UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
quarterly period ended October 31, 2008
or
¨
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from to
Commission
File Number: 001-09614
Vail
Resorts, Inc.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
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51-0291762
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(State
or Other Jurisdiction of Incorporation or Organization)
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(I.R.S.
Employer Identification No.)
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390
Interlocken Crescent
Broomfield,
Colorado
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80021
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(303)
404-1800
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(Registrant’s
Telephone Number, Including Area
Code)
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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.
x
Yes
¨
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer
x
Accelerated filer
¨
Non-accelerated
filer
¨
(Do not
check if a smaller reporting company)
Smaller reporting
company
¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
¨
Yes
x
No
As of
December 3, 2008, 36,719,865 shares of the registrant’s common stock were
outstanding.
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PART
I
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FINANCIAL
INFORMATION
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Item
1.
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F-1
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Item
2.
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1
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Item
3.
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11
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Item
4.
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11
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PART
II
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OTHER
INFORMATION
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Item
1.
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12
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Item
1A.
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12
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Item
2.
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12
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Item
3.
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13
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Item
4.
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13
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Item
5.
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13
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Item
6.
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13
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PART
I
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FINANCIAL
INFORMATION
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Item
1.
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F-2
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F-3
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F-4
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F-5
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Consolidated
Condensed Balance Sheets
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(In
thousands, except share and per share amounts)
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October
31,
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July
31,
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October
31,
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2008
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2008
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2007
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(unaudited)
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(unaudited)
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Assets
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Current
assets:
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Cash
and cash equivalents
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$
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102,668
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$
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162,345
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$
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166,044
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Restricted
cash
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12,453
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58,437
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|
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42,876
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Trade
receivables, net
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44,468
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50,185
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24,954
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Inventories,
net
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67,718
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49,708
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63,701
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Other
current assets
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41,988
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38,220
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46,615
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Total
current assets
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269,295
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358,895
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344,190
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Property,
plant and equipment, net (Note 5)
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1,077,760
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1,056,837
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917,344
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Real
estate held for sale and investment
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256,323
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249,305
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415,411
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Goodwill,
net
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142,282
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142,282
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141,699
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Intangible
assets, net
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72,463
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72,530
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73,243
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Other
assets
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47,062
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46,105
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43,034
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Total
assets
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$
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1,865,185
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$
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1,925,954
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$
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1,934,921
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Liabilities
and Stockholders' Equity
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Current
liabilities:
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Accounts
payable and accrued liabilities (Note 5)
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$
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327,516
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$
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294,182
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$
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360,352
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Income
taxes payable
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49,784
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57,474
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34,708
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Long-term
debt due within one year (Note 4)
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354
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15,355
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76,944
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Total
current liabilities
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377,654
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367,011
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472,004
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Long-term
debt (Note 4)
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491,778
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541,350
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534,527
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Other
long-term liabilities (Note 5)
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223,381
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183,643
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168,131
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Deferred
income taxes
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57,063
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75,279
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54,354
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Commitments
and contingencies (Note 8)
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Minority
interest in net assets of consolidated subsidiaries
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27,198
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29,915
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24,533
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Stockholders'
equity:
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Preferred
stock, $0.01 par value, 25,000,000 shares authorized, no shares issued and
outstanding
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--
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--
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--
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Common
stock, $0.01 par value, 100,000,000 shares authorized, 40,000,502
(unaudited), 39,926,496 and 39,864,167 (unaudited) shares issued,
respectively
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400
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399
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399
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Additional
paid-in capital
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547,043
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545,773
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538,009
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Retained
earnings
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273,541
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308,045
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180,508
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Treasury
stock, at cost; 3,282,508 (unaudited), 3,004,108 and 906,004 (unaudited)
shares, respectively (Note 10)
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(132,873
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)
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(125,461
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)
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(37,544
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)
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Total
stockholders' equity
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688,111
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728,756
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681,372
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Total
liabilities and stockholders' equity
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$
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1,865,185
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$
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1,925,954
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$
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1,934,921
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The
accompanying Notes are an integral part of these consolidated condensed
financial statements.
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Consolidated
Condensed Statements of Operations
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(In
thousands, except per share amounts)
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(Unaudited)
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Three
Months Ended
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October
31,
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2008
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2007
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Net
revenue:
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Mountain
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$
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40,778
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$
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42,536
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Lodging
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45,253
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43,317
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Real
estate
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66,750
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12,034
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Total
net revenue
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152,781
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97,887
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Segment
operating expense:
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Mountain
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81,223
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80,947
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Lodging
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44,898
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41,236
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Real
estate
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51,377
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6,913
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Total
segment operating expense
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177,498
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129,096
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Other
operating expense:
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Depreciation
and amortization
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(25,078
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)
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(20,761
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)
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Loss
on disposal of fixed assets, net
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(180
|
)
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(234
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)
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Loss
from operations
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(49,975
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)
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(52,204
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)
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Mountain
equity investment income, net
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1,015
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1,969
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Investment
income
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|
643
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3,218
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Interest
expense, net
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(7,947
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)
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(7,644
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)
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Contract
dispute credit, net (Note 8)
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--
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11,920
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|
Minority
interest in loss of consolidated subsidiaries, net
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2,351
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2,063
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Loss
before benefit from income taxes
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(53,913
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)
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(40,678
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)
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Benefit
from income taxes
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19,409
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16,068
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Net
loss
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$
|
(34,504
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)
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$
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(24,610
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)
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Per
share amounts (Note 3):
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Basic
net loss per share
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$
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(0.93
|
)
|
$
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(0.63
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)
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Diluted
net loss per share
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$
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(0.93
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)
|
$
|
(0.63
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)
|
The
accompanying Notes are an integral part of these consolidated condensed
financial statements.
Vail
Resorts, Inc.
|
Consolidated
Condensed Statements of Cash Flows
|
(In
thousands)
|
(Unaudited)
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Three
Months Ended
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|
|
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|
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October
31,
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2008
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2007
|
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Cash
flows from operating activities:
|
|
|
|
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Net
loss
|
$
|
(34,504
|
)
|
$
|
(24,610
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)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
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|
|
|
|
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|
Depreciation
and amortization
|
|
25,078
|
|
|
20,761
|
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|
Real
estate cost of sales
|
|
40,127
|
|
|
698
|
|
|
Stock-based
compensation expense
|
|
2,567
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|
|
2,246
|
|
|
Deferred
income taxes, net
|
|
(19,188
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)
|
|
(18,654
|
)
|
|
Minority
interest in loss of consolidated subsidiaries, net
|
|
(2,351
|
)
|
|
(2,063
|
)
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|
Other
non-cash income, net
|
|
(1,807
|
)
|
|
(2,146
|
)
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
Restricted
cash
|
|
45,984
|
|
|
11,874
|
|
|
Accounts
receivable, net
|
|
6,616
|
|
|
15,170
|
|
|
Inventories,
net
|
|
(18,010
|
)
|
|
(15,637
|
)
|
|
Investments
in real estate
|
|
(50,774
|
)
|
|
(64,330
|
)
|
|
Accounts
payable and accrued liabilities
|
|
40,063
|
|
|
47,630
|
|
|
Deferred
real estate deposits
|
|
(11,149
|
)
|
|
18,738
|
|
|
Private
club deferred initiation fees and deposits
|
|
34,637
|
|
|
1,761
|
|
|
Other
assets and liabilities, net
|
|
(6,370
|
)
|
|
(10,813
|
)
|
|
Net cash provided by (used in) operating activities
|
|
50,919
|
|
|
(19,375
|
)
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
(43,384
|
)
|
|
(52,290
|
)
|
|
Other
investing activities, net
|
|
(2,582
|
)
|
|
523
|
|
|
Net cash used in investing activities
|
|
(45,966
|
)
|
|
(51,767
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Repurchases
of common stock
|
|
(7,412
|
)
|
|
(11,698
|
)
|
|
Proceeds
from borrowings under Non-Recourse Real Estate Financings
|
|
9,013
|
|
|
17,586
|
|
|
Payments
of Non-Recourse Real Estate Financings
|
|
(58,407
|
)
|
|
--
|
|
|
Proceeds
from borrowings under other long-term debt
|
|
20,640
|
|
|
26,614
|
|
|
Payments
of other long-term debt
|
|
(35,808
|
)
|
|
(26,840
|
)
|
|
Other
financing activities, net
|
|
7,344
|
|
|
705
|
|
|
Net cash (used in) provided by financing activities
|
|
(64,630
|
)
|
|
6,367
|
|
|
Net decrease in cash and cash equivalents
|
|
(59,677
|
)
|
|
(64,775
|
)
|
Cash
and cash equivalents:
|
|
|
|
|
|
|
|
Beginning
of period
|
|
162,345
|
|
|
230,819
|
|
|
End
of period
|
$
|
102,668
|
|
$
|
166,044
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest, net of amounts capitalized
|
$
|
15,776
|
|
$
|
11,960
|
|
Taxes
paid, net
|
$
|
8,882
|
|
$
|
2,123
|
|
The
accompanying Notes are an integral part of these consolidated condensed
financial statements.
Vail
Resorts, Inc.
Notes
to Consolidated Condensed Financial Statements
(Unaudited)
Vail
Resorts, Inc. (“Vail Resorts” or the “Parent Company”) 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 resort properties at
the Vail, Breckenridge, Keystone and Beaver Creek mountain resorts in Colorado
and the Heavenly Mountain Resort in the Lake Tahoe area of California and
Nevada, as well as ancillary businesses, primarily including ski school, dining
and retail/rental operations. These resorts operate primarily on
Federal land under the terms of Special Use Permits granted by the USDA Forest
Service (the “Forest Service”). The Company holds a 69.3% interest in
SSI Venture, LLC (“SSV”), a retail/rental company. In the Lodging
segment, the Company owns and/or manages a collection of luxury hotels under its
RockResorts International, LLC (“RockResorts”) brand, as well as other strategic
lodging properties and a large number of condominiums located in proximity to
the Company’s ski resorts, the Grand Teton Lodge Company (“GTLC”), which
operates three destination resorts at Grand Teton National Park (under a
National Park Service concessionaire contract), and golf
courses. Vail Resorts Development Company (“VRDC”), a wholly-owned
subsidiary, conducts the operations of the Company’s Real Estate segment, which
owns and develops real estate in and around the Company’s resort
communities. The Company’s mountain business and its lodging
properties at or around the Company’s ski resorts are seasonal in nature with
peak operating seasons from mid-November through mid-April. The
Company’s operations at GTLC and its golf courses generally operate 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, Variable Interest Entities).
In the
opinion of the Company, the accompanying Consolidated Condensed Financial
Statements reflect all adjustments necessary to state fairly the Company's
financial position, results of operations and cash flows for the interim periods
presented. All such adjustments are of a normal recurring
nature. Results for interim periods are not indicative of the results
for the entire year. The accompanying Consolidated Condensed
Financial Statements should be read in conjunction with the audited Consolidated
Financial Statements included in the Company's Annual Report on Form 10-K for
the year ended July 31, 2008. Certain information and footnote
disclosures, including significant accounting policies, normally included in
fiscal year financial statements prepared in accordance with accounting
principles generally accepted in the United States of America (“GAAP”) have been
condensed or omitted. The July 31, 2008 Consolidated Condensed
Balance Sheet was derived from audited financial statements.
2. Summary
of Significant Accounting Policies
Use of Estimates--
The
preparation of financial statements in conformity with GAAP 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 revenue and expenses during the reporting
period. Actual results could differ from those
estimates.
Reclassification of Book
Overdrafts--
Book overdrafts represent checks issued that had not been
presented for payment to the banks and are classified as accounts payable in the
Company’s Consolidated Condensed Balance Sheets. The Company
typically funds these overdrafts through normal collections of funds or
transfers from other bank balances. For the three months ended
October 31, 2007, the Company revised its presentation of changes in book
overdrafts from a financing activity to an operating activity in its
Consolidated Condensed Statement of Cash Flows to conform to its current year
presentation. In the Company’s Annual Report on Form 10-K for the
year ended July 31, 2008, the Company also presented changes in book overdrafts
as an operating activity. The effect of this change increased cash
used in operating activities for the three months ended October 31, 2007 from
$17.3 million (as previously disclosed in the prior year’s Quarterly Report on
Form 10-Q) to $19.4 million with a corresponding increase in the cash flows
provided by financing activities for the three months ended October 31, 2007
from $4.3 million (as previously disclosed in the prior year’s Quarterly Report
on Form 10-Q) to $6.4 million.
New Accounting
Pronouncements
-- In September 2006, the FASB issued SFAS No. 157,
“Fair Value Measurements” (“SFAS 157”), which defines fair value,
establishes a framework for measuring fair value, and expands disclosures about
fair value measurements. SFAS 157 does not require any new fair
value measurements, but rather provides guidance on how to measure fair value by
providing a fair value hierarchy which prioritizes the inputs to valuation
techniques used to measure fair value. The Company adopted
SFAS 157 beginning August 1, 2008 (see Note 7, Fair Value Measurements, for
more information on the adoption of SFAS 157).
In
February 2008, the FASB issued Staff Position 157-2, “Effective Date of FASB
Statement No. 157” (“FSP 157-2”). This FSP delays the effective date
of SFAS 157 for all nonfinancial assets and liabilities, except those that are
recognized or disclosed at fair value on a recurring basis (at least annually),
to fiscal years beginning after November 15, 2008 (the Company's fiscal year
ending July 31, 2010) and interim periods within the fiscal year of
adoption. The Company has deferred the application of SFAS 157 for
nonfinancial assets and liabilities as prescribed by FSP 157-2. The
Company is currently evaluating the impacts, if any, the adoption of the
provisions of SFAS 157 for nonfinancial assets and liabilities will have on the
Company’s financial position or results of operations.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities”
(“SFAS 159”). SFAS 159 provides the Company the irrevocable
option to carry many financial assets and liabilities at fair value, with
changes in fair value recognized in earnings. The requirements of
SFAS 159 became effective for the Company beginning August 1, 2008;
however, the Company did not elect the fair value measurement option for any of
its financial assets or liabilities.
In
December 2007, the FASB issued SFAS No. 141R, “Business Combinations”
(“SFAS 141R”), which establishes principles and requirements for how an
acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in an
acquiree, including the recognition and measurement of goodwill acquired in a
business combination. SFAS 141R also requires acquisition-related
transaction expenses and restructuring costs be expensed as incurred rather than
capitalized as a component of the business combination. SFAS 141R
will be applicable prospectively to business combinations consummated after July
31, 2009 (the Company’s fiscal year ending July 31, 2010).
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interest in
Consolidated Financial Statements, an amendment of ARB No. 51”
(“SFAS 160”), which will change the accounting and reporting for minority
interests, which will be recharacterized as noncontrolling interests and
classified as a component of equity within the balance
sheet. Currently, noncontrolling interests (minority interests) are
reported as a liability in the Company’s consolidated balance sheet and the
related income (loss) attributable to minority interests is reflected as an
expense (credit) in arriving at net income. Upon adoption of SFAS
160, the Company will be required to report its minority interests as a separate
component of stockholders’ equity and present net income allocable to the
minority interests along with net income attributable to the stockholders of the
Company separately in its consolidated statement of operations. SFAS
160 requires retroactive adoption of the presentation and disclosure
requirements for existing minority interests. All other requirements
of SFAS 160 shall be applied prospectively. The requirements of
SFAS 160 are effective for the Company beginning August 1, 2009 (the
Company’s fiscal year ending July 31, 2010).
SFAS No.
128, “Earnings Per Share” (“SFAS 128”), establishes standards for computing and
presenting earnings per share (“EPS”). SFAS 128 requires the dual
presentation of basic and diluted EPS on the face of the consolidated condensed
statements of operations 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 holders of common stock
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 shares of common stock
that would then share in the earnings of the Company. Presented below
is basic and diluted EPS for the three months ended October 31, 2008 and 2007
(in thousands, except per share amounts):
|
|
Three
Months Ended October 31,
|
|
2008
|
|
2007
|
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
Net
loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
$
|
(34,504
|
)
|
|
$
|
(34,504
|
)
|
|
$
|
(24,610
|
)
|
|
$
|
(24,610
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding
|
|
36,922
|
|
|
|
36,922
|
|
|
|
38,892
|
|
|
|
38,892
|
|
Effect
of dilutive securities
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
Total
shares
|
|
36,922
|
|
|
|
36,922
|
|
|
|
38,892
|
|
|
|
38,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per common share
|
$
|
(0.93
|
)
|
|
$
|
(0.93
|
)
|
|
$
|
(0.63
|
)
|
|
$
|
(0.63
|
)
|
The
number of shares issuable on the exercise of share based awards that were
excluded from the calculation of diluted net loss per share because the effect
of their inclusion would have been anti-dilutive totaled 0.8 million and 1.0
million (maximum number of vested and unvested share based awards) for the three
months ended October 31, 2008 and 2007, respectively.
4. Long-Term
Debt
Long-term
debt as of October 31, 2008, July 31, 2008 and October 31, 2007 is summarized as
follows (in thousands):
|
|
October
31,
|
July
31,
|
October
31,
|
|
Maturity
(a)
|
2008
|
2008
|
2007
|
Credit
Facility Revolver
|
2012
|
$
|
--
|
$
|
--
|
$
|
--
|
SSV
Facility
|
2011
|
|
--
|
|
--
|
|
--
|
Industrial
Development Bonds (b)
|
2011-2020
|
|
42,700
|
|
57,700
|
|
57,700
|
Employee
Housing Bonds
|
2027-2039
|
|
52,575
|
|
52,575
|
|
52,575
|
Non-Recourse
Real Estate Financings (c)
|
--
|
|
--
|
|
49,394
|
|
104,468
|
6.75%
Senior Subordinated Notes (“6.75% Notes”)
|
2014
|
|
390,000
|
|
390,000
|
|
390,000
|
Other
|
2009-2029
|
|
6,857
|
|
7,036
|
|
6,728
|
Total
debt
|
|
|
492,132
|
|
556,705
|
|
611,471
|
Less: Current
maturities (d)
|
|
|
354
|
|
15,355
|
|
76,944
|
Long-term
debt
|
|
$
|
491,778
|
$
|
541,350
|
$
|
534,527
|
(a)
|
Maturities
are based on the Company's July 31 fiscal year
end.
|
(b)
|
The
Company has outstanding $42.7 million of industrial development bonds
(collectively, the “Industrial Development Bonds”), of which $41.2 million
were issued by Eagle County, Colorado and mature, subject to prior
redemption, on August 1, 2019. The Series 1991 Sports
Facilities Refunding Revenue Bonds, issued by Summit County, Colorado,
have an aggregate outstanding principal amount of $1.5 million and mature,
subject to prior redemption, on September 1, 2010. On August
29, 2008, $15.0 million of borrowings under the Series 1990 Sports
Facilities Refunding Revenue Bonds, issued by Summit County, Colorado were
paid in full at maturity.
|
(c)
|
Non-Recourse
Real Estate Financings borrowings under the original $123.0 million
construction agreement for The Chalets at The Lodge at Vail, LLC
(“Chalets”) were paid in full during the three months ended October 31,
2008. As of July 31, 2008 Non-Recourse Real Estate Financings
included borrowings of $49.4 million under the construction agreement for
the Chalets. As of October 31, 2007 Non-Recourse Real Estate
Financings consisted of borrowings under the original $175.0 million
construction agreement for Arrabelle at Vail Square, LLC (“Arrabelle”) of
$61.6 million and under the construction agreement for the Chalets of
$42.9 million.
|
(d)
|
Current
maturities represent principal payments due in the next 12
months.
|
Aggregate
maturities for debt outstanding as of October 31, 2008 reflected by fiscal year
are as follows (in thousands):
2009
|
$
|
171
|
2010
|
|
349
|
2011
|
|
1,831
|
2012
|
|
305
|
2013
|
|
319
|
Thereafter
|
|
489,157
|
Total
debt
|
$
|
492,132
|
The
Company incurred gross interest expense of $9.7 million and $11.1 million for
the three months ended October 31, 2008 and 2007, respectively, of which $0.8
million and $0.6 million was amortization of deferred financing
costs. The Company capitalized $1.7 million and $3.5 million of
interest during the three months ended October 31, 2008 and 2007,
respectively.
The
composition of property, plant and equipment follows (in
thousands):
|
October
31,
|
July
31,
|
October
31,
|
|
2008
|
2008
|
2007
|
Land
and land improvements
|
$
|
266,194
|
|
$
|
265,123
|
|
$
|
249,834
|
|
Buildings
and building improvements
|
|
729,211
|
|
|
685,393
|
|
|
555,784
|
|
Machinery
and equipment
|
|
459,544
|
|
|
457,825
|
|
|
428,976
|
|
Furniture
and fixtures
|
|
152,735
|
|
|
149,251
|
|
|
111,239
|
|
Software
|
|
40,359
|
|
|
39,605
|
|
|
33,706
|
|
Vehicles
|
|
29,588
|
|
|
28,829
|
|
|
26,950
|
|
Construction
in progress
|
|
72,744
|
|
|
80,601
|
|
|
106,736
|
|
Gross property, plant and equipment
|
|
1,750,375
|
|
|
1,706,627
|
|
|
1,513,225
|
|
Accumulated
depreciation
|
|
(672,615
|
)
|
|
(649,790
|
)
|
|
(595,881
|
)
|
Property, plant and equipment, net
|
$
|
1,077,760
|
|
$
|
1,056,837
|
|
$
|
917,344
|
|
The
composition of accounts payable and accrued liabilities follows (in
thousands):
|
|
October
31,
|
|
July
31,
|
|
October
31,
|
|
|
2008
|
|
2008
|
|
2007
|
Trade
payables
|
$
|
73,348
|
|
$
|
53,187
|
|
$
|
96,896
|
|
Real
estate development payables
|
|
57,001
|
|
|
52,574
|
|
|
35,322
|
|
Deferred
revenue
|
|
82,343
|
|
|
45,805
|
|
|
69,568
|
|
Deferred
real estate and other deposits
|
|
46,582
|
|
|
58,421
|
|
|
83,576
|
|
Accrued
salaries, wages and deferred compensation
|
|
16,052
|
|
|
22,397
|
|
|
18,405
|
|
Accrued
benefits
|
|
22,303
|
|
|
22,777
|
|
|
22,997
|
|
Accrued
interest
|
|
6,722
|
|
|
14,552
|
|
|
6,919
|
|
Liabilities
to complete real estate projects, short term
|
|
2,821
|
|
|
4,199
|
|
|
4,817
|
|
Other
accruals
|
|
20,344
|
|
|
20,270
|
|
|
21,852
|
|
Total accounts payable and accrued liabilities
|
$
|
327,516
|
|
$
|
294,182
|
|
$
|
360,352
|
|
The
composition of other long-term liabilities follows (in thousands):
|
|
October
31,
|
|
July
31,
|
October
31,
|
|
|
2008
|
|
2008
|
|
2007
|
Private
club deferred initiation fee revenue
|
$
|
150,747
|
|
$
|
92,066
|
|
$
|
93,234
|
|
Deferred
real estate deposits
|
|
45,856
|
|
|
45,775
|
|
|
42,657
|
|
Private
club initiation deposits
|
|
5,453
|
|
|
29,881
|
|
|
18,745
|
|
Other
long-term liabilities
|
|
21,325
|
|
|
15,921
|
|
|
13,495
|
|
Total other long-term liabilities
|
$
|
223,381
|
|
$
|
183,643
|
|
$
|
168,131
|
|
The
Company is the primary beneficiary of four employee housing entities
(collectively, the “Employee Housing Entities”), Breckenridge Terrace, LLC, The
Tarnes at BC, LLC (“Tarnes”), BC Housing LLC and Tenderfoot Seasonal Housing,
LLC, which are Variable Interest Entities (“VIEs”), and has consolidated them in
its Consolidated Condensed Financial Statements. As a group, as of
October 31, 2008, the Employee Housing Entities had total assets of $38.0
million (primarily recorded in property, plant and equipment, net) and total
liabilities of $69.7 million (primarily recorded in long-term debt as “Employee
Housing Bonds”). All of the assets ($7.9 million as of October 31,
2008) of Tarnes serve as collateral for Tarnes' Tranche B Employee Housing
Bonds. 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 is the primary beneficiary of Avon Partners II, LLC (“APII”), which is a
VIE. APII owns commercial space and the Company currently leases
substantially all of that space. APII had total assets of $5.5
million (primarily recorded in property, plant and equipment, net) and no debt
as of October 31, 2008.
The
Company, through various lodging subsidiaries, manages hotels in which the
Company has no ownership interest in the entities that own such
hotels. These entities were formed by unrelated third parties to
acquire, own, operate and realize the value in resort hotel
properties. The Company managed the day-to-day operations of six
hotel properties as of October 31, 2008. 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. Based upon the latest information provided by these third
party entities, these VIEs had estimated total assets of approximately $246.1
million and total liabilities of approximately $147.2 million. The
Company's maximum exposure to loss as a result of its involvement with these
VIEs is limited to a $2.2 million note receivable including accrued interest
from one of the third parties and the net book value of the intangible asset
associated with a management agreement in the amount of $0.7 million as of
October 31, 2008.
7. Fair
Value Measurements
SFAS 157
establishes how reporting entities should measure fair value for measurement and
disclosure purposes. The Standard does not require any new fair value
measurements but rather establishes a common definition of fair value applicable
to all assets and liabilities measured at fair value. SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date. The fair value hierarchy established by SFAS
157 prioritizes the inputs into valuation techniques used to measure fair
value. Accordingly, the Company uses valuation techniques which
maximize the use of observable inputs and minimize the use of unobservable
inputs when determining fair value. The three levels of the hierarchy
are as follows:
Level 1:
Inputs that reflect unadjusted quoted prices in active markets that are
accessible to the Company for identical assets or liabilities;
Level 2:
Inputs include quoted prices for similar assets and liabilities in active and
inactive markets or that are observable for the asset or liability either
directly or indirectly; and
Level 3:
Unobservable inputs which are supported by little or no market
activity.
The table
below summarizes the Company’s financial assets and liabilities measured at fair
value in accordance with SFAS 157 as of October 31, 2008 (all other financial
assets and liabilities applicable to SFAS 157 are immaterial) (in
thousands):
|
|
|
Fair
Value Measurements at Reporting Date Using
|
|
|
Balance
at
|
|
|
|
|
|
|
|
|
October
31,
|
|
|
|
|
|
|
Description
|
|
2008
|
|
Level
1
|
|
Level
2
|
|
Level
3
|
Cash
equivalents
|
|
$
|
55,855
|
|
$
|
48,855
|
|
$
|
7,000
|
|
$
|
--
|
The
Company’s cash equivalents include money market funds, time deposits and U.S.
government debt securities which are measured using Level 1 and Level 2 inputs
utilizing quoted market prices or pricing models whereby all significant inputs
are either observable or corroborated by observable market data.
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 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
$1.5 million, $1.6 million and $1.0 million, primarily within “other long-term
liabilities” in the accompanying Consolidated Condensed Balance Sheets, as of
October 31, 2008, July 31, 2008 and October 31, 2007, 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 the year ending July 31,
2016.
Guarantees
As of
October 31, 2008, the Company had various other guarantees, primarily in the
form of letters of credit in the amount of $94.6 million, consisting primarily
of $51.0 million in support of the Employee Housing Bonds, $36.2 million of
construction and development related guarantees and $6.1 million for workers’
compensation and general liability deductibles related to construction and
development activities.
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 FASB Financial Interpretation No. 45, “Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others” (“FIN 45”) 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 and 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
indemnify their directors and officers over their lifetimes for certain events
or occurrences while the officer or director is, or was, serving the Company or
its subsidiaries 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 should enable the Company to recover a portion of
any future amounts paid.
Unless
otherwise noted, the Company has not recorded any significant liabilities for
the letters of credit, indemnities and other guarantees noted above in the
accompanying Consolidated Condensed Financial Statements, either because the
Company has recorded on its Consolidated Condensed Balance Sheets the underlying
liability associated with the guarantee, the guarantee or indemnification
existed prior to January 1, 2003, the guarantee is with respect to the Company’s
own performance 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 immaterial 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 liabilities 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 whether to complete 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 Condensed Balance Sheet, to
complete or fund certain improvements with respect to real estate developments;
the Company has estimated such costs to be approximately $3.4 million as of
October 31, 2008, and anticipates completion of the majority of these
commitments within the next two years.
Self
Insurance
The
Company is self-insured for claims under its health benefit plans and for
workers’ compensation claims, subject to a stop loss policy. The
self-insurance liability related to workers' compensation is determined
actuarially based on claims filed. The self-insurance liability
related to claims under the Company’s health benefit plans is determined based
on analysis of actual claims. The amounts related to these claims are
included as a component of accrued benefits in accounts payable and accrued
liabilities (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 (Mountain and Lodging) related cases and contractual
and commercial litigation that arises from time to time in connection with the
Company's real estate 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. As of
October 31, 2008, July 31, 2008 and October 31, 2007 the accrual for the above
loss contingencies was not material individually and in the
aggregate.
Cheeca Lodge & Spa
Contract Dispute
On
October 19, 2007, RockResorts received payment of the final settlement from
Cheeca Holdings, LLC, related to the disputed contract termination of the
formerly managed RockResorts Cheeca Lodge & Spa property, in the amount of
$13.5 million, of which $11.9 million (net of final attorney’s fees) is recorded
in “contract dispute credit, net” in the Consolidated Condensed Statement of
Operations for the three months ended October 31, 2007.
9. Segment
Information
The
Company has three reportable segments: Mountain, Lodging and Real
Estate. 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 owns and develops real estate in and around the Company’s 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 (defined as segment
net revenue less segment operating expenses, plus or minus segment equity
investment income or loss), which is a non-GAAP financial
measure. 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 (Chief Executive Officer) for purposes of
evaluating segment performance.
Reported
EBITDA is not a measure of financial performance under GAAP. 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
(loss), net change in cash and cash equivalents 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 GAAP and thus is susceptible to
varying calculations, Reported EBITDA as presented may not be comparable to
other similarly titled measures of other companies.
The
Company utilizes Reported EBITDA in evaluating performance of the Company and in
allocating resources to its segments. Mountain Reported EBITDA
consists of Mountain net revenue less Mountain operating expense plus Mountain
equity investment income. Lodging Reported EBITDA consists of Lodging
net revenue less Lodging operating expense. Real Estate Reported
EBITDA consists of Real Estate net revenue 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.
Following
is key financial information by reportable segment which is used by management
in evaluating performance and allocating resources (in thousands):
|
|
Three
Months Ended October 31,
|
|
|
|
2008
|
|
2007
|
|
Net
revenue:
|
|
|
|
|
|
|
|
|
Lift
tickets
|
|
$
|
--
|
|
|
$
|
--
|
|
Ski
school
|
|
|
--
|
|
|
|
--
|
|
Dining
|
|
|
3,929
|
|
|
|
4,762
|
|
Retail/rental
|
|
|
22,426
|
|
|
|
23,540
|
|
Other
|
|
|
14,423
|
|
|
|
14,234
|
|
Total
Mountain net revenue
|
|
|
40,778
|
|
|
|
42,536
|
|
Lodging
|
|
|
45,253
|
|
|
|
43,317
|
|
Resort
|
|
|
86,031
|
|
|
|
85,853
|
|
Real
estate
|
|
|
66,750
|
|
|
|
12,034
|
|
Total
net revenue
|
|
$
|
152,781
|
|
|
$
|
97,887
|
|
Segment
operating expense:
|
|
|
|
|
|
|
|
|
Mountain
|
|
$
|
81,223
|
|
|
$
|
80,947
|
|
Lodging
|
|
|
44,898
|
|
|
|
41,236
|
|
Resort
|
|
|
126,121
|
|
|
|
122,183
|
|
Real
estate
|
|
|
51,377
|
|
|
|
6,913
|
|
Total
segment operating expense
|
|
$
|
177,498
|
|
|
$
|
129,096
|
|
Mountain
equity investment income, net
|
|
$
|
1,015
|
|
|
$
|
1,969
|
|
|
|
|
|
|
|
|
|
|
Reported
EBITDA:
|
|
|
|
|
|
|
|
|
Mountain
|
|
$
|
(39,430
|
)
|
|
$
|
(36,442
|
)
|
Lodging
|
|
|
355
|
|
|
|
2,081
|
|
Resort
|
|
|
(39,075
|
)
|
|
|
(34,361
|
)
|
Real
estate
|
|
|
15,373
|
|
|
|
5,121
|
|
Total
Reported EBITDA
|
|
$
|
(23,702)
|
|
|
$
|
(29,240
|
)
|
|
|
|
|
|
|
|
|
|
Reconciliation
to net loss:
|
|
|
|
|
|
|
|
|
Total
Reported EBITDA
|
|
$
|
(23,702
|
)
|
|
$
|
(29,240
|
)
|
Depreciation
and amortization
|
|
|
(25,078
|
)
|
|
|
(20,761
|
)
|
Loss
on disposal of fixed assets, net
|
|
|
(180
|
)
|
|
|
(234
|
)
|
Investment
income
|
|
|
643
|
|
|
|
3,218
|
|
Interest
expense, net
|
|
|
(7,947
|
)
|
|
|
(7,644
|
)
|
Contract
dispute credit, net
|
|
|
--
|
|
|
|
11,920
|
|
Minority
interest in loss of consolidated subsidiaries, net
|
|
|
2,351
|
|
|
|
2,063
|
|
Loss
before benefit from income taxes
|
|
|
(53,913
|
)
|
|
|
(40,678
|
)
|
Benefit
from income taxes
|
|
|
19,409
|
|
|
|
16,068
|
|
Net
loss
|
|
$
|
(34,504
|
)
|
|
$
|
(24,610
|
)
|
|
|
|
|
|
|
|
|
|
Real
estate held for sale and investment
|
|
$
|
256,323
|
|
|
$
|
415,411
|
|
10. Stock
Repurchase Plan
On March
9, 2006, the Company’s Board of Directors approved the repurchase of up to
3,000,000 shares of common stock and on July 16, 2008 approved an increase of
the Company’s common stock repurchase authorization by an additional 3,000,000
shares. During the three months ended October 31, 2008, the Company
repurchased 278,400 shares of common stock at a cost of $7.4
million. Since inception of this stock repurchase plan through
October 31, 2008, the Company has repurchased 3,282,508 shares at a cost of
approximately $132.9 million. As of October 31, 2008, 2,717,492
shares remained available to repurchase under the existing repurchase
authorization. Shares of common stock purchased pursuant to the
repurchase program will be held as treasury shares and may be used for the
issuance of shares under the Company's employee share award plans.
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 Eagle Park Reservoir Company,
Gros Ventre Utility Company, Mountain Thunder, Inc., SSV, Larkspur Restaurant
& Bar, LLC, Arrabelle, Gore Creek Place, LLC, Chalets and certain other
insignificant entities (together, the “Non-Guarantor
Subsidiaries”). APII 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 indenture governing
the 6.75% Notes.
Presented
below is the consolidated financial information of the Parent Company, the
Guarantor Subsidiaries and the Non-Guarantor Subsidiaries. Financial
information for the Non-Guarantor Subsidiaries is presented in the column titled
“Other Subsidiaries.” Balance sheet data is presented as of October
31, 2008, July 31, 2008 and October 31, 2007. Statement of operations
and condensed statement of cash flows data are presented for the three months
ended October 31, 2008 and 2007.
