between Borrower and Administrative Agent with respect to certain fees payable by Borrower in connection with the Loans, as the same may be modified or amended from time to time.
"Foreign Lender" shall mean any Lender that is organized under the laws of a jurisdiction other than that in which Borrower is located. For purposes of this definition, the United States of America, each state thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.
"Funding Date" shall mean any Business Day on which proceeds of the Loan are advanced to or for the benefit of Borrower in accordance with and subject to the terms and conditions of this Agreement.
"GAAP" shall mean generally accepted accounting principles in the United States applied on a consistent basis, in accordance with Section 1.02(a4.
"General Assignment" shall mean that certain Assignment of Contracts, Licenses, Approvals and Rights executed by Borrower for the benefit of Administrative Agent substantially concurrently herewith, as the same may be Modified from time to time.
"General Contract" shall mean that certain Construction Contract dated as of April 18, 2005, between Borrower and the General Contractor, as the same may be Modified from time to time in accordance with the terms of this Agreement.
"General Contractor" shall mean R.A. Nelson & Associates, Inc., or another general contractor for the Construction Work acceptable to Administrative Agent.
"General Contractor Fee" shall mean the general contractor fees agreed to by Borrower and General Contractor as provided in the General Contract.
"Government Approval" shall mean any action, authorization, consent, approval, license, lease, ruling, permit, tariff, rate, certification, exemption, filing or registration by or with any Governmental Authority, including all licenses, permits, allocations, authorizations, approvals and certificates obtained by or in the name of, or assigned to, Borrower and used in connection with the ownership, construction, operation, use or occupancy of the Project, including building permits, zoning and planning approvals, business licenses, licenses to conduct business, certificates of occupancy and all such other permits, licenses and rights.
"Governmental Authority" shall mean any governmental department, commission, board, bureau, agency, regulatory authority, instrumentality, judicial or administrative body, federal, state, local, or foreign having jurisdiction over the matter or matters in question.
"Guarantor Documents" shall mean the Completion Guaranty. "Guarantor" shall mean The Vail Corporation, a Colorado corporation.
"Hard Costs" shall mean the aggregate costs of all labor, materials, equipment and fixtures necessary for completion of construction of the Improvements, as more particularly set forth in the Project Budget.
"Hazardous Substance" shall mean, collectively, (a) any petroleum or petroleum products, flammable materials, explosives, radioactive materials, asbestos, urea formaldehyde foam insulation, and transformers or other equipment that contain polychlorinated biphenyls ("PCB"), (b) any chemicals or other materials or substances that are now or hereafter become defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic pollutants", "contaminants", "pollutants" or words of similar import under any Environmental Law and (c) any other chemical or other material or substance, exposure to which is now or hereafter prohibited, limited or regulated under any Environmental Law.
"Improvements" shall mean, collectively sixteen (16) luxury duplex residences (each a "Unit") within eight (8) residential buildings, containing approximately 63,576 square feet of residential space, all storage space contained therein, all signage improvements and all of the other improvements to be constructed on the Land, as more particularly described in the Plans and Specifications.
"Indebtedness" shall mean, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person), other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within ninety (90) days of the date the respective goods are delivered or the respective services are rendered; (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services; (c)
Indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person; and (e) Indebtedness of others Guaranteed by such Person. Indebtedness shall not include obligations to return Earnest Money Deposits to Purchasers of Units pursuant to a Qualified Purchase Contract.
"Indemnified Parties" shall mean Administrative Agent, the Affiliates of Administrative Agent, each Lender, and each of the foregoing parties' respective directors, officers, employees, attorneys, agents, successors and assigns.
"Indemnified Taxes" shall mean Taxes other than Excluded Taxes.
"Initial Equity Contribution" shall mean an equity contribution by Borrower which shall include the Appraised Land Value, in a minimum amount equal to ten percent (10%) of the total Project Costs, and all Earnest Money Deposits made on or prior to the date hereof.
"Insurance Proceeds" shall mean all insurance proceeds, damages, claims and rights of action and the right thereto under any insurance policies relating to the Project.
"Interest Period" shall mean each period commencing on the date such LIBOR Rate Loan is made or Converted from a Base Rate Loan or (in the event of a Continuation) the last day of the immediately preceding Interest Period for such Loan and ending on the numerically corresponding day in the first, second, third or sixth calendar month thereafter, as Borrower may select (subject to the terms and conditions hereof).
"Knowledge" shall mean, with respect to a Person, (a) the actual knowledge of such Person (and if such Person is an entity, the actual knowledge of the individuals with responsibility for the management, control, and day to day operations of such entity), including, without limitation, with respect to Borrower and its Affiliates, in connection with the acquisition, development and construction of the Improvements, and (b) the knowledge such Person would have after having undertaken and completed such commercially reasonable diligence and investigation that a similarly-situated commercial property owner or developer would have undertaken with respect to the matter about which the applicable representation is made.
"Land" shall have the meaning assigned to such term in the Recitals.
"Lender" shall have the meaning assigned to such term in the preamble.
"LIBOR" shall mean, as of the applicable date and time for determination provided herein, a per annum rate of interest (rounded upward, if necessary, to the nearest 1/16th of 1%) equal to the rate which appears on the Telerate Page 3750 (or any successor or substitute thereto selected by Administrative Agent in its sole discretion) as of 11:00 a.m., London time, two (2) Banking Days prior to the first day of the applicable LIBOR Period selected by Borrower, for United States dollar deposits having a term coinciding with the LIBOR Period selected by Borrower, adjusted for any reserve requirements and any subsequent costs arising from a change in government regulation; provided that if such rate does not appear on such page as of the date of determination, or if such page shall cease to be publicly available at such time, or if the information contained on such page, in the sole judgment of Administrative Agent shall cease accurately to reflect the rate offered by leading banks in the London interbank market, LIBOR
shall be based on the rate that appears as of 11:00 a.m. London time on such date of determination on the LIBOR Page of Reuters Screen for Dollar deposits having a term comparable to such Interest Period and in an amount comparable to the amount of the applicable LIBOR Rate Loan; and provided further if both of such pages shall cease to be publicly available as of the time of determination, or if the information contained on such page, in the sole judgment of Administrative Agent shall cease accurately to reflect the rate offered by leading banks in the London interbank market, LIBOR shall be based on the rate reported by any publicly available source of similar market data selected by Administrative Agent that, in its sole judgment, accurately reflects such rate offered by leading banks in the London interbank market.
"LIBOR-Based Rate" shall mean the sum of (a) LIBOR, plus (b) the Applicable Margin.
"LIBOR Rate Loans" shall mean the portions of the Outstanding Principal Amount that bear interest at LIBOR-Based Rate.
"Lien" shall mean, with respect to any Property (including the Project), any mortgage, deed of trust, lien, pledge, charge, security interest or encumbrance of any kind in respect of such Property. For purposes of this Agreement and the other Loan Documents, a Person shall be deemed to own subject to a Lien any Property that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement (other than an operating lease) relating to such Property.
"Lien Law" shall mean the mechanics' lien laws of the State of Colorado, as amended from time to time.
"Limiting Regulation" shall mean any law or regulation of any jurisdiction, or any interpretation, directive or request under any such law or regulation (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) by any court or Governmental Authority charged with the interpretation or administration thereof, or any internal bank policy resulting therefrom (applicable to loans made in the United States of America) which would or could in any way require a Lender to have the approval right contained in Section 10.03(d).
"Loan Documents" shall mean, collectively, this Agreement, the Notes, the Security Documents, the Guarantor Documents, any Fee Letters, the Representation Agreement, and each other agreement, instrument or document required to be executed and delivered in connection with, or evidencing, securing, or supporting, the Loans, together with any Modifications thereof.
"Loan to Value Ratio" shall mean the ratio, expressed as a percentage, that (a) the sum of the Facility Amount bears to (b) the Appraised BulkValue, as determined on the basis of the most recent Appraisal obtained by Administrative Agent, any such Appraisal to be conclusive absent demonstrable error.
"Major Subcontract" shall mean any subcontract, trade contract, material agreement or supply contract relating to the construction of the Improvements or a component thereof in the amount of $250,000 or more.
"Major Subcontractor" shall mean any subcontractor or trade contractor or supplier, other than a Design Professional, who is a party to a Major Subcontract.
"Managing Member" shall mean The Vail Corporation, a Colorado corporation, as managing member under the Organizational Documents of Borrower, and its successors thereunder as managing member of Borrower as permitted under the Loan Documents.
"Material Adverse Effect" shall mean (a) as to Borrower, the likely inability or reasonably anticipated inability of Borrower to pay and perform their respective obligations under and in full compliance with the terms of the Loan Documents (including, without limitation, completing the Improvements on or before the Completion Date) as a result of (i) a material and adverse effect on the condition (financial or otherwise), assets or business of Borrower (other than a change solely as a result of a change in the financial markets), (ii) a material and adverse effect on the value of the Project (other than a change solely as a result of a change in the financial markets), or (iii) a material and adverse effect on the status of the liens in favor of Administrative Agent on the Collateral, and (b) as to Guarantor, the acceleration of the Vail Corporation's Principal Bank Credit Facility as the result of any material default thereunder after giving effect to all applicable notice, cure and grace periods and all consents, waivers or modifications which have been entered into by the requisite lenders under the terms of the such facility (for purposes of this paragraph, The Vail Corporation's "Principal Bank Credit Facility" means that certain Fourth Amended and Restated Credit Agreement, dated as of January 28, 2005 among The Vail Corporation (d/b/a Vail Associates, Inc.), Bank of America, N.A., as Administrative Agent and the other financial institutions identified therein, as amended, modified, extended or replaced from time to time on substantially similar terms and conditions; in the event that such agreement or its successor is terminated without replacement or that such agreement or its successor is Modified on terms and conditions that are not substantially similar, "Principal Bank Credit Facility" as to The Vail Corporation shall mean The Vail Corporation's principal bank revolving credit agreement as in effect at the time of determination, and in the event that no such bank revolving credit agreement exists, "Principal Bank Credit Facility" shall mean The Vail Corporation's Principal Bank Credit Facility as most recently in effect).
"Material Agreement" shall mean, individually and collectively, the General Contract, Architecture Agreement, each Qualified Purchase Contract, any CCR Agreement, and Borrower's Organizational Documents.
"Maturity Date" shall mean the earliest to occur of (a) the Scheduled Maturity Date in the event Borrower does not properly exercise the Extension Option pursuant to Article IV below; (b) the Extended Maturity Date in the event Borrower has properly exercised the Extension Option pursuant to Article IV; (c) upon the occurrence of any Transfer prohibited by the Loan Documents; and (d) the date on which the Outstanding Principal Balance is accelerated pursuant to the terms of this Agreement.
"Member(s)" shall mean, collectively, the Managing Member and such other Person or Persons as may be a member of Borrower from time to time in accordance with the terms of the Loan Documents.
"Minimum Loan Coverage" shall mean that Qualified Purchase Contracts shall be in place at all times during the term of the Loan providing for Net Sale Proceeds from the sale of Units, aggregating a minimum of 120% of the amount of the Loan (after deducting Earnest Money Deposits used in construction).
"Ministerial Matter" shall mean matters of an administrative or ministerial nature with respect to the Borrower, the Improvements, or the Loan, including, without limitation, matters
involving: (a) construction budgets, schedules, plans and specifications, and any changes made (or requested by Borrower to be made) with respect thereto, (b) construction contracts, architecture contracts, bonds, and other documents related to the Project, and any changes made (or requested by Borrower to be made) thereto, (c) forms of documents and Collateral required to be executed and/or delivered by Borrower or any other Person in connection with the Loan, and (d) the satisfaction of conditions precedent to disbursements of the Loan to Borrower; provided, however, that Ministerial Matters shall not be deemed to include any of the matters described in Section 13.09(b) below.
"Modifications" shall mean any amendments, supplements, modifications, renewals, replacements, consolidations, severances, substitutions and extensions thereof from time to time; "Modify", "Modified", or related words shall have meanings correlative thereto.
"Multiemployer Plan" shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"Net Sale Proceeds" shall mean (a) with respect to a request for a release of a Unit from the lien of the Security Instrument, the actual sales price of the Unit pursuant to a Qualified Purchase Contract less commissions and closing costs paid by Borrower to third parties; provided, however, in no event shall such commissions and closing costs exceed ten percent (10%) of the actual Unit sales price; (b) with respect to a casualty, the net amount of all Insurance Proceeds received by Administrative Agent pursuant to any Policies as a result of any Casualty, after deduction of Administrative Agent's costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting same, and (c) with respect to a Condemnation, the net amount of any Condemnation Award, after deduction of Administrative Agent's costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting same.
"Non-Discretionary Approvals" shall mean all non-discretionary governmental approvals, authorizations, permits and entitlements where issuing of the same is based solely on a determination of compliance or non-compliance with applicable laws and previously issued Discretionary Approvals, including, without limitation, all grading, shoring, excavating, and building permits.
"Notes" shall mean those certain Promissory Notes, each of even date herewith, executed and delivered by Borrower to the order of the Lender named therein, in the aggregate original principal amount of the Facility Amount, to evidence the Loans, as the same may be Modified from time to time, and including any Replacement Notes.
"Obligations" shall mean all obligations, liabilities and indebtedness of every nature of Borrower, from time to time owing to Administrative Agent or any Lender under or in connection with this Agreement, the Notes or any other Loan Document to which it is a party, including principal, interest, fees (including fees of counsel), and expenses whether now or hereafter existing under the Loan Documents.
"Official Records" shall mean the Official Records of Eagle County, State of Colorado.
"Organizational Documents" shall mean (a) for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, any shareholder rights agreement, and any
amendments thereto, (b) for any limited liability company, the articles of organization and any certificate relating thereto and the limited liability company (or operating) agreement of such limited liability company, and any amendments thereto, and (c) for any partnership (general or limited), the certificate of limited partnership or other certificate pertaining to such partnership and the partnership agreement of such partnership (which must be a written agreement), and any amendments thereto.
"Other Charges" shall mean all maintenance charges, impositions other than Real Estate Taxes, and any other charges, including license fees for the use of areas adjoining the Project, now or hereafter levied or assessed or imposed against the Project or any part thereof
"Other Taxes" shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.
"Outstanding Principal Amount" shall mean the aggregate outstanding principal amount of the Loans at any point in time.
"Payment Date" shall mean the first Business Day of each calendar month. The first Payment Date shall be the first Business Day of the first calendar month following the making of the first Loan pursuant to this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.
"Permitted Liens" shall mean (a) any Lien created by the Loan Documents, (b) those matters listed as exception on Schedule B to the Title Policy, (c) Liens for Real Estate Taxes and Other Charges imposed by any Governmental Authority not yet due or delinquent, and (d) such other title and survey exceptions as Administrative Agent may approve.
"Person" shall mean any individual, corporation, company, voluntary association, partnership, limited liability company, joint venture, trust, unincorporated organization or government (or any agency, instrumentality or political subdivision thereof).
"Plan" shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which any of their ERISA Affiliates is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Plans and Specifications" shall mean the final plans and specifications for the construction of the Improvements delivered by Borrower to Administrative Agent, prepared by Borrower's Design Professionals and approved by Administrative Agent, the Construction Consultant and, to the extent then required, by any applicable Governmental Authority and such other parties whose approval or consent may be required under any law, regulation, prior agreement, this Agreement and all Modifications thereof made by Change Orders permitted pursuant to the terms of this Agreement. A list of the presently existing Plans and Specifications is attached hereto as Exhibit E.
"Prime Rate" shall mean the rate of interest most-recently announced by U.S. Bank at its principal office in Minneapolis, Minnesota, from time to time as its prime rate, notwithstanding the fact that Administrative Agent and the Lenders may lend funds to their customers at rates that are at, above or below said prime rate, it being understood that such prime commercial rate is a reference rate and does not necessarily represent the lowest or best rate being charged by U.S. Bank to any customer. Changes in the Prime Rate shall become effective on the same day as the date of any change in said prime rate.
"Principal Office" shall mean the office of Administrative Agent, located on the date hereof at 918 - 17th Street, 5th Floor, Denver, Colorado 80202, or such other office as Administrative Agent shall designate upon ten (10) days' prior notice to Borrower and the Lenders.
"Project" shall mean, collectively, (a) the Land, together with any air rights and other rights, privileges, easements, hereditaments and appurtenances thereunto relating or appertaining to the Land, (b) the Improvements, together with all fixtures and equipment required for the operation of the Improvements, (c) all building materials and personal property related to the foregoing, and (d) all other items described as "Property" in the Security Instrument.
"Project Budget" shall mean the budget attached as Exhibit B hereto as the same may be Modified from time to time in accordance with the provisions of this Agreement.
"Project Costs" shall mean, collectively, the Appraised Land Value, Hard Costs and Soft Costs.
"Project Documents" shall mean, collectively, (a) the General Contract, (b) the Architecture Agreement, (c) the Plans and Specifications, (d) all Major Subcontracts, (e) the Government Approvals, (f) the Construction Schedule, (g) Consents, (h) the Design Professionals' Certificates, and (i) the Development Agreement, as the same may be Modified from time to time as permitted under the Loan Documents.
"Property" shall mean any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Proportionate Share" shall mean, with respect to each Lender, the percentage set forth opposite such Lender's name on Exhibit C attached hereto under the caption "Proportionate Share".
"Protective Advance" shall mean all necessary costs and expenses (including attorneys' fees and disbursements) incurred by Administrative Agent (a) in order to remedy an Event of Default under the Loan Documents, which Event of Default, by its nature, may impair any portion of the Collateral for the Loans or the value of such Collateral, interfere with the enforceability or enforcement of the Loan Documents, or otherwise materially impair the payment of the Loan (including, without limitation, the costs of unpaid insurance premiums, foreclosure costs, costs of collection, costs incurred in bankruptcy proceedings and other costs incurred in enforcing any of the Loan Documents); or (b) in respect of the operation of the Project following a foreclosure under the Security Instrument.
"Punch List Items" shall mean minor construction items to be completed or constructed with respect to the Base Building Work which do not materially interfere either with the use of the Base Building Work or the acceptance and occupancy of the space to a buyer.
"Purchaser Upgrade" shall mean a Modification or upgrade to the Plans and Specifications for a Unit requested by the purchaser of such Unit and required to be paid for by such purchaser.
"Purchaser Upgrade Account" shall mean one or more deposit accounts established by Borrower with Administrative Agent, and which is established and into which deposits for Purchaser Upgrades shall be held for disbursement in accordance with Section 2.02(c).
"Qualified Purchase Contract" shall mean (i) each of the contracts listed on Exhibit D, provided the same is in full force and effect for the purchase of a Unit or (ii) such other or substitute contract for the purchase of a Unit which is in full force and effect and meets the following criteria: (a) is in substantially the form previously submitted to and accepted by Administrative Agent; (b) is with an unaffiliated third-party purchaser; (c) pursuant to which the purchaser of such Unit, in accordance with the provisions of such contract, has placed into escrow or delivered to Borrower or Guarantor a non-refundable cash Earnest Money Deposit equal to at least 15% of the purchase price; (d) contains no major contingencies (other than construction of the Improvements and customary inspection, title and financing contingencies); and (e) the Administrative Agent has received a fully executed copy of the contract.
"Real Estate Taxes" shall mean all real estate taxes and all general and special assessments, levies, permits, inspection and license fees, all water and sewer rents and charges, all charges for utilities and all other public charges whether of a like kind or different nature, imposed upon or assessed against Borrower or the Project or any part thereof or upon the revenues, rents, issues, income and profits of the Project or arising in respect of the occupancy, use or possession thereof
"Regulations A, D, T, U and X" shall mean, respectively, Regulations A, D, T, U and X of the Board of Governors of the Federal Reserve System (or any successor), as the same may be Modified and in effect from time to time.
"Regulatory Change" shall mean, with respect to any Lender, any change after the Closing Date in federal, state or foreign law or regulations (including Regulation D) or the adoption or making after such date of any interpretation, directive or request applying to a class of banks including such Lender of or under any federal, state or foreign law or regulations (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) by any Governmental Authority or monetary authority charged with the interpretation or administration thereof
"Release" shall mean any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including the movement of Hazardous Substances through ambient air, soil, surface water, ground water, wetlands, land or subsurface strata.
"Release Price" shall mean the amount paid by Borrower to Administrative Agent to obtain a release or partial release of the Security Instrument. The Release Price for each Unit shall be equal to the Net Sales Proceeds for each Unit.
"Remediation" shall mean, without limitation, any investigation, site monitoring, response, remedial, removal, or corrective action, any activity to cleanup, detoxify, decontaminate, contain or otherwise remediate any Hazardous Substance, any actions to prevent, cure or mitigate any Release of any Hazardous Substance, any action to comply with any Environmental Laws or with any permits issued pursuant thereto, any inspection, investigation, study, monitoring, assessment, audit, sampling and testing, laboratory or other analysis, or evaluation relating to any Hazardous Substances.
"Replacement Note(s)" shall mean any Note executed by Borrower to the order of a Lender upon the assignment by such Lender of all or any portion of such Lender's interest in the Loan and the Loan Documents.
"Representation Agreement" shall mean that certain Representation Agreement of even date herewith executed by Guarantor in favor of Administrative Agent and Lenders.
"Request for Continuation or Conversion" shall mean the notice to be given by Borrower to Administrative Agent in respect of each Loan, in the form of Exhibit G hereto.
"Request for Loan Advance" shall mean the notice to be given by Borrower to Administrative Agent in respect of each Loan, in the form of Exhibit H hereto.
"Required Lenders" shall mean Lenders having more than 60% of the aggregate amount of the Commitments or, if the Commitments shall have terminated, Lenders holding more than 60% of the Outstanding Principal Amount.
"Scheduled Maturity Date" shall mean July 19, 2007, as such date may be extended by the Extension Period.
"Security Documents" shall mean, collectively, the Security Instrument, the General Assignment, the Assignment of Architecture Agreements, the Assignment of Construction Agreements, any Controlled Account Agreement, any other agreements executed by any Borrower Party granting a Lien on any Property or rights as security for the Loans, and all Uniform Commercial Code financing statements required by this Agreement (provided in no event shall the Guarantor Documents or the Environmental Indemnity be deemed Security Documents).
"Security Instrument" shall mean the Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by Borrower for the benefit of Administrative Agent concurrently herewith, as the same may be Modified from time to time.
