<PAGE>
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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 Quarterly Period Ended September 30, 1997
-OR-
/ / Transaction Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transaction period from to
COMMISSION FILE NUMBER 0-9789
---------------------
PREMIER PARKS INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 73-6137714
(State of other (I.R.S. Employer Identification
jurisdiction of No.)
incorporation or
organization)
</TABLE>
11501 NORTHEAST EXPRESSWAY, OKLAHOMA CITY, OK 73131
(Address of principal executive offices, Zip Code)
405-475-2500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
At November 5, 1997, Premier Parks Inc. had outstanding 18,300,672 shares of
Common Stock, par value $.05 per share.
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<PAGE>
ITEM 1. FINANCIAL STATEMENTS
PREMIER PARKS INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 169,151,000 $ 4,043,000
Accounts receivable............................................................ 15,960,000 1,180,000
Inventories.................................................................... 5,546,000 4,200,000
Prepaid expenses............................................................... 3,652,000 3,416,000
-------------- --------------
Total current assets......................................................... 194,309,000 12,839,000
Other assets:
Deferred charges............................................................... 10,594,000 6,752,000
Deposits and other assets...................................................... 6,036,000 9,087,000
-------------- --------------
Total other assets........................................................... 16,630,000 15,839,000
Property and equipment, at cost.................................................. 390,359,000 263,175,000
Less accumulated depreciation.................................................. 30,342,000 17,845,000
-------------- --------------
Total property and equipment................................................. 360,017,000 245,330,000
Intangible assets................................................................ 43,659,000 31,669,000
Less accumulated amortization.................................................. 2,348,000 874,000
-------------- --------------
Total intangible assets...................................................... 41,311,000 30,795,000
-------------- --------------
TOTAL ASSETS................................................................. $ 612,267,000 $ 304,803,000
-------------- --------------
-------------- --------------
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.......................................... $ 17,291,000 $ 11,059,000
Accrued interest payable....................................................... 4,054,000 4,304,000
Current portion of capitalized lease obligations............................... 990,000 1,492,000
-------------- --------------
Total current liabilities.................................................... 22,335,000 16,855,000
Long-term debt & capitalized lease obligations:
Capitalized lease obligations.................................................. 1,263,000 1,768,000
Credit facility................................................................ -- 57,574,000
Long-term debt--Senior notes................................................... 215,000,000 90,000,000
-------------- --------------
Total long-term debt & capitalized lease obligations......................... 216,263,000 149,342,000
Other long-term liabilities...................................................... 3,967,000 4,846,000
Deferred income taxes............................................................ 42,900,000 20,578,000
-------------- --------------
TOTAL LIABILITIES............................................................ 285,465,000 191,621,000
-------------- --------------
Stockholders' equity
Common stock................................................................... 917,000 569,000
Paid-in capital in excess of par............................................... 334,721,000 144,642,000
Accumulated deficit............................................................ (8,147,000) (31,340,000)
-------------- --------------
327,491,000 113,871,000
Less treasury stock, at cost................................................... 689,000 689,000
-------------- --------------
Total stockholders' equity................................................... 326,802,000 113,182,000
-------------- --------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY..................................... $ 612,267,000 $ 304,803,000
-------------- --------------
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</TABLE>
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
PREMIER PARKS INC.
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
REVENUES:
Theme park admissions............................................................ $ 53,985,000 $ 24,758,000
Theme park food, merchandise, and other.......................................... 66,029,000 35,651,000
------------- -------------
TOTAL REVENUES................................................................. 120,014,000 60,409,000
OPERATING COSTS AND EXPENSES:
Operating expenses............................................................... 36,827,000 15,496,000
Selling, general and administrative.............................................. 11,944,000 6,198,000
Costs of products sold........................................................... 15,540,000 7,392,000
Depreciation and amortization.................................................... 5,717,000 2,206,000
------------- -------------
TOTAL OPERATING COSTS AND EXPENSES............................................. 70,028,000 31,292,000
Income from operations......................................................... 49,986,000 29,117,000
OTHER EXPENSES:
Interest expense, net............................................................ (4,495,000) (2,024,000)
Other income (expense)........................................................... 18,000 (18,000)
------------- -------------
TOTAL OTHER (EXPENSES)......................................................... (4,477,000) (2,042,000)
Income before income taxes..................................................... 45,509,000 27,075,000
Income tax expense................................................................. 18,272,000 10,837,000
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NET INCOME..................................................................... $ 27,237,000 $ 16,238,000
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------------- -------------
NET INCOME APPLICABLE TO COMMON STOCK.......................................... $ 27,237,000 $ 16,238,000
------------- -------------
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PER SHARE AMOUNTS:
NET INCOME PER SHARE--PRIMARY...................................................... $ 1.49 $ 1.43
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NET INCOME PER SHARE--FULLY DILUTED................................................ $ 1.45 $ 1.39
------------- -------------
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Average shares outstanding--primary................................................ 18,300,672 11,357,232
------------- -------------
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Average shares outstanding--fully diluted.......................................... 18,833,946 11,684,180
------------- -------------
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</TABLE>
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
PREMIER PARKS INC.
CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
REVENUES:
Theme park admissions............................................................ $ 91,080,000 $ 38,970,000
Theme park food, merchandise, and other.......................................... 95,666,000 50,822,000
------------- -------------
TOTAL REVENUES............................................................... 186,746,000 89,792,000
OPERATING COSTS AND EXPENSES:
Operating expenses............................................................... 69,444,000 32,897,000
Selling, general and administrative.............................................. 29,688,000 15,363,000
Costs of products sold........................................................... 22,072,000 10,685,000
Depreciation and amortization.................................................... 13,974,000 5,599,000
------------- -------------
TOTAL OPERATING COSTS AND EXPENSES........................................... 135,178,000 64,544,000
Income from operations....................................................... 51,568,000 25,248,000
OTHER EXPENSES:
Interest expense, net............................................................ (12,869,000) (7,657,000)
Other income (expense)........................................................... (44,000) (59,000)
------------- -------------
TOTAL OTHER (EXPENSES)....................................................... (12,913,000) (7,716,000)
Income before income taxes................................................... 38,655,000 17,532,000
Income tax expense................................................................. 15,462,000 7,020,000
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NET INCOME................................................................... $ 23,193,000 $ 10,512,000
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NET INCOME APPLICABLE TO COMMON STOCK........................................ $ 23,193,000 $ 9,909,000
------------- -------------
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PER SHARE AMOUNTS:
NET INCOME PER SHARE--PRIMARY...................................................... $ 1.32 $ 1.24
------------- -------------
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NET INCOME PER SHARE--FULLY DILUTED................................................ $ 1.29 $ 1.11
------------- -------------
------------- -------------
Average shares outstanding--primary................................................ 17,512,552 7,979,227
------------- -------------
------------- -------------
Average shares outstanding--fully diluted.......................................... 18,045,828 9,438,644
------------- -------------
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</TABLE>
4
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
PREMIER PARKS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
--------------- --------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income.................................................................... $ 23,193,000 $ 10,512,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................................................. 13,974,000 5,599,000
Amortization of debt issuance costs........................................... 1,443,000 523,000
Increase in accounts receivable............................................... (14,696,000) (7,444,000)
Deferred income taxes......................................................... 15,226,000 6,993,000
Increase in inventories and prepaid expenses.................................. (1,420,000) (110,000)
Decrease (increase) in deposits and other assets.............................. 4,112,000 (2,858,000)
Increase (decrease) in accounts payable, accrued and other liabilities........ 2,339,000 (221,000)
Decrease in accrued interest payable.......................................... (250,000) (2,772,000)
--------------- --------------
Total adjustments........................................................... 20,728,000 (290,000)
--------------- --------------
Net cash provided by operating activities................................... 43,921,000 10,222,000
--------------- --------------
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to property and equipment........................................... (108,166,000) (29,290,000)
Acquisition of theme park, net of cash acquired............................... (21,376,000) --
Other investments............................................................. -- (38,000)
--------------- --------------
Net cash used in investing activities....................................... (129,542,000) (29,328,000)
--------------- --------------
CASH FLOW FROM FINANCING ACTIVITIES:
Repayment of long-term debt................................................... (66,081,000) (938,000)
Proceeds from borrowings...................................................... 132,500,000 --
Net cash proceeds from issuance of common stock............................... 189,427,000 65,151,000
Payment of debt issuance costs................................................ (5,117,000) (128,000)
--------------- --------------
Net cash provided by financing activities................................... 250,729,000 64,085,000
--------------- --------------
Increase in cash and cash equivalents....................................... 165,108,000 44,979,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................................ 4,043,000 28,787,000
--------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...................................... $ 169,151,000 $ 73,766,000
--------------- --------------
--------------- --------------
</TABLE>
5
<PAGE>
PREMIER PARKS INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. GENERAL.
Management's Discussion and Analysis of Financial Condition and Results of
Operations which follows these notes contains additional information on the
results of operations and the financial position of the Company. Those comments
should be read in conjunction with these notes. The Company's annual report on
Form 10-K for the year ended December 31, 1996 includes additional information
about the Company, its operations and its financial position, and should be read
in conjunction with this quarterly report on Form 10-Q. The information
furnished in this report reflects all adjustments which are, in the opinion of
management, necessary to present a fair statement of the results for the periods
presented.
Results of operations for the nine month and three month periods ended
September 30, 1997 are not indicative of the results expected for the full year.
In particular, the Company's theme park operations contribute most of their
annual revenue during the period from Memorial Day to Labor Day each year.
2. COMMON STOCK.
On April 4, 1996, a majority of the Company's common and preferred
shareholders and the Company's board of directors approved a one-for-five
reverse stock split effective May 6, 1996. The par value of the common stock was
increased to $.05 per share from $.01 per share. Additionally, the authorized
common shares of the Company were changed to 30,000,000. The accompanying
consolidated financial statements and notes to the consolidated financial
statements reflect the reverse stock split as if it had occurred as of January
1, 1996.
On June 4, 1996, and June 5, 1996, the Company issued 3,425,000 and 513,750,
respectively, of its common shares resulting in net proceeds to the Company of
$65,000,000. Additionally, on June 4, 1996, the Company exchanged 2,560,928 of
its common shares for all 200,000 shares of its previously outstanding preferred
stock.
On January 31, 1997, the Company issued 6,900,000 of its common shares
resulting in net proceeds to the Company of approximately $189,000,000.
On June 11, 1997, a majority of the Company's common shareholders approved
an increase in the authorized common shares of the Company to 90,000,000 shares.
3. ACQUISITION OF THEME PARKS.
On October 31, 1996, the Company acquired all of the interests in a
partnership which owned substantially all of the assets used in the operation of
Elitch Gardens, located in Denver, Colorado, for $62,500,000 in cash. Thereupon,
the partnership dissolved by operation of law. As a result, the assets were
directly owned by the Company. (In April 1997, these assets were transferred to
a wholly-owned subsidiary of the Company.) The transaction was accounted for as
a purchase. In addition, the Company has entered into a five-year consulting and
non-competition agreement with the president of the general partner of the
seller, Elitch Gardens Company, providing for annual consulting fees of
$100,000. Based upon the purchase method of accounting, the purchase price was
primarily allocated to property and equipment with $4,506,000 of costs recorded
as intangible assets, primarily goodwill.
On November 19, 1996, the Company acquired all of the interests in two
partnerships which owned substantially all of the assets used in the operation
of the two Waterworld/USA water parks for an aggregate cash purchase price of
approximately $17,250,000, of which $862,500 was placed in escrow to
6
<PAGE>
PREMIER PARKS INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997
fund potential indemnification claims by the Company. Thereupon, the
partnerships dissolved by operation of law. As a result, the assets were
directly owned by the Company. (In 1997, the assets were transferred to
wholly-owned subsidiaries of the Company.) The transaction was accounted for as
a purchase. Based upon the purchase method of accounting, the purchase price was
primarily allocated to property and equipment with $5,110,000 of costs recorded
as intangible assets, primarily goodwill.
On December 4, 1996, the Company acquired all of the interests in a limited
liability company which owned substantially all of the assets used in the
operation of The Great Escape and Splash Water Kingdom for a cash purchase price
of $33,000,000. The transaction was accounted for as a purchase. In connection
with the acquisition, the Company entered into a five-year non-competition
agreement and a related consulting agreement with the former owner, providing
for an aggregate consideration of $1,250,000. In addition, as a component of the
transaction, the Company issued 9,091 shares of its common stock ($200,000) to
an affiliate of the former owner. Based upon the purchase method of accounting,
the purchase price was primarily allocated to property and equipment with
$9,221,000 of costs recorded as intangible assets, primarily goodwill.
On February 5, 1997, the Company purchased all of the outstanding common
stock of Stuart Amusement Company, the owner of Riverside Park and an adjacent
multi-use stadium, for a purchase price of approximately $22,200,000 ($1,000,000
of which was paid through issuance of 32,129 of the Company's common shares).
The transaction was accounted for as a purchase. As of the acquisition date and
after giving effect to the purchase, $7,096,000 of deferred tax liabilities were
recognized for the tax consequences attributable to the differences between the
financial statement carrying amounts and the tax basis of Stuart Amusement
Company's assets and liabilities. Approximately $10,261,000 of cost in excess of
the fair value of the net assets acquired was recorded as goodwill. The balance
of the purchase price was allocated among the assets of Stuart Amusement Company
on the basis of estimates of fair value. Of the purchase price, $1,025,000 was
placed in escrow to fund potential indemnification claims by the Company.
The accompanying financial statements for the nine months ended September
30, 1997 reflect the results of these acquisitions from January 1, 1997 or, in
the case of Riverside Park, its acquisition date. The accompanying financial
statements for the three months ended September 30, 1997 reflect the results of
these acquisitions for the entire period. The accompanying historical financial
statements for the three month and nine month periods ended September 30, 1996
do not reflect the results of these acquisitions. (The parks included in all of
these acquisitions are referred to herein as the "Acquired Parks".)
The following is the summarized pro forma results of operations for the nine
months ended September 30, 1996. (They include the results of Riverside Park for
a full nine months.)
7
<PAGE>
THE COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
COMPANY
HISTORICAL HISTORICAL COMBINED PRO FORMA PRO FORMA
PREMIER ACQUIRED PARKS COMPANY ADJUSTMENTS (UNAUDITED)
--------- --------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Revenue:
Theme park admissions........................ $ 38,970 $ 34,062 $ 73,032 $ -- $ 73,032
Theme park food, merchandise and other....... 50,822 30,453 81,275 300 81,575
--------- ------- ----------- ------------- -----------
Total...................................... 89,792 64,515 154,307 300 154,607
Operating costs and expenses:
Operating expenses........................... 32,897 23,204 56,101 (350) 54,376
(1,375)
Selling, general and administrative.......... 15,363 17,035 32,398 (4,513) 27,885
Costs of products sold....................... 10,685 9,448 20,133 -- 20,133
Depreciation and amortization................ 5,599 13,028 18,627 (7,832) 10,795
--------- ------- ----------- ------------- -----------
Total...................................... 64,544 62,715 127,259 (14,070) 113,189
Income from operations......................... 25,248 1,800 27,048 14,370 41,418
Other income (expense):
Interest expense, net........................ (7,657) (4,624) (12,281) 1,160 (11,121)
Other income (expense)....................... (59) (284) (343) 125 (218)
--------- ------- ----------- ------------- -----------
Total...................................... (7,716) (4,908) (12,624) 1,285 (11,339)
Income (loss) before income taxes.............. 17,532 (3,108) 14,424 15,655 30,079
Income tax expense (benefit)................... 7,020 1,131 8,151 4,149 12,300
--------- ------- ----------- ------------- -----------
Net income (loss).......................... $ 10,512 $ (4,239) $ 6,273 $ 11,506 $ 17,779
--------- ------- ----------- ------------- -----------
--------- ------- ----------- ------------- -----------
Net income (loss) applicable to common stock... $ 9,909 $ (4,451) $ 5,458 $ 10,321 $ 15,779
Net income (loss) per common share............. $ 1.24 $ 1.35
Weighted average shares........................ 7,979,000 11,702,000
EBITDA(1)...................................... $ 30,848 $ 14,544 $ 45,392 $ 6,663 $ 52,055
</TABLE>
- ------------------------
(1) EBITDA is defined as earnings from continuing operations before interest
expense, net, income tax expense (benefit), depreciation and amortization,
minority interest and equity in loss of partnership. The Company has
included information concerning EBITDA because it is used by certain
investors as a measure of the Company(1)s ability to service and/or incur
debt. EBITDA is not required by GAAP and should not be considered in
isolation or as an alternative to net income, net cash provided by
operating, investing and financing activities or other financial data
prepared in accordance with GAAP or as an indicator of the Company(1)s
operating performance. This information should be read in conjunction with
the Statements of the Cash Flows contained in the financial statements
included elsewhere herein.
4. LONG-TERM INDEBTEDNESS.
(a) In August 1995, the Company issued $90,000,000 principal amount of
senior notes (the "1995 Notes"). The 1995 Notes are senior unsecured obligations
of the Company, which mature on August 15, 2003. The 1995 Notes bear interest at
12% per annum payable semiannually on August 15 and February 15 of each year.
The 1995 Notes are redeemable, at the Company's option, in whole or part, at any
time on or after August 15, 1999, at varying redemption prices. Additionally, at
any time prior to August 15, 1998, the Company may redeem in the aggregate up to
33 1/3% of the original aggregate principal amount of the 1995 Notes with the
proceeds of one or more public equity offerings at a redemption price of 110% of
the principal amount. The 1995 Notes are guaranteed on a senior, unsecured,
joint and several basis by all of the Company's principal operating
subsidiaries.
The proceeds of the 1995 Notes were used in the acquisition by the Company
of the Funtime Parks in August 1995 and in the refinancing at that time of
previously existing indebtedness.
The indenture under which the 1995 Notes were issued was amended on January
21, 1997, in contemplation of the Company's January 1997 senior debt and equity
offerings. The indenture places
8
<PAGE>
THE COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
limitations on operations and sales of assets by the Company or its
subsidiaries, permits incurrence of additional debt only in compliance with
certain financial ratios, and limits the Company's ability to pay cash dividends
or make other distributions to the holders of its capital stock or to redeem
such stock.
The indenture, as amended, permits the Company, subject to certain
limitations, to incur additional indebtedness, including $125,000,000 of
indebtedness issued January 31, 1997 described in note (c) below and secured
senior revolving credit facility indebtedness of up to $75,000,000.
(b) In connection with the acquisitions described in Note 3, in October 1996
the Company entered into a senior secured credit facility (the "Credit
Facility") with a syndicate of lenders. The Credit Facility had an aggregate
availability of $115,000,000. Interest rates per annum under the Credit Facility
were equal to a base rate equal to the higher of the Federal Funds Rate plus %
or the prime rate of Citibank N.A., in each case plus the Applicable Margin (as
defined thereunder) or the London Interbank Offered Rate plus the Applicable
Margin. The Credit Facility contained restrictive covenants that, among other
things, limited the ability of the Company and its subsidiaries to dispose of
assets; incur additional indebtedness or liens; pay dividends; repurchase stock;
make investments; engage in mergers or consolidations and engage in certain
transactions with subsidiaries and affiliates. In addition, the Credit Facility
required that the Company comply with certain specified financial ratios and
tests.
On January 31, 1997, the Company and the lenders agreed to amend the Credit
Facility. Under the amendments, $30,000,000 is available as a revolving credit
facility, which will remain in place through December 31, 2001 (without
reduction prior to that date). The balance of the facility was converted into an
$85,000,000 reducing revolving credit facility. This portion of the facility
will be available to fund acquisitions and make capital improvements. The amount
available under this portion of the facility will reduce to $75,000,000 on
December 31, 1999, to $45,000,000 on December 31, 2000, and will mature on
December 31, 2001. Borrowings under the amended Credit Facility are secured by
substantially all the assets of the Company and its subsidiaries (other than
real estate) and are guaranteed by the Company's operating subsidiaries. The
restrictive covenants are essentially the same as those of the original October
1996 Credit Facility. No amounts were outstanding under this Credit Facility as
of September 30, 1997.
(c) On January 31, 1997, the Company issued $125,000,000 of 9 3/4% senior
notes due January 2007 (the "1997 Notes"). The 1997 Notes are senior unsecured
obligations of the Company and equal to the 1995 Notes in priority upon
liquidation. Interest is payable on January 15 and July 15 of each year,
commencing July 15, 1997. The 1997 Notes are redeemable, at the Company's
option, in whole or in part, at any time on or after January 15, 2002, at
varying redemption prices. Additionally, at any time prior to January 15, 2000,
the Company may redeem in the aggregate up to 33 1/3% of the original aggregate
principal amount of 1997 Notes with the proceeds of one or more public equity
offerings at a redemption price of 110% of the principal amount. The 1997 Notes
are guaranteed on a senior, unsecured, joint and several basis by all of the
Company's principal operating subsidiaries.
The indenture under which the 1997 Notes were issued contains covenants
substantially similar to those of the 1995 Notes. A portion of the proceeds were
used to fully pay amounts outstanding under the Company's Credit Facility.
9
<PAGE>
PART 1 FINANCIAL INFORMATION (CONTINUED)
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Operating revenues:
Operating revenues were $186.7 million in the nine months ended September
30, 1997 compared to $89.8 million actual operating revenues and $154.3 million
actual combined operating revenues (including the revenues of the Acquired
Parks), in the first nine months of 1996. The aggregate $32.4 million (21.0%)
increase in operating revenues over actual combined results for the 1996 period
includes an $18.0 million (24.7%) increase in admissions revenue and a $14.4
million (17.7%) increase in food, merchandise and other revenues. This revenue
increase is primarily attributable to a 17.4% increase (1.2 million) in combined
attendance at the Company's eleven parks in the 1997 period, and a 3.1% increase
in per capita spending over the prior year period, as well as an increase in
sponsorship revenue.