Investments
in subsidiaries are accounted for by the Parent Company and Guarantor
Subsidiaries using the equity method of accounting. Net income (loss)
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 (loss) 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 October 31, 2008
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100%
Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantor
|
|
Other
|
|
Eliminating
|
|
|
|
|
|
|
|
Company
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
--
|
|
|
$
|
92,806
|
|
|
$
|
9,862
|
|
|
$
|
--
|
|
|
$
|
102,668
|
|
|
Restricted
cash
|
|
|
--
|
|
|
|
12,193
|
|
|
|
260
|
|
|
|
--
|
|
|
|
12,453
|
|
|
Trade
receivables, net
|
|
|
--
|
|
|
|
43,662
|
|
|
|
806
|
|
|
|
--
|
|
|
|
44,468
|
|
|
Inventories,
net
|
|
|
--
|
|
|
|
10,965
|
|
|
|
56,753
|
|
|
|
--
|
|
|
|
67,718
|
|
|
Other
current assets
|
|
|
16,115
|
|
|
|
21,622
|
|
|
|
4,251
|
|
|
|
--
|
|
|
|
41,988
|
|
|
Total
current assets
|
|
|
16,115
|
|
|
|
181,248
|
|
|
|
71,932
|
|
|
|
--
|
|
|
|
269,295
|
|
|
Property,
plant and equipment, net
|
|
|
--
|
|
|
|
828,390
|
|
|
|
249,370
|
|
|
|
--
|
|
|
|
1,077,760
|
|
|
Real
estate held for sale and investment
|
|
|
--
|
|
|
|
204,323
|
|
|
|
52,000
|
|
|
|
--
|
|
|
|
256,323
|
|
|
Goodwill,
net
|
|
|
--
|
|
|
|
123,034
|
|
|
|
19,248
|
|
|
|
--
|
|
|
|
142,282
|
|
|
Intangible
assets, net
|
|
|
--
|
|
|
|
56,584
|
|
|
|
15,879
|
|
|
|
--
|
|
|
|
72,463
|
|
|
Other
assets
|
|
|
3,758
|
|
|
|
36,570
|
|
|
|
6,734
|
|
|
|
--
|
|
|
|
47,062
|
|
|
Investments
in subsidiaries and advances to (from) parent
|
|
|
1,174,116
|
|
|
|
713,098
|
|
|
|
(114,512
|
)
|
|
|
(1,772,702
|
)
|
|
|
--
|
|
|
Total
assets
|
|
$
|
1,193,989
|
|
|
$
|
2,143,247
|
|
|
$
|
300,651
|
|
|
$
|
(1,772,702
|
)
|
|
$
|
1,865,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
5,889
|
|
|
$
|
224,520
|
|
|
$
|
97,107
|
|
|
$
|
--
|
|
|
$
|
327,516
|
|
|
Income
taxes payable
|
|
|
49,784
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
49,784
|
|
|
Long-term
debt due within one year
|
|
|
--
|
|
|
|
11
|
|
|
|
343
|
|
|
|
--
|
|
|
|
354
|
|
|
Total
current liabilities
|
|
|
55,673
|
|
|
|
224,531
|
|
|
|
97,450
|
|
|
|
--
|
|
|
|
377,654
|
|
|
Long-term
debt
|
|
|
390,000
|
|
|
|
42,721
|
|
|
|
59,057
|
|
|
|
--
|
|
|
|
491,778
|
|
|
Other
long-term liabilities
|
|
|
3,142
|
|
|
|
217,436
|
|
|
|
2,803
|
|
|
|
--
|
|
|
|
223,381
|
|
|
Deferred
income taxes
|
|
|
57,063
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
57,063
|
|
|
Minority
interest in net assets of consolidated subsidiaries
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
27,198
|
|
|
|
27,198
|
|
|
Total
stockholders’ equity
|
|
|
688,111
|
|
|
|
1,658,559
|
|
|
|
141,341
|
|
|
|
(1,799,900
|
)
|
|
|
688,111
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
1,193,989
|
|
|
$
|
2,143,247
|
|
|
$
|
300,651
|
|
|
$
|
(1,772,702
|
)
|
|
$
|
1,865,185
|
|
Supplemental
Condensed Consolidating Balance Sheet
As
of July 31, 2008
(in
thousands)
|
|
|
|
|
|
100%
Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantor
|
|
Other
|
|
Eliminating
|
|
|
|
|
|
|
Company
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
--
|
|
|
$
|
156,782
|
|
|
$
|
5,563
|
|
|
$
|
--
|
|
|
$
|
162,345
|
|
Restricted
cash
|
|
|
--
|
|
|
|
10,526
|
|
|
|
47,911
|
|
|
|
--
|
|
|
|
58,437
|
|
Trade
receivables, net
|
|
|
--
|
|
|
|
47,953
|
|
|
|
2,232
|
|
|
|
--
|
|
|
|
50,185
|
|
Inventories,
net
|
|
|
--
|
|
|
|
11,786
|
|
|
|
37,922
|
|
|
|
--
|
|
|
|
49,708
|
|
Other
current assets
|
|
|
15,142
|
|
|
|
19,205
|
|
|
|
3,873
|
|
|
|
--
|
|
|
|
38,220
|
|
Total
current assets
|
|
|
15,142
|
|
|
|
246,252
|
|
|
|
97,501
|
|
|
|
--
|
|
|
|
358,895
|
|
Property,
plant and equipment, net
|
|
|
--
|
|
|
|
806,696
|
|
|
|
250,141
|
|
|
|
--
|
|
|
|
1,056,837
|
|
Real
estate held for sale and investment
|
|
|
--
|
|
|
|
204,260
|
|
|
|
45,045
|
|
|
|
--
|
|
|
|
249,305
|
|
Goodwill,
net
|
|
|
--
|
|
|
|
123,034
|
|
|
|
19,248
|
|
|
|
--
|
|
|
|
142,282
|
|
Intangible
assets, net
|
|
|
--
|
|
|
|
56,650
|
|
|
|
15,880
|
|
|
|
--
|
|
|
|
72,530
|
|
Other
assets
|
|
|
3,936
|
|
|
|
34,922
|
|
|
|
7,247
|
|
|
|
--
|
|
|
|
46,105
|
|
Investments
in subsidiaries and advances to (from) parent
|
|
|
1,248,019
|
|
|
|
599,199
|
|
|
|
(61,968
|
)
|
|
|
(1,785,250
|
)
|
|
|
--
|
|
Total
assets
|
|
$
|
1,267,097
|
|
|
$
|
2,071,013
|
|
|
$
|
373,094
|
|
|
$
|
(1,785,250
|
)
|
|
$
|
1,925,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
12,446
|
|
|
$
|
196,360
|
|
|
$
|
85,376
|
|
|
$
|
--
|
|
|
$
|
294,182
|
|
Income
taxes payable
|
|
|
57,474
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
57,474
|
|
Long-term
debt due within one year
|
|
|
--
|
|
|
|
15,022
|
|
|
|
333
|
|
|
|
--
|
|
|
|
15,355
|
|
Total
current liabilities
|
|
|
69,920
|
|
|
|
211,382
|
|
|
|
85,709
|
|
|
|
--
|
|
|
|
367,011
|
|
Long-term
debt
|
|
|
390,000
|
|
|
|
42,722
|
|
|
|
108,628
|
|
|
|
--
|
|
|
|
541,350
|
|
Other
long-term liabilities
|
|
|
3,142
|
|
|
|
149,557
|
|
|
|
30,944
|
|
|
|
--
|
|
|
|
183,643
|
|
Deferred
income taxes
|
|
|
75,279
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
75,279
|
|
Minority
interest in net assets of consolidated subsidiaries
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
29,915
|
|
|
|
29,915
|
|
Total
stockholders’ equity
|
|
|
728,756
|
|
|
|
1,667,352
|
|
|
|
147,813
|
|
|
|
(1,815,165
|
)
|
|
|
728,756
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
1,267,097
|
|
|
$
|
2,071,013
|
|
|
$
|
373,094
|
|
|
$
|
(1,785,250
|
)
|
|
$
|
1,925,954
|
|
Supplemental
Condensed Consolidating Balance Sheet
|
|
As
of October 31, 2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100%
Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantor
|
|
Other
|
|
Eliminating
|
|
|
|
|
|
|
|
Company
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
--
|
|
|
$
|
160,983
|
|
|
$
|
5,061
|
|
|
$
|
--
|
|
|
$
|
166,044
|
|
|
Restricted
cash
|
|
|
--
|
|
|
|
14,008
|
|
|
|
28,868
|
|
|
|
--
|
|
|
|
42,876
|
|
|
Trade
receivables, net
|
|
|
--
|
|
|
|
23,705
|
|
|
|
1,249
|
|
|
|
--
|
|
|
|
24,954
|
|
|
Inventories,
net
|
|
|
--
|
|
|
|
9,604
|
|
|
|
54,097
|
|
|
|
--
|
|
|
|
63,701
|
|
|
Other
current assets
|
|
|
15,851
|
|
|
|
20,278
|
|
|
|
10,486
|
|
|
|
--
|
|
|
|
46,615
|
|
|
Total
current assets
|
|
|
15,851
|
|
|
|
228,578
|
|
|
|
99,761
|
|
|
|
--
|
|
|
|
344,190
|
|
|
Property,
plant and equipment, net
|
|
|
--
|
|
|
|
795,610
|
|
|
|
121,734
|
|
|
|
--
|
|
|
|
917,344
|
|
|
Real
estate held for sale and investment
|
|
|
--
|
|
|
|
91,358
|
|
|
|
324,053
|
|
|
|
--
|
|
|
|
415,411
|
|
|
Goodwill,
net
|
|
|
--
|
|
|
|
123,033
|
|
|
|
18,666
|
|
|
|
--
|
|
|
|
141,699
|
|
|
Intangible
assets, net
|
|
|
--
|
|
|
|
56,845
|
|
|
|
16,398
|
|
|
|
--
|
|
|
|
73,243
|
|
|
Other
assets
|
|
|
4,469
|
|
|
|
26,672
|
|
|
|
11,893
|
|
|
|
--
|
|
|
|
43,034
|
|
|
Investments
in subsidiaries and advances to (from) parent
|
|
|
1,147,857
|
|
|
|
368,633
|
|
|
|
(123,167
|
)
|
|
|
(1,393,323
|
)
|
|
|
--
|
|
|
Total
assets
|
|
$
|
1,168,177
|
|
|
$
|
1,690,729
|
|
|
$
|
469,338
|
|
|
$
|
(1,393,323
|
)
|
|
$
|
1,934,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
5,655
|
|
|
$
|
200,895
|
|
|
$
|
153,802
|
|
|
$
|
--
|
|
|
$
|
360,352
|
|
|
Income
taxes payable
|
|
|
34,708
|
|
|
|
-
|
|
|
|
-
|
|
|
|
--
|
|
|
|
34,708
|
|
|
Long-term
debt due within one year
|
|
|
--
|
|
|
|
15,050
|
|
|
|
61,894
|
|
|
|
--
|
|
|
|
76,944
|
|
|
Total
current liabilities
|
|
|
40,363
|
|
|
|
215,945
|
|
|
|
215,696
|
|
|
|
--
|
|
|
|
472,004
|
|
|
Long-term
debt
|
|
|
390,000
|
|
|
|
42,712
|
|
|
|
101,815
|
|
|
|
--
|
|
|
|
534,527
|
|
|
Other
long-term liabilities
|
|
|
2,088
|
|
|
|
102,485
|
|
|
|
63,558
|
|
|
|
--
|
|
|
|
168,131
|
|
|
Deferred
income taxes
|
|
|
54,354
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
54,354
|
|
|
Minority
interest in net assets of consolidated subsidiaries
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
24,533
|
|
|
|
24,533
|
|
|
Total
stockholders’ equity
|
|
|
681,372
|
|
|
|
1,329,587
|
|
|
|
88,269
|
|
|
|
(1,417,856
|
)
|
|
|
681,372
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
1,168,177
|
|
|
$
|
1,690,729
|
|
|
$
|
469,338
|
|
|
$
|
(1,393,323
|
)
|
|
$
|
1,934,921
|
|
Supplemental
Condensed Consolidating Statement of Operations
|
For
the three months ended October 31, 2008
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100%
Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantor
|
|
Other
|
|
Eliminating
|
|
|
|
|
|
|
|
Company
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
Total
net revenue
|
|
$
|
--
|
|
|
$
|
117,168
|
|
|
$
|
38,838
|
|
|
$
|
(3,225
|
)
|
$
|
152,781
|
|
Total
operating expense
|
|
|
169
|
|
|
|
162,157
|
|
|
|
43,617
|
|
|
|
(3,187
|
)
|
|
202,756
|
|
|
(Loss)
income from operations
|
|
|
(169
|
)
|
|
|
(44,989
|
)
|
|
(4,779
|
)
|
|
(38
|
)
|
|
|
(49,975
|
)
|
Equity
investment income, net
|
|
|
--
|
|
|
|
1,015
|
|
|
|
--
|
|
|
|
--
|
|
|
|
1,015
|
|
Other
(expense) income, net
|
|
|
(6,761
|
)
|
|
|
468
|
|
|
(1,049
|
)
|
|
38
|
|
|
|
(7,304
|
)
|
Minority
interest in loss of consolidated subsidiaries, net
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
2,351
|
|
|
|
2,351
|
|
|
Loss
before income taxes
|
|
|
(6,930
|
)
|
|
|
(43,506
|
)
|
|
(5,828
|
)
|
|
2,351
|
|
|
|
(53,913
|
)
|
Benefit
(provision) from income taxes
|
|
|
2,494
|
|
|
|
16,918
|
|
|
|
(3
|
)
|
|
|
--
|
|
|
|
19,409
|
|
|
Net
loss before equity in (loss) income of consolidated
subsidiaries
|
|
|
(4,436
|
)
|
|
|
(26,588
|
)
|
|
|
(5,831
|
)
|
|
|
2,351
|
|
|
|
(34,504
|
)
|
Equity
in (loss) income of consolidated subsidiaries
|
|
|
(30,068
|
)
|
|
|
5,863
|
|
|
|
--
|
|
|
|
24,205
|
|
|
|
--
|
|
|
Net
(loss) income
|
|
$
|
(34,504
|
)
|
|
$
|
(20,725
|
)
|
$
|
(5,831
|
)
|
$
|
26,556
|
|
|
$
|
(34,504
|
)
|
Supplemental
Condensed Consolidating Statement of Operations
|
For
the three months ended October 31, 2007
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100%
Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantor
|
|
Other
|
|
Eliminating
|
|
|
|
|
|
|
|
Company
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
Total
net revenue
|
|
$
|
--
|
|
|
$
|
74,771
|
|
|
$
|
25,936
|
|
|
$
|
(2,820
|
)
|
$
|
97,887
|
|
Total
operating expense
|
|
|
(193
|
)
|
|
|
118,267
|
|
|
|
34,799
|
|
|
|
(2,782
|
)
|
|
150,091
|
|
|
Income
(loss) from operations
|
|
|
193
|
|
|
|
(43,496
|
)
|
|
(8,863
|
)
|
|
(38
|
)
|
|
|
(52,204
|
)
|
Equity
investment income, net
|
|
|
--
|
|
|
|
1,969
|
|
|
|
--
|
|
|
|
--
|
|
|
|
1,969
|
|
Other
(expense) income, net
|
|
|
(6,760
|
)
|
|
|
15,508
|
|
|
(1,292
|
)
|
|
38
|
|
|
|
7,494
|
|
Minority
interest in loss of consolidated subsidiaries, net
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
2,063
|
|
|
|
2,063
|
|
|
Loss
before income taxes
|
|
|
(6,567
|
)
|
|
|
(26,019
|
)
|
|
(10,155
|
)
|
|
2,063
|
|
|
|
(40,678
|
)
|
Benefit
from income taxes
|
|
|
2,594
|
|
|
|
13,474
|
|
|
|
--
|
|
|
|
--
|
|
|
|
16,068
|
|
|
Net
loss before equity in (loss) income of consolidated
subsidiaries
|
|
|
(3,973)
|
|
|
|
(12,545
|
)
|
|
|
(10,155
|
)
|
|
|
2,063
|
|
|
|
(24,610
|
)
|
Equity
in (loss) income of consolidated subsidiaries
|
|
|
(20,637
|
)
|
|
|
--
|
|
|
|
--
|
|
|
|
20,637
|
|
|
|
--
|
|
|
Net
(loss) income
|
|
$
|
(24,610
|
)
|
|
$
|
(12,545
|
)
|
$
|
(10,155
|
)
|
$
|
22,700
|
|
|
$
|
(24,610
|
)
|
Supplemental
Condensed Consolidating Statement of Cash Flows
|
For
the three months ended October 31, 2008
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100%
Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantor
|
|
Other
|
|
|
|
|
|
|
|
|
|
Company
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Consolidated
|
Net
cash (used in) provided by operating activities
|
|
$
|
(36,215
|
)
|
|
$
|
43,155
|
|
|
$
|
43,979
|
|
|
$
|
50,919
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
--
|
|
|
|
(38,399
|
)
|
|
|
(4,985
|
)
|
|
|
(43,384
|
)
|
|
Other
investing activities, net
|
|
|
--
|
|
|
|
(2,665
|
)
|
|
|
83
|
|
|
|
(2,582
|
)
|
|
|
Net
cash used in investing activities
|
|
|
--
|
|
|
|
(41,064
|
)
|
|
|
(4,902
|
)
|
|
|
(45,966
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchases
of common stock
|
|
|
(7,412
|
)
|
|
|
--
|
|
|
|
--
|
|
|
|
(7,412
|
)
|
|
Proceeds
from borrowings under Non-Recourse Real Estate Financings
|
|
|
--
|
|
|
|
--
|
|
|
|
9,013
|
|
|
|
9,013
|
|
|
Payments
of Non-Recourse Real Estate Financings
|
|
|
--
|
|
|
|
--
|
|
|
|
(58,407
|
)
|
|
|
(58,407
|
)
|
|
Proceeds
from borrowings under other long-term debt
|
|
|
--
|
|
|
|
--
|
|
|
|
20,640
|
|
|
|
20,640
|
|
|
Payments
of other long-term debt
|
|
|
--
|
|
|
|
(15,000
|
)
|
|
|
(20,808
|
)
|
|
|
(35,808
|
)
|
|
Other
financing activities, net
|
|
|
(207
|
)
|
|
|
3,572
|
|
|
|
3,979
|
|
|
|
7,344
|
|
|
Advances
from (to) affiliates
|
|
|
43,834
|
|
|
|
(54,639
|
)
|
|
|
10,805
|
|
|
|
--
|
|
|
|
Net
cash provided by (used in) financing activities
|
|
|
36,215
|
|
|
|
(66,067
|
)
|
|
|
(34,778
|
)
|
|
|
(64,630
|
)
|
|
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
--
|
|
|
|
(63,976
|
)
|
|
|
4,299
|
|
|
|
(59,677
|
)
|
Cash
and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
of period
|
|
|
--
|
|
|
|
156,782
|
|
|
|
5,563
|
|
|
|
162,345
|
|
|
End
of period
|
|
$
|
--
|
|
|
$
|
92,806
|
|
|
$
|
9,862
|
|
|
$
|
102,668
|
|
Supplemental
Condensed Consolidating Statement of Cash Flows
|
For
the three months ended October 31, 2007
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100%
Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantor
|
|
Other
|
|
|
|
|
|
|
|
|
|
Company
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Consolidated
|
Net
cash (used in) provided by operating activities
|
|
$
|
(30,154
|
)
|
|
$
|
18,810
|
|
|
$
|
(8,031
|
)
|
|
$
|
(19,375
|
)
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
--
|
|
|
|
(29,499
|
)
|
|
|
(22,791
|
)
|
|
|
(52,290
|
)
|
|
Other
investing activities, net
|
|
|
--
|
|
|
|
187
|
|
|
|
336
|
|
|
|
523
|
|
|
|
Net
cash used in investing activities
|
|
|
--
|
|
|
|
(29,312
|
)
|
|
|
(22,455
|
)
|
|
|
(51,767
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchases
of common stock
|
|
|
(11,698
|
)
|
|
|
--
|
|
|
|
--
|
|
|
|
(11,698
|
)
|
|
Net
(payments) proceeds from borrowings under long-term debt
|
|
|
--
|
|
|
|
(17,266
|
)
|
|
|
34,626
|
|
|
|
17,360
|
|
|
Other
financing activities, net
|
|
|
2,285
|
|
|
|
2,366
|
|
|
|
(3,946
|
)
|
|
|
705
|
|
|
Advances
(to) from affiliates
|
|
|
39,567
|
|
|
|
(39,567
|
)
|
|
|
--
|
|
|
|
--
|
|
|
|
Net
cash provided by (used in) financing activities
|
|
|
30,154
|
|
|
|
(54,467
|
)
|
|
|
30,680
|
|
|
|
6,367
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
--
|
|
|
|
(64,969
|
)
|
|
|
194
|
|
|
|
(64,775
|
)
|
Cash
and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
of period
|
|
|
--
|
|
|
|
225,952
|
|
|
|
4,867
|
|
|
|
230,819
|
|
|
End
of period
|
|
$
|
--
|
|
|
$
|
160,983
|
|
|
$
|
5,061
|
|
|
$
|
166,044
|
|
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The
following Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended July 31, 2008 (“Form 10-K”) and the
Consolidated Condensed Financial Statements as of October 31, 2008 and 2007 and
for the three months then ended, included in Part I, Item 1 of this Form 10-Q,
which provide additional information regarding the financial position, results
of operations and cash flows of the Company. 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 those discussed in this Form 10-Q and in the Company's other filings
with the Securities and Exchange Commission (“SEC”), including the risks
described in Item 1A, “Risk Factors” of Part I of the Form 10-K.
Management’s
Discussion and Analysis includes discussion of financial performance within each
of the Company’s segments. The Company has chosen to specifically
include Reported EBITDA (defined as segment net revenue less segment operating
expense, plus or minus segment equity investment income or loss) and Net Debt
(defined as long-term debt plus long-term debt due within one year less cash and
cash equivalents), in the following discussion because management considers
these measurements to be significant indications of the Company’s financial
performance and available capital resources. Reported EBITDA and Net
Debt are not measures of financial performance or liquidity under accounting
principles generally accepted in the United States of America
(“GAAP”). The Company utilizes Reported EBITDA in evaluating
performance of the Company and in allocating resources to its
segments. Refer to the end of the Results of Operations section
for a reconciliation of Reported EBITDA to net loss. Management also
believes that Net Debt is an important measurement as it is an indicator of the
Company’s ability to obtain additional capital resources for its future cash
needs. Refer to the end of the Results of Operations section for a
reconciliation of Net Debt.
Items
excluded from Reported EBITDA and Net Debt are significant components in
understanding and assessing financial performance or
liquidity. Reported EBITDA and Net Debt should not be considered in
isolation or as an alternative to, or substitute for, net income (loss), net
change in cash and cash equivalents or other financial statement data presented
in the Consolidated Condensed Financial Statements as indicators of financial
performance or liquidity. Because Reported EBITDA and Net Debt are
not measurements determined in accordance with GAAP and are thus susceptible to
varying calculations, Reported EBITDA and Net Debt 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. The Mountain segment is
comprised of the operations of five ski resort properties as well as ancillary
businesses, primarily including ski school, dining and retail/rental
operations. Mountain segment revenue is seasonal in nature, the
majority of which is earned in the Company’s second and third fiscal
quarters. Operations within the Lodging segment include (i)
ownership/management of a group of nine luxury hotels through the RockResorts
International, LLC (“RockResorts”) brand, including five proximate to the
Company's ski resorts; (ii) the ownership/management of non-RockResorts branded
hotels and condominiums proximate to the Company's ski resorts; (iii) Grand
Teton Lodge Company (“GTLC”); and (iv) golf courses. The Resort
segment is the combination of the Mountain and Lodging segments. The
Real Estate segment owns and develops real estate in and around the Company's
resort communities.
The
Company's first fiscal quarter is a seasonally low period as the Company's ski
operations are generally not open for business until mid-November, which falls
in the Company's second fiscal quarter. Additionally, many of the
Company's lodging properties experience similar seasonal trends. As a
result, the Company generally incurs significant losses in the Resort segment
during the first fiscal quarter.
Revenue
of the Mountain segment during the first fiscal quarter is primarily generated
from summer and group related visitation at the Company's five mountain resorts,
as well as SSI Venture, LLC’s (“SSV”) retail operations.
Revenue
of the Lodging segment during the Company's first fiscal quarter is generated
primarily by the operations of GTLC (as GTLC's peak operating season occurs
during the summer months), as well as golf operations and seasonally low
operations from the Company's other owned and managed properties. In
addition, the Company's lodging properties benefit from group business in early
fall. Performance 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 by out-of-state and
international (“Destination”) guests. Revenue generated through
management fees is based upon the revenue of managed individual hotel properties
within the lodging portfolio, and to the extent that these managed properties
are not proximate to ski resorts, the seasonality of those hotels more closely
resembles the seasonality and trends within their geographical region and the
overall travel industry.
The
Company’s Real Estate segment primarily engages in both the vertical development
of projects and to a lesser degree the sale of land to third-party developers,
which latter activity generally includes the retention of some involvement and
control in the infrastructure, development, oversight and design of the projects
and a contingent revenue structure based on the ultimate sale of the developed
units. The Company attempts to mitigate the risk of vertical
development by utilizing guaranteed maximum price construction contracts
(although certain construction costs may not be covered by contractual
limitations), pre-selling a portion of the project, which generally requires
significant non-refundable deposits, and obtaining non-recourse financing for
certain projects. The Company’s real estate development projects also
may result in the creation of certain resort assets that provide additional
benefit to the Resort segment. The Company’s Real Estate revenue and
associated expense fluctuate based upon the timing of closings and the type of
real estate being sold, thus increasing the volatility of Real Estate operating
results between periods. In the near-term, the majority of Real
Estate revenue is expected to be generated from vertical development projects
that are currently under construction, in which revenue and related cost of
sales will be recorded at the time of real estate closings.
Recent
Trends, Risks and Uncertainties
Together
with those risk factors identified in the Company’s Form 10-K, 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 or condition:
·
|
The
economic downturn currently affecting the U.S. and global economy is
expected to continue to have a negative impact on overall trends in the
travel and leisure industries. Consequently, visitation to the
Company’s resorts and/or the amount the Company’s guests spend at its
resorts is being negatively impacted by the weaker U.S. and global
economy, in addition to lowered demand for the Company’s real estate
projects. Currently the Company is experiencing a significant
decline in reservations as compared to the same period in the prior year
from destination guests. However, the Company cannot predict
the ultimate impact this will have on its visitation and results of
operations for the 2008/2009 ski season, depending upon whether these
booking trends continue, worsen or improve within the macroeconomic
environment. Additionally, a large portion of the Mountain
segment operating expenses are fixed costs (with the exception of certain
variable expenses including forest service fees, other resort related
fees, credit card fees, retail/rental operations, ski school labor and
dining operations) which could impact the Company’s results of operations
and cash flows if there is a significant decline in skier
visitation.
|
·
|
The
timing and amount of snowfall can have an impact on skier
visits. To mitigate this impact, as well as to lock in more
lift ticket revenue in general, the Company focuses efforts on sales of
season passes prior to the beginning of the ski
season. Additionally, the Company has invested in snowmaking
upgrades in an effort to address the inconsistency of early season
snowfall where possible. Season pass revenue, although
primarily collected prior to the ski season, is recognized in the
Consolidated Condensed Statements of Operations throughout the ski
season. Deferred revenue related to season pass sales
(including the Epic Season Pass, as discussed below) was $66.0 million and
$55.2 million as of October 31, 2008 and 2007,
respectively.
|
·
|
In
March 2008, the Company announced a new season pass product (the “Epic
Season Pass”) for the upcoming 2008/2009 ski season, which offers
unrestricted and unlimited access to the Company’s five ski
resorts. The Epic Season Pass is being marketed towards the
Company’s Destination guests although it is available to in-state and
local (“In-State”) guests and must be purchased on or before December 1,
2008, prior to the vast majority of the ski season. As such,
the Company expects an increase in season pass revenue for the 2008/2009
ski season; however, the Company cannot predict the overall impact the
Epic Season Pass will have on overall lift revenue and effective ticket
price (“ETP”).
|
·
|
Real
Estate Reported EBITDA is highly dependent on, among other things, the
timing of closings on real estate under contract, which determines when
revenue and associated cost of sales is recognized. Changes to
the anticipated timing of closing on one or more real estate projects, or
unit closings within a real estate project, could materially impact Real
Estate Reported EBITDA for a particular quarter or fiscal
year. Additionally, the magnitude of real estate projects
currently under development or contemplated could result in significant
fluctuations in Real Estate Reported EBITDA between
periods. For example, the Company closed on 39 of the 45 units
at Crystal Peak Lodge during the three months ended October 31, 2008 and
expects to close on the majority of the remaining condominium units during
the year ending July 31, 2009. The Company closed on one of the
13 Lodge at Vail Chalets (“Chalets”) during the three months ended October
31, 2008, which is in addition to the five Chalets that closed in the year
ended July 31, 2008 and expects to close on the remaining seven Chalets
upon final completion during the year ending July 31,
2009. Also, the Company expects to close in the year ending
July 31, 2009 one unit at The Arrabelle at Vail Square (“Arrabelle”) upon
final completion and has another unit available for sale. The
Company has entered into definitive sales contracts with a value of
approximately $108 million related to the above projects yet to be
closed.
|
·
|
The
Company has several other real estate projects across its resorts under
development and in the planning stages. While the current
instability in the capital markets and slowdown in the national real
estate market have not, to date, materially impacted the Company’s Real
Estate segment operating results, the Company does have elevated risk
associated with the selling and/or closing of its real estate under
development as a result of the current economic climate. These
risks surrounding the Company’s real estate developments are partially
mitigated by the fact that the Company’s projects include a relatively low
number of units situated at the base of its resorts, which are unique due
to the relatively low supply of developable land. Additionally,
the Company’s real estate projects must meet the Company’s pre-sale
requirements, which generally include substantial non-refundable deposits,
before significant development begins; however, there is no guarantee that
a sustained downward trend in the capital and real estate markets would
not materially impact the Company’s real estate development activities or
operating results. In addition to the expected completion of the
Arrabelle, Chalets and Crystal Peak Lodge development projects during the
year ending July 31, 2009, the Company is also moving forward with the
development of One Ski Hill Place located at the base of Peak 8 in
Breckenridge and The Ritz-Carlton Residences, Vail. The Company
expects to incur between $320 million to $340 million of remaining
development costs subsequent to October 31, 2008 on the Arrabelle,
Chalets, Crystal Peak Lodge, One Ski Hill Place and The Ritz-Carlton
Residences, Vail projects.
|
·
|
The
Company had $102.7 million in cash and cash equivalents as of October 31,
2008 (the first fiscal quarter historically is a seasonal low point for
cash and cash equivalents on hand given that the first fiscal quarter and
prior year fiscal fourth quarter have essentially no ski operations), with
no borrowings under the revolver component of its Credit Facility and
expects to generate additional cash from operations, including future
closures on real estate vertical development projects during the 2009
fiscal year. In addition to building or preserving excess cash,
especially considering the current economic environment, the Company
continuously evaluates other options on how to utilize its excess cash,
including any combination of the following strategic options: self-fund
real estate under development; continue recent levels of investment in
resort assets; pursue strategic acquisitions; pay off outstanding debt;
repurchase additional common stock of the Company (see Note 10, Stock
Repurchase Plan, of the Notes to Consolidated Condensed Financial
Statements for more information regarding the Company’s stock repurchase
plan); and/or other options to return value to
stockholders. The Company’s debt is long-term in nature and the
Company believes its debt has favorable interest rates. In
determining its uses of excess cash, the Company has some constraints as a
result of the Company’s Fourth Amended and Restated Credit Agreement,
dated as of January 28, 2005, as amended, between The Vail Corporation (a
wholly-owned subsidiary of the Company), Bank of America, N.A. as
administrative agent and the Lenders party thereto (the “Credit
Agreement”) underlying the Company’s Credit Facility and the Indenture,
dated as of January 29, 2004 among the Company, the guarantors therein and
the Bank of New York as Trustee (“Indenture”), governing the 6.75% Senior
Subordinated Notes due 2014 (“6.75% Notes”), which limit the Company’s
ability to pay dividends, repurchase stock and pay off certain of its
debt, including its 6.75% Notes.
|
·
|
The
U.S. stock and credit markets have recently experienced significant
volatility which has led to a significant decline in market value of
companies in the travel and leisure industry, including the
Company. However, we currently do not believe that the recent
decline in the Company’s market capitalization is a triggering event
requiring an interim impairment test with regards to the Company’s
goodwill and indefinite-lived intangible assets. The Company
has $214.7 million of goodwill and indefinite-lived intangible assets for
which the Company currently plans on performing its annual impairment test
during its fiscal fourth quarter 2009, unless circumstances materially
change, necessitating an interim impairment analysis. The
Company cannot predict the outcome of this annual test and whether the
result will require the Company to record a non-cash impairment
charge.
|
·
|
On
November 1, 2008, the Company closed its acquisition of the resort ground
transportation business, Colorado Mountain Express (“CME”), for a total
consideration of $38.3 million, as well as $0.9 million to reimburse the
seller for certain new capital expenditures as provided for in the
purchase agreement. The operating results of CME will be
reported within the Lodging segment beginning with the three and six
months ending January 31, 2009.
|
RESULTS
OF OPERATIONS
Summary
Due to
the seasonality of the Company’s operations, the Company normally incurs net
losses during the first fiscal quarter, as shown in the summary operating
results below (in thousands):
|
|
Three
Months Ended
|
|
|
October
31,
|
|
|
2008
|
|
2007
|
|
Mountain
Reported EBITDA
|
|
$
|
(39,430
|
)
|
|
$
|
(36,442
|
)
|
|
Lodging
Reported EBITDA
|
|
|
355
|
|
|
|
2,081
|
|
|
Resort
Reported EBITDA
|
|
|
(39,075
|
)
|
|
|
(34,361
|
)
|
|
Real
Estate Reported EBITDA
|
|
|
15,373
|
|
|
|
5,121
|
|
|
Total
Reported EBITDA
|
|
|
(23,702
|
)
|
|
|
(29,240
|
)
|
|
Loss
before benefit from income taxes
|
|
|
(53,913
|
)
|
|
|
(40,678
|
)
|
|
Net
loss
|
|
$
|
(34,504
|
)
|
|
$
|
(24,610
|
)
|
|
The loss
before benefit from income taxes increased $13.2 million for the three months
ended October 31, 2008 as compared to the same period in the prior year, despite
an improvement in Total Reported EBITIDA of $5.5 million, primarily due to a
prior year $11.9 million contract dispute credit, net and a $4.3 million
increase in depreciation and amortization. A further discussion of
segment results and other items can be found below.
Mountain
Segment
Mountain
segment operating results for the three months ended October 31, 2008 and 2007
are presented by category as follows (in thousands):
|
|
Three
Months Ended
|
|
Percentage
|
|
|
October
31,
|
|
Increase
|
|
|
2008
|
|
|
2007
|
|
(Decrease)
|
Lift
tickets
|
$
|
--
|
|
$
|
--
|
|
--
|
|
%
|
Ski
school
|
|
--
|
|
|
--
|
|
--
|
|
%
|
Dining
|
|
3,929
|
|
|
4,762
|
|
(17.5
|
)
|
%
|
Retail/rental
|
|
22,426
|
|
|
23,540
|
|
(4.7
|
)
|
%
|
Other
|
|
14,423
|
|
|
14,234
|
|
1.3
|
|
%
|
Total
Mountain net revenue
|
|
40,778
|
|
|
42,536
|
|
(4.1
|
)
|
%
|
Total
Mountain operating expense
|
|
81,223
|
|
|
80,947
|
|
0.3
|
|
%
|
Mountain
equity investment income, net
|
|
1,015
|
|
|
1,969
|
|
(48.5
|
)
|
%
|
Total
Mountain Reported EBITDA
|
$
|
(39,430
|
)
|
$
|
(36,442
|
)
|
(8.2
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Mountain Reported EBITDA includes $1.2 million and $1.1 million of stock-based
compensation expense for the three months ended October 31, 2008 and 2007,
respectively.
The
Company's first fiscal quarter historically results in negative Mountain
Reported EBITDA, as the Company's ski resorts generally do not open for ski
operations until the Company's second fiscal quarter. The first
fiscal quarter consists primarily of fixed expenses plus summer business and
retail/rental operations.
Total
Mountain net revenue decreased primarily as a result of a decrease of $1.1
million in retail/rental revenue negatively impacted primarily by lower sales
volumes primarily in the Colorado Front Range. Dining revenue for the
three months ended October 31, 2008 was negatively impacted by temporary
closures of Keystone on-mountain dining facilities due to construction of the
new Keystone gondola. Other revenue was also negatively impacted by
temporary closure of the summer on-mountain activities in Breckenridge,
including the alpine slide, due to real estate construction activities at the
base area of Breckenridge.
Mountain
operating expense in the three months ended October 31, 2008 was relatively flat
compared to prior year, however, the three months ended October 31, 2007
included $2.3 million of legal costs associated with The Canyons ski resort
(“The Canyons”) litigation. Excluding The Canyons litigation expense,
expenses would have increased by 3.3% for the three months ended October 31,
2008, compared to the three months ended October 31, 2007, which was primarily
due to higher repairs and maintenance and allocated corporate costs, partially
offset by lower variable expenses associated with the reduced retail/rental and
dining revenues.
Mountain
equity investment income, net, which represents the Company’s share of income
from its retail brokerage joint venture, was unfavorably impacted by an overall
decline in real estate closings compared to the same period in the prior year
from both commercial projects and residential sales.
Lodging
Segment
Lodging
segment operating results for the three months ended October 31, 2008 and 2007
are presented by category as follows (in thousands except average daily rates
(“ADR”) and revenue per available room (“RevPAR”)):
|
Three
Months Ended
|
Percentage
|
|
October
31,
|
Increase
|
|
2008
|
2007
|
(Decrease)
|
Total
Lodging net revenue
|
$
|
45,253
|
|
$
|
43,317
|
|
4.5
|
|
%
|
Total
Lodging operating expense
|
|
44,898
|
|
|
41,236
|
|
8.9
|
|
%
|
Total
Lodging Reported EBITDA
|
$
|
355
|
|
$
|
2,081
|
|
(82.9
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
ADR
|
$
|
167.45
|
|
$
|
157.91
|
|
6.0
|
|
%
|
RevPAR
|
$
|
63.95
|
|
$
|
63.97
|
|
0.0
|
|
%
|
Total
Lodging Reported EBITDA includes $0.4 million and $0.3 million of stock-based
compensation expense for the three months ended October 31, 2008 and 2007,
respectively.
Total
Lodging segment net revenue for the three months ended October 31, 2008
increased by $1.9 million as compared to the three months ended October 31,
2007. Total Lodging segment net revenue for the three months ended
October 31, 2008 includes revenue generated from The Arrabelle at Vail Square
hotel (“The Arrabelle Hotel”), which opened in January 2008. The
increase in revenue was also driven by an increase in overall ADR of 6.0% as
compared to the three months ended October 31, 2007, which was partially offset
by fewer available rooms and lower occupancy, primarily as a result of a decline
in conference and group room nights, as compared to the three months ended
October 31, 2007.
Operating
expense increased in the three months ended October 31, 2008 as compared to the
three months ended October 31, 2007 due to operating expenses associated with
The Arrabelle Hotel in addition to increased expenses at GTLC and allocated
corporate costs, partially offset by the start-up and pre-opening costs
associated with The Arrabelle Hotel in the prior year’s quarter.
Real
Estate Segment
Real
Estate segment operating results for the three months ended October 31, 2008 and
2007 are presented by category as follows (in thousands):
|
Three
Months Ended
|
|
|
|
October
31,
|
|
Percentage
|
|
2008
|
2007
|
|
Increase
|
Total
Real Estate net revenue
|
$
|
66,750
|
|
$
|
12,034
|
|
|
454.7
|
|
%
|
Total
Real Estate operating expense
|
|
51,377
|
|
|
6,913
|
|
|
643.2
|
|
%
|
Total
Real Estate Reported EBITDA
|
$
|
15,373
|
|
$
|
5,121
|
|
|
200.2
|
|
%
|
Real
Estate Reported EBITDA includes $0.9 million and $0.6 million of stock-based
compensation expense for the three months ended October 31, 2008 and 2007,
respectively.
The
Company’s Real Estate operating revenue is primarily determined by the timing of
closings and the mix of real estate sold in any given
period. Different types of projects have different revenue and
expense volumes and margins; therefore, as the real estate inventory mix changes
it can greatly impact Real Estate segment net revenue, operating expense and
Real Estate Reported EBITDA.
Real
Estate segment net revenue for the three months ended October 31, 2008 was
driven primarily by the closing on 39 of the 45 residences at Crystal Peak Lodge
at Breckenridge ($51.2 million) and the closing on one of the 13 units at
Chalets ($14.4 million). Operating expense for the three months ended
October 31, 2008 included cost of sales of $44.3 million (including sales
commissions) commensurate with revenue recognized, as well as general and
administrative costs of approximately $7.1 million. General and
administrative costs are primarily comprised of marketing expenses for the major
real estate projects under development (including those that have not yet
closed), overhead costs such as labor and benefits associated with the expanded
real estate infrastructure to support the increased vertical development and
allocated corporate costs.
Real
Estate segment net revenue for the three months ended October 31, 2007 was
driven primarily by contingent gains on development parcel sales that closed in
previous periods. Operating expense for the three months ended
October 31, 2007 primarily consisted of marketing expenses for the major real
estate projects under development, overhead costs such as labor and benefits and
allocated corporate costs.
Other
Items
In
addition to segment operating results, the following material items contributed
to the Company's overall financial position.
Depreciation and
amortization
. Depreciation and amortization expense for the
three months ended October 31, 2008 increased primarily as a result of placing
in service significant resort assets, which included The Arrabelle Hotel, a new
skier services building and a private club associated with the Chalets project
and an increase in the fixed asset base due to a higher level of capital
expenditures.
Investment
income.
The Company invests excess cash in highly liquid
investments, as permitted under the Credit Agreement underlying the Credit
Facility and the Indenture relating to the 6.75% Notes. The decrease
in investment income for the three months ended October 31, 2008 compared to the
three months ended October 31, 2007 is primarily due to a reduction in the
average interest earned on investments and a decrease in average invested cash
during the period as a result of significant share repurchases over the past
year, higher capital improvements and construction costs related to vertical
real estate development.
Interest expense,
net.
The Company’s primary sources of interest expense are the
6.75% Notes, its Credit Facility, including unused commitment fees and letter of
credit fees, the outstanding $42.7 million of industrial development bonds and
the series of bonds issued to finance the construction of employee housing
facilities. Interest expense increased $0.3 million for the three
months ended October 31, 2008 compared to the three months ended October 31,
2007, primarily due to a decrease in capitalized interest associated with
ongoing real estate and related resort development partially offset by a
reduction in average debt outstanding and a reduction in the average variable
borrowing rate of the employee housing bonds.
Contract dispute credit, net.
On October 19,
2007, RockResorts received payment of the final settlement from Cheeca Holdings,
LLC (“Cheeca”), related to the disputed contract termination of the formerly
managed RockResorts Cheeca Lodge & Spa property, in the amount of $13.5
million, of which $11.9 million (net of final attorney’s fees) is recorded in
“contract dispute credit, net” in the Consolidated Condensed Statement of
Operations for the three months ended October 31, 2007.
Income taxes.
The
effective tax rate for the three months ended October 31, 2008 and 2007 was
36.0% and 39.5%, respectively. The income tax benefit recorded in the
three months ended October 31, 2007 reflects the reversal of a previously
recorded liability in the amount of $0.7 million associated with unrecognized
tax benefits that were determined to be realizable due to a settlement reached
with state tax authorities. The interim period effective tax rate is
primarily driven by the amount of anticipated pre-tax book income for the full
fiscal year and an estimate of the amount of non-deductible items for tax
purposes.
The
Internal Revenue Service (“IRS”) has completed its examination of the Company’s
tax returns for tax years 2001 through 2003 and has issued a report of its
findings. The examiner’s primary finding is the disallowance of the
Company’s position to remove the restrictions under Section 382 of the Internal
Revenue Code of approximately $73.8 million of net operating losses (“NOL”)
carryforwards. These restricted NOL carryforwards relate to fresh
start accounting from the Company’s reorganization in 1992. The
Company has appealed the examiner’s disallowance of these NOL carryforwards to
the Office of Appeals. However, if the Company is unsuccessful in its
appeals process, it will not negatively impact the Company’s financial position
or results of operations.
Reconciliation
of Non-GAAP measures
The
following table reconciles from segment Reported EBITDA to net loss (in
thousands):
|
|
Three
Months Ended
|
|
|
|
October
31,
|
|
|
|
2008
|
|
|
|
2007
|
|
Mountain
Reported EBITDA
|
$
|
(39,430
|
)
|
|
$
|
(36,442
|
)
|
Lodging
Reported EBITDA
|
|
355
|
|
|
|
2,081
|
|
|
Resort
Reported EBITDA
|
|
(39,075
|
)
|
|
|
(34,361
|
)
|
Real
Estate Reported EBITDA
|
|
15,373
|
|
|
|
5,121
|
|
|
Total
Reported EBITDA
|
|
(23,702
|
)
|
|
|
(29,240
|
)
|
Depreciation
and amortization
|
|
(25,078
|
)
|
|
|
(20,761
|
)
|
Loss
on disposal of fixed assets
|
|
(180
|
)
|
|
|
(234
|
)
|
Investment
income
|
|
643
|
|
|
|
3,218
|
|
Interest
expense, net
|
|
(7,947
|
)
|
|
|
(7,644
|
)
|
Contract
dispute credit, net
|
|
--
|
|
|
|
11,920
|
|
Minority
interest in loss of consolidated subsidiaries, net
|
|
2,351
|
|
|
|
2,063
|
|
Loss
before benefit from income taxes
|
|
(53,913
|
)
|
|
|
(40,678
|
)
|
Benefit from income taxes
|
|
19,409
|
|
|
|
16,068
|
|
Net
loss
|
|
$
|
(34,504
|
)
|
|
$
|
(24,610
|
)
|
The
following table reconciles Net Debt (defined as long-term debt plus long-term
debt due within one year less cash and cash equivalents) (in
thousands):
|
|
October 31,
|
|
|
2008
|
|
2007
|
Long-term
debt
|
|
$
|
491,778
|
|
$
|
534,527
|
Long-term
debt due within one year
|
|
|
354
|
|
|
76,944
|
Total
debt
|
|
|
492,132
|
|
|
611,471
|
Less:
cash and cash equivalents
|
|
|
102,668
|
|
|
166,044
|
Net
debt
|
|
$
|
389,464
|
|
$
|
445,427
|
LIQUIDITY
AND CAPITAL RESOURCES
Significant
Sources of Cash
Historically,
the Company's first fiscal quarter end is seasonally low for cash and cash
equivalents on hand given that the first and the prior year’s fourth fiscal
quarters have essentially no ski operations and the Company is incurring fixed
costs as well as incurring Resort capital expenditures and investments in real
estate. In total, the Company used $59.7 million and $64.8 million of
cash in the three months ended October 31, 2008 and October 31, 2007,
respectively. The Company generated $50.9 million of cash from
operating activities during the three months ended October 31, 2008, compared to
using $19.4 million for the three months ended October 31, 2007. The
three months ended October 31, 2008 were positively impacted by an increase in
Real Estate Reported EBITDA adjusted for real estate cost of sales less
investments in real estate in the amount of $63.2 million, increased private
club deferred initiation fees and deposits of $32.9 million primarily related to
the collection of the final installments related to the Vail Mountain Club
initiation deposits and a reduction in restricted cash balances of $34.1 million
which became available for general purpose use. These increases were
partially offset by a decrease in real estate deposits of $29.9 million which
were applied to real estate sales. Additionally, the three months
ended October 31, 2007 included the receipt of the Cheeca settlement which
resulted in a net increase of $11.9 million in cash. Cash used in
investing activities for the three months ended October 31, 2008 decreased by
$5.8 million compared to the three months ended October 31, 2007 due to
decreased resort capital expenditures of $8.9 million. Net cash used
by financing activities for the three months ended October 31, 2008 increased by
$71.0 million compared to the three months ended October 31, 2007 primarily
resulting from the $58.4 million pay off of the Non-Recourse Real Estate
Financing and the repayment of $15.0 million borrowings under the Series 1990
Sports Facilities Refunding Bonds Revenue Bonds, both in the current year first
fiscal quarter.
In
addition to the Company’s $102.7 million of cash and cash equivalents at October
31, 2008, the Company has available $306.2 million under its Credit Facility
(which represents the total commitment of $400.0 million less certain letters of
credit outstanding of $93.8 million). As of October 31, 2008 and
2007, total long-term debt (including long-term debt due within one year) was
$492.1 million and $611.5 million, respectively, with the decrease at October
31, 2008 being primarily due to the pay off of the Non-Recourse Real Estate
Financings related to the Company’s vertical development
projects. Net Debt (defined as long-term debt plus long-term debt due
within one year less cash and cash equivalents) decreased from $445.4 million as
of October 31, 2007 to $389.5 million as of October 31, 2008 due primarily to
the pay off of the Company’s Non-Recourse Real Estate Financings partially
offset by the decrease in cash and cash equivalents. The Company
believes it is in a good position to take advantage of potential strategic
options as further discussed below, as the Company has significant cash and cash
equivalents on hand and no revolver borrowings under its Credit
Facility.
The
Company expects that its liquidity needs in the near term will be met by
continued utilization of operating cash flows (including cash to be generated
from anticipated real estate closings) and borrowings, if necessary, under
the Credit Facility. In order to provide additional flexibility for
the Company’s liquidity needs, the Company finalized in March 2008 an agreement
with the lenders in its Credit Facility to utilize an accordion feature to
expand commitments under the existing facility by $100.0 million (for a total
borrowing capacity of $400.0 million), at the same terms existing in the current
facility. The Company believes the Credit Facility, which matures in
2012, including the expanded commitments would provide added flexibility
especially when evaluating future financing needs for its real estate projects
given the current state of the non-recourse financing available in the capital
markets, and is priced favorably, with any new borrowings currently being priced
at LIBOR plus 0.50%.
In
addition to building or preserving excess cash, the Company continuously
evaluates other options on how to utilize its excess cash, including any
combination of the following strategic options: self-fund real estate under
development, continue recent levels of investment in resort assets, pursue
strategic acquisitions, pay off outstanding debt, repurchase additional common
stock of the Company and/or other options to return value to
stockholders. The Company’s debt generally has favorable fixed
interest rates and is long-term in nature. The Company’s Credit
Facility and the Indenture limit the Company’s ability to make investments or
distributions, including the payment of dividends and/or the repurchase of the
Company’s common stock, and the pay off of certain of its debt, including its
6.75% Notes.
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 it will incur a significant increase in cash income tax payments
due to the prior utilization of all NOL carryforwards (subject to the appeal of
the IRS ruling described above). Subsequent to October 31, 2008, the
Company completed its acquisition of CME which required a cash payment of
approximately $38.3 million, as well as $0.9 million to reimburse the seller for
certain new capital expenditures.
The
Company expects to spend approximately $250 million to $270 million in calendar
year 2008 for real estate development projects, including the construction of
associated resort-related depreciable assets, of which $210 million was spent as
of October 31, 2008, leaving approximately $40 million to $60 million to spend
in the remainder of calendar year 2008. The Company has entered into
contracts with third parties to provide construction-related services to the
Company throughout the course of construction for these projects; commitments
for future services to be performed over the next several years under such
current contracts total approximately $266 million. The primary
projects are expected to include continued construction and development costs,
as well as planning and infrastructure costs associated with planned development
projects in and around each of the Company’s resorts. The Company
currently estimates to spend approximately $230 million to $250 million in
calendar year 2009 for real estate development projects, including the
construction of associated resort-related depreciable assets. In
addition to utilizing project-specific financing and cash on hand as
appropriate, the Company also pre-sells units requiring deposits in a proposed
development prior to committing to the completion of the
development.
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 evaluates additional capital improvements based
on expected strategic impacts and/or expected return on
investment. The Company currently anticipates it will spend
approximately $106 million to $110 million of resort capital expenditures for
calendar year 2008 excluding resort depreciable assets arising from real estate
activities noted above, of which $83 million was spent as of October 31, 2008,
leaving approximately $23 million to $27 million to spend in the remainder of
calendar year 2008. This overall resort capital investment will allow
the Company to maintain its high quality standards and make incremental
discretionary improvements at the Company’s five ski resorts and throughout its
owned hotels. Included in these capital expenditures are
approximately $40 million to $42 million which are necessary to maintain
appearance and level of service appropriate to the Company’s world-class resort
operations, including routine replacement of snow grooming equipment and rental
fleet equipment. Discretionary expenditures for calendar 2008 include
the completed replacement of a previously existing gondola with a new
state-of-the-art eight passenger Keystone River Run gondola in River Run Village
(which was operational November 2008); completion of an on-mountain ski school
building following the new Buckaroo Express gondola installed in 2007 at Beaver
Creek; full renovation of The Osprey at Beaver Creek (formerly known as the Inn
at Beaver Creek), including substantial upgrades to create a unique ultra-luxury
RockResorts branded hotel; new snowmaking equipment at Peak 7 in Breckenridge;
start of a Jackson Lake Lodge room remodel in Grand Teton National Park; and
upgrades to the Company’s central reservations, marketing database and
e-commerce booking systems, among other projects. The Company has not
finalized its specific resort capital plan for calendar year 2009, although it
is currently anticipated that such plan will continue at the same level of
expenditures to maintain appearance and level of service, but the Company will
evaluate total discretionary expenditures based on the current economic
environment . The Company currently plans to utilize cash flow from
operations and cash on hand to provide the cash necessary to execute its capital
plan.