"Solvent" shall mean, when used with respect to any Person, that at the time of determination: (i) the fair saleable value of its assets is in excess of the total amount of its liabilities (including contingent liabilities); (ii) the present fair saleable value of its assets is greater than its probable liability on its existing debts as such debts become absolute and matured; (iii) it is then able and expects to be able to pay its debts (including contingent debts and other commitments) as they mature; and (iv) it has capital sufficient to carry on its business as conducted and as proposed to be conducted.
"Soft Costs" shall mean interest payable on the principal amount of the Loans and all other costs in the Project Budget which constitute Project Costs, excluding the Appraised Land
Value and Hard Costs, which relate to the construction of the Improvements and the operation of the Project during the term of this Agreement.
"S&P" shall mean Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor thereto.
"Subsidiary" shall mean, with respect to any Person, any corporation, limited liability company, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, limited liability company, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, limited liability company, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person.
"Survey" shall mean a survey of the Project reasonably satisfactory to Administrative Agent in form and content and made by a registered land surveyor reasonably satisfactory to Administrative Agent.
"Taxes" shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.
"Title Company" shall mean Land Title Guaranty Co. and any one or more co-insurers or reinsurers acceptable to Administrative Agent.
"Title Policy" shall mean an ALTA policy or policies of title insurance satisfactory to Administrative Agent, together with evidence of the payment of all premiums due thereon, issued by the Title Company (a) insuring Administrative Agent for the benefit of the Lenders in an amount equal to the aggregate amount of the Commitments that Borrower is lawfully seized and possessed of a valid and subsisting fee simple interest in the Project and that the Security Instrument constitutes a valid fee simple deed of trust lien on the Project, subject to no Liens other than Permitted Liens and (b) providing (i) affirmative insurance or endorsements for coverage against all mechanics' and materialmen's liens, and (ii) such other affirmative insurance and endorsements (including, without limitation, 100 or its equivalent (comprehensive endorsement, modified for a lender), 116.1 ( same land as shown on survey), 116.4 (contiguity endorsement), 103.4 or equivalent (street access endorsement), 100.30 (mineral protection) and ALTA 8.1 (environmental) as Administrative Agent may require.
"Trading with the Enemy Act" shall mean 50 U.S.C. App. 1 et seq.
"Transactions" shall mean, collectively, (a) the execution, delivery and performance by Borrower of this Agreement and the other Loan Documents, the borrowing of the Loans, the use of the proceeds thereof and (b) the execution, delivery and performance by the other Borrower Parties of the other Loan Documents to which they are a party and the performance of their obligations thereunder.
"Transfer" shall mean any transfer, sale, lease, assignment, mortgage, encumbrance, pledge or conveyance of all or a portion of any of (a) the Project, (b) the direct or indirect Equity
Interests in Borrower (other than Transfers of interest in Vail Resorts, Inc.), or (c) the direct or indirect right or power to direct the operations, decisions and affairs of Borrower, whether through the ability to exercise voting power, by contract or otherwise (other than rights in connection with the ownership of interest in Vail Resorts, Inc.).
"Types of Loans" refers to whether such Loan is a Base Rate Loan or a LIBOR Rate Loan, each of which constitutes a "Type". Loans hereunder are distinguished by "Type".
"Unavoidable Delay" shall mean any delay due to strikes, acts of God, fire, earthquake, floods, explosion, actions of the elements, other accidents or casualty, declared or undeclared war, terrorist acts, riots, mob violence, inability to procure or a general shortage of labor, equipment, facilities, energy, materials or supplies in the open market, failure of transportation, lockouts, actions of labor unions, condemnation, court orders, laws, rules, regulations or orders of Governmental Authorities, or other cause beyond the reasonable control of Borrower; provided, however, "Unavoidable Delays" shall not include delays caused by Borrower's lack of or inability to procure monies to fulfill Borrower's commitments and obligations under this Agreement or the other Loan Documents.
"Uniform Commercial Code" shall mean the Uniform Commercial Code of the State of Colorado and the state of formation/organization of Borrower, as applicable.
"Unit" shall mean each and any of the 16 townhome units comprising a portion of the Improvements.
"Unsatisfactory Work" shall mean any Construction Work which Administrative Agent and/or the Construction Consultant has reasonably determined has not been completed in a good and workmanlike manner, and, to the extent any Construction Work is not specifically addressed in the construction drawings and specifications, in a manner consistent with sound design principles and/or sound construction practices, or in substantial conformity with the Plans and Specifications, or in accordance with all Applicable Law.
"U.S. Bank" shall mean U.S. Bank National Association, a national association, and its successors and/or assigns.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
1.02 Accounting Terms and Determinations. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time.
1.03 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time Modified (subject to any restrictions on such
Modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof' and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Exhibits shall be construed to refer to Articles and Sections of, and Exhibits and Exhibits to, this Agreement, (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights and (f) whenever this Agreement provides that any consent or approval will not be "unreasonably withheld" or words of like import, the same shall be deemed to include within its meaning that such consent or approval will not be unreasonably delayed.
1.04 Additional Defined Terms. The following terms are defined in the following Sections:
"Additional Costs" Section 5.01
"Advance Date" Section 2.02(g)
"Advanced Amount" Section 13.11(b)
"Base Building Substantial Completion Conditions" Section 6.03
"Breakage Costs" Section 5.05
"Borrower Contingency Fund" Section 7.04 (a)
"Condemnation Threshold Amount" Section 11.02(b)
"Contingency Fund" Section 7.04(a)
"Controlled Account Agreement" Section 14.25(a)
"Controlled Account Collateral" Section 14.25(c)
"Default Cure Period" Section 13.11(f)
"Defaulting Lender" Section 13.11(a)
"Deficiency Deposit" Section 7.02(b)
"Design Professionals' Certificates Section 6.01
"Environmental Liens" Section 9.12(a)
"Event of Default" Article XII
"Extended Maturity Date" Section 4.01
"Extension Fee" Section 4.01(g)
"Extension Notice" Section 4.01(a)
"Extension Option" Section 4.01
"Extension Period" Section 4.01
"In Balance" Section 7.02(a)
"Insurance Premiums" Section 9.05(e)
"Insurance Threshold Amount" Section 11.02(a)
"Interest Reserve" Section 7.05(a)
"Late Charge" Section 3.03
"Loan" and "Loans" Section 2.01(a)
"Loan Transactions" Section 2.02(j)
"Losses" Section 14.04
"Maximum Rate" Section 14.24
"Non-Defaulting Lender" Section 13.11(a)
"Payee" Section 2.02(g)
"Policy" and "Policies" Section 9.05(b)
"Payor" Section 2.02(g)
"Project Budget Line-Item" Section 7.03(a)
"Project Contingency Fund" Section 7.04(a)
"Replacement Lender" Section 13.14(g)
"Required Payment" Section 2.02(g)
"Restoration" Section 11.01(a)
"Retainage" Section 7.06(a)
"Sales Tax Increment Financing" Section 10.15
"Significant Casualty" Section 11.02(b)
"Significant Condemnation Event" Section 11.02(b)
"Special Advance Lender" Section 13.11(a)
"Syndication" Section 14.07(c)
"Unpaid Amount" Section 13.11(b).
ARTICLE II
THE LOAN FACILITY
2.01 Loans.
(a) Each Lender severally agrees, on the terms and conditions of this Agreement, to make loans (each advance of such a loan being a "Loan" and collectively, the "Loans") on a non-revolving basis to Borrower in Dollars from time to time in amounts equal to its Proportionate Share of the aggregate amount of Loans to be made at such time; provided, however, that (i) in no event shall the aggregate principal amount advanced by each Lender exceed the applicable Lender's Commitment, subject to the provisions of Section 13.11; (ii) no more than five (5) LIBOR Rate Loans may be in effect at any one time provided that all LIBOR Rate Loans with the same Interest Period (commencing and ending on the same day) shall be considered one LIBOR Rate Loan for the purposes of this Section 2.01(a); and (iii) the Loans shall be advanced for the payment of Project Costs in accordance with the Project Budget.
(b) Subject to the terms of this Agreement, Borrower may borrow the Loans by Type, which shall mean as Base Rate Loans and/or LIBOR Rate Loans, and such Loans may be Converted or Continued pursuant to Section 2.07.
2.02 Borrowings; Certain Notices.
(a) Notices by the Borrower to Administrative Agent regarding (i) requests for Loans; (ii) the Continuations or Conversions of Loans, (iii) optional prepayments of the Loan, and (iv) requests for disbursements from the Purchaser Upgrade Account shall be irrevocable and shall be effective only if received by Administrative Agent not later than 2:00 p.m. Mountain time, on the number of Business Days prior to the date of the requested actions as specified below:
Notice |
Number of Business Days Prior |
Request for Loan Advance |
7 |
Designation of Applicable Interest |
3 prior to last day |
Period of Requests for disbursements |
of applicable LIBOR Period |
from the Purchaser Upgrade Account |
(or, for initial advance, 3 days prior) |
to initial advance |
|
Optional Prepayment |
3 |
Each Request for Loan Advance or Request for Continuation or Conversion shall (A) be duly completed and signed by an Authorized Officer of Borrower, (B) be accompanied by all of the applicable documents and materials, required pursuant to Articles VI and VII, (C) specify the amount (subject to Section 2.02(j)), of such proposed Loan Transaction, and the date (which shall be a Business Day) of such proposed Loan Transaction, as applicable, and (D) in the case of a Request for Loan Advance, be accompanied by all documentation required by this Agreement as a condition precedent to the applicable Loans. Three (3) business days prior to the date of the proposed Loan Transaction, Borrower shall specify the Interest Period and shall specify the Loans to which such requested Interest Period is to relate. If Borrower fails to select the duration of any Interest Period for any LIBOR Rate Loan within the time period (i.e., three (3) Business Days prior to the first day of the next applicable Interest Period) and otherwise as provided in this Section 2.02(a), such Loan (if outstanding as a LIBOR Rate Loan) will be automatically Continued as a LIBOR Rate Loan with an Interest Period of one (1) month on the last day of the current Interest Period for such Loan (based on LIBOR determined two (2) Business Days prior to the first day of the next Interest Period). Requests for disbursements from the Purchaser Upgrade Account shall be delivered in writing as set forth above and shall contain such information and documentation as Administrative Agent deems reasonably necessary, which shall in no event be greater than the information and document requirement for a Loan Advance.
available to Administrative Agent by the Lenders pursuant to Section 2.02(b) above (and such funds made available to Administrative Agent pursuant to Section 13.11 below) in like funds, or funds from the Purchaser Upgrade Account, as applicable, at Borrower's direction as set forth in the Request for Loan Advance or Request for Purchaser Upgrade Account disbursement, or, during the continuance of an Event of Default, at the election of Administrative Agent, (i) to the Borrower for disbursement in accordance with the Request for Loan Advance and application in accordance with the requirements of the Loan Documents, (ii) directly to General Contractor or other party any costs payable to such party, or (iii) at the Borrower's expense, to the Title Company, with instructions to such Person to pay said monies to the parties as so instructed by Administrative Agent. The execution of this Agreement by Borrower shall, and hereby does, constitute an irrevocable authorization to Administrative Agent to make direct advances provided for in this Section 2.02(c) and no further authorization from the Borrower shall be necessary to warrant such direct advances, and all such direct advances shall be secured by the Security Instrument as fully as if made directly to Borrower, regardless of the disposition thereof by any party so paid. At Administrative Agent's request, any advance of Loan proceeds made by and through the Title Company may be made pursuant to the provisions of a construction escrow agreement in the form then in use by such company with such Modifications thereto as are reasonably required by Administrative Agent. Borrower agrees to join as a party to such escrow agreement and to comply with the requirements set forth therein (which shall be in addition to and not in substitution for the requirements contained in this Agreement) and to pay the fees and expenses of the Title Company charged in connection with the performance of its duties under such construction escrow agreement.
Administrative Agent to such Lender by 10:00 a.m. Mountain time on the next Business Day following the Business Day on which Administrative Agent received such payment, in immediately available funds, at the account designated in writing by such Lender from time to time.
(g) Non-Receipt of Funds by Administrative Agent. Without limiting the provisions of Section 13.11 below as to the Lenders, and Section 12.01 below as to Borrower, unless Administrative Agent shall have been notified by a Lender or Borrower, as the case may be (for the purposes of this Section 2.02(g), each a "Payor") prior to the date on which such Payor is required to make payment to Administrative Agent of (in the case of a Lender pursuant to Section 2.02(b) above) the proceeds of a Loan to be made by such Payor hereunder, or (in the case of the Borrower pursuant to Section 2.02(d) above) a payment to Administrative Agent for the account of one or more of the Lenders hereunder (such payment being herein called a "Required Payment"), which notice shall be effective upon receipt, that such Payor does not intend to make such Required Payment to Administrative Agent, Administrative Agent may assume that such Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient(s) of such Required Payment (a "Payee") on such date. If such Payor has not in fact made the Required Payment to Administrative Agent, the Payee of such payment from Administrative Agent shall, within one (1) Business Day after Administrative Agent's demand therefor, repay to Administrative Agent the amount so paid together with interest thereon in respect of each day during the period commencing on the date (the "Advance Date") such amount was so paid by Administrative Agent until the date Administrative Agent recovers such amount at a rate per annum equal to (i) the Federal Funds Rate for such day in the case of payments required to be returned to Administrative Agent by any of the Lenders, or (ii) the Applicable Interest Rate due hereunder with respect to payments returned by the Borrower to Administrative Agent, and, if such Payee(s) shall fail to promptly make such payment, Administrative Agent shall be entitled to recover such amount, on demand, from the applicable Payor, together with interest at the aforesaid rates; provided, however, that if neither the Payee(s) nor applicable Payor shall return the Required Payment to Administrative Agent within three (3) Business Days of the Advance Date, then, retroactively to the Advance Date, such Payor and the Payee(s) shall each be obligated to pay interest on the Required Payment as follows:
respect of such Required Payment and shall not relieve such Payor of any obligation it may have hereunder or under any other Loan Documents to Borrower and no advance by Administrative Agent to Borrower under this Section 2.02 shall release any Lender of its obligation to fund such Loan except as set forth in the following sentence. If any such Lender shall thereafter advance any such Required Payment to Administrative Agent, such Required Payment shall be deemed such Lender's applicable Loan to Borrower.
2.03 Changes to Commitments.
2.04 Lending Offices. The Loans of each Type made by each Lender shall be made and maintained at such Lender's Applicable Lending Office for Loans of such Type.
2.05 Several Obligations; Remedies Independent. The failure of any Lender to make any Loan to be made by it on the date specified therefor shall not relieve any other Lender of its obligation to make its Loan on such date, but no Lender nor Administrative Agent shall be responsible for the failure of any other Lender to make a Loan required to be made by such other Lender. The amounts payable by Borrower at any time hereunder and under the Note to each Lender shall be a separate and independent debt.
2.06 Notes. The Loans made by each Lender shall be evidenced by its Note. No Lender shall be entitled to have its Note substituted or exchanged for any reason, or subdivided for promissory notes of lesser denominations. In the event of the loss, theft or destruction of any Note, upon Borrower's receipt of a reasonably satisfactory indemnification agreement executed in favor of Borrower by the holder of such Note, or in the event of the mutilation of any Note, upon the surrender of such mutilated Note by the holder thereof to Borrower, Borrower shall execute and deliver to such holder a replacement Note in lieu of the lost, stolen, destroyed or mutilated Note. The Notes shall not be necessary to establish the indebtedness of the Borrower to the Lenders on account of advances made under this Agreement.
2.07 Conversion and Continuations of Loans.
(a) Subject to Section 2.02(j), Borrower shall have the right to Convert Loans of one Type into Loans of another Type or Continue Loans of one Type as Loans of the same Type at any time or from time to time until one (1) month preceding the Maturity Date; provided that: (i) Borrower shall give Administrative Agent notice of each such Conversion or Continuation as provided in Section 2.02(a) above, (ii) LIBOR Rate Loans may be prepaid or Converted only on the last day of an Interest Period for such Loans unless Borrower complies with the terms of Section 5.05, (iii) subject to Sections 5.01 and 5.03, any Conversion or Continuation of Loans shall be pro rata among the Lenders, (iv) each Interest Period that commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month; (v) each Interest Period that would otherwise end on a day that is not a Business Day shall end on the next succeeding Business Day (or, if such next succeeding Business Day falls in the next succeeding calendar month, on the immediately preceding Business Day); (vi) no Interest Period shall have a duration of less than one (1) month; (vi) in no event shall any Interest
Period extend beyond the Maturity Date; and (vii) there may be no more than 5 separate Interest Periods in respect of LIBOR Rate Loans outstanding from each Lender at any one time. Notwithstanding the foregoing, and without limiting the rights and remedies of Administrative Agent and the Lenders under Article XII, in the event that any Event of Default exists, Administrative Agent may (and at the request of the Required Lenders shall) suspend the right of Borrower to Convert any Loan into a LIBOR Rate Loan or Continue any Loan as a LIBOR Rate Loan for so long as such Event of Default remains outstanding, in which event all Loans shall be converted (on the last day(s) of the respective Interest Periods therefor) or Continued, as the case may be, as Base Rate Loans.
(b) Notwithstanding clause (a) above, (i) Borrower shall not be entitled to select a LIBOR Period that does not end on or before the Maturity Date; (ii) on each date for determination of LIBOR, the Administrative Agent shall determine the applicable LIBOR-Based Rate (which determination shall be conclusive in the absence of manifest error) and shall promptly give notice of the same to Borrower and Lender by telephone, telecopier or electronic mail; (iii) for the first three (3) calendar months following the closing of the Loan, Borrower shall not be entitled to elect any LIBOR Period other than a 30-day LIBOR Period; (iv) during the existence of an Event of Default, Borrower may not elect a LIBOR-Based Rate. Lender shall be deemed to have funded its Loans that bear interest at the LIBOR-Based Rate from LIBOR deposits obtained by Lender, regardless of whether Lender has funded such LIBOR-Based Loan from another source.
ARTICLE III
PAYMENTS OF INTEREST AND PRINCIPAL
3.01 Interest.
(d) Promptly after the determination of any interest rate provided for herein or any change therein, Administrative Agent shall give notice thereof to the Lenders to which such interest is payable and to Borrower, but the failure of Administrative Agent to provide such notice shall not affect Borrower's obligation for the payment of interest on the Loans.
3.02 Repayment of Loans. Borrower hereby promises to pay to Administrative Agent for the account of each Lender the principal of such Lender's outstanding Loans, together with accrued and unpaid interest, fees and all other amounts due under the Loan Documents, on the Maturity Date.
3.03 Late Charge. In addition to any sums due under Section 3.01(c), if Borrower fails to pay any installment of interest as provided in Sections 3.01 and 3.02 above, except the payment of principal due on the Maturity Date, within ten (10) days after the date on which the same is due, Borrower shall pay to Administrative Agent a late charge on such past-due amount, as liquidated damages and not as a penalty, equal to five percent (5.0%) of such amount (a "Late Charge"). In connection therewith, Borrower agrees as follows: (a) because of such late payment, Administrative Agent and Lender will incur certain costs and expenses including, without limitation, administrative costs, collection costs, loss of interest, and other direct and indirect costs in an uncertain amount; (b) it would be impractical or extremely difficult to fix the exact amount of such costs in such event; and (c) the Default Rate and the late charge are reasonable and good faith estimates of such costs. The application of the Default Rate or the assessment of a late charge to any such late payment as described in this Section 3.03 will not be interpreted or deemed to extend the period for payment or otherwise limit any of Administrative Agent's or Lender's remedies hereunder or under the other Loan Documents.
3.04 Optional Prepayments. Subject to the provisions of Sections 3.06 and 5.05, Borrower shall have the right to prepay Loans in whole or in part, without premium or penalty; provided that: (a) Borrower shall give Administrative Agent notice of each such prepayment as provided in Section 2.02(a) (and, upon the date specified in any such notice of prepayment, the amount to be prepaid shall become due and payable hereunder) and (b) except as otherwise set forth in Section 2.02(j), partial prepayments shall be in the minimum aggregate principal amount of $100,000.00, and in whole multiples of $100,000.00 above such amount. Loans that are prepaid cannot be reborrowed.
3.05 Mandatory Prepayments.
3.06 Interest and Other Charges on Prepayment. If the Loans are prepaid, in whole or in part, pursuant to Section 3.04 or 3.05, each such prepayment shall be made on the prepayment date specified in the notice to Administrative Agent pursuant to Section 2.02(a) or as otherwise permitted pursuant to Section 3.05, and (in every case) together with (a) the accrued and unpaid interest on the principal amount prepaid, and (b) any amounts payable to the Lender pursuant to Section 5.05 as a result of such prepayment.
3.07 Lender's Records as to Sums Owing. Absent manifest error, Administrative Agent's records as to the amounts of principal, interest and other sums owing hereunder shall be conclusive and binding.
3.08 Application of Payments Received. All payments received by Administrative Agent hereunder shall be applied: First, to the payment of all fees, expenses and other amounts due Administrative Agent or the Lenders hereunder (excluding principal and interest); second, to accrued interest; and third, the balance to outstanding principal. As to sums applied to accrued interest under clause "second" above, such prepayment shall be applied first to LIBOR Rate Loans of the shortest maturity so as to minimize breakage costs. Notwithstanding anything to the contrary set forth in this Section 3.08 or in any of the Loan Documents, if an Event of Default exists, Administrative Agent may distribute payments to the Lenders for application in such manner as it, subject to Section 2.02(h), may determine to be appropriate.
3.09 Sharing of Payments, Etc.
such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under Section 14.10 to share in the benefits of any recovery on such secured claim.
ARTICLE IV
EXTENSION OF THE MATURITY DATE
4.01 Extension of Scheduled Maturity Date. Borrower may, at its option, extend the Scheduled Maturity Date for a period (the "Extension Period") of six months (and the end of such period, the "Extended Maturity Date"), subject to the satisfaction of the following conditions (the "Extension Option"):
Any such extension shall be otherwise subject to all of the other terms and provisions of this Agreement and the other Loan Documents.
ARTICLE V
INCREASED COSTS, LIBOR AVAILABILITY, ILLEGALITY, ETC.