Operating expenses:
Operating expenses increased during the first nine months of 1997 to $69.4
million from $32.9 million actual operating expenses and $56.1 million actual
combined operating expenses (including the expenses of the Acquired Parks) in
the first nine months of 1996. This $13.3 million (23.8%) increase from actual
combined operating expenses for the 1996 period consists of a $5.1 million
increase (15.5%) at the six parks owned by the Company during its 1996 season
and an $8.2 million increase (35.4%) at the Acquired Parks. These increases
primarily reflect increased staffing levels to accommodate the increased
attendance levels, increased wage rates, increased repairs and maintenance,
increased utility expenses for new attractions and other miscellaneous
increases.
Selling, general and administrative:
Selling, general and administrative expenses were $29.7 million for the nine
months ended September 30, 1997, an increase from $15.4 million actual for the
nine months ended September 30, 1996, but a decrease from $32.4 million actual
combined (including the Acquired Parks) for the nine months ended September 30,
1996. Selling, general and administrative expenses at the six parks owned by the
Company for the 1996 period (including corporate) increased by $1.6 million in
the 1997 period, primarily reflecting increased personnel and advertising costs,
offset by a decrease in insurance expense. Selling, general and administrative
expenses at the Acquired Parks decreased by $4.3 million, notwithstanding
increases in marketing expenses, as a result of significant savings in
personnel, insurance, professional services and other areas.
Costs of products sold:
Costs of products sold increased from $10.7 million actual and $20.1 million
actual combined (including the Acquired Parks) for the first nine months of 1996
to $22.1 million for the first nine months of 1997. These increases primarily
relate to increased sales of merchandise, food and related items.
Depreciation and Interest expense:
Depreciation and amortization expense increased from $5.6 million actual in
1996 to $14.0 million actual in 1997, primarily as a result of the recognition
of depreciation and amortization expense from the Acquired Parks and the ongoing
capital program at the Company's theme parks. Interest expense, net
10
<PAGE>
PART 1 FINANCIAL INFORMATION (CONTINUED)
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
increased from $7.7 million to $12.9 million as a result of interest on the 1997
Notes and amortization of costs incurred in connection with the 1997 Notes and
the Credit Facility.
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Operating revenues:
Operating revenues were $120.0 million in the three month period ended
September 30, 1997 compared to $60.4 million actual in the three month period
ended September 30, 1996. Of this $59.6 million increase, $53.5 million is
attributable to revenues generated by the Acquired Parks whose results are not
included for 1996, and $6.1 million is attributable to an increase at the
Company's original six parks, due principally to an increase in attendance over
the same prior-year period.
Operating expenses:
Operating expenses increased during the three months ended September 30,
1997 from $15.5 million in 1996 to $36.8 million. Of this $21.3 million
increase, $17.9 million relates directly to expenses incurred by the Acquired
Parks whose results are not included for 1996 and $3.4 million is related to the
Company's original six parks, principally arising from increased salary and wage
expense, increased repair and maintenance and costs associated with new
attractions.
Selling, general and administrative:
Selling, general and administrative expenses increased from $6.2 million in
the three months ended September 30, 1996 to $11.9 million during the three
months ended September 30, 1997. Of this increase, $4.7 million relates to costs
incurred by the Acquired Parks which were not included in 1996 and $1.0 million
relates to costs incurred at the Company's original six parks.
Costs of products sold:
Costs of products sold increased from $7.4 million for the three months
ended September 30, 1996 to $15.5 million for the three months ended September
30, 1997. Of this $8.1 million increase, $7.5 million relates to costs incurred
at the Acquired Parks, and $0.6 million is attributable to the operations of the
Company's original six parks, all as a result of increased volume.
Depreciation and interest expense:
Depreciation and amortization expense increased $3.5 million primarily as a
result of the recognition of depreciation and amortization expense from the
Acquired Parks and to a lesser extent as a result of the ongoing capital program
at the Company's theme parks. Interest expense, net increased $2.5 million as a
result of interest on the 1997 Notes and amortization of costs incurred in
connection with the 1997 Notes and the Credit Facility.
LIQUIDITY, CAPITAL COMMITMENTS AND RESOURCES
At September 30, 1997, the Company's indebtedness (including capitalized
leases) aggregated $217.3 million, of which approximately $1.0 million matures
prior to September 30, 1998. The Company anticipates repaying current
indebtedness from funds generated from operations.
11
<PAGE>
PART 1 FINANCIAL INFORMATION (CONTINUED)
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
During the nine months ended September 30, 1997, the Company generated net
cash of $43.9 million from operating activities. Net cash used in investing
activities in the first nine months of 1997 increased to $129.5 million, which
consisted of capital expenditures at the Company's parks (including Marine
World, a California marine and wildlife park managed by the Company) and the
February 1997 acquisition of Riverside Park in Massachusetts. The Company
generated $250.7 million of net cash from financing activities in the nine
months ended September 30, 1997, mainly from the proceeds from the issuance of
the 1997 Notes and from the sale of 6,900,000 shares of Company Common Stock,
both of which occurred in January 1997. A total of $65.2 million of these
proceeds was used to pay down in full amounts which had been drawn under the
October 1996 Credit Facility.
On June 2, 1997, a slide collapse occurred at the Company's Concord,
California water park, resulting in the park's closure for a period of twelve
days. The park re-opened with the approval of the City of Concord on June 14,
1997. Although the collapse and the resulting closure had an adverse impact on
that park's operating performance for 1997, the performance of the Company's
other parks have more than compensated for this park's lesser contribution. The
Company also expects to recover under its business interruption insurance for
all or a substantial part of this shortfall. In addition, the Company believes
that its liability insurance coverage should be more than adequate to provide
for any personal injury liability which may ultimately be found to exist in
connection with the collapse.
In September 1997, the Company agreed to purchase all of the ownership
interests in an entity which owned at closing substantially all of the assets
used in the operation of Kentucky Kingdom--The Thrill Park in Louisville,
Kentucky for a purchase price of $64 million, payable in cash and stock. The
acquisition was consummated on November 7, 1997. The Company funded the cash
portion of the purchase price (approximately $59 million) from existing cash and
issued 121,679 shares of its common stock in connection therewith.
The Company expects that its currently available cash and funds available
from borrowing facilities will be adequate to meet currently anticipated working
capital and debt service requirements, to fund any additional acquisitions which
it may make, and to fund planned capital expenditures for the 1998 season at its
existing parks as well as at additional parks it may acquire.
12
<PAGE>
PART II--OTHER INFORMATION
ITEMS 1-5
Not applicable
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
10.1 Stock Purchase Agreement, dated September 26, 1997, among the Company,
Kentucky Kingdom, Inc., Hart-Lundsford Enterprises, LLC and Edward J. Hart
(schedules and exhibits intentionally omitted).
10.2 Employment Agreement, dated November 7, 1997, between the Company and
Edward J. Hart.
27. Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
13
<PAGE>
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.
PREMIER PARKS INC.
-----------------------------------------
(Registrant)
/s/ KIERAN E. BURKE
-----------------------------------------
Kieran E. Burke
Chairman/CEO
/s/ JAMES F. DANNHAUSER
November 12, 1997 -----------------------------------------
- ------------------------------ James F. Dannhauser
Date Chief Financial Officer
14
<PAGE>
Exhibit 10.1
STOCK PURCHASE AGREEMENT
AMONG
PREMIER PARKS INC.,
KENTUCKY KINGDOM, INC.,
HART-LUNSFORD ENTERPRISES, LLC,
AND
EDWARD J. HART
SEPTEMBER 26, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
REORGANIZATION............................................................. 1
SECTION 1.1 Reorganization....................................... 1
ARTICLE IA
SALE AND PURCHASE; CLOSING
SECTION 1A.1 Purchase and Sale of the Interests................... 3
SECTION 1A.2 Purchase Price....................................... 3
SECTION 1A.3 Earnout.............................................. 5
SECTION 1A.4 Closing.............................................. 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF KKI AND HART............................. 7
SECTION 2.1 Authority Relative to this Agreement................. 7
SECTION 2.2 No Conflicts; Consents............................... 8
SECTION 2.3 Corporate Existence and Power........................ 8
SECTION 2.4 Charter Documents and Corporate Records.............. 8
SECTION 2.5 Financial Information................................ 8
SECTION 2.6 Liabilities.......................................... 9
SECTION 2.7 Inventory............................................ 9
SECTION 2.8 Absence of Certain Changes........................... 9
SECTION 2.9 The Assets........................................... 10
SECTION 2.10 Contracts............................................ 11
SECTION 2.11 Intangible Property.................................. 12
SECTION 2.12 Claims and Proceedings............................... 12
SECTION 2.13 Tax Matters.......................................... 13
SECTION 2.14 Employee Benefits Plans.............................. 14
SECTION 2.15 Employee-Related Matters............................. 15
SECTION 2.16 Insurance............................................ 16
SECTION 2.17 Compliance with Laws................................. 16
SECTION 2.18 Permits.............................................. 17
SECTION 2.19 Environmental Matters................................ 17
SECTION 2.20 Finders; Fees........................................ 17
SECTION 2.21 Ability to Conduct Business.......................... 18
SECTION 2.22 Leases............................................... 18
SECTION 2.23 Transaction Shares................................... 18
SECTION 2.24 The LLC.............................................. 19
SECTION IIA
REPRESENTATIONS AND WARRANTIES OF HL....................................... 19
SECTION 2A.1 Authority Relative to this Agreement................. 19
SECTION 2A.2 No Conflicts; Consents............................... 20
SECTION 2A.3 Corporate Existence and Power........................ 20
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SECTION 2A.4 Taxes................................................ 20
SECTION 2A.5 HL Shares............................................ 20
SECTION 2A.6 HL LLC............................................... 21
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER.................................... 21
SECTION 3.1 Authority Relative to this Agreement................. 21
SECTION 3.2 No Conflicts; Consents............................... 22
SECTION 3.3 Corporate Existence and Power........................ 22
SECTION 3.4 Finders; Fees........................................ 22
SECTION 3.5 Buyer Reports........................................ 22
SECTION 3.6 Transaction Shares................................... 22
ARTICLE IV
COVENANTS AND AGREEMENTS................................................... 23
SECTION 4.1 Conduct of Business of KKI........................... 23
SECTION 4.2 Corporate Examinations and Investigations............ 23
SECTION 4.3 Additional Financial Statements...................... 24
SECTION 4.4 Filings and Authorizations........................... 24
SECTION 4.5 Efforts to Consummate................................ 24
SECTION 4.6 Negotiations With Others............................. 25
SECTION 4.7 Notices of Certain Events............................ 25
SECTION 4.8 Public Announcements................................. 25
SECTION 4.9 Covenant Not-to-Compete.............................. 26
SECTION 4.10 Expenses. ........................................... 27
SECTION 4.11 Tax Matters. ........................................ 27
SECTION 4.12 Employee Matters..................................... 28
SECTION 4.13 Certain Renewals..................................... 29
SECTION 4.14 Collection of Accounts Receivable.................... 29
SECTION 4.15 Transfer Taxes; Allocations.......................... 29
SECTION 4.16 Discharge of Potential Liabilities................... 29
SECTION 4.17 Access............................................... 30
SECTION 4.18 Election............................................. 30
SECTION 4.19 HL Lease............................................. 30
SECTION 4.20 Purchased Shares..................................... 30
SECTION 4.21 Operating Expense.................................... 31
SECTION 4.22 Buyer Filings........................................ 31
SECTION 4.23 Buyer Loan........................................... 31
SECTION 4.24 Operation of Park.................................... 31
SECTION 4.25 Special Meeting...................................... 32
ARTICLE V
CONDITIONS TO CLOSING...................................................... 32
SECTION 5.1 Conditions to the Obligations of the Parties......... 32
SECTION 5.2 Conditions to the Obligations of KKI................. 33
SECTION 5.3 Conditions to the Obligations of Buyer............... 34
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ARTICLE VI
INDEMNIFICATION............................................................ 37
SECTION 6.1 Survival of Representations and Warranties........... 37
SECTION 6.2 Obligation of KKI and Hart to Indemnify.............. 38
SECTION 6.3 Obligation of Buyer to Indemnify..................... 38
SECTION 6.4 Notice and Opportunity to Defend Third Party Claims.. 38
SECTION 6.5 Limits on Indemnification............................ 39
SECTION 6.6 Adjustment........................................... 40
SECTION 6.7 Exclusive Remedy..................................... 40
ARTICLE VII
SPECIFIC PERFORMANCE; TERMINATION.......................................... 40
SECTION 7.1 Specific Performance................................. 40
SECTION 7.2 Termination.......................................... 40
SECTION 7.3 Effect of Termination; Right to Proceed.............. 42
ARTICLE VIII
MISCELLANEOUS.............................................................. 42
SECTION 8.1 Notices.............................................. 42
SECTION 8.2 Entire Agreement..................................... 43
SECTION 8.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies............................. 43
SECTION 8.4 Governing Law........................................ 43
SECTION 8.5 Binding Effect; No Assignment........................ 44
SECTION 8.6 Exhibits............................................. 44
SECTION 8.7 Severability......................................... 44
SECTION 8.8 Counterparts......................................... 44
SECTION 8.9 Third Parties........................................ 44
SECTION 8.10 Further Assurances................................... 44
SECTION 8.11 Title and Risk of Loss............................... 45
ARTICLE IX
DEFINITIONS................................................................ 45
SECTION 9.1 Definitions.......................................... 45
SECTION 9.2 Interpretation....................................... 55
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<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of September 26, 1997, by and among
PREMIER PARKS INC., a Delaware corporation ("Buyer"), KENTUCKY KINGDOM, INC., a
Kentucky corporation ("KKI"), HART-LUNSFORD ENTERPRISES, LLC, a Kentucky limited
liability company ("HL") (for the limited purposes set forth herein) and EDWARD
J. HART ("Hart").
WHEREAS, KKI owns and operates Kentucky Kingdom (the "Park"), such
ownership and operation being referred to herein as the "Business";
WHEREAS, HL is the lessor under the HL Leases;
WHEREAS, prior to the Closing, KKI and HL desire to effect the
Reorganization; and
WHEREAS, KKI desires to sell, convey and assign, and Buyer desires to
purchase, all of the Interests subject to the terms and conditions hereinafter
set forth.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
REORGANIZATION
SECTION 1.1 Reorganization. (a) Prior to the Closing, KKI will transfer to
a newly-formed Delaware limited liability company (the "LLC"), all of KKI's
right, title and interest in and to the Assets, free and clear of all Liens
other than Permitted Liens and, in consideration thereof, the LLC will assume
all of the Liabilities of KKI in respect of the Assumed Liabilities, the Assumed
Capital Leases and the Retired Debt (the "Transferred Liabilities") and will
issue to KKI all of the membership interests in the LLC (the "Interests"), free
and clear of all Liens. KKI will properly elect on Form 8832 for the LLC to be
treated as a corporation.
(b) Prior to the Closing, HL will transfer to a newly-formed
Delaware limited liability company ("HL LLC") all of HL's right, title and
interest in and to the HL Leases and the assets leased under the HL Leases (the
"HL Assets") and, in consideration thereof, HL LLC will assume the Liabilities
of HL specified in Schedule 1.1(b) (the "HL Liabilities") and HL LLC will issue
to HL all of the membership interests in HL LLC (the "HL Interests"), free and
clear of all Liens. HL will properly elect on Form 8832 for HL LLC to be treated
as a corporation.
(c) Prior to the Closing, KKI will acquire all of the HL Interests
in consideration of the issuance to HL of a promissory note of KKI in favor of
HL in the principal amount of $2,000,000 (the "KKI Note").
<PAGE>
(d) Prior to the Closing, KKI will cause HL LLC to be merged into the
LLC (the "Merger"), pursuant to which the HL Interests will be cancelled, the
LLC will be the surviving entity of the Merger and the Interests will constitute
the membership interests of the LLC as the surviving entity.
(e) The transactions referred to in this Section 1.1 are hereinafter
referred to as the "Reorganization," and all instruments and documents (other
than those annexed as Exhibits to this Agreement) executed in connection
therewith shall be in form and substance acceptable to Buyer.
(f) Pursuant to the Reorganization, the LLC shall not assume or be
bound by or otherwise be responsible for any duties, responsibilities,
obligations or Liabilities of KKI, HL or any other person of any kind or nature,
known, unknown, contingent or otherwise, other than Transferred Liabilities and
the HL Liabilities expressly assumed by it pursuant to the Reorganization.
Without limiting the generality of the foregoing, except as otherwise provided
in this Agreement, the LLC shall not assume, undertake or accept any duties,
responsibilities, obligations or Liabilities (whether existing now or at the
Closing or that may arise in the future) with respect to:
(i) any Liabilities of KKI, HL or any of their Affiliates
relating to the ownership or operation of the Assets or the Business on or prior
to the Closing Date;
(ii) any Liabilities of KKI, HL or their Affiliates relating
to the ownership or operation of the Excluded Assets and the operations of KKI,
HL and their respective Affiliates other than the Business;
(iii) except with respect to Assumed Operating Expenses, any
accounts payable relating to the Business incurred on or prior to the Closing
Date;
(iv) any Environmental Liabilities;
(v) Liabilities and obligations under Contracts that are not
Transferred Contracts;
(vi) Liabilities and obligations (A) arising or to be
performed at or prior to the Closing under the Transferred Contracts, (B)
relating to any rental or other payment under the Leases which is based on or
related to the revenues or other results of operations of the Business for any
period prior to the Closing Date or any other deferred rent or other payment
thereunder which relates to any period prior to the Closing Date, including,
without limitation, any and all amounts payable as Rent (as defined therein) in
excess of $882,354 under the State Fair Lease with respect to the Lease Years
(as defined therein) 1997, 1998 and 1999 ("Percentage Rent"), whether payable
prior to, on or after the Closing Date, or (C) arising out of a breach or
default by KKI (or the LLC as successor thereto) at or prior to the Closing
(including any event occurring prior to the Closing that
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<PAGE>
with the passage of time or giving of notice, or both, would become a breach or
default) under any Transferred Contract;
(vii) Liabilities and obligations (in excess of the amount of
the accrual therefor reflected on Exhibit 1A.2A) with respect to any Claims,
whether existing on the date hereof or arising hereafter, arising out of
ownership of the Assets or the operation of the Business on or prior to the
Closing;
(viii) except as otherwise provided in this Agreement,
Liabilities and obligations to persons employed by KKI at any time prior to the
Closing (or any of such employee's beneficiaries, heirs or assignees) arising
out of such employee's employment by KKI, including the 1997 Bonuses;
(ix) Excluded Tax Liabilities;
(x) any Liabilities in respect of any Debt (other than the
Assumed Capital Leases, the Retired Debt and the HL Liabilities); and
(xi) any Liabilities of KK.
All such duties, responsibilities, obligations or Liabilities described in this
Section 1.1(f) being referred to herein as "Retained Liabilities."
ARTICLE 1A
SALE AND PURCHASE; CLOSING
SECTION 1A.1 Purchase and Sale of the Interests. Subject to the terms and
conditions set forth herein, at the Closing, KKI shall sell, transfer and
deliver to Buyer, and Buyer shall purchase and accept from KKI, the Interests
owned by KKI, free and clear of all Liens.
SECTION 1A.2 Purchase Price.
(a) The purchase price for the Interests shall be the sum of (i)
Sixty-Four Million Dollars ($64,000,000) (the "Closing Payment") plus (ii) the
amount, if any, of the Earnout Payments (collectively, the "Purchase Price").
(b) The Closing Payment is payable as follows:
(i) at the Closing, Buyer shall assume the principal amount
of, accrued interest on and all other amounts payable under the Debt represented
by the Assumed Capital Leases;
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<PAGE>
(ii) at the Closing, Buyer shall repay in full the amount (the
"Debt Payment") of outstanding principal, accrued interest thereon, and all
other amounts necessary to secure at the Closing full satisfaction and discharge
of all Debt, other than Debt assumed by Buyer in respect of the Assumed Capital
Leases (the "Retired Debt"), and all HL Liabilities;
(iii) at the Closing, Buyer shall either pay, discharge or
assume the Liabilities of KKI listed on Exhibit 1A.2A hereof at the amounts
specified therein (the "Liability Payment");
(iv) at the Closing, Buyer shall deliver $2,000,000 (payable
in Buyer Stock (the "HL Shares") and valued at the Average Closing Price) to HL
in satisfaction in full of the KKI Note; and
(v) at the Closing, Buyer will deliver to KKI an amount (the
"Net Proceeds") (by delivery of Buyer Stock and, if applicable, immediately
available funds as provided in Section 1A.2(c)) equal to the Closing Payment
minus the sum of (A) the amounts paid and assumed by Buyer pursuant to clauses
(i), (ii), (iii) and (iv) above, and (B) the amount of the Prepaid Deposits.