Principal
payments on the vast majority of the Company’s long-term debt ($489.2 million of
the total $492.1 million debt outstanding as of October 31, 2008) are not due
until fiscal 2014 and beyond.
The
Company’s debt service requirements can be impacted by changing interest rates
as the Company had $52.6 million of variable-rate debt outstanding as of October
31, 2008. A 100-basis point change in LIBOR would cause the Company’s
annual interest payments to change by approximately $0.5 million. 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, including non-recourse real estate
financings, it may enter into. The Company’s long term liquidity
needs are dependent upon operating results that 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 can respond to liquidity
impacts of changes in the business and economic environment by managing its
capital expenditures and real estate development activities.
On March
9, 2006, the Company’s Board of Directors approved the repurchase of up to
3,000,000 shares of common stock and on July 16, 2008 approved an increase of
the Company’s common stock repurchase authorization by an additional 3,000,000
shares. During the three months ended October 31, 2008, the Company
repurchased 278,400 shares of common stock at a cost of $7.4
million. Since inception of this stock repurchase plan, the Company
has repurchased 3,282,508 shares at a cost of approximately $132.9 million,
through October 31, 2008. As of October 31, 2008, 2,717,492 shares
remained available to repurchase under the existing repurchase
authorization. Shares of common stock purchased pursuant to the
repurchase program will be held as treasury shares and may be used for the
issuance of shares under the Company’s employee share award
plans. Acquisitions under the stock repurchase program may be made
from time to time at prevailing prices as permitted by applicable laws, and
subject to market conditions and other factors. The timing as well as
the number of shares that may be repurchased under the program will depend on a
number of factors including the Company’s future financial performance, the
Company’s available cash resources and competing uses for cash that may arise in
the future, the restrictions in the Credit Facility and in the Indenture,
prevailing prices of the Company’s common stock and the number of shares that
become available for sale at prices that the Company believes are
attractive. The stock repurchase program may be discontinued at any
time and is not expected to have a significant impact on the Company’s
capitalization.
Covenants
and Limitations
The
Company must abide by certain restrictive financial covenants under its Credit
Facility and the Indenture. The most restrictive of those covenants
include the following Credit Facility covenants: Net Funded Debt to Adjusted
EBITDA ratio, Minimum Net Worth and the Interest Coverage ratio (each as defined
in the Credit Agreement). In addition, the Company’s financing
arrangements, including the Indenture, limit its ability to incur certain
indebtedness, make certain restricted payments, enter into 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 Net Funded
Debt to Adjusted EBITDA ratio as defined in the Credit Agreement.
The
Company was in compliance with all restrictive financial covenants in its debt
instruments as of October 31, 2008. The Company expects it will meet
all applicable financial maintenance covenants in its Credit Agreement,
including the Net Funded Debt to Adjusted EBITDA ratio throughout the year
ending July 31, 2009. However, there can be no assurance that the
Company will meet such 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.
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, revenue, expenses, results
of operations, liquidity, capital expenditures or capital
resources.
FORWARD-LOOKING
STATEMENTS
Except
for any historical information contained herein, the matters discussed in this
Form 10-Q 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 available as of the date hereof, which
are based on forecasts of future results and estimates of amounts not yet
determinable. These statements also relate to our contemplated 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,
but are not limited to:
·
|
downturn
in general economic conditions, including adverse effects on the overall
travel and leisure
related industries;
|
·
|
terrorist
acts upon the United States;
|
·
|
threat
of or actual war;
|
·
|
unfavorable
weather conditions;
|
·
|
our
ability to obtain financing on terms acceptable to us to finance our real
estate investments, capital expenditures and growth
strategy;
|
·
|
our
ability to continue to grow our resort and real estate
operations;
|
·
|
competition
in our mountain and lodging
businesses;
|
·
|
our
ability to hire and retain a sufficient seasonal
workforce;
|
·
|
our
ability to successfully initiate and/or complete real estate development
projects and achieve the anticipated financial benefits from such
projects;
|
·
|
adverse
changes in real estate markets;
|
·
|
implications
arising from new Financial Accounting Standards Board
(“FASB”)/governmental legislation, rulings or
interpretations;
|
·
|
our
reliance on government permits or approvals for our use of Federal land or
to make operational improvements;
|
·
|
our
ability to integrate and successfully operate future acquisitions;
and
|
·
|
adverse
consequences of current or future legal
claims.
|
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 Form 10-Q, including investors and prospective
investors, are cautioned not to place undue reliance on such forward-looking
statements. Actual results may differ materially from those suggested
by the forward-looking statements that the Company makes for a number of reasons
including those described in this Form 10-Q and in Part I, Item 1A, “Risk
Factors” of the Form 10-K. All forward-looking statements are made
only as of the date hereof. Except as may be required by law, the Company does
not intend to update these forward-looking statements, even if new information,
future events or other circumstances have made them incorrect or
misleading.
ITEM
3. 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 October 31, 2008, the Company had $52.6 million of
variable rate indebtedness, representing 10.7% of the Company's total debt
outstanding, at an average interest rate during the three months ended October
31, 2008 of 6.2%. Based on variable-rate borrowings outstanding as of
October 31, 2008, a 100-basis point (or 1.0%) change in LIBOR would have caused
the Company's annual interest payments to change by $0.5 million. The
Company's market risk exposure fluctuates based on changes in underlying
interest rates.
Disclosure
Controls and Procedures
Management
of the Company, under the supervision and with participation of the Chief
Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), have evaluated
the effectiveness of the Company's disclosure controls and procedures as such
term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934 (the “Act”) as of the end of the period covered by this report on
Form 10-Q.
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.
Changes
in Internal Control over Financial Reporting
There
were no changes in the Company's internal control over financial reporting
during the period covered by this Form 10-Q that have materially affected, or
are reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART
II OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS.
The Canyons Ski Resort
Litigation
During
the fourth quarter of the fiscal year ended July 31, 2007, the Company entered
into an agreement with Peninsula Advisors, LLC (“Peninsula”) for the negotiation
and mutual acquisition of The Canyons and the land underlying The
Canyons. On July 15, 2007, American Skiing Company (“ASC”) entered
into an agreement to sell The Canyons to Talisker Corporation and Talisker
Canyons Finance Company, LLC (together “Talisker”). On July 27, 2007,
the Company filed a complaint in the District Court in Colorado against
Peninsula and Talisker claiming, among other things, breach of contract by
Peninsula and intentional interference with contractual relations and
prospective business relations by Talisker and seeking damages, specific
performance and injunctive relief. On October 19, 2007, the Company’s
request for a preliminary injunction to prevent the closing of the acquisition
by Talisker of The Canyons from ASC was denied. On November 8, 2007,
Talisker filed an answer to the Company’s complaint along with three
counterclaims. On November 12, 2007, Peninsula filed a motion to
dismiss and for partial summary judgment. The Company believes that
these counter claims and motions are without merit. These motions are
set for hearing on December 12, 2008. The Company is unable to
predict the ultimate outcome of the above described actions.
There
have been no material changes from risk factors previously disclosed in Item 1A
to Part I of the Company’s Form 10-K.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.
Repurchase
of equity securities
The
following table summarizes the purchase of the Company’s equity securities
during the first quarter of the year ending July 31, 2009:
|
|
Total
Number of Shares Purchased
|
|
|
Average
Price Paid per Share
|
|
|
Total
Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(1)
|
|
|
Maximum
Number of Shares that May Yet Be Purchased Under the Plans or Programs
(1)
|
August
1, 2008 – August 31, 2008
|
|
--
|
|
|
--
|
|
|
--
|
|
|
2,995,892
|
September
1, 2008 – September 30, 2008
|
|
--
|
|
|
--
|
|
|
--
|
|
|
2,995,892
|
October
1, 2008 – October 31, 2008
|
|
278,400
|
|
|
26.63
|
|
|
278,400
|
|
|
2,717,492
|
|
|
278,400
|
|
|
26.63
|
|
|
278,400
|
|
|
|
(1)
|
On
March 9, 2006, the Company’s Board of Directors approved the repurchase of
up to 3,000,000 shares of common stock and subsequently on July 16, 2008
approved an increase of the Company’s common stock repurchase
authorization by an additional 3,000,000 shares. Acquisitions
under the share repurchase program may be made from time to time at
prevailing prices as permitted by applicable laws, and subject to market
conditions and other factors. The stock repurchase program may
be discontinued at any time.
|
None.
None.
ITEM
6. 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. for the quarter ended January 31,
2005.)
|
|
3.2
|
Amended
and Restated By-Laws. (Incorporated by reference to Exhibit 3.2 on Form
10-K of Vail Resorts, Inc. for the year ended July 31,
2008.)
|
|
4.1(a)
|
Indenture,
dated as of January 29, 2004, among Vail Resorts, Inc., the guarantors
therein and the Bank of New York as Trustee (Including Exhibit A, Form of
Global Note). (Incorporated by reference to Exhibit 4.1 on Form
8-K of Vail Resorts, Inc. filed on February 2, 2004.)
|
|
4.1(b)
|
Supplemental
Indenture, dated as of March 10, 2006 to Indenture dated as of January 29,
2004 among Vail Resorts, Inc., as Issuer, the Guarantors named therein, as
Guarantors, and The Bank of New York, as Trustee. (Incorporated
by reference to Exhibit 10.34 on Form 10-Q of Vail Resorts, Inc. for the
quarter ended January 31, 2006.)
|
|
4.1(c)
|
Form
of Global Note. (Incorporated by reference to Exhibit 4.1 on
Form 8-K of Vail Resorts, Inc. filed February 2, 2004.)
|
|
4.1(d)
|
Supplemental
Indenture, dated as of April 26, 2007 to Indenture dated as of January 29,
2004 among Vail Resorts, Inc., as Issuer, the Guarantors named therein, as
Guarantors, and The Bank of New York, as Trustee. (Incorporated by
reference to Exhibit 4.1(d) on Form 10-K of Vail Resorts, Inc. for the
year ended July 31, 2008.)
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|
4.1(e)
|
Supplemental
Indenture, dated as of July 11, 2008 to Indenture dated as of January 29,
2004 among Vail Resorts, Inc., as Issuer, the Guarantors named therein, as
Guarantors, and The Bank of New York Mellon Trust Company, N.A., as
Trustee. (Incorporated by reference to Exhibit 4.1(e) on Form 10-K of Vail
Resorts, Inc. for the year ended July 31, 2008.)
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|
10.1
|
Executive
Employment Agreement made and entered into October 15, 2008 by and between
Vail Resorts, Inc., and Robert A. Katz.
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16
|
10.2
|
Executive
Employment Agreement made and entered into October 15, 2008 by and between
Vail Resorts, Inc., and Jeffrey W. Jones.
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36
|
10.3
|
Executive
Employment Agreement made and entered into October 15, 2008 by and between
Vail Holdings, Inc., a wholly-owned subsidiary of Vail Resorts, Inc., and
Keith Fernandez.
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52
|
10.4
|
Executive
Employment Agreement made and entered into October 15, 2008 by and between
Vail Holdings, Inc., a wholly-owned subsidiary of Vail Resorts, Inc., and
John McD. Garnsey.
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68
|
10.5
|
Executive
Employment Agreement made and entered into October 15, 2008 by and between
Vail Holdings, Inc., a wholly-owned subsidiary of Vail Resorts, Inc., and
Blaise Carrig.
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84
|
10.6
|
Executive
Employment Agreement made and entered into October 15, 2008 by and between
Vail Holdings, Inc., a wholly-owned subsidiary of Vail Resorts, Inc., and
Stanley D. Brown.
|
100
|
10.7
|
Vail
Resorts, Inc. Management Incentive Plan.
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116
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10.8
|
Form
of Indemnification Agreement.
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125
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31.1
|
Certifications
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
143
|
31.2
|
Certifications
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
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145
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32
|
Certifications
of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
147
|
SIGNATURES
Pursuant
to the requirements 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.
Date: December
9, 2008
|
Vail
Resorts, Inc.
|
|
|
|
By:
|
/s/ Jeffrey W. Jones
|
|
Jeffrey
W. Jones
|
|
Senior
Executive Vice President and
|
|
Chief
Financial Officer
|
|
(Duly
Authorized Officer)
|
Date: December
9, 2008
|
Vail
Resorts, Inc.
|
|
|
|
By:
|
/s/ Mark L. Schoppet
|
|
Mark
L. Schoppet
|
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Vice
President, Controller and
|
|
Chief
Accounting Officer
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Exhibit
10.1
EXECUTIVE
EMPLOYMENT AGREEMENT
This
EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into
October 15, 2008 by and between VAIL RESORTS, INC., a Delaware corporation (the
“Company”) and Robert A. Katz (“Executive”).
Whereas
the parties had previously entered into that certain Employment Agreement, dated
February 28, 2006 (the “Original Agreement”), but now desire to make certain
updates to the terms contained in that Original Agreement as required to comply
with law and as otherwise agreed herein and in order to accomplish the foregoing
to enter into this replacement Agreement.
The
parties hereto agree as follows:
(a) The
Company hereby employs Executive to serve as the Chief Executive Officer of the
Company on the terms and conditions set forth herein. In such capacity,
Executive shall have the responsibilities normally associated with such
position, subject to the direction and supervision of the Board of Directors of
the Company (the “Board”). Executive shall also serve as a member of
the Board and the Executive Committee of the Board.
(b) Executive
accepts employment hereunder and agrees that, during the term of Executive’s
employment, Executive will observe and comply with the policies and rules of the
Company and devote substantially all Executive’s time during normal business
hours and best efforts to the performance of Executive’s duties hereunder, which
duties shall be performed in an efficient and competent manner and to the best
of Executive’s ability. Executive further agrees that, during the
term of this Agreement, Executive will not, without the prior written consent of
the Board, directly or indirectly engage in any manner in any business or other
endeavor, either as an owner, employee, officer, director, independent
contractor, agent, partner, advisor, or in any other capacity calling for the
rendition of Executive’s personal services. This restriction shall
not preclude Executive from having passive investments, and devoting reasonable
time to the supervision thereof (so long as such does not create a conflict of
interest or interfere with Executive’s obligations hereunder), in any business
or enterprise that is not in competition with any business or enterprise of the
Company or any of its parents, subsidiaries or affiliates (collectively, the
“Companies”). This Agreement shall not limit Executive’s community or
charitable activities so long as such activities do not impair or interfere with
Executive’s performance of the services contemplated by this
Agreement.
For all
services rendered by Executive to or on behalf of the Companies, the Company
shall provide or cause to be provided to Executive, subject to making any and
all withholdings and deductions required of the Company or its affiliates by law
with all other income tax consequences being borne by Executive, the
following:
(a)
Base
Salary
. Executive shall receive a base salary of Eight Hundred
and Forty-Three Thousand Five Hundred Dollars ($843,500.00) per year (the “Base
Salary”), payable in accordance with the normal payroll practices of the
Company, and net of mandatory time off deductions and other applicable
withholding and deductions. Executive’s Base Salary shall be reviewed
annually by the Compensation Committee of the Board (the “Compensation
Committee”). Any increases in such Base Salary shall be at the
discretion of the Compensation Committee, and Executive acknowledges that the
Compensation Committee is not obligated to grant any increases. The
Base Salary shall not be lowered during the term of this Agreement without
Executive’s written consent.
(b)
Vail Resorts Management
Incentive Plan for Corporate Executives
. Executive shall be
entitled to participate in the Management Incentive Plan for Corporate
Executives (the “MIP”) on the same terms as may be applicable to other senior
executives of the Company and subject to the terms of the MIP. Under
the MIP, Executive’s target annual bonus award will be One Hundred Percent
(100%) of Executive’s Base Salary based upon Executive’s performance in light of
objectives established by the Board and assessed by the Compensation
Committee. The value of any award under the MIP (“MIP Award”) made to
Executive shall be payable in the form of cash as to Fifty Percent
(50%) of the MIP Award and in the form of Restricted Stock Units (“RSUs”) with a
value equal to the remaining Fifty Percent (50%) of the MIP
Award. The RSUs shall be issued subject to the terms of the VRI
Amended and Restated 2002 Long Term Incentive and Share Award Plan (the “Equity
Compensation Plan”) and the agreement provided pursuant thereto, using the
Company’s standard valuation methodology and vesting in increments of 1/3 per
year over a three year period, such vesting to commence on the first anniversary
of the grant date of such RSUs. Any awards under the MIP are at the
discretion of the Compensation Committee.
(c)
Benefits; Paid Time Off
.
Executive shall be eligible to participate in the benefit plans and perks and on
the same terms as may be extended generally to other senior executives of the
Companies and to the extent Executive is eligible under the terms of the
applicable plan. Executive shall also receive two hundred sixteen
(216) hours of paid time off, which amount shall include hours for paid
holidays, as well as be required to take such hours of mandatory-time-off in
accordance with the Company’s policies and procedures.
(d)
Clubs and Other
Privileges
. Executive shall, subject to applicable rules in
effect from time to time, be entitled during the term of employment to the
benefits of membership in all of the private clubs owned and operated by the
Company from time to time (collectively “Clubs”) as part of the
Company’s quality evaluation program and subject to completion of bi-annual
feedback surveys; provided that Executive shall not actually be a member of such
Clubs and in no event shall Executive be entitled to any claim of reimbursement
for any initiation or similar fees. Executive shall be solely
responsible for the payment of any and all charges incurred at such Clubs, but
may utilize Executive’s annual allowance provided pursuant to Executive
Perquisite Fund (as may be in effect from time to time) to pay such charges,
excepting only the payment of regular dues, which Executive shall not be
obligated to pay. In addition, Executive shall receive all other
benefits and perquisites on the same terms afforded from time to time to senior
executives generally or as specifically approved by the Compensation
Committee. Executive shall participate in the Executive Perquisite
Fund (under the terms as of the date hereof) in the amount of $70,000 per
annum.
(e)
Expense
Reimbursement
. Executive shall have a travel and entertainment
budget that is reasonable in light of Executive’s position and responsibilities
and shall be reimbursed for all reasonable business-related travel and
entertainment expenses incurred by Executive thereunder upon submission of
appropriate documentation thereof in compliance with applicable Company
policies.
(f)
Legal
Expenses
. The Company shall reimburse Executive’s reasonable
documented legal fees and expenses (not to exceed $10,000) incurred in the
review and negotiation of this Agreement.
(g)
LTI
Grant
. So long as Executive shall be employed by the Company
on March 1, 2009 (and has not received any notice of termination for any reason
as of or prior to that date), Executive shall be granted (the “March 2009
Grant”) a long term incentive award having a grant value of $4,800,000, of which
(1) $1,000,000 (using the Company’s standard valuation methodology) shall be
pursuant to a grant of Restricted Stock Units (“RSUs”), and (2) $3,800,000
(using the Company’s standard valuation methodology) shall be pursuant to a
grant of Share Appreciation Rights (“SARs”), each of which (x) shall be subject
to the terms of the VRI Amended and Restated 2002 Long Term Incentive and Share
Award Plan (or such successor equity compensation plan) and the agreements
provided pursuant thereto, and (y) shall vest in full on September 30, 2011;
provided
,
however
, that this
provision shall be of no effect in the event that a Change in Control, as
defined below, has been completed on or before March 1, 2009, and only if the
effect of such Change in Control is to extinguish, exchange or convert the
common stock of the Company concurrent with the Change in Control being
effected. Notwithstanding the terms of any other agreement or plan,
none of the vesting of the RSUs or SARs issued pursuant to the March 2009 Grant
shall accelerate in the event of a duly completed Change in Control which has
been publicly announced or completed prior to September 1, 2009 but rather shall
vest pursuant to (y) above
.
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3.
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Term and
Termination
.
|
(a)
Term
. The
effective date of this Agreement shall be October 15, 2008 (“Employment
Commencement Date”). Unless terminated earlier, the term of this
Agreement shall be for the period commencing with the Employment Commencement
Date and continuing through October 15, 2011 and shall thereafter be
automatically renewed for successive one-year periods unless, no later than 60
days before the expiration of the then-current term, either Executive or the
Company gives the other written notice of non-renewal, in which case this
Agreement shall expire upon the conclusion of the then-current initial or
renewal term.
(b)
Termination for
Cause
. The Company may terminate this Agreement at any time
for “Cause”. For purposes of this Agreement, “Cause” shall mean (i)
any conduct related to the Company involving gross negligence, gross
mismanagement, or the unauthorized disclosure of confidential information or
trade secrets; (ii) dishonesty or a violation of the Company’s Code of Ethics
and Business Conduct that has or reasonably could be expected to result in a
detrimental impact on the reputation, goodwill or business position of any of
the Companies; (iii) gross obstruction of business operations or illegal or
disreputable conduct by Executive that impairs or reasonably could be expected
to impair the reputation, goodwill or business position of any of the Companies,
and any acts that violate any policy of the Company relating to discrimination
or harassment; (iv) commission of a felony or a crime involving moral turpitude
or the entrance of a plea of guilty or nolo contedere to a felony or a crime
involving moral turpitude; or (v) any action involving a material breach of the
terms of the Agreement including material inattention to or material neglect of
duties and Executive shall not have remedied such breach within 30 days after
receiving written notice from the Board specifying the details
thereof. In the event of a termination for Cause, Executive shall be
entitled to receive only Executive’s then-current Base Salary through the date
of such termination. Further, Executive acknowledges that in the
event of such a termination for Cause, Executive shall not be entitled to
receive any bonus payment for the year of termination or subsequent years under
the MIP or any other incentive compensation plan in which Executive is then
participating.
(c)
Termination Without
Cause
. The Company may terminate this Agreement at any time
without Cause, by giving Executive written notice specifying the effective date
of such termination. In the event of a termination without Cause and
provided that Executive and the Company execute (and, if applicable, thereafter
not revoke) a written release in connection with such termination substantially
in the form attached hereto as Annex I (the “Mutual Release”), Executive shall
be entitled to receive (i) Executive’s then-current Base Salary through the
effective date of such termination, (ii) a pro-rated bonus for the portion of
the Company’s fiscal year through the effective date of such termination, which
pro-rated bonus shall be based on applying the level of achievement of the
performance targets (with respect to both Executive and the Companies) to
Executive’s target bonus for the year of such termination payable in a lump sum
at the same time as bonuses are paid to the Company’s senior executives
generally (the “Pro-Rated Bonus”), and (iii) twenty-four (24) months of
Executive’s then current Base Salary payable in a lump sum. For the
purposes of this section, any written notice of non-renewal given by the Company
pursuant to Section 3(a) of this Agreement shall be deemed termination without
Cause.
Any
payment to Executive made pursuant hereto shall be paid to Executive no later
than the date that is two and a half months following the calendar year in which
such termination without Cause occurs. In addition, provided that the
Mutual Release has been executed, all unvested shares or portions of any equity
grant not yet vested (including RSUs, SARs, stock options or any other form of
equity or long-term incentive) made by the Company to Executive concurrent with
or subsequent to the execution of the Original Agreement under any equity
compensation plan of the Company (“Unvested Equity Grants”) shall automatically
become fully vested upon termination pursuant to this Section 3(c).
(d)
Termination By Executive For
Good Reason
. Executive shall be entitled to terminate this
Agreement at any time for “Good Reason” by giving the Company written notice of
such termination. For purposes of this Agreement, “Good Reason” shall
mean (i) the Company has breached its obligations hereunder in any material
respect, (ii) the Company has decreased Executive’s then current Base Salary,
(iii) Executive is directed to relocate Executive’s principal office more than
30 miles from Interlocken Business Park without Executive’s consent, (iv) the
Company has effected a material diminution in Executive’s reporting
responsibilities, authority, or duties as in effect immediately prior to such
change, and/or (v) the occurrence of a Change in Control (as defined below);
provided
,
however
, that
Executive shall not have the right to terminate this Agreement for Good Reason
unless: (A) Executive has provided notice to the Company of any of the foregoing
conditions within 90 days of the initial existence of the condition; (B) the
Company has been given at least 30 days after receiving such notice to cure such
condition (other than if Good Reason is due to a Change in Control); and (C)
Executive actually terminates employment within six months following the initial
existence of the condition. In such event, provided that Executive
and the Company have executed (and, if applicable, thereafter not revoked) the
Mutual Release, Executive shall be entitled to receive (w) Executive’s then
current Base Salary through the effective date of such termination, (x) a
Pro-Rated Bonus, (y) Twenty-Four (24) months of Executive’s then current
Base Salary payable in a lump sum. Any payment to Executive made
pursuant hereto shall be paid to Executive no later than the date that is two
and a half months following the calendar year in which such termination for Good
Reason occurs. In addition, provided that the Mutual Release has been
executed, all Unvested Equity Grants shall automatically become fully vested
upon termination pursuant to this Section 3(d).
(e)
Termination By Executive
Without Good Reason
. Executive may also terminate this
Agreement at any time without Good Reason by giving the Company at least thirty
(30) days’ prior written notice. In such event, Executive shall be
entitled to receive only Executive’s then-current Base Salary through the date
of termination. Further, Executive acknowledges that in the event of
such a termination without Good Reason, Executive shall not be entitled to
receive any bonus payment for the year of termination or subsequent years under
the MIP or any other incentive compensation plan in which Executive is then
participating.
(f)
Termination Due To
Disability
. In the event that Executive becomes “Totally and
Permanently Disabled” (as reasonably determined by the Board acting in good
faith), the Company shall have the right to terminate this Agreement upon
written notice to Executive; provided, however, that in the event that Executive
and the Company execute (and, if applicable, thereafter not
revoke) the Mutual Release, Executive shall be entitled to receive
(i) Executive’s then-current Base Salary through the date of such termination,
(ii) a Pro-Rated Bonus, and (iii) Executive’s then-current Base Salary, net of
short term disability payments remitted to Executive by the Company pursuant to
the Company’s Short-Term Disability Plan, through the earlier of (y) the
scheduled expiration date of this Agreement (but in no event less than twelve
(12) months from the date of disability) or (z) the date on which Executive’s
long-term disability insurance payments commence. In addition,
provided that the Mutual Release has been executed, all Unvested Equity Grants
shall automatically become fully vested upon termination pursuant to this
Section 3(f).
(g)
Termination Due To
Death
. This Agreement shall be deemed automatically terminated
upon the death of Executive. In such event, provided Executive’s
personal representative and the Company execute a release substantially in the
form of the Mutual Release, Executive’s personal representative shall be
entitled to receive (i) Executive’s then-current Base Salary through such date
of termination, and (ii) a Pro-Rated Bonus. In addition, provided
that the Mutual Release has been executed, all Unvested Equity Grants shall
automatically become fully vested upon termination pursuant to this Section
3(g).
(h)
Other
Benefits
. Upon Executive’s termination pursuant to Sections
3(c) or (d), and, in the event that Executive and the Company execute (and, if
applicable, thereafter not revoke) the Mutual Release, the Company agrees to pay
Executive, in lump sum, one year’s COBRA premiums for continuation of health and
dental coverage in existence at the time of such termination, as determined as
of Executive’s date of termination
.
This payment will be
remitted to Executive at the same time that Executive is paid pursuant to
Sections 3(c) and (d). Except as expressly set forth in this Section
3, Executive shall not be entitled to receive any compensation or other benefits
in connection with the termination of Executive’s employment.
(i)
Termination in Connection
with a Change in Contro
l. In the event of a termination of
Executive’s employment by the Company without Cause or by Executive for Good
Reason or notice by the Company of non-renewal of this Agreement, all within 365
days of a consummation of a Change in Control of the Company and provided that
Executive and the Company execute (and, if applicable, thereafter not revoke)
the Mutual Release, Executive shall be entitled to receive (i) Executive’s
then-current Base Salary through the effective date of such termination or
non-renewal, (ii) a Pro-Rated Bonus, (iii) a lump sum payment equal
to twenty-four (24) months of Executive’s then current Base Salary plus an
amount equal to the cash bonus paid to Executive in the prior calendar year,
payable no later than the date that is two and a half months following the
calendar year in which such termination or non-renewal occurs, and (iv) to the
extent not already vested, full vesting of all Unvested Equity
Grants. For purposes of this Agreement, “Change in Control” shall
mean an event or series of events by which: (A) any
“person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), but excluding
any employee benefit plan of such person or its subsidiaries, and any person or
entity acting in its capacity as trustee, agent, or other fiduciary or
administrator of any such plan) becomes the “beneficial owner” (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of 35% or
more of the equity securities of the Company entitled to vote for members of the
Board or equivalent governing body of the Company on a fully-diluted basis; or
(B) during any period of twenty four (24) consecutive months, a majority of the
members of the Board or other equivalent governing body of the Company cease to
be composed of individuals (1) who were members of that Board or equivalent
governing body on the first day of such period, (2) whose election or nomination
to that Board or equivalent governing body was approved by individuals referred
to in clause (1) above constituting at the time of such election or nomination
at least a majority of that Board or equivalent governing body, or (3) whose
election or nomination to that Board or other equivalent governing body was
approved by individuals referred to in clauses (1) and (2) above constituting at
the time of such election or nomination at least a majority of that Board or
equivalent governing body (excluding, in the case of both clause (2) and clause
(3), any individual whose initial nomination for, or assumption of office as, a
member of that Board or equivalent governing body occurs as a result of an
actual or threatened solicitation of proxies or consents for the election or
removal of one or more directors by any person or group other than a
solicitation for the election of one or more directors by or on behalf of the
Board); or (C) any person or two or more persons acting in concert shall have
acquired, by contract or otherwise, control over the equity securities of the
Company entitled to vote for members of the Board or equivalent governing body
of the Company on a fully-diluted basis (and taking into account all such
securities that such person or group has the right to acquire pursuant to any
option right) representing 51% or more of the combined voting power of such
securities; or (D)the Company sells or transfers (other than by mortgage or
pledge) all or substantially all of its properties and assets to, another
“person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act).
(j)
Provisions of Agreement that
Survive Termination
. No termination of this Agreement shall
affect any of the rights and obligations of the parties hereto under Sections 4,
5, 6 and 7, and such rights and obligations shall survive such termination in
accordance with the terms of such sections.
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4.
|
Restrictive
Covenants
.
|
(a) The
provisions of this Section 4 shall apply for a period of two (2) years beginning
with the date of termination of Executive’s employment hereunder for any
reason. During such period, Executive will not, except with the prior
written consent of the Board, directly or indirectly own, manage, operate, join,
control, finance or participate in the ownership, management, operation, control
or financing of, or be connected as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise with, or use or permit
his name to be used in connection with, any business or enterprise that is
engaged in a "Competing Enterprise," which is defined as an entity whose
operations are conducted within the ski industry in North America or in the real
estate development, lodging or hospitality industries in the State of Colorado.
Notwithstanding the foregoing, Executive may participate, own, finance, manage,
obtain employment or otherwise be connected with a larger regional, national or
international business or enterprise (a "New Employer") which owns or operates a
Competing Enterprise as a brand, branch, division, subsidiary or affiliate
provided that (i) the Competing Enterprise accounts for less than 10% of the New
Employer's annual revenues and annual net income on both a historical or pro
forma basis for the New Employer's most recently completed fiscal year, and (ii)
Executive's duties for the New Employer are not primarily related to the conduct
of such Competing Enterprise.
The
foregoing restrictions shall not be construed to prohibit the ownership by
Executive of less than five percent (5%) of any class of securities of any
corporation which is engaged in any of the foregoing businesses having a class
of securities registered pursuant to the Securities Exchange Act of 1934 (the
"Exchange Act"), provided that such ownership represents a passive investment
and that neither Executive nor any group of persons including Executive in any
way, either directly or indirectly, manages or exercises control of any such
corporation, guarantees any of its financial obligations, otherwise takes any
part in its business (other than exercising his rights as a shareholder), or
seeks to do any of the foregoing.
(b) Further,
Executive covenants and agrees that, during Executive’s employment hereunder and
for the period of two (2) years thereafter, Executive will not, directly or
indirectly solicit for another business or enterprise, or otherwise interfere
with the Company’s relationship with, any person who is a Grade 27 managerial or
higher level employee of any of the Companies at the time of Executive’s
termination.
(c) Executive
acknowledges that the restrictions, prohibitions and other provisions hereof,
are reasonable, fair and equitable in terms of duration, scope and geographic
area; are necessary to protect the legitimate business interests of the Company;
and are a material inducement to the Company to enter into this
Agreement.
(d) In
the event Executive breaches any provision of Section 4, in addition to any
other remedies that the Company may have at law or in equity, Executive shall
promptly reimburse the Company for any severance payments received from, or
payable by, the Company. In addition, the Company shall be entitled
in its sole discretion to offset all or any portion of the amount of any unpaid
reimbursements against any amount owed by the Company to Executive.
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5.
|
Document Return;
Resignations
.
|
(a) Upon
termination of Executive’s employment hereunder for any reason, or upon the
Company’s earlier request, Executive agrees that Executive shall promptly
surrender to the Company all letters, papers, documents, instruments, records,
books, products, data and work product stored on electronic storage media, and
any other materials owned by any of the Companies or used by Executive in the
performance of Executive’s duties under this Agreement.
(b) Upon
termination of Executive hereunder for any reason, Executive agrees that
Executive shall be deemed to have resigned from all officer, director,
management or board positions to which Executive may have been elected or
appointed by reason of Executive’s employment or involvement with the Company,
specifically including but not limited to the Board, the boards of any of the
Companies and any other boards, districts, homeowner and/or industry
associations in which Executive serves as a result of or in his capacity as CEO
(collectively, the “Associations”). Executive agrees to promptly
execute and deliver to the Company or its designee any other document, including
without limitation a letter of resignation, reasonably requested by the Company
to effectuate the purposes of this Section 5(b). If the Company is
unable, after reasonable effort, to secure Executive’s signature on any document
that the Company deems to be necessary to effectuate the purposes of this
Section 5(b), Executive hereby designates and appoints the Company and its duly
authorized officers and agents as Executive’s agent and attorney-in-fact, to act
for and on Executive’s behalf to execute, verify and submit to any appropriate
third party any such document, which shall thereafter have the same legal force
and effect as if executed by Executive.
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6.
|
Confidentiality and
Assignment of Intellectual
Property
.
|
(a) During
Executive’s employment with the Company, and at all times following the
termination of Executive’s employment hereunder for any reason, Executive shall
not use for Executive’s own benefit or for the benefit of any subsequent
employer, or disclose, directly or indirectly, to any person, firm or entity, or
any officer, director, stockholder, partner, associate, employee, agent or
representative thereof, any confidential information or trade secrets of any of
the Companies or the Associations, other than as reasonably necessary to perform
Executive’s duties under this Agreement. As used herein, the term
“confidential information” includes budgets, business plans, strategies,
analyses of potential transactions, costs, personnel data, and other proprietary
information of the Company that is not in the public domain.
(b) For
purposes of this Section 6(b), “Company Inventions” means all ideas, processes,
trademarks and service marks, inventions, discoveries, and improvements to any
of the foregoing, that Executive learns of, conceives, develops or creates alone
or with others during Executive’s employment with the Company (whether or not
conceived, developed or created during regular working hours) that directly or
indirectly arise from or relate to: (i) the Company’s business, products or
services; or (ii) work performed for the Company by Executive or any other
Company employee, agent or contractor; or (iii) the use of the Company’s
property or time; or (iv) access to the Company’s confidential
information. Executive hereby assigns to the Company Executive’s
entire right, title and interest in all Company Inventions, which shall be the
sole and exclusive property of the Company whether or not subject to patent,
copyright, trademark or trade secret protection. Executive also
acknowledges that all original works of authorship that are made by Executive
(solely or jointly with others), within the scope of Executive’s employment with
the Company, and that are protectable by copyright, are “works made for hire,”
as that term is defined in the United States Copyright Act (17
U.S.C. §§ 101, et seq.). To the extent that any such
works, by operation of law, cannot be “works made for hire,” Executive hereby
assigns to Company all right, title, and interest in and to such works and to
any related copyrights. Executive shall promptly execute, acknowledge
and deliver to the Company all additional instruments or documents deemed at any
time by the Company in its sole discretion to be necessary to carry out the
intentions of this paragraph.
Following
the termination of Executive’s employment hereunder for any reason, Executive
agrees that Executive shall not make any statements disparaging of any of the
Companies, their respective boards, their businesses, and the officers,
directors, stockholders, or employees of any of the Companies or the
Associations. In response to inquiries from prospective employers,
which shall be referred by Executive only to the Senior Vice President of Human
Resources, the Company shall confirm only dates of employment, job title, and
job responsibilities. Subject to the terms of this Section 7,
Executive, as appropriate, may respond truthfully to inquiries from prospective
employers of Executive, and the Company and Executive may respond truthfully as
may be required by any governmental or judicial body acting in its official
capacity.
It is
understood that this Agreement has been entered into personally by the
parties. Neither party shall have the right to assign, transfer,
encumber or dispose of any duties, rights or payments due hereunder, which
duties, rights and payments with respect hereto are expressly declared to be
non-assignable and non-transferable, being based upon the personal services of
Executive, and any attempted assignment or transfer shall be null and void and
without binding effect on either party; provided, however, that the Company may
assign this Agreement to any parent, subsidiary, affiliate or successor
corporation.
The
parties acknowledge that the remedy at law for any violation or threatened
violation of Sections 4, 5, 6, 7 and/or 8 of this Agreement may be inadequate
and that, accordingly, either party shall be entitled to injunctive relief in
the event of such a violation or threatened violation without being required to
post bond or other surety. The above stated remedies shall be in
addition to, and not in limitation of, any other rights or remedies to which
either party is or may be entitled at law, in equity, or under this
Agreement.
The
Company agrees that it shall indemnify and hold harmless Executive in connection
with legal proceedings seeking to impose liability on Executive in such
Executive’s capacity as a director, officer or employee of the Companies to the
fullest extent permitted under the Company’s Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws. In furtherance
thereof, the Company and Executive each agree to execute and deliver an
Indemnification Agreement by and between the Company and Executive, attached
hereto as
Exhibit
A
and incorporated herein by reference, concurrently with the execution
and delivery of this Agreement. To the extent any provision set forth
in the Indemnification Agreement is in conflict with any provision set forth in
this Agreement, the provision set forth in the Indemnification Agreement shall
govern. Further, Executive shall be entitled to coverage under the
Directors and Officers Liability Insurance program to the same extent as other
senior executives of the Companies.
This
Agreement constitutes the full understanding and entire employment agreement of
the parties, and supersedes and is in lieu of any and all other understandings
or agreements between the Company and Executive including the Original Agreement
which is replaced in its entirety. Nothing herein is intended to
limit any rights or duties Executive has under the terms of any applicable
incentive compensation, benefit plan or other similar agreements.
All disputes
relating to or arising from this Agreement and/or Executive’s employment with
the Company shall be resolved, upon written request by either party, by final
and binding arbitration by the Judicial Arbiter Group (“JAG”) in Denver,
Colorado in accordance with the JAMS Streamlined Arbitration Rules and
Procedures as in effect at the time of the arbitration. The JAG
arbitration fees shall be paid equally by the parties
hereto. Arbitration hereunder shall take place before one JAG
arbitrator mutually agreed upon by the parties within 30 days of the written
request for arbitration. If the parties are unable or fail to agree upon
the arbitrator within such time, the parties shall submit a request at the end
of such period to JAG to select the arbitrator within 15 days
thereafter. The arbitration and determination rendered by the JAG
arbitrator shall be final and binding on the parties and judgment may be entered
upon such determination in any court having jurisdiction thereof (and such
judgment enforced, if necessary, through judicial proceedings). It is
understood and agreed that the arbitrator shall be specifically empowered to
designate and award any remedy available at law or in equity, including specific
performance. The arbitrator may award costs and expenses of the
arbitration proceeding (including, without limitation, reasonable attorneys'
fees) to the prevailing party.
Any
amendment to this Agreement shall be made only in writing and signed by each of
the parties hereto.
The
internal laws of the State of Colorado law shall govern the construction and
enforcement of this Agreement.
Any
notice required or authorized hereunder shall be deemed delivered when
deposited, postage prepaid, in the United States mail, certified, with return
receipt requested, addressed to the parties as follows:
Robert A.
Katz
615 Highland
Avenue
Boulder, CO,
80302
Vail Resorts,
Inc.
390
Interlocken Crescent
Broomfield,
Colorado 80021
Attn: General
Counsel
Anything
in this Agreement to the contrary notwithstanding, if on the date of termination
of Executive’s employment with the Company, as a result of such termination,
Executive would receive any payment that, absent the application of this Section
16 would be subject to interest and additional tax imposed pursuant to Section
409A(a) of the Internal Revenue Code of 1986, as amended (the “Code”) as a
result of the application of Section 409A(a)(2)(B)(i) of the Code, then no such
payment shall be made prior to the date that is the earliest of (1) 6 months
after the date of termination of Executive’s employment, (2) Executive’s death,
or (3) such other date as will cause such payment not to be subject to such
interest and additional tax.
(a)
Anything
in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment, award, benefit or distribution (including, without
limitation, the acceleration of any payment, award, distribution or benefit), by
the Company or its subsidiaries to or for the benefit of Executive (whether
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 17) (a ”Payment”)
would be subject to the excise tax imposed by Section 4999 of the Code or any
corresponding provisions of state or local tax law, or any interest or penalties
are incurred by Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as, the “Excise Tax”), then Executive shall be entitled to receive
an additional payment (a “Gross-Up Payment”) in an amount such that after
payment by Executive of all taxes (including any Excise Tax, income tax or
employment tax) imposed upon the Gross-Up Payment and any interest or
penalties imposed with respect to such taxes, Executive retains from the
Gross-Up Payment an amount equal to the excess, if any, of (i) the Excise Tax
imposed upon the Payments, and (ii) the Excise Tax, if any, that would have been
imposed on the Payments if the Executive had not served as a non-employee
director of the Company prior to the Effective Date (and, therefore, Executive’s
non-employee director compensation had not been taken into account in the Excise
Tax computation). The payment of a Gross-Up Payment under this
Section 17(a) shall not be conditioned upon Executive’s termination of
employment. Notwithstanding the foregoing provisions of this Section
17, if it shall be determined that Executive is entitled to a Gross-Up Payment,
but that the portion of the Payments that would be treated as “parachute
payments” under Section 280G of the Code does not exceed the Safe Harbor Amount
(as defined in the following sentence) by more than $100,000, then no Gross-up
Payment shall be made to Executive and the amounts payable under this Agreement
shall be reduced so that the Payments, in the aggregate, are reduced to the Safe
Harbor Amount. The “Safe Harbor Amount” is the greatest amount of
payments in the nature of compensation that are contingent on a Change in
Control for purposes of Section 280G of the Code that could be paid to Executive
without giving rise to any Excise Tax. The reduction of the amounts
payable hereunder, if applicable, shall be made by reducing the cash payments
under Section 3. For purposes of reducing the payments to the Safe
Harbor Amount, only amounts payable under this Agreement (and no other Payments)
shall be reduced. If the reduction of the amounts payable under this
Agreement would not result in a reduction of the Payments to the Safe Harbor
Amount, no amounts payable under this Agreement shall be reduced pursuant to
this Section 17(a).
(b)
Subject
to the provisions of Section 17(c), all determinations required to be made under
this Section 17, including the determination of whether a Gross-Up Payment is
required and of the amount of any such Gross-Up Payment, shall be made by the
Company’s independent auditors or such other accounting firm agreed by the
parties hereto (the “Accounting Firm”), which shall provide detailed supporting
calculations to the Company within 15 business days after the receipt of notice
from the Company that Executive has received a Payment, or such earlier time as
is requested by the Company, provided that any determination that an Excise Tax
is payable by Executive shall be made on the basis of substantial
authority. The Company will promptly provide copies of such
supporting calculations to Executive. The Initial Gross-Up Payment,
if any, as determined pursuant to this Section 17(b), shall be paid to Executive
(or for the benefit of the Executive to the extent of the Company’s withholding
obligation with respect to applicable taxes) no later than the later of (i) the
due date for the payment of any Excise Tax, and (ii) the receipt of the
Accounting Firm’s determination. If the Accounting firm determines
that no Excise Tax is payable by Executive, it shall furnish the Company with a
written opinion that substantial authority exists for Executive not to report
any Excise Tax on his Federal income tax return and, as a result, the Company is
not required to withhold Excise Tax from payments to Executive. The
Company will promptly provide a copy of any such opinion to
Executive. Any determination by the Accounting Firm meeting the
requirements of this Section 17(b) shall be binding upon the Company and
Executive. As a result of the uncertainly in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made (“Underpayment”), consistent
with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 17(c) and Executive
thereafter is required to make a payment of Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment, if any, that has occurred and
any such Underpayment shall be promptly paid by the Company to or for the
benefit of Executive. The fees and disbursements of the Accounting
Firm shall be paid by the Company.
