EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated August 9, 2000 between American
Skiing Company, a Maine company, with its chief executive offices in Newry,
Maine (the "Company"), and Leslie B. Otten of Newry, Maine ("Executive"),
effective as of January 1, 2000 (the "Effective Date").
WHEREAS, Executive has been employed as chairman and chief
executive officer of the Company; and WHEREAS, the Company
desires to continue to employ Executive as chairman and chief
executive officer and to enter
into such an agreement embodying the terms of such employment (the "Agreement");
and
WHEREAS, Executive desires to continue to serve as chairman
and chief executive officer of the Company and to enter into such an Agreement;
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein and for other good and valuable consideration, the parties
hereby agree as follows:
1. Term of Employment. The Company hereby employs
Executive for a period commencing on the Effective Date and ending on December
31, 2005 (the "Initial Term"); provided, however, that on each December 31st,
starting with December 31, 2005, the term shall be automatically extended
for an additional one (1) year period (the first possible extension period
therefore being January 1, 2006 - December 31, 2006), unless, at least 90 days
prior to the relevant December 31, either party hereto shall provide written
notice of its or his desire not to extend the term hereof to the other party
hereto subject to Section 7 of the Agreement; such initial term and all
automatic extensions thereof shall be referred to herein as the "Employment
Term".
2. Position.
(a) Executive shall serve as Chairman and Chief
Executive Officer of the Company, a member of the Executive Committee of the
Board of Directors of the Company (the "Board"), a member of the Nominating
Committee of the Board, a member of the board of directors of ASC Utah and
American Skiing Company Resort Properties, Inc. or any "Material Subsidiary"
(as such term is defined in the Stockholders' Agreement dated August 9, 1999,
as amended (the "Stockholders Agreement")) and to serve as a member of each
committee of the board of directors of each Material Subsidiary. Executive
shall be in charge of and responsible for directing and overseeing all
operations of the Company, and its subsidiaries shall at all times be the
highest ranking corporate officer of the Company, and shall otherwise perform
such duties and exercise such powers commensurate with his position subject to
the general direction, approval and control as shall be reasonably determined
from time to time by the Board and shall include the power to hire and fire
personnel of the Company and its subsidiaries, but shall be governed by the
provisions of the Stockholders Agreement. Executive shall report directly to the
Board. Executive's principal place of employment shall be at the executive
offices of the Company, and Executive shall perform his duties hereunder
principally from such executive offices of the Company, subject to travel
requirements on Company business.
(b) During the Employment Term, Executive
shall devote substantially all of his business time and best efforts to the
performance of his duties hereunder and shall not engage in any other business,
profession or occupation for compensation or otherwise, without the prior
written consent of the Board, provided, however, that Executive may continue to
own and develop (i) through Sugarbush Land Holdings, Inc. and/or SB River
Realty LLC real property located in or around Warren, Fayston and Waitsfield,
Vermont (the "Sugar Bush Property") and (ii) through the Sunday River Land
Corporation real property located in or around Newry and Riley Township, Maine
(the "SR Property") subject to the following limitations:Except to the extent to
which any agreement between Executive and the Company may be applicable with
respect to real property, if Executive proposes to sell or otherwise transfer
his interest in the SR Property or enter into a binding agreement to develop
the SR Property with a third party (collectively "Development"), other than the
grant of a mortgage or other security for an obligation, Executive shall notify
the Company and Oakhill Capital Partners, L.P. at the address specified in
Section 11(g) hereof, in writing of such Development, and the terms and
conditions of such Development. The Notice shall further state that the Company,
shall have the right to purchase or otherwise engage in such Development
pursuant to terms and conditions at least as favorable as those proposed to such
third party (the "Right of First Refusal"). If within twenty (20) days following
delivery of the Notice, the Company fails to deliver to Executive written notice
of its intention to exercise its Right of First Refusal pursuant to the previous
sentence hereof, then the Company shall be deemed to have waived its Right of
First Refusal.
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Notwithstanding anything herein, during the Employment
Term, Executive may not develop any real property for use in a Competitive
Business; as such term is defined in Section 8 of the Agreement. Nothing in this
Section 2(b) shall limit or restrict Executive from performing uncompensated
services for or from serving on the board of directors, any business entity,
charitable, religious or any other non-profit organization, so long as such
service does not interfere with Executive's ability or availability to perform
his duties hereunder, Executive shall provide the Board at least annually, a
list of each such board upon which he serves.