(c) No later than ten days prior to the Closing Date referred to in
Section 1A.4 below, KKI will execute and deliver to Buyer a certificate setting
forth (i) the percentage share (the "Percentage Share") in the Net Proceeds of
each shareholder of KKI and (ii) the name of each shareholder of KKI who is not
an "accredited investor" (a "Nonaccredited Shareholder") as such term is defined
in Regulation D under the Securities Act of 1933, as amended (the "Securities
Act"). Except as otherwise provided below, at the Closing, Buyer will deliver to
KKI shares of Buyer Stock in payment of the Net Proceeds (the "Proceeds
Shares"), registered in the name of each of the shareholders of KKI. The
Proceeds Shares will be valued at the Average Closing Price, and the number of
Proceeds Shares issuable to each such shareholder shall be that number of shares
of Buyer Stock (rounded to the nearest number of whole shares) determined by
multiplying the Net Proceeds by such shareholder's Percentage Share and dividing
such product by the Average Closing Price. The parties acknowledge and agree
that the Proceeds Shares and the HL Shares (collectively, the "Transaction
Shares") are being issued pursuant to the exemption from the registration
requirements of the Securities Act provided in Section 4(2) thereof and
constitute restricted securities within the meaning of the Securities Act. The
persons receiving Transaction Shares hereunder (the "Transaction Shareholders")
may not transfer the Transaction Shares absent compliance with the provisions of
the Securities Act and applicable state securities laws and all stock
certificates evidencing the Transaction Shares will bear a legend to such
effect. Notwithstanding the foregoing, if (i) the number of Nonaccredited
Shareholders shall exceed 35 or (ii) Buyer's counsel shall otherwise determine
that the issuance of Proceeds Shares to all shareholders of KKI as contemplated
herein shall not be exempt from registration under the Securities Act, at the
Closing Buyer will deliver to KKI immediately available funds, in lieu of
Proceeds Shares, in respect of the Percentage Share of the Net Proceeds of that
number of Nonaccredited Shareholders as
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<PAGE>
shall be necessary in order to permit Buyer's counsel to deliver at Closing the
opinion provided for in Exhibit 5.2B with respect to compliance with the
Securities Act of the Contemplated Transactions. In that event, the
Nonaccredited Shareholders who will receive cash in lieu of Proceeds Shares
shall be selected on the basis that the Nonaccredited Shareholders with the
smallest Percentage Share will be selected first. At the Closing, Buyer and each
Transaction Shareholder shall enter into a registration rights agreement with
respect to the Transaction Shares substantially in the form of Exhibit 1A.2D
(the "Registration Rights Agreement"). The Registration Rights Agreement will
provide that Buyer will file a Registration Statement on Form S-3 relating to
the Transaction Shares no later than the tenth business day following the
Closing Date, will pay all costs in respect thereto (other than fees and
expenses of counsel to any Transaction Shareholder or any discounts, fees or
commissions upon resale of the Transaction Shares) and will use its reasonable
best efforts to have the Registration Statement declared effective as soon as
practicable following the filing thereof.
SECTION 1A.3 Earnout. (a) In addition to the Closing Payment, Buyer agrees
to pay to KKI in respect of the Interests sold by it hereunder, the following
amounts (the "Earnout Payments"):
(i) Subject to the provisions of Section 1A.3(d), with respect
to the year ending December 31, 1998:
(A) If Gross Revenues of the Park for the year ending
December 31, 1998 equal or exceed $24,000,000, $4,500,000 payable solely in
shares of Buyer Stock (valued at the Average Closing Price) payable on April 15,
1999.
(B) If Gross Revenues of the Park for the year ending
December 31, 1998 are less than $24,000,000 but exceed $15,000,000, an amount
(payable solely in shares of Buyer Stock (valued at the Average Closing Price))
equal to the product obtained by multiplying $4,500,000 by a fraction, the
numerator of which shall be the amount by which such Gross Revenues for such
year exceeded $15,000,000 and the denominator of which shall be $9,000,000,
payable on April 15, 1999. The shares of Buyer Stock issuable pursuant to this
Section 1A.3(a)(i) are hereinafter referred to as the "Initial Earnout Shares."
(ii) With respect to the year ending December 31, 1998:
(A) If Gross Revenues of the Park for the year ending
December 31, 1998 equal or exceed $30,000,000, $3,000,000 payable solely in
shares of Buyer Stock (valued at the Average Closing Price) payable on April 15,
1999.
(B) If Gross Revenues of the Park for the year ending
December 31, 1998 are less than $30,000,000 but exceed $25,000,000, an amount
(payable solely in shares of Buyer Stock (valued at the Average Closing Price))
equal to the product obtained by multiplying $3,000,000 by a fraction, the
numerator of which shall be the amount by
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<PAGE>
which such Gross Revenues for such year exceeded $25,000,000 and the denominator
of which shall be $5,000,000, payable on April 15, 1999.
(iii) With respect to the year ending December 31, 1999:
(A) If Gross Revenues of the Park for the year ending
December 31, 1999 equal or exceed $35,000,000, $3,000,000 payable solely in
shares of Buyer Stock (valued at the Average Closing Price) payable on April 15,
2000.
(B) If Gross Revenues of the Park for the year ending
December 31, 1999 are less than $35,000,000 but exceed $30,000,000, an amount
(payable solely in shares of Buyer Stock (valued at the Average Closing Price))
equal to the product obtained by multiplying $3,000,000 by a fraction, the
numerator of which shall be the amount by which such Gross Revenues for such
year exceeded $30,000,000 and the denominator of which shall be $5,000,000,
payable on April 15, 2000.
(iv) If Gross Revenues of the Park for the year ending
December 31, 2000 equal or exceed $40,000,000, $2,000,000 payable solely in
shares of Buyer Stock (valued at the Average Closing Price) payable on April 15,
2001.
(b) No fractional shares of Buyer Stock shall be issued under the
Earnout Payments and the number of shares issued to KKI will be rounded to the
nearest whole number of shares of Buyer Stock.
(c) KKI acknowledges and agrees that any shares of Buyer Stock
issuable in satisfaction of the Earnout Payments (the "Earnout Shares") will be
issued pursuant to an exemption from the registration requirements of the
Securities Act provided in Section 4(2) thereof and constitute restricted
securities within the meaning of the Securities Act. KKI may not transfer such
shares of Common Stock absent compliance with the provisions of the Securities
Act and applicable state securities laws and all stock certificates evidencing
said shares will bear a legend to such effect. Promptly following the delivery
of any Earnout Shares hereunder, Buyer will file a Registration Statement
relating to such shares, will pay all costs in respect thereto (other than fees
and expenses of counsel to KKI or any discounts, fees or commissions upon resale
of such shares) and will use its reasonable best efforts to have the
Registration Statement declared effective as soon as practicable following the
filing thereof.
(d) On or prior to the Closing Date, Buyer, KKI and an escrow agent
selected by Buyer and KKI ("Escrow Agent") will execute and deliver an escrow
agreement ("Escrow Agreement") substantially in the form of Exhibit 1A.3D hereto
pursuant to which Buyer will deliver to Escrow Agent out of the Earnout Payment
provided in Section 1A.3(a)(i) the number of Initial Earnout Shares with an
aggregate value of One Million Five Hundred Thousand Dollars ($1,500,000)
(valued at the Average Closing Price for the Initial Earnout Shares), rounded to
the nearest number of whole shares of Buyer Stock (the "Escrow Shares"), which
will provide a non-exclusive source for the payment of any Losses
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for which Buyer may be entitled to indemnification as and to the extent provided
in Article VI.
SECTION 1A.4 Closing. Subject to the terms and conditions of this
Agreement, the sale and purchase of the Interests contemplated hereby (the
"Closing") shall take place at 10:00 a.m., local time, at the offices of Ogden,
Newell & Welch, 1700 Citizens Plaza, 500 West Jefferson Street, Louisville,
Kentucky 40202-2874, no later than the fifth business day following the
satisfaction or waiver of the conditions specified in Article V (other than
conditions requiring the delivery of the Closing Payment, the Interests, the HL
Shares, the Employment Agreement or certificates, instruments and documents
referenced in Sections 5.2(g) and 5.3(n), excluding the Lease Documents and the
Bills of Sale relating to the Reorganization) (the "Closing Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF KKI AND HART
KKI and Hart represent and warrant to Buyer that:
SECTION 2.1 Authority Relative to this Agreement. KKI and Hart have full
power, capacity and authority to execute and deliver this Agreement and each
other Transaction Document to which each is or, at the Closing, will be a party
and to consummate the transactions contemplated hereby and thereby, including,
without limitation, the Reorganization and the sale of the Interests to Buyer
(collectively, the "Contemplated Transactions"). The execution and delivery of
this Agreement and the consummation of the Contemplated Transactions to which
KKI or Hart is or, at the Closing, will be a party have been duly and validly
authorized by KKI and Hart, and, except as contemplated by Section 4.25, no
other proceedings on the part of KKI or Hart (or any other person) are necessary
to authorize the execution and delivery by KKI or Hart of this Agreement or the
consummation of the Contemplated Transactions to which KKI or Hart is or, at the
Closing, will be a party. This Agreement has been and, at the Closing, the other
Transaction Documents to which KKI or Hart is a party will have been, duly and
validly executed and delivered by KKI and Hart, and (assuming the valid
execution and delivery thereof by the other parties thereto) constitute or will
at the Closing constitute, as the case may be, the legal, valid and binding
agreements of KKI and Hart enforceable against KKI or Hart in accordance with
their respective terms except as such obligations and their enforceability may
be limited by applicable bankruptcy and other similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
equitable remedies is subject to the discretion of the court before which any
proceeding therefor may be brought (whether at law or in equity).
SECTION 2.2 No Conflicts; Consents. The execution, delivery and
performance by KKI and Hart of this Agreement and each other Transaction
Document to which each
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is or will be a party or the consummation of the Contemplated Transactions does
not and will not (i) violate any provision of the Certificate of Incorporation
or By-laws (or comparable instruments) of KKI; (ii) require KKI, Hart, the LLC
or any other Affiliate of KKI to obtain any consent, approval or action of or
waiver from, or make any filing with, or give any notice to, any Governmental
Body or any other person, except for compliance with the HSR Act and except as
set forth on Schedule 2.2 ("KKI Required Consents"); (iii) if KKI Required
Consents are obtained prior to Closing, violate, conflict with or result in a
breach or default under (after the giving of notice or the passage of time or
both), or permit the termination of, any Contract of a type required to be
listed on Schedule 2.10 to which KKI or Hart is a party or by which it or any of
their respective assets may be bound or subject, or result in the creation of
any Lien upon the Assets pursuant to the terms of any such Contract; (iv) if KKI
Required Consents are obtained prior to Closing, violate any Law or Order of any
Governmental Body against, or binding upon, KKI, Hart or upon the Assets or the
Business; or (v) if KKI Required Consents are obtained prior to Closing, violate
or result in the revocation or suspension of any Permit.
SECTION 2.3 Corporate Existence and Power. KKI is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all requisite powers and all material
Permits required to carry on the Business as now conducted. Except for KK
Construction, Inc., a wholly-owned subsidiary of KKI ("KK"), and except as
contemplated by the Reorganization, KKI does not have any Subsidiary or own any
equity interest or equity investment in any other person. Except as provided in
Schedule 2.3, KK does not own any assets, have any Liabilities or conduct any
business.
SECTION 2.4 Charter Documents and Corporate Records. (a) KKI has
heretofore delivered to Buyer true and complete copies of the Certificate of
Incorporation and By-laws of KKI and KK as in effect on the date hereof. On or
prior to the Closing, KKI shall amend its Certificate of Incorporation to change
its name to a name that does not utilize any of the Intellectual Property
Rights.
(b) All financial, business and accounting books, ledgers, accounts
and official and other records relating to KKI and the Business have been
properly and accurately kept and completed in all material respects, and there
are no material inaccuracies or discrepancies contained or reflected therein.
SECTION 2.5 Financial Information. (a) KKI has previously furnished to
Buyer true and complete copies of (i) KKI's audited financial statements (the
"Audited Statements") at and for the years ended October 2, 1994 and October 29,
1995 and KKI's unaudited financial statements at and for the year ended October
27, 1996 (collectively with the Audited Statements, the "Annual Statements"),
(ii) KKI's unaudited financial statements at and for each calendar month of 1997
and 1996 through July 27, 1997 (the "Interim Statements"), and (iii) all
management letters, audit letters, attorney audit response letters issued in
connection with the Audited Statements and all other correspondence between KKI
or its Representatives and Carpenter & Mountjoy, PSC since October 1, 1994. The
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Audited Statements were audited by Carpenter & Mountjoy, PSC, without
qualification in the report thereof. Each delivered financial statement has been
prepared in accordance with GAAP consistently applied as set forth in the notes
thereto and presents fairly the financial position of KKI as of its date, and
its earnings, changes in stockholders' equity and cash flow for the periods then
ended. Each delivered balance sheet fully sets forth all assets and Liabilities
of KKI existing as of its date which, under GAAP, should be set forth therein,
and each delivered statement of earnings sets forth the items of income and
expense of KKI which should appear therein under GAAP.
(b) Schedule 2.5 accurately sets forth the attendance (by month) at
the Park during 1995, 1996 and each calendar month of 1997 ending prior to the
date hereof.
SECTION 2.6 Liabilities. Except as and to the extent reflected in the
balance sheet of KKI (the "Latest Balance Sheet") at October 27, 1996 (the
"Latest Balance Sheet Date") referred to in Section 2.5, KKI did not have, as of
the Latest Balance Sheet Date, any Liabilities or obligations (other than
obligations of continued performance under Contracts and other commitments and
arrangements entered into in the ordinary course of business); and except as
described in Schedule 2.6 hereto or in note L to the Latest Balance Sheet, KKI
has not incurred any such Liabilities since the Latest Balance Sheet Date except
(i) current Liabilities for trade or business obligations incurred in connection
with the purchase of goods or services in the ordinary course of the Business
and consistent with past practice and (ii) Liabilities reflected on any balance
sheet included in the Interim Statements delivered to Buyer prior to the date
hereof. The balance sheet of KKI as of July 27, 1997 included in the Interim
Statements gives effect to all transactions described in note L to the Latest
Balance Sheet.
SECTION 2.7 Inventory. Schedule 2.7 sets forth a true and complete list of
Inventory by category as of September 30, 1997 (including an aging schedule
showing all items over 60 days old). All Inventory consists of items which are
good and merchantable and of a quantity and quality usable or saleable in the
ordinary course of the Business consistent with past practices.
SECTION 2.8 Absence of Certain Changes. (a) Since the Latest Balance Sheet
Date, except as disclosed in Schedule 2.8 or as contemplated by this Agreement
in respect of the Reorganization, KKI has conducted the Business in the ordinary
course consistent with past practices and there has not been:
(i) Any material adverse change in the Assets or any material
adverse change in the condition (financial or otherwise), results of operations
or prospects of KKI or the Business (collectively, the "Condition of the
Business") or any event, occurrence or circumstance that could reasonably be
expected to cause such a material adverse change;
(ii) Any transaction or Contract with respect to the purchase,
acquisition, lease, disposition or transfer of all or any part of any Assets or
to any capital expenditure relating to the Business (in each case, other than as
disclosed in any Interim
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Statement delivered to Buyer prior to the date of this Agreement or transactions
or Contracts entered into in the ordinary course of the Business in accordance
with past practice);
(iii) Any damage, destruction or other casualty loss (whether
or not covered by insurance), condemnation or other taking affecting the Assets,
the Business or KKI, to the extent material to the Business;
(iv) Any change in any method of accounting or accounting
practice by KKI;
(v) Except as set forth in Schedule 2.14 or 2.15, any increase
in the compensation payable or to become payable to any officer, shareholder,
director, consultant, agent or employee of KKI, or any alteration in the
benefits payable to any thereof;
(vi) Any payment, satisfaction or discharge of any material
Claim or Liability, other than the payment, discharge or satisfaction in the
ordinary course of the Business of Claims or Liabilities incurred in the
ordinary course of Business, consistent with past practice, or any waiver or
amendment by KKI of any warranty, Claim, cause of action, guaranty or similar
right of KKI pertaining to any of the Assets;
(vii) Any material adverse change in the relationships of KKI
with its customers, suppliers and vendors; or
(viii) Except for any changes made in the ordinary course of
Business, any material change in any of KKI's business policies, including
pricing, purchasing, personnel, returns or budget policies.
(b) Except as set forth in Schedule 2.8, no Liability of KKI is past
due.
SECTION 2.9 The Assets. (a) Schedule 2.9 sets forth a complete list and
description of the Real Property. KKI has good, valid and insurable title, or
valid and insurable leasehold interest, in and to the Land and good, marketable
and insurable title to the Improvements, in each case, free and clear of all
Liens of any nature whatsoever, other than (i) Liens securing or relating to the
Retired Debt, the Assumed Capital Leases or the Assumed Liabilities, (ii) Liens
for Taxes for current taxable periods that are not yet due and payable, and
(iii) in the case of the Land, easements, covenants, restrictions and other
similar encumbrances of record listed on Schedule 2.9, which do not relate to
any Retained Liabilities and do not materially interfere with the use of the
Land as presently used or impair the conduct of the Business as presently
conducted (collectively, "Permitted Liens"). Schedule 2.9 sets forth with
respect to such Real Property a list of all title insurance policies, appraisal
reports, surveys and engineering and environmental reports held or controlled by
KKI, copies of which have been provided to Buyer. All Improvements located on
the Real Property are in good operating condition (subject to normal wear and
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tear) with no structural or other defects known to KKI that could interfere in
any material respect with the operation of the Business, are located within
applicable boundary lines and are suitable for the purposes for which they are
currently used. The Business is not in violation in any material respect of any
building, zoning, anti-pollution, health, occupational safety or other Law,
Order or Permit in respect of the Real Property. Except as disclosed on Schedule
2.9, no person, other than KKI, has any right to occupy or possess any of the
Real Property. The Leases constitute the only Contracts pursuant to which KKI
leases any of the Real Property. No portion of the Real Property lies within a
wetlands area or a flood plain, and the Real Property has access to publicly
dedicated roads.
(b) KKI has good and marketable title to (or valid leasehold
interest in) all Equipment used in the Business, free and clear of all Liens
except Permitted Liens. The Equipment constituting a part of the Assets (whether
owned or leased) has been well-maintained in accordance with industry standards,
is in good condition and repair (subject to normal wear and tear) and is, in the
aggregate, adequate in quantity and quality for the operation of the Business as
presently conducted. The Assets that are amusement rides or other equipment
which are covered by the standards promulgated by the American Society of
Testing Materials have been operated and maintained in accordance with such
standards. Schedule 2.9(b) contains a list and description of all Equipment with
a book value (before depreciation) of $10,000 or more and indicates the
Equipment listed thereon that is leased. At or prior to the Closing, KKI shall
have acquired good and marketable title to all Assets (other than the Assets
leased pursuant to the HL Lease) used in the Business that, on the date hereof,
are leased to KKI from, or otherwise owned by, any shareholder or Affiliate of
KKI (including, without limitation, KK).
(c) KKI has good and marketable title to the Assets (other than the
Real Property and Equipment) free and clear of any Liens other than Permitted
Liens.
SECTION 2.10 Contracts. (a) Schedule 2.10 sets forth an accurate and
complete list of all Contracts to which KKI is a party or by which it or its
assets are bound or subject, relating to the Business, except for those
Contracts with persons who are not Affiliates of either KKI or Hart relating
solely to the purchase or sale of property (other than the Real Property) or
services by KKI in the ordinary course of the Business which (i) require KKI to
make or receive payments not in excess of $25,000 and (ii) have a remaining term
of less than twelve months on the date of this Agreement or are terminable by
KKI without penalty during such period. Schedule 2.10 also includes a brief
description of the Leases and all other Contracts relating to the Real Property,
the Retired Debt, the HL Liabilities and the Assumed Capital Leases. True and
correct copies of all written Contracts listed on such Schedule and summaries of
the material provisions of all oral Contracts so listed have been delivered to
Buyer.
(b) All Contracts listed on Schedule 2.10 are valid, subsisting, in
full force and effect and binding upon KKI, as the case may be, and, to the
knowledge of KKI, the other parties thereto in accordance with their terms. KKI
is not in default (or alleged
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default) under any such Contract in any material respect, nor, to the knowledge
of KKI, is any other party thereto in default thereunder in any material
respect, and, to KKI's knowledge, there is no condition that with notice or the
lapse of time or both would constitute a material default (or give rise to a
termination right) under any such Contract. To the knowledge of KKI, none of the
other parties to any Transferred Contract intends to terminate or materially
alter the provisions thereof by reason of the Contemplated Transactions or
otherwise. Since the Latest Balance Sheet Date, KKI has not waived any material
right under any Transferred Contract or any Contract relating to Retired Debt or
the Assumed Capital Leases, materially amended or extended beyond December 31,
1997 any such Contract or terminated or failed to renew (or received notice of
termination or failure to renew with respect to) any such Contract. At or prior
to the Closing, KKI will, and will cause KK to, terminate all Contracts between
each other or between KK and any other person relating to the Business or the
Assets and pay all amounts owing thereunder.
SECTION 2.11 Intangible Property. Schedule 2.11 sets forth all
Intellectual Property Rights, including a copy of all registrations and
applications with respect thereto filed with or issued by any Governmental Body.
The Contemplated Transactions will not have an adverse effect on the right,
title and interest of Buyer as of the Closing Date in and to the Intellectual
Property Rights. Except as set forth on Schedule 2.11, (i) KKI has not received
any written notice of invalidity, infringement or misappropriation from any
third party with respect to any Intellectual Property Rights; (ii) to the
knowledge of KKI, it has not interfered with, infringed upon, misappropriated or
otherwise come into conflict with any intellectual property or other rights of
any third parties; and (iii) to the knowledge of KKI, no third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property Rights of KKI.