5.01 Costs of Making or Maintaining LIBOR Rate Loans. Borrower shall pay to Administrative Agent (for the benefit of the applicable Lender) from time to time such amounts as any Lender may determine to be necessary to compensate such Lender for any costs that such Lender determines are attributable to its making or maintaining of any LIBOR Rate Loans or its obligation to make any LIBOR Rate Loans hereunder (in each case, as opposed to Base Rate Loans), or, subject to the following provisions of this Article V, any reduction in any amount receivable by such Lender hereunder in respect of any of such LIBOR Rate Loans or such obligation (such increases in costs and reductions in amounts receivable being herein called "Additional Costs"), provided such Additional Costs result from any Regulatory Change that:
If any Lender requests compensation from Borrower under this Section 5.01, Borrower may, by notice to such Lender (with a copy to Administrative Agent), suspend the obligation of such Lender thereafter to make or Continue LIBOR Rate Loans, or Convert Base Rate Loans into LIBOR Rate Loans, until the Regulatory Change giving rise to such request ceases to be in effect or until Borrower notifies such Lender that Borrower is lifting such suspension (in which case the provisions of Section 5.04 shall be applicable); provided that such suspension shall not affect the right of such Lender to receive the compensation so requested for so long as any LIBOR Rate Loan remains in effect.
5.02 Limitation on LIBOR Rate Loans; LIBOR Not Available. Anything herein to the contrary notwithstanding, if, on or prior to the determination of any LIBOR for any Interest Period for any LIBOR Rate Loan:
(a) Administrative Agent determines, which determination shall be conclusive absent manifest error, that quotations of interest rates for the relevant deposits referred to in the definition of "LIBOR" are not being provided in the relevant amounts or for the relevant maturities for purposes of determining rates of interest for LIBOR Rate Loans as provided herein; or
(b) the Required Lenders determine, which determination shall be conclusive absent manifest error, and notify Administrative Agent that the relevant rates of interest referred to in the definition of "LIBOR" upon the basis of which the rate of interest for LIBOR Rate Loans for such Interest Period is to be determined are not likely adequate to cover the cost to such Lenders of making or maintaining LIBOR Rate Loans for such Interest Period;
then Administrative Agent shall give Borrower and each Lender prompt notice thereof and, so long as such condition remains in effect, the Lenders shall be under no obligation to make additional LIBOR Rate Loans, or to Continue LIBOR Rate Loans or to Convert Base Rate Loans into LIBOR Rate Loans, and Borrower shall, on the last day(s) of the then current Interest Period(s) for the outstanding LIBOR Rate Loans, either prepay such LIBOR Rate Loans or, in accordance with Section 2.07, Convert such LIBOR Rate Loans into Base Rate Loans or other LIBOR Rate Loans in amounts and maturities which are still being provided. Notwithstanding the foregoing, (i) if the applicable conditions under clauses (a) or (b) above affect only a portion of LIBOR Rate Loans, the balance of LIBOR Rate Loans may continue as LIBOR Rate Loans and (ii) if the applicable conditions under clauses (a) and (b) only affect certain Interest Periods, Borrower, subject to the terms and conditions of this Agreement, may elect to have LIBOR Rate Loans with such other Interest Periods.
5.03 Illegality. Notwithstanding any other provision of this Agreement, if it becomes unlawful for any Lender or its Applicable Lending Office to honor its obligation to make or maintain LIBOR Rate Loans hereunder, then such Lender shall promptly notify Administrative Agent thereof (who shall notify Borrower), and such Lender's obligation to make or Continue, or to Convert Loans of any other Type into LIBOR Rate Loans, shall be suspended until such time as such Lender may again make and maintain LIBOR Rate Loans (in which case the provisions of Section 5.04 shall be applicable).
5.04 Treatment of Affected Loans. If the obligation of any Lender to make LIBOR Rate Loans or to Continue or to Convert Base Rate Loans into LIBOR Rate Loans shall be suspended pursuant to Section 5.01 or 5.03, then such Lender's LIBOR Rate Loans shall be automatically Converted into Base Rate Loans on the last day(s) of the then current Interest Period(s) for LIBOR Rate Loans (or, in the case of a Conversion resulting from a circumstance described in Section 5.03, on such earlier date as such Lender may specify to Borrower with a copy to Administrative Agent) and, unless and until either (i) such Lender gives notice as provided below that the circumstances specified in Section 5.01 or 5.03 that gave rise to such conversion no longer exist or (ii) Borrower, in the case of Section 5.01, ends any suspension by Borrower:
If such Lender gives notice to Borrower with a copy to Administrative Agent that the circumstances specified in Section 5.01 or 5.03 that gave rise to the Conversion of such Lender's
LIBOR Rate Loans pursuant to this Section 5.04 no longer exist (which notice such Lender agrees to give promptly upon such circumstances ceasing to exist) or Borrower terminates its applicable suspension at a time when LIBOR Rate Loans made by other Lenders are outstanding, such Lender's Base Rate Loans shall be automatically Converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding LIBOR Rate Loans, to the extent necessary so that, after giving effect thereto, all Base Rate and LIBOR Rate Loans are allocated among the Lenders ratably (as to principal amounts, Types and Interest Periods) in accordance with their respective Commitments.
5.05 Compensation. Borrower shall pay to Administrative Agent for account of each Lender, upon the request of such Lender through Administrative Agent, such amount or amounts as shall be sufficient to compensate it for any loss, cost or expense (including, without limitation, any loss or expense sustained or incurred in obtaining, liquidating or employing deposits or other funds acquired to effect, fund or maintain any LIBOR Rate Loan) (collectively, "Breakage Costs") that such Lender determines is attributable to:
Without limiting the effect of the preceding sentence, such compensation shall include, without limitation, an amount equal to the excess, if any, of (i) the amount of interest that otherwise would have accrued on the principal amount so paid, prepaid, Converted or not borrowed for the period from the date of such payment, prepayment, Conversion or failure to borrow to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, the Interest Period for such Loan that would have commenced on the date specified for such borrowing) at the applicable Adjusted LIBOR for such Loan provided for herein over (ii) the amount of interest that such Lender would earn on such principal amount for such period if such Lender would have bid in the London interbank market for Dollar deposits of leading banks in amounts comparable to such principal amount and with maturities comparable to such period (as reasonably determined by such Lender), or if such Lender shall not, or shall cease to, make such bids, the equivalent rate, as reasonably determined by such Lender, derived from Telerate Page 3750 or other publicly available source as described in the definition of "LIBOR"). A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 5.05 shall be delivered to Borrower and shall be conclusive absent manifest error. Borrower shall pay such Lender the amount shown as due on any such
certificate within ten (10) days after receipt thereof. Any payment due to any of the Lenders pursuant to this Section 5.05 shall be deemed additional interest under such Lender's Note.
5.06 Additional Waivers. Borrower acknowledges that, during any period in which Borrower has elected the LIBOR-Based Rate as the Applicable Interest Rate, payment or prepayment of any portion of the Loan on a date other than the last day of an applicable LIBOR Period shall result in Lender's incurring additional costs, expenses and/or liabilities and that it is extremely difficult and impractical to ascertain the extent of such costs, expenses and/or liabilities, and any such payment or prepayment therefore must include the Breakage Costs and other sums set forth above. Borrower hereby expressly (a) waives any rights it may have under Applicable Law to prepay any portion of the Loan without penalty or charge, upon acceleration of the maturity of this Note, and (b) agrees that if a prepayment of any portion of the Loans is made, following any acceleration of the maturity of the Notes by the holders thereof on account of any transfer or disposition as prohibited or restricted by the Loan Agreement or by the Security Instrument, then Borrower shall be obligated to pay, concurrently therewith, as a prepayment premium, the applicable Breakage Costs and other sums specified above.
5.07 Taxes.
Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to Administrative Agent.
(e) Refunds. If Administrative Agent or a Lender determines that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by Borrower or with respect to which Borrower has paid additional amounts pursuant to this Section 5.07, it shall pay over such refund to Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by Borrower under this Section 5.07 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund).
ARTICLE VI
CONDITIONS PRECEDENT
6.01 Conditions Precedent to Closing and the Effectiveness of Commitments. The Closing shall not be deemed to have occurred and, regardless as to whether Administrative Agent or any Lender has executed this Agreement, neither Administrative Agent nor any Lender shall have any obligation hereunder or under any of the other Loan Documents, unless and until the conditions and requirements set forth in this Section 6.01 have been completed and fulfilled to the satisfaction of Administrative Agent, in Administrative Agent's sole and absolute discretion, and at Borrower's sole cost and expense:
challenge thereto, and to the extent requested by Administrative Agent, Administrative Agent shall have received copies of the foregoing certified by an Authorized Officer of Borrower to be true and correct.
(1) In the event Administrative Agent authorizes the recording of the Security Instrument or the making of any Loan at a time when all conditions described in this Section 6.01 have not been satisfied (including, without limitation, that all documents and other items described on Schedule 6.01 have not been approved by and/or delivered to Administrative Agent), such condition must be satisfied before any Loan (or additional Loan, as the case may be) shall be made.
6.02 Conditions Precedent to the making of any Loans. Neither Administrative Agent nor any of the Lenders shall be required to make any Loans hereunder until the conditions and requirements set forth in this Section 6.02 have been completed and fulfilled to the satisfaction of Administrative Agent, in Administrative Agent's sole discretion, at Borrower's sole cost and expense. It is agreed, however, that Administrative Agent (on behalf of the Lenders) may, in its discretion, make advances prior to completion and fulfillment of any or all of the conditions and requirements set forth below, without waiving its right to require such completion and fulfillment before any additional advances are made. If all such conditions set forth below are not satisfied as of the date of each proposed Loan set forth in each Request for Loan Advance, neither Administrative Agent nor any of the Lenders shall have any further obligation to make any advances of Loan proceeds hereunder.
complete in all material respects on and as of the date of the making of such Loan with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).
(1) Request for Loan Advance. A Request for Loan Advance as provided in Section 2.02(a) duly executed by an Authorized Officer of Borrower, together with the required attachments thereto;
(g) Casualty and Condemnation. The Project shall not have been subject to
(i) a material injury from fire or other casualty or (ii) a Condemnation, which, in either case, would, following the allocation of Insurance Proceeds or Condemnation Awards to the Project Budget, cause a failure of the Loans to be In Balance.
(h) Fees and Expenses. Borrower shall have paid (i) all installments of the fees and expenses that are then due and payable to Administrative Agent or the Lenders, and
(ii) any unreimbursed costs and expenses due to Administrative Agent, and/or any of the Lenders pursuant to Section 14.03.
(i) Prior Loans. To the extent not previously delivered to Administrative Agent, Borrower shall provide evidence of the payment of all costs, expenses and other charges for which advances of Loans shall have been previously provided.
(j) Non-Discretionary Approvals. All Non-Discretionary Approvals required as of such date shall have been granted and/or issued, as applicable, shall be in full force and effect without any pending legal or regulatory challenge thereto, and Administrative Agent shall have received evidence of the foregoing.
(k) Access. Borrower shall have provided the Construction Consultant, Administrative Agent and the Lenders, or their representatives, prompt and reasonable access to the Project, and copies of all such documents, bills, construction records, lien waivers, Change Orders, drawings, plans and specifications as the Construction Consultant shall reasonably require, to enable the Construction Consultant to review each Request for Loan Advance.
(I) Other Conditions. All of the requirements of Article VII shall have been complied with.
(m) Other Documents and Deliveries. Administrative Agent shall have received and approved of all documents and other items described on Schedule 6.02.
6.03 Conditions Precedent to the Final Loans. The obligation of the Lenders to make the final Loans to Borrower for Base Building Work is subject to the further condition precedent that all of the following requirements (collectively, the "Base Building Substantial Completion Conditions") shall have been completed to the satisfaction of Administrative Agent:
ARTICLE VII
DISBURSEMENT OF THE LOANS; LOAN BALANCING
7.01 General Conditions.
(a) Subject to (i) Borrower's satisfaction of the conditions precedent set forth in Article VI and (ii) Borrower's compliance with the applicable provisions of this Article VII, Administrative Agent shall disburse the proceeds of each Loan within five (5) Business Days after Administrative Agent's receipt all of the documents and items to be delivered or received pursuant to Articles VI and VII. Notwithstanding the foregoing, at no time shall Administrative Agent or the Lenders be obligated to: (A) advance to Borrower more than the amount that Borrower has funded from its own monies or is then required to fund to the party seeking payment or, in the case of reimbursement, to the party seeking reimbursement (subject to Retainage, if applicable), (B) make an advance if the Loans are not In Balance in accordance with Section 7.02, (C) subject to possible reallocation in accordance with Section 7.03, advance proceeds of a Loan in an amount in excess of the Project Budget Line-Items set forth in the Project Budget, as the same may be adjusted in accordance with the terms of this Agreement, (D) except as provided in Section 7.06 hereof, advance any portion of the Retainage, (E) except as provided in Section 9.27 hereof, make any Loans with respect to materials not yet incorporated into the Improvements, (F) make an advance in connection with any Change Order for which Administrative Agent's approval is required under Section 10.14 which has not been approved by Administrative Agent in accordance with Section 10.14, (G) make any Loans for payments to any subcontractor until (1) in the case of a Major Subcontractor, such Major Subcontractor has been approved by Administrative Agent and (2) in the case of a Major Subcontractor, duly executed and delivered to Administrative Agent the applicable consent and attornment agreement in substantially the form attached to
the Assignment of Construction Agreements, or (H) make any Loans with respect to any sums due a Design Professional until such Design Professional if the total amount of the projected costs payable to such Design Professional are in excess of $250,000 has (i) entered into a duly executed and delivered contract with Borrower, a copy (certified by an Authorized Officer of Borrower) of which contract has been delivered to Administrative Agent, and (ii) duly executed and delivered to Administrative Agent the applicable consent and attornment agreement in substantially the form attached to the Assignment of Architecture Agreement, or (I) make any Loans with respect to the General Contractor Fee except for General Contractor Fees advanced based upon percentage of completion with payment to be complete upon the issuance of all certificates of occupancy, release of all liens by contractors, materialmen and suppliers, and the Loans being In Balance.
7.02 Loan Balancing.
(a) Definition of "In Balance" Loans. Borrower represents that the Project Budget sets forth all anticipated costs to be incurred by Borrower in connection with the ownership, development, construction, financing, marketing, and maintenance of the Project from time to time through the Scheduled Maturity Date. Borrower acknowledges and agrees that the Loans shall be deemed not "In Balance" if, at any time, (i) the Loan to Value ratio is greater than 75%; (ii) the Loan coverage is less than the Minimum Loan Coverage; or (iii) the projected cost of any category of costs included in any individual Project Budget Line-Item (including, without limitation, the Interest Reserve and the Contingency Fund line items) exceeds the amount set forth in the Project Budget for such individual Project Budget Line-Item by more than fifteen percent (15%) (as the same may be adjusted in accordance with Section 7.04 and any other terms of this Agreement), as reasonably determined by
Administrative Agent and the Construction Consultant in their reasonable discretion. So long as the foregoing events do not exist, the Loans shall be deemed "In Balance."
(b) Deficiency Deposits. If at any time the Loans are deemed not "In Balance," then Borrower shall, provided sufficient funds do not remain in the Borrower Contingency Fund to cover such deficiency, within five (5) Business Days after written notice from Administrative Agent deposit with Administrative Agent an amount sufficient to cover such deficiency (a "Deficiency Deposit"), which Deficiency Deposit shall be deposited into a Controlled Account. Administrative Agent and the Lenders shall not be required to make any disbursement of any Loans before receiving payment of any such Deficiency Deposit and the prior application of any such Deficiency Deposit to the payment of any budgeted costs to bring the Loans In Balance. If an Event of Default shall occur and be continuing, Administrative Agent may (subject to the provisions of Section 13.03), at its option, (i) exercise any or all of its rights under the Loan Documents, (ii) apply any unexpended Deficiency Deposit to the costs of completion of the Improvements, and/or (iii) apply any unexpended Deficiency Deposit to the immediate reduction of any amounts due under the Notes and the other Loan Documents. Notwithstanding anything in this Section 7.02(b) or elsewhere in this Agreement to the contrary, nothing in this Section 7.02(b) or elsewhere in this Agreement or the Loan Documents shall obligate the holders of the Equity Interests for the payment of any amounts due from Borrower to Lender hereunder.
7.03 Project Budget Line-Items; Loans to be Used for Specific Line-Items.
violate the provisions of the Lien Law or affect the priority of the Security Instrument on the Project. Notwithstanding anything to the contrary contained herein, in the event Administrative Agent's approval of an adjustment to a Project Budget Line Item is required, Administrative Agent, in its reasonable discretion, may condition any such approval on obtaining, at Borrower's sole cost and expense, an endorsement to the Title Policy insuring against any statutory lien for services, labor or materials furnished or contracted for which at such time has gained (or may thereafter gain) priority over the lien of the Security Instrument as a result of such reallocation.
7.04 Project Budget Contingencies.
7.05 Interest; Fees; and Expenses.
(a) Included in the Project Budget are projected amounts for (i) interest on the Loans (the "Interest Reserve"), (ii) the fees payable to Administrative Agent and the Lenders, (iii) the fees and expenses of the Construction Consultant, Administrative Agent's counsel and the Title Company, and (iv) the fees and expenses related to the recording of the Security Instrument.
7.06 R etainage.
7.07 Unsatisfactory Work. If the Construction Consultant or Administrative Agent shall determine that a portion of the Construction Work for which Loans are sought is Unsatisfactory Work, Administrative Agent shall be entitled to (i) withhold from such Loans such amounts the proceeds of which are intended to pay for the Unsatisfactory Work and (ii) to the extent the Construction Consultant reasonably determines that the failure to remedy such Unsatisfactory Work prior to proceeding with Construction Work would have a material adverse impact on the value of the Project or the ability to complete other work pursuant to the Plans and Specifications, require the affected portion of the Construction Work to be stopped until such time as Administrative Agent and the Construction Consultant are satisfied that the Unsatisfactory Work is corrected, and no such action by Administrative Agent shall be deemed to affect Borrower's obligation to complete the Improvements on or before the Completion Date or right to proceed with and receive Loans in connection with Construction Work that is not affected by the Unsatisfactory Work, and the Lenders shall, subject to compliance by Borrower with all other applicable requirements of this Agreement, be required to make Loans with respect to such Unsatisfactory Work only after the Construction Consultant and Administrative Agent shall have determined that the work which had been identified as Unsatisfactory Work has been corrected to the satisfaction of the Construction Consultant and Administrative Agent.
7.08 Intentionally Omitted.
7.09 No Waiver or Approval by Reason of Loan Advances. The making of any Loans by the Lenders shall not be deemed an acceptance or approval by Administrative Agent or the Lenders (for the benefit of Borrower or any third party) of the Construction Work or other work theretofore done or constructed or to the Lenders' obligations to make further Loans, nor, in the event Borrower is unable to satisfy any condition, shall any such failure to insist upon strict compliance have the effect of precluding Administrative Agent or the Lenders from thereafter declaring such inability to be an Event of Default as herein provided. Administrative Agent's and/or the Lenders' waiver of, or failure to enforce, any conditions to or requirements associated with any Loans in any one or more circumstances shall not constitute or imply a waiver of such conditions or requirements in any other circumstances.
7.10 Construction Consultant. Administrative Agent reserves the right to employ the Construction Consultant and any other consultants necessary, in Administrative Agent's reasonable judgment, to review Requests for Loan Advance, inspect all construction and the periodic progress of the same, the reasonable cost therefor to be borne by Borrower as a loan expense. Borrower shall make available to Administrative Agent and the Construction Consultant on reasonable notice during business hours, all documents and other information
(including, without limitation, receipts, invoices, lien waivers and other supporting documentation to substantiate the costs to be paid with the proceeds of any Request for Loan Advance) which any contractor or other Person entitled to payment for Construction Work is required to deliver to Borrower and shall use commercially reasonable efforts to obtain any further documents or information reasonably requested by Administrative Agent or the Construction Consultant in connection with any Loan or the administration of this Agreement. Borrower acknowledges and agrees that the Construction Consultant shall have no responsibilities or duties to Borrower, and shall be employed solely for the benefit of Administrative Agent and the Lenders. No default of Borrower will be waived by an inspection by Administrative Agent or the Construction Consultant. In no event will any inspection by Administrative Agent or the Construction Consultant be a representation that there has been or will be compliance with the Plans and Specifications or that the Construction Work is free from defective materials or workmanship. Any and all provisions of this Agreement in respect of the Construction Consultant shall be enforceable solely by, and at the option of, Administrative Agent, and Borrower shall not be a third-party beneficiary thereof. Any and all reports, advice or other information provided by the Construction Consultant to Administrative Agent and/or the Lenders or otherwise produced by or in the possession of the Construction Consultant shall be confidential and Borrower shall have no right to obtain or review same.
7.11 Authorization to Make Loan Advances to Cure Borrower's Defaults. If an Event of Default shall occur and be continuing, Administrative Agent (subject to the provisions of Section 13.03) may (but shall not be required to) perform any of such covenants and agreements with respect to which Borrower is in Default and of which Administrative Agent has notified Borrower. Any amounts expended by Administrative Agent in so doing and any amounts expended by Administrative Agent in connection therewith shall constitute a Loan and be added to the Outstanding Principal Amount, and the Lenders shall make the applicable Loans to fund any such disbursements. The authorization hereby granted is irrevocable, and no prior notice to or further direction or authorization from Borrower is necessary for Administrative Agent to make such disbursements.
7.12 Administrative Agent's Right to Make Loan Advances in Compliance with the Completion Guaranty. Any Loan proceeds disbursed by Administrative Agent as contemplated by Section 2 of the Completion Guaranty (whether the applicable work is being performed by the Guarantor or Administrative Agent) shall constitute a Loan and be added to the Outstanding Principal Amount, and the Lenders shall make the applicable Loans to fund any such disbursements. The authorization hereby granted is irrevocable and no prior notice to or further direction or authorization from Borrower is necessary for Administrative Agent to make such disbursements.
7.13 No Third-Party Benefit. This Agreement is solely for the benefit of the Lenders, Administrative Agent and Borrower. All conditions of the obligations of the Lenders to make advances hereunder are imposed solely and exclusively for the benefit of the Lenders and may be freely waived or Modified in whole or in part by the Lenders at any time if in their sole discretion they deem it advisable to do so, and no Person other than Borrower (provided, however, that all conditions have been satisfied) shall have standing to require the Lenders to make any Loan advances or shall be a beneficiary of this Agreement or any advances to be made hereunder.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Administrative Agent and the Lenders that:
8.01 Organization; Powers. Each of Borrower Parties is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. Each of Borrower and the Guarantor is organized or qualified to do business and in good standing in the State of Colorado.