(c)
Executive
shall notify the Company in writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as soon as practicable but
not later than ten business days after Executive receives written notice of such
claim and shall apprise the Company of the nature of such claim and the date on
which such Claim is requested to be paid. Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on
which it gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If
the Company notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive shall:
(i)
give the
Company any information reasonably requested by the Company relating to such
claim,
(ii)
take such
action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Company,
(iii)
cooperate
with the Company in good faith in order effectively to contest such claim,
and
(iv)
permit
the Company to participate in any proceedings relating to such claim;
provided, however
,
that the Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold Executive harmless, on an after-tax basis, for any
Excise Tax, income tax or employment tax, including interest and penalties with
respect thereto, imposed as a result of such representation and payment of costs
and expenses. Without limitation on the foregoing provisions of this
Section 17(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
Executive to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine;
provided,
however
, that if the Company directs Executive to pay such claim and sue
for a refund, the Company shall advance the amount of such payment to Executive
on an interest-free basis and shall indemnify and hold Executive harmless, on an
after-tax basis, from any Excise Tax, income tax or employment tax, including
interest or penalties with respect thereto, imposed with respect to such advance
(except that if such a loan would not be permitted under applicable law, the
Company may not direct Executive to pay the claim and sue for a refund); and
further provided
that any extension of the statute of limitations relating to the payment
of taxes for the taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company’s control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If,
after the receipt by Executive of an amount advanced by the Company pursuant to
Section 17(c), Executive becomes entitled to receive any refund with respect to
such claim, Executive shall (subject to the Company’s complying with the
requirements to Section 17(c)) promptly pay the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 17(c), a determination is made that
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
the Gross-Up Payment required to be paid.
|
18.
|
No Duty to
Mitigate
.
|
Executive
shall not be required to mitigate damages or the amount of any payment provided
for under this Agreement by seeking other employment or otherwise, nor will any
payments hereunder be subject to offset in the event Executive does
mitigate.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors, permitted assigns, heirs, executors and legal
representatives.
This
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original but all such
counterparts together shall constitute one and the same
instrument. Each counterpart may consist of two copies hereof each
signed by one of the parties hereto.
Headings
in this Agreement are for convenience only and shall not control the meaning of
this Agreement. Whenever applicable, masculine and neutral pronouns
shall equally apply to the feminine genders; the singular shall include the
plural and the plural shall include the singular. The parties have
reviewed and understand this Agreement, and each has had a full opportunity to
negotiate this Agreement’s terms and to consult with counsel of their own
choosing. Therefore, the parties expressly waive all applicable
common law and statutory rules of construction that any provision of this
Agreement should be construed against this Agreement’s drafter, and agree that
this Agreement and all amendments thereto shall be construed as a whole,
according to the fair meaning of the language used.
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22.
|
Severability and
Modification by Court.
|
If any
court of competent jurisdiction declares any provision of this Agreement invalid
or unenforceable, the remainder of this Agreement shall remain fully
enforceable. To the extent that any such court concludes that any
provision of this Agreement is void or voidable, the court shall reform such
provision(s) to render the provision(s) enforceable, but only to the extent
absolutely necessary to render the provision(s) enforceable and only in view of
the parties’ express desire that the Company be protected to the greatest extent
allowed by law from unfair competition, unfair solicitation and/or the misuse or
disclosure of its confidential information and records containing such
information.
[Signature
Page to follow.]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
of the date first written above.
VAIL
RESORTS, INC.
By:
/s/ Jeffrey W.
Jones__________________
Name:
Jeffrey W. Jones
Title:
Senior Executive Vice President and Chief Financial Officer
EXECUTIVE:
/s/ Robert A.
Katz______________________
Robert A.
Katz
Annex
I
MUTUAL
RELEASE
This
mutual release (this “Release”) is entered into as of this _____________ day of
_____________, 20___ (the “Release Date”) by _______________ (“Employee”), on
the one hand and Vail Resorts, Inc. (“VRI”) on the other hand.
1. Reference
is hereby made to Executive Employment Agreement, dated __________, 20__ (the
“Executive Employment Agreement”) by the parties hereto setting forth the
agreements among the parties regarding the termination of the employment
relationship between Employee and VRI. Capitalized terms used but not
defined herein have the meanings ascribed to them in Executive Employment
Agreement.
2. Employee,
for him, his spouse, heirs, executors, administrators, successors, and assigns,
hereby releases and discharges VRI and its respective direct and indirect
parents and subsidiaries, and other affiliated companies, and each of their
respective past and present officers, directors, agents and employees, from any
and all actions, causes of action, claims, demands, grievances, and complaints,
known and unknown, that Employee or his spouse, heirs, executors,
administrators, successors, or assigns ever had or may have at any time through
the Release Date. Employee acknowledges and agrees that this Release
is intended to and does cover, but is not limited to: (i) any claim of
employment discrimination of any kind whether based on a federal, state, or
local statute or court decision, including the Age Discrimination in Employment
Act with appropriate notice and rescission periods observed; (ii) any claim,
whether statutory, common law, or otherwise, arising out of the terms or
conditions of Employee’s employment and/or Employee’s separation from VRI
including, but not limited to, any claims in the nature of tort or contract
claims, wrongful discharge, promissory estoppel, intentional or negligent
infliction of emotional distress, and/or breach of covenant of good faith and
fair dealing. The enumeration of specific rights, claims, and causes
of action being released shall not be construed to limit the general scope of
this Release. It is the intent of the parties that, by this Release,
Employee is giving up all rights, claims and causes of action occurring prior to
the Release Date, whether or not any damage or injury therefrom has yet
occurred. Employee accepts the risk of loss with respect to both
undiscovered claims and with respect to claims for any
harm hereafter suffered
arising out of conduct, statements, performance or decisions occurring before
the Release Date.
3. VRI
hereby releases and discharges Employee, his spouse, heirs, executors,
administrators, successors, and assigns, from any and all actions, causes of
actions, claims, demands, grievances and complaints, known and unknown, that VRI
ever had or may have at any time through the Release Date. VRI
acknowledges and agrees that this Release is intended to and does cover, but is
not limited to: (i) any claim, whether statutory, common law, or otherwise,
arising out of the terms or conditions of Employee’s employment and/or
Employee’s separation from VRI, and (ii) any claim for attorneys’ fees,
costs, disbursements, or other like expenses. The enumeration of
specific rights, claims, and causes of action being released shall not be
construed to limit the general scope of this Release. It is the
intent of the parties that, by this Release, VRI is giving up all of its
respective rights, claims, and causes of action occurring prior to the Release
Date, whether or not any damage or injury therefrom has yet
occurred. VRI accepts the risk of loss with respect to both
undiscovered claims and with respect to claims for any harm hereafter suffered
arising out of conduct, statements, performance or decisions occurring before
the Release Date.
4. This
Release shall in no event (i) apply to any claim by either Employee or VRI
arising from any breach by the other party of its obligations under Executive
Employment Agreement occurring on or after the Release Date, (ii) waive
Employee’s claim with respect to compensation or benefits earned or accrued
prior to the Release Date to the extent such claim survives termination of
Employee’s employment under the terms of Executive Employment Agreement, or
(iii) waive Employee’s right to indemnification under the by-laws of the
Company.
5.
Enforceability of
Release
:
|
(a)
|
You
acknowledge that you have been advised to consult with an attorney before
signing this Release.
|
|
(b)
|
You
acknowledge the adequacy and sufficiency of the consideration outlined in
Executive Employment Agreement for your promises set forth in this Release
and that the Company is not otherwise obligated to pay such
sums.
|
|
(c)
|
You
acknowledge that you have been offered at least twenty-one (21) days to
consider this Release, that you have read Executive Employment Agreement
and this Release, and understand its terms and significance, and that you
have executed this Release and with full knowledge of its effect, after
having carefully read and considered all terms of this Release and, if you
have chosen to consult with an attorney, your attorney has fully explained
all terms and their significance to
you.
|
|
(d)
|
You
hereby certify your understanding that you may revoke this Release, as it
applies to you, within seven (7) days following execution of this Release
and that this Release shall not become effective or enforceable until that
revocation period has expired. Any revocation should be sent,
in writing, to Vail Resorts, Inc., 390 Interlocken Crescent, Broomfield,
Colorado 80021, Attn: Office of the General
Counsel. You also understand that, should you revoke this
Release within the seven-day period, this Release, as it applies to you,
would be voided in its entirety and the sums set forth in Executive
Employment Agreement would not be paid or owed to
you.
|
6. This
Mutual Release shall be effective as of the eighth day following the Release
Date and only if executed by both parties.
IN
WITNESS WHEREOF, each party hereto, intending to be legally bound, has executed
this Mutual Release on the date indicated below.
ROBERT A.
KATZ VAIL
RESORTS, INC.
_________________________________ By:_________________________________
Date:______________________________ Date:_______________________________
Exhibit
10.2
EXECUTIVE
EMPLOYMENT AGREEMENT
This
EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into
October 15, 2008 by and between VAIL RESORTS, INC., a Delaware corporation (the
“Company and Jeffrey W. Jones (“Executive”).
Whereas
the parties had previously entered into that certain Amended and Restated
Employment Agreement, dated September 29, 2004 (the “Original Agreement”), as
amended by that First Amendment to Amended and Restated Employment Agreement
(“First Amendment”), but now desire to make certain updates to the terms
contained in that Original Agreement as required to comply with law and as
otherwise agreed to herein and in order to accomplish the foregoing to enter
into this replacement Agreement.
The
parties hereto agree as follows:
(a)
The Company
hereby employs Executive to serve as Senior Executive Vice President and Chief
Financial Officer on the terms and conditions set forth herein. In such
capacity, Executive shall have the responsibilities normally associated with
such position, subject to the direction and supervision of the Chief Executive
Officer (the “CEO and the Board of Directors of the Company (the
“Board”). Executive shall also serve as a member of the
Board.
(b)
Executive
accepts employment hereunder and agrees that, during the term of Executive’s
employment, Executive will observe and comply with the policies and rules of the
Company and devote substantially all Executive’s time during normal business
hours and best efforts to the performance of Executive’s duties hereunder, which
duties shall be performed in an efficient and competent manner and to the best
of Executive’s ability. Executive further agrees that, during the
term of this Agreement, Executive will not, without the prior written consent of
the CEO and the Board, directly or indirectly engage in any manner in any
business or other endeavor, either as an owner, employee, officer, director,
independent contractor, agent, partner, advisor, or in any other capacity
calling for the rendition of Executive’s personal services. This
restriction shall not preclude Executive from having passive investments, and
devoting reasonable time to the supervision thereof (so long as such does not
create a conflict of interest or interfere with Executive’s obligations
hereunder), in any business or enterprise that is not in competition with any
business or enterprise of the Company or any of its parents, subsidiaries or
affiliates (collectively, the “Companies”). This Agreement shall not
limit Executive’s community or charitable activities so long as such activities
do not impair or interfere with Executive’s performance of the services
contemplated by this Agreement.
For all
services rendered by Executive to or on behalf of the Companies, the Company
shall provide or cause to be provided to Executive, subject to making any and
all withholdings and deductions required of the Company or its affiliates by law
with all other income tax consequences being borne by Executive, the
following:
(a)
Base
Salary
. Executive shall receive a base salary of Four Hundred
Fifty Five Thousand Two Hundred Seventy One Dollars ($455,271.00) per year (the
“Base Salary”), payable in accordance with the normal payroll practices of the
Company, and net of mandatory time off deductions and other applicable
withholding and deductions. Executive’s Base Salary shall be reviewed
annually by the CEO and the Compensation Committee of the Board (the
“Compensation Committee”). Any increases in such Base Salary shall be
at the discretion of the Compensation Committee, after consultation with and
upon recommendation of the CEO, and Executive acknowledges that the Compensation
Committee is not obligated to grant any increases. The Base Salary
shall not be lowered during the term of this Agreement without Executive’s
written consent.
(b)
Vail Resorts Management
Incentive Plan for Corporate Executives
. Executive shall be
entitled to participate in the Management Incentive Plan for Corporate
Executives (the “MIP”) on the same terms as may be applicable to other senior
executives of the Company and subject to the terms of the MIP. Under
the MIP, Executive’s target annual bonus will be Sixty Percent (60%) of
Executive’s Base Salary based upon Executive’s performance in light of
objectives established by the CEO, and the Companies’ performance in light of
objectives established by the Compensation Committee. Any awards
under the MIP are at the discretion of the Compensation Committee.
(c)
Benefits; Paid Time Off
.
Executive shall be eligible to participate in the benefit plans and perks and on
the same terms as may be extended generally to other senior executives of the
Companies and to the extent Executive is eligible under the terms of the
applicable plan. Executive shall also receive Two Hundred Sixteen
(216) hours of paid time off, which amount shall include hours for paid
holidays, as well as be required to take such hours of mandatory-time-off in
accordance with the Company’s policies and procedures.
(d)
Clubs and Other
Privileges
. Executive shall, subject to applicable rules in
effect from time to time, be entitled during the term of employment to the
benefits of membership in such of the private clubs owned and operated by the
Company as designated by the CEO from time to time (collectively
“Clubs”) as part of the Company’s quality evaluation program and subject to
completion of bi-annual feedback surveys; provided that Executive shall not
actually be a member of such Clubs and in no event shall Executive be entitled
to any claim of reimbursement for any initiation or similar
fees. Executive shall be solely responsible for the payment of any
and all charges incurred at such Clubs, but may utilize Executive’s annual
allowance provided pursuant to Executive Perquisite Fund (as may be in effect
from time to time) to pay such charges, excepting only the payment of regular
dues, which Executive shall not be obligated to pay. In addition,
Executive shall receive all other benefits and perquisites on the same terms
afforded from time to time to senior executives generally (
e.g
., season ski passes,
executive perquisite fund).
(e)
Expense
Reimbursement
. Executive shall have a travel and entertainment
budget that is reasonable in light of Executive’s position and responsibilities
and shall be reimbursed for all reasonable business-related travel and
entertainment expenses incurred by Executive thereunder upon submission of
appropriate documentation thereof in compliance with applicable Company
policies.
(f)
Legal Expenses
.
The Company shall reimburse Executive’s reasonable documented legal fees and
expenses (not to exceed $10,000) incurred in the review and negotiation of this
Agreement.
(h)
Long Term Incentive
Compensation
. Executive shall be entitled to receive certain long
term compensation as set forth in the First Amendment, all in accordance with
the terms and conditions set forth therein which shall be incorporated herein
with full force and effect.
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3.
|
Term and
Termination
.
|
(a)
Term
. The
effective date of this Agreement shall be October 15, 2008 (“Employment
Commencement Date”). Unless terminated earlier, the term of this
Agreement shall be for the period commencing with the Employment Commencement
Date and continuing through October 15, 2011 and shall thereafter be
automatically renewed for successive one-year periods unless, no later than 60
days before the expiration of the then-current term, either Executive or the
Company gives the other written notice of non-renewal, in which case this
Agreement shall expire upon the conclusion of the then-current initial or
renewal term.
(b)
Termination for
Cause
. The Company may terminate this Agreement at any time
for “Cause”. For purposes of this Agreement, “Cause” shall mean (i)
any conduct involving gross negligence, gross mismanagement, or the unauthorized
disclosure of confidential information or trade secrets; (ii) dishonesty or a
violation of the Company’s Code of Ethics and Business Conduct that has or
reasonably could be expected to result in a detrimental impact on the
reputation, goodwill or business position of any of the Companies; (iii) gross
obstruction of business operations or illegal or disreputable conduct by
Executive that impairs or reasonably could be expected to impair the reputation,
goodwill or business position of any of the Companies, and any acts that violate
any policy of the Company relating to discrimination or harassment; (iv)
commission of a felony or a crime involving moral turpitude or the entrance of a
plea of guilty or nolo contedere to a felony or a crime involving moral
turpitude; or (v) any action involving a material breach of the terms of the
Agreement including material inattention to or material neglect of duties and
Executive shall not have remedied such breach within 30 days after receiving
written notice from the Board specifying the details thereof. In the
event of a termination for Cause, Executive shall be entitled to receive only
Executive’s then-current Base Salary through the date of such
termination. Further, Executive acknowledges that in the event of
such a termination for Cause, Executive shall not be entitled to receive any
bonus payment for the year of termination or subsequent years under the MIP or
any other incentive compensation plan in which Executive is then
participating.
(c)
Termination Without
Cause
. The Company may terminate this Agreement at any time
without Cause, by giving Executive written notice specifying the effective date
of such termination. In the event of a termination without Cause and
provided that Executive and the Company execute (and, if applicable, thereafter
not revoke) a written release in connection with such termination substantially
in the form attached hereto as Annex I (the “Mutual Release”), Executive shall
be entitled to receive (i) Executive’s then-current Base Salary through the
effective date of such termination, (ii) a pro-rated bonus for the portion of
the Company’s fiscal year through the effective date of such termination, which
shall be based on applying the level of achievement of the performance targets
(with respect to both Executive and the Companies) to Executive’s target bonus
for the year of such termination payable in a lump sum at the same time as
bonuses are paid to the Company’s senior executives generally (the “Pro-Rated
Bonus”), and (iii) twelve (12) months of Executive’s then current Base
Salary payable in a lump sum. For the purposes of this section, any
written notice of non-renewal given by the Company pursuant to Section 3(a) of
this Agreement shall be deemed termination without Cause. Any payment to
Executive made pursuant hereto shall be paid to Executive no later than the date
that is two and a half months following the calendar year in which such
termination without Cause occurs.
(d)
Termination By Executive For
Good Reason
. Executive shall be entitled to terminate this
Agreement at any time for “Good Reason” by giving the Company written notice of
such termination. For purposes of this Agreement, “Good Reason” shall
mean (i) the Company has breached its obligations hereunder in any material
respect, (ii) the Company has decreased Executive’s then current Base Salary,
(iii) Executive is directed to relocate Executive’s principal office more than
30 miles from Interlocken Business Park without Executive’s consent, and/or (iv)
the Company has effected a material diminution in Executive’s reporting title,
responsibilities, authority, or duties as in effect immediately prior to such
change, which shall also be deemed to have occurred, in the case of a Change in
Control, as defined below, if the Company is no longer listed on a public
trading exchange;
provided
,
however
, that
Executive shall not have the right to terminate this Agreement for Good Reason
unless: (a) Executive has provided notice to the Company of any of the foregoing
conditions within 90 days of the initial existence of the condition executive
was aware or reasonably should have been; (B) the Company has been given at
least 30 days after receiving such notice to cure such condition; and (C)
Executive actually terminates employment within [six months] following the
initial existence of the condition. In such event, provided that
Executive and the Company have executed (and, if applicable, thereafter not
revoked) the Mutual Release, Executive shall be entitled to receive (w)
Executive’s then current Base Salary through the effective date of such
termination, (x) a Pro-Rated Bonus, (y) twelve (12) months of Executive’s
then current Base Salary payable in a lump sum. Any payment to
Executive made pursuant hereto shall be paid to Executive no later than the date
that is two and a half months following the calendar year in which such
termination for Good Reason occurs.
(e)
Termination By Executive
Without Good Reason
. Executive may also terminate this
Agreement at any time without Good Reason by giving the Company at least thirty
(30) days’ prior written notice. In such event, Executive shall be
entitled to receive only Executive’s then-current Base Salary through the date
of termination. Further, Executive acknowledges that in the event of
such a termination without Good Reason, Executive shall not be entitled to
receive any bonus payment for the year of termination or subsequent years under
the MIP or any other incentive compensation plan in which Executive is then
participating.
(f)
Termination Due To
Disability
. In the event that Executive becomes “Totally and
Permanently Disabled” (as reasonably determined by the Board acting in good
faith), the Company shall have the right to terminate this Agreement upon
written notice to Executive; provided, however, that in the event that Executive
and the Company execute (and, if applicable, thereafter not
revoke) the Mutual Release, Executive shall be entitled to receive
(i) Executive’s then-current Base Salary through the date of such termination,
(ii) a Pro-Rated Bonus, and (iii) Executive’s then-current Base Salary, net of
short term disability payments remitted to Executive by the Company pursuant to
the Company’s Short-Term Disability Plan, through the earlier of (y) the
scheduled expiration date of this Agreement (but in no event less than twelve
(12) months from the date of disability) or (z) the date on which Executive’s
long-term disability insurance payments commence.
(h)
Termination Due To
Death
. This Agreement shall be deemed automatically terminated
upon the death of Executive. In such event, provided Executive’s
personal representative and the Company execute a release substantially in the
form of the Mutual Release, Executive’s personal representative shall be
entitled to receive (i) Executive’s then-current Base Salary through such date
of termination, and (ii) a Pro-Rated Bonus.
(i)
Other
Benefits
. Upon Executive’s termination pursuant to Sections
3(c) or (d), and, in the event that Executive and the Company execute (and, if
applicable, thereafter not revoke) the Mutual Release, the Company agrees to pay
Executive, in lump sum, one year’s COBRA premiums for continuation of health and
dental coverage in existence at the time of such termination, as determined as
of Executive’s date of termination
.
This payment will be
remitted to Executive at the same time that Executive is paid pursuant to
Sections 3(c) and (d). Except as expressly set forth in this Section
3, Executive shall not be entitled to receive any compensation or other benefits
in connection with the termination of Executive’s employment.
(j)
Termination in Connection
with a Change in Contro
l. In the event of a termination of
Executive’s employment by the Company without Cause or by Executive for Good
Reason or notice by the Company of non-renewal of this Agreement, all within 365
days of a consummation of a Change in Control of the Company and provided that
Executive and the Company execute (and, if applicable, thereafter not revoke)
the Mutual Release, Executive shall be entitled to receive (i) Executive’s
then-current Base Salary through the effective date of such termination or
non-renewal, (ii) a Pro-Rated Bonus, (iii) a lump sum payment equal
to twelve (12) months of Executive’s then current Base Salary plus an
amount equal to the cash bonus paid to Executive in the prior calendar year,
payable no later than the date that is two and a half months following the
calendar year in which such termination or non-renewal occurs, and (iv) to the
extent not already vested, full vesting of any RSUs, SARs or other equity awards
(including, but not limited to performance share options) held by Executive
whether granted to Executive pursuant to this Agreement or
otherwise. For purposes of this Agreement, “Change in Control” shall
mean an event or series of events by which: (A) any
“person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), but excluding
any employee benefit plan of such person or its subsidiaries, and any person or
entity acting in its capacity as trustee, agent, or other fiduciary or
administrator of any such plan) becomes the “beneficial owner” (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of 35% or
more of the equity securities of the Company entitled to vote for members of the
Board or equivalent governing body of the Company on a fully-diluted basis; or
(B) during any period of twenty four (24) consecutive months, a majority of the
members of the Board or other equivalent governing body of the Company cease to
be composed of individuals (1) who were members of that Board or equivalent
governing body on the first day of such period, (2) whose election or nomination
to that Board or equivalent governing body was approved by individuals referred
to in clause (1) above constituting at the time of such election or nomination
at least a majority of that Board or equivalent governing body, or (3) whose
election or nomination to that Board or other equivalent governing body was
approved by individuals referred to in clauses (1) and (2) above constituting at
the time of such election or nomination at least a majority of that Board or
equivalent governing body (excluding, in the case of both clause (2) and clause
(3), any individual whose initial nomination for, or assumption of office as, a
member of that Board or equivalent governing body occurs as a result of an
actual or threatened solicitation of proxies or consents for the election or
removal of one or more directors by any person or group other than a
solicitation for the election of one or more directors by or on behalf of the
Board); or (C) any person or two or more persons acting in concert shall have
acquired, by contract or otherwise, control over the equity securities of the
Company entitled to vote for members of the Board or equivalent governing body
of the Company on a fully-diluted basis (and taking into account all such
securities that such person or group has the right to acquire pursuant to any
option right) representing 51% or more of the combined voting power of such
securities; or (D)the Company sells or transfers (other than by mortgage or
pledge) all or substantially all of its properties and assets to, another
“person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act).
(k)
Provisions of Agreement that
Survive Termination
. No termination of this Agreement shall
affect any of the rights and obligations of the parties hereto under Sections 4,
5, 6 and 7, and such rights and obligations shall survive such termination in
accordance with the terms of such sections.
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4.
|
Restrictive
Covenants
.
|
(a) The
provisions of this Section 4 shall apply for a period of one (1) year beginning
with the date of termination of Executive’s employment hereunder for any
reason. During such period, Executive will not, without the prior
written consent of the CEO, directly or indirectly, become associated, either as
owner, employee, officer, director, independent contractor, agent, partner,
advisor or in any other capacity calling for the rendition of personal services
(“New Capacity”), with any individual, partnership, corporation, or other
organization (“New Enterprise”) doing business in North America whose business
or enterprise is ski resort ownership or operation or doing business in the
State of Colorado whose business or enterprise is real estate development,
lodging or hospitality (“Competing Business”);
provided
,
however
, that the
foregoing shall not preclude Executive from (i) engaging in such New Capacity
where (A) such Competing Business accounts for less than 10% of the New
Enterprise’s annual revenues and annual net income on both a historical or pro
forma basis for its most recently completed fiscal year, or (B) Executive’s
duties for the New Enterprise are not primarily related to the conduct of such
Competing Business, or (ii) having passive investments in less than five percent
(5%) of the outstanding capital stock of a competitive corporation that is
listed on a national securities exchange or regularly traded in the
over-the-counter market or that have been approved in writing by the
CEO. Executive acknowledges that this Agreement is a contract for the
protection of trade secrets within the meaning of Colorado Revised Statutes §
8-2-113(2)(b) and that Executive is an executive or manager, or professional
staff to an executive or manager, within the meaning of Colorado Revised
Statutes § 8-2-113(2)(d). Executive acknowledges that Executive has
had a full and fair opportunity to consult with counsel of Executive’s own
choosing concerning the meaning and legal effect of this Section
4(a).
(b)
Further,
Executive covenants and agrees that, during Executive’s employment hereunder and
for the period of one year thereafter, Executive will not, directly or
indirectly, solicit for another business or enterprise, or otherwise interfere
with the Company’s relationship with, any person who is a Grade 27 managerial or
higher level employee of any of the Companies at the time of Executive’s
termination.
(c) Executive
acknowledges that the restrictions, prohibitions and other provisions hereof,
are reasonable, fair and equitable in terms of duration, scope and geographic
area; are necessary to protect the legitimate business interests of the Company;
and are a material inducement to the Company to enter into this
Agreement.
(d)
In the event
Executive breaches any provision of Section 4, in addition to any other remedies
that the Company may have at law or in equity, Executive shall promptly
reimburse the Company for any severance payments received from, or payable by,
the Company. In addition, the Company shall be entitled in its sole
discretion to offset all or any portion of the amount of any unpaid
reimbursements against any amount owed by the Company to Executive.
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5.
|
Document Return;
Resignations
.
|
(a) Upon
termination of Executive’s employment hereunder for any reason, or upon the
Company’s earlier request, Executive agrees that Executive shall promptly
surrender to the Company all letters, papers, documents, instruments, records,
books, products, data and work product stored on electronic storage media, and
any other materials owned by any of the Companies or used by Executive in the
performance of Executive’s duties under this Agreement.
(b)
Upon
termination of Executive hereunder for any reason, Executive agrees that
Executive shall be deemed to have resigned from all officer, director,
management or board positions to which Executive may have been elected or
appointed by reason of Executive’s employment or involvement with the Company,
specifically including but not limited to the Board, the boards of any of the
Companies and any other boards, districts, homeowner and/or industry
associations in which Executive serves at the direction of the CEO
(collectively, the “Associations”). Executive agrees to promptly
execute and deliver to the Company or its designee any other document, including
without limitation a letter of resignation, reasonably requested by the Company
to effectuate the purposes of this Section 5(b). If the Company is
unable, after reasonable effort, to secure Executive’s signature on any document
that the Company deems to be necessary to effectuate the purposes of this
Section 5(b), Executive hereby designates and appoints the Company and its duly
authorized officers and agents as Executive’s agent and attorney-in-fact, to act
for and on Executive’s behalf to execute, verify and submit to any appropriate
third party any such document, which shall thereafter have the same legal force
and effect as if executed by Executive.
|
6.
|
Confidentiality and
Assignment of Intellectual
Property
.
|
(a) During
Executive’s employment with the Company, and at all times following the
termination of Executive’s employment hereunder for any reason, Executive shall
not use for Executive’s own benefit or for the benefit of any subsequent
employer, or disclose, directly or indirectly, to any person, firm or entity, or
any officer, director, stockholder, partner, associate, employee, agent or
representative thereof, any confidential information or trade secrets of any of
the Companies or the Associations, other than as reasonably necessary to perform
Executive’s duties under this Agreement. As used herein, the term
“confidential information” includes budgets, business plans, strategies,
analyses of potential transactions, costs, personnel data, and other proprietary
information of the Company that is not in the public domain.
(b)
For purposes
of this Section 6(b), “Company Inventions” means all ideas, processes,
trademarks and service marks, inventions, discoveries, and improvements to any
of the foregoing, that Executive learns of, conceives, develops or creates alone
or with others during Executive’s employment with the Company (whether or not
conceived, developed or created during regular working hours) that directly or
indirectly arise from or relate to: (i) the Company’s business, products or
services; or (ii) work performed for the Company by Executive or any other
Company employee, agent or contractor; or (iii) the use of the Company’s
property or time; or (iv) access to the Company’s confidential
information. Executive hereby assigns to the Company Executive’s
entire right, title and interest in all Company Inventions, which shall be the
sole and exclusive property of the Company whether or not subject to patent,
copyright, trademark or trade secret protection. Executive also
acknowledges that all original works of authorship that are made by Executive
(solely or jointly with others), within the scope of Executive’s employment with
the Company, and that are protectable by copyright, are “works made for hire,”
as that term is defined in the United States Copyright Act (17
U.S.C. §§ 101, et seq.). To the extent that any such
works, by operation of law, cannot be “works made for hire,” Executive hereby
assigns to Company all right, title, and interest in and to such works and to
any related copyrights. Executive shall promptly execute, acknowledge
and deliver to the Company all additional instruments or documents deemed at any
time by the Company in its sole discretion to be necessary to carry out the
intentions of this paragraph.
Following the
termination of Executive’s employment hereunder for any reason, Executive agrees
that Executive shall not make any statements disparaging of any of the
Companies, their respective boards, their businesses, and the officers,
directors, stockholders, or employees of any of the Companies or the
Associations. In response to inquiries from prospective employers,
which shall be referred by Executive only to the Senior Vice President of Human
Resources, the Company shall confirm only dates of employment, job title, and
job responsibilities. Subject to the terms of this Section 7,
Executive, as appropriate, may respond truthfully to inquiries from prospective
employers of Executive, and the Company and Executive may respond truthfully as
may be required by any governmental or judicial body acting in its official
capacity.
It is
understood that this Agreement has been entered into personally by the
parties. Neither party shall have the right to assign, transfer,
encumber or dispose of any duties, rights or payments due hereunder, which
duties, rights and payments with respect hereto are expressly declared to be
non-assignable and non-transferable, being based upon the personal services of
Executive, and any attempted assignment or transfer shall be null and void and
without binding effect on either party; provided, however, that the Company may
assign this Agreement to any parent, subsidiary, affiliate or successor
corporation.
The parties
acknowledge that the remedy at law for any violation or threatened violation of
Sections 4, 5, 6, 7 and/or 8 of this Agreement may be inadequate and that,
accordingly, either party shall be entitled to injunctive relief in the event of
such a violation or threatened violation without being required to post bond or
other surety. The above stated remedies shall be in addition to, and
not in limitation of, any other rights or remedies to which either party is or
may be entitled at law, in equity, or under this Agreement.
The Company
agrees that it shall indemnify and hold harmless Executive in connection with
legal proceedings seeking to impose liability on Executive in such Executive’s
capacity as a director, officer or employee of the Companies to the fullest
extent permitted under the Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws of the Company. In furtherance thereof,
the Company and Executive each agree to execute and deliver an Indemnification
Agreement by and between the Company and Executive, attached hereto as
Exhibit A
and
incorporated herein by reference, concurrently with the execution and delivery
of this Agreement. To the extent any provision set forth in the
Indemnification Agreement is in conflict with any provision set forth in this
Agreement, the provision set forth in the Indemnification Agreement shall
govern. Further, Executive shall be entitled to coverage under the
Directors and Officers Liability Insurance program to the same extent as other
senior executives of the Companies.
This
Agreement constitutes the full understanding and entire employment agreement of
the parties, and supersedes and is in lieu of any and all other understandings
or agreements between the Company and Executive including the Original Agreement
which is replaced in its entirety;
provided
,
however
, that the
terms of the First Amendment shall remain in full force and effect and the
obligations thereunder shall be executed in accordance with their
terms. Nothing herein is intended to limit any rights or duties
Executive has under the terms of any applicable incentive compensation, benefit
plan or other similar agreements.
All disputes
relating to or arising from this Agreement and/or Executive’s employment with
the Company shall be resolved, upon written request by either party, by final
and binding arbitration by the Judicial Arbiter Group (“JAG”) in Denver,
Colorado in accordance with the JAMS Streamlined Arbitration Rules and
Procedures as in effect at the time of the arbitration. The JAG
arbitration fees shall be paid equally by the parties
hereto. Arbitration hereunder shall take place before one JAG
arbitrator mutually agreed upon by the parties within 30 days of the written
request for arbitration. If the parties are unable or fail to agree upon
the arbitrator within such time, the parties shall submit a request at the end
of such period to JAG to select the arbitrator within 15 days
thereafter. The arbitration and determination rendered by the JAG
arbitrator shall be final and binding on the parties and judgment may be entered
upon such determination in any court having jurisdiction thereof (and such
judgment enforced, if necessary, through judicial proceedings). It is
understood and agreed that the arbitrator shall be specifically empowered to
designate and award any remedy available at law or in equity, including specific
performance. The arbitrator may award costs and expenses of the
arbitration proceeding (including, without limitation, reasonable attorneys'
fees) to the prevailing party.
Any
amendment to this Agreement shall be made only in writing and signed by each of
the parties hereto.
The
internal laws of the State of Colorado law shall govern the construction and
enforcement of this Agreement.
Any notice
required or authorized hereunder shall be deemed delivered when deposited,
postage prepaid, in the United States mail, certified, with return receipt
requested, addressed to the parties as follows:
Jeffrey W.
Jones
9022 Jason
Court
Boulder, CO
80303
Vail Resorts,
Inc.
390
Interlocken Crescent
Broomfield,
Colorado 80021
Attn: General
Counsel
Anything in
this Agreement to the contrary notwithstanding, if on the date of termination of
Executive’s employment with the Company, as a result of such termination,
Executive would receive any payment that, absent the application of this Section
16 would be subject to interest and additional tax imposed pursuant to Section
409A(a) of the Internal Revenue Code of 1986, as amended (the “Code”) as a
result of the application of Section 409A(a)(2)(B)(i) of the Code, then no such
payment shall be made prior to the date that is the earliest of (1) 6 months
after the date of termination of Executive’s employment, (2) Executive’s death,
or (3) such other date as will cause such payment not to be subject to such
interest and additional tax.
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17.
|
No Duty to
Mitigate
.
|
Executive
shall not be required to mitigate damages or the amount of any payment provided
for under this Agreement by seeking other employment or otherwise, nor will any
payments hereunder be subject to offset in the event Executive does
mitigate.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors, permitted assigns, heirs, executors and legal
representatives.
This
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original but all such
counterparts together shall constitute one and the same
instrument. Each counterpart may consist of two copies hereof each
signed by one of the parties hereto.
Headings in
this Agreement are for convenience only and shall not control the meaning of
this Agreement. Whenever applicable, masculine and neutral pronouns
shall equally apply to the feminine genders; the singular shall include the
plural and the plural shall include the singular. The parties have
reviewed and understand this Agreement, and each has had a full opportunity to
negotiate this Agreement’s terms and to consult with counsel of their own
choosing. Therefore, the parties expressly waive all applicable
common law and statutory rules of construction that any provision of this
Agreement should be construed against this Agreement’s drafter, and agree that
this Agreement and all amendments thereto shall be construed as a whole,
according to the fair meaning of the language used.
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21.
|
Severability and
Modification by Court.
|
If any court
of competent jurisdiction declares any provision of this Agreement invalid or
unenforceable, the remainder of this Agreement shall remain fully
enforceable. To the extent that any such court concludes that any
provision of this Agreement is void or voidable, the court shall reform such
provision(s) to render the provision(s) enforceable, but only to the extent
absolutely necessary to render the provision(s) enforceable and only in view of
the parties’ express desire that the Company be protected to the greatest extent
allowed by law from unfair competition, unfair solicitation and/or the misuse or
disclosure of its confidential information and records containing such
information.
[Signature
Page to follow.]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
of the date first written above.
VAIL
RESORTS, INC.
By:
/s/ Robert A.
Katz
Name:
Robert A. Katz
Title:
Chief Executive Officer
EXECUTIVE:
/s/ Jeffrey W.
Jones
Jeffrey
W. Jones
Annex
I
MUTUAL
RELEASE
This
mutual release (this “Release”) is entered into as of this _____________ day of
_____________, 20___ (the “Release Date”) by Jeffrey W. Jones (“Employee”), on
the one hand and Vail Resorts, Inc. (“VRI”) on the other hand.
1. Reference
is hereby made to Executive Employment Agreement, dated __________, 20__ (the
“Executive Employment Agreement”) by the parties hereto setting forth the
agreements among the parties regarding the termination of the employment
relationship between Employee and VRI. Capitalized terms used but not
defined herein have the meanings ascribed to them in Executive Employment
Agreement.
2. Employee,
for him/herself, his/her spouse, heirs, executors, administrators, successors,
and assigns, hereby releases and discharges VRI and its respective direct and
indirect parents and subsidiaries, and other affiliated companies, and each of
their respective past and present officers, directors, agents and employees,
from any and all actions, causes of action, claims, demands, grievances, and
complaints, known and unknown, that Employee or his/her spouse, heirs,
executors, administrators, successors, or assigns ever had or may have at any
time through the Release Date. Employee acknowledges and agrees that
this Release is intended to and does cover, but is not limited to: (i) any claim
of employment discrimination of any kind whether based on a federal, state, or
local statute or court decision, including the Age Discrimination in Employment
Act with appropriate notice and rescission periods observed; (ii) any claim,
whether statutory, common law, or otherwise, arising out of the terms or
conditions of Employee’s employment and/or Employee’s separation from VRI
including, but not limited to, any claims in the nature of tort or contract
claims, wrongful discharge, promissory estoppel, intentional or negligent
infliction of emotional distress, and/or breach of covenant of good faith and
fair dealing. The enumeration of specific rights, claims, and causes
of action being released shall not be construed to limit the general scope of
this Release. It is the intent of the parties that, by this Release,
Employee is giving up all rights, claims and causes of action occurring prior to
the Release Date, whether or not any damage or injury therefrom has yet
occurred. Employee accepts the risk of loss with respect to both
undiscovered claims and with respect to claims for any
harm hereafter suffered
arising out of conduct, statements, performance or decisions occurring before
the Release Date.
3. VRI
hereby releases and discharges Employee, his/her spouse, heirs, executors,
administrators, successors, and assigns, from any and all actions, causes of
actions, claims, demands, grievances and complaints, known and unknown, that VRI
ever had or may have at any time through the Release Date. VRI
acknowledges and agrees that this Release is intended to and does cover, but is
not limited to: (i) any claim, whether statutory, common law, or otherwise,
arising out of the terms or conditions of Employee’s employment and/or
Employee’s separation from VRI, and (ii) any claim for attorneys’ fees,
costs, disbursements, or other like expenses. The enumeration of
specific rights, claims, and causes of action being released shall not be
construed to limit the general scope of this Release. It is the
intent of the parties that, by this Release, VRI is giving up all of its
respective rights, claims, and causes of action occurring prior to the Release
Date, whether or not any damage or injury therefrom has yet
occurred. VRI accepts the risk of loss with respect to both
undiscovered claims and with respect to claims for any harm hereafter suffered
arising out of conduct, statements, performance or decisions occurring before
the Release Date.
4. This
Release shall in no event (i) apply to any claim by either Employee or VRI
arising from any breach by the other party of its obligations under Executive
Employment Agreement occurring on or after the Release Date, (ii) waive
Employee’s claim with respect to compensation or benefits earned or accrued
prior to the Release Date to the extent such claim survives termination of
Employee’s employment under the terms of Executive Employment Agreement, or
(iii) waive Employee’s right to indemnification under the by-laws of the
Company.
5.
Enforceability of
Release
:
|
(a)
|
You
acknowledge that you have been advised to consult with an attorney before
signing this Release.
|
|
(b)
|
You
acknowledge the adequacy and sufficiency of the consideration outlined in
Executive Employment Agreement for your promises set forth in this Release
and that the Company is not otherwise obligated to pay such
sums.
|
|
(c)
|
You
acknowledge that you have been offered at least twenty-one (21) days to
consider this Release, that you have read Executive Employment Agreement
and this Release, and understand its terms and significance, and that you
have executed this Release and with full knowledge of its effect, after
having carefully read and considered all terms of this Release and, if you
have chosen to consult with an attorney, your attorney has fully explained
all terms and their significance to
you.
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(d)
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You
hereby certify your understanding that you may revoke this Release, as it
applies to you, within seven (7) days following execution of this Release
and that this Release shall not become effective or enforceable until that
revocation period has expired. Any revocation should be sent,
in writing, to Vail Resorts Management Company, 390 Interlocken Crescent,
Suite 1000, Broomfield, Colorado 80021, Attn: Office of the
General Counsel. You also understand that, should you revoke
this Release within the seven-day period, this Release, as it applies to
you, would be voided in its entirety and the sums set forth in Executive
Employment Agreement would not be paid or owed to
you.
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6. This
Mutual Release shall be effective as of the eighth day following the Release
Date and only if executed by both parties.
IN
WITNESS WHEREOF, each party hereto, intending to be legally bound, has executed
this Mutual Release on the date indicated below.
JEFFREY
W.
JONES VAIL
RESORTS, INC.
_________________________________ By:_________________________________
Date:______________________________ Date:_______________________________
Exhibit
10.3
EXECUTIVE
EMPLOYMENT AGREEMENT
This
EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into
October 15, 2008 by and between VAIL HOLDINGS, INC., a Colorado corporation (the
“Company”), a wholly-owned subsidiary of VAIL RESORTS, INC., a Delaware
corporation (“VRI”), and Keith Fernandez (“Executive”).
Whereas
the parties had previously entered into that certain Amended and Restated
Employment Agreement, dated May 4, 2006, as amended by that Amendment to
Employment Agreement, dated August 6, 2007 (the “Original Agreement”), but now
desire to make certain updated to the terms contained in that Original Agreement
as required to comply with law and as otherwise agreed to herein and in order to
accomplish the foregoing to enter into this replacement Agreement.
The
parties hereto agree as follows:
(a)
The Company
hereby employs Executive to serve as President and Chief Operating Officer of
Vail Resorts Development Company on the terms and conditions set forth herein.
In such capacity, Executive shall have the responsibilities normally associated
with such position, subject to the direction and supervision of the Chief
Executive Officer (the “CEO”).
(b)
Executive
accepts employment hereunder and agrees that, during the term of Executive’s
employment, Executive will observe and comply with the policies and rules of the
Company and devote substantially all Executive’s time during normal business
hours and best efforts to the performance of Executive’s duties hereunder, which
duties shall be performed in an efficient and competent manner and to the best
of Executive’s ability. Executive further agrees that, during the
term of this Agreement, Executive will not, without the prior written consent of
the CEO, directly or indirectly engage in any manner in any business or other
endeavor, either as an owner, employee, officer, director, independent
contractor, agent, partner, advisor, or in any other capacity calling for the
rendition of Executive’s personal services. This restriction shall
not preclude Executive from having passive investments, and devoting reasonable
time to the supervision thereof (so long as such does not create a conflict of
interest or interfere with Executive’s obligations hereunder), in any business
or enterprise that is not in competition with any business or enterprise of the
Company or any of its parents, subsidiaries or affiliates (collectively, the
“Companies”). This Agreement shall not limit Executive’s community or
charitable activities so long as such activities do not impair or interfere with
Executive’s performance of the services contemplated by this
Agreement.