SECTION 2.12 Claims and Proceedings. Except as set forth on Schedule
2.12(a), there are no outstanding Orders of any Governmental Body against or
involving KKI, its assets or the Business. Except as set forth on Schedule
2.12(b) or as reflected in the most recent loss runs provided to Buyer under
Section 2.16, there are no actions, suits, claims or counterclaims or legal,
administrative, governmental, arbitral or other proceedings or investigations
(collectively, "Claims") (whether or not the defense thereof or Liabilities in
respect thereof are covered by insurance), pending or to the knowledge of KKI
threatened on the date hereof, against or involving KKI, the Assets or the
Business. Schedule 2.12(b) also indicates those Claims the defense thereof or
Liabilities in respect thereof are covered by insurance. Except as set forth on
Schedule 2.12(c), at the Closing there will be no such Claims pending or, to the
knowledge of KKI, threatened, other than Claims that, individually or in the
aggregate, could not reasonably be expected to have a material adverse effect on
the Condition of the Business. Except as set forth on Schedule 2.12(d), to the
knowledge of KKI, on the date hereof, there is no fact, event or circumstances
that would give rise to any uninsured Claim. As of the Closing, there will exist
no such fact, event or circumstance known to KKI that would give rise to any
Claim that, if pending or to the knowledge of KKI threatened on the Closing
Date, could reasonably be expected to have a material adverse effect on the
Condition of the Business.
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SECTION 2.13 Tax Matters. Except as disclosed on Schedule 2.13, all Tax
Returns required to be filed by KKI (or its predecessors) on or before the
Closing Date have been or shall be timely filed and all such Tax Returns are
true, correct and complete. All Taxes (including estimated Taxes) which are due
have been or shall be paid. All Taxes of KKI which are not yet due will be paid
as and when due out of cash funds set aside on or before the Closing Date for
that purpose. As of the time of filing, the Tax Returns correctly reflected
(and, as to any Tax Returns not filed as of the date thereof will correctly
reflect) the facts regarding the income, Business, assets, operations,
activities and status of KKI. At the Closing, there will be no Tax Liens upon
any assets of KKI except for Liens for current Taxes not yet due and payable.
All amounts required to be withheld by KKI from employees for income Taxes,
social security, FUTA and other payroll Taxes have been collected and withheld,
and either paid to the respective Governmental Bodies or Tax Authorities or set
aside as cash funds in segregated accounts for such purpose. All Taxes which are
due and payable by KKI under the Leases for the period prior to and including
the Closing Date have been or shall be paid prior to Closing. Except for sales
Taxes which result from the consummation of the Contemplated Transactions, KKI
has collected and remitted to the appropriate Tax Authority all sales and use or
similar Taxes required to have been collected and all withholding Taxes required
to have been withheld on or prior to the Closing Date and have been furnished
properly completed exemption certificates for all exempt transactions and
payments. KKI has maintained and has in its possession all records, supporting
documents and exemption certificates required by applicable sales use,
employment, payroll and other withholding Tax Laws and regulations to be
retained in connection with the collection and remittance of any such Taxes for
all periods up to and including the Closing Date. KKI (or any of its
predecessors) is not a party to nor has received any notice with respect to any
proposed or pending examination, investigation, audit, action or Claim by any
Tax Authority relating to Taxes (including any power of attorney or request for
extension of any period within which a Tax may be assessed), nor is party to any
dispute or, to KKI's knowledge, threatened dispute with respect thereto and no
Claim for assessment or collection of Taxes has been made upon KKI. Schedule
2.13 includes a description of all such past examinations, investigations,
audits, actions or Claims within the past six years. KKI is not a "foreign
person" within the meaning of Section 1445 of the Code, and KKI will furnish
Buyer with an affidavit that establishes, under the relevant facts and
circumstances, that Buyer is not required to withhold any amount under Section
1445 of the Code in connection with the Contemplated Transactions. KKI is not
and has never been a member of or included in any consolidated, combined or
unitary group for purposes of filing Tax Returns or paying Taxes at any time.
KKI has no Liability for Taxes of any other person under Treasury Regulation
Section 1.1502-6 (or any similar provision of state or foreign law), or as a
transferee of such person, or under any other provision of Law or Tax sharing,
Tax indemnity or similar Contract. KKI is not liable for any payment with
respect to which, if any Tax withholding were required, KKI would be required to
compensate the payee for the amount withheld. KKI does not own any property that
is tax-exempt use property within the meaning of Section 168(h) of the Code or
that is described in Section 168(f)(8) of the Internal Revenue Code as in effect
prior to its amendment by the Tax Reform Act of 1986. No claim has been made by
any Governmental Body or Tax Authority that KKI is subject to state or local Tax
in a state
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other than Kentucky or a locality other than Louisville. Schedule 2.13 contains
a list of the filing dates of all Tax Returns that are required to be filed by
KKI and a schedule of the Assets owned by KKI and the Tax recovery period of
such Assets. Schedule 2.13(b) contains an allocation of the value of the
Interests among the different categories of Assets, including tangible retain
property, transferred to the LLC. Schedule 2.13(b) contains an allocation of the
value of the HL Interests among the different categories of HL Assets, including
tangible retail property. Following the Merger, the income Tax basis of the
Assets owned by the LLC will be equal to the values of such Assets set forth on
Schedule 2.13(b). As used in this Section 2.13, the term "KKI" includes KK.
SECTION 2.14 Employee Benefits Plans. (a) Except as set forth on Schedule
2.14, neither KKI nor any Affiliate thereof, nor the Business, nor any portion
of the Business (all of the above hereinafter individually and collectively
called the "Entity"), nor any other company or entity which together with the
Entity constitutes a member of the Entity's "controlled group" or "affiliated
service group" (within the meaning of Sections 4001(a)(14) and/or (b) of ERISA
and/or Sections 414(b), (c), (m) or (o) of the Code (such group or groups
hereinafter referred to individually and collectively as the "Group")), has at
any time adopted or maintained, or has any present or future obligation to
contribute to or make payment under (i) any employee benefit plan (as defined in
Section 3(3) of ERISA), or (ii) any other benefit plan, program, contract or
arrangement of any kind whatsoever (whether for the benefit of present, former,
retired or future employees, officers, directors or consultants of the Entity or
the Group, or for the benefit of any other person or persons) including, without
limitation, arrangements providing for contributions, benefits or payments in
the event of a change of ownership or control in whole or in part of the Entity
or the Group, or with respect to disability, relocation, child care, educational
assistance, deferred compensation, pension, retirement, profit sharing, thrift,
savings, stock ownership, stock bonus, restricted stock, health, dental,
medical, life, hospitalization, stock purchase, stock option, incentive, bonus,
sabbatical leave, vacation, severance or other contribution, benefit or payment
of any kind, or (iii) any employment, consulting, service or other contract of
any kind whatsoever (all such employee benefit plans and other benefit plans,
programs, contracts or arrangements and such employment, consulting, service or
other Contracts hereinafter individually and collectively called the "Employee
Benefit Plan(s)"). No Entity and no member of the Group is or has at any time
been obligated to contribute to any Employee Benefit Plan subject to Title IV of
ERISA. No Entity and no member of the Group has completely or partially
withdrawn from any "multiemployer plan" within the meaning of Section 3(37) of
ERISA.
(b) In addition, except as set forth in Schedule 2.14 hereof, to the
best knowledge of KKI, (i) there have been no "prohibited transactions" within
the meaning of Section 406 of ERISA or Section 4975 of the Code with respect to
any of the Employee Benefit Plans; (ii) no Liability has been or is expected to
be incurred by the Entity or any member of the Group under Title IV of ERISA
with respect to any Employee Benefit Plan currently or formerly maintained by
any of them; (iii) any and all amounts which the Entity or any member of the
Group are required to pay as contributions or otherwise to, or with respect to
the Employee Benefit Plans have been timely made; (iv) no Employee
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Benefit Plan has incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, and
neither Entity nor any member of the Group has provided, or is required to
provide, security to any Employee Benefit Plan which is subject to Title IV of
ERISA or otherwise; (v) the current value of all "benefit liabilities" within
the meaning of Section 4001(a)(16) of ERISA under each Employee Benefit Plan
which is subject to Title IV of ERISA or otherwise, does not exceed the current
value of the assets of such Employee Benefit Plan allocable to such benefit
liabilities; (vi) each of the Employee Benefit Plans has been operated and
administered in accordance with all applicable Laws; (vii) each of the Employee
Benefit Plans which is intended to be "qualified" within the meaning of Sections
401(a) and 501(a) of the Code has been determined by the IRS to be so qualified
and continues to be so qualified; (viii) there are no pending, threatened or
anticipated Claims involving any of the Employee Benefit Plans; (ix) the Entity
and the Group have not incurred and do not expect to incur any withdrawal
liability with respect to a multiemployer plan under Subtitle E of Title IV of
ERISA; (x) no notice of a "reportable event" within the meaning of Section 4043
of ERISA has been required to be filed with respect to any Employee Benefit
Plan; (ix) neither the Entity nor any member of the Group is a party to, or
participates in, or has any Liability or contingent Liability with respect to
any multiemployer plan; (xii) neither the execution and delivery of this
Agreement nor the consummation of the Contemplated Transactions will accelerate
benefits or any payments under any Employee Benefit Plan; and (xiii) neither the
Entity nor any member of the Group has any commitment to create any additional
Employee Benefit Plan, or to amend any Employee Benefit Plan so as to increase
benefits thereunder.
(c) Schedule 2.14 identifies all Employee Benefit Plans covering
current, former or retired employees, officers, directors and consultants of the
Entity and the Group (the "Entity Plans"). A true and correct copy of each of
the Entity Plans (and all amendments thereto, whether currently effective or to
become effective at a later date) listed on Schedule 2.14 and all contracts
relating thereto, or to the funding thereof (including, without limitation, all
trust agreements, insurance contracts, investment management agreements,
subscription and participation agreements, administration and recordkeeping
agreements) have been provided to Buyer. All Entity Plans have at all times been
established and maintained in accordance with their terms. Each Entity Plan can
be unilaterally terminated without penalty by KKI on no more than sixty (60)
days' notice. In the case of any Entity Plan which is not in written form, an
accurate description of such Entity Plan has been provided to Buyer. A true and
correct copy of the most recent annual report, actuarial report, summary plan
description, and IRS determination letter and/or ruling with respect to each
such Entity Plan, and a current schedule of assets (and the fair market value
thereof assuming liquidation of any asset which is not readily tradeable) held
with respect to any funded Entity Plan has been provided to Buyer, and there
have been no material changes in the financial condition in the respective
Entity Plans (or other information provided hereunder) from that stated in such
annual report, actuarial reports and schedule of assets.
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SECTION 2.15 Employee-Related Matters. (a) Schedule 2.15 contains a true
and correct list of all officers, directors, full-time employees and consultants
of KKI, including any Contract relating thereto, and a description of the rate
and nature of all compensation payable by KKI to each such person. Schedule 2.15
also contains a description of all existing severance, accrued vacation policies
or retiree benefits of any current or former director, officer, employee or
consultant (to the extent not included on Schedule 2.14). Except as set forth on
such Schedule, the employment or consulting arrangement of all such persons and
all part-time employees of KKI is terminable at will.
(b) Except as set forth in Schedule 2.15, (i) KKI is not a party to
any Contract with any labor organization or other representative of its
employees; (ii) there is no unfair labor practice charge or complaint pending
or, to the knowledge of KKI, threatened against KKI; (iii) KKI has not
experienced any labor strike, slowdown, work stoppage or similar labor
controversy within the past three years; (iv) no representation question has
been raised respecting any of KKI's employees working within the past three
years, nor, to the knowledge of KKI, are there any campaigns being conducted to
solicit authorization from KKI's employees to be represented by any labor
organization; (v) no Claim before any Governmental Body brought by or on behalf
of any employee, prospective employee, former employee, retiree, labor
organization, other representative of KKI's employees or any Governmental Body,
is pending or, to the knowledge of KKI, threatened against KKI; (vi) KKI is not
a party to, or otherwise bound by, any Order relating to its employees or
employment practices; and (vii) except with respect to ongoing disputes of a
routine nature involving immaterial amounts, KKI has paid in full to all of its
employees all wages, salaries, commissions, bonuses, benefits and other
compensation due and payable to such employees.
SECTION 2.16 Insurance. Schedule 2.16 sets forth a list of all insurance
policies, fidelity and surety bonds and fiduciary liability policies (the
"Insurance Policies") covering the Assets, the Business, operations, employees,
officers and directors of KKI and true and complete copies of all such Insurance
Policies have been delivered to Buyer. Schedule 2.16 also sets forth a true and
complete list of Claims made in respect of Insurance Policies during the three
years prior to the date hereof. True and correct copies of all loss runs with
respect to such period have been delivered to Buyer. There is no Claim by KKI
pending under any of such Insurance Policies, as to which coverage has been
questioned, denied or disputed by the underwriters of such Insurance Policies or
any requirement by any insurer to perform work which has not been satisfied. All
premiums payable on or before the Closing Date under all Insurance Policies have
been paid and KKI is otherwise in compliance in all material respects with the
terms and conditions of all such Insurance Policies. All Insurance Policies are
in full force and effect. Claims under all Insurance Policies are payable on an
"occurrence basis" such that a claim of any type covered thereunder that arises
after the Closing Date for an event that occurred prior thereto would be covered
by such Insurance Policies.
SECTION 2.17 Compliance with Laws. KKI is not in violation in any material
respect of any order, judgment, injunction, award, citation, decree, consent
decree or writ
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(collectively, "Orders"), or any material law, statute, code, ordinance, rule,
regulation or other requirement, including any Environmental Laws (collectively,
"Laws"), of any government or political subdivision thereof, whether federal,
state, local or foreign, or any agency or instrumentality of any such government
or political subdivision, or any court or arbitrator (collectively,
"Governmental Bodies") affecting its assets or the Business.
SECTION 2.18 Permits. KKI has obtained all Permits, and has made all
required registrations and filings with, any Governmental Body that are material
to the lawful use and occupancy of the Real Property or the lawful conduct of
the Business. All material Permits are listed on Schedule 2.18 and are in full
force and effect; no material violations are or have been recorded in respect of
any Permit within the three years prior to the Closing Date; and no proceeding
is pending or, to the knowledge of KKI, threatened to revoke or limit any
Permit. Except as listed on Schedule 2.18, no Permit will terminate by reason of
the Contemplated Transactions.
SECTION 2.19 Environmental Matters. Except as referenced in Schedule 2.19,
(a) there has been, directly or indirectly, no use, manufacture, generation,
refining, storage, transport, disposal or treatment of Hazardous Substances by
KKI (or, to the knowledge of KKI, any lessor under the Leases or any predecessor
in interest to KKI or any such lessor), or any Release at, on or under any Real
Property (or any real property adjacent thereto) by KKI or, to the knowledge of
KKI, by any other person, in violation of any Environmental Law or which would
require remedial action under any Environmental Law; KKI has not contaminated
the soil, ground water or surface water; to the knowledge of KKI, none of the
soil, ground water or surface water of such Real Property is or has been
contaminated by any Release.
(b) No portion of the Real Property has ever been used as a
petroleum storage, refining or distribution facility or terminal, or a gasoline
station by KKI or any tenant or licensee of KKI thereat or, to the knowledge of
KKI, by any former owner, lessee or operator;
(c) As to the ownership or operation of the Assets or the Business,
KKI has not created, suffered or permitted, and has not received any written
notice of (i) any alleged violation with respect to any Environmental Law; or
(ii) any prior, pending or threatened Regulatory Action or other Claim involving
any such party or any present or former owner, lessee or operator of the Real
Property.
(d)(i) there are no incinerators, septic tanks, underground or
aboveground tanks or cesspools, pipes or pipelines for the storage or
transportation of Hazardous Materials, including without limitation, heating
oil, fuel oil, gasoline and/or other petroleum products, whether such tanks,
pipelines or pipes are in operation, closed or abandoned (the "Tanks") located,
or to the knowledge of KKI, which have been located, on, at or under the Real
Property, (ii) all sewage from the Real Property is discharged into a public
sanitary sewer system, and (iii) there has been no Release from the Real
Property or arising out of the conduct of the Business by KKI, or to KKI's
knowledge, by any other
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party, into the atmosphere, any adjoining or adjacent body of water, or
adjoining or adjacent property in violation of Environmental Law. KKI has
delivered to Buyer copies of all environmental reports and all other written
materials held or controlled by KKI regarding the environmental matters set
forth in this Section 2.19. Notwithstanding the foregoing, if the Real Property
contains any such Tanks, KKI represents that KKI is in compliance in all
material respects with all registration and other requirements of Environmental
Law (including U.S.C. Section 6991, "Regulation of Underground Storage Tanks")
regulating the existence, usage and removal thereof.
SECTION 2.20 Finders; Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of KKI or any Affiliate thereof who might be entitled to any fee or
commission from KKI upon consummation of the Contemplated Transactions.
SECTION 2.21 Ability to Conduct Business. As of the Closing, the Assets
will be sufficient and adequate to permit the continued conduct of the Business
substantially as it has been conducted since January 1, 1997 and, assuming all
KKI Required Consents are obtained, the consummation of the Contemplated
Transactions hereby will enable Buyer to conduct the Business substantially as
it has been conducted since that date.
SECTION 2.22 Leases. Except as set forth in Schedule 2.22:
(a) the Leases are in full force and effect with no default by KKI
or, to its knowledge, lessors thereunder existing beyond applicable notice and
cure periods or any event or condition which, with the giving of notice or
passage of time would constitute such a default, and neither KKI, nor to its
knowledge, lessors under the Leases have any existing rights of offset or
abatement;
(b) all work, repairs and improvements (including capital
improvements) required to have been done on or prior to the Closing under the
Leases by KKI have been completed in accordance therewith;
(c) the Leases are superior to any and all mortgages now or
hereafter constituting a Lien on the Real Property and/or the interest of either
party to the Leases therein;
(d) there are no rights of first refusal, options to purchase,
"buy-out" rights, or other termination rights which have been exercised, or are
currently exercisable, by either party to the Leases; and
(e) all rent and other amounts payable by KKI under the Leases have
been paid to the date hereof, and shall be paid to the date of Closing.
SECTION 2.23 Transaction Shares. Each Transaction Shareholder represents
and warrants to Buyer that the Transaction Shares are being acquired by such
Transaction
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Shareholder for its own account and not with a view to the distribution, resale
or other transfer thereof, except in compliance with the Securities Act and
applicable state securities laws. Except as provided in the certificate to be
delivered by KKI to Buyer under Section 1A.2(c), each such Transaction
Shareholder is an "accredited investor" as such term is defined in Regulation D
promulgated under the Securities Act. Each such Transaction Shareholder has (i)
reviewed carefully the Buyer Reports, (ii) such knowledge and experience in
financial, tax and business matters so as to enable it to make an informed
investment decision with respect to the Transaction Shares and (iii) overall
commitments to investments which are not readily marketable as are reasonable in
relation to such Transaction Shareholder's net worth. Each Transaction
Shareholder which is not a party hereto shall be deemed to have made the
representations and warranties contained in this Section 2.23 by virtue of such
Transaction Shareholder's acceptance of Transaction Shares at the Closing.
SECTION 2.24 The LLC. At the Closing, (i) the LLC shall have been duly
organized and shall be validly existing in good standing as a limited liability
company under the laws of its jurisdiction of organization and duly qualified as
a foreign corporation in good standing in the Commonwealth of Kentucky, (ii) the
Interests shall be owned by KKI, free and clear of any Liens, and no person
(other than Buyer) shall have any right to acquire any Interests or other equity
interests of the LLC, (iii) the LLC shall have good and marketable title (or
valid leasehold interest) in and to all of the Assets, free and clear of all
Liens other than Permitted Liens, (iv) the LLC shall own no assets other than
the Assets and shall have no Liabilities other than the Transferred Liabilities
and the HL Liabilities and (iv) the LLC shall have conducted no business
activity prior to the Closing, other than in connection with the Reorganization.
Prior to the Closing, KKI shall have delivered to Buyer true and correct copies
of the operating agreement and other organizational documents of the LLC, all of
which shall be in form and substance reasonably satisfactory to Buyer, and true
and complete copies of the Forms 8832 that were filed by the LLC with the
Internal Revenue Service and state and local Tax Authorities in all
jurisdictions in which KKI files any Tax Returns. Each such Form 8832 shall have
been filed in time for the LLC to be treated as a corporation for all income Tax
purposes from the date the LLC was formed. At the Closing, all references to KKI
in the representations and warranties set forth in Sections 2.8, 2.9, 2.10,
2.11, 2.12, 2.17, 2.18, 2.19 and 2.22 shall be deemed to include both KKI and
the LLC.
ARTICLE IIA
REPRESENTATIONS AND WARRANTIES
OF HL
HL represents and warrants to Buyer that:
SECTION 2A.1 Authority Relative to this Agreement. HL has full power,
capacity and authority to execute and deliver this Agreement and each other
Transaction
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Document to which it is or, at the Closing, will be a party and to consummate
the Contemplated Transactions to which it is a party. As of the Closing Date,
the execution and delivery of this Agreement and the consummation of the
Contemplated Transactions to which HL is or, at the Closing, will be a party
shall have been duly and validly authorized by HL, and no other proceedings on
the part of HL (or any other person) are necessary to authorize the execution
and delivery by HL of this Agreement or the consummation of the Contemplated
Transactions to which HL is or, at the Closing, will be a party. This Agreement
has been and, at the Closing, the other Transaction Documents to which HL is a
party will have been, duly and validly executed and delivered by HL, and
(assuming the valid execution and delivery thereof by the other parties thereto)
will at the Closing constitute the legal, valid and binding agreements of HL
enforceable against HL in accordance with their respective terms except as such
obligations and their enforceability may be limited by applicable bankruptcy and
other similar laws affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies is subject to the discretion
of the court before which any proceeding therefor may be brought (whether at law
or in equity).