8.02 Authorization; Enforceability. The Transactions are within each of Borrower Party's organizational powers and have been duly authorized by all necessary organizational action under their respective Organizational Documents. This Agreement and the other Loan Documents have been duly executed and delivered by Borrower Parties party thereto and each of the Loan Documents to which a Borrower Party is a party when delivered will constitute, a legal, valid and binding obligation of the applicable Borrower Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws of affecting creditors' rights generally and subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
8.03 Government Approvals; No Conflicts. The Transactions (a) do not require any Government Approvals of, registration or filing with, or any other action by, any Governmental Authority, except for (i) such as have been obtained or made and are in full force and effect (ii) filings and recordings in respect of the Liens created pursuant to the Security Documents and (iii) the Discretionary and Non-Discretionary Approvals required in connection with the Construction Work, (b) will not violate any Applicable Law or the Organizational Documents of any of Borrower Parties, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon any of Borrower Parties, or give rise to a right thereunder to require any payment to be made by any of Borrower Parties, and (d) except for the Liens created pursuant to the Security Documents, will not result in the creation or imposition of any Lien on any asset of any of Borrower Parties.
8.04 Financial Condition. Borrower has heretofore furnished to each of the Lenders certain financial statements of Borrower and Guarantor. All such financial statements are complete and correct in all material respects and fairly present the financial condition of Borrower and Guarantor as of the dates of such financial statements, all in accordance with GAAP. Neither Borrower or Guarantor has on the date hereof any Indebtedness, material contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments of a type required to be disclosed in said financial statements in accordance with GAAP, except as referred to or reflected or provided for in said balance sheets as at said dates. Since the applicable dates of such financial statements, there has been no event that would have a Material Adverse Effect.
8.05 Litigation. Except as disclosed in Schedule 8.05 hereto, (a) there are no legal or arbitral proceedings, or any proceedings by or before any Governmental Authority or agency, now pending or (to the Knowledge of Borrower) threatened against Borrower or the Project which could reasonably be expected to have a Material Adverse Effect.
8.06 ERISA. Borrower has not established any Plan which would cause Borrower to be subject to ERISA and none of Borrower's assets constitutes or will constitute "plan assets" of one or more Plans. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. Each Plan, and, to the Knowledge of Borrower Parties, each, Multiemployer Plan, is in compliance with, the applicable provisions of ERISA, the Code and any other Applicable Law.
8.07 Taxes. Each of Borrower Parties has timely filed or timely caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which such Borrower Party has set aside on its books adequate reserves in accordance with GAAP or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
8.08 Investment and Holding Company Status. None of Borrower Parties is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company", or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935.
8.09 Environmental Matters. Except for matters set forth in the Environmental Reports:
8.10 Organizational Structure.
8.11 Title.
by Administrative Agent, in Administrative Agent's sole good faith discretion, or liens or security interests otherwise approved by Administrative Agent in Administrative Agent's sole good faith discretion.
8.12 No Bankruptcy Filing. Borrower is not 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 major portion of Borrower's assets or property, and Borrower has no Knowledge of any Person contemplating the filing of any such petition against it.
8.13 Executive Offices; Places of Organization. The location of Borrower's and the Managing Member's principal place of business and chief executive office is the address set forth in the preamble of this Agreement, except to the extent changed in accordance with Section 10.07. Borrower and the Managing Member were organized, or incorporated, as applicable, in the State of Colorado.
8.14 Compliance; Government Approvals. Borrower, the Project and Borrower's use thereof and operations thereat comply, and upon completion of construction of the Improvements will comply, in all material respects with all Applicable Laws. All Government Approvals necessary in connection with the construction and operation of the Project as contemplated by the Loan Documents and the Project Documents and the Material Agreements, to be obtained by Borrower and any other Person on behalf of Borrower (to the Knowledge of Borrower) are, set forth in Schedule 8.14 hereto and, except for those Government Approvals set forth in Part B of Schedule 8.14 hereto, have been duly obtained, were validly issued, are in full force and effect, are not subject to appeal, are held in the name of Borrower and are free from conditions or requirements, the compliance with which could reasonably be expected to have a Material Adverse Effect or which Borrower does not reasonably expect to be able to satisfy. There is no proceeding pending or, to the Knowledge of Borrower, threatened that seeks, or may reasonably be expected, to rescind, terminate, Modify or suspend any such Government Approval. The information set forth in each application and other written material submitted by Borrower to the applicable Governmental Authority in connection with each such Government Approval is accurate and complete in all material respects. The Government Approvals set forth in Part B of Schedule 8.14 hereto are required solely in connection with later stages of construction and operation of the Improvements and are not customarily obtained until a later stage of construction or after residential occupancy has commenced. Borrower has no reason to believe that any Government Approval that has not been obtained by Borrower, but which will be required in the future, will not be granted to it in due course, on or prior to the date when required and free from any condition or requirement compliance with which could reasonably be expected to have a Material Adverse Effect or which Borrower does not reasonably expect to be able to satisfy. The Project, if constructed in accordance with the Plans and Specifications, the Project Documents and the Material Agreements, will conform to and comply in all material respects with all covenants, conditions, restrictions and reservations in the Government Approvals and the Project Documents and the Material Agreements applicable thereto and all Applicable Laws. Borrower has no reason to believe that Administrative Agent, acting for the benefit of the Lenders, will not be entitled, without undue expense or delay, to the benefit of each Government Approval set forth on Schedule 8.14 hereto upon the exercise of remedies under the Security Documents. Administrative Agent has received a true and complete copy of each Government Approval heretofore obtained or made by Borrower.
8.15 Condemnation; Casualty. No Condemnation has been commenced or, to Borrower's Knowledge, is contemplated with respect to all or any portion of the Project or for the relocation of roadways providing access to the Project. No Casualty has occurred with respect to the Project.
8.16 Utilities and Public Access; No Shared Facilities. The Project has adequate rights of access to public ways and is or will be served by adequate electric, gas, water, sewer, sanitary sewer and storm drain facilities during both the construction and operation of the Improvements. All public utilities necessary to the use and enjoyment of the Project as intended to be used and enjoyed are or will be located in the public right-of-way abutting the Project. Telephone and communications services are available to the boundaries of the Land, adequate to serve the Project and not subject to any conditions (other than normal charges to the utility supplier) which would limit the use of such utilities. All streets and easements necessary for construction and operation of the Project are available to the boundaries of the Land. Except for public infrastructure improvements, there are no amenities, services or facilities (including those for access, parking, recreational activities and otherwise) not located or to be constructed upon the Project which are necessary to the use or enjoyment of, or intended to benefit the owner or occupants of, the Improvements.
8.17 Solvency. On the Closing Date and after and giving effect to the Loans occurring on the Closing Date, and the disbursement of the proceeds of such Loans pursuant to Borrower's instructions, each Borrower Party is and will be Solvent.
8.18 Governmental Regulations. Borrower is not a "foreign person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended from time to time. No part of the proceeds of the Loan made hereunder will be used for "purchasing" or "carrying" "margin stock" as so defined or for any purpose which violates, or which would be inconsistent with, the provisions of the Regulations of the Board of Governors of the Federal Reserve System. The Loan is an exempt transaction under the Truth-in-Lending Act (15 U.S.C.A. Sections 1601, et seq.).
8.19 No Joint Assessment; Separate Lots. Borrower has not suffered, permitted or initiated the joint assessment of the Project with any other real property constituting a separate tax lot.
8.20 Security Documents and Liens. The Security Documents upon recording with the County Recorder of Eagle County, will create, as security for the Obligations, valid and enforceable, exclusive, perfected first priority security interests in and Liens on all of the respective collateral intended to be covered thereunder, in favor of Administrative Agent as administrative agent for the ratable benefit of the Lenders, subject to no Liens other than the Permitted Liens, except as enforceability may be limited by applicable insolvency, bankruptcy or other laws affecting creditors rights generally, or general principles of equity, whether such enforceability is considered in a proceeding in equity or at law. Such security interests in and Liens on such collateral shall be superior to and prior to the rights of all third parties in such collateral except as set forth in the Permitted Liens, and, other than in connection with any future change in Borrower's name or the location in which Borrower is organized or registered, no further recordings or filings are or will be required in connection with the creation, perfection or enforcement of such security interests and Liens, other than the filing of continuation statements in accordance with applicable law. Upon filing with the Secretary of State of Colorado and
recording with the County Recorder of Eagle County of a Uniform Commercial Code financing statement describing the Collateral covered by any Security Document that is governed by the Uniform Commercial Code (or irrevocably delivered to a title agent for such filing), such filing will perfect a valid first priority security interest with respect to the rights and property that are the subject of such Security Document to the extent a security interest in such Collateral can be perfected by filing a financing statement and subject to the Permitted Liens. Any agreement, executed with respect to the Project or any part thereof are and shall be subject and subordinate to the Security Instrument except as set forth in the Permitted Liens.
8.21 Project Documents. Borrower has heretofore delivered to Administrative Agent a true and complete copy of each Project Document and, subject to the terms of Section 10.13, none of the Project Documents has been further amended, modified or terminated. The Project Documents are in full force and effect and Borrower is not in default under or with respect to any Project Document. To the Borrower's Knowledge, no other party to a Project Document is in default under any material covenant or obligation set forth therein.
8.22 Material Agreements. Borrower has heretofore delivered to Administrative Agent a true, correct and complete copy of each Material Agreement, and the Material Agreements constitute all of the agreements to which Borrower (or any predecessor-in-interest to Borrower) is a party that materially affects or relates to the ownership or operation of the Project. Subject to the terms of Section 10.13, none of the Material Agreement has been further Modified. The Material Agreements are in full force and effect and Borrower is not in default beyond any applicable notice or cure periods under or with respect to any Material Agreement. To Borrower's Knowledge, as of the date hereof, no other party to a Material Agreement is in default under any material covenant or obligation set forth therein.
8.23 Project Budget. The amounts and allocations set forth in the Project Budget (including the Hard Costs and Soft Costs), as each may be amended in accordance with the terms of this Agreement, present a full, complete and good faith representation of all costs, expenses and fees required to acquire and develop the Project and complete the Construction Work. Borrower is unaware of any other such costs, expenses or fees which are material and are not covered by the Project Budget.
8.24 [Intentionally Omitted].
8.25 [ Intentionally Omittedl].
8.26 Insurance. Borrower has in force, and has paid the Insurance Premiums in respect of, all of the insurance required by Section 9.05.
8.27 Flood Zone. Except as shown on the Survey, no portion of the Improvements is located in a flood hazard area as designated by the Federal Emergency Management Agency or, if in the flood zone, flood insurance is maintained therefor in full compliance with the provisions of Section 9.05.
8.28 f Intentionally Omitted].
8.29 Boundaries. Except as may be disclosed on the Survey and in the Title Policy, none of the Improvements are outside the boundaries of the Project (or building restriction or setback lines applicable thereto) and no improvements on adjoining properties encroach upon the
Land and no easements or other encumbrances upon the Land encroach upon any of the Improvements so as to adversely effect the value or marketability of the Project.
8.30 Illegal Activity. No portion of the Project has been purchased with proceeds of any illegal activity and no part of the proceeds of the Loans will be used in connection with any illegal activity.
8.31 Permitted Liens. None of the Permitted Liens individually or in the aggregate, materially interferes with the benefits of the security intended to be provided by the Loan Documents, materially and adversely affects the value of the Project, impairs the use or the operation of the Project or impairs Borrower's ability to pay its obligations in a timely manner.
8.32 Anti-Terrorism Laws.
8.33 Defaults. No Event of Default exists under any of the Loan Documents.
8.36 Design Professionals' Certificates. To Borrower's Knowledge, the certifications set forth in the certificates of the Design Professionals which Borrower has furnished to Administrative Agent in connection herewith are true and correct.
8.37 Other Representations. All of the representations in the other Loan Documents by Borrower and its Affiliates are true and correct in all material respects as of the date hereof.
8.38 Loan In Balance. The Loan is In Balance.
8.39 Employee Benefit Plans. Borrower maintains no pension, retirement or profit sharing employee benefit plan that is subject to any provision of ERISA. Borrower has no employees.
8.40 No Construction. No construction, other than site development work and construction previously disclosed to Administrative Agent, has commenced on the Land.
8.41 Intentionally Omitted.
8.42 Appraisal. Borrower is not aware of any facts or circumstances of any nature which make, or are likely in the future to make, the Appraisal of the Project inaccurate in any material respect.
8.43 Labor Controversies. To Borrower's knowledge there are no labor controversies pending or threatened against Borrower with respect to the Project or any construction contractor involved in the construction of the Improvements which have not been disclosed in writing to the Administrative Agent or the Lenders and would not reasonably be expected to constitute or result in a Material Adverse Effect.
8.44 Insider. Neither Borrower nor any Affiliate of Borrower (which shall not include any limited partner of Borrower which is not deemed to have "control" of Borrower respectively, as the term "control" is defined in 12 U.S.C. §375b(9)(B) or in regulations promulgated pursuant thereto) nor any other Person having "control" (as so defined) of Borrower is, or is a "related interest" of, an "executive officer", "director", or Person who "directly or indirectly, or acting through or in concert with one or more persons, owns, controls, or has the power to vote more than 10 percent of any class of voting securities" or other "insider" (as those terms are defined in 12 U.S.C. §375b or in regulations promulgated pursuant thereto) of any Lender, of a bank holding company of which any Lender is a subsidiary, or of any subsidiary of a bank holding company of which any Lender is a subsidiary, or of any bank at which any Lender maintains a correspondent account, or of any bank which maintains a correspondent account with any Lender.
8.45 True and Complete Disclosure. To Borrower's Knowledge, the information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of Borrower Parties to Administrative Agent or any Lender in connection with the negotiation, preparation or delivery of this Agreement and the other Loan Documents or included herein or therein, when taken as a whole do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein under the circumstances made, not misleading. All written information furnished after the date hereof by any Borrower Party to Administrative Agent and the Lenders in connection with this Agreement and the other Loan Documents and the Transactions will be true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified.
8.46 Survival of Representations. Each Request for Loan Advance shall constitute an affirmation that the representations and warranties of Article VIII remain true and correct in all material respects as of the date of such Request for Loan Advance and will be so on the date of disbursement of the requested Loan, except with respect to (a) matters which have been disclosed in writing to and approved by Administrative Agent (subject, however, to the terms of this Agreement) or (b) liens of mechanics and materialmen and matters addressed in Section 8.05, would not, if adversely decided, be reasonably expected to have a Material Adverse Effect.
ARTICLE IX
AFFIRMATIVE COVENANTS OF BORROWER
Borrower covenants and agrees with the Lenders and Administrative Agent that, so long as any Commitment or Loan is outstanding and until payment in full of all amounts payable (other than contingent indemnification obligations) by Borrower hereunder:
9.01 Information. Borrower shall deliver to Administrative Agent:
9.02 Notices of Material Events. Borrower shall give to Administrative Agent prompt written notice of the following:
(a) the occurrence of any Default or Event of Default, including a description of the same in reasonable detail;
9.03 Existence, Etc. Borrower will, and will cause each other Borrower Party to, preserve and maintain its legal existence and all material rights, privileges, licenses and franchises necessary for the maintenance of its existence and the conduct of its affairs.
9.04 Compliance with Laws; Adverse Regulatory Changes.
9.05 Insurance.
(h) Notwithstanding the foregoing, Administrative Agent may require Borrower to obtain additional insurance coverages and amounts, provided that such additional insurance is then customarily required by other lenders for properties similar to the Project, as reasonably determined by Administrative Agent.
9.06 Real Estate Taxes and Other Charges.
9.07 [Intentionally Omitted].
9.08 Further Assurances. Borrower will, and will cause each of the other Borrower Parties to promptly, upon request by Administrative Agent, execute any and all further documents, agreements and instruments, and take all such further actions which may be required under any applicable law, or which Administrative Agent may reasonably request, to effectuate the Transactions, all at the expense of Borrower. Borrower, at its sole cost and expense, shall take or cause to be taken all action reasonably required or requested by Administrative Agent to maintain and preserve the Liens of the Security Documents and the priority thereof. Borrower shall from time to time execute or cause to be executed any and all further instruments (including financing statements, continuation statements and similar statements with respect to any of the Security Documents), and register and record such instruments in all public and other offices, and shall take all such further actions, as may be necessary or requested by Administrative Agent
for such purposes, including timely filing or refiling all continuations and any assignments of any such financing statements, as appropriate, in the appropriate filing offices.
9.09 Performance of Project Documents, Material Agreements, and Easements.
9.10 Performance of the Loan Documents. Borrower shall observe, perform and satisfy all the terms, provisions, covenants and conditions required to be observed, performed or satisfied by it under the Loan Documents, and shall pay when due all costs, fees and expenses required to be paid by it under the Loan Documents.
9.11 Books and Records; Inspection Rights. Borrower will, and will cause each of the other Borrower Parties to, keep proper books of record and account in which full, true, complete and correct entries are made of all dealings and transactions in relation to its business and activities. Borrower will, and will cause each of the other Borrower Parties to, permit any representatives designated by Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records relating to the Project and the overall financial condition of such parties, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested.
9.12 Environmental Compliance.
(a) Environmental Covenants. Borrower covenants and agrees that: (i) all uses and operations on or of the Project by Borrower shall be in compliance with all
Environmental Laws and permits issued pursuant thereto (and that Borrower will use commercially reasonable efforts to cause any other Person who uses the Project to do so in compliance with all Environmental Laws and permits issued pursuant thereto); (ii) Borrower shall not permit a Release of Hazardous Substances in, on, under or from the Project; (iii) Borrower shall not permit Hazardous Substances in, on, or under the Project, except those that are in compliance with all Environmental Laws (i.e., materials used in cleaning and other building operations) and matters disclosed in the Environmental Reports; (iv) Borrower shall keep the Project free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law, whether due to any act or omission of Borrower or any other Person (collectively, "Environmental Liens"); (v) notwithstanding clause (iii) above, Borrower shall not, or permit any other Person to, install any asbestos or asbestos containing materials on the Project; (vi) Borrower shall cause the Remediation of such Hazardous Substances present on, under or emanating from the Project, or migrating onto or into the Project, in accordance with and to the extent required by this Agreement and Environmental Laws; (vii) Borrower shall provide Administrative Agent, the Lenders and their representatives with access at reasonable times to all or any portion of the Project for purposes of inspection, provided that such inspections shall not unreasonably interfere with the operation of the Project or occupants thereof, and shall cooperate with Administrative Agent, the Lenders and their representatives in connection with such inspections, including but not limited to providing all relevant information and making knowledgeable persons available for interviews; and (viii) promptly deliver to Administrative Agent copies of all required Government Approvals relating to the proper removal of any asbestos, any aboveground storage tank, and any underground storage tank currently existing at the Project.
(b) Environmental Notices. Borrower shall promptly provide notice to Administrative Agent of: (i) all Environmental Claims asserted or threatened against Borrower or any other party occupying the Project or any portion thereof or against the Project which become known to Borrower; (ii) the discovery by Borrower of any occurrence or condition on the Project or on any real property adjoining or in the vicinity of the Project which could reasonably be expected to lead to an Environmental Claim against Borrower, Administrative Agent or any of the Lenders; (iii) the commencement or completion of any Remediation at the Project; and (iv) any Environmental Lien. In connection therewith, Borrower shall transmit to Administrative Agent copies of any citations, orders, notices or other 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 above.
9.13 [ Intentionally Omitted].
9.14 Reserves. Administrative Agent may, following and during the continuance of an Event of Default, at any time and from time to time, at its option (or at the direction of the Required Lenders), to be exercised by written notice to Borrower, require the deposit by Borrower into a Controlled Account, at the time of each payment of an installment of interest or principal under the Notes, of additional amounts sufficient to discharge the obligations of Borrower under Sections 9.05 and 9.06 (if applicable, and excluding all income, franchise, single business or other taxes imposed on Borrower unless the same is in lieu of real estate taxes) when they become due. Simultaneously with the initial deposit under this Section 9.14, Borrower shall deposit with Administrative Agent an amount determined by Administrative Agent to be necessary to ensure that there will be on deposit with Administrative Agent an amount which,
when added to the monthly payments subsequently required to be deposited with Administrative Agent hereunder on account of Real Estate Taxes, Insurance Premiums will result in there being on deposit with Administrative Agent an amount sufficient to pay the next due periodic installment of Real Estate Taxes, Insurance Premiums at least one (1) month prior to the delinquency date thereof and the next periodic payments of insurance premiums and ground rent at least one (1) month prior to the due date thereof. Commencing on the first Business Day of the first calendar month after the occurrence of an Event of Default and continuing thereafter on the first Business Day of each month thereafter, Borrower shall pay to Administrative Agent deposits in an amount equal to one-twelfth (1/12) of the yearly amount of Real Estate Taxes and Insurance Premiums that will next become due and payable on the Project. The determination of the amount to be deposited with Administrative Agent with each installment shall be made by Administrative Agent in its sole discretion. Such amounts shall be held by Administrative Agent in a Controlled Account and applied (together with any interest earned thereon) to the payment of the obligations in respect to which such amounts were deposited or, at the option of Administrative Agent, to the payment of said obligations in such order or priority as Administrative Agent shall determine, on or before the respective dates on which the same or any of them would become delinquent. If one (1) month prior to the due date of any of the aforementioned obligations the amounts then on deposit therefor shall be insufficient for the payment of such obligations in full, Borrower, within five (5) Business Days after demand, shall deposit the amount of the deficiency Administrative Agent into the Controlled Account. Nothing herein contained shall be deemed to affect any right or remedy of Administrative Agent and/or the Lenders under the provisions of this Agreement or the other Loans Documents or of any statute or rule of law to pay any such amount and to add the amount so paid together with interest at the Default Rate to the indebtedness secured by the Security Instrument. Borrower hereby pledges to and grants to Administrative Agent a security interest in any and all monies now or hereafter deposited in such Controlled Account as additional security for the payment of the Loans and agrees to enter into an agreement with Administrative Agent and the bank where such account is established substantially in the form in order to perfect Administrative Agent's security interest therein. In making any payment from such Controlled Account, Administrative Agent may do so according to any bill, statement or estimate or procured from the appropriate public office (with respect to Real Estate Taxes), insurer or agent (with respect to Insurance Premiums), without inquiry into the accuracy of such bill, statement or estimate or into the validity of any such charge.