For all
services rendered by Executive to or on behalf of the Companies, the Company
shall provide or cause to be provided to Executive, subject to making any and
all withholdings and deductions required of the Company or its affiliates by law
with all other income tax consequences being borne by Executive, the
following:
(a)
Base
Salary
. Executive shall receive a base salary of Four Hundred
Twenty Thousand Dollars ($420,000) per year (the “Base Salary”), payable in
accordance with the normal payroll practices of the Company, and net of
mandatory time off deductions and other applicable withholding and
deductions. Executive’s Base Salary shall be reviewed annually by the
CEO and the Compensation Committee of the Board (the “Compensation
Committee”). Any increases in such Base Salary shall be at the
discretion of the Compensation Committee, after consultation with and upon
recommendation of the CEO, and Executive acknowledges that the Compensation
Committee is not obligated to grant any increases. The Base Salary
shall not be lowered during the term of this Agreement without Executive’s
written consent.
(b)
Vail Resorts Management
Incentive Plan for Corporate Executives
. Executive shall be
entitled to participate in the Management Incentive Plan for Corporate
Executives (the “MIP”) on the same terms as may be applicable to other senior
executives of the Company and subject to the terms of the MIP. Under
the MIP, Executive’s target annual bonus will be Fifty Percent (50%) of
Executive’s Base Salary based upon Executive’s performance in light of
objectives established by the CEO, and the Companies’ performance in light of
objectives established by the Compensation Committee. Any awards
under the MIP are at the discretion of the Compensation Committee.
(c)
Long Term Incentive
Compensation
.Each year, commencing on our about October 2008 or such
other date as determined by the Compensation Committee, Executive shall receive
an equity grant, in such form as determined by the Compensation Committee, under
and subject to the terms of the VRI Amended and Restated 2002 Long Term
Incentive and Share Award Plan or any successor plan and the agreement provided
pursuant thereto, in a value of $450,000 (using VRI’s standard valuation
methodology), as such value and terms, including the period of vesting, may be
adjusted by the Compensation Committee in its sole discretion.
(d)
Benefits; Paid Time Off
.
Executive shall be eligible to participate in the benefit plans and perks and on
the same terms as may be extended generally to other senior executives of the
Companies and to the extent Executive is eligible under the terms of the
applicable plan. Executive shall also receive Two Hundred Sixteen
(216) hours of paid time off, which amount shall include hours for paid
holidays, as well as be required to take such hours of mandatory-time-off in
accordance with the Company’s policies and procedures.
(e)
Clubs and Other
Privileges
. Executive shall, subject to applicable rules in
effect from time to time, be entitled during the term of employment to the
benefits of membership in such of the private clubs owned and operated by the
Company as designated by the CEO from time to time (collectively
“Clubs”) as part of the Company’s quality evaluation program and subject to
completion of bi-annual feedback surveys; provided that Executive shall not
actually be a member of such Clubs and in no event shall Executive be entitled
to any claim of reimbursement for any initiation or similar
fees. Executive shall be solely responsible for the payment of any
and all charges incurred at such Clubs, but may utilize Executive’s annual
allowance provided pursuant to Executive Perquisite Fund (as may be in effect
from time to time) to pay such charges, excepting only the payment of regular
dues, which Executive shall not be obligated to pay. In addition,
Executive shall receive all other benefits and perquisites on the same terms
afforded from time to time to senior executives generally (
e.g
., season ski passes,
executive perquisite fund).
(f)
Expense
Reimbursement
. Executive shall have a travel and entertainment
budget that is reasonable in light of Executive’s position and responsibilities
and shall be reimbursed for all reasonable business-related travel and
entertainment expenses incurred by Executive thereunder upon submission of
appropriate documentation thereof in compliance with applicable Company
policies.
(g)
Legal Expenses
. The
Company shall reimburse Executive’s reasonable documented legal fees and
expenses (not to exceed $10,000) incurred in the review and negotiation of this
Agreement.
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3.
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Term and
Termination
.
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(a)
Term
. The
effective date of this Agreement shall be October 15, 2008 (“Employment
Commencement Date”). Unless terminated earlier, the term of this
Agreement shall be for the period commencing with the Employment Commencement
Date and continuing through October 15, 2011 and shall thereafter be
automatically renewed for successive one-year periods unless, no later than 60
days before the expiration of the then-current term, either Executive or the
Company gives the other written notice of non-renewal, in which case this
Agreement shall expire upon the conclusion of the then-current initial or
renewal term.
(b)
Termination for
Cause
. The Company may terminate this Agreement at any time
for “Cause”. For purposes of this Agreement, “Cause” shall mean (i)
any conduct involving gross negligence, gross mismanagement, or the unauthorized
disclosure of confidential information or trade secrets; (ii) dishonesty or a
violation of the Company’s Code of Ethics and Business Conduct that has or
reasonably could be expected to result in a detrimental impact on the
reputation, goodwill or business position of any of the Companies; (iii) gross
obstruction of business operations or illegal or disreputable conduct by
Executive that impairs or reasonably could be expected to impair the reputation,
goodwill or business position of any of the Companies, and any acts that violate
any policy of the Company relating to discrimination or harassment; (iv)
commission of a felony or a crime involving moral turpitude or the entrance of a
plea of guilty or nolo contedere to a felony or a crime involving moral
turpitude; or (v) any action involving a material breach of the terms of the
Agreement including material inattention to or material neglect of
duties. In the event of a termination for Cause, Executive shall be
entitled to receive only Executive’s then-current Base Salary through the date
of such termination. Further, Executive acknowledges that in the
event of such a termination for Cause, Executive shall not be entitled to
receive any bonus payment for the year of termination or subsequent years under
the MIP or any other incentive compensation plan in which Executive is then
participating.
(c)
Termination Without
Cause
. The Company may terminate this Agreement at any time
without Cause, by giving Executive written notice specifying the effective date
of such termination. In the event of a termination without Cause and
provided that Executive and the Company execute (and, if applicable, thereafter
not revoke) a written release in connection with such termination substantially
in the form attached hereto as Annex I (the “Mutual Release”), Executive shall
be entitled to receive (i) Executive’s then-current Base Salary through the
effective date of such termination, (ii) a pro-rated bonus for the portion of
the Company’s fiscal year through the effective date of such termination, which
pro-rated bonus shall be based on applying the level of achievement of the
performance targets (with respect to both Executive and the Companies) to
Executive’s target bonus for the year of such termination payable in a lump sum
at the same time as bonuses are paid to the Company’s senior executives
generally (the “Pro-Rated Bonus”), and (iii) twelve (12) months of
Executive’s then current Base Salary payable in a lump sum. For the
purposes of this section, any written notice of non-renewal given by the Company
pursuant to Section 3(a) of this Agreement shall be deemed termination without
Cause. Any payment to Executive made pursuant hereto shall be paid to Executive
no later than the date that is two and a half months following the calendar year
in which such termination without Cause occurs.
(d)
Termination By Executive For
Good Reason
. Executive shall be entitled to terminate this
Agreement at any time for “Good Reason” by giving the Company written notice of
such termination. For purposes of this Agreement, “Good Reason” shall
mean (i) the Company has breached its obligations hereunder in any material
respect, (ii) the Company has decreased Executive’s then current Base Salary,
(iii) Executive is directed to relocate Executive’s principal office more than
50 miles from Interlocken Business Park without Executive’s consent, and/or (iv)
the Company has effected a material diminution in Executive’s reporting
responsibilities, authority, or duties as in effect immediately prior to such
change;
provided
,
however
, that
Executive shall not have the right to terminate this Agreement for Good Reason
unless: (a) Executive has provided notice to the Company of any of the foregoing
conditions within 90 days of the initial existence of the condition; (B) the
Company has been given at least 30 days after receiving such notice to cure such
condition; and (C) Executive actually terminates employment within six months
following the initial existence of the condition. In such event,
provided that Executive and the Company have executed (and, if applicable,
thereafter not revoked) the Mutual Release, Executive shall be entitled to
receive (w) Executive’s then current Base Salary through the effective date of
such termination, (x) a Pro-Rated Bonus, (y) twelve (12) months of
Executive’s then current Base Salary payable in a lump sum. Any
payment to Executive made pursuant hereto shall be paid to Executive no later
than the date that is two and a half months following the calendar year in which
such termination for Good Reason occurs.
(e)
Termination By Executive
Without Good Reason
. Executive may also terminate this
Agreement at any time without Good Reason by giving the Company at least thirty
(30) days’ prior written notice. In such event, Executive shall be
entitled to receive only Executive’s then-current Base Salary through the date
of termination. Further, Executive acknowledges that in the event of
such a termination without Good Reason, Executive shall not be entitled to
receive any bonus payment for the year of termination or subsequent years under
the MIP or any other incentive compensation plan in which Executive is then
participating.
(f)
Termination Due To
Disability
. In the event that Executive becomes “Totally and
Permanently Disabled” (as reasonably determined by the Board acting in good
faith), the Company shall have the right to terminate this Agreement upon
written notice to Executive; provided, however, that in the event that Executive
and the Company execute (and, if applicable, thereafter not
revoke) the Mutual Release, Executive shall be entitled to receive
(i) Executive’s then-current Base Salary through the date of such termination,
(ii) a Pro-Rated Bonus, and (iii) Executive’s then-current Base Salary, net of
short term disability payments remitted to Executive by the Company pursuant to
the Company’s Short-Term Disability Plan, through the earlier of (y) the
scheduled expiration date of this Agreement (but in no event less than twelve
(12) months from the date of disability) or (z) the date on which Executive’s
long-term disability insurance payments commence.
(g)
Termination Due To
Death
. This Agreement shall be deemed automatically terminated
upon the death of Executive. In such event, provided Executive’s
personal representative and the Company execute a release substantially in the
form of the Mutual Release, Executive’s personal representative shall be
entitled to receive (i) Executive’s then-current Base Salary through such date
of termination, and (ii) a Pro-Rated Bonus.
(h)
Other
Benefits
. Upon Executive’s termination pursuant to Sections
3(c) or (d), and, in the event that Executive and the Company execute (and, if
applicable, thereafter not revoke) the Mutual Release, the Company agrees to pay
Executive, in lump sum, one year’s COBRA premiums for continuation of health and
dental coverage in existence at the time of such termination, as determined as
of Executive’s date of termination
.
This payment will be
remitted to Executive at the same time that Executive is paid pursuant to
Sections 3(c) and (d). Except as expressly set forth in this Section
3, Executive shall not be entitled to receive any compensation or other benefits
in connection with the termination of Executive’s employment.
(i)
Termination in Connection
with a Change in Contro
l. In the event of a termination of
Executive’s employment by the Company without Cause or by Executive for Good
Reason or notice by the Company of non-renewal of this Agreement, all within 365
days of a consummation of a Change in Control of VRI and provided that Executive
and the Company execute (and, if applicable, thereafter not revoke) the Mutual
Release, Executive shall be entitled to receive (i) Executive’s then-current
Base Salary through the effective date of such termination or non-renewal, (ii)
a Pro-Rated Bonus, (iii) a lump sum payment equal to twelve (12) months of
Executive’s then current Base Salary plus an amount equal to the cash bonus paid
to Executive in the prior calendar year, payable no later than the date that is
two and a half months following the calendar year in which such termination or
non-renewal occurs, and (iv) to the extent not already vested, full vesting of
any RSUs, SARs or other equity awards (including, but not limited to performance
share options) held by Executive whether granted to Executive pursuant to this
Agreement or otherwise. For purposes of this Agreement, “Change in
Control” shall mean an event or series of events by
which: (A) any “person” or “group” (as such terms are used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), but excluding any employee benefit plan of such person or
its subsidiaries, and any person or entity acting in its capacity as trustee,
agent, or other fiduciary or administrator of any such plan) becomes the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of 35% or more of the equity securities of VRI entitled
to vote for members of the Board or equivalent governing body of VRI on a
fully-diluted basis; or (B) during any period of twenty four (24) consecutive
months, a majority of the members of the Board or other equivalent governing
body of VRI cease to be composed of individuals (1) who were members of that
Board or equivalent governing body on the first day of such period, (2) whose
election or nomination to that Board or equivalent governing body was approved
by individuals referred to in clause (1) above constituting at the time of such
election or nomination at least a majority of that Board or equivalent governing
body, or (3) whose election or nomination to that Board or other equivalent
governing body was approved by individuals referred to in clauses (1) and (2)
above constituting at the time of such election or nomination at least a
majority of that Board or equivalent governing body (excluding, in the case of
both clause (2) and clause (3), any individual whose initial nomination for, or
assumption of office as, a member of that Board or equivalent governing body
occurs as a result of an actual or threatened solicitation of proxies or
consents for the election or removal of one or more directors by any person or
group other than a solicitation for the election of one or more directors by or
on behalf of the Board); or (C) any person or two or more persons acting in
concert shall have acquired, by contract or otherwise, control over the equity
securities of VRI entitled to vote for members of the Board or equivalent
governing body of VRI on a fully-diluted basis (and taking into account all such
securities that such person or group has the right to acquire pursuant to any
option right) representing 51% or more of the combined voting power of such
securities; or (D)VRI sells or transfers (other than by mortgage or pledge) all
or substantially all of its properties and assets to, another “person” or
“group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act).
(j)
Provisions of Agreement that
Survive Termination
. No termination of this Agreement shall
affect any of the rights and obligations of the parties hereto under Sections 4,
5, 6 and 7, and such rights and obligations shall survive such termination in
accordance with the terms of such sections.
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4.
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Restrictive
Covenants
.
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(a)
The
provisions of this Section 4 shall apply for a period of one (1) year beginning
with the date of termination of Executive’s employment hereunder for any
reason. During such period, Executive will not, without the prior
written consent of the CEO, directly or indirectly, become associated, either as
owner, employee, officer, director, independent contractor, agent, partner,
advisor or in any other capacity calling for the rendition of personal services
(“New Capacity”), with any individual, partnership, corporation, or other
organization doing business in the State of Colorado (“New Enterprise”) whose
business or enterprise is resort real estate development (“Competing Business”);
provided, however, that the foregoing shall not preclude Executive from (i)
engaging in such New Capacity where (A) such Competing Business account for less
than 10% of the New Enterprise’s annual revenues and annual net income on both a
historical or pro forma basis for its most recently completed fiscal year, or
(B) Executive’s duties for the New Enterprise are not primarily related to the
conduct of such Competing Business, or (ii) having passive investments in less
than five percent (5%) of the outstanding capital stock of a competitive
corporation that is listed on a national securities exchange or regularly traded
in the over-the-counter market or that have been approved in writing by the
CEO. Executive acknowledges that this Agreement is a contract for the
protection of trade secrets within the meaning of Colorado Revised Statutes §
8-2-113(2)(b) and that Executive is an executive or manager, or professional
staff to an executive or manager, within the meaning of Colorado Revised
Statutes § 8-2-113(2)(d). Executive acknowledges that Executive has
had a full and fair opportunity to consult with counsel of Executive’s own
choosing concerning the meaning and legal effect of this Section
4(a).
(b)
Further,
Executive covenants and agrees that, during Executive’s employment hereunder and
for the period of one year thereafter, Executive will not, directly or
indirectly, solicit for another business or enterprise, or otherwise interfere
with the Company’s relationship with, any person who is a Grade 27 managerial or
higher level employee of any of the Companies at the time of Executive’s
termination.
(c) Executive
acknowledges that the restrictions, prohibitions and other provisions hereof,
are reasonable, fair and equitable in terms of duration, scope and geographic
area; are necessary to protect the legitimate business interests of the Company;
and are a material inducement to the Company to enter into this
Agreement.
(d)
In the event
Executive breaches any provision of Section 4, in addition to any other remedies
that the Company may have at law or in equity, Executive shall promptly
reimburse the Company for any severance payments received from, or payable by,
the Company. In addition, the Company shall be entitled in its sole
discretion to offset all or any portion of the amount of any unpaid
reimbursements against any amount owed by the Company to Executive.
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5.
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Document Return;
Resignations
.
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(a) Upon
termination of Executive’s employment hereunder for any reason, or upon the
Company’s earlier request, Executive agrees that Executive shall promptly
surrender to the Company all letters, papers, documents, instruments, records,
books, products, data and work product stored on electronic storage media, and
any other materials owned by any of the Companies or used by Executive in the
performance of Executive’s duties under this Agreement.
(b)
Upon
termination of Executive hereunder for any reason, Executive agrees that
Executive shall be deemed to have resigned from all officer, director,
management or board positions to which Executive may have been elected or
appointed by reason of Executive’s employment or involvement with the Company,
specifically including but not limited to the Board, the boards of any of the
Companies and any other boards, districts, homeowner and/or industry
associations in which Executive serves at the direction of the CEO
(collectively, the “Associations”). Executive agrees to promptly
execute and deliver to the Company or its designee any other document, including
without limitation a letter of resignation, reasonably requested by the Company
to effectuate the purposes of this Section 5(b). If the Company is
unable, after reasonable effort, to secure Executive’s signature on any document
that the Company deems to be necessary to effectuate the purposes of this
Section 5(b), Executive hereby designates and appoints the Company and its duly
authorized officers and agents as Executive’s agent and attorney-in-fact, to act
for and on Executive’s behalf to execute, verify and submit to any appropriate
third party any such document, which shall thereafter have the same legal force
and effect as if executed by Executive.
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6.
|
Confidentiality and
Assignment of Intellectual
Property
.
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(a)
During
Executive’s employment with the Company, and at all times following the
termination of Executive’s employment hereunder for any reason, Executive shall
not use for Executive’s own benefit or for the benefit of any subsequent
employer, or disclose, directly or indirectly, to any person, firm or entity, or
any officer, director, stockholder, partner, associate, employee, agent or
representative thereof, any confidential information or trade secrets of any of
the Companies or the Associations, other than as reasonably necessary to perform
Executive’s duties under this Agreement. As used herein, the term
“confidential information” includes budgets, business plans, strategies,
analyses of potential transactions, costs, personnel data, and other proprietary
information of the Company that is not in the public domain.
(b)
For purposes
of this Section 6(b), “Company Inventions” means all ideas, processes,
trademarks and service marks, inventions, discoveries, and improvements to any
of the foregoing, that Executive learns of, conceives, develops or creates alone
or with others during Executive’s employment with the Company (whether or not
conceived, developed or created during regular working hours) that directly or
indirectly arise from or relate to: (i) the Company’s business, products or
services; or (ii) work performed for the Company by Executive or any other
Company employee, agent or contractor; or (iii) the use of the Company’s
property or time; or (iv) access to the Company’s confidential
information. Executive hereby assigns to the Company Executive’s
entire right, title and interest in all Company Inventions, which shall be the
sole and exclusive property of the Company whether or not subject to patent,
copyright, trademark or trade secret protection. Executive also
acknowledges that all original works of authorship that are made by Executive
(solely or jointly with others), within the scope of Executive’s employment with
the Company, and that are protectable by copyright, are “works made for hire,”
as that term is defined in the United States Copyright Act (17
U.S.C. §§ 101, et seq.). To the extent that any such
works, by operation of law, cannot be “works made for hire,” Executive hereby
assigns to Company all right, title, and interest in and to such works and to
any related copyrights. Executive shall promptly execute, acknowledge
and deliver to the Company all additional instruments or documents deemed at any
time by the Company in its sole discretion to be necessary to carry out the
intentions of this paragraph.
Following
the termination of Executive’s employment hereunder for any reason, Executive
agrees that Executive shall not make any statements disparaging of any of the
Companies, their respective boards, their businesses, and the officers,
directors, stockholders, or employees of any of the Companies or the
Associations. In response to inquiries from prospective employers,
which shall be referred by Executive only to the Senior Vice President of Human
Resources, the Company shall confirm only dates of employment, job title, and
job responsibilities. Subject to the terms of this Section 7,
Executive, as appropriate, may respond truthfully to inquiries from prospective
employers of Executive, and the Company and Executive may respond truthfully as
may be required by any governmental or judicial body acting in its official
capacity.
It is
understood that this Agreement has been entered into personally by the
parties. Neither party shall have the right to assign, transfer,
encumber or dispose of any duties, rights or payments due hereunder, which
duties, rights and payments with respect hereto are expressly declared to be
non-assignable and non-transferable, being based upon the personal services of
Executive, and any attempted assignment or transfer shall be null and void and
without binding effect on either party; provided, however, that the Company may
assign this Agreement to any parent, subsidiary, affiliate or successor
corporation.
The
parties acknowledge that the remedy at law for any violation or threatened
violation of Sections 4, 5, 6, 7 and/or 8 of this Agreement may be inadequate
and that, accordingly, either party shall be entitled to injunctive relief in
the event of such a violation or threatened violation without being required to
post bond or other surety. The above stated remedies shall be in
addition to, and not in limitation of, any other rights or remedies to which
either party is or may be entitled at law, in equity, or under this
Agreement.
The
Company agrees that it shall indemnify and hold harmless Executive in connection
with legal proceedings seeking to impose liability on Executive in such
Executive’s capacity as a director, officer or employee of the Companies to the
fullest extent permitted under the Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws of VRI. In furtherance
thereof, the Company and Executive each agree to execute and deliver an
Indemnification Agreement by and between the Company and Executive, attached
hereto as
Exhibit
A
and incorporated herein by reference, concurrently with the execution
and delivery of this Agreement. To the extent any provision set forth
in the Indemnification Agreement is in conflict with any provision set forth in
this Agreement, the provision set forth in the Indemnification Agreement shall
govern. Further, Executive shall be entitled to coverage under the
Directors and Officers Liability Insurance program to the same extent as other
senior executives of the Companies.
This
Agreement constitutes the full understanding and entire employment agreement of
the parties, and supersedes and is in lieu of any and all other understandings
or agreements between the Company and Executive including the Original Agreement
which is replaced in its entirety. Nothing herein is intended to
limit any rights or duties Executive has under the terms of any applicable
incentive compensation, benefit plan or other similar agreements.
All disputes
relating to or arising from this Agreement and/or Executive’s employment with
the Company shall be resolved, upon written request by either party, by final
and binding arbitration by the Judicial Arbiter Group (“JAG”) in Denver,
Colorado in accordance with the JAMS Streamlined Arbitration Rules and
Procedures as in effect at the time of the arbitration. The JAG
arbitration fees shall be paid equally by the parties
hereto. Arbitration hereunder shall take place before one JAG
arbitrator mutually agreed upon by the parties within 30 days of the written
request for arbitration. If the parties are unable or fail to agree upon
the arbitrator within such time, the parties shall submit a request at the end
of such period to JAG to select the arbitrator within 15 days
thereafter. The arbitration and determination rendered by the JAG
arbitrator shall be final and binding on the parties and judgment may be entered
upon such determination in any court having jurisdiction thereof (and such
judgment enforced, if necessary, through judicial proceedings). It is
understood and agreed that the arbitrator shall be specifically empowered to
designate and award any remedy available at law or in equity, including specific
performance. The arbitrator may award costs and expenses of the
arbitration proceeding (including, without limitation, reasonable attorneys'
fees) to the prevailing party.
Any
amendment to this Agreement shall be made only in writing and signed by each of
the parties hereto.
The
internal laws of the State of Colorado law shall govern the construction and
enforcement of this Agreement.
Any
notice required or authorized hereunder shall be deemed delivered when
deposited, postage prepaid, in the United States mail, certified, with return
receipt requested, addressed to the parties as follows:
Keith
Fernandez
4421 Augusta
Drive
Broomfield,
CO 80020
Vail
Holdings, Inc.
390
Interlocken Crescent
Broomfield,
Colorado 80021
Attn: General
Counsel
Anything in
this Agreement to the contrary notwithstanding, if on the date of termination of
Executive’s employment with the Company, as a result of such termination,
Executive would receive any payment that, absent the application of this Section
16 would be subject to interest and additional tax imposed pursuant to Section
409A(a) of the Internal Revenue Code of 1986, as amended (the “Code”) as a
result of the application of Section 409A(a)(2)(B)(i) of the Code, then no such
payment shall be made prior to the date that is the earliest of (1) 6 months
after the date of termination of Executive’s employment, (2) Executive’s death,
or (3) such other date as will cause such payment not to be subject to such
interest and additional tax.
Executive
shall not be required to mitigate damages or the amount of any payment provided
for under this Agreement by seeking other employment or otherwise, nor will any
payments hereunder be subject to offset in the event Executive does
mitigate.
.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors, permitted assigns, heirs, executors and legal
representatives.
This
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original but all such
counterparts together shall constitute one and the same
instrument. Each counterpart may consist of two copies hereof each
signed by one of the parties hereto.
Headings in
this Agreement are for convenience only and shall not control the meaning of
this Agreement. Whenever applicable, masculine and neutral pronouns
shall equally apply to the feminine genders; the singular shall include the
plural and the plural shall include the singular. The parties have
reviewed and understand this Agreement, and each has had a full opportunity to
negotiate this Agreement’s terms and to consult with counsel of their own
choosing. Therefore, the parties expressly waive all applicable
common law and statutory rules of construction that any provision of this
Agreement should be construed against this Agreement’s drafter, and agree that
this Agreement and all amendments thereto shall be construed as a whole,
according to the fair meaning of the language used.
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21.
|
Severability and
Modification by Court.
|
If any
court of competent jurisdiction declares any provision of this Agreement invalid
or unenforceable, the remainder of this Agreement shall remain fully
enforceable. To the extent that any such court concludes that any
provision of this Agreement is void or voidable, the court shall reform such
provision(s) to render the provision(s) enforceable, but only to the extent
absolutely necessary to render the provision(s) enforceable and only in view of
the parties’ express desire that the Company be protected to the greatest extent
allowed by law from unfair competition, unfair solicitation and/or the misuse or
disclosure of its confidential information and records containing such
information.
[Signature
Page to follow.]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
of the date first written above.
VAIL
HOLDINGS, INC.
By:
/s/ Robert A.
Katz_________________
Name:
Robert A. Katz
Title:
Chief Executive Officer
EXECUTIVE:
/s/ Keith
Fernandez____________________
Keith
Fernandez
Annex
I
MUTUAL
RELEASE
This
mutual release (this “Release”) is entered into as of this _____________ day of
_____________, 20___ (the “Release Date”) by Keith Fernandez (“Employee”), on
the one hand and Vail Holdings, Inc., (“VHI”) on the other hand.
1. Reference
is hereby made to Executive Employment Agreement, dated __________, 20__ (the
“Executive Employment Agreement”) by the parties hereto setting forth the
agreements among the parties regarding the termination of the employment
relationship between Employee and VHI. Capitalized terms used but not
defined herein have the meanings ascribed to them in Executive Employment
Agreement.
2. Employee,
for him/herself, his/her spouse, heirs, executors, administrators, successors,
and assigns, hereby releases and discharges VHI and its respective direct and
indirect parents and subsidiaries, and other affiliated companies, and each of
their respective past and present officers, directors, agents and employees,
from any and all actions, causes of action, claims, demands, grievances, and
complaints, known and unknown, that Employee or his/her spouse, heirs,
executors, administrators, successors, or assigns ever had or may have at any
time through the Release Date. Employee acknowledges and agrees that
this Release is intended to and does cover, but is not limited to: (i) any claim
of employment discrimination of any kind whether based on a federal, state, or
local statute or court decision, including the Age Discrimination in Employment
Act with appropriate notice and rescission periods observed; (ii) any claim,
whether statutory, common law, or otherwise, arising out of the terms or
conditions of Employee’s employment and/or Employee’s separation from VHI
including, but not limited to, any claims in the nature of tort or contract
claims, wrongful discharge, promissory estoppel, intentional or negligent
infliction of emotional distress, and/or breach of covenant of good faith and
fair dealing. The enumeration of specific rights, claims, and causes
of action being released shall not be construed to limit the general scope of
this Release. It is the intent of the parties that, by this Release,
Employee is giving up all rights, claims and causes of action occurring prior to
the Release Date, whether or not any damage or injury therefrom has yet
occurred. Employee accepts the risk of loss with respect to both
undiscovered claims and with respect to claims for any
harm hereafter suffered
arising out of conduct, statements, performance or decisions occurring before
the Release Date.
3. VHI
hereby releases and discharges Employee, his/her spouse, heirs, executors,
administrators, successors, and assigns, from any and all actions, causes of
actions, claims, demands, grievances and complaints, known and unknown, that VHI
ever had or may have at any time through the Release Date. VHI
acknowledges and agrees that this Release is intended to and does cover, but is
not limited to: (i) any claim, whether statutory, common law, or otherwise,
arising out of the terms or conditions of Employee’s employment and/or
Employee’s separation from VHI, and (ii) any claim for attorneys’ fees,
costs, disbursements, or other like expenses. The enumeration of
specific rights, claims, and causes of action being released shall not be
construed to limit the general scope of this Release. It is the
intent of the parties that, by this Release, VHI is giving up all of its
respective rights, claims, and causes of action occurring prior to the Release
Date, whether or not any damage or injury therefrom has yet
occurred. VHI accepts the risk of loss with respect to both
undiscovered claims and with respect to claims for any harm hereafter suffered
arising out of conduct, statements, performance or decisions occurring before
the Release Date.
4. This
Release shall in no event (i) apply to any claim by either Employee or VHI
arising from any breach by the other party of its obligations under Executive
Employment Agreement occurring on or after the Release Date, (ii) waive
Employee’s claim with respect to compensation or benefits earned or accrued
prior to the Release Date to the extent such claim survives termination of
Employee’s employment under the terms of Executive Employment Agreement, or
(iii) waive Employee’s right to indemnification under the by-laws of the
Company.
5.
Enforceability of
Release
:
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(a)
|
You
acknowledge that you have been advised to consult with an attorney before
signing this Release.
|
|
(b)
|
You
acknowledge the adequacy and sufficiency of the consideration outlined in
Executive Employment Agreement for your promises set forth in this Release
and that the Company is not otherwise obligated to pay such
sums.
|
|
(c)
|
You
acknowledge that you have been offered at least twenty-one (21) days to
consider this Release, that you have read Executive Employment Agreement
and this Release, and understand its terms and significance, and that you
have executed this Release and with full knowledge of its effect, after
having carefully read and considered all terms of this Release and, if you
have chosen to consult with an attorney, your attorney has fully explained
all terms and their significance to
you.
|
|
(d)
|
You
hereby certify your understanding that you may revoke this Release, as it
applies to you, within seven (7) days following execution of this Release
and that this Release shall not become effective or enforceable until that
revocation period has expired. Any revocation should be sent,
in writing, to Vail Resorts Management Company, 390 Interlocken Crescent,
Suite 1000, Broomfield, Colorado 80021, Attn: Office of the
General Counsel. You also understand that, should you revoke
this Release within the seven-day period, this Release, as it applies to
you, would be voided in its entirety and the sums set forth in Executive
Employment Agreement would not be paid or owed to
you.
|
6. This
Mutual Release shall be effective as of the eighth day following the Release
Date and only if executed by both parties.
IN
WITNESS WHEREOF, each party hereto, intending to be legally bound, has executed
this Mutual Release on the date indicated below.
KEITH
FERNANDEZ VAIL
HOLDINGS, INC.
_________________________________ By:_________________________________
Date:______________________________ Date:_______________________________
Exhibit
10.4
EXECUTIVE
EMPLOYMENT AGREEMENT
This
EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into
October 15, 2008 by and between VAIL HOLDINGS, INC., a Colorado corporation (the
“Company”), a wholly-owned subsidiary of VAIL RESORTS, INC., a Delaware
corporation (“VRI”), and John McD. Garnsey (“Executive”).
The
parties hereto agree as follows:
(a)
The Company
hereby employs Executive to serve as President - Vail Resorts Hospitality on the
terms and conditions set forth herein. In such capacity, Executive shall have
the responsibilities normally associated with such position, subject to the
direction and supervision of the Chief Executive Officer (the
“CEO”).
(b)
Executive
accepts employment hereunder and agrees that, during the term of Executive’s
employment, Executive will observe and comply with the policies and rules of the
Company and devote substantially all Executive’s time during normal business
hours and best efforts to the performance of Executive’s duties hereunder, which
duties shall be performed in an efficient and competent manner and to the best
of Executive’s ability. Executive further agrees that, during the
term of this Agreement, Executive will not, without the prior written consent of
the CEO and the Board, directly or indirectly engage in any manner in any
business or other endeavor, either as an owner, employee, officer, director,
independent contractor, agent, partner, advisor, or in any other capacity
calling for the rendition of Executive’s personal services. This
restriction shall not preclude Executive from having passive investments, and
devoting reasonable time to the supervision thereof (so long as such does not
create a conflict of interest or interfere with Executive’s obligations
hereunder), in any business or enterprise that is not in competition with any
business or enterprise of the Company or any of its parents, subsidiaries or
affiliates (collectively, the “Companies”). This Agreement shall not
limit Executive’s community or charitable activities so long as such activities
do not impair or interfere with Executive’s performance of the services
contemplated by this Agreement.
For all
services rendered by Executive to or on behalf of the Companies, the Company
shall provide or cause to be provided to Executive, subject to making any and
all withholdings and deductions required of the Company or its affiliates by law
with all other income tax consequences being borne by Executive, the
following:
(a)
Base
Salary
. Executive shall receive a base salary of Three Hundred
Thirty Five Thousand Dollars ($335,000) per year increasing, effective August 1,
2009, to Three Hundred Sixty-Five Thousand Dollars ($365,000) per year (the
“Base Salary”), payable in accordance with the normal payroll practices of the
Company, and net of mandatory time off deductions and other applicable
withholding and deductions. Executive’s Base Salary shall be reviewed
annually by the CEO and the Compensation Committee of the Board (the
“Compensation Committee”). Any increases in such Base Salary shall be
at the discretion of the Compensation Committee, after consultation with and
upon recommendation of the CEO, and Executive acknowledges that the Compensation
Committee is not obligated to grant any increases. The Base Salary
shall not be lowered during the term of this Agreement without Executive’s
written consent.
(b)
Vail Resorts Management
Incentive Plan for Corporate Executives
. Executive shall be
entitled to participate in the Management Incentive Plan for Corporate
Executives (the “MIP”) on the same terms as may be applicable to other senior
executives of the Company and subject to the terms of the MIP. Under
the MIP, Executive’s target annual bonus will be Fifty Percent (50%) of
Executive’s Base Salary based upon Executive’s performance in light of
objectives established by the CEO, and the Companies’ performance in light of
objectives established by the Compensation Committee. Any awards
under the MIP are at the discretion of the Compensation Committee.
(c)
Benefits; Paid Time Off
.
Executive shall be eligible to participate in the benefit plans and perks and on
the same terms as may be extended generally to other senior executives of the
Companies and to the extent Executive is eligible under the terms of the
applicable plan. Executive shall also receive Two Hundred Sixteen
(216) hours of paid time off, which amount shall include hours for paid
holidays, as well as be required to take such hours of mandatory-time-off in
accordance with the Company’s policies and procedures.
(d)
Clubs and Other
Privileges
. Executive shall, subject to applicable rules in
effect from time to time, be entitled during the term of employment to the
benefits of membership in such of the private clubs owned and operated by the
Company as designated by the CEO from time to time (collectively
“Clubs”) as part of the Company’s quality evaluation program and subject to
completion of bi-annual feedback surveys; provided that Executive shall not
actually be a member of such Clubs and in no event shall Executive be entitled
to any claim of reimbursement for any initiation or similar
fees. Executive shall be solely responsible for the payment of any
and all charges incurred at such Clubs, but may utilize Executive’s annual
allowance provided pursuant to Executive Perquisite Fund (as may be in effect
from time to time) to pay such charges, excepting only the payment of regular
dues, which Executive shall not be obligated to pay. In addition,
Executive shall receive all other benefits and perquisites on the same terms
afforded from time to time to senior executives generally (
e.g
., season ski passes,
executive perquisite fund).
(e)
Expense
Reimbursement
. Executive shall have a travel and entertainment
budget that is reasonable in light of Executive’s position and responsibilities
and shall be reimbursed for all reasonable business-related travel and
entertainment expenses incurred by Executive thereunder upon submission of
appropriate documentation thereof in compliance with applicable Company
policies.
(f)
Legal Expenses
. The
Company shall reimburse Executive’s reasonable documented legal fees and
expenses (not to exceed $10,000) incurred in the review and negotiation of this
Agreement.
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3.
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Term and
Termination
.
|
(a)
Term
. The
effective date of this Agreement shall be October 15, 2008 (“Employment
Commencement Date”). Unless terminated earlier, the term of this
Agreement shall be for the period commencing with the Employment Commencement
Date and continuing through October 15, 2011 and shall thereafter be
automatically renewed for successive one-year periods unless, no later than 60
days before the expiration of the then-current term, either Executive or the
Company gives the other written notice of non-renewal, in which case this
Agreement shall expire upon the conclusion of the then-current initial or
renewal term.
(b)
Termination for
Cause
. The Company may terminate this Agreement at any time
for “Cause”. For purposes of this Agreement, “Cause” shall mean (i)
any conduct involving gross negligence, gross mismanagement, or the unauthorized
disclosure of confidential information or trade secrets; (ii) dishonesty or a
violation of the Company’s Code of Ethics and Business Conduct that has or
reasonably could be expected to result in a detrimental impact on the
reputation, goodwill or business position of any of the Companies; (iii) gross
obstruction of business operations or illegal or disreputable conduct by
Executive that impairs or reasonably could be expected to impair the reputation,
goodwill or business position of any of the Companies, and any acts that violate
any policy of the Company relating to discrimination or harassment; (iv)
commission of a felony or a crime involving moral turpitude or the entrance of a
plea of guilty or nolo contedere to a felony or a crime involving moral
turpitude; or (v) any action involving a material breach of the terms of the
Agreement including material inattention to or material neglect of
duties. In the event of a termination for Cause, Executive shall be
entitled to receive only Executive’s then-current Base Salary through the date
of such termination. Further, Executive acknowledges that in the
event of such a termination for Cause, Executive shall not be entitled to
receive any bonus payment for the year of termination or subsequent years under
the MIP or any other incentive compensation plan in which Executive is then
participating.
(c)
Termination Without
Cause
. The Company may terminate this Agreement at any time
without Cause, by giving Executive written notice specifying the effective date
of such termination. In the event of a termination without Cause and
provided that Executive and the Company execute (and, if applicable, thereafter
not revoke) a written release in connection with such termination substantially
in the form attached hereto as Annex I (the “Mutual Release”), Executive shall
be entitled to receive (i) Executive’s then-current Base Salary through the
effective date of such termination, (ii) a pro-rated bonus for the portion of
the Company’s fiscal year through the effective date of such termination, which
pro-rated bonus shall be based on applying the level of achievement of the
performance targets (with respect to both Executive and the Companies) to
Executive’s target bonus for the year of such termination payable in a lump sum
at the same time as bonuses are paid to the Company’s senior executives
generally (the “Pro-Rated Bonus”), and (iii) twelve (12) months of
Executive’s then current Base Salary payable in a lump sum. For the
purposes of this section, any written notice of non-renewal given by the Company
pursuant to Section 3(a) of this Agreement shall be deemed termination without
Cause. Any payment to Executive made pursuant hereto shall be paid to
Executive no later than the date that is two and a half months following the
calendar year in which such termination without Cause occurs.
(d)
Termination By Executive For
Good Reason
. Executive shall be entitled to terminate this
Agreement at any time for “Good Reason” by giving the Company written notice of
such termination. For purposes of this Agreement, “Good Reason” shall
mean (i) the Company has breached its obligations hereunder in any material
respect, (ii) the Company has decreased Executive’s then current Base Salary,
(iii) Executive is directed to relocate Executive’s principal office more than
50 miles from Interlocken Business Park without Executive’s consent, and/or (iv)
the Company has effected a material diminution in Executive’s reporting
responsibilities, authority, or duties as in effect immediately prior to such
change;
provided
,
however
, that
Executive shall not have the right to terminate this Agreement for Good Reason
unless: (a) Executive has provided notice to the Company of any of the foregoing
conditions within 90 days of the initial existence of the condition; (B) the
Company has been given at least 30 days after receiving such notice to cure such
condition; and (C) Executive actually terminates employment within six months
following the initial existence of the condition. In such event,
provided that Executive and the Company have executed (and, if applicable,
thereafter not revoked) the Mutual Release, Executive shall be entitled to
receive (w) Executive’s then current Base Salary through the effective date of
such termination, (x) a Pro-Rated Bonus, (y) twelve (12) months of
Executive’s then current Base Salary payable in a lump sum. Any
payment to Executive made pursuant hereto shall be paid to Executive no later
than the date that is two and a half months following the calendar year in which
such termination for Good Reason occurs.
(e)
Termination By Executive
Without Good Reason
. Executive may also terminate this
Agreement at any time without Good Reason by giving the Company at least thirty
(30) days’ prior written notice. In such event, Executive shall be
entitled to receive only Executive’s then-current Base Salary through the date
of termination. Further, Executive acknowledges that in the event of
such a termination without Good Reason, Executive shall not be entitled to
receive any bonus payment for the year of termination or subsequent years under
the MIP or any other incentive compensation plan in which Executive is then
participating.
(f)
Termination Due To
Disability
. In the event that Executive becomes “Totally and
Permanently Disabled” (as reasonably determined by the Board acting in good
faith), the Company shall have the right to terminate this Agreement upon
written notice to Executive; provided, however, that in the event that Executive
and the Company execute (and, if applicable, thereafter not
revoke) the Mutual Release, Executive shall be entitled to receive
(i) Executive’s then-current Base Salary through the date of such termination,
(ii) a Pro-Rated Bonus, and (iii) Executive’s then-current Base Salary, net of
short term disability payments remitted to Executive by the Company pursuant to
the Company’s Short-Term Disability Plan, through the earlier of (y) the
scheduled expiration date of this Agreement (but in no event less than twelve
(12) months from the date of disability) or (z) the date on which Executive’s
long-term disability insurance payments commence.
(g)
Termination Due To
Death
. This Agreement shall be deemed automatically terminated
upon the death of Executive. In such event, provided Executive’s
personal representative and the Company execute a release substantially in the
form of the Mutual Release, Executive’s personal representative shall be
entitled to receive (i) Executive’s then-current Base Salary through such date
of termination, and (ii) a Pro-Rated Bonus.
(h)
Other
Benefits
. Upon Executive’s termination pursuant to Sections
3(c) or (d), and, in the event that Executive and the Company execute (and, if
applicable, thereafter not revoke) the Mutual Release, the Company agrees to pay
Executive, in lump sum, one year’s COBRA premiums for continuation of health and
dental coverage in existence at the time of such termination, as determined as
of Executive’s date of termination
.
This payment will be
remitted to Executive at the same time that Executive is paid pursuant to
Sections 3(c) and (d). Except as expressly set forth in this Section
3, Executive shall not be entitled to receive any compensation or other benefits
in connection with the termination of Executive’s employment.