SECTION 2A.2 No Conflicts; Consents. The execution, delivery and
performance by HL of this Agreement and each other Transaction Document to which
it is or will be a party or the consummation of the Contemplated Transactions
does not and will not (i) violate any provision of the organizational documents
of HL; (ii) require HL to obtain any consent, approval or action of or waiver
from, or make any filing with, or give any notice to, any Governmental Body or
any other person; (iii) violate, conflict with or result in a breach or default
under (after the giving of notice or the passage of time or both), or permit the
termination of, any Contract to which HL is a party or by which it or any of its
assets may be bound or subject, or result in the creation of any Lien upon the
HL Assets pursuant to the terms of any such Contract; or (iv) violate any Law or
Order of any Governmental Body against, or binding upon, HL or any member
thereof or upon the HL Assets.
SECTION 2A.3 Corporate Existence and Power. HL is a limited liability
company duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization.
SECTION 2A.4 Taxes. To the extent applicable, all of the representations
and warranties made by KKI in Section 2.13 are incorporated herein by reference
except that references therein to KKI shall be deemed to be references herein to
HL.
SECTION 2A.5 HL Shares. The HL Shares are being acquired by HL for its own
account and not with a view to the distribution, resale or other transfer
thereof, except in compliance with the Securities Act and applicable state
securities laws. HL is an "accredited investor" as such term is defined in
Regulation D promulgated under the Securities Act. HL has (i) reviewed carefully
the Buyer Reports, (ii) such knowledge and experience in financial, tax and
business matters so as to enable it to make an informed investment decision with
respect to the HL Shares and (iii) overall commitments to
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investments which are not readily marketable as are reasonable in relation to
HL's net worth.
SECTION 2A.6 HL LLC. Immediately prior to the Merger, (i) HL LLC shall
have been duly organized and shall be validly existing in good standing as a
limited liability company under the laws of its jurisdiction of organization and
shall be duly qualified as a foreign corporation in good standing in the
Commonwealth of Kentucky, (ii) the HL Interests shall be owned by HL LLC, free
and clear of any Liens, and no person (other than the LLC) shall have any right
to acquire any HL Interests or other equity interests of the HL LLC, (iii) HL
LLC shall have good and marketable title (or valid leasehold interest) in and to
all of the HL Assets, free and clear of all Liens other than Permitted Liens,
(iv) HL LLC shall own no assets other than the HL Assets and shall have no
Liabilities other than the HL Liabilities and (iv) HL LLC shall have conducted
no business activity prior to the Closing, other than in connection with the
Reorganization. Prior to the Closing, HL shall have delivered to Buyer true and
correct copies of the operating agreement and other organizational documents of
HL LLC, all of which shall be in form and substance reasonably satisfactory to
Buyer, and true and complete copies of the Forms 8832 that were filed by HL LLC
with the Internal Revenue Service and state and local Tax Authorities in all
jurisdictions in which HL files any Tax Returns. Each such Form 8832 shall have
been filed in time for HL LLC to be treated as a corporation for all income Tax
purposes from the date HL LLC was formed.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF BUYER
SECTION 3.1 Authority Relative to this Agreement. Buyer has full power and
authority to execute and deliver this Agreement and each other Transaction
Document to which it is or, at the Closing, will be a party and to consummate
the Contemplated Transactions. The execution and delivery of this Agreement and
the consummation of the Contemplated Transactions to which Buyer is or, at the
Closing, will be a party have been duly and validly authorized and approved by
the board of directors thereof and no other corporate proceedings on the part of
Buyer are necessary to authorize the execution and delivery by Buyer of this
Agreement or the consummation of the Contemplated Transactions to which it is
or, at the Closing, will be a party. This Agreement has been and, at the
Closing, the other Transaction Documents to which Buyer is a party will have
been duly and validly executed and delivered by Buyer and (assuming the valid
execution and delivery thereof by the other parties thereto) constitutes or will
at the Closing constitute the legal, valid and binding agreement of Buyer,
enforceable against Buyer in accordance with their respective terms, except as
such obligations and their enforceability may be limited by applicable
bankruptcy and other similar laws affecting the enforcement of creditors' rights
generally and except that the availability of equitable remedies is subject
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to the discretion of the court before which any proceeding therefor may be
brought (whether at law or in equity).
SECTION 3.2 No Conflicts; Consents. The execution, delivery and
performance by Buyer of this Agreement and each other Transaction Document to
which it is or, at the Closing, will be a party and the consummation of the
Contemplated Transactions to which it is or, at the Closing, will be a party do
not and will not (i) violate any provision of the certificate of incorporation
or by-laws of Buyer; (ii) require Buyer to obtain any consent, approval or
action of or waiver from, or make any filing with, or give any notice to, any
Governmental Body or any other person, except for compliance with the HSR Act
and except as set forth in Schedule 3.2 ("Buyer Required Consents"); (iii) if
Buyer Required Consents are obtained prior to the Closing, violate, conflict
with or result in the breach or default under (after the giving of notice or the
passage of time); or permit the termination of, any material Contract to which
Buyer is a party or by which Buyer or its assets may be bound or subject; or
(iv) if Buyer Required Consents are obtained prior to the Closing, violate any
Law or Order of any Governmental Body against, or binding upon, Buyer or upon
its assets or business.
SECTION 3.3 Corporate Existence and Power. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
SECTION 3.4 Finders; Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of Buyer who might be entitled to any fee or commission from Buyer upon
consummation of the Contemplated Transactions.
SECTION 3.5 Buyer Reports. Buyer has delivered to the shareholders of KKI
and HL true and correct copies of (a) Buyer's Annual Report on Form 10-K for the
year ended December 31, 1996, (b) Buyer's Proxy Statement relating to its 1997
Annual Meeting of shareholders and (c) Buyer's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997 (collectively, together with the Buyer Filings
and disclosure statement, if any, provided to the shareholders of KKI and HL
pursuant to Section 4.22, the "Buyer Reports"). At the Closing Date, the Buyer
Reports, taken as a whole, will not contain an untrue statement of material
fact, nor omit to state a material fact necessary to make the statements made
therein not misleading.
SECTION 3.6 Transaction Shares. The Transaction Shares and the Earnout
Shares have been duly authorized by Buyer and, when issued in accordance with
the terms hereof, will have been duly issued and will be fully paid and
non-assessable shares of Buyer Stock.
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ARTICLE IV
COVENANTS AND AGREEMENTS
SECTION 4.1 Conduct of Business of KKI. (a) From the date hereof through
the Closing Date, KKI agrees, and from and after the Reorganization, will cause
the LLC:
(i) To conduct its operations according to the ordinary and
usual course of the Business consistent with past practice, to preserve intact
its present business organization and structure, to use reasonable efforts to
keep available the services of its officers, agents and full-time employees, to
use reasonable efforts to preserve and maintain the Assets and the good will of
the Business and to use reasonable efforts to preserve its relationships with
customers and suppliers, and others having business dealings with KKI or the
LLC.
(ii) To maintain in the ordinary course of the Business,
consistent with past practice and in accordance with all Contracts, the Real
Property, all Equipment, the Inventory and other tangible Assets in their
present repair, order and condition, subject to ordinary wear and tear and to
the requirements of such Contracts.
(iii) Except as contemplated by Section 4.23, not to incur any
Liability (other than Liabilities incurred in the ordinary course of the
Business, consistent with past practice, which are not in the aggregate material
thereto), nor enter into any Contract of a type required to be included on any
Schedule hereto.
(iv) Not to undertake (nor permit to be undertaken) any of the
actions specified in Section 2.8.
(v) To fully comply with the Leases and immediately deliver to
Buyer copies of all notices delivered or received thereunder or in connection
therewith.
(b) From the date hereof through the Closing Date, KKI agrees that
it will use reasonable efforts to conduct the Business in such a manner so that,
except to the extent of any changes therein arising out of the Reorganization,
the representations and warranties of KKI contained herein shall continue to be
true and correct on and as of the Closing Date as if made on and as of the
Closing Date.
(c) From the date hereof through the Closing Date, KKI agrees that
it will consult with Buyer prior to any renewal, amendment, extension or
termination of, waiver of any material right under, or any failure to renew, any
Transferred Contract and will not take any such action if Buyer objects thereto
in writing.
SECTION 4.2 Corporate Examinations and Investigations. (a) Prior to the
Closing Date, KKI agrees that Buyer shall be entitled, through its directors,
officers, Affiliates, employees, attorneys, accountants, representatives,
lenders, consultants and other
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agents (collectively, "Representatives") to make such investigation of the
Assets, the Business and operations of KKI, and such examination of the books,
records and financial condition of KKI and KK, as Buyer reasonably deems
necessary. Any such investigation and examination shall be conducted at
reasonable times, under reasonable circumstances and upon reasonable notice, and
KKI shall cooperate fully therein. In that connection, KKI shall make available
to Representatives of Buyer during such period, without however causing any
unreasonable interruption in the operations of KKI, all such information and
copies of such documents and records concerning the affairs of KKI as such
Representatives may reasonably request, shall permit Representatives of Buyer
access to the Assets and all parts thereof and to KKI's employees, customers,
suppliers, contractors and others, and shall cause KKI's Representatives to
cooperate fully in connection with such review and examination. No investigation
by Buyer shall diminish or obviate any of the representations, warranties,
covenants or agreements of KKI contained in this Agreement.
SECTION 4.3 Additional Financial Statements. Prior to the Closing Date, as
soon as available and in any event within twenty (20) calendar days after the
end of each monthly accounting period of KKI ending after the date of the most
recent Interim Statement, KKI shall furnish Buyer with an unaudited financial
statements of KKI for such month in form and substance comparable to the Interim
Statements and with such other financial or other information routinely prepared
by KKI or reasonably requested by Buyer.
SECTION 4.4 Filings and Authorizations. KKI (and, to the extent required,
HL) and Buyer, before or within two business days after the execution and
delivery of this Agreement, shall file or supply, or cause to be filed or
supplied, all notifications, reports and other information required to be filed
or supplied pursuant to the HSR Act in connection with the Contemplated
Transactions and which are required by Law to effectuate the consummation of the
Contemplated Transactions. The parties shall cooperate with each other in
connection with such filings and furnish each other with copies of such filings
and any correspondence received from any Governmental Body in connection
therewith. KKI and Buyer, as promptly as practicable, shall make, or cause to be
made, all filings and submissions under such Laws as are applicable to them or
to their respective Affiliates as may be required for them to consummate the
Contemplated Transactions in accordance with the terms of this Agreement and
shall furnish copies thereof to the other parties prior to such filing and shall
not make any such filing or submission to which Buyer (in the case of filings by
KKI or HL) or KKI (in the case of filings by Buyer) reasonably objects in
writing. All such filings shall comply in form and content in all material
respects with applicable Law.
SECTION 4.5 Efforts to Consummate. Subject to the terms and conditions
herein, each of KKI, HL and Buyer, without payment or further consideration,
shall use its good faith efforts to take or cause to be taken all action and to
do or cause to be done all things necessary, proper or advisable under
applicable Laws, Contracts, Permits and Orders to consummate and make effective,
as soon as reasonably practicable, the Contemplated Transactions, including, but
not limited to, the obtaining of all KKI Required Consents and
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Buyer Required Consents and Permits or consents of any third party, whether
private or governmental, required in connection with such party's performance of
such transactions and each party hereto shall cooperate with the other in all of
the foregoing. Without limiting the generality of the foregoing, KKI will, upon
execution of this Agreement, use reasonable best efforts to obtain, as soon as
practicable hereafter, execution of the Lease Documents, and all costs and
expenses incurred in connection therewith shall be borne by KKI.
SECTION 4.6 Negotiations With Others. From and after the date hereof
unless and until this Agreement shall have terminated in accordance with its
terms, KKI, HL and Hart agree that neither KKI, HL nor any of their Affiliates
or any officer, director, employee, shareholder or other Representative of KKI
or its Affiliates, will directly or indirectly (i) solicit, engage in
discussions or engage in negotiations with any person (other than Buyer or any
of its Affiliates) with respect to an Acquisition Proposal; (ii) provide
information to any person (other than Buyer or any of its Representatives) in
connection with an Acquisition Proposal; or (iii) enter into any transaction
with any person (other than Buyer or any of its Affiliates) with respect to an
Acquisition Proposal. If KKI, HL, Hart, any Affiliate or Representative thereof
receives any offer or proposal to enter into discussions or negotiations
relating to any of the above, KKI will immediately notify Buyer in writing as to
the identity of the offeror or the party making any such proposal and the
specific terms of such offer or proposal.
SECTION 4.7 Notices of Certain Events. Prior to the Closing Date, KKI, HL
and Buyer shall promptly notify the other parties of:
(a) any notice or other communication delivered or received by such
party (or its Representatives) to or from any other person (other than notices
or other communications solely between KKI and Buyer) with respect to the
Contemplated Transactions (including, without limitation, any notice or other
communication to or from any person objecting to, or alleging that the consent
of any person is or may be required in connection with, the Contemplated
Transactions);
(b) any notice or other communication from any Governmental Body in
connection with the Contemplated Transactions; and
(c) any event, condition or circumstance occurring from the date
hereof through the Closing Date that would constitute a violation or breach of
any representation or warranty, whether made as of the date hereof or as of the
Closing Date, or that would constitute a violation or breach of any covenant of
any party contained in this Agreement.
SECTION 4.8 Public Announcements. Prior to the Closing Date, KKI, HL and
Buyer will consult with each other before issuing any press release or otherwise
making any public statement with respect to the Contemplated Transactions, and
no party hereto will issue any such press release or make any such public
statement without the prior approval of Buyer (in the case of releases or
statements by HL or KKI) or KKI (in the case
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of those by Buyer), except as may be required by applicable Law in which event
the other party shall have the right to review and comment upon (but not
approve) any such press release or public statement prior to its issuance.
SECTION 4.9 Covenant Not-to-Compete. (a) During the period commencing on
the Closing Date and ending five years thereafter (the "Term"):
(i) In order to preserve the value of the Assets and the
Interests, each of KKI, Hart and HL agrees that it will not, directly or
indirectly, as a partner, officer, employee, director, stockholder, investor,
lender, proprietor, consultant, representative, agent or otherwise become or be
interested in, or associate with or render assistance to, any person (other than
Buyer) engaged in the ownership, operation and/or management of any amusement
park, theme park, water park or family entertainment center located (A) within
250 miles of the Park or (B) in the case of acting as a lender, within the
United States. The foregoing provisions shall not, however, prohibit the
ownership by any person of not more than two percent (2%) of any class of
outstanding equity securities listed for trading on a national securities
exchange or publicly traded in the over-the-counter market of any person (other
than Buyer) which engages in any of such businesses.
(ii) Each of KKI and Hart agrees that it will not, directly or
indirectly, during the Term, for its own benefit or for the benefit of any other
person knowingly solicit the professional services of any employee, agent or
consultant of Buyer or any Affiliate of Buyer or otherwise interfere with the
relationship between Buyer or any Affiliate and any of such persons.
(b) After the Closing, neither KKI nor Hart nor any of KKI's
Representatives will, directly or indirectly, use, disclose or make available to
anyone (other than Buyer) any confidential information concerning the ownership
and/or operation of the Park (the "Confidential Information"), except to the
extent that such Confidential Information has been made publicly available by
Buyer. The Confidential Information includes, without limitation, the business
practices, financial information, customer and prospective customers names,
suppliers and prospective suppliers names, leads and account information,
mailing lists, computer programs, advertising campaigns (including, without
limitation, displays, drawings, memoranda, designs, styles or devices), employee
names, compensation and benefit information of KKI pertaining to the Park.
(c) The parties agree that a violation of the foregoing agreements
not to compete or disclose, or any provision thereof, will cause irreparable
damage to Buyer, and Buyer shall be entitled (without any requirement of posting
a bond or other security), in addition to any other rights and remedies which it
may have, at law or in equity, to an injunction enjoining and restraining KKI,
HL, Hart and/or KKI's Representatives from doing or continuing to do any such
act or any other violations or threatened violations of this Section 4.9.
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(d) The parties hereto agree that the covenant set forth in this
Section 4.9 is reasonable with respect to its duration, geographical area and
scope. If the final judgment of a court of competent jurisdiction declares that
any term or provision of this Section 4.9 is invalid or unenforceable, the
parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
SECTION 4.10 Expenses. Buyer and KKI shall each pay 50% of the expenses
incurred in connection with any filing by them under the HSR Act, the title
insurance and survey referred to in Section 5.3(f) and the organizational
expenses of the LLC. If applicable, HL shall pay 100% of the expenses incurred
in connection with any filing under the HSR Act in respect of the Reorganization
transactions involving HL LLC. Except as otherwise specifically provided in this
Agreement, Buyer, KKI and the other parties hereto shall bear their respective
expenses, in each case, incurred in connection with the preparation, execution
and performance of this Agreement and the Contemplated Transactions, including,
without limitation, all fees and expenses of their respective Representatives.
SECTION 4.11 Tax Matters. (a) KKI shall provide Buyer with all clearance
certificate or similar document(s) that may be required by any Tax Authority of
any jurisdiction in order to relieve Buyer of any obligation to withhold any
portion of the Purchase Price.
(b) Prior to filing any Tax Return for any Taxable period ended on
or prior to December 31, 1997, KKI, KK or HL, as the case may be, shall provide
Buyer with copies of such Tax Returns at least twenty business days prior to the
date on which such Tax Returns will be timely filed. Except for the Tax
consequences of the Reorganization, such Tax Returns will be prepared and the
amount of income and the Tax Liability owed will be computed in accordance and
consistent with the past custom and practice in filing Tax Returns. Such Tax
Returns will be timely filed with the appropriate Tax Authorities. Except with
respect to income Taxes for its Taxable year ended November 3, 1997, KKI will
pay (not later than the day before the Closing Date) to the appropriate Tax
Authority all Taxes payable with respect to the Taxable period covered by such
Tax Returns. KKI will timely pay all income Taxes (including payments of
estimated Taxes) that are due and payable with respect to Taxable periods
covered by such Tax Returns.
(c) KKI and HL shall include the Tax consequences of the
Reorganization in their Tax Returns for their income Tax year within which the
Reorganization occurs. With respect only to the Tax consequences of the
Reorganization, such Tax Returns shall not be filed without the prior approval
of the Buyer. Once approved by the Buyer, such Tax Returns shall not be amended
without the consent of the Buyer. The Tax Returns
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that include the Reorganization shall reflect the treatment of the transfer of
KKI's Assets to the LLC and of the HL Assets to HL LLC, in each case in exchange
for the Interests and the HL Interests, as Taxable exchanges for income Tax
purposes. The Tax liability of KKI or HL, as the case may be, reported on such
Tax Returns, shall be determined using, as the value of the Assets transferred
to the LLC or to HL LLC, as the case may be, the values set forth on Schedule
2.13(b) and treating the Interests and the HL Interests received in exchange for
such Assets as having a value equal to the aggregate value of such Assets, as
set forth on Schedule 2.13(b).
(d) The LLC will not be included in a consolidated or combined
return of KKI whether by termination of any election of KKI to file consolidated
returns or otherwise.
SECTION 4.12 Employee Matters.
(a) On the Closing Date, Buyer shall offer employment to such
employees of the Business as it shall determine in its sole discretion, which
offer will include employee benefits that are comparable to those offered by
Buyer or its Affiliates to their comparable employees as of the Closing Date;
provided, however, that any offer of employment shall be contingent upon the
Closing actually occurring. Notwithstanding the foregoing, Buyer agrees that,
effective on the Closing Date, it will employ (i) the general counsel of KKI as
the general counsel of the Park for a period of at least two years after the
Closing (unless earlier terminated for cause), at an annual salary of $75,000
and (ii) the shareholders of the Sellers named in Schedule 4.12 for a period of
one year after the Closing (unless earlier terminated for cause). All such
employees who accept Buyer's offer of employment will become employees of Buyer
("Transferred Employees") as of the Closing Date. Buyer shall not be responsible
for filing employment Tax Returns (including Forms W-2) for Transferred
Employees for periods ending on or prior to the Closing Date.
(b) KKI shall retain responsibility and complete liability for all
benefits earned by the Transferred Employees through the Closing Date under
KKI's Employee Benefit Plans and shall pay to each Transferred Employee the
accrued benefit of such Transferred Employee thereunder in accordance with the
terms of such Plans. Without the prior written consent of Buyer, no assets held
in trust in respect of any Employee Benefit Plan of KKI shall be transferred to
Buyer or to any plan adopted or maintained by Buyer.
(c) KKI shall bear the entire cost and expense of wages, salaries,
bonuses (including all bonuses based on or related to the results of operations
of the Business during its 1997 season, whether payable prior to, on or after
the Closing Date (the "1997 Bonuses"), severance obligations, worker's
compensation claims, and any other direct or indirect compensation or employee
benefits (whether arising under KKI's Employee Benefit Plans or otherwise) of
all employees of the Business for all periods ending on or prior to the Closing
Date, irrespective of the time at which any claims therefor are made. For
purposes hereof, an expense will be deemed to be incurred when the services
related thereto have been rendered and a disability shall be deemed to have
occurred on the date of the
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applicable accident or trauma rather than the date upon which any determination
is made concerning the existence of the disability.
(d) Neither Buyer nor KKI intend this Section to create any rights
or interests, except as between Buyer and KKI, and no present or future
employees of either party (or any dependents of such employees) will be treated
or deemed as third party beneficiaries in or under this Agreement.