9.15 Accessibility Laws.
(a) Compliance. Borrower will perform and comply promptly with, and cause the Project, including any future alterations to the Project constructed by Borrower to be constructed, maintained, used and operated in accordance with all applicable Accessibility Laws and will maintain accurate records of all expenditures made in connection with any alterations with respect to Accessibility Laws to the Project. Upon the request of Administrative Agent, and if (i) any Governmental Authority having jurisdiction over the Project or Borrower shall issue a violation or a notice of violation with respect to any Accessibility Laws, (ii) required by any applicable Accessibility Laws or (iii) Administrative Agent reasonably believes an Accessibility Laws violation may exist at or affect the Project, Borrower shall conduct such surveys of the Project as Administrative Agent shall reasonably require to ascertain that the Project is in compliance with all Accessibility Laws.
(b) Notices. If Borrower receives any notice that Borrower or the Project is in default under or is not in compliance with any Accessibility Law, or notice of any proceeding initiated under or with respect thereto, Borrower will promptly furnish a copy of such notice to Administrative Agent.
9.19 Use of Proceeds; Margin Regulations. Borrower will use (a) the proceeds of the Loans in accordance with the Project Budget and (b) the disbursements from any Deficiency Deposit for the Project Costs. No part of the proceeds of the Loans 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 Regulation T, U, X or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements.
9.20 [Intentionally Omitted].
9.21 Inspection. Borrower shall permit representatives of Administrative Agent, the Construction Consultant and the Lenders, at reasonable times and on reasonable advance notice, to examine its books of record and account, to make copies and abstracts therefrom, and to discuss its affairs, finances and accounts with its principal officers, engineers and independent accountants (and by this provision Borrower authorizes said accountants to discuss with such Persons such affairs, finances and accounts, but after prior notice to Borrower of such discussions). Without limiting the foregoing, representatives of the Construction Consultant, Administrative Agent and the Lenders shall have the right at reasonable times and on reasonable advance notice to (a) inspect the Project and all materials to be used in connection with the construction of the Improvements from time to time and to witness the construction thereof, (b) to examine all detailed plans and shop drawings in connection with the construction of the Improvements and (c) meet with the representatives of the Design Professionals, the General Contractor and the Major Subcontractors to discuss the status and issues relating to the construction of the Improvements (and by this provision Borrower authorizes Borrower's Architect, the General Contractor and the Major Subcontractors to cooperate and discuss with such Persons such construction matters, but after reasonable prior notice to Borrower of such discussions). Borrower shall at all times cause a complete set of the original plans (and all supplements thereto) relating to the construction of the Project to be maintained at the Project or construction office and available for inspection by such representatives.
9.22 Project Construction.
(a) Borrower will construct or cause the construction of the Construction Work in accordance with generally accepted engineering and construction practice, the Plans and Specifications, the Construction Schedule and Applicable Laws. Borrower will timely commence (but in no event later than sixty (60) days after the date hereof) construction of the Construction Work. Borrower shall cause such Construction Work to be completed by the Completion Date (other than Punch List items) subject to Section 14.27. Once begun, Borrower shall use its commercially reasonable efforts to cause the construction of the
Construction Work to be prosecuted with diligence in accordance with the Construction Schedule so as (i) to substantially complete the Base Building Work (including the satisfaction of the Base Building Substantial Completion Conditions') and obtain a temporary certificate of occupancy or such other permits or approvals as may be applicable to the Base Building Work on or before the Completion Date, free and clear of Liens or claims for Liens for materials supplied and for labor or services performed in connection with the construction of the Base Building Work and (ii) to complete each portion of the Construction Work prior to the date required pursuant to each Qualified Purchase Contract. Borrower shall not commence construction of the Construction Work, or any particular component or phase thereof, until Borrower has obtained all permits, licenses and approvals required under any Applicable Law for the commencement of construction of the Construction Work or such component or phase thereof, as the case may be. In no event will Borrower permit or suffer any party, including subcontractors, to commence proceedings to enforce any Lien unless and to the extent that said Lien is fully bonded; provided that such bonding effects the removal of any such Liens or claims.
9.23 [Intentionally Omitted].
9.24 Proceedings to Enjoin or Prevent Construction. If any proceedings are filed seeking to enjoin or otherwise prevent or declare invalid or unlawful all or any part of the Construction Work, Borrower, at its sole cost and expense, will use commercially reasonable efforts to cause such proceedings to be vigorously contested in good faith, and in the event of an adverse ruling or decision, use commercially reasonable efforts to prosecute all allowable appeals therefrom, and will, without limiting the generality of the foregoing, use commercially reasonable efforts to resist the entry or seek the stay of any temporary or permanent injunction that may be entered, and use its best efforts to bring about a favorable and speedy disposition of all such proceedings.
9.25 Administrative Agent's, Lenders' and Construction Consultant's Actions for their Own Protection Only. The authority herein conferred upon Administrative Agent, the Lenders and/or the Construction Consultant and any action taken by Administrative Agent, the Lenders and/or the Construction Consultant in making inspections, procuring sworn statements and waivers of lien, approving contracts and subcontracts and approving Plans and Specifications will be taken by Administrative Agent, the Lenders and the Construction Consultant for their own protection only, and none of Administrative Agent, the Lenders or the Construction Consultant shall be deemed to have assumed any responsibility to Borrower or any other party with respect to any such action herein authorized or taken by Administrative Agent, the Lenders or the Construction Consultant or with respect to the Construction Work, performance of contracts or subcontracts by any contractors or subcontractors, or prevention of claims for mechanics' liens. Any review, investigation or inspection conducted by Administrative Agent, the Lenders, the Construction Consultant or any other architectural or engineering consultants retained by Administrative Agent in order to verify independently Borrower's satisfaction of any conditions precedent to advances under this Agreement, Borrower's performance of any of the covenants, agreements and obligations of Borrower under this Agreement, or the validity of any representations and warranties made by Borrower hereunder (regardless of whether or not the party conducting such review, investigation or inspection should have discovered that any of such conditions precedent were not satisfied or that any such covenants, agreements or obligations were not performed or that any such representations or warranties were not true), shall not affect (or constitute a waiver by Administrative Agent or the Lenders of) (i) any of Borrower's representations, warranties or obligations under this Agreement or Administrative Agent's and the Lenders' reliance thereon or right to require the performance thereof or (ii) Administrative Agent's or the Lenders' reliance upon any certifications of Borrower or the Design Professionals required under this Agreement or any other facts, information or reports furnished to Administrative Agent and/or the Lenders by Borrower hereunder.
9.26 Sign and Publicity. If Administrative Agent requests, Borrower shall, to the extent permitted by Applicable Law, erect a sign approved by Administrative Agent and Borrower on the Project in a conspicuous location indicating that the financing for the Project has been provided by the Lenders. The cost of any such sign shall be paid by Administrative Agent. In addition, Administrative Agent and the Lenders shall have the right to publicize the making of the Loans notwithstanding the provisions of Section 14.23.
9.27 On-Site and Off-Site Materials. Borrower shall cause all materials supplied for or intended to be utilized in, the construction of the Project, but not affixed to or incorporated into the Project, to be stored on the Project site or at such other location as may be approved by Administrative Agent in writing, with adequate safeguards, as required by Administrative Agent, to prevent loss, theft, damage or commingling with other materials or projects, such safeguards
shall include: (i) prior to making disbursements for materials which are stored on the Project or on property owned by an Affiliate of Borrower in the immediate vicinity of the Project (the "Lay-Down Yard") and intended to be incorporated into the Improvements pursuant to the Plans (collectively, "On-Site Stored Materials"), Administrative Agent shall have received (A) invoices, bills of sale and other documentation evidencing the amount owed for such materials, Borrower's ownership thereof, and evidence of the release of any right, title or lien in respect thereof by any vendor, conditioned only upon disbursement to such vendor of the disbursement amount requested, (B) evidence that such materials are covered by the insurance policies required by this Construction Loan Agreement and are identified and protected against loss, theft and damage in a manner acceptable to Administrative Agent and the Construction Consultant, and (C) evidence that advances made by the Lenders for any stored materials, whether or not such stored materials are stored on the Project or the Lay-Down Yard, do not at any one time exceed in the aggregate $1,000,000 inclusive of the amount requested; (ii) with respect to advances for the purchase of certain major building materials which are ready for delivery to the Property but are temporarily stored at off-site locations other than the Project or property adjacent to the Project (collectively, "Off-Site Stored Materials"), approved by the Administrative Agent and the Construction Consultant prior to the delivery to the Project or incorporation into the Improvements of such Off-Site Stored Materials; provided, however, that in the case of each such advance, the Administrative Agent shall have received (A) a written statement from the manufacturer or storer of such Off-Site Stored Materials (or a provision in the purchase order therefor to such effect) that Administrative Agent, the Construction Consultant and either of their agents may fully inspect such Off-Site Stored Materials at all reasonable times, and (B) evidence that advances to be made by the Lenders for all Off-Site Stored Materials do not exceed, at any one time $500,000, inclusive of the amount requested; and (iii) with respect to advances for the purchase of certain finally assembled, fully fabricated furniture, fixtures and equipment, which are ready for delivery to the Project but are temporarily stored at off-site locations other than the Project (collectively, "Off-Site Stored Furnishings"), approved by Administrative Agent and the Construction Consultant prior to delivery to the Project; provided, however, that in the case of each such Loan, the conditions contained herein have been satisfied with respect to the Off-Site Stored Furnishings and Administrative Agent shall have received a written statement from the manufacturer or storer of such Off-Site Stored Furnishings (or a provision in the purchase order therefor to such effect) that Administrative Agent, the Construction Consultant and either of their agents may fully inspect such Off-Site Stored Furnishings at all reasonable times.
ARTICLE X
NEGATIVE COVENANTS OF BORROWER
Borrower covenants and agrees that, until the payment in full of the Obligations (other than contingent indemnification obligations), it will not do or permit, directly or indirectly, any of the following:
10.01 Fundamental Change.
(a) Mergers; Consolidations; Disposal of Assets. Borrower will not merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) any substantial part of its Properties and assets whether now owned or hereafter acquired (but excluding any sale or disposition of obsolete or excess furniture,
fixture and equipment in the ordinary course of business if same is replaced with new furniture, fixtures and equipment of equal or greater utility), or wind up, liquidate or dissolve, or enter into any agreement to do any of the foregoing.
(b) Organizational Documents. Without the prior written consent of Administrative Agent, Borrower will not make any Modification of the terms or provisions in any such Person's Organizational Documents.
10.02 Limitation on Liens. Borrower will not create, incur, assume or suffer to exist any Lien upon any of the Project or its interest therein, whether now owned or hereafter acquired, except for the Permitted Liens. Borrower shall not be in Default under this Section 10.02 if (a) a Lien for the performance of work or the supply of materials is filed against the Project unless Borrower fails to discharge such Lien by payment or bonding on or prior to the date that is the earlier of (i) forty-five (45) days after the date of filing of such lien and (ii) the date on which the Project is subject to a levy, execution, attachment or sequestration, or (b) so long as Borrower contests in good faith the validity or amount of any asserted lien and diligently prosecutes or defends an action appropriate to obtain a binding determination of the disputed matter, and in connection with such contest provides Administrative Agent with such security as it may require in its sole discretion to protect Administrative Agent against all loss, damage, and expense, including reasonable attorneys' fees, which Administrative Agent might incur if the asserted lien is determined to be valid.
10.03 Transfer; Pledge.
(d) Notwithstanding anything to the contrary in this Section 10.03, except as set forth in Section 10.03[b), any Change of Control or Transfer which would result in a Change of Control (in addition to any other consents or approvals required hereunder) shall be further subject to (i) Borrower providing prior written notice to Administrative Agent of any such transfer, (ii) no Default or Event of Default then existing, (iii) the proposed transferee being a corporation, partnership, joint venture, joint-stock company, trust or individual approved in writing by each Lender subject to a Limiting Regulation in its discretion, and (iv) payment to Administrative Agent on behalf of the Lenders of all costs and expenses incurred by Administrative Agent or any of the Lenders in connection with such transfer. Each Lender at the time subject to a Limiting Regulation shall, within ten (10) Business Days after receiving Borrower's notice of a proposed Change of Control or Transfer subject to this Section 10.03(d), furnish to Borrower a certificate (which shall be conclusive absent manifest error) stating that it is subject to a Limiting Regulation, whereupon such Lender shall have the approval right contained in clause (iii) above. Each Lender which fails to furnish such a certificate to Borrower during such ten (10) Business Day period shall be automatically and conclusively deemed not to be subject to a Limiting Regulation. If any Lender subject to a Limiting Regulation fails to approve a proposed transferee under clause (iii) above (any such Lender being herein called a "Rejecting Lender"), Borrower, upon three (3) Business Days notice, may (A) notwithstanding Section 2.02(h), prepay such Rejecting Lender's outstanding Loans in accordance with the provisions for prepayment set forth in Section 3.04 or (B) require that such Rejecting Lender transfer all of its right, title and interest under this Agreement and such Rejecting Lender's Note to an Eligible Assignee designated by Borrower that is approved by Administrative Agent provided that such Eligible Assignee assumes all of the obligations of such Rejecting Lender hereunder, and purchases all of such Rejecting Lender's Loans hereunder for consideration equal to the aggregate outstanding principal amount of such Rejecting Lender's Loans, together with interest thereon to the date of such purchase (to the extent not paid by Borrower), and satisfactory arrangements are made for payment to such Rejecting Lender of all other amounts accrued and payable hereunder to such Rejecting Lender as of the date of such transfer (including any fees accrued hereunder and any amounts that would be payable under Section 2.02(h) as if all such Rejecting Lender's Loans were prepaid in full on such date). Subject to the provisions of Section 14.07(b), such Eligible Assignee shall be a "Lender" for all purposes hereunder. Without prejudice to the survival of any other agreement of Borrower hereunder, the agreements of Borrower contained in Sections 5.01, 5.07 and 14.03 shall survive for the benefit of such Rejecting Lender with respect to the time period prior to such replacement.
10.04 Indebtedness. Borrower shall not create, incur or suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness except the following:
10.05 Investments. Borrower will not make or permit to remain outstanding any Investments except operating deposit accounts with banks.
10.06 Restricted Payments. Borrower shall make no Distributions until the Notes have been paid in full.
10.07 Change of Organization Structure; Location of Principal Office. Borrower shall not change its name or change the location of its chief executive office, state of formation or organizational structure unless, in each instance, Borrower shall have (a) given Administrative Agent at least thirty (30) days' prior notice thereof, (b) made all filings or recordings, and taken all other action, necessary or desirable under Applicable Law to protect and continue the priority of the Liens created by the Security Documents, (c) if reasonably requested by Administrative Agent, delivered to Administrative Agent an opinion of counsel reasonably satisfactory to Administrative Agent covering the matters referred to in clause (b) above, and (d) if reasonably requested by Administrative Agent, caused the Title Company to issue an endorsement to the Title Policy reflecting such change and indicating that there has been no change in the state of title to the Project as a result of such change.
10.08 Transactions with Affiliates. Except for transactions with Slifer, Smith and Frampton, payments of project management fees or reimbursable expenses to Vail Resorts Development Company as provided in the Project Budget, or as expressly permitted by this Agreement, Borrower shall not enter into, or be a party to, any transaction with an Affiliate of Borrower, except in the ordinary course of business and on terms which are fully disclosed to Administrative Agent, and are no less favorable to Borrower than would be obtained in a comparable arm's length transaction with an unrelated third party.
10.09 [Intentionally Omitted].
10.10 No Joint Assessment; Separate Lots. Borrower shall not suffer, permit or initiate the joint assessment of the Project with any other real property constituting a separate tax lot.
10.11 Zoning. Borrower shall not, without Administrative Agent's reasonably prior written consent, seek, make, suffer, consent to or acquiesce in any change or variance in any zoning or land use laws or other conditions of use of the Project or any portion thereof. Borrower shall not use or permit the use of any portion of the Project in any manner that could reasonably be expected to result in such use becoming a non-conforming use under any zoning or land use law or any other applicable law or Modify any agreements relating to zoning or land use matters or with the joinder or merger of lots for zoning, land use or other purposes, without the prior written consent of Administrative Agent. Without limiting the foregoing, in no event shall Borrower take any action that would reduce or impair either (a) the number of parking spaces at the Improvements required by Applicable Law or (b) access to the Project from adjacent public roads.
10.12 ERISA. Borrower shall not shall not take any action, or omit to take any action, which would (a) cause Borrower's assets to constitute "plan assets" for purposes of ERISA or the Code or (b) cause the Transactions to be a nonexempt prohibited transaction (as such term is defined in Section 4975 of the Code or Section 406 of ERISA) that could subject Administrative Agent and/or the Lenders, on account of any Loan or execution of the Loan Documents hereunder, to any tax or penalty on prohibited transactions imposed under Section 4975 of the Code or Section 502(i) of ERISA.
10.13 Amendment of Contracts and Government Approvals. Borrower shall not, without Administrative Agent's prior consent (which shall not be unreasonably withheld or delayed, except with respect to clause (ii) below and to the extent otherwise provided in this Section 10.13), (i) take any action to cancel or terminate any Project Document, any Material Agreement, or any Government Approval to which it is a party; (ii) sell, assign, pledge, transfer, mortgage, hypothecate or otherwise dispose of (by operation of law or otherwise) or encumber any part of its interest in such Project Documents, Material Agreements or Government Approvals; (iii) waive any material default under or breach of any material provisions of any such Project Document, Material Agreement or Government Approval or waive, fail to enforce, forgive or release any material right, interest or entitlement, howsoever arising, under or in respect of any material provisions of any such Project Document, Material Agreement or Government Approval or vary or agree to the variation in any material way of any material provisions of any such Project Document, Material Agreement or Government Approval or of the performance of any other Person under any such Project Document, Material Agreement or Government Approval; (iv) Modify any material provision of, or give any material consent under, any such Project Document (including, without limitation, the Plans and Specifications, the Construction Schedule, the General Contract and any Major Subcontract), Material Agreement or Government Approval, including, without limitation, any Modification which, subject to Purchaser Upgrades and Borrower's right to make Change Orders pursuant to the provisions of Section 10.14 below, would materially increase the Project Budget (including, without limitation, any Project Budget Line-Item); (v) petition, request or take any other legal or administrative action that seeks, or may reasonably be expected, to rescind, terminate or suspend any such Project Document, Material Agreement or Government Approval or amend or modify all or any material part thereof; or (vi) enter into, or permit the General Contractor to enter into any new Major Subcontract.
10.14 Change Orders; Purchaser Upgrades.
10.15 Sales Tax Increment Financing. Borrower shall not enter into any sales tax increment financing agreement or other agreement with any Governmental Authority relating in any way to the Project ("Sales Tax Increment Financing") without (a) obtaining prior written consent of Administrative Agent and (b) executing an assignment of the proceeds from such Sales Tax Increment Financing pursuant to an assignment agreement in form and substance satisfactory to Administrative Agent in its sole discretion, as additional Collateral for the Obligations hereunder.
10.16 Intentionally Omitted].
10.17 Anti-Terrorism Law. Borrower shall not (i) conduct any business or engage in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in Section 8.32 above, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Anti-Terrorism Order or any other Anti-Terrorism Law, or (iii) 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 any Anti-Terrorism Law (and Borrower shall deliver to the Lenders any certification or other evidence requested from time to time by any Lender in its reasonable discretion, confirming Borrower's compliance with this Section 10.17 and Section 8.32)).
ARTICLE XI
INSURANCE OR CONDEMNATION AWARDS 11.01 Casualties and Condemnations.
attorneys and experts, and cooperate with them in the carrying on or defense of any such proceedings.
11.02 Insurance Proceeds and Condemnation Awards.
Administrative Agent, after the deduction of expenses of collection, to the reduction or discharge of the Obligations, and (ii) subject to all other provisions of this Agreement, Administrative Agent shall continue to make Loan Advances to Borrower notwithstanding the existence of such Casualty or Condemnation.
(f) With respect to any Condemnation, (i) the Lenders shall not be limited to the interest paid on the Condemnation Award by the condemning authority but shall be entitled to receive out of the Condemnation Award interest at the rate or rates provided herein or in the Notes and this Agreement, (ii) if the Project or any portion thereof is subject to a Condemnation, provided that any Condemnation Awards are made available to Borrower for such purpose by Administrative Agent, Borrower shall promptly commence and diligently prosecute the Restoration of the Project and otherwise comply with the provisions of Section 11.03, (iii) if the Project is sold, through foreclosure or otherwise, prior to the receipt by Administrative Agent of the Condemnation Award, Administrative Agent and the Lenders shall have the right, whether or not a deficiency judgment on the Notes shall have been sought, recovered or denied, to receive the Condemnation Award, or a portion thereof sufficient to pay the Obligations. The failure by Borrower to apply Condemnation Awards in accordance with this Article XI shall be an Event of Default.
11.03 Application of Insurance Proceeds and Condemnation Awards.
(a) If either the Insurance Proceeds or the Condemnation Award are equal to or greater than the Insurance Threshold Amount or the Condemnation Threshold Amount, as applicable, Administrative Agent shall adjust the Project Budget to reflect any such Insurance Proceeds or Condemnation Award and shall make the Insurance Proceeds or Condemnation Award available to Borrower for Restoration so long as each of the following conditions are met (provided that, if at the time of any request for disbursement of Insurance Proceeds or Condemnation Awards Borrower shall fail to satisfy such conditions, Borrower shall be entitled, except as to clause (i), to cure such failure within 30 days after Administrative Agent's refusal to make such disbursement and resubmit such request for disbursement):
(b) Pending disbursement to Borrower, the Insurance Proceeds or Condemnation Awards shall be held by Administrative Agent in a Controlled Account. If the entire amount of Insurance Proceeds or a Condemnation Award are not required (i) to be made available for the Restoration or (ii) the conditions for Insurance Proceeds or Condemnation Awards to be made available to Borrower set forth in subsection (a) above are not satisfied and Borrower's right to cure such matters has expired, the Insurance Proceeds or Condemnation Award may (A) be retained and applied by Administrative Agent toward the payment of the Obligations not later than the end of the next Interest Period that is at least five (5) days after Borrower shall have failed to satisfy the funding conditions (subject to Borrower's cure rights), whether or not then due and payable, in such order, priority and proportions as Administrative
Agent in its sole discretion shall deem proper, or (B) at the sole discretion of Administrative Agent, the same may be paid, either in whole or in part, to Borrower for such purposes and upon such conditions as Administrative Agent shall designate.