3. Base Salary. During the Employment Term, the Company
shall pay Executive a base salary (the "Base Salary") at an annual rate of
$380,000, payable in regular installments in accordance with the Company's usual
payroll practices. Executive shall be entitled to such increases in his Base
Salary, if any, as may be determined from time to time in the sole discretion of
the Board; provided, however, that in any event, on each anniversary of the
Employment Term commencing on or after January 1, 2001, Base Salary shall be
increased by an amount of not less than the increase in the Consumer Price Index
over the 12 month period ending on December 31st of the preceding calendar
year. Consumer Price Index shall mean the Consumer Price Index for Urban
Consumers issued by the Department of Labor for Boston, Massachusetts or any
substantially similar index (the "CPI").
4. Bonus Payments. Executive shall be afforded the
opportunity to earn a cash bonus for each calendar year ending during the
Employment Term, contingent upon the Company's achievement of certain
specified target earnings before interest, taxes, depreciation and amortization
(the "EBITDA Budget") established prior to each July 31st in respect of the
fiscal year commencing thereafter, by the Board or a committee thereof in its
discretion (but after consultation with Executive). Such bonus award shall be as
follows:(i) $190,000 upon the Company's attainment of 90% of the EBITDA Budget,
and for each whole percentage increase between 90% and 100%, such amount
shall be increased ratably, (ii) $300,000 upon the Company's attainment of 100%
of the EBITDA Budget and for each whole percentage increase between 100% and
110%, such amount shall be increased ratably, and (iii) $380,000 upon the
Company's attainment of 110% or greater of the EBITDA Budget (the "Bonus"). The
Bonus shall be paid at the same time as annual bonuses are paid to other senior
executives of the Company. In addition, in the Board's sole and complete
discretion, with respect to any fiscal year, Executive may also be awarded an
additional bonus not to exceed $100,000. The foregoing amounts shall be subject
to annual adjustment upward on each anniversary of the Employment Term in
accordance with increases in the CPI over the preceding year.
5. Employee Benefits, Business Expenses and Perquisites.
(a) During the Employment Term, Executive shall
be entitled to participate in all regular employee benefit plans established by
the Company and generally made available to senior executives of the Company,
including, without limitation, any savings and profit sharing plans, retirement
plans, vacation, health plans, life insurance or disability insurance plans or
tax preparation services (collectively, "Employee Benefits").
(b) Reasonable travel, entertainment and other
business expenses incurred by Executive in the performance of his duties
hereunder shall be reimbursed by the Company in accordance with Company policies
and procedures applicable to senior executives of the Company as in effect from
time to time.
(c) During the Employment Term, Executive shall
be entitled to a housing allowance for reimbursement of appropriate residential
living quarters in the Grand Summit Hotel, the Canyons, Utah or the actual
net cost of a substantially equivalent living quarters adjacent to said hotel
not to exceed $8,000 per month.
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6. Stock Options.
At the discretion of the Compensation Committee of
the Board, Executive shall be eligible for consideration for annual grants of
stock options under the Company's stock option plan, as awarded by the Board to
the Company's senior executives.
7. Termination.
(a) For Just Cause by the Company. (i) Executive's
employment hereunder may be terminated by the Board for "Just Cause". Any such
termination shall be effected in accordance with the procedures set forth in
Section 2.08 of the Stockholders Agreement, unless such procedures are
inconsistent with the Company's by laws as in effect at the time of such
termination. For purposes of the Agreement, "Cause" shall mean (A) Executive's
substantial failure to perform his duties hereunder or to follow reasonable,
lawful directions of the Board conforming to this Agreement causing demonstrable
injury to the Company, (B) willful misconduct or willful malfeasance by
Executive in connection with his employment, (C) Executive's conviction of,
or plea of nolo contendere to, any crime constituting a felony under the laws
of the United States or any State thereof, or any other crime involving moral
turpitude or (D) Executive's material breach of any of the provisions of the
Agreement, the Company's bylaws or the Stockholders Agreement. A termination
described in clause (C) shall be effective immediately following the Board's
review as hereinafter provided and upon compliance with the procedures set
forth in Section 2.08 of the Stockholders Agreement. If the Board gives notice
of its intention to discharge Executive for Just Cause under clause (A), (B) or
(D) of this Section 7(a), the Board shall designate with specificity the conduct
in question and a finding of Just Cause shall be made only after Executive has
had reasonable advance notice of and opportunity to be heard by the Board
regarding such conduct. Executive shall have a thirty (30) day opportunity
to cure, if cure is possible, and if, in the Board's sole discretion,
Executive has not cured the Just Cause for his termination within that time,
the Board shall have the right to declare Executive's employment terminated;
provided, however, that the procedures set forth in Section 2.08 of the
Stockholders Agreement or equivalent procedures set forth in the successor
agreement to the Stockholders Agreement, if any shall be followed.