(i)
Termination in Connection
with a Change in Contro
l. In the event of a termination of
Executive’s employment by the Company without Cause or by Executive for Good
Reason or notice by the Company of non-renewal of this Agreement, all within 365
days of a consummation of a Change in Control of VRI and provided that Executive
and the Company execute (and, if applicable, thereafter not revoke) the Mutual
Release, Executive shall be entitled to receive (i) Executive’s then-current
Base Salary through the effective date of such termination or non-renewal, (ii)
a Pro-Rated Bonus, (iii) a lump sum payment equal to twelve (12) months of
Executive’s then current Base Salary plus an amount equal to the cash bonus paid
to Executive in the prior calendar year, payable no later than the date that is
two and a half months following the calendar year in which such termination or
non-renewal occurs, and (iv) to the extent not already vested, full vesting of
any RSUs, SARs or other equity awards (including, but not limited to performance
share options) held by Executive whether granted to Executive pursuant to this
Agreement or otherwise. For purposes of this Agreement, “Change in
Control” shall mean an event or series of events by
which: (A) any “person” or “group” (as such terms are used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), but excluding any employee benefit plan of such person or
its subsidiaries, and any person or entity acting in its capacity as trustee,
agent, or other fiduciary or administrator of any such plan) becomes the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of 35% or more of the equity securities of VRI entitled
to vote for members of the Board or equivalent governing body of VRI on a
fully-diluted basis; or (B) during any period of twenty four (24) consecutive
months, a majority of the members of the Board or other equivalent governing
body of VRI cease to be composed of individuals (1) who were members of that
Board or equivalent governing body on the first day of such period, (2) whose
election or nomination to that Board or equivalent governing body was approved
by individuals referred to in clause (1) above constituting at the time of such
election or nomination at least a majority of that Board or equivalent governing
body, or (3) whose election or nomination to that Board or other equivalent
governing body was approved by individuals referred to in clauses (1) and (2)
above constituting at the time of such election or nomination at least a
majority of that Board or equivalent governing body (excluding, in the case of
both clause (2) and clause (3), any individual whose initial nomination for, or
assumption of office as, a member of that Board or equivalent governing body
occurs as a result of an actual or threatened solicitation of proxies or
consents for the election or removal of one or more directors by any person or
group other than a solicitation for the election of one or more directors by or
on behalf of the Board); or (C) any person or two or more persons acting in
concert shall have acquired, by contract or otherwise, control over the equity
securities of VRI entitled to vote for members of the Board or equivalent
governing body of VRI on a fully-diluted basis (and taking into account all such
securities that such person or group has the right to acquire pursuant to any
option right) representing 51% or more of the combined voting power of such
securities; or (D)VRI sells or transfers (other than by mortgage or pledge) all
or substantially all of its properties and assets to, another “person” or
“group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act).
(k)
Provisions of Agreement that
Survive Termination
. No termination of this Agreement shall
affect any of the rights and obligations of the parties hereto under Sections 4,
5, 6 and 7, and such rights and obligations shall survive such termination in
accordance with the terms of such sections.
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4.
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Restrictive
Covenants
.
|
(a)
The
provisions of this Section 4 shall apply for a period of one (1) year beginning
with the date of termination of Executive’s employment hereunder for any
reason. During such period, Executive will not, without the prior
written consent of the CEO, directly or indirectly, become associated, either as
owner, employee, officer, director, independent contractor, agent, partner,
advisor or in any other capacity calling for the rendition of personal services
(“New Capacity”), with any individual, partnership, corporation, or other
organization doing business in the State of Colorado (“New Enterprise”) whose
business or enterprise is lodging or hospitality (“Competing Business”);
provided, however, that the foregoing shall not preclude Executive from (i)
engaging in such New Capacity where (A) such Competing Business account for less
than 10% of the New Enterprise’s annual revenues and annual net income on both a
historical or pro forma basis for its most recently completed fiscal year, or
(B) Executive’s duties for the New Enterprise are not primarily related to the
conduct of such Competing Business, or (ii) having passive investments in less
than five percent (5%) of the outstanding capital stock of a competitive
corporation that is listed on a national securities exchange or regularly traded
in the over-the-counter market or that have been approved in writing by the
CEO. Executive acknowledges that this Agreement is a contract for the
protection of trade secrets within the meaning of Colorado Revised Statutes §
8-2-113(2)(b) and that Executive is an executive or manager, or professional
staff to an executive or manager, within the meaning of Colorado Revised
Statutes § 8-2-113(2)(d). Executive acknowledges that Executive has
had a full and fair opportunity to consult with counsel of Executive’s own
choosing concerning the meaning and legal effect of this Section
4(a).
(b)
Further,
Executive covenants and agrees that, during Executive’s employment hereunder and
for the period of one year thereafter, Executive will not, directly or
indirectly, solicit for another business or enterprise, or otherwise interfere
with the Company’s relationship with, any person who is a Grade 27 managerial or
higher level employee of any of the Companies at the time of Executive’s
termination.
(c) Executive
acknowledges that the restrictions, prohibitions and other provisions hereof,
are reasonable, fair and equitable in terms of duration, scope and geographic
area; are necessary to protect the legitimate business interests of the Company;
and are a material inducement to the Company to enter into this
Agreement.
(d)
In the event
Executive breaches any provision of Section 4, in addition to any other remedies
that the Company may have at law or in equity, Executive shall promptly
reimburse the Company for any severance payments received from, or payable by,
the Company. In addition, the Company shall be entitled in its sole
discretion to offset all or any portion of the amount of any unpaid
reimbursements against any amount owed by the Company to Executive.
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5.
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Document Return;
Resignations
.
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(a)
Upon
termination of Executive’s employment hereunder for any reason, or upon the
Company’s earlier request, Executive agrees that Executive shall promptly
surrender to the Company all letters, papers, documents, instruments, records,
books, products, data and work product stored on electronic storage media, and
any other materials owned by any of the Companies or used by Executive in the
performance of Executive’s duties under this Agreement.
(b)
Upon
termination of Executive hereunder for any reason, Executive agrees that
Executive shall be deemed to have resigned from all officer, director,
management or board positions to which Executive may have been elected or
appointed by reason of Executive’s employment or involvement with the Company,
specifically including but not limited to the Board, the boards of any of the
Companies and any other boards, districts, homeowner and/or industry
associations in which Executive serves at the direction of the CEO
(collectively, the “Associations”). Executive agrees to promptly
execute and deliver to the Company or its designee any other document, including
without limitation a letter of resignation, reasonably requested by the Company
to effectuate the purposes of this Section 5(b). If the Company is
unable, after reasonable effort, to secure Executive’s signature on any document
that the Company deems to be necessary to effectuate the purposes of this
Section 5(b), Executive hereby designates and appoints the Company and its duly
authorized officers and agents as Executive’s agent and attorney-in-fact, to act
for and on Executive’s behalf to execute, verify and submit to any appropriate
third party any such document, which shall thereafter have the same legal force
and effect as if executed by Executive.
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6.
|
Confidentiality and
Assignment of Intellectual
Property
.
|
(a)
During
Executive’s employment with the Company, and at all times following the
termination of Executive’s employment hereunder for any reason, Executive shall
not use for Executive’s own benefit or for the benefit of any subsequent
employer, or disclose, directly or indirectly, to any person, firm or entity, or
any officer, director, stockholder, partner, associate, employee, agent or
representative thereof, any confidential information or trade secrets of any of
the Companies or the Associations, other than as reasonably necessary to perform
Executive’s duties under this Agreement. As used herein, the term
“confidential information” includes budgets, business plans, strategies,
analyses of potential transactions, costs, personnel data, and other proprietary
information of the Company that is not in the public domain.
(b)
For purposes
of this Section 6(b), “Company Inventions” means all ideas, processes,
trademarks and service marks, inventions, discoveries, and improvements to any
of the foregoing, that Executive learns of, conceives, develops or creates alone
or with others during Executive’s employment with the Company (whether or not
conceived, developed or created during regular working hours) that directly or
indirectly arise from or relate to: (i) the Company’s business, products or
services; or (ii) work performed for the Company by Executive or any other
Company employee, agent or contractor; or (iii) the use of the Company’s
property or time; or (iv) access to the Company’s confidential
information. Executive hereby assigns to the Company Executive’s
entire right, title and interest in all Company Inventions, which shall be the
sole and exclusive property of the Company whether or not subject to patent,
copyright, trademark or trade secret protection. Executive also
acknowledges that all original works of authorship that are made by Executive
(solely or jointly with others), within the scope of Executive’s employment with
the Company, and that are protectable by copyright, are “works made for hire,”
as that term is defined in the United States Copyright Act (17
U.S.C. §§ 101, et seq.). To the extent that any such
works, by operation of law, cannot be “works made for hire,” Executive hereby
assigns to Company all right, title, and interest in and to such works and to
any related copyrights. Executive shall promptly execute, acknowledge
and deliver to the Company all additional instruments or documents deemed at any
time by the Company in its sole discretion to be necessary to carry out the
intentions of this paragraph.
Following
the termination of Executive’s employment hereunder for any reason, Executive
agrees that Executive shall not make any statements disparaging of any of the
Companies, their respective boards, their businesses, and the officers,
directors, stockholders, or employees of any of the Companies or the
Associations. In response to inquiries from prospective employers,
which shall be referred by Executive only to the Senior Vice President of Human
Resources, the Company shall confirm only dates of employment, job title, and
job responsibilities. Subject to the terms of this Section 7,
Executive, as appropriate, may respond truthfully to inquiries from prospective
employers of Executive, and the Company and Executive may respond truthfully as
may be required by any governmental or judicial body acting in its official
capacity.
It is
understood that this Agreement has been entered into personally by the
parties. Neither party shall have the right to assign, transfer,
encumber or dispose of any duties, rights or payments due hereunder, which
duties, rights and payments with respect hereto are expressly declared to be
non-assignable and non-transferable, being based upon the personal services of
Executive, and any attempted assignment or transfer shall be null and void and
without binding effect on either party; provided, however, that the Company may
assign this Agreement to any parent, subsidiary, affiliate or successor
corporation.
The
parties acknowledge that the remedy at law for any violation or threatened
violation of Sections 4, 5, 6, 7 and/or 8 of this Agreement may be inadequate
and that, accordingly, either party shall be entitled to injunctive relief in
the event of such a violation or threatened violation without being required to
post bond or other surety. The above stated remedies shall be in
addition to, and not in limitation of, any other rights or remedies to which
either party is or may be entitled at law, in equity, or under this
Agreement.
The
Company agrees that it shall indemnify and hold harmless Executive in connection
with legal proceedings seeking to impose liability on Executive in such
Executive’s capacity as a director, officer or employee of the Companies to the
fullest extent permitted under the Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws of VRI. In furtherance
thereof, the Company and Executive each agree to execute and deliver an
Indemnification Agreement by and between the Company and Executive, attached
hereto as
Exhibit
A
and incorporated herein by reference, concurrently with the execution
and delivery of this Agreement. To the extent any provision set forth
in the Indemnification Agreement is in conflict with any provision set forth in
this Agreement, the provision set forth in the Indemnification Agreement shall
govern. Further, Executive shall be entitled to coverage under the
Directors and Officers Liability Insurance program to the same extent as other
senior executives of the Companies.
This
Agreement constitutes the full understanding and entire employment agreement of
the parties, and supersedes and is in lieu of any and all other understandings
or agreements between the Company and Executive. Nothing herein is
intended to limit any rights or duties Executive has under the terms of any
applicable incentive compensation, benefit plan or other similar
agreements.
.
All disputes
relating to or arising from this Agreement and/or Executive’s employment with
the Company shall be resolved, upon written request by either party, by final
and binding arbitration by the Judicial Arbiter Group (“JAG”) in Denver,
Colorado in accordance with the JAMS Streamlined Arbitration Rules and
Procedures as in effect at the time of the arbitration. The JAG
arbitration fees shall be paid equally by the parties
hereto. Arbitration hereunder shall take place before one JAG
arbitrator mutually agreed upon by the parties within 30 days of the written
request for arbitration. If the parties are unable or fail to agree upon
the arbitrator within such time, the parties shall submit a request at the end
of such period to JAG to select the arbitrator within 15 days
thereafter. The arbitration and determination rendered by the JAG
arbitrator shall be final and binding on the parties and judgment may be entered
upon such determination in any court having jurisdiction thereof (and such
judgment enforced, if necessary, through judicial proceedings). It is
understood and agreed that the arbitrator shall be specifically empowered to
designate and award any remedy available at law or in equity, including specific
performance. The arbitrator may award costs and expenses of the
arbitration proceeding (including, without limitation, reasonable attorneys'
fees) to the prevailing party.
Any
amendment to this Agreement shall be made only in writing and signed by each of
the parties hereto.
The
internal laws of the State of Colorado law shall govern the construction and
enforcement of this Agreement.
Any
notice required or authorized hereunder shall be deemed delivered when
deposited, postage prepaid, in the United States mail, certified, with return
receipt requested, addressed to the parties as follows:
John McD.
Garnsey
21500 Highway
Six
Eagle, CO
81631
Vail
Holdings, Inc.
390
Interlocken Crescent
Broomfield,
Colorado 80021
Attn: General
Counsel
Anything
in this Agreement to the contrary notwithstanding, if on the date of termination
of Executive’s employment with the Company, as a result of such termination,
Executive would receive any payment that, absent the application of this Section
16 would be subject to interest and additional tax imposed pursuant to Section
409A(a) of the Internal Revenue Code of 1986, as amended (the “Code”) as a
result of the application of Section 409A(a)(2)(B)(i) of the Code, then no such
payment shall be made prior to the date that is the earliest of (1) 6 months
after the date of termination of Executive’s employment, (2) Executive’s death,
or (3) such other date as will cause such payment not to be subject to such
interest and additional tax.
.
Executive
shall not be required to mitigate damages or the amount of any payment provided
for under this Agreement by seeking other employment or otherwise, nor will any
payments hereunder be subject to offset in the event Executive does
mitigate.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors, permitted assigns, heirs, executors and legal
representatives.
This
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original but all such
counterparts together shall constitute one and the same
instrument. Each counterpart may consist of two copies hereof each
signed by one of the parties hereto.
Headings in
this Agreement are for convenience only and shall not control the meaning of
this Agreement. Whenever applicable, masculine and neutral pronouns
shall equally apply to the feminine genders; the singular shall include the
plural and the plural shall include the singular. The parties have
reviewed and understand this Agreement, and each has had a full opportunity to
negotiate this Agreement’s terms and to consult with counsel of their own
choosing. Therefore, the parties expressly waive all applicable
common law and statutory rules of construction that any provision of this
Agreement should be construed against this Agreement’s drafter, and agree that
this Agreement and all amendments thereto shall be construed as a whole,
according to the fair meaning of the language used.
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21.
|
Severability and
Modification by Court.
|
If any court
of competent jurisdiction declares any provision of this Agreement invalid or
unenforceable, the remainder of this Agreement shall remain fully
enforceable. To the extent that any such court concludes that any
provision of this Agreement is void or voidable, the court shall reform such
provision(s) to render the provision(s) enforceable, but only to the extent
absolutely necessary to render the provision(s) enforceable and only in view of
the parties’ express desire that the Company be protected to the greatest extent
allowed by law from unfair competition, unfair solicitation and/or the misuse or
disclosure of its confidential information and records containing such
information.
[Signature
Page to follow.]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
of the date first written above.
VAIL
HOLDINGS, INC.
By:
/s/ Robert A. Katz
_____________________
Name:
Robert A. Katz
Title:
Chief Executive Officer
EXECUTIVE:
/s/ John McD.
Garnsey____________________
John McD.
Garnsey
Annex
I
MUTUAL
RELEASE
This
mutual release (this “Release”) is entered into as of this _____________ day of
_____________, 20___ (the “Release Date”) by John McD. Garnsey (“Employee”), on
the one hand and Vail Holdings, Inc., (“VHI”) on the other hand.
1. Reference
is hereby made to Executive Employment Agreement, dated __________, 20__ (the
“Executive Employment Agreement”) by the parties hereto setting forth the
agreements among the parties regarding the termination of the employment
relationship between Employee and VHI. Capitalized terms used but not
defined herein have the meanings ascribed to them in Executive Employment
Agreement.
2. Employee,
for him/herself, his/her spouse, heirs, executors, administrators, successors,
and assigns, hereby releases and discharges VHI and its respective direct and
indirect parents and subsidiaries, and other affiliated companies, and each of
their respective past and present officers, directors, agents and employees,
from any and all actions, causes of action, claims, demands, grievances, and
complaints, known and unknown, that Employee or his/her spouse, heirs,
executors, administrators, successors, or assigns ever had or may have at any
time through the Release Date. Employee acknowledges and agrees that
this Release is intended to and does cover, but is not limited to: (i) any claim
of employment discrimination of any kind whether based on a federal, state, or
local statute or court decision, including the Age Discrimination in Employment
Act with appropriate notice and rescission periods observed; (ii) any claim,
whether statutory, common law, or otherwise, arising out of the terms or
conditions of Employee’s employment and/or Employee’s separation from VHI
including, but not limited to, any claims in the nature of tort or contract
claims, wrongful discharge, promissory estoppel, intentional or negligent
infliction of emotional distress, and/or breach of covenant of good faith and
fair dealing. The enumeration of specific rights, claims, and causes
of action being released shall not be construed to limit the general scope of
this Release. It is the intent of the parties that, by this Release,
Employee is giving up all rights, claims and causes of action occurring prior to
the Release Date, whether or not any damage or injury therefrom has yet
occurred. Employee accepts the risk of loss with respect to both
undiscovered claims and with respect to claims for any
harm hereafter suffered
arising out of conduct, statements, performance or decisions occurring before
the Release Date.
3. VHI
hereby releases and discharges Employee, his/her spouse, heirs, executors,
administrators, successors, and assigns, from any and all actions, causes of
actions, claims, demands, grievances and complaints, known and unknown, that VHI
ever had or may have at any time through the Release Date. VHI
acknowledges and agrees that this Release is intended to and does cover, but is
not limited to: (i) any claim, whether statutory, common law, or otherwise,
arising out of the terms or conditions of Employee’s employment and/or
Employee’s separation from VHI, and (ii) any claim for attorneys’ fees,
costs, disbursements, or other like expenses. The enumeration of
specific rights, claims, and causes of action being released shall not be
construed to limit the general scope of this Release. It is the
intent of the parties that, by this Release, VHI is giving up all of its
respective rights, claims, and causes of action occurring prior to the Release
Date, whether or not any damage or injury therefrom has yet
occurred. VHI accepts the risk of loss with respect to both
undiscovered claims and with respect to claims for any harm hereafter suffered
arising out of conduct, statements, performance or decisions occurring before
the Release Date.
4. This
Release shall in no event (i) apply to any claim by either Employee or VHI
arising from any breach by the other party of its obligations under Executive
Employment Agreement occurring on or after the Release Date, (ii) waive
Employee’s claim with respect to compensation or benefits earned or accrued
prior to the Release Date to the extent such claim survives termination of
Employee’s employment under the terms of Executive Employment Agreement, or
(iii) waive Employee’s right to indemnification under the by-laws of the
Company.
5.
Enforceability of
Release
:
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(a)
|
You
acknowledge that you have been advised to consult with an attorney before
signing this Release.
|
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(b)
|
You
acknowledge the adequacy and sufficiency of the consideration outlined in
Executive Employment Agreement for your promises set forth in this Release
and that the Company is not otherwise obligated to pay such
sums.
|
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(c)
|
You
acknowledge that you have been offered at least twenty-one (21) days to
consider this Release, that you have read Executive Employment Agreement
and this Release, and understand its terms and significance, and that you
have executed this Release and with full knowledge of its effect, after
having carefully read and considered all terms of this Release and, if you
have chosen to consult with an attorney, your attorney has fully explained
all terms and their significance to
you.
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(d)
|
You
hereby certify your understanding that you may revoke this Release, as it
applies to you, within seven (7) days following execution of this Release
and that this Release shall not become effective or enforceable until that
revocation period has expired. Any revocation should be sent,
in writing, to Vail Resorts Management Company, 390 Interlocken Crescent,
Suite 1000, Broomfield, Colorado 80021, Attn: Office of the
General Counsel. You also understand that, should you revoke
this Release within the seven-day period, this Release, as it applies to
you, would be voided in its entirety and the sums set forth in Executive
Employment Agreement would not be paid or owed to
you.
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6. This
Mutual Release shall be effective as of the eighth day following the Release
Date and only if executed by both parties.
IN
WITNESS WHEREOF, each party hereto, intending to be legally bound, has executed
this Mutual Release on the date indicated below.
JOHN MCD.
GARNSEY VAIL
HOLDINGS, INC.
_________________________________ By:_________________________________
Date:______________________________ Date:_______________________________
Exhibit
10.5
EXECUTIVE
EMPLOYMENT AGREEMENT
This
EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into
October 15, 2008 by and between VAIL HOLDINGS, INC., a Colorado corporation (the
“Company”), a wholly-owned subsidiary of VAIL RESORTS, INC., a Delaware
corporation (“VRI”), and Blaise Carrig (“Executive”).
Whereas
the parties had previously entered into that certain Employment Agreement, dated
July 23, 2002 (the “Original Agreement”), as supplemented by that certain
Addendum, dated as of September 1, 2002 (the “Addendum”), but now desire to make
certain updates to the terms contained in that Original Agreement as required to
comply with law and as otherwise agreed herein and in order to accomplish the
foregoing enter into this replacement Agreement.
The
parties hereto agree as follows:
(a)
The Company
hereby employs Executive to serve as Co- President, Mountain Division, and Chief
Operating Officer, Heavenly on the terms and conditions set forth herein. In
such capacity, Executive shall have the responsibilities normally associated
with such position, subject to the direction and supervision of the Chief
Executive Officer (the “CEO”).
(b)
Executive
accepts employment hereunder and agrees that, during the term of Executive’s
employment, Executive will observe and comply with the policies and rules of the
Company and devote substantially all Executive’s time during normal business
hours and best efforts to the performance of Executive’s duties hereunder, which
duties shall be performed in an efficient and competent manner and to the best
of Executive’s ability. Executive further agrees that, during the
term of this Agreement, Executive will not, without the prior written consent of
the CEO and the Board, directly or indirectly engage in any manner in any
business or other endeavor, either as an owner, employee, officer, director,
independent contractor, agent, partner, advisor, or in any other capacity
calling for the rendition of Executive’s personal services. This
restriction shall not preclude Executive from having passive investments, and
devoting reasonable time to the supervision thereof (so long as such does not
create a conflict of interest or interfere with Executive’s obligations
hereunder), in any business or enterprise that is not in competition with any
business or enterprise of the Company or any of its parents, subsidiaries or
affiliates (collectively, the “Companies”). This Agreement shall not
limit Executive’s community or charitable activities so long as such activities
do not impair or interfere with Executive’s performance of the services
contemplated by this Agreement.
For all
services rendered by Executive to or on behalf of the Companies, the Company
shall provide or cause to be provided to Executive, subject to making any and
all withholdings and deductions required of the Company or its affiliates by law
with all other income tax consequences being borne by Executive, the
following:
(a)
Base
Salary
. Executive shall receive a base salary of Three Hundred
Sixty-Five Thousand Dollars ($365,000) per year increasing, effective August 1,
2009, to Three Hundred Eighty-Five Thousand Dollars ($385,000) per year (the
“Base Salary”), payable in accordance with the normal payroll practices of the
Company, and net of mandatory time off deductions and other applicable
withholding and deductions. Executive’s Base Salary shall be reviewed
annually by the CEO and the Compensation Committee of the Board (the
“Compensation Committee”). Any increases in such Base Salary shall be
at the discretion of the Compensation Committee, after consultation with and
upon recommendation of the CEO, and Executive acknowledges that the Compensation
Committee is not obligated to grant any increases. The Base Salary
shall not be lowered during the term of this Agreement without Executive’s
written consent.
(b)
Vail Resorts Management
Incentive Plan for Corporate Executives
. Executive shall be
entitled to participate in the Management Incentive Plan for Corporate
Executives (the “MIP”) on the same terms as may be applicable to other senior
executives of the Company and subject to the terms of the MIP. Under
the MIP, Executive’s target annual bonus will be Fifty Percent (50%) of
Executive’s Base Salary based upon Executive’s performance in light of
objectives established by the CEO, and the Companies’ performance in light of
objectives established by the Compensation Committee. Any awards
under the MIP are at the discretion of the Compensation Committee.
(c)
Benefits; Paid Time Off
.
Executive shall be eligible to participate in the benefit plans and perks and on
the same terms as may be extended generally to other senior executives of the
Companies and to the extent Executive is eligible under the terms of the
applicable plan. Executive shall also receive One Hundred Eighty Four
(184) hours of paid time off, which amount shall include hours for paid
holidays, as well as be required to take such hours of mandatory-time-off in
accordance with the Company’s policies and procedures.
(d)
Clubs and Other
Privileges
. Executive shall, subject to applicable rules in
effect from time to time, be entitled during the term of employment to the
benefits of membership in such of the private clubs owned and operated by the
Company as designated by the CEO from time to time (collectively
“Clubs”) as part of the Company’s quality evaluation program and subject to
completion of bi-annual feedback surveys; provided that Executive shall not
actually be a member of such Clubs and in no event shall Executive be entitled
to any claim of reimbursement for any initiation or similar
fees. Executive shall be solely responsible for the payment of any
and all charges incurred at such Clubs, but may utilize Executive’s annual
allowance provided pursuant to Executive Perquisite Fund (as may be in effect
from time to time) to pay such charges, excepting only the payment of regular
dues, which Executive shall not be obligated to pay. In addition,
Executive shall receive all other benefits and perquisites on the same terms
afforded from time to time to senior executives generally (
e.g
., season ski passes,
executive perquisite fund).
(e)
Expense
Reimbursement
. Executive shall have a travel and entertainment
budget that is reasonable in light of Executive’s position and responsibilities
and shall be reimbursed for all reasonable business-related travel and
entertainment expenses incurred by Executive thereunder upon submission of
appropriate documentation thereof in compliance with applicable Company
policies.
(f)
Legal
Expenses
. The Company shall reimburse Executive’s reasonable
documented legal fees and expenses (not to exceed $10,000) incurred in the
review and negotiation of this Agreement.
(g)
Residence
. The
Company and Executive previously reached certain agreements regarding
Executive’s primary residence as set forth in the Addendum, which shall remain
in full force and effect without modification hereunder.
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3.
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Term and
Termination
.
|
(a)
Term
. The
effective date of this Agreement shall be October 15, 2008 (“Employment
Commencement Date”). Unless terminated earlier, the term of this
Agreement shall be for the period commencing with the Employment Commencement
Date and continuing through October 15, 2011 and shall thereafter be
automatically renewed for successive one-year periods unless, no later than 60
days before the expiration of the then-current term, either Executive or the
Company gives the other written notice of non-renewal, in which case this
Agreement shall expire upon the conclusion of the then-current initial or
renewal term.
(b)
Termination for
Cause
. The Company may terminate this Agreement at any time
for “Cause”. For purposes of this Agreement, “Cause” shall mean (i)
any conduct involving gross negligence, gross mismanagement, or the unauthorized
disclosure of confidential information or trade secrets; (ii) dishonesty or a
violation of the Company’s Code of Ethics and Business Conduct that has or
reasonably could be expected to result in a detrimental impact on the
reputation, goodwill or business position of any of the Companies; (iii) gross
obstruction of business operations or illegal or disreputable conduct by
Executive that impairs or reasonably could be expected to impair the reputation,
goodwill or business position of any of the Companies, and any acts that violate
any policy of the Company relating to discrimination or harassment; (iv)
commission of a felony or a crime involving moral turpitude or the entrance of a
plea of guilty or nolo contedere to a felony or a crime involving moral
turpitude; or (v) any action involving a material breach of the terms of the
Agreement including material inattention to or material neglect of
duties. In the event of a termination for Cause, Executive shall be
entitled to receive only Executive’s then-current Base Salary through the date
of such termination. Further, Executive acknowledges that in the
event of such a termination for Cause, Executive shall not be entitled to
receive any bonus payment for the year of termination or subsequent years under
the MIP or any other incentive compensation plan in which Executive is then
participating.
(c)
Termination Without
Cause
. The Company may terminate this Agreement at any time
without Cause, by giving Executive written notice specifying the effective date
of such termination. In the event of a termination without Cause and
provided that Executive and the Company execute (and, if applicable, thereafter
not revoke) a written release in connection with such termination substantially
in the form attached hereto as Annex I (the “Mutual Release”), Executive shall
be entitled to receive (i) Executive’s then-current Base Salary through the
effective date of such termination, (ii) a pro-rated bonus for the portion of
the Company’s fiscal year through the effective date of such termination, which
pro-rated bonus shall be based on applying the level of achievement of the
performance targets (with respect to both Executive and the Companies) to
Executive’s target bonus for the year of such termination payable in a lump sum
at the same time as bonuses are paid to the Company’s senior executives
generally (the “Pro-Rated Bonus”), and (iii) twelve (12) months of
Executive’s then current Base Salary payable in a lump sum. For the
purposes of this section, any written notice of non-renewal given by the Company
pursuant to Section 3(a) of this Agreement shall be deemed termination without
Cause. Any payment to Executive made pursuant hereto shall be paid to Executive
no later than the date that is two and a half months following the calendar year
in which such termination without Cause occurs.
(d)
Termination By Executive For
Good Reason
. Executive shall be entitled to terminate this
Agreement at any time for “Good Reason” by giving the Company written notice of
such termination. For purposes of this Agreement, “Good Reason” shall
mean (i) the Company has breached its obligations hereunder in any material
respect, (ii) the Company has decreased Executive’s then current Base Salary,
(iii) Executive is directed to relocate Executive’s principal office more than
50 miles from Heavenly’s executive offices in Stateline,
Nevada without Executive’s consent, and/or (iv) the Company has
effected a material diminution in Executive’s reporting responsibilities,
authority, or duties as in effect immediately prior to such change;
provided
,
however
, that
Executive shall not have the right to terminate this Agreement for Good Reason
unless: (a) Executive has provided notice to the Company of any of the foregoing
conditions within 90 days of the initial existence of the condition; (B) the
Company has been given at least 30 days after receiving such notice to cure such
condition; and (C) Executive actually terminates employment within six months
following the initial existence of the condition. In such event,
provided that Executive and the Company have executed (and, if applicable,
thereafter not revoked) the Mutual Release, Executive shall be entitled to
receive (w) Executive’s then current Base Salary through the effective date of
such termination, (x) a Pro-Rated Bonus, (y) twelve (12) months of
Executive’s then current Base Salary payable in a lump sum. Any
payment to Executive made pursuant hereto shall be paid to Executive no later
than the date that is two and a half months following the calendar year in which
such termination for Good Reason occurs.
(e)
Termination By Executive
Without Good Reason
. Executive may also terminate this
Agreement at any time without Good Reason by giving the Company at least thirty
(30) days’ prior written notice. In such event, Executive shall be
entitled to receive only Executive’s then-current Base Salary through the date
of termination. Further, Executive acknowledges that in the event of
such a termination without Good Reason, Executive shall not be entitled to
receive any bonus payment for the year of termination or subsequent years under
the MIP or any other incentive compensation plan in which Executive is then
participating.
(f)
Termination Due To
Disability
. In the event that Executive becomes “Totally and
Permanently Disabled” (as reasonably determined by the Board acting in good
faith), the Company shall have the right to terminate this Agreement upon
written notice to Executive; provided, however, that in the event that Executive
and the Company execute (and, if applicable, thereafter not
revoke) the Mutual Release, Executive shall be entitled to receive
(i) Executive’s then-current Base Salary through the date of such termination,
(ii) a Pro-Rated Bonus, and (iii) Executive’s then-current Base Salary, net of
short term disability payments remitted to Executive by the Company pursuant to
the Company’s Short-Term Disability Plan, through the earlier of (y) the
scheduled expiration date of this Agreement (but in no event less than twelve
(12) months from the date of disability) or (z) the date on which Executive’s
long-term disability insurance payments commence.
(g)
Termination Due To
Death
. This Agreement shall be deemed automatically terminated
upon the death of Executive. In such event, provided Executive’s
personal representative and the Company execute a release substantially in the
form of the Mutual Release, Executive’s personal representative shall be
entitled to receive (i) Executive’s then-current Base Salary through such date
of termination, and (ii) a Pro-Rated Bonus.
(h)
Other
Benefits
. Upon Executive’s termination pursuant to Sections
3(c) or (d), and, in the event that Executive and the Company execute (and, if
applicable, thereafter not revoke) the Mutual Release, the Company agrees to pay
Executive, in lump sum, one year’s COBRA premiums for continuation of health and
dental coverage in existence at the time of such termination, as determined as
of Executive’s date of termination
.
This payment will be
remitted to Executive at the same time that Executive is paid pursuant to
Sections 3(c) and (d). Except as expressly set forth in this Section
3, Executive shall not be entitled to receive any compensation or other benefits
in connection with the termination of Executive’s employment.
(i)
Termination in Connection
with a Change in Contro
l. In the event of a termination of
Executive’s employment by the Company without Cause or by Executive for Good
Reason or notice by the Company of non-renewal of this Agreement, all within 365
days of a consummation of a Change in Control of VRI and provided that Executive
and the Company execute (and, if applicable, thereafter not revoke) the Mutual
Release, Executive shall be entitled to receive (i) Executive’s then-current
Base Salary through the effective date of such termination or non-renewal, (ii)
a Pro-Rated Bonus, (iii) a lump sum payment equal to twelve (12) months of
Executive’s then current Base Salary plus an amount equal to the cash bonus paid
to Executive in the prior calendar year], payable no later than the date that is
two and a half months following the calendar year in which such termination or
non-renewal occurs, and (iv) to the extent not already vested, full vesting of
any RSUs, SARs or other equity awards (including, but not limited to performance
share options) held by Executive whether granted to Executive pursuant to this
Agreement or otherwise. For purposes of this Agreement, “Change in
Control” shall mean an event or series of events by
which: (A) any “person” or “group” (as such terms are used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), but excluding any employee benefit plan of such person or
its subsidiaries, and any person or entity acting in its capacity as trustee,
agent, or other fiduciary or administrator of any such plan) becomes the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of 35% or more of the equity securities of VRI entitled
to vote for members of the Board or equivalent governing body of VRI on a
fully-diluted basis; or (B) during any period of twenty four (24) consecutive
months, a majority of the members of the Board or other equivalent governing
body of VRI cease to be composed of individuals (1) who were members of that
Board or equivalent governing body on the first day of such period, (2) whose
election or nomination to that Board or equivalent governing body was approved
by individuals referred to in clause (1) above constituting at the time of such
election or nomination at least a majority of that Board or equivalent governing
body, or (3) whose election or nomination to that Board or other equivalent
governing body was approved by individuals referred to in clauses (1) and (2)
above constituting at the time of such election or nomination at least a
majority of that Board or equivalent governing body (excluding, in the case of
both clause (2) and clause (3), any individual whose initial nomination for, or
assumption of office as, a member of that Board or equivalent governing body
occurs as a result of an actual or threatened solicitation of proxies or
consents for the election or removal of one or more directors by any person or
group other than a solicitation for the election of one or more directors by or
on behalf of the Board); or (C) any person or two or more persons acting in
concert shall have acquired, by contract or otherwise, control over the equity
securities of VRI entitled to vote for members of the Board or equivalent
governing body of VRI on a fully-diluted basis (and taking into account all such
securities that such person or group has the right to acquire pursuant to any
option right) representing 51% or more of the combined voting power of such
securities; or (D)VRI sells or transfers (other than by mortgage or pledge) all
or substantially all of its properties and assets to, another “person” or
“group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act).
(j)
Provisions of Agreement that
Survive Termination
. No termination of this Agreement shall
affect any of the rights and obligations of the parties hereto under Sections 4,
5, 6 and 7, and such rights and obligations shall survive such termination in
accordance with the terms of such sections.
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4.
|
Restrictive
Covenants
.
|
(a)
The
provisions of this Section 4 shall apply for a period of one (1) year beginning
with the date of termination of Executive’s employment hereunder for any
reason. During such period, Executive will not, without the prior
written consent of the CEO, directly or indirectly, become associated, either as
owner, employee, officer, director, independent contractor, agent, partner,
advisor or in any other capacity calling for the rendition of personal services
(“New Capacity”), with any individual, partnership, corporation, or other
organization (“New Enterprise”) doing business in North America whose business
or enterprise is ski resort ownership or operation (“Competing Business”);
provided
,
however
, that the
foregoing shall not preclude Executive from (i) engaging in such New Capacity
where (A) such Competing Business accounts for less than 10% of the New
Enterprise’s annual revenues and annual net income on both a historical or pro
forma basis for its most recently completed fiscal year, or (B) Executive’s
duties for the New Enterprise are not primarily related to the conduct of such
Competing Business, or (ii) having passive investments in less than five percent
(5%) of the outstanding capital stock of a competitive corporation that is
listed on a national securities exchange or regularly traded in the
over-the-counter market or that have been approved in writing by the
CEO. Executive acknowledges that this Agreement is a contract for the
protection of trade secrets within the meaning of Colorado Revised Statutes §
8-2-113(2)(b) and that Executive is an executive or manager, or professional
staff to an executive or manager, within the meaning of Colorado Revised
Statutes § 8-2-113(2)(d). Executive acknowledges that Executive has
had a full and fair opportunity to consult with counsel of Executive’s own
choosing concerning the meaning and legal effect of this Section
4(a).
(b)
Further,
Executive covenants and agrees that, during Executive’s employment hereunder and
for the period of one year thereafter, Executive will not, directly or
indirectly, solicit for another business or enterprise, or otherwise interfere
with the Company’s relationship with, any person who is a Grade 27 managerial or
higher level employee of any of the Companies at the time of Executive’s
termination.
(c)
Executive
acknowledges that the restrictions, prohibitions and other provisions hereof,
are reasonable, fair and equitable in terms of duration, scope and geographic
area; are necessary to protect the legitimate business interests of the Company;
and are a material inducement to the Company to enter into this
Agreement.
(d)
In the event
Executive breaches any provision of Section 4, in addition to any other remedies
that the Company may have at law or in equity, Executive shall promptly
reimburse the Company for any severance payments received from, or payable by,
the Company. In addition, the Company shall be entitled in its sole
discretion to offset all or any portion of the amount of any unpaid
reimbursements against any amount owed by the Company to Executive.
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5.
|
Document Return;
Resignations
.
|
(a)
Upon
termination of Executive’s employment hereunder for any reason, or upon the
Company’s earlier request, Executive agrees that Executive shall promptly
surrender to the Company all letters, papers, documents, instruments, records,
books, products, data and work product stored on electronic storage media, and
any other materials owned by any of the Companies or used by Executive in the
performance of Executive’s duties under this Agreement.
(b)
Upon
termination of Executive hereunder for any reason, Executive agrees that
Executive shall be deemed to have resigned from all officer, director,
management or board positions to which Executive may have been elected or
appointed by reason of Executive’s employment or involvement with the Company,
specifically including but not limited to the Board, the boards of any of the
Companies and any other boards, districts, homeowner and/or industry
associations in which Executive serves at the direction of the CEO
(collectively, the “Associations”). Executive agrees to promptly
execute and deliver to the Company or its designee any other document, including
without limitation a letter of resignation, reasonably requested by the Company
to effectuate the purposes of this Section 5(b). If the Company is
unable, after reasonable effort, to secure Executive’s signature on any document
that the Company deems to be necessary to effectuate the purposes of this
Section 5(b), Executive hereby designates and appoints the Company and its duly
authorized officers and agents as Executive’s agent and attorney-in-fact, to act
for and on Executive’s behalf to execute, verify and submit to any appropriate
third party any such document, which shall thereafter have the same legal force
and effect as if executed by Executive.
|
6.
|
Confidentiality and
Assignment of Intellectual
Property
.
|
(a)
During
Executive’s employment with the Company, and at all times following the
termination of Executive’s employment hereunder for any reason, Executive shall
not use for Executive’s own benefit or for the benefit of any subsequent
employer, or disclose, directly or indirectly, to any person, firm or entity, or
any officer, director, stockholder, partner, associate, employee, agent or
representative thereof, any confidential information or trade secrets of any of
the Companies or the Associations, other than as reasonably necessary to perform
Executive’s duties under this Agreement. As used herein, the term
“confidential information” includes budgets, business plans, strategies,
analyses of potential transactions, costs, personnel data, and other proprietary
information of the Company that is not in the public domain.
(b)
For purposes
of this Section 6(b), “Company Inventions” means all ideas, processes,
trademarks and service marks, inventions, discoveries, and improvements to any
of the foregoing, that Executive learns of, conceives, develops or creates alone
or with others during Executive’s employment with the Company (whether or not
conceived, developed or created during regular working hours) that directly or
indirectly arise from or relate to: (i) the Company’s business, products or
services; or (ii) work performed for the Company by Executive or any other
Company employee, agent or contractor; or (iii) the use of the Company’s
property or time; or (iv) access to the Company’s confidential
information. Executive hereby assigns to the Company Executive’s
entire right, title and interest in all Company Inventions, which shall be the
sole and exclusive property of the Company whether or not subject to patent,
copyright, trademark or trade secret protection. Executive also
acknowledges that all original works of authorship that are made by Executive
(solely or jointly with others), within the scope of Executive’s employment with
the Company, and that are protectable by copyright, are “works made for hire,”
as that term is defined in the United States Copyright Act (17
U.S.C. §§ 101, et seq.). To the extent that any such
works, by operation of law, cannot be “works made for hire,” Executive hereby
assigns to Company all right, title, and interest in and to such works and to
any related copyrights. Executive shall promptly execute, acknowledge
and deliver to the Company all additional instruments or documents deemed at any
time by the Company in its sole discretion to be necessary to carry out the
intentions of this paragraph.
Following
the termination of Executive’s employment hereunder for any reason, Executive
agrees that Executive shall not make any statements disparaging of any of the
Companies, their respective boards, their businesses, and the officers,
directors, stockholders, or employees of any of the Companies or the
Associations. In response to inquiries from prospective employers,
which shall be referred by Executive only to the Senior Vice President of Human
Resources, the Company shall confirm only dates of employment, job title, and
job responsibilities. Subject to the terms of this Section 7,
Executive, as appropriate, may respond truthfully to inquiries from prospective
employers of Executive, and the Company and Executive may respond truthfully as
may be required by any governmental or judicial body acting in its official
capacity.
It is
understood that this Agreement has been entered into personally by the
parties. Neither party shall have the right to assign, transfer,
encumber or dispose of any duties, rights or payments due hereunder, which
duties, rights and payments with respect hereto are expressly declared to be
non-assignable and non-transferable, being based upon the personal services of
Executive, and any attempted assignment or transfer shall be null and void and
without binding effect on either party; provided, however, that the Company may
assign this Agreement to any parent, subsidiary, affiliate or successor
corporation.
The
parties acknowledge that the remedy at law for any violation or threatened
violation of Sections 4, 5, 6, 7 and/or 8 of this Agreement may be inadequate
and that, accordingly, either party shall be entitled to injunctive relief in
the event of such a violation or threatened violation without being required to
post bond or other surety. The above stated remedies shall be in
addition to, and not in limitation of, any other rights or remedies to which
either party is or may be entitled at law, in equity, or under this
Agreement.
The
Company agrees that it shall indemnify and hold harmless Executive in connection
with legal proceedings seeking to impose liability on Executive in such
Executive’s capacity as a director, officer or employee of the Companies to the
fullest extent permitted under the Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws of VRI. In furtherance
thereof, the Company and Executive each agree to execute and deliver an
Indemnification Agreement by and between the Company and Executive, attached
hereto as
Exhibit
A
and incorporated herein by reference, concurrently with the execution
and delivery of this Agreement. To the extent any provision set forth
in the Indemnification Agreement is in conflict with any provision set forth in
this Agreement, the provision set forth in the Indemnification Agreement shall
govern. Further, Executive shall be entitled to coverage under the
Directors and Officers Liability Insurance program to the same extent as other
senior executives of the Companies.
This
Agreement constitutes the full understanding and entire employment agreement of
the parties, and supersedes and is in lieu of any and all other understandings
or agreements between the Company and Executive, including the Original
Agreement which is replaced in its entirety;
provided
,
however
, that the
terms of the Addendum shall remain in full force and effect. Nothing
herein is intended to limit any rights or duties Executive has under the terms
of any applicable incentive compensation, benefit plan or other similar
agreements.
All disputes
relating to or arising from this Agreement and/or Executive’s employment with
the Company shall be resolved, upon written request by either party, by final
and binding arbitration by JAMS in San Francisco, California in accordance with
the JAMS Streamlined Arbitration Rules and Procedures as in effect at the time
of the arbitration. The JAMS arbitration fees shall be paid equally
by the parties hereto. Arbitration hereunder shall take place before
one JAMS arbitrator mutually agreed upon by the parties within 30 days of the
written request for arbitration. If the parties are unable or fail to
agree upon the arbitrator within such time, the parties shall submit a request
at the end of such period to JAMS to select the arbitrator within 15 days
thereafter. The arbitration and determination rendered by the JAMS
arbitrator shall be final and binding on the parties and judgment may be entered
upon such determination in any court having jurisdiction thereof (and such
judgment enforced, if necessary, through judicial proceedings). It is
understood and agreed that the arbitrator shall be specifically empowered to
designate and award any remedy available at law or in equity, including specific
performance. The arbitrator may award costs and expenses of the
arbitration proceeding (including, without limitation, reasonable attorneys'
fees) to the prevailing party.
Any
amendment to this Agreement shall be made only in writing and signed by each of
the parties hereto.