ARTICLE XII
EVENTS OF DEFAULT
12.01 Events of Default. Any one or more of the following events shall constitute an "Event of Default":
(1) Guarantor Default. Any Event of Default shall occur under, or Guarantor shall revoke or attempt to revoke, contest or commence any action against or seeking to nullify or void its obligations under, any of the Guarantor Documents; or
12.02 Remedies. Upon the occurrence of an Event of Default and at any time thereafter during the continuance of such event, Administrative Agent may (subject to, and in accordance with, the provisions of Section 13.03) and, upon request of the Required Lenders shall, by written notice to Borrower, pursue any one or more of the following remedies, concurrently or successively, it being the intent hereof that none of such remedies shall be to the exclusion of any other:
(a) In the case of an Event of Default other than one referred to in clause (f! of Section 12.01 with respect to Borrower, terminate the Commitments and/or declare the Outstanding Principal Amount, and the accrued interest on the Loans and all other amounts payable by Borrower hereunder (including any amounts payable under Section 5.05) and under the Notes and the other Loan Documents to be forthwith due and payable whereupon such amounts shall be immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by Borrower; provided,
however, that in the case of the occurrence of an Event of Default referred to in clause (f) of Section 12.01 with respect to a Borrower Party, the Commitments shall automatically be terminated and the Outstanding Principal Amount, and the accrued interest on, the Loans and all other amounts payable by Borrower hereunder (including any amounts payable under Section 5.05), under the Notes and the other Loan Documents shall automatically become immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by Borrower;
behalf; and to prosecute and defend all actions or proceedings in connection with the Project or fixtures or equipment; to take action and require such performance as it deems necessary under any bonds furnished in connection with the construction of the Improvements and to make settlements and compromises with surety or sureties thereunder, and in connection therewith, to execute instruments of release and satisfaction; it being understood and agreed that this power of attorney shall be a power coupled with an interest and cannot be revoked;
WHETHER OR NOT ADMINISTRATIVE AGENT OR THE LENDERS ELECT TO EMPLOY ANY OR ALL OF THE REMEDIES AVAILABLE UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, NEITHER ADMINISTRATIVE AGENT NOR ANY OF THE LENDERS SHALL BE LIABLE FOR THE CONSTRUCTION OF OR FAILURE TO CONSTRUCT, COMPLETE OR PROTECT THE IMPROVEMENTS OR FOR PAYMENT OF ANY EXPENSES INCURRED IN CONNECTION WITH THE EXERCISE OF ANY REMEDY AVAILABLE TO ADMINISTRATIVE AGENT OR THE LENDERS OR FOR THE PERFORMANCE OR NON-PERFORMANCE OF ANY OTHER OBLIGATION OF BORROWER.
ARTICLE XIII
ADMINISTRATIVE AGENT
13.01 Appointment, Powers and Immunities. Each Lender hereby irrevocably appoints and authorizes Administrative Agent to act as its agent hereunder and under the other Loan Documents with such powers as are specifically delegated to Administrative Agent by the terms of this Agreement and of the other Loan Documents, together with such other powers as are reasonably incidental thereto. Administrative Agent shall be a party to each of the Loan Documents (other than the Notes) as secured party, beneficiary, indemnitee, and such other applicable capacities, on behalf of and for the benefit of Lenders (and each Lender hereby ratifies and reaffirms the Loan Documents so executed and agrees to be bound by the terms thereof) and hold all Collateral covered thereby for the benefit of the Lenders, and receive all payments or proceeds received in connection therewith for the undivided benefit and protection of the Lenders in accordance with the terms and conditions of this Agreement. As soon as practicable after each such receipt of proceeds by Administrative Agent, Administrative Agent shall determine the respective amounts to be distributed and promptly thereafter shall credit to itself the amount to which it is entitled (as Administrative Agent, Lender or otherwise) and wire the amounts to which the other Lenders are entitled in accordance with such written instruction as each Lender from time to time may deliver to Administrative Agent. Each Lender shall hold its
own Note and shall receive a copy of each Loan Document. Administrative Agent (which term as used in this Section 7 shall include reference to its Affiliates and its own and its Affiliates' officers, directors, employees and agents) shall not:
The relationship between and among Administrative Agent and each Lender is a contractual relationship only, and nothing herein shall be deemed to impose on Administrative Agent any obligations other than those for which express provision is made herein or in the other Loan Documents. Administrative Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. Administrative Agent may deem and treat the payee of a Note as the holder thereof for all purposes hereof unless and until a notice of the assignment or transfer thereof shall have been filed with Administrative Agent pursuant to Section 14.07. Except to the extent expressly provided in Sections 13.08, 13.10, and 13.11(g), the provisions of this Section 13 are solely for the benefit of Administrative Agent and the Lenders, and the Borrower shall not have any rights as a third-party beneficiary of any of the provisions hereof and the Administrative Agent and Lenders may, pursuant to a written agreement executed by all such Persons, Modify or waive such provisions of this Section 13 in their sole and absolute discretion.
13.02 Reliance by Administrative Agent. Administrative Agent shall be entitled to rely upon any certification, notice, document or other communication (including any thereof by telephone, telecopy, telegram or cable) reasonably believed by it to be genuine and correct and to
have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Administrative Agent. As to any matters not expressly provided for by this Agreement or any other Loan Document, Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by the Required Lenders, and such instructions of the Required Lenders and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders.
13.03 Borrower Defaults.
with respect to the possession, ownership, development, construction, control, operation, leasing, management and sale of the Project shall be made by Administrative Agent. All income or other money received after so acquiring title to or taking possession of the Project with respect to the Project, including income from the operation and management of the Project and the proceeds of a sale of the Project, shall be applied: First, to the payment or reimbursement of Administrative Agent for expenses incurred in accordance with the provisions of this Section 13 and to the payment of any fees and charges then due agent to the extent not paid by the Borrower; Second, to the payment of operating expenses with respect to the Project; Third, to the establishment of reasonable reserves for the operation of the Project; Fourth, to the payment or reimbursement of the Lenders for any advances made pursuant to Section 13.03(d); Fifth to fund any capital improvement, leasing and other reserves established at the discretion of Administrative Agent; and Sixth, pari passu to the Lenders in accordance with their respective Proportionate Shares, unless an Unpaid Amount is owed pursuant to Section 13.11, in which event such Unpaid Amount shall be deducted from the portion of such proceeds of the Defaulting Lender and be applied to payment of such Unpaid Amount to the Special Advance Lender.
13.04 Rights as a Lender. With respect to its Loan Commitment and the Loans made by it, U.S. Bank National Association (and any successor acting as "Administrative Agent" hereunder) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as Administrative Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include Administrative Agent in its individual capacity as Lender. U.S. Bank National Association (and any successor acting as "Administrative Agent" hereunder) and any of its Affiliates may (without having to account therefor to any other Lender) accept deposits from, lend money to, make investments in and generally engage in any kind of banking, investment banking, trust or other business with the Borrower (and any of its Affiliates) as if it were not acting as Administrative Agent, and U.S. Bank National Association (and any such successor) and any of its Affiliates may accept fees and other consideration from the Borrower for services in connection with this Agreement or otherwise without having to account for the same to the Lenders.
13.05 Indemnification. Each Lender agrees to indemnify Administrative Agent (to the extent not reimbursed by the Borrower, but without limiting the Obligations of the Borrower hereunder) ratably in accordance with their Proportionate Shares, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against Administrative Agent in its capacity as Administrative Agent (including by any Lender) arising out of or by reason of any investigation in or in any way relating to or arising out of this Agreement or any other Loan Document or any other documents contemplated by or referred to herein or therein (including the costs and expenses that the Borrower is obligated to pay hereunder) or the enforcement of any of the terms hereof or thereof; provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of Administrative Agent.
13.06 Non-Reliance on Administrative Agent and Other Lenders. Each Lender agrees that it has, independently and without reliance on Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and the Guarantor and its decision to enter into this Agreement and that
it will, independently and without reliance upon Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or under any other Loan Document. Subject to the provisions of Section 13.5 above, Administrative Agent shall not be required to keep itself informed as to the performance or observance by the Borrower or the Guarantor of this Agreement or any of the other Loan Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of the Borrower or the Guarantor. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by Administrative Agent hereunder, Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower or the Guarantor (or any of their Affiliates) that may come into the possession of Administrative Agent or any of its Affiliates. Without limiting the foregoing, Administrative Agent shall not be responsible in any manner to any Lender (or any permitted successor or assign of any Lender), and each Lender represents and warrants that it has not relied upon Administrative Agent for or in respect of, (a) the creditworthiness of Borrower and the risks involved to such Lender, (b) the effectiveness, enforceability, genuineness, validity, or the due execution of any Loan Document, (c) any representation, warranty, document, certificate, report, or statement made therein or furnished thereunder or in connection therewith, (d) the existence, priority, or perfection of any Lien granted or purported to be granted under any Loan Document, or (e) the observation of or compliance with any of the terms, covenants, or conditions of any Loan Document on the part of Borrower.
13.07 Failure to Act. Except for action expressly required of Administrative Agent hereunder and under the other Loan Documents, Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction from the Lenders of their indemnification obligations under Section 13.05 against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action.
13.08 Resignation of Administrative Agent. It is agreed by the Lenders that Administrative Agent shall remain Administrative Agent under this Agreement and the other Loan Documents throughout the term of the Loan; provided, however, Administrative Agent may resign at any time by giving at least thirty (30) days prior notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent that shall be a Person that (1) meets the qualifications of an Eligible Assignee and (2) has substantial experience in construction loan administration, and if such successor Administrative Agent is not a Lender, as long as no Event of Default exists, the Borrower shall have the right to approve such successor Administrative Agent, which approval shall not be unreasonably withheld, conditioned or delayed. If no successor Administrative Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent's giving of notice of resignation of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, that shall be a Person that meets the requirements of clauses (1) and (2) above, and if such successor Administrative Agent is not a Lender, the Borrower, as long as no Event of Default exists, shall have the right to approve such successor Administrative Agent, which approval shall not be unreasonably withheld, conditioned or delayed. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent
shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder; provided, however, that the retiring Administrative Agent shall not be discharged from any liabilities which existed prior to the effective date of such resignation. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section 13 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent.
13.09 Consents and Certain Actions under, and Modifications of, Loan Documents.
(i) Without the consent of all Lenders:
(ii) Without the consent of the Required Lenders:
(iii) Without the consent of the affected Lender, change such Lender's Proportionate Share (provided, however, that this clause shall not apply to reductions in or a deemed reduction in any Lender's Proportionate Share pursuant to Section 13.11 hereof, nor shall it be construed to prevent a Lender from assigning its interest in the Loan pursuant to Section 14.07).
(c) If Administrative Agent solicits any consents or approvals from the Lenders under any of the Loan Documents, each Lender shall within ten (10) Business Days of receiving such request, give Administrative Agent written notice of its consent or approval or denial thereof (or such shorter time as may be required under the applicable Loan Document for Administrative Agent to respond, in which case Lenders shall have the same time period minus one (1) Business Day); provided that if any Lender does not respond within such ten (10) Business Days, such Lender shall be deemed to have authorized Administrative Agent to vote such Lender's interest with respect to the matter which was the subject of Administrative Agent's solicitation as Administrative Agent elects. Any such solicitation by Administrative Agent for a consent or approval shall be in writing and shall include a description of the matter or thing as to which such consent or approval is requested and shall include Administrative Agent's recommended course of action or determination in respect thereof
13.10 Authorization. Administrative Agent is hereby authorized by the Lenders to execute, deliver and perform in accordance with the terms of each of the Loan Documents to
which Administrative Agent is or is intended to be a party and each Lender agrees to be bound by all of the agreements of Administrative Agent contained in such Loan Documents. The Borrower shall be entitled to rely on all written agreements, approvals and consents received from Administrative Agent as being that also of the Lenders, without obtaining separate acknowledgment or proof of authorization of same.
13.11 Defaulting Lenders.
Lenders under this Agreement and the other Loan Documents, including to advance Loans, to share losses incurred in connection with the Loan, including costs and expenses of enforcement of the Loans, to make advances to preserve the lien of the Security Instrument or to preserve and protect the Project or to effect completion of the Improvements to be constructed pursuant to the Loan Documents, shall be without regard to any adjustment in the Proportionate Shares occasioned by the acts of a Defaulting Lender. The Special Advance Lender shall be entitled to an amount (the "Unpaid Amount") equal to the applicable Advanced Amount, plus any unpaid interest due and owing with respect thereto, less any repayments thereof made by the Defaulting Lender immediately upon demand. The Defaulting Lender shall have the right to repurchase the senior participation in its Loans from the Special Advance Lender pursuant to subsection (f) below by the payment of the Unpaid Amount.
Agreement or the other Loan Documents, except to the extent a Defaulting Lender became a Defaulting Lender due to the gross negligence or willful misconduct of Administrative Agent and/or any Lender. Administrative Agent shall, after payment of any amounts due to any Special Advance Lender pursuant to the terms of subsection (c) above, set-off against any payments due to such Defaulting Lender for the claims of Administrative Agent and the other Non-Defaulting Lenders pursuant to this indemnity.
(1) A Defaulting Lender may cure a default arising out its failure to fund its Proportionate Share of an advance or to make any respective Loan required pursuant to this Agreement, and subject to the following, upon such cure shall no longer be deemed to be a Defaulting Lender, if, within five (5) days (the "Default Cure Period") of such default, it pays the full amount of the Unpaid Amount, together with interest thereon in respect of each day during the period commencing on the date such Advanced Amount was so paid by the Special Advance Lender until the date the Special Advance Lender recovers such amount at a rate per annum equal to the Federal Funds Rate in the event such cure is made within three (3) Business Days of such default; provided, however, if such Defaulting Lender fails to cure such default within such three (3) Business Days, the Special Advance Lender shall be entitled to recover, and such Defaulting Lender shall pay, such amount, on demand from Administrative Agent, together with interest thereon in respect of each day during the period commencing on such third (3rd) Business Day until the date the Special Advance Lender recovers such amount at a rate per annum equal to the Default Rate for each such day. If a Defaulting Lender pays the Unpaid Amount and interest due thereon within the Default Cure Period (or thereafter with the consent of Administrative Agent), such Defaulting Lender nonetheless shall be bound by any amendment to or waiver of any provision of, or any action taken or omitted to be taken by Administrative Agent and/or the other Lenders under, any Loan Document which is made subsequent to the Lender's becoming a Defaulting Lender and prior to its curing the default as provided in this Section 13.11(f); provided that such amendment or waiver of action was taken in accordance with the provisions of this Agreement. A Defaulting Lender shall have absolutely no right to cure any default after the expiration of the Default Cure Period unless Administrative Agent, in its sole discretion, elects to permit such cure.
(g) If any Lender becomes a Defaulting Lender and none of the other Lenders becomes a Special Advance Lender pursuant to Section 13.11(a), the Borrower shall have the right, provided there exists no Default or Event of Default that has not arisen as a result of the Defaulting Lender's failure to fund, to cause another financial institution acceptable to Administrative Agent to assume the Defaulting Lender's obligations with respect to the Advance Amount on the then-existing terms and conditions of the Loan Documents (such replacement institution, a "Replacement Lender"). It shall be a condition to such assumption that the Replacement Lender concurrently assumes the obligations of the Defaulting Lender with respect to the unfunded portion of the Commitments of such Defaulting Lender. Such assumption shall be pursuant to a written instrument reasonably satisfactory to Administrative Agent. Upon such assumption, the Replacement Lender shall become a "Lender" for all purposes hereunder, with a Loan Commitment in an amount equal to the Advance Amount, and the Defaulting Lender's Loan Commitment shall automatically be reduced by the Advance Amount. In connection with the foregoing, the Borrower shall execute and deliver to the Replacement Lender and the Defaulting Lender Replacement Notes. Such Replacement Notes shall be in amounts equal to, in the case of the Replacement Lender's note, the Advance Amount and, in the case of the Defaulting Lender's note, its Commitment, as reduced as aforesaid. Such replacement notes shall constitute "Notes" and
the obligations evidenced thereby shall be secured by the Security Instrument. In connection with the Borrower's execution of replacement notes as aforesaid, the Borrower shall deliver to Administrative Agent such evidence of the due authorization, execution and delivery of the replacement notes and any related documents as Administrative Agent may reasonably request. The execution and delivery of replacement notes as required above shall be a condition precedent to any further advances of Loan proceeds. Upon receipt of its replacement note, the Defaulting Lender will return to the Borrower its note(s) that was replaced; provided that the delivery of a replacement note to the Defaulting Lender pursuant to this Section 13.11(g) shall operate to void and replace the note(s) previously held by the Defaulting Lender regardless of whether or not the Defaulting Lender returns same as required hereby.
13.12 Amendments Concerning Agency Functions. Notwithstanding anything to the contrary contained in this Agreement, Administrative Agent shall not be bound by any Modification of this Agreement or any other Loan Document which affects its duties, rights, and/or functions hereunder or thereunder unless it shall have given its prior written consent thereto.
13.13 Liability of Administrative Agent. Administrative Agent shall not have any liabilities or responsibilities to the Borrower on account of the failure of any Lender (other than Administrative Agent in its capacity as a Lender) to perform its obligations hereunder or to any Lender on account of the failure of the Borrower to perform its obligations hereunder or under any other Loan Document.
13.14 Transfer of Agency Function. Without the consent of the Borrower or any Lender, Administrative Agent may at any time or from time to time transfer its functions as Administrative Agent hereunder to any of its offices wherever located in the United States; provided that Administrative Agent shall promptly notify the Borrower and the Lenders thereof.
13.15 Sharing of Payments, Etc. If any Lender shall obtain from the Borrower payment of any principal of or interest on any Loan owing to it or payment of any other amount under this Agreement or any other Loan Document through the exercise of any right of set-off, banker's
lien or counterclaim or similar right or otherwise (other than from Administrative Agent as provided herein), and, as a result of such payment, such Lender shall have received a greater percentage of the principal of or interest on the Loans or such other amounts then due hereunder or thereunder by the Borrower to such Lender than the percentage received by any other Lender, it shall promptly purchase from such other Lenders participations in (or, if and to the extent specified by such Lender, direct interests in) the Loans or such other amounts, respectively, owing to such other Lenders (or in interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all the Lenders shall share the benefit of such excess payment (net of any expenses that may be incurred by such Lender in obtaining or preserving such excess payment) pro rata in accordance with the unpaid principal of and/or interest on the Loans or such other amounts, respectively, owing to each of the Lenders. To such end, all the Lenders shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. Each Lender agrees that it shall turn over to Administrative Agent (for distribution by Administrative Agent to the other Lenders in accordance with the terms of this Agreement) any payment (whether voluntary or involuntary, through the exercise of any right of setoff or otherwise) on account of the Loans held by it in excess of its ratable portion of payments on account of the Loans obtained by all the Lenders. Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or Obligation of the Borrower. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a set-off to which Section 14.10 applies, then such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under Section 14.10 to share in the benefits of any recovery on such secured claim.
13.16 Bankruptcy of Borrower. In the event a bankruptcy or other insolvency proceeding is commenced by or against the Borrower or any Guarantor, Administrative Agent shall have the sole and exclusive right to file and pursue a joint proof of claim on behalf of the Lenders. Each Lender irrevocably waives its right to file or pursue a separate proof of claim in any such proceedings.
13.17 Termination. The rights and obligations of Administrative Agent and the Lenders shall terminate when the Obligations of Borrower hereunder have been paid and finally discharged in full and the obligations of the Lenders to advance funds to the Borrower under this Agreement are terminated or, if the Administrative Agent or Administrative Agent's nominee takes title to the Project by foreclosure or conveyance in lieu of foreclosure, when the Project is thereafter sold to a third-party purchaser. All indemnification provisions in favor of Administrative Agent herein and in the other Loan Documents shall survive the termination hereof.
ARTICLE XIV
MISCELLANEOUS
14.01 Non-Waiver; Remedies Cumulative. No failure on the part of Administrative Agent, any Lender or Borrower to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement or any other Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement or any other Loan Documents preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein and the other Loan Documents are cumulative and not exclusive of any remedies provided by law.
14.02 Notices.
(a) All notices, requests, demands, statements, authorizations, approvals, directions, consents and other communications provided for herein and under the Loan Documents (to which Borrower is a party) shall be given or made in writing and shall be deemed sufficiently given or served for all purposes as of the date (i) when hand delivered (provided that delivery shall be evidenced by a receipt executed by or on behalf of the addressee), (ii) one (1) Business Day after being sent by reputable overnight courier service (with delivery evidenced by written receipt) for next Business Day delivery, or (iii) with a simultaneous delivery by one of the methods in clause (i) or (ii) above, by facsimile, when sent, with confirmation and a copy sent by first class mail, in each case addressed to the intended recipient at the address specified below; or, as to any party, at such other address as shall be designated by such party in a notice to each other party hereto. Unless otherwise expressly provided in the Loan Documents, Borrower shall only be required to send notices, requests, demands, statements, authorizations, approvals, directions, consents and other communications to Administrative Agent on behalf of all of the Lenders.
If to Borrower: Gore Creek Place, LLC
c/o Vail Resorts Development Co
137 Benchmark Road
Avon, CO 81620
Attention: Mr. Greg Dickhens
Facsimile: 970-845-2555
With a copy to: Brownstein Hyatt & Farber, P.C.
410 Seventeenth Street
22
nd
Floor
Denver, CO 80202
Attention: Patricia L. Gruber, Esq.