(ii) If Executive is terminated for Just
Cause pursuant to this Section 7(a), he shall be entitled to receive his Base
Salary through the date of termination and Executive shall be entitled to no
other salary or bonus payments or any other benefits under the Agreement. All
other benefits, if any, due Executive following Executive's termination of
employment pursuant to this Section 7(a) shall be determined in accordance with
the plans, policies and practices of the Company; provided, however, that
Executive shall not participate in any severance plan, policy or program of
the Company.
(b) Disability or Death. (i) Executive's employment
hereunder shall terminate upon his death. If Executive becomes physically or
mentally incapacitated and is therefore unable (or will, as a result thereof,
be unable) for a period of four (4) consecutive months or for an aggregate of
six (6) months in any twelve (12) consecutive month period to perform the
essential functions of his job, with reasonable accommodations (such incapacity
is hereinafter referred to as "Disability"), the Board shall have the right to
terminate Executive's employment hereunder, subject to the receipt of Board
consent as provided above. Any question as to the existence of a Disability as
to which Executive and the Board cannot agree shall be determined in writing by
a qualified independent physician mutually acceptable to Executive and the
Board. If Executive and the Board cannot agree as to a qualified independent
physician, each shall appoint such a physician and those two physicians shall
select a third who shall make such determination in writing. The determination
of Disability made in writing to the Board and Executive shall be final and
conclusive for all purposes of the Agreement. During the period when such
determination is being made, Executive shall remain an employee and be
compensated as such in full; provided that Executive does not unduly prolong or
delay such determination.
(ii) Upon termination of Executive's employment
hereunder during the Employment Term as a result of Executive's death,
Executive's estate shall receive from the Company his Base Salary and earned
accrued bonus at the rate in effect at the time of Executive's death through
the end of the month in which his death occurs. Executive's estate shall be
entitled to no other salary or bonus payments under the Agreement.
(c) Without Cause by the Company or with Good Reason
by Executive. (i) Executive's term of employment hereunder may be terminated
by the Board without Cause (for reasons other than death or Disability) or by
Executive for Good Reason (as defined below), in each case, upon ten (10)
business days written notice. Any such termination by the Company shall be
effected in accordance with the procedures set forth in Section 2.08 o f the
Stockholder Agreement, unless such procedures are inconsistent with the
Company's bylaws as in effect at the time of such termination.
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(ii) For purposes of the Agreement, "Good
Reason" shall mean: (A) any material breach by the Company of the provisions of
the Agreement, including but not limited to, any reduction by the Company in
Executive's Base Salary to which Executive does not consent and (B) any material
diminution in Executive's authority, duties or responsibilities, it being
understood and agreed that the exercise of rights of approval of certain
corporate action by a supermajority vote of the Board, as set forth in the
Stockholders Agreement shall not be considered to be a diminution of Executive's
duties or responsibilities.
(d) Termination by Executive. If Executive terminates
his employment with the Company for any reason (other than for Good Reason,
death or Disability) during the Employment Term, such termination shall be
treated as a termination for Cause pursuant to Section 7(a) of the Agreement and
the provisions of Section 7(a) shall apply.
(e) Severance Pay. In case of any termination of the
Employment Term for (i) Disability pursuant to Section 7(b) or (ii) without
Cause by the Company or for Good Reason by Executive pursuant to Section
7(c), the Company shall pay Executive, subject to Section 7(g) hereof: (A) his
Base Salary at the rate in effect immediately prior to such termination for
twenty-four (24) months following such termination, such payments to be made
over the twenty-four (24)months in accordance with the Company's regular payroll
practices. All other benefits, if any, due Executive following Executive's
termination shall be determined in accordance with the plans, policies and
practices of the Company; provided, however, that Executive shall not
participate in any other salary severance plan, policy or program of the Company
(collectively the "Executive Severance Payments").
(f) Notice of Termination. Any purported termination
of employment or the Agreement by the Company or by Executive shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 11(g) hereof and within 30 days prior to such
termination; provided, that a shorter notice period may apply if so prescribed
by the applicable subsection of this Section 7. For purposes of the Agreement,
a "Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in the Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of employment under the provision so indicated.