The
internal laws of the State of Nevada shall govern the construction and
enforcement of this Agreement.
Any
notice required or authorized hereunder shall be deemed delivered when
deposited, postage prepaid, in the United States mail, certified, with return
receipt requested, addressed to the parties as follows:
Blaise
Carrig
558 Green
Acres Drive
Gardnerville,
NV 89460
Vail
Holdings, Inc.
390
Interlocken Crescent
Broomfield,
Colorado 80021
Attn: General
Counsel
Anything
in this Agreement to the contrary notwithstanding, if on the date of termination
of Executive’s employment with the Company, as a result of such termination,
Executive would receive any payment that, absent the application of this Section
16 would be subject to interest and additional tax imposed pursuant to Section
409A(a) of the Internal Revenue Code of 1986, as amended (the “Code”) as a
result of the application of Section 409A(a)(2)(B)(i) of the Code, then no such
payment shall be made prior to the date that is the earliest of (1) 6 months
after the date of termination of Executive’s employment, (2) Executive’s death,
or (3) such other date as will cause such payment not to be subject to such
interest and additional tax.
Executive
shall not be required to mitigate damages or the amount of any payment provided
for under this Agreement by seeking other employment or otherwise, nor will any
payments hereunder be subject to offset in the event Executive does
mitigate.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors, permitted assigns, heirs, executors and legal
representatives.
This
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original but all such
counterparts together shall constitute one and the same
instrument. Each counterpart may consist of two copies hereof each
signed by one of the parties hereto.
Headings
in this Agreement are for convenience only and shall not control the meaning of
this Agreement. Whenever applicable, masculine and neutral pronouns
shall equally apply to the feminine genders; the singular shall include the
plural and the plural shall include the singular. The parties have
reviewed and understand this Agreement, and each has had a full opportunity to
negotiate this Agreement’s terms and to consult with counsel of their own
choosing. Therefore, the parties expressly waive all applicable
common law and statutory rules of construction that any provision of this
Agreement should be construed against this Agreement’s drafter, and agree that
this Agreement and all amendments thereto shall be construed as a whole,
according to the fair meaning of the language used.
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21.
|
Severability
and Modification by
Court.
|
If any
court of competent jurisdiction declares any provision of this Agreement invalid
or unenforceable, the remainder of this Agreement shall remain fully
enforceable. To the extent that any such court concludes that any
provision of this Agreement is void or voidable, the court shall reform such
provision(s) to render the provision(s) enforceable, but only to the extent
absolutely necessary to render the provision(s) enforceable and only in view of
the parties’ express desire that the Company be protected to the greatest extent
allowed by law from unfair competition, unfair solicitation and/or the misuse or
disclosure of its confidential information and records containing such
information.
[Signature
Page to follow.]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
of the date first written above.
VAIL
HOLDINGS, INC.
By:
/s/ Robert A. Katz
Name:
Robert A. Katz
Title:
Chief Executive Officer
EXECUTIVE:
/s/ Blaise
Carrig
Blaise
Carrig
Annex
I
MUTUAL
RELEASE
This
mutual release (this “Release”) is entered into as of this _____________ day of
_____________, 20___ (the “Release Date”) by Blaise Carrig (“Employee”), on the
one hand and Vail Holdings, Inc., (“VHI”) on the other hand.
1. Reference
is hereby made to Executive Employment Agreement, dated __________, 20__ (the
“Executive Employment Agreement”) by the parties hereto setting forth the
agreements among the parties regarding the termination of the employment
relationship between Employee and VHI. Capitalized terms used but not
defined herein have the meanings ascribed to them in Executive Employment
Agreement.
2. Employee,
for him/herself, his/her spouse, heirs, executors, administrators, successors,
and assigns, hereby releases and discharges VHI and its respective direct and
indirect parents and subsidiaries, and other affiliated companies, and each of
their respective past and present officers, directors, agents and employees,
from any and all actions, causes of action, claims, demands, grievances, and
complaints, known and unknown, that Employee or his/her spouse, heirs,
executors, administrators, successors, or assigns ever had or may have at any
time through the Release Date. Employee acknowledges and agrees that
this Release is intended to and does cover, but is not limited to: (i) any claim
of employment discrimination of any kind whether based on a federal, state, or
local statute or court decision, including the Age Discrimination in Employment
Act with appropriate notice and rescission periods observed; (ii) any claim,
whether statutory, common law, or otherwise, arising out of the terms or
conditions of Employee’s employment and/or Employee’s separation from VHI
including, but not limited to, any claims in the nature of tort or contract
claims, wrongful discharge, promissory estoppel, intentional or negligent
infliction of emotional distress, and/or breach of covenant of good faith and
fair dealing. The enumeration of specific rights, claims, and causes
of action being released shall not be construed to limit the general scope of
this Release. It is the intent of the parties that, by this Release,
Employee is giving up all rights, claims and causes of action occurring prior to
the Release Date, whether or not any damage or injury therefrom has yet
occurred. Employee accepts the risk of loss with respect to both
undiscovered claims and with respect to claims for any
harm hereafter suffered
arising out of conduct, statements, performance or decisions occurring before
the Release Date.
3. VHI
hereby releases and discharges Employee, his/her spouse, heirs, executors,
administrators, successors, and assigns, from any and all actions, causes of
actions, claims, demands, grievances and complaints, known and unknown, that VHI
ever had or may have at any time through the Release Date. VHI
acknowledges and agrees that this Release is intended to and does cover, but is
not limited to: (i) any claim, whether statutory, common law, or otherwise,
arising out of the terms or conditions of Employee’s employment and/or
Employee’s separation from VHI, and (ii) any claim for attorneys’ fees,
costs, disbursements, or other like expenses. The enumeration of
specific rights, claims, and causes of action being released shall not be
construed to limit the general scope of this Release. It is the
intent of the parties that, by this Release, VHI is giving up all of its
respective rights, claims, and causes of action occurring prior to the Release
Date, whether or not any damage or injury therefrom has yet
occurred. VHI accepts the risk of loss with respect to both
undiscovered claims and with respect to claims for any harm hereafter suffered
arising out of conduct, statements, performance or decisions occurring before
the Release Date.
4. This
Release shall in no event (i) apply to any claim by either Employee or VHI
arising from any breach by the other party of its obligations under Executive
Employment Agreement occurring on or after the Release Date, (ii) waive
Employee’s claim with respect to compensation or benefits earned or accrued
prior to the Release Date to the extent such claim survives termination of
Employee’s employment under the terms of Executive Employment Agreement, or
(iii) waive Employee’s right to indemnification under the by-laws of the
Company.
5.
Enforceability of
Release
:
|
(a)
|
You
acknowledge that you have been advised to consult with an attorney before
signing this Release.
|
|
(b)
|
You
acknowledge the adequacy and sufficiency of the consideration outlined in
Executive Employment Agreement for your promises set forth in this Release
and that the Company is not otherwise obligated to pay such
sums.
|
|
(c)
|
You
acknowledge that you have been offered at least twenty-one (21) days to
consider this Release, that you have read Executive Employment Agreement
and this Release, and understand its terms and significance, and that you
have executed this Release and with full knowledge of its effect, after
having carefully read and considered all terms of this Release and, if you
have chosen to consult with an attorney, your attorney has fully explained
all terms and their significance to
you.
|
|
(d)
|
You
hereby certify your understanding that you may revoke this Release, as it
applies to you, within seven (7) days following execution of this Release
and that this Release shall not become effective or enforceable until that
revocation period has expired. Any revocation should be sent,
in writing, to Vail Resorts Management Company, 390 Interlocken Crescent,
Suite 1000, Broomfield, Colorado 80021, Attn: Office of the
General Counsel. You also understand that, should you revoke
this Release within the seven-day period, this Release, as it applies to
you, would be voided in its entirety and the sums set forth in Executive
Employment Agreement would not be paid or owed to
you.
|
6. This
Mutual Release shall be effective as of the eighth day following the Release
Date and only if executed by both parties.
IN
WITNESS WHEREOF, each party hereto, intending to be legally bound, has executed
this Mutual Release on the date indicated below.
BLAISE
CARRIG VAIL
HOLDINGS, INC.
_________________________________ By:_________________________________
Date:______________________________ Date:_______________________________
Exhibit
10.6
EXECUTIVE
EMPLOYMENT AGREEMENT
This
EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into
October 15, 2008 by and between VAIL HOLDINGS, INC., a Colorado corporation (the
“Company”), a wholly-owned subsidiary of VAIL RESORTS, INC., a Delaware
corporation (“VRI”), and Stanley D. Brown (“Executive”).
The
parties hereto agree as follows:
(a)
The Company
hereby employs Executive to serve as President - Vail Resorts Hospitality on the
terms and conditions set forth herein. In such capacity, Executive shall have
the responsibilities normally associated with such position, subject to the
direction and supervision of the Chief Executive Officer (the
“CEO”).
(b)
Executive
accepts employment hereunder and agrees that, during the term of Executive’s
employment, Executive will observe and comply with the policies and rules of the
Company and devote substantially all Executive’s time during normal business
hours and best efforts to the performance of Executive’s duties hereunder, which
duties shall be performed in an efficient and competent manner and to the best
of Executive’s ability. Executive further agrees that, during the
term of this Agreement, Executive will not, without the prior written consent of
the CEO and the Board, directly or indirectly engage in any manner in any
business or other endeavor, either as an owner, employee, officer, director,
independent contractor, agent, partner, advisor, or in any other capacity
calling for the rendition of Executive’s personal services. This
restriction shall not preclude Executive from having passive investments, and
devoting reasonable time to the supervision thereof (so long as such does not
create a conflict of interest or interfere with Executive’s obligations
hereunder), in any business or enterprise that is not in competition with any
business or enterprise of the Company or any of its parents, subsidiaries or
affiliates (collectively, the “Companies”). This Agreement shall not
limit Executive’s community or charitable activities so long as such activities
do not impair or interfere with Executive’s performance of the services
contemplated by this Agreement.
For all
services rendered by Executive to or on behalf of the Companies, the Company
shall provide or cause to be provided to Executive, subject to making any and
all withholdings and deductions required of the Company or its affiliates by law
with all other income tax consequences being borne by Executive, the
following:
(a)
Base
Salary
. Executive shall receive a base salary of Three Hundred
Thirty Five Thousand Dollars ($335,000) per year increasing, effective August 1,
2009, to Three Hundred Sixty-Five Thousand Dollars ($365,000) per year (the
“Base Salary”), payable in accordance with the normal payroll practices of the
Company, and net of mandatory time off deductions and other applicable
withholding and deductions. Executive’s Base Salary shall be reviewed
annually by the CEO and the Compensation Committee of the Board (the
“Compensation Committee”). Any increases in such Base Salary shall be
at the discretion of the Compensation Committee, after consultation with and
upon recommendation of the CEO, and Executive acknowledges that the Compensation
Committee is not obligated to grant any increases. The Base Salary
shall not be lowered during the term of this Agreement without Executive’s
written consent.
(b)
Vail Resorts Management
Incentive Plan for Corporate Executives
. Executive shall be
entitled to participate in the Management Incentive Plan for Corporate
Executives (the “MIP”) on the same terms as may be applicable to other senior
executives of the Company and subject to the terms of the MIP. Under
the MIP, Executive’s target annual bonus will be Fifty Percent (50%) of
Executive’s Base Salary based upon Executive’s performance in light of
objectives established by the CEO, and the Companies’ performance in light of
objectives established by the Compensation Committee. Any awards
under the MIP are at the discretion of the Compensation Committee.
(c)
Benefits; Paid Time Off
.
Executive shall be eligible to participate in the benefit plans and perks and on
the same terms as may be extended generally to other senior executives of the
Companies and to the extent Executive is eligible under the terms of the
applicable plan. Executive shall also receive Two Hundred Sixteen
(216) hours of paid time off, which amount shall include hours for paid
holidays, as well as be required to take such hours of mandatory-time-off in
accordance with the Company’s policies and procedures.
(d)
Clubs and Other
Privileges
. Executive shall, subject to applicable rules in
effect from time to time, be entitled during the term of employment to the
benefits of membership in such of the private clubs owned and operated by the
Company as designated by the CEO from time to time (collectively
“Clubs”) as part of the Company’s quality evaluation program and subject to
completion of bi-annual feedback surveys; provided that Executive shall not
actually be a member of such Clubs and in no event shall Executive be entitled
to any claim of reimbursement for any initiation or similar
fees. Executive shall be solely responsible for the payment of any
and all charges incurred at such Clubs, but may utilize Executive’s annual
allowance provided pursuant to Executive Perquisite Fund (as may be in effect
from time to time) to pay such charges, excepting only the payment of regular
dues, which Executive shall not be obligated to pay. In addition,
Executive shall receive all other benefits and perquisites on the same terms
afforded from time to time to senior executives generally (
e.g
., season ski passes,
executive perquisite fund).
(e)
Expense
Reimbursement
. Executive shall have a travel and entertainment
budget that is reasonable in light of Executive’s position and responsibilities
and shall be reimbursed for all reasonable business-related travel and
entertainment expenses incurred by Executive thereunder upon submission of
appropriate documentation thereof in compliance with applicable Company
policies.
(f)
Legal Expenses
.
The Company shall reimburse Executive’s reasonable documented legal fees and
expenses (not to exceed $10,000) incurred in the review and negotiation of this
Agreement.
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3.
|
Term and
Termination
.
|
(a)
Term
. The
effective date of this Agreement shall be October 15, 2008 (“Employment
Commencement Date”). Unless terminated earlier, the term of this
Agreement shall be for the period commencing with the Employment Commencement
Date and continuing through October 15, 2011 and shall thereafter be
automatically renewed for successive one-year periods unless, no later than 60
days before the expiration of the then-current term, either Executive or the
Company gives the other written notice of non-renewal, in which case this
Agreement shall expire upon the conclusion of the then-current initial or
renewal term.
(b)
Termination for
Cause
. The Company may terminate this Agreement at any time
for “Cause”. For purposes of this Agreement, “Cause” shall mean (i)
any conduct involving gross negligence, gross mismanagement, or the unauthorized
disclosure of confidential information or trade secrets; (ii) dishonesty or a
violation of the Company’s Code of Ethics and Business Conduct that has or
reasonably could be expected to result in a detrimental impact on the
reputation, goodwill or business position of any of the Companies; (iii) gross
obstruction of business operations or illegal or disreputable conduct by
Executive that impairs or reasonably could be expected to impair the reputation,
goodwill or business position of any of the Companies, and any acts that violate
any policy of the Company relating to discrimination or harassment; (iv)
commission of a felony or a crime involving moral turpitude or the entrance of a
plea of guilty or nolo contedere to a felony or a crime involving moral
turpitude; or (v) any action involving a material breach of the terms of the
Agreement including material inattention to or material neglect of
duties. In the event of a termination for Cause, Executive shall be
entitled to receive only Executive’s then-current Base Salary through the date
of such termination. Further, Executive acknowledges that in the
event of such a termination for Cause, Executive shall not be entitled to
receive any bonus payment for the year of termination or subsequent years under
the MIP or any other incentive compensation plan in which Executive is then
participating.
(c)
Termination Without
Cause
. The Company may terminate this Agreement at any time
without Cause, by giving Executive written notice specifying the effective date
of such termination. In the event of a termination without Cause and
provided that Executive and the Company execute (and, if applicable, thereafter
not revoke) a written release in connection with such termination substantially
in the form attached hereto as Annex I (the “Mutual Release”), Executive shall
be entitled to receive (i) Executive’s then-current Base Salary through the
effective date of such termination, (ii) a pro-rated bonus for the portion of
the Company’s fiscal year through the effective date of such termination, which
pro-rated bonus shall be based on applying the level of achievement of the
performance targets (with respect to both Executive and the Companies) to
Executive’s target bonus for the year of such termination payable in a lump sum
at the same time as bonuses are paid to the Company’s senior executives
generally (the “Pro-Rated Bonus”), and (iii) twelve (12) months of
Executive’s then current Base Salary payable in a lump sum. For the
purposes of this section, any written notice of non-renewal given by the Company
pursuant to Section 3(a) of this Agreement shall be deemed termination without
Cause. Any payment to Executive made pursuant hereto shall be paid to
Executive no later than the date that is two and a half months following the
calendar year in which such termination without Cause occurs.
(d)
Termination By Executive For
Good Reason
. Executive shall be entitled to terminate this
Agreement at any time for “Good Reason” by giving the Company written notice of
such termination. For purposes of this Agreement, “Good Reason” shall
mean (i) the Company has breached its obligations hereunder in any material
respect, (ii) the Company has decreased Executive’s then current Base Salary,
(iii) Executive is directed to relocate Executive’s principal office more than
50 miles from Interlocken Business Park without Executive’s consent, and/or (iv)
the Company has effected a material diminution in Executive’s reporting
responsibilities, authority, or duties as in effect immediately prior to such
change;
provided
,
however
, that
Executive shall not have the right to terminate this Agreement for Good Reason
unless: (a) Executive has provided notice to the Company of any of the foregoing
conditions within 90 days of the initial existence of the condition; (B) the
Company has been given at least 30 days after receiving such notice to cure such
condition; and (C) Executive actually terminates employment within six months
following the initial existence of the condition. In such event,
provided that Executive and the Company have executed (and, if applicable,
thereafter not revoked) the Mutual Release, Executive shall be entitled to
receive (w) Executive’s then current Base Salary through the effective date of
such termination, (x) a Pro-Rated Bonus, (y) twelve (12) months of
Executive’s then current Base Salary payable in a lump sum. Any
payment to Executive made pursuant hereto shall be paid to Executive no later
than the date that is two and a half months following the calendar year in which
such termination for Good Reason occurs.
(e)
Termination By Executive
Without Good Reason
. Executive may also terminate this
Agreement at any time without Good Reason by giving the Company at least thirty
(30) days’ prior written notice. In such event, Executive shall be
entitled to receive only Executive’s then-current Base Salary through the date
of termination. Further, Executive acknowledges that in the event of
such a termination without Good Reason, Executive shall not be entitled to
receive any bonus payment for the year of termination or subsequent years under
the MIP or any other incentive compensation plan in which Executive is then
participating.
(f)
Termination Due To
Disability
. In the event that Executive becomes “Totally and
Permanently Disabled” (as reasonably determined by the Board acting in good
faith), the Company shall have the right to terminate this Agreement upon
written notice to Executive; provided, however, that in the event that Executive
and the Company execute (and, if applicable, thereafter not
revoke) the Mutual Release, Executive shall be entitled to receive
(i) Executive’s then-current Base Salary through the date of such termination,
(ii) a Pro-Rated Bonus, and (iii) Executive’s then-current Base Salary, net of
short term disability payments remitted to Executive by the Company pursuant to
the Company’s Short-Term Disability Plan, through the earlier of (y) the
scheduled expiration date of this Agreement (but in no event less than twelve
(12) months from the date of disability) or (z) the date on which Executive’s
long-term disability insurance payments commence.
(g)
Termination Due To
Death
. This Agreement shall be deemed automatically terminated
upon the death of Executive. In such event, provided Executive’s
personal representative and the Company execute a release substantially in the
form of the Mutual Release, Executive’s personal representative shall be
entitled to receive (i) Executive’s then-current Base Salary through such date
of termination, and (ii) a Pro-Rated Bonus.
(h)
Other
Benefits
. Upon Executive’s termination pursuant to Sections
3(c) or (d), and, in the event that Executive and the Company execute (and, if
applicable, thereafter not revoke) the Mutual Release, the Company agrees to pay
Executive, in lump sum, one year’s COBRA premiums for continuation of health and
dental coverage in existence at the time of such termination, as determined as
of Executive’s date of termination
.
This payment will be
remitted to Executive at the same time that Executive is paid pursuant to
Sections 3(c) and (d). Except as expressly set forth in this Section
3, Executive shall not be entitled to receive any compensation or other benefits
in connection with the termination of Executive’s employment.
(i)
Termination in Connection
with a Change in Contro
l. In the event of a termination of
Executive’s employment by the Company without Cause or by Executive for Good
Reason or notice by the Company of non-renewal of this Agreement, all within 365
days of a consummation of a Change in Control of VRI and provided that Executive
and the Company execute (and, if applicable, thereafter not revoke) the Mutual
Release, Executive shall be entitled to receive (i) Executive’s then-current
Base Salary through the effective date of such termination or non-renewal, (ii)
a Pro-Rated Bonus, (iii) a lump sum payment equal to twelve (12) months of
Executive’s then current Base Salary plus an amount equal to the cash bonus paid
to Executive in the prior calendar year, payable no later than the date that is
two and a half months following the calendar year in which such termination or
non-renewal occurs, and (iv) to the extent not already vested, full vesting of
any RSUs, SARs or other equity awards (including, but not limited to performance
share options) held by Executive whether granted to Executive pursuant to this
Agreement or otherwise. For purposes of this Agreement, “Change in
Control” shall mean an event or series of events by
which: (A) any “person” or “group” (as such terms are used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), but excluding any employee benefit plan of such person or
its subsidiaries, and any person or entity acting in its capacity as trustee,
agent, or other fiduciary or administrator of any such plan) becomes the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of 35% or more of the equity securities of VRI entitled
to vote for members of the Board or equivalent governing body of VRI on a
fully-diluted basis; or (B) during any period of twenty four (24) consecutive
months, a majority of the members of the Board or other equivalent governing
body of VRI cease to be composed of individuals (1) who were members of that
Board or equivalent governing body on the first day of such period, (2) whose
election or nomination to that Board or equivalent governing body was approved
by individuals referred to in clause (1) above constituting at the time of such
election or nomination at least a majority of that Board or equivalent governing
body, or (3) whose election or nomination to that Board or other equivalent
governing body was approved by individuals referred to in clauses (1) and (2)
above constituting at the time of such election or nomination at least a
majority of that Board or equivalent governing body (excluding, in the case of
both clause (2) and clause (3), any individual whose initial nomination for, or
assumption of office as, a member of that Board or equivalent governing body
occurs as a result of an actual or threatened solicitation of proxies or
consents for the election or removal of one or more directors by any person or
group other than a solicitation for the election of one or more directors by or
on behalf of the Board); or (C) any person or two or more persons acting in
concert shall have acquired, by contract or otherwise, control over the equity
securities of VRI entitled to vote for members of the Board or equivalent
governing body of VRI on a fully-diluted basis (and taking into account all such
securities that such person or group has the right to acquire pursuant to any
option right) representing 51% or more of the combined voting power of such
securities; or (D)VRI sells or transfers (other than by mortgage or pledge) all
or substantially all of its properties and assets to, another “person” or
“group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act).
(k)
Provisions of Agreement that
Survive Termination
. No termination of this Agreement shall
affect any of the rights and obligations of the parties hereto under Sections 4,
5, 6 and 7, and such rights and obligations shall survive such termination in
accordance with the terms of such sections.
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4.
|
Restrictive
Covenants
.
|
(a)
The
provisions of this Section 4 shall apply for a period of one (1) year beginning
with the date of termination of Executive’s employment hereunder for any
reason. During such period, Executive will not, without the prior
written consent of the CEO, directly or indirectly, become associated, either as
owner, employee, officer, director, independent contractor, agent, partner,
advisor or in any other capacity calling for the rendition of personal services
(“New Capacity”), with any individual, partnership, corporation, or other
organization doing business in the State of Colorado (“New Enterprise”) whose
business or enterprise is lodging or hospitality (“Competing Business”);
provided, however, that the foregoing shall not preclude Executive from (i)
engaging in such New Capacity where (A) such Competing Business account for less
than 10% of the New Enterprise’s annual revenues and annual net income on both a
historical or pro forma basis for its most recently completed fiscal year, or
(B) Executive’s duties for the New Enterprise are not primarily related to the
conduct of such Competing Business, or (ii) having passive investments in less
than five percent (5%) of the outstanding capital stock of a competitive
corporation that is listed on a national securities exchange or regularly traded
in the over-the-counter market or that have been approved in writing by the
CEO. Executive acknowledges that this Agreement is a contract for the
protection of trade secrets within the meaning of Colorado Revised Statutes §
8-2-113(2)(b) and that Executive is an executive or manager, or professional
staff to an executive or manager, within the meaning of Colorado Revised
Statutes § 8-2-113(2)(d). Executive acknowledges that Executive has
had a full and fair opportunity to consult with counsel of Executive’s own
choosing concerning the meaning and legal effect of this Section
4(a).
(b)
Further,
Executive covenants and agrees that, during Executive’s employment hereunder and
for the period of one year thereafter, Executive will not, directly or
indirectly, solicit for another business or enterprise, or otherwise interfere
with the Company’s relationship with, any person who is a Grade 27 managerial or
higher level employee of any of the Companies at the time of Executive’s
termination.
(c)
Executive
acknowledges that the restrictions, prohibitions and other provisions hereof,
are reasonable, fair and equitable in terms of duration, scope and geographic
area; are necessary to protect the legitimate business interests of the Company;
and are a material inducement to the Company to enter into this
Agreement.
(d)
In the event
Executive breaches any provision of Section 4, in addition to any other remedies
that the Company may have at law or in equity, Executive shall promptly
reimburse the Company for any severance payments received from, or payable by,
the Company. In addition, the Company shall be entitled in its sole
discretion to offset all or any portion of the amount of any unpaid
reimbursements against any amount owed by the Company to Executive.
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5.
|
Document Return;
Resignations
.
|
(a)
Upon
termination of Executive’s employment hereunder for any reason, or upon the
Company’s earlier request, Executive agrees that Executive shall promptly
surrender to the Company all letters, papers, documents, instruments, records,
books, products, data and work product stored on electronic storage media, and
any other materials owned by any of the Companies or used by Executive in the
performance of Executive’s duties under this Agreement.
(b)
Upon
termination of Executive hereunder for any reason, Executive agrees that
Executive shall be deemed to have resigned from all officer, director,
management or board positions to which Executive may have been elected or
appointed by reason of Executive’s employment or involvement with the Company,
specifically including but not limited to the Board, the boards of any of the
Companies and any other boards, districts, homeowner and/or industry
associations in which Executive serves at the direction of the CEO
(collectively, the “Associations”). Executive agrees to promptly
execute and deliver to the Company or its designee any other document, including
without limitation a letter of resignation, reasonably requested by the Company
to effectuate the purposes of this Section 5(b). If the Company is
unable, after reasonable effort, to secure Executive’s signature on any document
that the Company deems to be necessary to effectuate the purposes of this
Section 5(b), Executive hereby designates and appoints the Company and its duly
authorized officers and agents as Executive’s agent and attorney-in-fact, to act
for and on Executive’s behalf to execute, verify and submit to any appropriate
third party any such document, which shall thereafter have the same legal force
and effect as if executed by Executive.
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6.
|
Confidentiality and
Assignment of Intellectual
Property
.
|
(a)
During
Executive’s employment with the Company, and at all times following the
termination of Executive’s employment hereunder for any reason, Executive shall
not use for Executive’s own benefit or for the benefit of any subsequent
employer, or disclose, directly or indirectly, to any person, firm or entity, or
any officer, director, stockholder, partner, associate, employee, agent or
representative thereof, any confidential information or trade secrets of any of
the Companies or the Associations, other than as reasonably necessary to perform
Executive’s duties under this Agreement. As used herein, the term
“confidential information” includes budgets, business plans, strategies,
analyses of potential transactions, costs, personnel data, and other proprietary
information of the Company that is not in the public domain.
(b)
For purposes
of this Section 6(b), “Company Inventions” means all ideas, processes,
trademarks and service marks, inventions, discoveries, and improvements to any
of the foregoing, that Executive learns of, conceives, develops or creates alone
or with others during Executive’s employment with the Company (whether or not
conceived, developed or created during regular working hours) that directly or
indirectly arise from or relate to: (i) the Company’s business, products or
services; or (ii) work performed for the Company by Executive or any other
Company employee, agent or contractor; or (iii) the use of the Company’s
property or time; or (iv) access to the Company’s confidential
information. Executive hereby assigns to the Company Executive’s
entire right, title and interest in all Company Inventions, which shall be the
sole and exclusive property of the Company whether or not subject to patent,
copyright, trademark or trade secret protection. Executive also
acknowledges that all original works of authorship that are made by Executive
(solely or jointly with others), within the scope of Executive’s employment with
the Company, and that are protectable by copyright, are “works made for hire,”
as that term is defined in the United States Copyright Act (17
U.S.C. §§ 101, et seq.). To the extent that any such
works, by operation of law, cannot be “works made for hire,” Executive hereby
assigns to Company all right, title, and interest in and to such works and to
any related copyrights. Executive shall promptly execute, acknowledge
and deliver to the Company all additional instruments or documents deemed at any
time by the Company in its sole discretion to be necessary to carry out the
intentions of this paragraph.
Following
the termination of Executive’s employment hereunder for any reason, Executive
agrees that Executive shall not make any statements disparaging of any of the
Companies, their respective boards, their businesses, and the officers,
directors, stockholders, or employees of any of the Companies or the
Associations. In response to inquiries from prospective employers,
which shall be referred by Executive only to the Senior Vice President of Human
Resources, the Company shall confirm only dates of employment, job title, and
job responsibilities. Subject to the terms of this Section 7,
Executive, as appropriate, may respond truthfully to inquiries from prospective
employers of Executive, and the Company and Executive may respond truthfully as
may be required by any governmental or judicial body acting in its official
capacity.
It is
understood that this Agreement has been entered into personally by the
parties. Neither party shall have the right to assign, transfer,
encumber or dispose of any duties, rights or payments due hereunder, which
duties, rights and payments with respect hereto are expressly declared to be
non-assignable and non-transferable, being based upon the personal services of
Executive, and any attempted assignment or transfer shall be null and void and
without binding effect on either party; provided, however, that the Company may
assign this Agreement to any parent, subsidiary, affiliate or successor
corporation.
The
parties acknowledge that the remedy at law for any violation or threatened
violation of Sections 4, 5, 6, 7 and/or 8 of this Agreement may be inadequate
and that, accordingly, either party shall be entitled to injunctive relief in
the event of such a violation or threatened violation without being required to
post bond or other surety. The above stated remedies shall be in
addition to, and not in limitation of, any other rights or remedies to which
either party is or may be entitled at law, in equity, or under this
Agreement.
The
Company agrees that it shall indemnify and hold harmless Executive in connection
with legal proceedings seeking to impose liability on Executive in such
Executive’s capacity as a director, officer or employee of the Companies to the
fullest extent permitted under the Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws of VRI. In furtherance
thereof, the Company and Executive each agree to execute and deliver an
Indemnification Agreement by and between the Company and Executive, attached
hereto as
Exhibit
A
and incorporated herein by reference, concurrently with the execution
and delivery of this Agreement. To the extent any provision set forth
in the Indemnification Agreement is in conflict with any provision set forth in
this Agreement, the provision set forth in the Indemnification Agreement shall
govern. Further, Executive shall be entitled to coverage under the
Directors and Officers Liability Insurance program to the same extent as other
senior executives of the Companies.
This
Agreement constitutes the full understanding and entire employment agreement of
the parties, and supersedes and is in lieu of any and all other understandings
or agreements between the Company and Executive. Nothing herein is
intended to limit any rights or duties Executive has under the terms of any
applicable incentive compensation, benefit plan or other similar
agreements.
All disputes
relating to or arising from this Agreement and/or Executive’s employment with
the Company shall be resolved, upon written request by either party, by final
and binding arbitration by the Judicial Arbiter Group (“JAG”) in Denver,
Colorado in accordance with the JAMS Streamlined Arbitration Rules and
Procedures as in effect at the time of the arbitration. The JAG
arbitration fees shall be paid equally by the parties
hereto. Arbitration hereunder shall take place before one JAG
arbitrator mutually agreed upon by the parties within 30 days of the written
request for arbitration. If the parties are unable or fail to agree upon
the arbitrator within such time, the parties shall submit a request at the end
of such period to JAG to select the arbitrator within 15 days
thereafter. The arbitration and determination rendered by the JAG
arbitrator shall be final and binding on the parties and judgment may be entered
upon such determination in any court having jurisdiction thereof (and such
judgment enforced, if necessary, through judicial proceedings). It is
understood and agreed that the arbitrator shall be specifically empowered to
designate and award any remedy available at law or in equity, including specific
performance. The arbitrator may award costs and expenses of the
arbitration proceeding (including, without limitation, reasonable attorneys'
fees) to the prevailing party.
Any
amendment to this Agreement shall be made only in writing and signed by each of
the parties hereto.
The
internal laws of the State of Colorado law shall govern the construction and
enforcement of this Agreement.
Any
notice required or authorized hereunder shall be deemed delivered when
deposited, postage prepaid, in the United States mail, certified, with return
receipt requested, addressed to the parties as follows:
Stanley D.
Brown
9044 Jason
Court
Boulder, CO
80303
Vail
Holdings, Inc.
390
Interlocken Crescent
Broomfield,
Colorado 80021
Attn: General
Counsel
Anything in
this Agreement to the contrary notwithstanding, if on the date of termination of
Executive’s employment with the Company, as a result of such termination,
Executive would receive any payment that, absent the application of this Section
16 would be subject to interest and additional tax imposed pursuant to Section
409A(a) of the Internal Revenue Code of 1986, as amended (the “Code”) as a
result of the application of Section 409A(a)(2)(B)(i) of the Code, then no such
payment shall be made prior to the date that is the earliest of (1) 6 months
after the date of termination of Executive’s employment, (2) Executive’s death,
or (3) such other date as will cause such payment not to be subject to such
interest and additional tax.
Executive
shall not be required to mitigate damages or the amount of any payment provided
for under this Agreement by seeking other employment or otherwise, nor will any
payments hereunder be subject to offset in the event Executive does
mitigate.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors, permitted assigns, heirs, executors and legal
representatives.
This
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original but all such
counterparts together shall constitute one and the same
instrument. Each counterpart may consist of two copies hereof each
signed by one of the parties hereto.
Headings in
this Agreement are for convenience only and shall not control the meaning of
this Agreement. Whenever applicable, masculine and neutral pronouns
shall equally apply to the feminine genders; the singular shall include the
plural and the plural shall include the singular. The parties have
reviewed and understand this Agreement, and each has had a full opportunity to
negotiate this Agreement’s terms and to consult with counsel of their own
choosing. Therefore, the parties expressly waive all applicable
common law and statutory rules of construction that any provision of this
Agreement should be construed against this Agreement’s drafter, and agree that
this Agreement and all amendments thereto shall be construed as a whole,
according to the fair meaning of the language used.
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|
Severability and
Modification by Court.
|
If any court
of competent jurisdiction declares any provision of this Agreement invalid or
unenforceable, the remainder of this Agreement shall remain fully
enforceable. To the extent that any such court concludes that any
provision of this Agreement is void or voidable, the court shall reform such
provision(s) to render the provision(s) enforceable, but only to the extent
absolutely necessary to render the provision(s) enforceable and only in view of
the parties’ express desire that the Company be protected to the greatest extent
allowed by law from unfair competition, unfair solicitation and/or the misuse or
disclosure of its confidential information and records containing such
information.
[Signature
Page to follow.]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
of the date first written above.
VAIL
HOLDINGS, INC.
By: /s/
Robert A.
Katz
Name:
Robert A. Katz
Title:
Chief Executive Officer
EXECUTIVE:
/s/ Stanley D.
Brown
Stanley
D. Brown
Annex
I
MUTUAL
RELEASE
This
mutual release (this “Release”) is entered into as of this _____________ day of
_____________, 20___ (the “Release Date”) by Stanley D. Brown (“Employee”), on
the one hand and Vail Holdings, Inc., (“VHI”) on the other hand.
1.
Reference is
hereby made to Executive Employment Agreement, dated __________, 20__ (the
“Executive Employment Agreement”) by the parties hereto setting forth the
agreements among the parties regarding the termination of the employment
relationship between Employee and VHI. Capitalized terms used but not
defined herein have the meanings ascribed to them in Executive Employment
Agreement.
2.
Employee, for
him/herself, his/her spouse, heirs, executors, administrators, successors, and
assigns, hereby releases and discharges VHI and its respective direct and
indirect parents and subsidiaries, and other affiliated companies, and each of
their respective past and present officers, directors, agents and employees,
from any and all actions, causes of action, claims, demands, grievances, and
complaints, known and unknown, that Employee or his/her spouse, heirs,
executors, administrators, successors, or assigns ever had or may have at any
time through the Release Date. Employee acknowledges and agrees that
this Release is intended to and does cover, but is not limited to: (i) any claim
of employment discrimination of any kind whether based on a federal, state, or
local statute or court decision, including the Age Discrimination in Employment
Act with appropriate notice and rescission periods observed; (ii) any claim,
whether statutory, common law, or otherwise, arising out of the terms or
conditions of Employee’s employment and/or Employee’s separation from VHI
including, but not limited to, any claims in the nature of tort or contract
claims, wrongful discharge, promissory estoppel, intentional or negligent
infliction of emotional distress, and/or breach of covenant of good faith and
fair dealing. The enumeration of specific rights, claims, and causes
of action being released shall not be construed to limit the general scope of
this Release. It is the intent of the parties that, by this Release,
Employee is giving up all rights, claims and causes of action occurring prior to
the Release Date, whether or not any damage or injury therefrom has yet
occurred. Employee accepts the risk of loss with respect to both
undiscovered claims and with respect to claims for any
harm hereafter suffered
arising out of conduct, statements, performance or decisions occurring before
the Release Date.
3.
VHI hereby
releases and discharges Employee, his/her spouse, heirs, executors,
administrators, successors, and assigns, from any and all actions, causes of
actions, claims, demands, grievances and complaints, known and unknown, that VHI
ever had or may have at any time through the Release Date. VHI
acknowledges and agrees that this Release is intended to and does cover, but is
not limited to: (i) any claim, whether statutory, common law, or otherwise,
arising out of the terms or conditions of Employee’s employment and/or
Employee’s separation from VHI, and (ii) any claim for attorneys’ fees,
costs, disbursements, or other like expenses. The enumeration of
specific rights, claims, and causes of action being released shall not be
construed to limit the general scope of this Release. It is the
intent of the parties that, by this Release, VHI is giving up all of its
respective rights, claims, and causes of action occurring prior to the Release
Date, whether or not any damage or injury therefrom has yet
occurred. VHI accepts the risk of loss with respect to both
undiscovered claims and with respect to claims for any harm hereafter suffered
arising out of conduct, statements, performance or decisions occurring before
the Release Date.
4.
This Release
shall in no event (i) apply to any claim by either Employee or VHI arising from
any breach by the other party of its obligations under Executive Employment
Agreement occurring on or after the Release Date, (ii) waive Employee’s claim
with respect to compensation or benefits earned or accrued prior to the Release
Date to the extent such claim survives termination of Employee’s employment
under the terms of Executive Employment Agreement, or (iii) waive Employee’s
right to indemnification under the by-laws of the Company.
5.
Enforceability of
Release
:
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(a)
|
You
acknowledge that you have been advised to consult with an attorney before
signing this Release.
|
|
(b)
|
You
acknowledge the adequacy and sufficiency of the consideration outlined in
Executive Employment Agreement for your promises set forth in this Release
and that the Company is not otherwise obligated to pay such
sums.
|
|
(c)
|
You
acknowledge that you have been offered at least twenty-one (21) days to
consider this Release, that you have read Executive Employment Agreement
and this Release, and understand its terms and significance, and that you
have executed this Release and with full knowledge of its effect, after
having carefully read and considered all terms of this Release and, if you
have chosen to consult with an attorney, your attorney has fully explained
all terms and their significance to
you.
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(d)
|
You
hereby certify your understanding that you may revoke this Release, as it
applies to you, within seven (7) days following execution of this Release
and that this Release shall not become effective or enforceable until that
revocation period has expired. Any revocation should be sent,
in writing, to Vail Resorts Management Company, 390 Interlocken Crescent,
Suite 1000, Broomfield, Colorado 80021, Attn: Office of the
General Counsel. You also understand that, should you revoke
this Release within the seven-day period, this Release, as it applies to
you, would be voided in its entirety and the sums set forth in Executive
Employment Agreement would not be paid or owed to
you.
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6. This
Mutual Release shall be effective as of the eighth day following the Release
Date and only if executed by both parties.
IN
WITNESS WHEREOF, each party hereto, intending to be legally bound, has executed
this Mutual Release on the date indicated below.
STANLEY
D.
BROWN VAIL
HOLDINGS, INC.
_________________________________ By:_________________________________
Date:______________________________ Date:_______________________________
Vail
Resorts, Inc.
Management
Incentive Plan
Executives
Grade
32 & Above
Objective
The
purpose of the Management Incentive Plan (the “Plan”) is to reinforce individual
employee behaviors that contribute to the mission, values, growth and
profitability of Vail Resorts, Inc. by:
·
|
Rewarding
and recognizing goal-exceeding performance in one or more of the following
areas:
|
-
|
Resort
(Mountain and Lodging Segments) EBITDA (All
executives)
|
-
|
Lodging
EBITDA (Lodging executives)
|
-
|
Real
Estate Division Goal Attainment (All
executives)
|
-
|
Individual
employee performance, including adherence to the Company’s mission and
values (All executives)
|
Eligibility
All
full-time employees of Vail Resorts, Inc. and any of its subsidiaries
(collectively, the “Company”) at grade levels 32 and above as identified in the
Company’s compensation grade structure are eligible to participate in the Plan
(excluding employees who participate in a department specific incentive
plan).
For
employees who become or cease to be eligible (other than due to new hire or
separation from employment with the Company) or who move between eligibility
target levels under this Plan during a fiscal year, the amount of their award,
if any, will be prorated (by month) based on the length of time in each eligible
position for any change after the first fiscal quarter, which is not
prorated. If an employee is promoted into a grade level 32 or above
during a fiscal year and becomes eligible to participate in this Plan, the
employee will be eligible to receive an award in that fiscal year, which award
may be prorated, (if the change is after the first fiscal quarter), under this
Plan or their previous bonus plan and level, at the sole discretion of the
Compensation Committee of the Board of Directors (the “Compensation
Committee”).
New
Hires
An
employee hired into a position eligible for this Plan will receive a prorated
incentive for the Plan Year based on the number of months worked from the
employee’s hire date rounded to the number of full months worked in the fiscal
year. A full month will be counted if a new hire was hired on or
prior to the 16
th
of the
month. Anyone hired after the end of the third quarter of the fiscal
year will not be eligible to receive an award in that fiscal year, except at the
sole discretion of the Compensation Committee.
Bonuses
under the Plan do not accrue until the date Plan payments are
made. To be eligible to receive a payment, a participant must be
employed by the Company on the date Plan payments are made.
Effective
Dates
The Plan
is effective August 1, 2008, and will conclude on July 31, 2013.
Funding
For
Corporate executives, the Plan is 80% funded based on Resort EBITDA and 20%
funded based on the attainment of the VRDC Goals (defined below).
For
Mountain executives, the Plan is 80% funded based on Resort EBITDA and 20%
funded based on the attainment of the VRDC Goals (defined below).
For
Lodging executives, the Plan is 40% funded based on Resort EBITDA, 40% funded
based on Lodging EBITDA, and 20% funded based on the attainment of the VRDC
Goals (defined below).
For VRDC
executives, the Plan is 25% funded based on Resort EBITDA and 75% funded based
on the attainment of one or more of the following VRDC performance goals:
attaining EBITDA targets for the Company’s real estate segment, achieving
pre-sales targets on real estate projects, receiving zoning approval on real
estate projects, meeting budgeted profitability on real estate targets, and
achieving sales targets in existing real estate projects (collectively, the
“VRDC Goals”).
The
maximum amount that may be earned as an award under the Plan for any Plan year
by any one eligible employee shall be $4,000,000. The schedule
attached hereto as
Exhibit A
is used to
determine the percent of the target bonus funded by Resort, Mountain and Lodging
EBITDA performance. The schedule attached hereto as
Exhibit B
is used to
determine the percent of the target bonus funded by VRDC Goals. The Compensation
Committee will establish the Resort, Mountain and Lodging EBITDA performance
targets and corresponding funding levels and the VRDC Goals and may amend
Exhibit A
and
Exhibit B
by October
29 of each fiscal year and while the attainment of such goals is substantially
uncertain.
Target
Percentages
The
target bonuses as a percentage of base salary for executives in different
divisions of the Company for purposes of the Plan and at different grade levels
are set forth on
Exhibit C
attached
hereto. The Compensation Committee may amend
Exhibit C
in its sole
discretion on a yearly basis by October 29 of each fiscal year and while the
attainment of Resort, Mountain and Lodging EBITDA performance targets and
corresponding funding levels and VRDC Goals is substantially
uncertain.