SECTION 4.13 Certain Renewals. With respect to each Permit which may
expire prior to the Closing Date or within sixty days thereafter, KKI shall (i)
timely file with the appropriate Governmental Bodies applications for renewal of
each such Permit (the "Applications"), (ii) deliver to Buyer true and complete
copies of such Applications, (iii) diligently prosecute such Applications prior
to Closing, and (iv) cooperate fully with all Governmental Bodies in the
processing of such Applications.
SECTION 4.14 Collection of Accounts Receivable. From and after the Closing
Date, Buyer shall be solely responsible for collecting the accounts receivable
of KKI and the LLC existing on the Closing Date (the "Receivables") and, except
as provided herein, KKI shall take no action to collect any such Receivables.
Buyer shall give prompt written notice to KKI of any amount collected in respect
of any Receivable and shall promptly remit such amount to KKI. Any amount
received without designation of the invoice to which it should be applied shall
first be applied to the Receivables due from such account debtor. Any amount
received by Buyer from any account debtor, which is designated by such account
debtor as applicable to a receivable other than a Receivable, shall be the
property of Buyer and shall be applied by Buyer to the balance then due and
owing by such account debtor to Buyer. With respect to any Receivable that is
not collected within 90 days following the Closing Date, Buyer shall consent in
writing to the commencement by KKI, at its expense, of legal action to collect
such Receivable.
SECTION 4.15 Transfer Taxes; Allocations. (a) Except as otherwise provided
herein, all excise, sales, value added, use, registration, stamp, transfer and
similar Taxes (including, without limitation, any real estate transfer taxes
relating to the Real Property or the Leases or any personal property transfer or
sales Taxes relating to the Assets), incurred in connection with the transfer of
the Assets to the LLC and the transfer of the Interests to Buyer shall be borne
equally by KKI and Buyer. Buyer and KKI shall cooperate in providing each other
appropriate resale exemption certificates and other appropriate Tax
documentation and related information at, prior to and after Closing.
(b) Real estate taxes, personal property taxes, water and sewer
charges, general and special assessments and general and special utility charges
and other similar operating expenses relating to the Business shall be
apportioned at the Closing as of the earlier of (i) the Closing Date or (ii)
November 3, 1997. At the Closing, Buyer and KKI shall reimburse the other party,
as appropriate, for amounts payable pursuant to this Section 4.15(b).
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SECTION 4.16 Discharge of Potential Liabilities. KKI agrees to pay and
discharge when due all claims of creditors of KKI and the LLC that may be
asserted against Buyer or the LLC except with respect to the Transferred
Liabilities.
SECTION 4.17 Access. After the Closing and from time to time, each party
hereto shall permit the other parties and their Representatives to have access
during regular business hours and upon reasonable notice, to inspect and copy
agreements, records, books and other documents that are included in or relate to
the Assets or the Business and identified with reasonable particularity,
wherever located, for the purposes of (i) preparing Tax Returns and financial
statements and responding to Tax audits, and (ii) prosecuting or defending any
Claim, which arises out of or relates to the Business or the Assets. Each party
shall cooperate fully with the other parties in connection with the foregoing.
If, after the Closing, any party determines to destroy any agreements, records,
books or documents referred to above, it will give to the other parties at least
two months' prior written notice thereof, and such other party shall have the
right during such two-month period upon reasonable notice and during regular
business hours to take possession of any such agreements, records, books or
documents.
SECTION 4.18 Election. (a) Buyer shall be entitled, upon written notice to
KKI, to make an election (the "Election") under Section 338(h)(10) of the Code,
and the regulations promulgated thereunder, and any application analogous
provision of state or local law, with respect to its acquisition of Interests in
the LLC hereunder. For purposes of such Election, the Purchase Price shall be
allocated among the Assets and the covenant contained in Section 4.9 hereof in
the manner set forth on Schedule 2.13(b) for all purposes, and each of the
parties shall make all appropriate tax and other filings on a basis consistent
with such allocation. The parties shall exchange drafts of any information
returns required by Section 1060 of the Code, and all similar state statutes,
ten days prior to filing any such return.
(b) If Buyer makes such an Election:
(i) Buyer shall be responsible for the preparation and timely
filing of all KKI returns, documents, statements and other forms required to be
filed with any federal, state or local Tax Authority or any other Governmental
Body in connection with the Election (the "Section 338 Forms"); and
(ii) KKI shall cooperate with Buyer to enable Buyer to prepare
and file all Section 338 Forms and shall execute and deliver to Buyer such
documents or forms as are required by the Code or the regulations promulgated
thereunder (and any applicable analogous provisions of state or local Law) to
properly complete the Section 338 Forms of KKI and the Buyer and to complete the
Election; provided that such material is completed and delivered by Buyer to KKI
for execution at least 15 days prior to the date Buyer wishes to file such
material.
SECTION 4.19 [Intentionally left blank].
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SECTION 4.20 [Intentionally left blank].
SECTION 4.21 Operating Expense. Within fourteen (14) days following the
date hereof, KKI shall prepare and deliver to Buyer a schedule setting forth the
anticipated operating expenses of the Business for the period commencing on
November 4, 1997 and ending on the Closing Date, which schedule KKI may update
in writing from time to time as necessary. Buyer shall have the right, within
three days after receipt of such schedule or any update thereof, to strike or
reduce any expense thereon by giving notice thereof to KKI; provided, however,
that Buyer shall have a reasonable basis therefor. If the Closing Date shall be
subsequent to November 3, 1997, at the Closing Buyer shall (i) pay to KKI an
amount equal to the Net Operating Expenses and (ii) assume the obligations of
KKI or the LLC in respect of all operating expenses ("Assumed Operating
Expenses") appearing on any such approved expenses schedule incurred (but not
paid) by KKI or the LLC on or prior to the Closing Date.
SECTION 4.22 Buyer Filings. During the period prior to the Closing Date,
Buyer shall deliver to each shareholder of KKI and HL, promptly after the filing
thereof, a true and correct copy of each report, information statement or other
document ("Buyer Filings") filed by Buyer with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended. Prior to the
Closing Date, Buyer (i) will provide such shareholders and HL with a reasonable
opportunity to ask questions and receive answers from Representatives of Buyer
concerning their purchase of Transaction Shares, and (ii) may, in its
discretion, provide to each such shareholder and HL a disclosure statement
containing such information as Buyer shall deem necessary to comply with the
representation and warranty contained in the last sentence of Section 3.5.
SECTION 4.23 Buyer Loan. On or prior to October 1, 1997, Buyer shall make
a loan (the "Buyer Loan") to KKI in the principal amount of up to Two Million
Dollars ($2,000,000) by delivery of immediately available funds to KKI in such
amount, against receipt by Buyer of an executed copy of KKI's promissory note in
the form of Exhibit 4.23 hereto. The Buyer Loan shall constitute Retired Debt
hereunder, and the principal thereof, and all accrued interest thereon, will be
repaid in full at Closing out of the Purchase Price. KKI will use the proceeds
of the Buyer Loan solely to repay on such date the Debt described on Schedule
4.23 hereto or, with the prior written consent of Buyer, amounts due to trade
creditors of KKI.
SECTION 4.24 Operation of Park. (a) In connection with the Park's 1998
season, Buyer and its Subsidiaries shall make at least $7,000,000 in capital
improvements to the Park and will expend in advertising and marketing expenses
for the Park at least $500,000 in excess of KKI's actual advertising and
marketing expenses for the 1997 season.
(b) In connection with the Park's 1999 season, Buyer and its
Subsidiaries shall make at least $5,000,000 in capital improvements to the Park
and will expend in advertising and marketing expenses for the Park at least
$1,000,000 in excess of KKI's actual advertising and marketing expenses for the
1997 season.
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(c) Buyer shall deliver to KKI on or prior to November 15, 1997, a
schedule setting forth the proposed capital improvements to the Park for the
1998 season. With respect to all capital improvements and advertising and
marketing expenses referred to in this Section 4.24, Buyer will consult in good
faith with Hart with respect thereto prior to making any such capital
improvements or incurring any such expenses. The amounts of capital improvements
and advertising and marketing expenses specified in Sections 4.24(a) and (b) may
be reduced by agreement between Buyer and Hart.
(d) The terms "capital improvements" and "advertising and marketing
expenses" shall be determined in accordance with GAAP. If Buyer or any of its
Subsidiaries incurs advertising and marketing expenses that relate to both the
Park and other parks owned or operated by Buyer or any such Subsidiary, Buyer
will allocate such expenses between the Park and such other parks in good faith.
SECTION 4.25 Special Meeting. As soon as practicable (but in no event
later than fifteen days following the execution and delivery hereof), KKI and
Hart shall cause to be convened a duly called and held special meeting or will
take action by written consent (the "Meeting"), of the shareholders of KKI to
vote to approve the Contemplated Transactions and to take all other actions
required to be taken by the shareholders of KKI under applicable Law, Contract
or the Certificate of Incorporation or By-laws of KKI, to approve the
Contemplated Transactions. At such Meeting, Hart will vote the shares of capital
stock of KKI held by it (or with respect to which Hart has the power to vote) in
favor of the Contemplated Transactions.
ARTICLE V
CONDITIONS TO CLOSING
SECTION 5.1 Conditions to the Obligations of the Parties. The obligations
of KKI, HL and Buyer to consummate the Contemplated Transactions are subject to
the satisfaction of the following conditions, which, in the case of Section
5.1(c), may be waived by Buyer and KKI:
(a) HSR Act. Any applicable waiting period under the HSR Act
relating to the Contemplated Transactions shall have expired.
(b) No Injunction. No provision of any applicable Law and no Order
shall prohibit the consummation of the Contemplated Transactions.
(c) No Proceeding or Litigation. No Claim instituted by any person
(other than Buyer, KKI, HL, the shareholders of KKI or their respective
Affiliates), shall have been commenced or be pending against KKI, HL, Buyer, the
LLC or any of their respective Affiliates, officers or directors which Claim
seeks to restrain, prevent, change or delay in any material respect the
Contemplated Transactions or seeks to challenge any of
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the material terms or provisions of this Agreement or seeks material damages in
connection with any of such transactions.
SECTION 5.2 Conditions to the Obligations of KKI. All obligations of KKI,
HL and Hart hereunder are subject, at the option of KKI, to the fulfillment
prior to or at the Closing of each of the following further conditions:
(a) Performance. Buyer shall have performed and complied with all
agreements, obligations and covenants required by this Agreement to be performed
or complied with by it at or prior to the Closing Date.
(b) Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement and in any certificate or other
writing delivered by Buyer pursuant hereto shall be true at and as of the
Closing Date as if made at and as of such time.
(c) Closing Payment. (i) Buyer shall have made the Liability Payment
and the Debt Payment;
(ii) Buyer shall have delivered to KKI, on behalf of the
Transaction Shareholders, and to HL (A) certificates representing the
Transaction Shares which each such Transaction Shareholder and HL is entitled to
receive, registered in the name of such Transaction Shareholder or HL and (B)
executed copies of the Registration Rights Agreement; and
(iii) Buyer shall have delivered to KKI, on behalf of each
shareholder of KKI (other than Transaction Shareholders), immediately available
funds equal to the Percentage Share of the Net Proceeds of all such
shareholders.
(d) Net Operating Expenses. If the Closing Date shall be subsequent
to November 2, 1997, Buyer shall have delivered to KKI immediately available
funds equal to the amount of the Net Operating Expenses.
(e) Employment Agreement. Buyer shall have delivered to Hart an
executed copy of an employment agreement, substantially in the form annexed
hereto as Exhibit 5.2A (the "Employment Agreement").
(f) Buyer Required Consents. All Buyer Required Consents shall have
been obtained.
(g) Documentation. There shall have been delivered to KKI the
following:
(i) A certificate, dated the Closing Date, of the Chairman of
the Board, the President or Chief Financial Officer of Buyer confirming the
matters set forth in Sections 5.2(a) and (b) hereof.
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(ii) A certificate, dated the Closing Date, of the Secretary
or Assistant Secretary of Buyer certifying, among other things, that attached or
appended to such certificate (A) is a true and correct copy of its Certificate
of Incorporation and all amendments if any thereto as of the date thereof; (B)
is a true and correct copy of its By-laws as of the date thereof; (C) is a true
copy of all corporate actions taken by it, including resolutions of its board of
directors authorizing the execution, delivery and performance of this Agreement,
and each other Transaction Document to be delivered by Buyer pursuant hereto;
and (D) are the names and signatures of its duly elected or appointed officers
who are authorized to execute and deliver this Agreement and any certificate,
document or other instrument in connection herewith.
(iii) Evidence of the good standing and corporate existence of
Buyer reasonably requested by KKI.
(iv) A signed opinion of Buyer's counsel, dated the Closing
Date and addressed to KKI, substantially in the form of opinion annexed as
Exhibit 5.2B hereto.
(v) Copies of all Buyer Required Consents.
(vi) An executed copy of the Escrow Agreement.
(vii) A copy of an assumption agreement executed by the LLC
substantially in the form annexed as Exhibit 5.2C (the "Assumption Agreement").
SECTION 5.3 Conditions to the Obligations of Buyer. All obligations of
Buyer hereunder are subject, at the option of Buyer, to the fulfillment prior to
or at the Closing of each of the following further conditions:
(a) Performance. KKI, Hart and HL shall have performed and complied
with all agreements, obligations and covenants required by this Agreement to be
performed or complied with by it at or prior to the Closing Date.
(b) Representations and Warranties. Except to the extent of any
changes therein arising out of the Reorganization, the representations and
warranties of KKI, HL and Hart contained in this Agreement and in any
certificate or other writing delivered by KKI pursuant hereto shall be true at
and as of the Closing Date as if made at and as of such time.
(c) Shareholder Litigation. No Claim shall have been commenced or
threatened by any shareholder of KKI, member of HL or any Representative or
Affiliate of any such person seeking to restrain, prevent, change or delay in
any material respect the Contemplated Transactions, seeking to challenge any of
the material terms or provisions of this Agreement or the other Transaction
Documents, or seeking material damages in connection with any of such
transactions.
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(d) Environmental Matters. Buyer shall have received environmental
reports prepared by a licensed, qualified environmental engineer acceptable to
Buyer on the Real Property confirming the accuracy of the representations and
warranties in Article II with respect to environmental matters.
(e) KKI Required Consents. All KKI Required Consents shall have been
obtained.
(f) Survey and Title Insurance. Buyer shall have procured (i) title
insurance insuring the LLC's interest (acquired hereunder) in and to the Real
Property, which insurance shall be subject only to Permitted Liens and such
standard printed exceptions on the extended coverage ALTA Form (1992) title
insurance policy as are reasonably acceptable to Buyer, from a nationally
recognized title insurance company qualified to do business in Kentucky
reasonably satisfactory to Buyer and KKI in an amount reasonably satisfactory to
Buyer and (ii) a current survey, by a licensed surveyor selected by Buyer, of
the Real Property, showing the boundaries, monuments, publicly dedicated access,
easements and rights-of-way of record, improvements (including all Improvements)
and encroachments, if any and otherwise complying with ALTA-ASCM Land Title
Survey requirements, including a certification by such surveyor to Buyer in form
and substance reasonably acceptable thereto.
(g) Discharge of Certain Liabilities. KKI shall have delivered to
Buyer evidence, reasonably satisfactory to Buyer, of the payment and discharge
by KKI of the Percentage Rent, the 1997 Bonuses, and all other amounts payable
by KKI on or prior to the Closing Date under Employee Benefit Plans.
(h) Liens. All Liens on the Assets in respect of the Retired Debt
and the HL Liabilities shall have been released and discharged in form and
substance acceptable to Buyer.
(i) Debt and Liabilities. The recipients of the Debt Payment and the
Liability Payment shall have delivered to Buyer all notes and other evidence of
the Liabilities and Debt discharged thereby. HL shall have delivered to Buyer
the KKI Note.
(j) Leases. Each lessor under any Retired Debt shall have delivered
to Buyer a bill of sale, in form and substance acceptable to Buyer, with respect
to the Assets leased under the Retired Debt.
(k) Reorganization. Buyer shall have received executed copies of all
documents and instruments required to effect the Reorganization.
(l) Employment Agreement. Hart shall have delivered to Buyer an
executed copy of the Employment Agreement.
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(m) Release. Buyer shall have received from Hart and each other
Affiliate of KKI (including, without limitation, KK and HL) an executed copy of
a release, substantially in the form of Exhibit 5.3A hereto, releasing and
discharging Buyer and its Affiliates (including, without limitation, the LLC)
from any and all Claims against and Liabilities of KKI arising out of or
relating to the Business or the operations of KKI.
(n) Documentation. There shall have been delivered to Buyer the
following:
(i) A certificate dated the Closing Date of the President of
KKI, Hart and a manager of HL, confirming the matters relating to it set forth
in Sections 5.3(a) and (b).
(ii) A certificate, dated the Closing Date, of the Secretary
or Assistant Secretary of each of KKI and HL certifying, among other things,
that attached or appended to such certificate (A) is a true and correct copy of
its Certificate of Incorporation (or comparable instrument) and all amendments
if any thereto as of the date thereof; (B) is a true and correct copy of its
By-laws (or comparable instrument) as of the date thereof; (C) is a true copy of
all actions taken by it, including resolutions of its board of directors (or
managers) and shareholders (or members) authorizing the execution, delivery and
performance of this Agreement, and each other Transaction Document to be
delivered by such party pursuant hereto; and (D) are the names and signatures of
its duly elected or appointed officers who are authorized to execute and deliver
this Agreement and any certificate, document or other instrument in connection
herewith.
(iii) Evidence of the good standing and corporate (or
equivalent) existence of KKI, HL and the LLC reasonably requested by Buyer.
(iv) A signed opinion of KKI's counsel, dated the Closing
Date, addressed to Buyer, substantially in the form of opinion annexed as
Exhibit 5.3B hereto.
(v) Copies of all KKI Required Consents and all Permits.
(vi)(A) certified true and complete copies of the Leases and
all amendments, modifications and extensions thereof, (B) an executed amendment
to the Kingery Lease, in form and substance reasonably acceptable to Buyer,
extending the term thereof (including renewal options of lessee) to at least the
end of the term of the State Fair Lease (including renewal options of lessee
thereunder) and providing lessee under the Kingery Lease with an option to buy
the Real Property subject thereto prior to the end of such extended term at the
then fair market value thereof to be determined as mutually agreed, (C) an
executed consent to the assignment of each Lease to the LLC and the sale of the
Interests to Buyer and an estoppel certificate from each of the lessors under
the Leases in form and substance reasonably acceptable to Buyer and (D) an
executed assignment by KKI of each Lease to the LLC (in recordable form) and
substantially in the form of Exhibit 5.3C hereto (collectively, the "Lease
Documents").
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(vii) An executed copy of the Escrow Agreement.
(viii) Possession and control of the Assets.
(ix) Executed copies of Bills of Sale and Assignment
substantially in the forms annexed hereto as Exhibit 5.3D (the "Bills of Sale")
with respect to (i) the transfer of the Assets to the LLC and (ii) the transfer
of the Interests to Buyer.
(x) An executed copy of the Assumption Agreement.
(xi) A copy of the Registration Rights Agreement, executed by
each Transaction Shareholder and HL.
(xii) An executed bargain and sale (with covenants against
grantor's acts) deed (or local equivalent) in recordable form conveying to the
LLC all of KKI's fee title interest in and to all owned Real Property, free and
clear of all Liens except Permitted Liens.
(xiii) Written resignations, dated the Closing Date, of each
manager of the LLC.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1 Survival of Representations and Warranties. (a)
Notwithstanding any right of Buyer fully to investigate the affairs of KKI and
notwithstanding any knowledge of facts determined or determinable by Buyer
pursuant to such investigation or right of investigation, Buyer has the right to
rely fully upon the representations, warranties, covenants and agreements of
KKI, Hart and HL contained in this Agreement, or listed or disclosed on any
Schedule hereto or in any instrument delivered in connection with or pursuant to
any of the foregoing. All such representations, warranties, covenants and
agreements shall survive the execution and delivery of this Agreement and the
Closing hereunder. Notwithstanding the foregoing, all representations and
warranties of KKI, Hart and HL contained in this Agreement, on any Schedule
hereto or in any instrument delivered in connection with or pursuant to this
Agreement shall terminate and expire eighteen (18) months after the Closing
Date; provided, however, that the liability of KKI or Hart under this Article VI
shall not terminate as to any specific claim or claims of the type referred to
in Section 6.2 hereof, whether or not fixed as to liability or liquidated as to
amount, with respect to which KKI or Hart has been given specific notice on or
prior to the date on which such liabilities would otherwise terminate pursuant
to the terms of this Section 6.1(a) and provided, further, that the termination
of any such representation and warranty shall not affect the ability of Buyer to
seek indemnification under Section 6.2(a)(iii) or 6.2(b)(iii) below.
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(b) All representations and warranties of Buyer shall terminate and
expire eighteen (18) months after the Closing Date; provided, however, that the
liability of Buyer shall not terminate as to any specific claim or claims of the
type referred to in Section 6.3 hereof, whether or not fixed as to liability or
liquidated as to amount, with respect to which Buyer has been given specific
notice on or prior to the date on which such liability would otherwise terminate
pursuant to the terms of this Section 6.1(b).