Facsimile: 303-223-1111
If to Administrative Agent: U.S. Bank National Association
DN-CO-BB5R
918 Seventeenth Street, 5th Floor
Denver, CO 80202
Attention: Mr. Matthew Carrothers
Facsimile: 303-585-4198
With a copy to: U.S. Bank National Association
Real Estate Capital Markets
BC-MN-HO3R
800 Nicollet Mall
Minneapolis, Minnesota 55402-7020
Attention: Mr. Huvishka Ali
Facsimile: 972-3 86-83 70
With a copy to: Snell & Wilmer L.L.P.
1200 Seventeenth Street, Suite 1900
Denver, CO 80202
Attn: Thomas L. DeVine, Esq
Facsimile: 3 03 -634-2020
(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by Administrative Agent and the applicable Lender. Administrative Agent or Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.
14.03 Expenses, Etc. Borrower agrees to pay on demand or reimburse on demand to the applicable party: (a) all out-of-pocket costs and expenses of Administrative Agent (including, but not limited to, the reasonable legal fees and expenses of its counsel, (ii) due diligence expenses, including title insurance reports and policies, surveys, title and lien searches, appraisals (including the Appraisal and any additional Appraisals ordered as a result of Borrower's election to extend the Scheduled Maturity Date pursuant to Section 4.01), the Environmental Report, the Construction Consultant's Construction, Cost and Plan Review, (iii) accounting firms, (iv) insurance consultants and (v) the Construction Consultant) in connection with (A) the negotiation, preparation, execution and delivery of this Agreement and the other Loan Documents and the syndication, making and administration of the Loans hereunder, (B) the creation, perfection or protection of the Liens to be created by the Security Documents, (C) the negotiation or preparation of any Modification or waiver of any of the terms of this Agreement or any of the other Loan Documents (whether or not consummated) and the construction of the Improvements and (D) Administrative Agent's duties under this Agreement and the other Loan Documents; (b) all reasonable out-of-pocket costs and expenses of the Lenders and Administrative Agent (including the reasonable fees and expenses of legal counsel in connection with (i) any Default and any enforcement or collection proceedings resulting therefrom, including all manner of participation in or other involvement with (A) bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation proceedings, (B) judicial or regulatory proceedings and (C) workout, restructuring or other negotiations or proceedings (whether or not the workout, restructuring or transaction contemplated thereby is consummated) and (ii) the enforcement of this Section 14.03; and (c) all transfer, stamp, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Agreement or any of the other Loan Documents or any other document referred to herein or therein and all costs, expenses, taxes, assessments and other charges incurred in connection with any filing, registration, recording or perfection of any security interest contemplated by any Security Document or any other document referred to therein.
14.04 Indemnification. Borrower hereby agrees to (a) indemnify the Indemnified Parties from, and hold each of them harmless, from and against all damages, losses, claims, actions, liabilities (or actions, investigations or other proceedings commenced or threatened in respect thereof) penalties, fines, costs and expenses including reasonable attorneys' fees and expenses (collectively and severally, "Losses") which may be imposed upon, asserted against or incurred or paid by any of them resulting from the claims of any third party relating to or arising
out of (i) the Project, (ii) any of the Loan Documents or the Transactions, (iii) any ERISA Events, (iv) any Environmental Losses, (iii) any defective workmanship or materials occurring in the construction of the Improvements or any Restoration and (vi) any act performed or permitted to be performed by any Indemnified Party under any of the Loan Documents, except for Losses to the extent determined by a court of competent jurisdiction to be caused by the gross negligence or willful misconduct of an Indemnified Party (but the effect of this exception only eliminates the liability of Borrower with respect to the Indemnified Party (and if such Indemnified Party is not a Lender, the Lender on whose behalf such Indemnified Party was acting) to the extent such Indemnified Party has been adjudged to have so acted and not with respect to any other Indemnified Party), and (b) reimburse each Indemnified Party on demand for any expenses (including attorneys' fees and disbursements) reasonably incurred in connection with the investigation of, preparation for or defense of any actual or threatened claim, action or proceeding arising therefrom (excluding any action or proceeding where the Indemnified Party is not a party to such action or proceeding out of which any such expenses arise unless such Indemnified Party is required to participate or respond in connection with such action or proceeding (e.g., by way of deposition, discovery requests, testimony, subpoena or similar reason)). The Obligations shall not be considered to have been paid in full unless all obligations of Borrower under this Section 14.04 shall have been fully performed (except for contingent indemnification obligations for which no claim has actually been made pursuant to this Agreement). This Section 14.04 shall survive repayment in full of the Loans and the assignment, sale or other transfer of Administrative Agent's or any Lender's interest hereunder.
14.05 Amendments, Etc. Except as otherwise expressly provided in this Agreement or the other Loan Documents, and subject to the provisions of Section 13.11(a), this Agreement and the other Loan Documents may be Modified only by an instrument in writing signed by Borrower and the Required Lenders, or by Borrower and Administrative Agent acting with the consent of the Required Lenders, and any provision of this Agreement may be waived by Administrative Agent as expressly provided in any Loan Document, by the Required Lenders or by Administrative Agent acting with the consent of the Required Lenders; provided that: (a) no Modification or waiver shall, unless by an instrument signed by all of the Lenders or by Administrative Agent acting with the consent of all of the Lenders: (i) subject to Borrower's right to extend pursuant to Section 4.01, extend the date fixed for the payment of principal of or interest on any Loan or any fee hereunder, (ii) reduce the amount of any such payment of principal, (iii) reduce the rate at which interest is payable thereon or any fee is payable hereunder, (iv) alter the rights or obligations of Borrower to prepay Loans, (v) alter the manner in which payments or prepayments of principal, interest or other amounts hereunder shall be applied as between the Lenders or Types of Loans, (vi) alter the terms of this Section 14.05, (vii) Modify the definition of the term "Required Lenders" or Modify in any other manner the number or percentage of the Lenders required to make any determinations or waive any rights hereunder or to Modify any provision hereof, (viii) alter the several nature of the Lenders' obligations hereunder, (ix) release Borrower, any collateral or any Guarantor or otherwise terminate any Lien under any Security Document providing for collateral security (except that no such consent shall be required, and Administrative Agent is hereby authorized, to release any Lien covering the collateral under the Security Documents (A) as expressly provided in the Loan Documents and (B) upon payment of the Obligations in full in accordance with the terms of the Loan Documents), (x) agree to additional obligations being secured by such collateral security, or (xi) alter the relative priorities of the obligations entitled to the benefits of the Liens created under the Security Documents; (b) any Modification of Article XIII, or of any of the rights or duties of Administrative Agent hereunder, shall require the consent of Administrative Agent and
the Required Lenders; and (c) no Modification shall increase the Commitment of any Lender without the consent of such Lender. Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, Administrative Agent Administrative Agent is hereby authorized to enter into Modifications to the Loan Documents which are ministerial in nature, including the preparation and execution of Uniform Commercial Code forms, and Assignments and Acceptances.
14.06 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.
14.07 Assignments and Participations.
14.08 Survival. The obligations of Borrower under Sections 5.01, 5.05, 5.07, 14.03, 14.04 and 14.12, and the obligations of the Lenders under Sections 13.05 and 13.11(e), shall survive the repayment of the Obligations and the termination of the Commitments and, in the case of any Lender that may assign any interest under the Loan Documents in accordance with the terms thereof including any Lender's interest in its Commitment or Loans hereunder, shall survive the making of such assignment, notwithstanding that such assigning Lender may cease to be a "Lender" hereunder. In addition, each representation and warranty made, or deemed to be made by a Request for Loan Advance, herein or pursuant hereto by Borrower shall survive the making of such representation and warranty, and no Lender shall be deemed to have waived, by reason of making any Loan, any Default that may arise by reason of such representation or
warranty proving to have been false or misleading, notwithstanding that such Lender or Administrative Agent may have had notice or knowledge or reason to believe that such representation or warranty was false or misleading at the time such Loan was made.
14.09 Multiple Copies. Each document to be delivered to Administrative Agent hereunder or under any other Loan Document shall be delivered in duplicate.
14.10 Right of Set-off.
14.11 Intentionally Omitted.
14.12 Brokers. Borrower hereby represents to Administrative Agent and each Lender that it has not dealt with any broker, underwriters, placement agent, or finder in connection with the Transactions. Borrower hereby agrees to indemnify and hold Administrative Agent and each 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.
14.13 Estoppel Certificates.
14.14 Preferences. To the extent that Borrower makes a payment or payments to Administrative Agent and/or any Lender, 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 Administrative Agent or a Lender, as the case may be.
14.15 Certain Waivers. Borrower hereby irrevocably and unconditionally waives (a) notice of any actions taken by Administrative Agent or any Lender hereunder or under any other Loan Document or any other agreement or instrument relating thereto except to the extent (i) otherwise expressly provided herein or therein or (ii) Borrower is not, pursuant to Applicable Law, permitted to waive the giving of notice, (b) all other notices, demands and protests, and all other formalities of every kind in connection with the enforcement of Borrower's obligations hereunder and under the other Loan Documents, the omission of or delay in which, but for the provisions of this Section 14.15, might constitute grounds for relieving Borrower of any of its obligations hereunder or under the other Loan Documents, except to the extent that Borrower is not, pursuant to Applicable Law, permitted to waive the giving of notice, (d) any requirement that Administrative Agent or any Lender protect, secure, perfect or insure any lien on any collateral for the Loans or exhaust any right or take any action against Borrower or any other
Person or against any collateral for the Loans, (e) any right or claim of right to cause a marshalling of Borrower's assets and (f) all rights of subrogation or contribution, whether arising by contract or operation of law or otherwise by reason of payment by Borrower pursuant hereto or to the other Loan Documents.
14.16 Entire Agreement. This Agreement, the Notes and the other Loan Documents constitute the entire agreement between Borrower, Administrative Agent and the Lenders with respect to the subject matter hereof and all understandings, oral representations and agreements heretofore or simultaneously had among the parties are merged in, and are contained in, such documents and instruments.
14.17 Severability. If any provision of this Agreement shall be held by any court of competent jurisdiction to be unlawful, void or unenforceable for any reason as to any Person or circumstance, such provision or provisions shall be deemed severable from and shall in no way affect the enforceability and validity of the remaining provisions of this Agreement.
14.18 Captions. The table of contents and captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement.
14.19 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Agreement by signing any such counterpart.
14.20 GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF COLORADO, EXCEPT TO THE EXTENT OTHERWISE SPECIFIED IN ANY OF THE LOAN DOCUMENTS.
14.21 SUBMISSION TO JURISDICTION. BORROWER, ADMINISTRATIVE AGENT AND EACH OF THE LENDERS HEREBY IRREVOCABLY (I) AGREE THAT ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES, THE GUARANTY, ANY SECURITY DOCUMENT, OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN A COURT OF RECORD IN THE STATE OF COLORADO, CITY AND COUNTY OF DENVER OR IN THE COURTS OF THE UNITED STATES OF AMERICA LOCATED IN SUCH STATE AND COUNTY, (II) CONSENT TO THE JURISDICTION OF EACH SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, (III) WAIVE ANY OBJECTION WHICH IT MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY OF SUCH COURTS AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND (IV) AGREE AND CONSENT THAT ALL SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING IN COLORADO STATE OR FEDERAL COURT SITTING IN DENVER, MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO BORROWER, ADMINISTRATIVE AGENT OR A LENDER, AS APPLICABLE, AT THE ADDRESS FOR NOTICES PURSUANT TO SECTION 14.02 HEREOF, AND SERVICE SO MADE SHALL BE COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF ADMINISTRATIVE AGENT OR ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF
ADMINISTRATIVE AGENT OR ANY LENDER TO BRING ANY SUIT, ACTION OR PROCEEDING AGAINST BORROWER OR THE PROPERTY OF BORROWER IN THE COURTS OF ANY OTHER JURISDICTIONS.
14.22 WAIVER OF JURY TRIAL . , COUNTERCLAIM. EACH OF BORROWER, ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES, THE GUARANTY, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS. BORROWER FURTHER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, IN CONNECTION WITH ANY LEGAL PROCEEDING BROUGHT BY OR ON BEHALF OF ADMINISTRATIVE AGENT OR THE LENDERS WITH RESPECT TO THIS AGREEMENT, THE NOTES , THE OTHER LOAN DOCUMENTS OR OTHERWISE IN RESPECT OF THE LOANS, ANY AND EVERY RIGHT BORROWER MAY HAVE TO (A) INTERPOSE ANY COUNTERCLAIM THEREIN, OTHER THAN A COMPULSORY COUNTERCLAIM, AND (B) HAVE THE SAME CONSOLIDATED WITH ANY OTHER OR SEPARATE SUIT, ACTION OR PROCEEDING. NOTHING CONTAINED IN THE IMMEDIATELY PRECEDING SENTENCE SHALL PREVENT OR PROHIBIT BORROWER FROM INSTITUTING OR MAINTAINING A SEPARATE ACTION AGAINST ADMINISTRATIVE AGENT OR THE LENDERS WITH RESPECT TO ANY ASSERTED CLAIM.
14.23 Confidentiality. Each of Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information that may be disclosed (a) to its Subsidiaries and Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 14.23, to (i) any assignee or pledgee of or Participant in, or any prospective assignee or pledgee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to Borrower and its obligations, (g) with the consent of Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 14.23 or (ii) becomes available to Administrative Agent or any Lender on a nonconfidential basis from a source other than Borrower. For the purposes of this Section 14.23, "Information" shall mean all information received from or on behalf of Borrower relating to Borrower, its Subsidiaries or Affiliates or their respective businesses, other than any such information that is available to Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by Borrower; provided that in the case of information received from Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section 14.23 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. Notwithstanding anything herein to the
contrary, the information subject to this Section 14.23 shall not include, and Administrative Agent and each Lender may disclose without limitation of any kind, any information with respect to the "tax treatment" and "tax structure" (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to Administrative Agent or such Lender relating to such tax treatment and tax structure; provided that with respect to any document or similar item that in either case contains information concerning the tax treatment or tax structure of the transactions as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to the tax treatment or tax structure of the Loans and transactions contemplated hereby.
14.24 Usury Savings Clause. It is the intention of Borrower, Administrative Agent and the Lenders to conform strictly to the usury and similar laws relating to interest payable on loans from time to time in force, and all Loan Documents between Borrower, Administrative Agent and the Lenders, whether now existing or hereafter arising and whether oral or written, are hereby expressly limited so that in no contingency or event whatsoever, whether by acceleration of maturity hereof or otherwise, shall the amount paid or agreed to be paid in the aggregate to the Lenders as interest (whether or not designated as interest, and including any amount otherwise designated by or deemed to constitute interest by a court of competent jurisdiction) hereunder or under the other Loan Documents or in any other agreement given to secure the Loans, or in any other document evidencing, securing or pertaining to the Loans, exceed the maximum amount (the "Maximum Rate") permissible under Applicable Laws. If under any circumstances whatsoever fulfillment of any provision hereof, of this Agreement or of the other Loan Documents, at the time performance of such provisions shall be due, shall involve exceeding the Maximum Rate, then, ipso facto, the obligation to be fulfilled shall be reduced to the Maximum Rate. For purposes of calculating the actual amount of interest paid and/or payable hereunder in respect of laws pertaining to usury or such other laws, all sums paid or agreed to be paid to the Lenders for the use, forbearance or detention of the Loans evidenced hereby, outstanding from time to time shall, to the extent permitted by Applicable Law, be amortized, pro-rated, allocated and spread from the date of disbursement of the proceeds of the Notes until payment in full of all of such indebtedness, so that the actual rate of interest on account of such Loans is uniform through the term hereof. If under any circumstances any Lender shall ever receive an amount which would exceed the Maximum Rate, such amount shall be deemed a payment in reduction of the principal amount of the applicable Loans and shall be treated as a voluntary prepayment under this Agreement and shall be so applied in accordance with the provisions of this Agreement, or if such excessive interest exceeds the outstanding amount of the applicable Loans and any other Obligations, the excess shall be deemed to have been a payment made by mistake and shall be refunded to Borrower.
14.25 Controlled Accounts. Borrower hereby agrees with Administrative Agent, as to any Controlled Account into which this Agreement requires Borrower to deposit funds, as follows:
(a) Establishment and Maintenance of the Controlled Account.
(i) Each Controlled Account (A) shall be a separate and identifiable account from all other funds held by the Depository Bank and (B) shall contain only funds required to be deposited pursuant to this Agreement. Any interest which may accrue on the amounts on deposit in a Controlled Account shall be added to and shall become part of the
balance of such Controlled Account. Borrower, Administrative Agent and the applicable Depository Bank shall enter into an agreement (the "Controlled Account Agreement"), in form and content acceptable to Administrative Agent which shall govern the Controlled Account and the rights, duties and obligations of each party to the Controlled Account Agreement.
(ii) The Controlled Account Agreement shall provide that (A) the Controlled Account shall be established in the name of Administrative Agent (on behalf of the Lenders), (B) the Controlled Account shall be subject to the sole dominion, control and discretion of Administrative Agent, and (C) neither Borrower nor any other Person, including, without limitation, any Person claiming on behalf of or through Borrower, shall have any right or authority, whether express or implied, to make use of or withdraw, or cause the use or withdrawal of, any proceeds from the Controlled Account or any of the other proceeds deposited in the Controlled Account, except as expressly provided in this Agreement or in the Controlled Account Agreement.
14.26 Financing Statements. Borrower authorizes Administrative Agent to file such financing statements (and any continuations statements with respect thereto) under the Uniform Commercial Code as Administrative Agent may deem necessary in order to perfect or maintain the perfection of any security interest granted or to be granted to Administrative Agent pursuant to any of the Loan Documents, in such jurisdictions as Administrative Agent may elect.
14.27 Unavoidable Delay. If the work of construction is directly affected and delayed by an Unavoidable Delay, Borrower must notify Administrative Agent in writing within ten (10) Business Days after the occurrence of any such Unavoidable Delay. So long as no Event of Default has occurred and is continuing and such notice has been given in a timely manner, and provided further that in each case, (i) the cause of the Unavoidable Delay is not within the
control of Borrower, (ii) after giving effect to the consequences of each such delay, the Loans shall remain In Balance, (iii) Borrower shall use all commercially reasonable efforts to mitigate the delay caused by such event of Unavoidable Delay, and (iv) Administrative Agent reasonably acknowledges that such delay is due to one of the foregoing causes (which acknowledgment shall not be unreasonably withheld or delayed), then Administrative Agent shall extend the Completion Date and the time for performance of any other construction obligations hereunder by a period of time equal to the period of such Unavoidable Delay. No such extension shall affect the time for performance of, or otherwise modify, any of Borrower's other Obligations under the Loan Documents or the maturity of the Notes. Neither Administrative Agent nor any Lender shall be liable in any way for Administrative Agent's or such Lender's failure to perform or delay in performing under the Loan Documents, and Administrative Agent may suspend or terminate all or any portion of its and the Lenders' obligations under the Loan Documents if such delay or failure to perform results directly or indirectly from, or is based upon, an Unavoidable Delay.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written.
BORROWER:
GORE CREEK PLACE, LLC, a Colorado limited liability company
By: The Vail Corporation, a Colorado corporation, its Managing Member
By: _________________________________
Gregory S. Dickens
Authorizes Agent
[Signatures continued on next page.]
ADMINISTRATIVE AGENT:
U.S. Bank National Association, a national banking association, as Administrative Agent for the Lenders
By: ____________________________________
Matthew W. Carrothers
Assistant Vice President
[Signatures continued on next page.]
LENDER:
U.S. Bank National Association, a national banking association
By: _________________________________
Matthew W. Carrothers
Assistant Vice President
[Signatures continued on next page.]
Exhibit A
Description of Land
LOT 3, WEST DAY SUBDIVISION, ACCORDING TO THE PLAT RECORDED MARCH 10, 2005 RECEPTION NO. 908760, COUNTY OF EAGLE, STATE OF COLORADO
Exhibit B
Project Budget
(See attached)
Exhibit C
List of Commitments and Proportionate Shares
Lender |
Amount of Commitment |
Proportionate Share |
U.S. Bank National Association |
$30,000,000 |
100% |
Total: |
$30,000,000 |
100% |
Exhibit D
Qualified Purchase Contracts
See Attached
Gore Creek Place, LLC
Contract List 16 Units
as of 7/11/05
Unit |
Buyer |
Date of Execution |
Date Amend. Exec. |
1W |
Robert B. Carey |
8/13/2004 |
10/15/2004 |
2E |
Mark Greenhill |
7/22/2004 |
10/12/2005 |
3W |
Emilio Azarraga |
1/11/2005 |
N/A |
4E |
ACCP Investments, LLC |
1/4/2005 |
|
5W |
Alfonso de Angoitia |
1/11/2005 |
|
6E |
Kenneth Schiciano |
1/18/2005 |
2/25/2005 |
7W |
Share Syndicate XIII, LLC |
9/8/2004 |
9/8/2004 |
8E |
Jan Sauvage Trust |
9/20/2004 |
10/12/2004 |
9 |
Wayne Ruting |
7/22/2004 |
10/12/2004 |
10 |
Luis Orvananos |
11/4/2004 |
N/A |
11 |
Castletop Capital Equities |
1/24/2005 |
N/A |
12 |
Arthur Rhein |
7/22/2004 |
4/17/2005 |
13 |
Jose Ortega |
7/22/2004 |
10/21/2004 |
14 |
John Klutznick |
7/22/2004 |
10/11/2004 |
15 |
Jim Sepic |
7/22/2004 |
7/22/2004 |
16 |
Jeffrey Mascio |
7/22/2004 |
7/22/2004 |
Exhibit E
List of Plans and Specifications
1. [___________________]
2. [___________________]
3. [___________________]
4. [___________________]
Exhibit F
[Reserved]
Exhibit G
Form of Request for Continuation or Conversion
REQUEST FOR CONTINUATION OR CONVERSION
Pursuant to Section [_____] of that certain Construction Loan Agreement among [______________] ("Borrower"), the Lenders party thereto, and U.S. Bank National Association, as Administrative Agent for the Lenders ("Administrative Agent"), this represents Borrower's irrevocable notice to the Administrative Agent of Borrower's intention to:
Borrower certifies that:
[Signature Page Follows]
DATED:___________________________________________________
BORROWER:
GORE CREEK PLACE, LLC, a Colorado limited liability company
By: The Vail Corporation, a Colorado corporation, its Managing Member
By: ________________________
Gregory S. Dickhens
Authorized Agent
Exhibit H
Form of Request for Loan Advance
REQUEST FOR LOAN ADVANCE
_______________________, 200__
Re: U.S. BANK NATIONAL ASSOCIATION, as Administrative Agent, Loans in the aggregate amount of $[ ] to [____________________]
Project: [INSERT ADDRESS]
Ladies and Gentlemen:
Reference is made to that certain Construction Loan Agreement dated 200__ among U.S. BANK NATIONAL ASSOCIATION, as Administrative Agent, certain lenders party thereto and the undersigned (the "Construction Loan Agreement"). Terms not defined in this Request for Loan Advance shall have the same meaning as in the Construction Loan Agreement.