Individual
Bonus Determinations
Bonus
determinations for individual executives (other than the Chief Executive
Officer) are determined by adjusting the funded target bonus by the application
of negative discretion based on individual performance. 100% of the total bonus
for each executive (other than the Chief Executive Officer) will be determined
based upon individual performance based on the year-end performance matrix in
Exhibit D. The Chief Executive Officer’s total bonus will be equal
to, and based solely on, the funded target bonus amount.
Individual
Performance
Individual
performance for all executives (other than the Chief Executive Officer) will be
determined through the applicable fiscal year performance review process, which
will be conducted by the Chief Executive Officer and reviewed by the
Compensation Committee. The Compensation Committee will conduct the
individual performance review for the Chief Executive Officer. Higher
performing executives will receive larger rewards for the individual portion of
the bonus than their lower performing peers based on the year-end performance
matrix in Exhibit D.
Example:
Grade 34
Mountain Executive earning $200,000 annually;
Target
Bonus % = 50%
Assume
Resort EBITDA at 100% of target and VRDC achieves their target
goals
Resort
EBITDA Funding = $200,000 x
50% x 80% = $80,000
VRDC
Goals Funding
= $200,000
x 50% x 20% =
$20,000
o
|
100%
based upon individual performance (“average”) =
$100,000
|
o
|
Total
average individual bonus = $100,000
|
-
|
Individual
performance can range from $0 to “average” amount to 166% of the “average”
amount ($0 to $166,000 for this example). The highest
performing executives could receive in excess of their target bonus
(subject to overall funding limits of the Plan in any fiscal year),
whereas the lowest performing executive could receive as little as $0 for
their bonus.
|
Plan
Payouts
Individual
bonus determinations calculated in accordance with the terms of this Plan will
be paid in cash or pursuant to equity awards granted under the Company’s equity
compensation plan, or a combination thereof, at the discretion of the
Compensation Committee, minus applicable deductions and withholding as required
by law, between August 1 and October 15 following the previous fiscal year
end.
Termination
of Employment
As stated
above, employees whose employment ends prior to the payment date under the Plan
for any fiscal year will not be eligible, subject to the discretion of the
Compensation Committee. However, if an otherwise eligible employee is
not employed as of the date of the payout under the Plan due to death,
short-term or long-term disability, such employee, if they would have otherwise
received a payout under the Plan but for their death or disability, shall be
entitled to receive a pro-rated (by month) payment for the portion of the fiscal
year the employee was actively employed.
Leave
of Absence
Individual
bonus determinations for employees who have a paid or unpaid leave of absence
(this does not include vacation) in excess of one month during the Plan year
will be pro-rated to reflect the time on leave.
Plan
Administration, Modification and Discontinuance
This Plan
is administered by the Compensation Committee. The Compensation Committee has
authority to interpret the Plan and to make, amend, or nullify any rules and
procedures deemed necessary for proper Plan administration, including, but not
limited to, performance targets, results and extraordinary
events. The EBITDA performance targets and corresponding funding
levels shall be adjusted for acquisitions, divestitures, or board imposed
unbudgeted expenses in the discretion of the Compensation Committee. In
addition, any stock compensation expense or restructuring expense will be
excluded from the applicable EBITDA performance targets used to determine
funding/payout levels.
Notwithstanding
the foregoing, no Plan payouts will be made until and unless the Compensation
Committee has certified that the performance goals and all other material terms
have been satisfied. The Compensation Committee has the sole
discretion to modify the application of this Plan.
Continued
Employment
The Plan
is not intended to and shall not be deemed to confer on any employee a guarantee
of continued employment by the Company.
Exhibit
10.8
Schedule Required
by Instruction 2 to Item 601 of Regulation S-K
The form
Indemnification Agreement was executed on October 15, 2008 by the following
executive officers:
NAME
|
OFFICE
|
Robert
A. Katz
|
Chief
Executive Officer
|
Jeffrey
W. Jones
|
Senior
Executive Vice President and Chief Financial Officer
|
Keith
A. Fernandez
|
President,
Vail Resorts Development Company
|
Stanley
D. Brown
|
President,
RockResorts and Vail Resorts Hospitality
|
Blaise
T. Carrig
|
Co-President,
Mountain Division and COO, Heavenly Mountain Resort
|
John
Mc.D. Garnsey
|
Co-
President, Mountain Division and COO, Beaver Creek Mountain
Resort
|
VAIL
HOLDINGS, INC.
INDEMNIFICATION
AGREEMENT
This
Indemnification Agreement (“
Agreement
”) is
effective as of October __, 2008, by and between Vail Holdings, Inc., a Delaware
corporation (the “
Company
”) and
____________ (“
Indemnitee
”). Capitalized
terms are defined herein and in
Section
14
.
WHEREAS,
the Company desires to attract and retain the services of highly qualified
individuals, such as Indemnitee, to serve the Company and its related
entities;
WHEREAS,
in order to induce Indemnitee to provide services to the Company, the Company
wishes to provide for the indemnification of, and the advancement of expenses
to, Indemnitee to the maximum extent permitted by law;
WHEREAS,
the Company and Indemnitee recognize the continued difficulty in obtaining
liability insurance for the Company’s directors, officers, employees, agents and
fiduciaries, the significant increases in the cost of such insurance and the
general reductions in the coverage of such insurance;
WHEREAS,
the Company and Indemnitee further recognize the substantial increase in
corporate litigation in general, subjecting directors, officers, employees,
agents and fiduciaries to expensive litigation risks at the same time as the
availability and coverage of liability insurance has been severely
limited;
WHEREAS,
the Company and Indemnitee desire to continue to have in place the additional
protection provided by an indemnification agreement and to provide
indemnification and advancement of expenses to the Indemnitee to the maximum
extent permitted by Delaware law; and
WHEREAS,
in view of the considerations set forth above, the Company desires that
Indemnitee shall be indemnified and advanced expenses by the Company as set
forth herein;
NOW,
THEREFORE, the Company and Indemnitee hereby agree as set forth
below:
1.
Indemnity
. The
Company hereby agrees to hold harmless and indemnify Indemnitee to the full
extent authorized or permitted by law and the Company's Certification of
Incorporation and By-laws. In furtherance of the foregoing
indemnification, and without limiting the generality thereof:
(a)
Proceedings
Other Than Proceedings by or in the Right of the Company
. Indemnitee
shall be entitled to the rights of indemnification provided in this Section l(a)
if, by reason of his Corporate Status, he is, or is threatened to be made, a
party to or participant in any Proceeding other than a Proceeding by or in the
right of the Company. Pursuant to this
Section l(a)
,
Indemnitee shall be indemnified against all Expenses, judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred by him or
on his behalf in connection with such Proceeding or any claim, issue or matter
therein, if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Company and, with respect to any
criminal Proceeding, had no reasonable cause to believe his conduct was
unlawful.
(b)
Proceedings
by or in the Right of the Company
. Indemnitee shall be
entitled to the rights of indemnification provided in this
Section l (b)
if, by
reason of his Corporate Status, he is, or is threatened to be made, a party to
or participant in any Proceeding brought by or in the right of the Company to
procure a judgment in its favor. Pursuant to this
Section l(b)
,
Indemnitee shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection with such Proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company; provided, however, that, if applicable law so
provides, no indemnification against such Expenses shall be made in respect of
any claim, issue or matter in such Proceeding as to which Indemnitee shall have
been finally adjudged to be liable to the Company unless and to the extent that
the U.S. District Court for the District of Colorado shall determine that such
indemnification may be made.
(c)
Indemnification
for Expenses if Indemnitee is Wholly or Partly
Successful
. Notwithstanding any other provision of this
Agreement, to the extent that Indemnitee is, by reason of his Corporate Status,
a party to and is successful, on the merits or otherwise, in any Proceeding, he
shall be indemnified to the maximum extent permitted by law against all Expenses
actually and reasonably incurred by him or on his behalf in connection
therewith. If Indemnitee is not wholly successful in such Proceeding
but is successful, on the merits or otherwise, as to one or more but less than
all claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses actually and reasonably incurred by him or on
his behalf in connection with each successfully resolved claim, issue or matter
which shall include all Expenses except those that relate to claims, issues or
matters as to which Indemnitee was not successful. For purposes of
this Section and without limitation, the termination of any claim, issue or
matter in such a Proceeding by dismissal, with or without prejudice (including
dismissals related to settlement), shall be deemed to be a successful result as
to such claim, issue or matter.
2.
Additional
Indemnity
. In addition to, and without regard to any
limitations on, the indemnification provided for in
Section 1
, the
Company shall and hereby does indemnify and hold harmless Indemnitee against all
Expenses, judgments, penalties, fines and amounts paid in settlement actually
and reasonably incurred by him or on his behalf if, by reason of his Corporate
Status he is, or is threatened to be made, a party to or participant in any
Proceeding (including a Proceeding by or in the right of the
Company). The only limitation that shall exist upon the Company’s
obligations pursuant to this
Section 2
shall be
that the Company shall not be obligated to make any payment to Indemnitee that
is finally determined (under the procedures, and subject to the presumptions,
set forth in
Sections
6
and
7
hereof) to be unlawful.
3.
Contribut
ion In
The Event Of Joint Liability
.
(a)
Whether
or not the indemnification provided in
Sections 1
and
2
hereof is
available, in respect of any Proceeding in which Company is jointly liable with
Indemnitee (or would be if joined in such action, suit or proceeding), Company
shall pay, in the first instance, the entire amount of any judgment, penalty,
fine or settlement of such Proceeding without requiring Indemnitee to contribute
to such payment and the Company hereby waives and relinquishes any right of
contribution it may have against Indemnitee. In the absence of
Indemnitee’s consent, which consent shall not be unreasonably withheld, the
Company shall not enter into any settlement of any Proceeding in which the
Company is jointly liable with Indemnitee (or would be if joined in such
Proceeding) unless such settlement provides for a full and final release of all
claims asserted against Indemnitee.
(b)
Without
diminishing or impairing the obligations of the Company set forth in the
preceding subparagraph, if, for any reason, Indemnitee shall elect or be
required to pay all or any portion of any judgment or settlement in any
threatened, pending or completed Proceeding in which Company is jointly liable
with Indemnitee (or would be if joined in such Proceeding), the Company shall
contribute to the amount of Expenses, judgments, penalties, fines and amounts
paid in settlement actually incurred and paid or payable by Indemnitee in
proportion to the relative benefits received by the Company and all officers,
directors or employees of the Company other than Indemnitee who are jointly
liable with him (or would be if joined in such Proceeding), on the one hand, and
Indemnitee, on the other hand, from the transaction from which such Proceeding
arose; provided, however, that the proportion determined on the basis of
relative benefit may, to the extent necessary to conform to law, be further
adjusted by reference to the relative fault of the Company and all officers,
directors or employees of the Company other than Indemnitee who are jointly
liable with Indemnitee (or would be if joined in such Proceeding), on the one
hand, and Indemnitee, on the other hand, in connection with the events that
resulted in such Expenses, judgments, penalties, fines or settlement amounts, as
well as any other equitable considerations which the law may require to be
considered. The relative fault of the Company and all officers,
directors or employees of the Company other than Indemnitee who are jointly
liable with him (or would be if joined in such Proceeding), on the one hand, and
Indemnitee, on the other hand, shall be determined by reference to, among other
things, the degree to which their actions were motivated by intent to gain
personal profit or advantage, the degree to which their liability is primary or
secondary, and the degree to which their conduct is active or
passive.
(c)
The
Company hereby agrees to fully indemnify and hold Indemnitee harmless from any
claims of contribution which may be brought by officers, directors or employees
of the Company who may be jointly liable with Indemnitee.
4.
Indemnification
For Expenses Of A Witness
. Notwithstanding any other provision
of this Agreement, to the extent that Indemnitee is, by reason of his Corporate
Status, a witness in any Proceeding to which such Indemnitee is not a party, he
shall be indemnified against all Expenses actually and reasonably incurred by
him or on his behalf in connection therewith; provided that attorneys’ fees
incurred by Indemnitee in connection with his or her service as a witness only
shall be reimbursed under this provision only if approved in advance by the
Company, such approval not to be unreasonably withheld.
5.
Advancement
Of Expenses
.
(a)
Notwithstanding
any other provision of this Agreement, the Company shall advance all Expenses
reasonably and necessarily incurred by or on behalf of Indemnitee in connection
with any Proceeding by reason of Indemnitee’s Corporate Status within twenty
(20) days after the receipt by the Company of a statement or statements from
Indemnitee requesting such advance or advances from time to time, whether prior
to or after final disposition of such Proceeding. Such statement or
statements requesting such advance or advances shall evidence to the Company’s
reasonable satisfaction all Expenses incurred by Indemnitee and shall include an
affidavit of Indemnitee’s counsel attesting that all Expenses sought to be
advanced were reasonably and necessarily incurred by Indemnity, and shall also
include or be preceded or accompanied by an undertaking by or on behalf of
Indemnitee to promptly repay any Expenses advanced if it shall ultimately be
determined that Indemnitee is not entitled to be indemnified against such
Expenses, and further undertaking to promptly repay any Expenses advanced but
found not to have been reasonably and necessarily incurred. Any
advances and undertakings to repay pursuant to this
Section 5
shall be
unsecured and interest free. To the extent permissible under third
party policies, the Company agrees that invoices for the advancement of Expenses
shall be billed in the name of and be payable directly by the
Company. Following, but not later than one year after, the conclusion
of any Proceeding with respect to which the Company has advanced Expenses, the
Company may commence an action to determine whether such Expenses were
reasonably and necessarily incurred by or on behalf of Indemnitee. In
any such action, Indemnity shall have the burden of demonstrating that all
Expenses advanced were reasonably and necessarily incurred and were required to
be advanced pursuant to this Agreement.
(b)
Notwithstanding
any of the foregoing provisions in this
Section 5
, the
Company shall not be obligated to advance any expenses to Indemnitee arising
from a lawsuit filed directly by the Company against Indemnitee if an absolute
majority of the members of the Board of Directors reasonably determines in good
faith, within twenty (20) days of Indemnitee’s request to be advance expenses,
that the facts known to them at the time such determination is made demonstrate
clearly and convincingly that Indemnitee acted in bad faith after Indemnitee has
had an opportunity, with counsel, to present his case to the Board of
Directors. If such a determination is made, Indemnitee may have such
decision reviewed by another forum, in the manner set forth in
Section 6
, with all
references therein to “indemnification” being deemed to refer to “advancement of
expenses” and the burden of proof shall be on the Company to demonstrate that,
based on the facts known at the time, Indemnitee acted in bad
faith. The Company may not avail itself of this
Section 5(b)
as to a
given lawsuit if, at any time after the occurrence of the activities or
omissions that are the primary focus of the lawsuit, the Company has undergone a
Change in Control.
6.
Procedures
And Presumptions For Determination Of Entitlement To
Indemnification
. It is the intent of this Agreement to secure
for Indemnitee rights of indemnity that are as favorable as may be permitted
under the law and public policy of the state of
Delaware. Accordingly, the parties agree that the following
procedures and presumptions shall apply in the event of any question as to
whether Indemnitee is entitled to indemnification under this
Agreement:
(a)
To obtain
indemnification (including, but not limited to, the advancement of Expenses and
contribution by the Company) under this Agreement, Indemnitee shall submit to
Chief Executive Officer of the Company a written request, including therein or
therewith such documentation and information as is reasonably available to
Indemnitee and is reasonably necessary to determine whether and to what extent
Indemnitee is entitled to indemnification. The Chief Executive
Officer shall, promptly upon receipt of such a request for indemnification,
advise the Board of Directors in writing that Indemnitee has requested
indemnification.
(b)
Upon
written request by Indemnitee for indemnification pursuant to the first sentence
of
Section 6(a)
hereof, a determination, if required by applicable law, with respect to
Indemnitee’s entitlement thereto shall be made in the specific case by one of
the following three methods, which shall be at the election of Indemnitee: (1)
by a majority vote of the disinterested directors, even though less than a
quorum, or (2) by independent legal counsel in a written opinion, or (3) by the
shareholders.
(c)
If the
determination of entitlement to indemnification is to be made by Independent
Counsel pursuant to
Section 6(b)
hereof,
the Independent Counsel shall be selected as provided in this
Section
6(c)
. The Independent Counsel shall be selected by Indemnitee
(unless Indemnitee shall request that such selection be made by the Board of
Directors). Indemnitee or the Company, as the case may be, may,
within ten (10) days after such written notice of selection shall have been
given, deliver to the Company or to Indemnitee, as the case may be, a written
objection to such selection; provided, however, that such objection may be
asserted only on the ground that the Independent Counsel so selected does not
meet the requirements of “Independent Counsel” as defined in
Section 14(g)
and the
objection shall set forth with particularity the factual basis of such
assertion. Absent a proper and timely objection, the person so
selected shall act as Independent Counsel. If a written objection is
made and substantiated, the Independent Counsel selected may not serve as
Independent Counsel unless and until such objection is withdrawn or a court has
determined that such objection is without merit. If, within thirty
(30) days after submission by Indemnitee of a written request for
indemnification pursuant to
Section 6(a)
hereof,
no Independent Counsel shall have been selected and not objected to, either the
Company or Indemnitee may seek judicial resolution of any objection which shall
have been made by the Company or Indemnitee to the other's selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the court or by such other person as the court shall
designate, and the person with respect to whom all objections are so resolved or
the person so appointed shall act as Independent Counsel under
Section 6(b)
hereof. The Company shall pay any and all reasonable fees and
expenses of Independent Counsel incurred by such Independent Counsel in
connection with acting pursuant to
Section 6(b)
hereof,
and the Company shall pay all reasonable fees and expenses incident to the
procedures of this
Section 6(c)
,
regardless of the manner in which such Independent Counsel was selected or
appointed.
(d)
In making
a determination with respect to entitlement to indemnification hereunder, the
person or persons or entity making such determination shall presume (unless
there is clear and convincing evidence to the contrary) that Indemnitee is
entitled to indemnification under this Agreement if Indemnitee has submitted a
request for indemnification in accordance with
Section
6(a)
. Anyone seeking to overcome this presumption shall have
the burden of proof and the burden of persuasion, by a preponderance of the
evidence.
(e)
Indemnitee
shall be presumed to have acted in good faith if Indemnitee’s action is based on
the records or books of account of the Company, including financial statements,
or on information supplied to Indemnitee by the officers of the Company in the
course of their duties, or on the advice of legal counsel for the Company or on
information or records given or reports made to the Company by an independent
certified public accountant, by a financial advisor or by an appraiser or other
expert selected with reasonable care by the Company. In addition, the
knowledge and/or actions, or failure to act, of any other director, officer,
trustee, partner, managing member, fiduciary, agent or employee of the Company
shall not be imputed to Indemnitee for purposes of determining the right to
indemnification under this Agreement. Whether or not the foregoing
provisions of this
Section 6(e)
are
satisfied, it shall in any event be presumed that Indemnitee has at all times
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. Anyone seeking to
overcome this presumption shall have the burden of proof and the burden of
persuasion, by a preponderance of the evidence.
(f)
The
Company acknowledges that a settlement or other disposition short of final
judgment may be successful if it permits a party to avoid expense, delay,
distraction, disruption and uncertainty. In the event that any
action, claim or proceeding to which Indemnitee is a party is resolved in any
manner other than by adverse judgment against Indemnitee (including, without
limitation, settlement of such action, claim or proceeding with or without
payment of money or other consideration) it shall be presumed that Indemnitee
has been successful on the merits or otherwise in such action, suit or
proceeding. Anyone seeking to overcome this presumption shall have
the burden of proof and the burden of persuasion, by a preponderance of the
evidence.
(g)
If the
person, persons or entity empowered or selected under
Section 6(b)
to
determine whether Indemnitee is entitled to indemnification shall not have made
a determination within sixty (60) days after receipt by the Company of the
request therefor, the requisite determination of entitlement to indemnification
shall be deemed to have been made and Indemnitee shall be entitled to such
indemnification, thereto; provided, however, that the running of such 60 day
period shall be tolled for the duration of any period during which Indemnitee
has, in the reasonable opinion of the person, persons or entity empowered or
selected under
Section
6(b)
to determine whether Indemnitee is entitled to indemnification,
failed to cooperate, as required by
Section 6(h)
, below,
with such person’s efforts to determine Indemnitee’s right to indemnification,
and provided further that that the foregoing provisions of this
Section 6(g)
shall
not apply if the determination of entitlement to indemnification is to be made
by the shareholders pursuant to
Section 6(b)
and if
within fifteen (15) days after receipt by the Company of the request for such
determination the Board of Directors resolve to submit such determination to the
shareholders for their consideration at the next annual meeting thereof and such
determination is made thereat.
(h)
Indemnitee
shall cooperate with the person, persons or entity making such determination
with respect to Indemnitee’s entitlement to indemnification, and provide to such
person, persons or entity upon reasonable advance request any documentation or
information which is reasonably available to Indemnitee and reasonably necessary
to such determination. Nothing in this Agreement shall require
Indemnitee to waive any of his rights under the United States Constitution or to
provide information that is privileged or otherwise protected from
disclosure. Any Independent Counsel, member of the Board of
Directors, or shareholder of the Company shall act reasonably and in good faith
in making a determination under the Agreement of Indemnitee's entitlement to
indemnification. Any costs or expenses (including attorneys’ fees and
disbursements) reasonably and necessarily incurred by Indemnitee in so
cooperating with the person, persons or entity making such determination shall
be borne by the Company (irrespective of the determination as to Indemnitee’s
entitlement to indemnification) and the Company hereby indemnifies and agrees to
hold Indemnitee harmless therefrom.
7.
Remedies
.
(a)
In the
event that (i) a determination is made pursuant to
Section 6
that
Indemnitee is not entitled to indemnification under this Agreement, (ii)
advancement of Expenses is not timely made pursuant to
Section 5
, (iii) no
determination of entitlement to indemnification shall have been made pursuant to
Section 6(b)
within 90 days after receipt by the Company of the request for indemnification,
(iv) payment of indemnification is not made pursuant to this Agreement within
ten (10) days after receipt by the Company of a written request therefor, or (v)
payment of indemnification is not made within ten (10) days after a
determination has been made that Indemnitee is entitled to indemnification or
such determination is deemed to have been made pursuant to
Section 6
, Indemnitee
shall be entitled to an adjudication of his entitlement to such
indemnification. The Company shall not oppose Indemnitee’s right to
seek any such adjudication in conformity with this
Section7(a)
, but the
Company may assert any appropriate objection or defense to such indemnification
in any such adjudication.
(b)
In the
event that a determination shall have been made pursuant to
Section 6(b)
that
Indemnitee is not entitled to indemnification, any judicial proceeding commenced
pursuant to this
Section 7
shall be
conducted in all respects as a
de novo
trial, on the merits
and Indemnitee shall not be prejudiced in any way by reason of that adverse
determination.
(c)
If a
determination shall have been made pursuant to
Section 6(b)
that
Indemnitee is entitled to indemnification, the Company shall be bound by such
determination in any judicial proceeding commenced pursuant to this
Section 7
, absent
(i) a misstatement by Indemnitee of a material fact, or omission of a
material fact necessary to make Indemnitee’s statement not materially
misleading, in connection with the request for indemnification or (ii) a
prohibition of such indemnification under applicable law.
(d)
The
Company shall indemnify and hold harmless Indemnitee to the fullest extent
permitted by law against all Expenses and, in accordance with
Section 5
, advance
such Expenses to Indemnitee, that are actually and reasonably incurred by
Indemnitee in connection with any judicial proceeding brought by Indemnitee in
which Indemnity substantially prevails in Indemnitee’s effort (i) to enforce
Indemnitee’s rights under, or to recover damages for breach of, this Agreement
or any other indemnification, advancement or contribution agreement or provision
of the Company’s Certificate of Incorporation or Bylaws now or hereafter in
effect, or (ii) to recover under any directors’ and officers’ liability
insurance policies maintained by the Company.
(e)
The
Company and Indemnity each shall be precluded from asserting in any judicial
proceeding commenced pursuant to this
Section 7
that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate that the Company and Indemnity each are bound by
all the provisions of this Agreement.
(f)
Interest
shall be paid by the Company to Indemnitee at the legal rate under Colorado law
for amounts which the Company indemnifies or is obliged to indemnify for the
period commencing with the date on which Indemnitee requests indemnification (or
reimbursement or advancement of any Expenses) and ending with the date on which
such payment is made to Indemnitee by the Company.
8.
Non-Exclusivity;
Survival Of Rights; Insurance
.
(a)
The
rights of indemnification as provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may at any time be entitled
under applicable law, the Certificate of Incorporation, the Bylaws, any
agreement, a vote of shareholders or a resolution of directors, or
otherwise. No amendment, alteration or repeal of this Agreement or of
any provision hereof shall limit or restrict any right of Indemnity under this
Agreement in respect of any action taken or omitted by Indemnitee in his
Corporate Status prior to such amendment, alteration or repeal. To
the extent that a change in the law, whether by statute or judicial decision,
permits greater indemnification than would be afforded currently under this
Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by
this Agreement the greater benefits so afforded by such change. No
right or remedy herein conferred is intended to be exclusive of any other right
or remedy, and every other right and remedy shall be cumulative and in addition
to every other right and remedy given hereunder or now or hereafter existing at
law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent or
later assertion or employment of any other right or remedy.
(b)
With
respect to any policy or policies of director’s liability insurance procured by
the Company, in its discretion, for the benefit of its officers and directors,
Indemnitee shall be provided insurance coverage no less favorable than that
provided to similarly situated officers and/or directors, as the case may
be. In all such policies of director and officer liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee at least the same rights and benefits as are accorded similarly
situated officers and/or directors, as the case may be. The Company
shall give prompt notice of the commencement of any Proceeding to the insurers
in accordance with the procedures set forth in the respective
policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of Indemnitee, all
amounts payable as a result of such Proceeding in accordance with the terms of
such policies. Notwithstanding anything to the contrary in this
Agreement, the Company shall not indemnify the Indemnitee to the extent
Indemnitee is actually reimbursed from the proceeds of insurance, and in the
event the Company makes any indemnification payments to Indemnitee and
Indemnitee is subsequently reimbursed from the proceeds of insurance, Indemnitee
shall promptly refund such indemnification payments to the Company to the extent
of such insurance reimbursement.
9.
Exceptions
To Right Of Indemnification
. Notwithstanding any other
provision of this Agreement other than
Section 5(b)
, the
Company shall not be obligated pursuant to the terms of this
Agreement:
(a)
Excluded Action or
Omissions
. To indemnify Indemnitee for Expenses resulting from
acts, omissions or transactions for which Indemnitee is prohibited from
receiving indemnification under this Agreement the Company’s Articles and Notice
of Articles, or applicable law; provided, however, notwithstanding any
limitation set forth in this
Section 9(a)
regarding the Company’s obligation to provide indemnification, Indemnitee shall
be entitled under
Section 5
to receive
Expense Advances hereunder with respect to any such Claim unless and until a
court having jurisdiction over the Claim shall have made a final judicial
determination (as to which all rights of appeal therefrom have been exhausted or
lapsed) that Indemnitee has engaged in acts, omissions or transactions for which
Indemnitee is prohibited from receiving indemnification under this Agreement or
applicable law.
(b)
Claims Initiated by
Indemnitee
. To indemnify or make Expense Advances to
Indemnitee with respect to Claims initiated or brought voluntarily by
Indemnitee, whether by way of claim, counterclaim, crossclaim, or any similar
means of asserting a claim, except (i) with respect to actions or proceedings
brought to establish or enforce a right to indemnification under this Agreement
or any other agreement or insurance policy or under the Company’s Articles or
Notice of Articles now or hereafter in effect relating to Claims for Covered
Events, (ii) in specific cases if the Board of Directors has approved the
initiation or bringing of such Claim or (iii) as otherwise required under
applicable law, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification or insurance recovery, as the case may
be.
(c)
Lack of Good
Faith
. To indemnify Indemnitee for any Expenses incurred by
the Indemnitee with respect to any action instituted (i) by Indemnitee to
enforce or interpret this Agreement, if a court having jurisdiction over such
action determines as provided in
Section 7
that any of
the material assertions made by the Indemnitee as a basis for such action lacked
a substantial basis in fact or law, was not made in good faith, or was frivolous
or (ii) by or in the name of the Company to enforce or interpret this Agreement,
if a court having jurisdiction over such action determines as provided in
Section 7
that any of
the material defenses asserted by Indemnitee in such action lacked a substantial
basis in fact or law, was not made in good faith, or was frivolous.
(d)
Claims Under Section
16(b)
. To indemnify Indemnitee for expenses and the payment of
profits arising from the purchase and sale by Indemnitee of securities in
violation of Section 16(b) of the Exchange Act, or any similar successor
statute; provided, however, that notwithstanding any limitation set forth in
this
Section
9(d)
regarding the Company’s obligation to provide indemnification,
Indemnitee shall be entitled under
Section 5
to receive
Expense Advances hereunder with respect to any such Claim unless and until a
court having jurisdiction over the Claim shall have made a final judicial
determination (as to which all rights of appeal therefrom have been exhausted or
lapsed) that Indemnitee has violated said statute.
10.
Settlement
. The
Company shall not settle any action, claim or Proceeding (in whole or in part)
against the Company, Indemnitee or any current or former director or officer
which would impose any Expense, judgment, fine, penalty or limitation on the
Indemnitee without the Indemnitee’s prior written consent, which consent shall
not be unreasonably withheld. The Company shall promptly notify
Indemnitee that the Company has received an offer or intends to make an offer to
settle any such Proceeding and shall provide Indemnitee reasonable time to
consider such offer, provided however Indemnitee shall have no less than two (2)
business days’ notice to consider such offer.
11.
Duration
Of Agreement
. This Agreement shall continue until and
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as a director or officer of the Company or as a
director, officer, trustee, partner, managing member, fiduciary, employee or
agent of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which Indemnitee served at the request of the
Company or (b) one (1) year after the final termination of any Proceeding
(including any rights of appeal thereto) then pending in respect of which
Indemnitee is granted rights of indemnification or advancement of Expenses
hereunder and of any proceeding commenced by Indemnitee pursuant to
Section 7
hereof
relating thereto (including any rights of appeal of any Section 7
Proceeding).
12.
Establishment
of a Trust; Security
.
(a)
To the
extent reasonably requested by Indemnitee and (i) approved by the Board of
Directors acting in good faith or (ii) in the event of a Threatened Change in
Control, the Company shall at any time and from time to time provide security to
Indemnitee for the Company’s obligations hereunder through an irrevocable bank
line of credit, funded trust or other collateral. Any such security,
once provided to Indemnitee, may not be revoked or released without the prior
written consent of Indemnitee, which consent shall not be unreasonably
withheld.
(b)
In the
event the Indemnitee requests the Company to establish a funded trust pursuant
to
Section
12(a)
(a “
Trust
”), the Company
shall, from time to time upon written request of Indemnitee, fund such Trust in
an amount reasonably sufficient to satisfy all Expenses reasonably anticipated
at the time of each such request to be reasonably and necessarily incurred in
connection with investigating, preparing for, participating in or defending any
Proceedings, and any and all judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such judgments, fines penalties and
amounts paid in settlement) in connection with any and all Proceedings from time
to time actually paid or claimed, reasonably anticipated or proposed to be
paid. The Company may, in its discretion, establish one collective
trust for the benefit of all Persons who may have rights similar to those of the
Indemnitee and the Trust shall form a part of such single collective
trust. The trustee of the Trust (the “
Trustee
”) shall be a
bank or trust company or other individual or entity chosen by the Company and
reasonably acceptable to the Indemnitee. Nothing in this
Section 12
shall
relieve the Company of any of its obligations under this
Agreement. The amount or amounts to be deposited in the Trust
pursuant to the foregoing funding obligation shall be determined by mutual
agreement of the Indemnitee and the Company or, if the Company and the
Indemnitee are unable to reach such an agreement, by Independent Counsel
selected in accordance with
Section 6(c)
hereof. The terms of the Trust shall provide that, except upon
the consent of both the Indemnitee and the Company, upon a Change in Control (a)
the Trust shall not be revoked or the principal thereof invaded, without the
written consent of the Indemnitee, (b) the Trustee shall advance, within ten
(10) business days of a request by the Indemnitee and upon the execution and
delivery to the Company of an undertaking providing that the Indemnitee
undertakes to repay the advance to the extent that it is ultimately determined
that Indemnitee is not entitled to be indemnified by the Company, any and all
Expenses to the Indemnitee, (c) the Trust shall continue to be funded by the
Company in accordance with the funding obligations set forth above, (d) the
Trustee shall promptly pay to the Indemnitee all amounts for which the
Indemnitee shall be entitled to indemnification pursuant to this Agreement or
otherwise and (e) all unexpended funds in such Trust shall revert to the Company
upon mutual agreement by the Indemnitee and the Company or, if the Indemnitee
and the Company are unable to reach such an agreement, by Independent Counsel
selected in accordance with
Section 6(c)
hereof,
that the Indemnitee has been fully indemnified under the terms of this
Agreement. The Trust shall be governed by Colorado law (without
regard to its conflicts of laws rules) and the Trustee shall consent to the
exclusive jurisdiction of the Colorado Court in accordance with
Section 21
hereof.
13.
Enforcement
.
(a)
The
Company expressly confirms and agrees that it has entered into this Agreement
and assumed the obligations imposed on it hereby in order to induce Indemnitee
to serve as a member of the Board of Directors, and the Company acknowledges
that Indemnitee is relying upon this Agreement in serving as a member of the
Board of Directors.
(b)
This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, oral, written and implied, between the parties hereto with
respect to the subject matter hereof.
(c)
The
Company and the Indemnitee agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It
is accordingly agreed that they each will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Colorado or in Colorado state court, this being in
addition to any other remedy to which they are entitled at Law or in
equity. In addition, each of the Company and the Indemnitee (a)
consents to submit itself to the personal jurisdiction of any federal court
located in the State of Colorado or any Colorado state court in the event any
dispute arises out of this Agreement, (b) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for leave
from any such court and (c) agrees that it will not bring any action relating to
this Agreement in any court other than a federal or state court sitting in the
State of Colorado.
14.
Definitions
. For
purposes of this Agreement:
(a)
“
Change in Control
”
shall be deemed to occur upon the earliest to occur after the date of this
Agreement of any of the following events:
(i)
any
Person or Group becomes the “beneficial owner” (as defined in Rules 13d-3 and
13d-5 under the Exchange Act), directly or indirectly, of thirty-five percent
(35%) or more of the Company’s Voting Securities;
(ii)
during
any period of twenty four (24) consecutive months, a majority of the members of
the Board of Directors or other equivalent governing body of the Company cease
to be composed of individuals (1) who were members of that Board of Directors or
equivalent governing body on the first day of such period, (2) whose election or
nomination to that Board of Directors or equivalent governing body was approved
by individuals referred to in clause (1) above constituting at the time of such
election or nomination at least a majority of that Board of Directors or
equivalent governing body, or (3) whose election or nomination to that Board of
Directors or other equivalent governing body was approved by individuals
referred to in clauses (1) and (2) above constituting at the time of such
election or nomination at least a majority of that Board of Directors or
equivalent governing body (excluding, in the case of both clause (2) and clause
(3), any individual whose initial nomination for, or assumption of office as, a
member of that Board of Directors or equivalent governing body occurs as a
result of an actual or threatened solicitation of proxies or consents for the
election or removal of one or more directors by any person or group other than a
solicitation for the election of one or more directors by or on behalf of the
Board of Directors); or
(iii)
any
Person or two or more Persons acting in concert shall have acquired, by contract
or otherwise, control over the Voting Securities (and taking into account all
such Voting Securities that such Person or Persons has the right to acquire
pursuant to any option right) representing fifty-one percent (51%) or more of
the combined voting power of such Voting Securities; or
(iv)
the
Company sells or transfers (other than by mortgage or pledge) all or
substantially all of its properties and assets to another Person or
Group.
(b)
“
Company
” shall
include any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise of which Indemnitee is or was serving at the
express written request of the Company as a director, officer, employee, agent
or fiduciary.
(c)
“
Corporate Status
”
describes the status of a person who is or was a director, officer, employee or
agent or fiduciary of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which such
person is or was serving at the express written request of the
Company.
(d)
“
Exchange Act
” shall
mean the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
(e)
“
Expenses
” shall
include all reasonable attorneys’ fees, retainers, court costs, transcript
costs, fees of experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery service fees,
and all other disbursements or expenses of the types customarily incurred in
connection with prosecuting, defending, preparing to prosecute or defend,
investigating, participating, or being or preparing to be a witness in a
Proceeding, and any federal, state, local or foreign taxes imposed on Indemnitee
as a result of the actual or deemed receipt of any payments under this
Agreement. Expenses also shall include Expenses incurred in
connection with any appeal resulting from any Proceeding, including without
limitation, the premium, security for, and other costs relating to any cost
bond, supersedeas bond or other bond or its equivalent.
(f)
“
Group
” shall mean any
group of Persons for purposes of Sections 13(d) and 14(d) of the Exchange
Act.
(g)
“
Independent Counsel
”
means a law firm, or a member of a law firm, that is experienced in matters of
corporation law, whose relationship with the Company, its officers and
directors, and Indemnitee is not such as would give rise to a reasonable
question concerning his or her ability to fairly and objectively evaluate the
issues with respect to which he or she is engaged, and who neither presently is,
nor in the past three years has been, retained to represent: (i) the Company or
Indemnitee in any matter material to either such party (other than with respect
to matters concerning any Indemnitee under this Agreement), or (ii) any other
party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term “Independent
Counsel” shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine
Indemnitee’s rights under this Agreement. The Company agrees to pay
the reasonable fees of the Independent Counsel referred to above and to fully
indemnify such counsel against any and all Expenses, claims, liabilities and
damages arising out of or relating to this Agreement or its engagement pursuant
hereto.
(h)
“
Person
” shall
have the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act;
provided, however, that Person shall exclude (i) the Company, (ii) any trustee
or other fiduciary holding securities under an employee benefit plan of the
Company and (iii) any corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their
ownership of shares of the Company
(i)
“
Proceeding
” includes
any threatened, pending or completed action, suit, arbitration, alternate
dispute resolution mechanism, investigation, inquiry, administrative hearing or
any other actual, threatened or completed proceeding, whether brought by or hi
the right of the Company or otherwise and whether civil, criminal,
administrative or investigative, in which Indemnitee was, is or will be involved
as a party or otherwise, by reason of the fact that Indemnitee is or was a
member of the Company or Indemnitee of the Company, by reason of any action
taken by him or of any inaction on his part while acting as a member of the
Company, or by reason of the fact that he is or was serving at the request of
the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise; in each case whether or
not he is acting or serving in any such capacity at the time any liability or
expense is incurred for which indemnification can be provided under this
Agreement; and excluding one initiated by Indemnitee pursuant to
Section 6
to enforce
his rights under this Agreement.
(j)
A “
Threatened Change in
Control
” shall mean the occurrence of one or more of the following
events: (i) the Company (or any affiliate of the Company) entering
into an agreement, the consummation of which would result in the occurrence of a
Change in Control; (ii) any Person (including, without limitation, the Company)
publicly announcing an intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control; (iii) any Person or Group
becoming the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of thirty-five percent (35%) or more of
the Company’s Voting Securities; or (iv) the Board notifying Indemnitee in
writing that a threat of a Change in Control exists.
(k) “
Voting
Securities
” shall mean any equity securities of the Company
that vote generally in the election of directors or equivalent governing body of
the Company on a fully-diluted basis.
15.
Severability
. If
any provision or provisions of this Agreement shall be held by a court of
competent jurisdiction to be invalid, void, illegal or otherwise unenforceable
for any reason whatsoever: (a) the validity, legality and enforceability of the
remaining provisions of this Agreement (including without limitation, each
portion of any section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby and shall
remain enforceable to the fullest extent permitted by law and (b) to the fullest
extent possible, the provisions of this Agreement (including, without
limitation, each portion of any section of this Agreement containing any such
provision held to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested thereby.
16.
Modification
And Waiver
. No supplement, modification, termination or
amendment of this Agreement shall be binding unless executed in writing by the
parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing
waiver.
17.
Notice By
Indemnitee
. Indemnitee agrees promptly to notify the Company
in writing upon being served with any summons, citation, subpoena, complaint,
indictment, information or other document relating to any Proceeding or matter
which may be subject to indemnification covered hereunder. The
failure to so notify the Company shall not relieve the Company of any obligation
which it may have to Indemnitee under this Agreement or otherwise.
18.
Notices
. All
notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given if (i) delivered by and
receipted for by the party to whom said notice or other communication shall have
been directed or if (ii) mailed by certified or registered mail with postage
prepaid, on the third business day after the date on which it is so
mailed:
(a) If
to Indemnitee, to:
[Name]
[Address]
[Address]
(b)
If to the
Company, to:
Vail Holdings,
Inc.
390 Interlocken
Crescent
Broomfield,
Colorado 80021
Attn: General
Counsel
19.
Identical
Counterparts
. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same
Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this
Agreement.
20.
Headings
. The
headings of the paragraphs of this Agreement are inserted for convenience only
and shall not be deemed to constitute part of this Agreement or to affect the
construction thereof.
21.
Consent
to Jurisdiction
. The Company and Indemnitee hereby irrevocably
and unconditionally (i) agree that any action or proceeding arising out of or in
connection with this Agreement shall be brought only in the state or federal
trial courts situated in the Denver, Colorado metropolitan area, (the “
Court
”), and not in
any other state or federal court in the United States of America or any court in
any other country, (ii) consent to submit to the exclusive jurisdiction of the
Court for purposes of any action or proceeding arising out of or in connection
with this Agreement, (iii) appoint, to the extent such party is not a resident
of the State of Colorado, irrevocably
[
the Company’s Statutory Agent
in Colorado
]
as its
agent in the State of Colorado as such party’s agent for acceptance of legal
process in connection with any such action or proceeding against such party with
the same legal force and validity as if served upon such party personally within
the State of Colorado, (iv) waive any objection to the laying of venue of any
such action or proceeding in the Court and (v) waive, and agree not to plead or
to make, any claim that any such action or proceeding brought in the Court has
been brought in an improper or inconvenient forum.
22.
Governing
Law
. The parties agree that this Agreement shall be governed
by, and construed and enforced in accordance with, the laws of Delaware without
application of the conflict of laws principles thereof.
[Signature
Page to follow.]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first above written.
VAIL
HOLDINGS, INC.
By
Name:
Title:
[Indemnitee]
Exhibit
31.1
CERTIFICATION
OF THE CHIEF EXECUTIVE OFFICER
PURSUANT
TO SECTION 302 OF THE
SARBANES-OXLEY
ACT OF 2002
I, Robert
A. Katz, certify that:
1.
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I
have reviewed this quarterly report on Form 10-Q of Vail Resorts,
Inc.;
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2.
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Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
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3.
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Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
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4.
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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:
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a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
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b)
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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;
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c)
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Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
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d)
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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 fiscal 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
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5.
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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):
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a)
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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
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b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
|
Date:
December 9, 2008
/s/
Robert A.
Katz
|
Robert
A. Katz
|
Chief
Executive Officer
|
Exhibit
31.2
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 quarterly report on Form 10-Q of Vail Resorts,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant's other certifying officer 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 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 this report based on such evaluation; and
|
|
d)
|
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 fiscal 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:
December 9, 2008
/s/
Jeffrey W.
Jones
|
Jeffrey
W. Jones
|
Senior
Executive Vice President and
|
Chief
Financial Officer
|
Exhibit
32
CERTIFICATION
OF THE CHIEF EXECUTIVE OFFICER
AND
THE CHIEF FINANCIAL OFFICER
PURSUANT
TO 18 U.S.C. SECTION 1350 AS ADOPTED 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 Company’s Quarterly Report on Form 10-Q for the quarter ended October
31, 2008 (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:
December 9, 2008
/s/
Robert A.
Katz
|
Robert
A. Katz
|
Chief
Executive Officer
|
Date:
December 9, 2008
/s/
Jeffrey W.
Jones
|
Jeffrey
W. Jones
|
Senior
Executive 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-Q 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. This
certification is not deemed filed with the Securities and Exchange Commission
and is not to be incorporated by reference into any filing of Vail Resorts, Inc.
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended (whether made before or after the date of the Form 10-Q),
irrespective of any general incorporation language contained in such
filing. 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.