SECTION 6.2 Obligation of KKI and Hart to Indemnify. Subject to the
provisions of Section 6.5:
(a) KKI agrees to indemnify, defend and hold harmless Buyer (and its
respective directors, officers, employees, Affiliates, successors and assigns)
from and against all Claims, losses, Liabilities, damages, deficiencies,
judgments, settlements, costs of investigation or other expenses (including
interest, penalties and reasonable attorneys' fees and disbursements and
expenses incurred in enforcing this indemnification) (collectively, the
"Losses") suffered or incurred by Buyer or any of the foregoing persons arising
out of (i) any breach of the representations and warranties of KKI contained in
this Agreement or in the Schedules or any Transaction Document, (ii) any breach
of the covenants and agreements of KKI contained in this Agreement or in the
Schedules or any Transaction Document or (iii) any Excluded Liabilities.
(b) Hart agrees to indemnify, defend and hold harmless Buyer (and
its respective directors, officers, employees, Affiliates, successors and
assigns) from and against all Losses suffered or incurred by Buyer or any of the
foregoing persons arising out of (i) any breach of the representations and
warranties of KKI, Hart or HL contained in this Agreement, (ii) any breach of
the covenants and agreements of KKI, Hart or HL contained in this Agreement or
in the Schedules or any Transaction Document or (iii) any Excluded Liabilities.
SECTION 6.3 Obligation of Buyer to Indemnify. Buyer agrees to indemnify,
defend and hold harmless KKI and, to the extent applicable, Hart and HL (and any
director, officer, employee, Affiliate or successors and assigns of KKI) from
and against any Losses suffered or incurred by KKI or any of the foregoing
persons arising out of (i) any breach of the representations and warranties of
Buyer or of the covenants and agreements of Buyer contained in this Agreement or
in the Schedules or any Transaction Documents or (ii) any Assumed Liabilities.
SECTION 6.4 Notice and Opportunity to Defend Third Party Claims. (a)
Promptly after receipt by any party hereto (the "Indemnitee") of notice of any
demand, claim or circumstance which would or might give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give prompt notice thereof (the "Claims Notice") to the party
or parties obligated to provide indemnification pursuant to Section 6.2 or 6.3
(collectively, the "Indemnifying Party"); provided, however, that the failure to
give such notice shall not affect the obligations of any Indemnifying Party
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hereunder except to the extent it is actually prejudiced thereby. The Claims
Notice shall describe the Asserted Liability in reasonable detail and shall
indicate the amount (estimated, if necessary, and to the extent feasible) of the
Loss that has been or may be suffered by the Indemnitee.
(b) The Indemnifying Party may elect to defend, at its own expense
and with its own counsel, any Asserted Liability unless (i) the Asserted
Liability seeks an Order, injunction or other equitable or declaratory relief
against the Indemnitee or (ii) the Indemnitee shall have reasonably concluded
that (x) there is a conflict of interest between the Indemnitee and the
Indemnifying Party in the conduct of such defense or (y) the Indemnitee shall
have one or more defenses not available to the Indemnifying Party. If the
Indemnifying Party elects to defend such Asserted Liability, it shall within
thirty days (or sooner, if the nature of the Asserted Liability so requires)
notify the Indemnitee of its intent to do so, and the Indemnitee shall
cooperate, at the expense of the Indemnifying Party, in the defense of such
Asserted Liability. If the Indemnifying Party elects not to defend the Asserted
Liability, is not permitted to defend the Asserted Liability by reason of the
first sentence of this Section 6.4(b), fails to notify the Indemnitee of its
election as herein provided or contests its obligation to indemnify under this
Agreement with respect to such Asserted Liability, the Indemnitee may pay,
compromise or defend such Asserted Liability at the sole cost and expense of the
Indemnifying Party. Notwithstanding the foregoing, neither the Indemnifying
Party nor the Indemnitee may settle or compromise any claim over the reasonable
written objection of the other; provided that the Indemnitee may settle or
compromise any claim as to which the Indemnifying Party has failed to notify the
Indemnitee of its election under this Section 6.4(b) or as to which the
Indemnifying Party is contesting its indemnification obligations hereunder. In
any event, the Indemnitee and the Indemnifying Party may participate, at their
own expense, in the defense of any Asserted Liability. If the Indemnifying Party
chooses to defend any Asserted Liability, the Indemnitee shall make available to
the Indemnifying Party any books, records or other documents within its control
that are necessary or appropriate for such defense. Any Losses of any Indemnitee
for which indemnification is available hereunder shall be paid upon written
demand therefor.
SECTION 6.5 Limits on Indemnification. (a) The aggregate amount of Losses
under Sections 6.2(a)(i) and 6.2(b)(i) as to which Buyer shall be entitled to
indemnification hereunder shall not exceed $1,500,000. Subject to the limitation
of the preceding sentence, notwithstanding any other provision of this Agreement
or the Employment Agreement and in addition to any other rights and remedies
available to Buyer, (i) KKI hereby acknowledges and agrees that Buyer shall have
the right of set-off and reduction against any and all Earnout Shares now or
hereafter owed to KKI under this Agreement in respect of all Losses specified in
Section 6.2(a) with respect to which Buyer is entitled to indemnification under
this Article VI and (ii) Hart hereby acknowledges and agrees that Buyer shall
have the right of set-off and reduction against any and all amounts now or
hereafter owned to Hart under the Employment Agreement and his proportionate
share of any Earnout Shares in respect of all Losses referred to in Section
6.2(b) with respect to which Buyer is entitled to indemnification under this
Article VI. Buyer agrees to notify
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KKI or Hart, as the case may be, after any such set-off by Buyer; provided that
the failure to give such notice shall not affect the validity thereof.
(b) KKI and Hart shall not be liable to Buyer for any Loss specified
in Section 6.2 above unless the aggregate amount of all such Losses exceeds
$50,000 in the aggregate, in which case Buyer shall be entitled to be
indemnified for all of its Losses, subject to the provisions of Section 6.5(a)
above.
SECTION 6.6 Adjustment. It is the intent of the parties that any amounts
paid under Section 6.2 or 6.3 shall represent an adjustment of the Purchase
Price and the parties will report such payments consistent with such intent.
Nevertheless, if any payment pursuant to Section 6.2 or 6.3 hereof would be
treated by any Tax Authority as other than a Purchase Price adjustment and
would, on that basis, be includable in the gross income of the Indemnitee that
is reported to such Tax Authority, then such payment shall be increased by the
amount necessary so that the Indemnitee is fully and completely indemnified on
an after-Tax basis.
SECTION 6.7 Exclusive Remedy. Except as otherwise explicitly provided in
this Agreement or any other Transaction Document, the parties agree that the
indemnification provisions of this Article VI shall constitute the parties' sole
and exclusive remedies in respect of this Agreement and the Contemplated
Transactions (other than Claims in the nature of fraud).
ARTICLE VII
SPECIFIC PERFORMANCE; TERMINATION
SECTION 7.1 Specific Performance. KKI and Buyer acknowledge and agree
that, if either party fails to proceed with the Closing in any circumstance
other than those described in Section 7.2 below which permits such party to
terminate this Agreement, the non-defaulting party will not have adequate
remedies at law with respect to such breach and that, in such event, the
non-defaulting party shall be entitled, without the necessity or obligation of
posting a bond or other security, to commence a suit in equity to obtain
specific performance of the defaulting party's obligations under this Agreement.
Each party specifically affirms the appropriateness of such injunctive or other
equitable relief in any such action and waives any defenses it may have in such
action, other than a material breach by the non-defaulting party hereunder.
SECTION 7.2 Termination. This Agreement may be terminated and the
Contemplated Transactions may be abandoned at any time prior to the Closing:
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(a) By mutual written consent of KKI and Buyer;
(b) By KKI if (i) there has been a material misrepresentation or
breach of warranty on the part of Buyer in the representations and warranties
contained herein and such material misrepresentation or breach of warranty, if
curable, is not cured within 30 days after written notice thereof from KKI; (ii)
Buyer has committed a material breach of any covenant imposed upon it hereunder
and fails to cure such breach within 30 days after written notice thereof from
KKI; or (iii) any condition to KKI's obligations hereunder becomes incapable of
fulfillment through no fault of KKI and is not waived by KKI; provided that, on
the date of termination, the conditions to Buyer's obligations hereunder
specified in Section 5.3 hereof (other than clauses (h), (i), (j) and (n)
(excluding clause (vi)) thereof) shall have been satisfied, and KKI, Hart and HL
shall be otherwise ready, willing and able to proceed with the Closing
hereunder;
(c) By Buyer, if (i) there has been a material misrepresentation or
breach of warranty on the part of KKI, HL or Hart in the representations and
warranties contained herein and such material misrepresentation or breach of
warranty, if curable, is not cured within 30 days after written notice thereof
from Buyer; (ii) KKI, Hart or HL has committed a material breach of any covenant
imposed upon it hereunder and fails to cure such breach within 30 days after
written notice thereof from Buyer; or (iii) any condition to Buyer's obligations
hereunder becomes incapable of fulfillment through no fault of Buyer and is not
waived by Buyer; provided that, on the date of termination, the conditions to
KKI's obligations hereunder specified in Section 5.2 hereof (other than clauses
(c), (d), (e) and (g) thereof) shall have been satisfied, and Buyer shall be
otherwise ready, willing and able to proceed with the Closing hereunder;
(d) By KKI or by Buyer, if there shall be any Law that makes
consummation of the Contemplated Transactions illegal or otherwise prohibited,
or if any Order enjoining KKI or Buyer from consummating the Contemplated
Transactions is entered and such Order shall have become final and
nonappealable; and
(e) By either KKI or Buyer if the Closing shall not have occurred on
or prior to November 30, 1997; provided that, (i) if so terminated by KKI, the
conditions specified in the proviso of Section 7.2(b) shall have been satisfied
on the date of termination and KKI, Hart and HL shall be then otherwise ready,
willing and able to proceed with the Closing, or (ii) if so terminated by Buyer,
the conditions specified in the proviso of Section 7.2(c) shall have been
satisfied on the date of termination and Buyer shall be then otherwise ready,
willing and able to proceed with the Closing.
SECTION 7.3 Effect of Termination; Right to Proceed. Subject to the
provisions of Section 7.1 hereof, in the event that this Agreement shall be
terminated pursuant to Section 7.2, all further obligations of the parties under
the Agreement shall terminate without further liability of any party hereunder
except (i) to the extent that a party has made a material misrepresentation
hereunder or committed a breach of any material covenant and agreement imposed
upon it hereunder; (ii) to the extent that any condition to
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a party's obligations hereunder became incapable of fulfillment because of the
breach by a party of its obligations hereunder and (iii) that the agreements
contained in Sections 4.8 and 4.10 shall survive the termination hereof. In the
event that a condition precedent to its obligation is not met, nothing contained
herein shall be deemed to require any party to terminate this Agreement, rather
than to waive such condition precedent and proceed with the Contemplated
Transactions.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Notices. (a) Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally by
hand or by recognized overnight courier, telecopied or mailed (by registered or
certified mail, postage prepaid) as follows:
(i) If to Buyer, one copy to:
Premier Parks Inc.
122 East 42nd Street, 49th Floor
New York, New York 10168
Telecopier: (212) 949-6203
Attn: Kieran E. Burke, Chairman and CEO
with a copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Telecopier: (212) 702-5810
Attn: James M. Coughlin, Esq.
(ii) If to KKI,HL, Hart or any shareholder of KKI, one copy to:
Kentucky Kingdom, Inc.
937 Phillips Lane
Louisville, Kentucky 40209
Telecopier: (502) 366-8746
Attn: Edward J. Hart
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with a copy to:
Ogden, Newell & Welch
1700 Citizens Plaza
500 West Jefferson Street
Louisville, KY 40202-2874
Telecopier: (502) 581-9564
Attn: Scott W. Brinkman, Esq.
(b) Each such notice or other communication shall be effective (i)
if given by telecopier, when such telecopy is transmitted to the telecopier
number specified in Section 8.1(a) (with confirmation of transmission) or (ii)
if given by any other means, when delivered at the address specified in Section
8.1(a). Any party by notice given in accordance with this Section 8.1 to the
other party may designate another address (or telecopier number) or person for
receipt of notices hereunder. Notices by a party may be given by counsel to such
party.
SECTION 8.2 Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) and the collateral agreements executed in connection with the
consummation of the Contemplated Transactions contain the entire agreement among
the parties with respect to the subject matter hereof and related transactions
and supersede all prior agreements, written or oral, with respect thereto.
SECTION 8.3 Waivers and Amendments; Non-Contractual Remedies; Preservation
of Remedies. This Agreement may be amended, superseded, cancelled, renewed or
extended only by a written instrument signed by KKI and Buyer. The provisions
hereof may be waived in writing by the party to be charged therewith. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege. Except as otherwise
provided herein, the rights and remedies herein provided are cumulative and are
not exclusive of any rights or remedies that any party may otherwise have at law
or in equity.
SECTION 8.4 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Kentucky applicable to agreements
made and to be performed entirely within such State, without regard to the
conflict of laws rules thereof.
SECTION 8.5 Binding Effect; No Assignment. This Agreement and all of its
provisions, rights and obligations shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, heirs and legal
representatives. This Agreement may not be assigned (including by operation of
Law) by a party without the express written consent of Buyer (in the case of
assignment by KKI, HL or Hart) or KKI
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(in the case of assignment by Buyer) and any purported assignment, unless so
consented to, shall be void and without effect. Notwithstanding the foregoing,
the parties agree that Buyer may cause one or more Subsidiaries of Buyer
designated by it to carry out all or part of the Contemplated Transactions to be
carried out by Buyer (other than the issuance of Buyer Stock). Nothing herein
express or implied is intended or shall be construed to confer upon or to give
anyone other than the parties hereto and their respective heirs, legal
representatives and successors any rights or benefits under or by reason of this
Agreement and no other party shall have any right to enforce any of the
provisions of this Agreement.
SECTION 8.6 Exhibits. All Exhibits and Schedules attached hereto are
hereby incorporated by reference into, and made a part of, this Agreement.
SECTION 8.7 Severability. If any provision of this Agreement for any
reason shall be held to be illegal, invalid or unenforceable, such illegality
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such illegal, invalid or unenforceable provision had never
been included herein.
SECTION 8.8 Counterparts. The Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
SECTION 8.9 Third Parties. Except as specifically set forth or referred to
herein, nothing herein express or implied is intended or shall be construed to
confer upon or give to any person other than the parties hereto and their
permitted successors or assigns, any rights or remedies under or by reason of
this Agreement or the Contemplated Transactions.
SECTION 8.10 Further Assurances. At any time and from time to time after
the Closing Date, upon the request of Buyer, KKI, HL and Hart will do, execute,
acknowledge and deliver, or cause to be done, executed, acknowledged or
delivered, all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney or assurances as may be reasonably required for the better
transferring, assigning, conveying, granting, assuring and confirming to Buyer,
or for aiding and assisting in the collection of or reducing to possession by
Buyer the Interests to be transferred, conveyed and assigned hereunder or to
vest in the LLC all of KKI's and HL's rights, title and interest in and to the
Assets being conveyed hereunder. KKI, Hart and Buyer will each, respectively,
bear their own costs and expenses incurred in compliance with its obligations
under this Section 8.10. In addition, at the cost of Buyer, KKI will, at any
time and from time to time after the Closing Date, cooperate with Buyer in
obtaining all financial information regarding KKI for periods prior to the
Closing Date required to be filed or made publicly available by Buyer under the
federal securities laws.
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SECTION 8.11 Title and Risk of Loss. Legal title, equitable title and
risk of loss with respect to the Interests, Assets and rights to be transferred
hereunder shall not pass to Buyer or the LLC, as the case may be, until the
Interests, Assets or rights are transferred at the Closing hereunder.
ARTICLE IX
DEFINITIONS
SECTION 9.1 Definitions. (a) The following terms, as used herein, have the
following meanings:
"Acquisition Proposal" shall mean any proposal for the acquisition of, or
merger or other business combination involving KKI or the LLC or the sale of any
equity interest in KKI or the LLC, or the Business or any Assets (including the
HL Assets) (except in the ordinary course), other than the transactions
contemplated by this Agreement.
"Affiliate" of any person shall mean any other person directly or
indirectly through one or more intermediary persons, controlling, controlled by
or under common control with such person.
"Agreement" or "this Agreement" shall mean, and the words "herein,"
"hereof" and "hereunder" and words of similar import shall refer to, this
agreement as it from time to time may be amended.
"Assets" shall mean all of the property, assets and rights used, held for
use or useful in the Business including:
(i) all real property owned and leased by KKI and used in the
Business (the "Land"), and all of KKI's rights, title and interest in and to all
buildings, improvements and fixtures constructed or located thereon (the
"Improvements," and together with Land, the "Real Property");
(ii) the rides, machinery, equipment, tools, supplies, spare
parts, rolling stock, furniture and other tangible personal property used, held
for use or useful in the Business (the "Equipment"), on the Closing Date;
(iii) all proceeds from the sale of season passes and any
other pre-sold tickets to the Park with respect to periods after the 1997 season
of the Park ("Prepaid Deposits") as of the Closing Date;
(iv) all patents, patent applications, trade names,
trademarks, copyrights, servicemarks, trademark and servicemark registrations
and applications
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(including, without limitation, all of KKI's rights to use the names "Kentucky
Kingdom" and "The Thrill Park" and any derivation thereof), whether or not used
in the Business;
(v) all of KKI's rights in, to and under trade secrets,
formulae and specifications and technical know-how, whether currently being used
or under development, including engineering and other drawings, data, design and
specifications, product literature and related materials, in each case which are
owned or licensed by KKI (together with the intellectual property described in
clause (iv), the "Intellectual Property Rights") and all of KKI's books, records
and computer programs relating thereto;
(vi) all of KKI's rights in, to and under the goodwill of the
Business;
(vii) KKI's rights under all Contracts listed as such on
Schedule 2.10, including, but not limited to, the Leases and the Assumed Capital
Leases (the "Transferred Contracts"), and all prepaid expenses, claims and other
prepayments, including security deposits and other retentions held by third
parties, with respect to the Transferred Contracts as of the Closing Date;
(viii) all of KKI's Inventory, wherever located, with respect
to the Business as such exists on the Closing Date;
(ix) all of KKI's rights under all governmental licenses,
certificates, permits and approvals (the "Permits") relating to or necessary to
the lawful conduct of the Business as of the Closing Date, to the extent such
Permits are transferable;
(x) except as provided in clause (b)(x) below, all warranties,
Claims, causes of action, guarantees or similar rights of KKI pertaining to the
Assets; and
(xi) all books and records relating to the Business and the
Assets (whether kept or maintained by KKI or any third party) including, without
limitation, copies of lists of customers and suppliers; admission tickets,
season passes, records with respect to costs, Inventory and Equipment; business
development plans; advertising materials, catalogues, correspondence, mailing
lists, photographs, sales materials and records; purchasing materials and
records; personnel records with respect to employees of the Business; media
materials and plates; sales order files; ledgers and other books of account of
KKI; plans, specifications, surveys, appraisals, reports and other materials
relating to the Assets; other records required to continue the Business as
heretofore and now being conducted by KKI; and all software programs, computer
printouts, databases and related items used in the Business.
(b) The Assets shall exclude the following assets and property (the
"Excluded Assets"):
(i) all of KKI's rights, title and interest in and to the
Transaction Documents;
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(ii) cash on hand, cash equivalents, investments (including,
without limitation, stock, debt investments, options and other instruments and
securities) and bank deposits of KKI as of the Closing Date;
(iii) all of the accounts receivable of KKI as of the Closing
Date;
(iv) Tax refunds and recoveries and similar benefits of KKI
which relate to any period prior to the Closing Date, and all of KKI's income
Tax Returns and records as of the Closing Date;
(v) all corporate records of KKI including, without
limitation, the stock ledger of KKI and the minute books regarding meetings of
the shareholders, directors and director committees of KKI;
(vi) KKI's rights under any Employee Benefit Plans;
(vii) all of KKI's rights under any Insurance Policies or
other Contracts, other than the Transferred Contracts;
(viii) all assets relating exclusively to any of KKI's
operations, other than the Business;
(ix) the capital stock of KK held by KKI and its Affiliates;
and
(x) all of KKI's rights, title and interest in and to the
Claim entitled Kentucky Kingdom, Inc. vs. Journal Broadcasting of Kentucky,
Inc., d/b/a WHAS TV.
From and after the Reorganization, references in the foregoing definitions
of Assets and Excluded Assets to KKI shall also be deemed to be references to
the LLC.
"Assumed Capital Leases" shall mean the Capital Leases of KKI or LLC that
Buyer agrees in writing to assume on or prior to the Closing.
"Assumed Liabilities" shall mean (i) the Assumed Operating Expenses and
(ii) the Liabilities and obligations of KKI (or the LLC) arising and to be
performed after the Closing under the Transferred Contracts.
The term "audit" or "audited" when used in regard to financial statements
shall mean an examination of the financial statements by a firm of independent
certified public accountants in accordance with generally accepted auditing
standards for the purpose of expressing an opinion thereon.
"Average Closing Price" shall mean the numerical average of the closing
sales price (regular way) per share of Buyer Stock (or, in case no such reported
sales takes place on such day the average of the closing bid and asked prices)
on the Nasdaq National Market
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System, for each of the ten trading days ending two trading days prior to (i) in
the case of shares of Buyer Stock issuable under Section 1A.3 (other than the
Initial Earnout Shares and the Earnout Shares issuable under Section 1A.3(a)(ii)
to the extent provided below), the date such shares are delivered to KKI as
provided in such Section, and (ii) in the case of Transaction Shares and the
Initial Earnout Shares, the Closing Date, in each case, free and clear of all
commissions, obligations, transaction fees or stamp taxes; provided, however,
that the Average Closing Price of Earnout Shares issuable under Section
1A.3(a)(ii) shall not exceed $44.00.