(g) Mitigation/Offset. Following the termination of
his employment under any of the above clauses of this Section 7, Executive
shall have no obligation or duty to seek subsequent employment or engagement as
an employee or a consultant, provided, however, that in the event that Executive
secures other employment, or shall be engaged in a significant consulting
relationship with any entity, the Company shall have the right to reduce the
salary continuation payments provided in Section 7(e) otherwise exceeding
one times salary payable pursuant to Section 8(e) by (X) compensation earned
by Executive, as an employee from subsequent employment and/or (Y) net income
earned by the Executive as an independent contractor, commencing on or after
his termination of employment. Executive shall provide the Company with written
notice that he has secured such other employment or entered into such other
consulting relationship within thirty (30) days following the commencement
of such employment or consulting relationship.
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8. Non-Competition/Nonsolicitation. (a) Executive
recognizes and acknowledges that the services to be performed by him hereunder
are special, unique and extraordinary and Executive further acknowledges and
recognizes the highly competitive nature of the business of the Company.
Accordingly, Executive agrees that during the Employment Term and for a period
of twelve (12) months following termination of employment (the "Restrictive
Period"), Executive will not, directly or indirectly, as an officer, director,
stockholder, partner, member, associate, employee, consultant, owner, agent,
creditor, co-venturer or otherwise, become or be financially interested in or be
associated with any other person or entity, in any state in the United States in
which the Company has operations at the date of his termination of employment,
in a "Competitive Business" with that of the Company at such time. For purposes
of the Agreement, a Competitive Business shall mean any business which derives
25% or more of its revenue directly or indirectly from skiing and other winter
resorts, winter-associated real estate development and related activities which
involve skiing and winter resorts as its primary business, but excluding SR
Property, SB River Realty LLC and Sugar Bush Land Holdings, Inc. as provided
in Section 2(b) hereof. Executive's ownership of shares in the Company and the
ownership, directly or indirectly, of not more than five percent (5%) of the
issued and outstanding stock of any corporation, the shares of which are
regularly traded on a national securities exchange or in the over-the-counter
market, shall not in any event be deemed to be a violation of the provisions of
this Section 8.
(b) During the Restricted Period, Executive shall
not (i) directly or indirectly, (A) solicit or encourage any employee of the
Company to leave the employment of the Company, or (B) hire any such employee
who has left the employment of the Company (other than as a result of the
termination of such employment by the Company) within one (1) year after the
termination of such employee's employment with the Company, and (ii) directly or
indirectly, solicit or encourage to cease to work with the Company any
consultant then under contract with the Company.
(c) For purposes of this Section 8 and Section 9
of the Agreement, the term "the Company" shall mean the Company and any
subsidiary or affiliate (as such term is defined in Rule 144 promulgated under
the Securities Act of 1933, as amended, or any successor rule) of the Company.
(d) It is expressly understood and agreed that
although Executive and the Company consider the restrictions contained in this
Section 8 to be reasonable, if a final judicial determination is made by a court
of competent jurisdiction that the time or territory or any other restriction
contained in the Agreement is an unenforceable restriction against Executive,
the provisions of the Agreement shall not be rendered void but shall be deemed
amended to apply as to such maximum time and territory and to such maximum
extent as such court may judicially determine or indicate to be enforceable.
Alternatively, if any court of competent jurisdiction finds that any restriction
contained in the Agreement is unenforceable, and such restriction cannot be
amended so as to make it enforceable, such finding shall not affect the
enforceability of any of the other restrictions contained herein.
9. Confidentiality and Nondisparagement.
(a) Executive will not at any time (whether during
or after his employment with the Company) disclose or use for his own benefit or
purposes or the benefit or purposes of any other person, entity or enterprise
other than the Company, any confidential trade secrets, information, or data
relating to customers, development programs, costs, marketing, trading,
investment, sales activities, promotion, credit and financial data,
manufacturing processes, financing methods, plans, or the business and affairs
of the Company generally, and shall not make disparaging statements about the
Company, its businesses, officers, directors, employees or stockholders;
provided, that the foregoing shall not apply (i) to information which is not
unique to the Company or which is generally known to the industry or the public
other than as a result of Executive's breach of this covenant, (ii)
to information, the disclosure of which Executive did not know, and did not have
reason to know, could be damaging to the reputation or business and affairs of
the Company, (iii) to information which Executive is required to disclose to any
governmental or judicial authority, or (iv) to information that could be
lawfully obtained, compiled or recreated by a third party unaffiliated with the
Company for a reasonable cost and with reasonable effort. Executive hereby
agrees that during and after the Employment Term, he shall provide the Company
with access to all memoranda, books, papers, plans, information, letters and
other data which relate to the operations of the business of the Company at such
times and from time to time as the Board shall request. Executive further agrees
that he will not retain or use for his account at any time any trade names,
trademark or service marks owned by the Company.