This Request for Loan Advance (i) is request No. under the Construction Loan
Agreement, (ii) constitutes Borrower's request to borrow Loans in the amounts and in the manner set forth below and (iii) is otherwise subject to the terms of the Construction Loan Agreement. The information relating to the proposed Loans is as follows:
Attached to this Request for Loan Advance are the following items:
A To the extent not previously delivered to Administrative Agent, for funds due under the General Contract, copies of the General Contractor's invoices relating to payments requested under this Request for Loan Advance, together with paid invoices evidencing payment of funds previously advanced to the General Contractor pursuant to Loans, provided, however, presentation of invoices shall not be required when the amount of the payment requested from the proceeds of the Advance is less than $100,000; in those circumstances, presentation of general ledger entries evidencing the amount due shall be sufficient;
In connection with this advance, Borrower hereby certifies that the following are true and
correct:
The undersigned requests that the requested Loans be advanced by depositing the same into Borrower's account to be designated by Borrower (Account No________________). The person signing
this Request for Loan Advance on behalf of Borrower represents and warrants to you that such person is authorized to execute this letter on behalf of Borrower.
BORROWER:
GORE CREEK PLACE, LLC, a Colorado limited liability company
By: The Vail Corporation, a Colorado corporation, its Managing Member
By:___________________________________
Name & Title:
Schedule 6.01
Closing Conditions
(I) Construction Status. The most recent General Contractor's progress payment request approved by the Developer showing the percentage of completion, the amount funded and Change Order status.
Schedule 6.02
Conditions to Loans
(1) Additional Project Documents and Plans and Plans and Specifications. To the extent not previously received and approved by Administrative Agent, Administrative Agent shall have received and approved all Project Documents and all Plans and specifications relating to the aspect of the Improvements for which such Loan is being requested.
(m) Other Documents. Such other documents and items as Administrative Agent may reasonably request.
Schedule 6.03
Conditions to Final Loans
(j) Engineering Report. At Borrower's expense, a report from the Construction Consultant, satisfactory in form and content to Administrative Agent, which shall verify that the Construction Work has been completed in accordance with the Plans and Specifications, approved by the appropriate Governmental Authorities and that the Project, and the Improvements constructed thereon, satisfy all Applicable Law.
Schedule 8.05
Pending Litigation
None.
Schedule 8.10
Organizational Chart
(See attached)
Schedule 8.14
Government Approvals
Part A - Existing Approvals Obtained
(i) |
Town of Vail Planning Commission Approval; |
(ii) |
Town of Vail Design Review Board Approvals; |
(iii) |
Town Council/Town of Vail Approval of Development Agreement and Amendment(s) thereto; |
(iv) |
Town of Vail Covenant Condemnation Approval and Recordation; |
(v) |
Building Permit(s); |
(vi) |
Lot 3 Resubdivision Plat; |
(vii) |
HUD Registration Approval; |
Part B - Approvals to be Obtained at Later Date
(viii) |
Temporary Certificate of Occupancy; |
(ix) |
Certificate of Occupancy; |
(x) |
Condominium Project Document Approvals (Condominium Map and Declaration, and any Amendments and Supplements thereto); and |
(xi) |
Design Board Reapprovals resulting from Owner Change Orders). |
Schedule 9.05
Insurance Requirements
I. PROPERTY INSURANCE
An ORIGINAL (or certified copy) Builder's Causes of as - Special Form ("All-Risk"), Completed Value, Non-Reporting Form Policy or ORIGINAL Acord 27 Certificate of Insurance naming the borrowing entity as an insured, reflecting coverage of 100% of the replacement cost, and written by a carver approved by Lender with a current A.M. Best's Insurance Guide Rating of at least A- IX (which is authorized to do business in the state in which the property is located) that affirmatively includes the following:
U.S. Bank National Association
918 17th Street, Fifth Floor
Denver, Colorado 80202
Attention: Matthew Carrothers
An ORIGINAL (or certified copy) Causes of Loss-Special Form ("All-Risk") Hazard Insurance Policy or ORIGINAL Acord 27 Certificate of Insurance naming the borrowing entity as an insured, reflecting coverage of 100% of the replacement cost, and written by a carrier approved by Lender with a current A.M. Best's Insurance Guide Rating of at least A- IX (which is authorized to do business in the state in which the property is located) that affirmatively includes the following
U.S. Bank National Association
918 17th Street, Fifth Floor
Denver, Colorado 80202
Attention: Matthew Carrothers
(i) The total projected gross rental income from tenant occupancy of the Project as set forth in the Budget,
(ii) The amount of all charges which are the legal obligation of tenants and which would otherwise be the obligation of Borrower, and
(iii) The fair rental value of any portion of the Project which is occupied by Borrower.
II. LIABILITY INSURANCE
An ORIGINAL Acord 25 Certificate of General Comprehensive Liability Insurance naming the borrowing entity as an insured, providing coverage on an "occurrence" rather than a "claims made" basis and written by a carrier approved by Lender with a current A.M. Best's Insurance Guide Rating of at least A- IX (which is authorized to do business in the state in which the property is located) that affirmatively includes the following:
Additional Insured Endorsement naming U.S. Bank National Association as an additional insured with a 10-day notice to Lender in the event of cancellation, non-renewal or material change. A Severability of Interests provision should be included
Address for U.S. Bank National Association is as follows:
U.S. Bank National Association
918 17th Street, Fifth Floor
Denver, Colorado 80202
Attention: Matthew Carrothers
III. WORKER'S COMPENSATION
To the extent not provided by the General Contractor ORIGINAL Certificate indicating Worker's Compensation coverage in the statutory amount and Employer's Liability Coverage with minimum limits of $500,000 / $500,000 / $500,000 naming the General Contractor and written by a carrier approved by Lender.
Exhibit 10.22(b)
COMPLETION GUARANTY AGREEMENT
In order to induce U.S. BANK NATIONAL ASSOCIATION, a national banking association, as Administrative Agent under the Construction Loan Agreement for the Lenders therein (hereinafter, together with its successors and assigns, referred to as the "Bank"), to make advances to GORE CREEK PLACE, LLC, a Colorado limited liability company (hereinafter referred to as the "Borrower"), in connection with a construction loan, pursuant to and in accordance with a Construction Loan Agreement, dated as of even date herewith, by and between the Borrower and the Bank (hereinafter referred to as the "Construction Loan Agreement") and evidenced by one or more promissory notes of even date herewith in the maximum aggregate principal amount of $30,000,000 (hereinafter referred to, collectively, as the "Note"), the undersigned, THE VAIL CORPORATION, a Colorado corporation (hereinafter referred to as the "Guarantor"), hereby agrees as follows pursuant to this Completion Guaranty Agreement (this "Guaranty"):
1. Subject to the terms hereof, the Guarantor unconditionally and absolutely guarantees to the Bank, following an Event of Default by Borrower, completion of construction of the Improvements (as defined in the Construction Loan Agreement) in the manner required by the Construction Loan Agreement, the Note and the other documents and instruments executed in connection therewith (all of the foregoing being hereinafter collectively referred to as the "Loan Documents"). Specifically, following an Event of Default under the Loan Documents by Borrower and written request to Guarantor from Bank for performance hereunder, the Guarantor agrees:
against the consequences of the foreclosure or enforcement of such liens, if the Borrower shall fail to take such actions;
2. Without in any way limiting the generality of the foregoing, following written request from Bank for performance by Guarantor hereunder to complete construction of the Improvements, Bank shall make available any undisbursed Commitments which are not subject to legal impairment to disbursement pursuant to a court order, a mechanic's or materialman's lien, a bankruptcy proceeding or notice to disburser and which have been designated in the Project Budget for the payment of Project Costs directly related to the construction of the Improvements. Such funds shall be disbursed only upon satisfaction by Guarantor of all requirements for disbursement set forth in the Construction Loan Agreement and in accordance with the disbursement procedures set forth in the Construction Loan Agreement, and any amendments thereof, except that Guarantor shall not be required to satisfy Borrower's requirements set forth in Sections 6.01 (d) and 6.02 (a) and (c)(i), (or to cure any Events of Default by Borrower in connection with the matters addressed in those sections) nor shall Guarantor be obligated to repay to Bank and Lenders the Loans. In connection with Guarantor's obligations hereunder, Guarantor shall be entitled to all rights of Borrower under the Construction Loan Agreement to reallocate the Borrower Contingency Fund so long as Guarantor has satisfied the requirements set forth in the preceding sentence. In the event that Guarantor does not satisfy all of the requirements for disbursement of Loans set forth hereinabove, does not comply with the disbursement procedures set forth in the Construction Loan Agreement following a request from Bank pursuant to Paragraph 1, or any representation warranty or certification made by Guarantor in the Representation Agreement shall prove to be false or misleading: (i) Bank shall have no further obligation to disburse any portion of the Commitments to Guarantor; (ii) Bank may pursue whatever remedies it may have available at law or in equity for breach of such terms and conditions; and (iii) at Bank's option, to be exercised in its sole discretion, Guarantor shall perform the Completion Obligations at its sole cost and expense without any right or recourse to any portion of the Commitments or Bank may complete the Project itself or cause the Project to be completed by a third party and charge the entire cost thereof to Guarantor. In connection with the Guarantor's obligations hereunder, whenever it is necessary for Guarantor to cure an Event of Default in order to satisfy any such requirement or procedure for disbursements described herein, Guarantor shall have such time to cure an Event of Default as may be granted by Bank, in its sole discretion, but in no event less
than ten (10) Business Days after Guarantor receives a request from Bank under Paragraph 1 for performance hereunder.
Borrower for Events of Default during any period of time that Guarantor is performing its obligations hereunder and satisfying the requirements for disbursement of Loans pursuant paragraph 2 hereof.
8. Without limiting the generality of Paragraph 5 above, the Guarantor hereby
consents and agrees that, at any time and from time to time:
all in such manner and upon such terms as the Bank may deem proper, and without notice to or further assent from the Guarantor, and all without affecting this Guaranty or the obligations of the Guarantor hereunder, which shall continue in full force and effect until all of the obligations of the Guarantor hereunder shall have been fully paid and performed.
9. The Guarantor hereby waives notice of acceptance of this Guaranty, presentment, demand, protest, notice of the occurrence of an event of default under the Loan Documents and any other notice of any kind whatsoever, with respect to any or all of the obligations of Guarantor hereunder and promptness in making any claim or demand hereunder; but no act or omission of any kind shall in any way affect or impair this Guaranty.
10. The Guarantor hereby represents and warrants as follows:
under any indenture or loan or credit agreement or any other agreement, lease or instrument to which the Guarantor is a party or by which Guarantor or its properties may be bound or affected; and the Guarantor is not in default under any such law, rule, regulation, order, it, judgment, injunction, decree, determination or award or any such indenture, agreement, lease or instrument.
If to Guarantor: The Vail Corporation
137 Benchmark Road
Avon, Colorado 81620
Attention: Mr. Greg Dickhens
Facsimile: 970-845-2555
With a copy to: Brownstein Hyatt & Farber, P.C.
410 Seventeenth Street Twenty-Second Floor
Denver, Colorado 80202
Attention: Patricia L. Gruber, Esq.
Facsimile: 303-223-1111
If to Bank: U.S. Bank National Association
DN-CO-BB5R
918 Seventeenth Street, 5th Floor
Denver, Colorado 80202
Attention: Mr. Matthew Carrothers
Facsimile: 303-585-4198
With a copy to: U.S. Bank National Association
Real Estate Capital Markets
BC-MN-H03R
800 Nicollet Mall
Minneapolis, Minnesota 55402-7020
Attention: Mr. Huvishka Ali
Facsimile: 972-386-8370
With a copy to: Snell & Wilmer L.L.P.
1200 Seventeenth Street, Suite 1900
Denver, Colorado 80202
Attention: Thomas L. DeVine, Esq.
Facsimile: 303-634-2020
Bank or Guarantor may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.
13. The Guarantor hereby waives and agrees not to assert or take advantage of any duty on the part of the Bank to disclose to the Guarantor any facts Bank may now or hereafter know about the Borrower, regardless of whether the Bank has reason to believe that any such facts materially increase the risk beyond that which the Guarantor intends to assume or has reason to believe that such facts are unknown to the Guarantor or has a reasonable opportunity to communicate such facts to the Guarantor, it being understood and agreed that the Guarantor is fully responsible for being and keeping informed of the financial condition of the Borrower and of any and all circumstances bearing the risk of non-payment on any obligations hereby guaranteed.
money deposits made by purchasers under the Purchase Contracts (as defined in the Construction Loan Agreement) as required by the terms of such Purchase Contracts. Guarantor's liability under this Paragraph 20 is in addition to the sums referenced in Paragraph 1 above.
[REMAINDER OF PAGE INTENTIONALLY BLANK)
SIGNED AND DELIVERED as of the 19 th day of July, 2005.
GUARANTOR:
THE VAIL CORPORATION, a Colorado corporation
By: _______________________________
Gregory S. Dickhens
Authorized Agent
BANK:
U.S. Bank National Association, a national banking
association, as Administrative Agent for the Lenders
By: _______________________________
Matthew W Carrothers
Assistant Vice President
Exhibit 10.24(a)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of May 10, 1999 by and between VAIL RESORTS, INC., a Colorado [sic] corporation ("VRI") and Martha Dugan Rehm (hereinafter referred to as "Executive").
RECITALS
COVENANTS
NOW, THEREFORE, the parties hereto agree as follows:
Further, Executive covenants and agrees that, during her employment by VRI and for the period of one year thereafter, Executive will not solicit for another business or enterprise any person who is a managerial or higher level employee of Vail Resorts, Inc. or any of its subsidiaries at the time of Executive's termination.
Martha Dugan Rehm
P.O. Box 901
Minturn, Colorado 81645
Vail Associates, Inc.
P.O. Box 7
Vail, Colorado 81658
Attn: Chief Executive Officer
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day first written above.
EMPLOYER:
VAIL RESORTS, INC.
By: ___________ /s/ ___________________
Its Chief Executive Officer
EXECUTIVE:
_______________ /s/ _________________
Martha Dugan Rehm
MUTUAL RELEASE
This mutual release (this "Release") is entered into as of this __________ day of __________________________, ________ (the "Release Date") by Martha Dugan Rehm ("Employee"), on the one hand and Vail Resorts, Inc. ("VRI") on the other hand.
IN WITNESS WHEREOF, each party hereto, intending to be legally bound, has executed this Mutual Release on the date indicated below.
VAIL RESORTS, INC.
______________________________ By: ________________________________
Martha Dugan Rehm
Date: __________________________ Date: _______________________________
Exhibit 10.24(b)
April 8, 2004
TO: Martha Rehm
FR: Adam Aron
RE: Your Base Salary Compensation
This memo will confirm our discussion that your annual base salary will adjust to become $350,000, effective October 1, 2004.
This has been reviewed with and approved by both the CEO and the Chairman of the Compensation Committee of the Board, and shall be a binding commitment to you from the Company.
Adam Aron (//s//)
Exhibit 21
SUBSIDIARIES
OF
VAIL RESORTS, INC .
Name |
State of Incorporation |
Trade Names |
||
Arrabelle at Vail Square, LLC |
Colorado |
|||
Avon Partners II Limited Liability Company |
Colorado |
|||
Beaver Creek Associates, Inc. |
Colorado |
|||
Beaver Creek Consultants, Inc. |
Colorado |
|||
Beaver Creek Food Services, Inc. |
Colorado |
"Beaver Creek Mountain Dining Company" |
||
Boulder/Beaver, LLC |
Colorado |
|||
Breckenridge Resort Properties, Inc. |
Colorado |
|||
Breckenridge Terrace, LLC |
Colorado |
|||
Colter Bay Corporation |
Wyoming |
|||
Complete Telecommunications, Inc. |
Colorado |
"VR Telecommunications, Inc." |
||
Eagle Park Reservoir Company |
Colorado |
|||
Forest Ridge Holdings, Inc. |
Colorado |
|||
Gillett Broadcasting, Inc. |
Delaware |
|||
Gore Creek Place, LLC |
Colorado |
|||
Grand Teton Lodge Company |
Wyoming |
|||
Gros Ventre Utility Company |
Wyoming |
|||
Heavenly Valley, Limited Partnership |
||||
Jackson Hole Golf and Tennis Club, Inc. |
Wyoming |
|||
Jackson Lake Lodge Corporation |
Wyoming |
|||
Jenny Lake Lodge, Inc. |
Wyoming |
|||
JHL&S LLC |
Wyoming |
"Snake River Lodge and Spa" |
||
Keystone Conference Services, Inc. |
Colorado |
|||
Keystone Development Sales, Inc. |
Colorado |
|||
Keystone Food and Beverage Company |
Colorado |
|||
Keystone Resort Property Management Company |
Colorado |
|||
Keystone/Intrawest, LLC |
Colorado |
|||
Larkspur Restaurant & Bar, LLC |
Colorado |
|||
Lodge Properties, Inc. |
Colorado |
"The Lodge at Vail" |
||
Lodge Realty, Inc. |
Colorado |
|||
Mountain Thunder, Inc. |
Colorado |
|||
Property Management Acquisition Corp., Inc. |
Tennessee |
|||
Rockresorts Casa Madrona, LLC |
Delaware |
|||
Rockresorts Cheeca, LLC |
Delaware |
|||
Rockresorts Cordillera Lodge Company, LLC |
Colorado |
|||
Rockresorts Equinox, Inc. |
Vermont |
|||
Rockresorts International, LLC |
Delaware |
|||
Rockresorts LaPosada, LLC |
Delaware |
|||
Rockresorts Rosario, LLC |
Delaware |
|||
Rockresorts Wyoming, LLC |
Wyoming |
|||
Rockresorts, LLC |
Delaware |
|||
RT Partners, Inc. |
Delaware |
|||
RTP, LLC (f/k/a Resort Technology Partners, LLC) |
Colorado |
|||
Slifer Smith & Frampton/Vail Associates Real Estate, LLC |
Colorado |
|||
Soho Development, LLC |
Colorado |
|||
SSI Venture, LLC |
Colorado |
"Specialty Sports Venture LLC" and "Specialty Sports Network" |
||
Tenderfoot Seasonal Housing, LLC |
Colorado |
|||
Teton Hospitality Services, Inc. |
Wyoming |
|||
The Vail Corporation |
Colorado |
"Vail Associates, Inc." and "Vail Resorts Management Company" |
||
The Village at Breckenridge Acquisition Corp., Inc. |
Tennessee |
|||
Timber Trail, Inc. |
Colorado |
|||
VA Rancho Mirage I, Inc. |
Colorado |
|||
VA Rancho Mirage II, Inc. |
Colorado |
|||
VA Rancho Mirage Resort, L.P. |
Delaware |
|||
Vail Associates Holdings, Ltd. |
Colorado |
|||
Vail Associates Investments, Inc. |
Colorado |
|||
Vail Associates Real Estate, Inc. |
Colorado |
|||
Vail Food Services, Inc. |
Colorado |
"Vail Mountain Dining Company" |
||
Vail Holdings, Inc. |
Colorado |
|||
Vail Hotel Management Company, LLC |
Colorado |
|||
Vail Resorts Development Company |
Colorado |
|||
Vail RR, Inc. |
Colorado |
|||
Vail Summit Resorts, Inc. |
Colorado |
"Breckenridge Ski Resort, Inc." and "Keystone Resort, Inc." and "Ralston Resorts, Inc." |
||
Vail Trademarks, Inc. |
Colorado |
|||
Vail/Arrowhead, Inc. |
Colorado |
|||
Vail/Beaver Creek Resort Properties, Inc. |
Colorado |
|||
VAMHC, Inc. |
Colorado |
|||
VR Heavenly I, Inc. |
Delaware |
|||
VR Heavenly II, Inc. |
Delaware |
|||
VR Holdings, Inc. |
Colorado |
Includes only those entities owned 50% or greater.
Exhibit 22
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-112601), on Form S-4 (Nos. 333-113929), and on Forms S-8 (Nos. 333-111020, 333-32320, and 333-38321) of Vail Resorts, Inc. of our report dated October 4, 2005 relating to the financial statements, financial statement schedule, management's assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers, LLP
Denver, Colorado
October 4, 2005
Exhibit 31
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Adam M. Aron, certify that:
1. |
I have reviewed this annual report on Form 10-K of Vail Resorts, Inc.; |
|
2. |
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; |
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by the report based on such evaluation; and |
|
c) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: October 5, 2005
/s/ Adam M. Aron |
Adam M. Aron |
Chairman of the Board and |
Chief Executive Officer |
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Jeffrey W. Jones, certify that:
1. |
I have reviewed this annual report on Form 10-K of Vail Resorts, Inc.; |
|
2. |
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; |
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by the report based on such evaluation; and |
|
c) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Dated: October 5, 2005
/s/ Jeffrey W. Jones |
Jeffrey W. Jones |
Senior Vice President and |
Chief Financial Officer |
Exhibit 32
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
AND THE CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned hereby certifies in his capacity as an officer of Vail Resorts, Inc. (the "Company") that the annual report of the Company on Form 10-K for the year ended July 31, 2005 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Report fairly presents, in all material respects, the financial condition and the results of operations of the Company at the end of and for the periods covered by such Report.
Date: October 5, 2005
/s/ Adam M. Aron |
Adam M. Aron |
Chairman of the Board and |
Chief Executive Officer |
Date: October 5, 2005
/s/ Jeffrey W. Jones |
Jeffrey W. Jones |
Senior Vice President and |
Chief Financial Officer |
This certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is not a part of the Form 10-K to which it refers, and is, to the extent permitted by law, provided by each of the above signatories to the extent of his respective knowledge. A signed original of this written statement required by Section 906 has been provided to Vail Resorts, Inc. and will be furnished to the Securities and Exchange Commission or its staff upon request.