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(b) The Company agrees not to issue or circulate
false or disparaging statements, remarks or rumors about Executive unless giving
truthful testimony under subpoena. Executive agrees not to issue or circulate
false or disparaging statements, remarks or rumors about the Company, its
businesses, officers, directors, employees or stockholders unless giving
truthful testimony under subpoena.
10. Specific Performance. Executive acknowledges and
agrees that the Company's remedies at law for a breach or threatened breach of
any of the provisions of Section 8 or 9 would be inadequate and, in recognition
of this fact, Executive agrees that, in the event of such a breach or threatened
breach, in addition to any remedies at law, the Company shall be entitled to
obtain equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction or any other equitable
remedy which may then be available; provided however, the foregoing shall not
prevent Executive from contesting the issuance of any such injunction on the
ground that noviolation or threatened violation of Section 9 or 10 has occurred.
11. Miscellaneous.
(a) Governing Law. The Agreement shall be governed
by and construed in accordance with the laws of the State of Maine.
(b) Indemnification. To the full extent not
inconsistent with applicable law and the Company's governing documents, in the
event that Executive is a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that he is or was a director, officer or employee of the
Company, the Company shall indemnify Executive and hold him harmless, against
all expenses (including reasonable costs and attorneys' fees), judgments,
fines and amounts paid in settlement (with the Company's consent) actually and
reasonably incurred by him, as and when incurred, in connection with such
action, suit or proceeding if he acted in good faith and in a manner reasonably
believed to be in the best interests of the Company. The provisions of this
Section 11(b) shall not be deemed exclusive of any other rights of
indemnification to which Executive may be entitled or which may be granted
to him, and it shall be in addition to any rights of indemnification to which
he may be entitled under any policy of insurance or the Company's bylaws or by
statute. These provisions shall continue in effect after Executive has ceased to
be an officer or director of the Company.
(c) Amendments. The Agreement may not be amended
except by written instrument signed by the parties
hereto.
(d) No Waiver. The failure of a party to insist
upon strict adherence to any term of the Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the right
thereafter to insist upon strict adherence to that term or any other term of the
Agreement.
(e) Severability. In the event that any one or
more of the provisions of the Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions of the Agreement shall not be affected thereby.
(f) Successors and Assigns. The Agreement shall be
binding upon and inure to the benefit of the heirs and representatives of
Executive and the assigns and successors of the Company, but neither the
Agreement nor any rights or obligations hereunder shall be assignable or
otherwise subject to hypothecation by Executive (except by will or by operation
of the laws of intestate succession) or by the Company, except it is understood
that the Company may assign the Agreement to any successor (whether by merger,
purchase or otherwise) to all or substantially all of the stock or assets of,
or common ownership interests in, the Company, if such successor expressly
agrees to assume, or otherwise assumes by application of law, the obligations
of the Company hereunder.
(g) Notice. For the purpose of the Agreement,
notices and all other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given (i) when delivered or mailed
by United States registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses of the parties or (ii) when delivered by
telecopy with written confirmation of receipt thereof, provided; however, that
a copy of all notices to the Company shall (X) be directed to the Secretary
of the Company with instructions to send such a copy to each member of the Board
and (Y) be forwarded simultaneously with the copy being sent to the Company to
each of Steven B. Gruber and Bradford E. Bernstein, Oakhill Capital Partners,
L.P.,Park Avenue Tower, 65 East 55th Street, New York, New York 10022, telecopy:
(212) 754-5685.
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(h) Withholding Taxes. The Company may withhold
from any amounts payable under the Agreement such Federal, state and local taxes
as may be required to be withheld pursuant to any applicable law or regulation.
(i) Counterparts. The Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed the
Agreement as of the day and year first above written.
LESLIE B. OTTEN
/s/Leslie B. Otten
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AMERICAN SKIING COMPANY
By:/s/Mark J. Miller
---------------------------
Title: Chief Financial Officer