"Buyer Stock" shall mean the shares of common stock, par value $.05 per
share, of Buyer.
"Capital Lease" shall mean any lease required to be capitalized under
GAAP.
"Certificate of Incorporation" shall mean, in the case of any corporation,
the certificate of incorporation, articles of incorporation or charter of a
corporation, howsoever denominated under the laws of the jurisdiction of its
incorporation.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Contract" shall mean any contract, agreement, indenture, note, bond,
lease, conditional sale contract, mortgage, license, franchise, instrument,
commitment or other binding arrangement, whether written or oral, and all
modifications and amendments thereto and substitutions thereof.
The term "control," with respect to any person, shall mean the power to
direct the management and policies of such person, directly or indirectly, by or
through stock ownership, agency or otherwise, or pursuant to or in connection
with an agreement, arrangement or understanding (written or oral) with one or
more other persons by or through stock ownership, agency or otherwise; and the
terms "controlling" and "controlled" shall have meanings correlative to the
foregoing.
"Debt" shall mean (i) money borrowed by KKI or the LLC from any person;
(ii) any indebtedness of KKI or the LLC arising under Capital Leases or
evidenced by a note, bond, debenture or similar instrument; (iii) all
obligations of KKI or the LLC under any leases (other than Capital Leases, the
Leases or any other lease relating to real property); (iv) all obligations of
KKI, the LLC or HL to pay any sales, use or comparable Taxes in respect of
Assets leased under any Capital Leases or leases referred to in clause (iii)
above; (v) all obligations of KKI or the LLC in respect of the redemption,
repayment or repurchase of any shares of its capital stock (other than the
Purchased Shares); (vi) any indebtedness of KKI or the LLC arising under
purchase money obligations or representing the deferred purchase price of
property and services (other than current trade payables incurred in the
ordinary course of the Business); (vii) any Liability of any person secured by a
Lien on any of the Assets and (viii) any Liability of KKI or the LLC under any
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guaranty, letter of credit (or reimbursement obligations with respect thereto),
performance credit or other agreement having the effect of assuring a creditor
against loss.
"Environmental Laws" shall mean any and all Laws (including common law),
Orders, Permits, agreements or any other requirement or restriction promulgated,
imposed, enacted or issued by any federal, state, local and foreign Governmental
Bodies relating to the environment, including the emission, discharge or Release
of pollutants, contaminants, Hazardous Substances or wastes into the environment
(which includes, without limitation, ambient air, surface water, ground water,
or land), or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, Hazardous Substances or wastes or the clean-up or other
remediation thereof.
"Environmental Liabilities" shall mean any Liabilities, obligations,
responsibilities, obligations to conduct remedial actions, losses, damages,
punitive damages, consequential damages, costs and other expenses (including,
without limitation, all reasonable fees, disbursements and expenses of counsel,
expert and consulting fees and costs of investigations and feasibility studies),
fines, penalties, and monetary sanctions, interest, direct or indirect, known or
unknown, absolute or contingent, past, present, or future, resulting from any
claim or demand by any person, whether based in contract, tort, implied or
express warranty, strict liability, common law, criminal or civil statute,
including any Environmental Law, arising solely out of the ownership, leasing or
operation by KKI or its Affiliates (including the LLC) of the Assets or the
Business, in connection with environmental conditions at the Park or the
manufacture, refining, storage, disposal or treatment of Hazardous Substances by
KKI or its Affiliates (including the LLC).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Liabilities" shall mean any Liabilities arising out of or in
respect of (i) Litigation Claims and (ii) Excluded Tax Liabilities.
"Excluded Tax Liabilities" shall mean any and all Liabilities for Taxes
(other than Tax Liabilities arising out of the Contemplated Transactions that
are payable by Buyer hereunder) that are payable by KKI (or its shareholders and
Affiliates), the LLC, HL or HL LLC pursuant to the terms of this Agreement or
pursuant to Law or that are payable by any such person arising out of events,
transactions, facts or circumstances occurring or existing on or prior to the
Closing Date.
"GAAP" shall mean generally accepted accounting principles in effect on
the date hereof as set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States.
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"Gross Revenues" shall have the meaning given it under GAAP applied on a
basis consistent with the audited financial statements of Buyer, provided that
there shall be included in Gross Revenues the gross revenues of any person which
is conducting business at the Park under any concession Contract. Gross Revenues
for any period shall be determined in good faith by Buyer.
"Hazardous Substances" shall mean any dangerous, toxic, radioactive,
caustic or otherwise hazardous material, pollutant, contaminant, chemical, waste
or substance defined, listed or described as any of such in or governed by any
Environmental Law, including but not limited to urea-formaldehyde,
polychlorinated biphenyls, asbestos or asbestos-containing materials, radon,
explosives, known carcinogens, petroleum and its derivatives, petroleum
products, flammable materials, radioactive materials, controlled or toxic
substances, any pollutant or contaminant, or any substance which might cause any
injury to human health or safety or to the environment or might subject the
owner, lessee or operator of the Real Property to any Regulatory Actions or
Claims.
"HL Lease" shall mean (a) those certain five (5) lease agreements dated
December 13, 1996, between HL as lessor and KKI as lessee and pertaining to,
respectively, the rides known as Chang, the Pirate Ship, the Vampire, the
Enterprise and the Giant Wheel, (b) those certain three (3) lease agreements
dated May 31, 1997, between HL as lessor and KKI as lessee and pertaining to,
respectively, the rides known as Playmania, the Starcastle Voyage Carousel and
the Go Karts and (c) any other lease agreements existing on the date of this
Agreement pursuant to which KKI leases Assets as to which HL acquires the
interests of the Lessor thereunder, all such acquisitions to be in form and
substance reasonably acceptable to Buyer.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Inventory" shall mean, as of any date, collectively, all inventories of
prize materials, food, beverages (alcoholic and nonalcoholic), merchandise, and
other products owned by KKI or the LLC and held for resale or for distribution,
together with packaging and samples thereof, operating supplies and spare or
maintenance parts owned by KKI or the LLC as of such date.
"IRS" shall mean the Internal Revenue Service.
"Leases" shall mean (i) the Amended and Restated Lease Agreement, dated as
of February 21, 1996, between KKI and The Commonwealth of Kentucky, State
Property and Buildings Commission, Finance and Administration Cabinet and State
Fair Board (the "State Fair Lease"), (ii) the undated and unsigned letter of
intent, between KKI and University of Louisville Athletic Association, Inc.,
(iii) Commercial Lease, dated April 5, 1990, between First Kentucky Trust
Company, as residual trustee under the will of Frederick W. Kingery and 227+1,
Ltd., d/b/a Kentucky Kingdom Amusement Park, predecessor in interest to KKI,
together with the Environmental Supplement thereto, dated
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April 5, 1990, and the Addendum thereto and the Second Addendum thereto, dated
March 9, 1995 (collectively, the "Kingery Lease") and (iv) the Lease, dated June
24, 1996, between KKI and Mary Lou Collins.
"Liability" shall mean any direct or indirect indebtedness, liability,
assessment, claim, loss, damage, deficiency, obligation or responsibility, fixed
or unfixed, choate or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, actual or potential, contingent or otherwise
(including any liability under any guaranties, letters of credit, performance
credits or with respect to insurance loss accruals and including any Loss of Tax
deductions or other benefits that would have been available in a cash purchase
of the Assets of KKI and HL for their fair market value as reflected on Schedule
2.13B).
"Lien" shall mean, with respect to any asset, any mortgage, lien
(including mechanics, warehousemen, laborers and landlords liens), claim,
pledge, charge, security interest, preemptive right, right of first refusal,
option, judgment, title defect, or encumbrance of any kind in respect of or
affecting such asset.
"Litigation Claims" shall mean any and all Claims (i) against KKI, HL, the
LLC, HL LLC, the Assets or the Business, whether asserted prior to or after the
Closing Date, arising out of events, transactions, facts or circumstances
occurring or existing on or prior to the Closing Date (other than Claims arising
out of Assumed Liabilities) to the extent that the aggregate amount of Losses in
respect thereof exceeds the accrual therefor specified in Exhibit 1A.2A or (ii)
by any shareholder of KKI, member of HL or any Representative or Affiliate
thereof, or any Contractor of KKI, whether arising prior to or after the
Closing, that challenges the validity, legality or fairness of the Contemplated
Transactions, any actions of KKI, HL or Hart taken in connection therewith, or
the adequacy or fairness of the Purchase Price or any other terms of the
Contemplated Transactions.
"Net Operating Expenses" shall mean the excess of (A) all operating
expenses of the Business appearing on any approved expenses schedule delivered
under Section 4.21 that are paid and incurred by KKI or the LLC subsequent to
November 3, 1997 and prior to the Closing, other than (i) principal, interest
and other payments on any Debt and (ii) any Liability or obligation of the type
reflected on Exhibit 1A.2A over (B) all cash received (excluding proceeds of
Receivables existing at November 3, 1997) and Receivables generated by the
Business subsequent to November 3, 1997 and prior to the Closing.
The term "person" shall mean an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity,
including a government or political subdivision or an agency or instrumentality
thereof.
"Regulatory Actions" shall mean any Claim, demand, action, suit, summons,
citation, directive, investigation, litigation, inquiry, enforcement action,
Lien, encumbrance, restriction, settlement, remediation, response, clean-up or
closure arrangement or other remedial obligation or proceeding brought or
instigated by any Governmental Body in connection with any Environmental Law,
including, without limitation, the listing of the
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<PAGE>
Real Property on any list of contaminated or potentially contaminated sites or
potential or verified Hazardous Waste sites under any Environmental Law, civil,
criminal and/or administrative proceedings, whether or not seeking costs,
damages, penalties or expenses.
"Release" shall mean the intentional or unintentional, spilling, leaking,
disposing, discharging or disturbance of, or emitting, depositing, injecting,
leaching, escaping, or any other release or threatened release to or from,
however defined, any Hazardous Substance in violation of any Environmental Law.
"Subsidiary" of KKI or Buyer shall mean any person of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are owned
directly or indirectly through one or more intermediaries, or both, by KKI or
Buyer.
"Tax" (including, with correlative meaning, the terms "Taxes" and
"Taxable") shall mean (i)(A) any net income, gross income, gross receipts,
sales, use, ad valorem, transfer, transfer gains, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, rent, recording,
occupation, premium, real or personal property, intangibles, environmental or
windfall profits tax, alternative or add-on minimum tax, customs duty or other
tax, fee, duty, levy, impost, assessment or charge of any kind whatsoever
(including but not limited to taxes assessed to real property and water and
sewer rents relating thereto), together with (B) any interest, penalty, addition
to tax, fine or other additional amount imposed thereon or with respect thereto
by any Governmental Body (domestic or foreign) (a "Tax Authority") responsible
for the imposition of any such tax and interest in respect of such penalties,
additions to tax, fines or additional amounts, in each case, with respect to
KKI, HL, the LLC, HL LLC, the Business or the Assets (or the transfer thereof);
(ii) any liability for the payment of any amount of the type described in the
immediately preceding clause (i) as a result of any such person being a member
of an affiliated or combined group with any other corporation at any time on or
prior to the Closing Date and (iii) any liability of any such person for the
payment of any amounts of the type described in the immediately preceding clause
(i) as a result of a contractual obligation to indemnify any other person.
"Tax Return" shall mean any return or report (including elections,
declarations, disclosures, schedules, estimates and information returns)
required to be supplied to any Tax Authority.
"Transaction Documents" shall mean, collectively, this Agreement, and each
of the other agreements and instruments to be executed and delivered by all or
some of the parties hereto in connection with the consummation of the
transactions contemplated hereby.
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<PAGE>
(c) The following terms are defined in the following sections of
this Agreement:
Term Section
---- -------
Annual Statements 2.5(a)
Applications 4.13
Asserted Liability 6.4(a)
Assumed Operating Expenses 4.21
Assumption Agreement 5.2(g)
Audited Statements 2.5(a)
Bills of Sale 5.3(n)
Business Recital
Buyer Recital
Buyer Filings 4.22
Buyer Loan 4.23
Buyer Reports 3.5
Buyer Required Consents 3.2
Claims 2.12
Claims Notice 6.4(a)
Closing 1A.4
Closing Date 1A.4
Closing Payment 1A.2(a)
Condition of the Business 2.8
Confidential Information 4.9(b)
Contemplated Transactions 2.1
Debt Payment 1A.2(b)
Earnout Payments 1A.3(a)
Earnout Shares 1A.3(c)
Election 4.18(a)
Employee Benefit Plan 2.14(a)
Employment Agreement 5.2(e)
Entity 2.14(a)
Entity Plans 2.14(c)
Escrow Agent 1A.3(d)
Escrow Agreement 1A.3(d)
Escrow Shares 1A.3(d)
Governmental Bodies 2.17
Group 2.14(a)
Hart 1.1(a)
HL Recital
HL Assets 1.1(b)
HL Interests 1.1(b)
HL Liabilities 1.1(b)
HL LLC 1.1(b)
HL Shares 1A.2(b)
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<PAGE>
Indemnifying Party 6.4(a)
Indemnitee 6.4(a)
Initial Earnout Shares 1A.3(a)
Insurance Policies 2.16
Interests 1.1(a)
Interim Statements 2.5(a)
KK 2.3
KKI Recital
KKI Note 1.1(c)
KKI Required Consents 2.2
Latest Balance Sheet 2.6
Latest Balance Sheet Date 2.6
Laws 2.17
Lease Documents 5.3(n)
Liability Payment 1A.2(b)
LLC 1.1(a)
Losses 6.2(a)
Meeting 4.25
Merger 1.1(d)
Net Proceeds 1A.2(b)
1997 Bonuses 4.12(c)
Nonaccredited Shareholder 1A.2(c)
Orders 2.17
Park Recital
Percentage Rent 1.1(f)
Percentage Share 1A.2(c)
Permitted Liens 2.9(a)
Proceeds Shares 1A.2(c)
Purchase Price 1A.2(b)
Receivables 4.14
Registration Rights Agreement 1A.2(c)
Reorganization 1.1(e)
Representatives 4.2
Retained Liabilities 1.1(f)
Retired Debt 1A.2(b)
Section 338 Forms 4.18(b)
Securities Act 1A.2(c)
Shareholders Recital
Tanks 2.19(d)
Term 4.9(a)
Transaction Shareholders 1A.2(c)
Transaction Shares 1A.2(c)
Transferred Employees 4.12(a)
Transferred Liabilities 1.1(a)
-54-
<PAGE>
SECTION 9.2 Interpretation. Unless the context otherwise requires, the
terms defined in Section 9.1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms defined herein. All accounting terms defined in Section 9.1,
and those accounting terms used in this Agreement not defined in Section 9.1,
except as otherwise expressly provided herein, shall have the meanings
customarily given thereto in accordance with GAAP. When a reference is made in
this Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
-55-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Stock Purchase
Agreement as of the date set forth above.
KENTUCKY KINGDOM, INC.
By: /s/ Edward J. Hart
--------------------------------
Edward J. Hart
President
PREMIER PARKS INC.
By: /s/ James F. Dannhauser
--------------------------------
James F. Dannhauser
Chief Financial Officer
/s/ Edward J. Hart
------------------------------------
EDWARD J. HART
HART-LUNSFORD ENTERPRISES, LLC
By: /s/ Edward J. Hart
--------------------------------
Edward J. Hart
Administrative Member
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<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of November 7, 1997, between
PREMIER PARKS INC., a Delaware corporation (the "Company"), and EDWARD J.
HART ("Hart").
W I T N E S S E T H
WHEREAS, pursuant to a Stock Purchase Agreement dated as of September 26,
1997 (the "Stock Purchase Agreement"), the Company acquired (the "Acquisition")
all of the membership interests of the limited liability company that acquired
pursuant thereto substantially all of the assets of Kentucky Kingdom, Inc.
("KKI") used in the operation of Kentucky Kingdom (the "Park");
WHEREAS, prior to the Acquisition, Hart served as the President of KKI;
WHEREAS, the Company wishes to preserve the business and good will of KKI
and its relationships with its customers, suppliers and contractors and wishes
to obtain the benefit of the expertise of Hart in the theme park business
following the Acquisition; and
WHEREAS, in order to preserve such relationships and to obtain such
benefits, Hart has agreed to serve as Managing Director of the Park on the terms
and conditions specified herein.
NOW, THEREFORE, in consideration of the mutual promises, representations
and warranties set forth herein, and for other good and valuable consideration,
it is hereby agreed as follows:
1. Certain Definitions. As used herein, the following terms shall have the
following meanings:
"Affiliate" of a person shall mean any other person that directly or
indirectly controls, is controlled by, or is under common control with the
person specified. For the purposes of this Agreement, "control," when used with
respect to any person, shall mean the power to direct the management and
policies of such person, whether through the ownership of securities, by
contract or otherwise.
"Additional Compensation" shall have the meaning provided in Section
5(b).
"Base Salary" shall have the meaning provided in Section 5(a).
"Board" shall mean the Board of Directors of the Subsidiary of the
Company that owns the Park.
"Gross Revenues" shall have the meaning provided in the Stock
Purchase Agreement.
<PAGE>
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any other entity.
"Subsidiary" shall mean, in respect of any person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of capital stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such person,
(ii) such person and one or more Subsidiaries of such person or (iii) one or
more Subsidiaries of such person.
"Term" shall mean the period specified in Section 3(a) below.
2. Employment. The Company hereby agrees to continue to employ Hart, and
Hart hereby accepts such employment, upon the terms and conditions set forth
herein.
3. Term. (a) Unless sooner terminated in accordance with the provisions of
Section 3(b) hereof, the term of Hart's employment under this Agreement shall
commence on the date hereof and shall end on the fifth anniversary hereof (the
"Term").
(b) This Agreement will terminate (upon written notice delivered by
the Company except in the case of clause (ii) below) if (i) Hart breaches in any
material respect any of his obligations contained herein, (ii) Hart voluntarily
terminates his employment hereunder, (iii) Hart otherwise becomes unable to
render his services hereunder or (iv) Hart breaches in any material respect his
indemnification obligations under the Stock Purchase Agreement.
4. Position and Duties. (a) During the Term, Hart shall have the
authority, functions, duties, powers and responsibilities of an executive nature
as from time to time may be prescribed by the Board or the Chief Executive
Officer or Chief Operating Officer of the Company. During the Term, Hart shall
have the title Managing Director of the Park. During the Term, Hart shall use
his best efforts to promote the best interests of the Company and the
Subsidiaries and shall not take any act contrary to such interests.
(b) During the Term, (i) Hart's services shall be rendered on a
full-time, exclusive basis, (ii) he will apply on a full-time basis all of his
skill and experience to the performance of his duties in such employment, (iii)
he shall have no other employment or outside business activities (other than
outside activities similar in scope and type to his outside business activities
existing as of the date of this Agreement and which do not interfere in any
material respect with the performance of his duties hereunder) and (iv) unless
Hart otherwise consents, the headquarters for the performance of his services
shall be the offices of the Park in Louisville, Kentucky, subject to such
reasonable travel as the performance of his duties hereunder may require.
-2-
<PAGE>
5. Compensation. (a) Base Salary. The Company shall pay to Hart a base
salary (the "Base Salary") of $300,000 per annum. The Base Salary shall be
payable in monthly installments in accordance with the Company's regular payroll
practices.
(b) Additional Compensation. (i) As Additional Compensation with
respect to the year ending December 31, 1998, if Gross Revenues of the Park for
the year ending December 31, 1998 equal or exceed $30,000,000, the Company shall
pay Hart $200,000 payable no later than April 15, 1999.
(ii) As Additional Compensation with respect to the year
ending December 31, 1999, if Gross Revenues of the Park for the year ending
December 31, 1999 equal or exceed $35,000,000, the Company shall pay Hart
$200,000 payable no later than April 15, 2000.
(iii) If this Agreement shall terminate in accordance with
Section 3(b) (other than pursuant to Section 3(b)(iii)) during 1998 or 1999, no
Additional Compensation shall be payable with respect to such year or any
subsequent year. If this Agreement shall terminate pursuant to Section 3(b)(iii)
during either such year, the Additional Compensation provided for hereunder with
respect to such year shall be adjusted by multiplying the amount of such cash
payment to which Hart would have been entitled had no such termination occurred
by a fraction, the numerator of which shall be the number of days elapsed during
such year prior to the date of such termination and the denominator of which
shall be 365, and no Additional Compensation shall be payable with respect to
any subsequent year.
6. Employee Benefit Programs. During the Term, Hart shall be
entitled to participate in all employee pension and welfare benefit plans and
programs made available to the Company's employees generally, as such plans or
programs may be in effect from time to time, including without limitation,
pension, savings and other retirement plans or programs, medical, dental,
hospitalization, short-term and long-term disability and life insurance plans,
and any other employee benefit plans or programs that may be sponsored by the
Company from time to time, whether funded or unfunded.
7. Reimbursement of Expenses. During the Term, the Company shall pay or
reimburse Hart for all reasonable travel, entertainment and other business
expenses actually incurred or paid by Hart in the performance of his duties
hereunder to the extent specifically authorized prior thereto by an executive
officer of the Company upon presentation of expense statements or vouchers or
such other supporting information as the Company may reasonably require.
8. Vacations. In addition to customary paid holidays, Hart shall be
entitled to paid vacation in accordance with the Company's policies for
employees with comparable duties and functions. Any unused vacation days during
any year shall not be carried forward to subsequent years, nor shall Hart
receive any additional compensation for such unused vacation days.
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<PAGE>
9. Restrictive Covenants. During the Term:
(a) Hart agrees that he will not directly or indirectly, as a
partner, officer, employee, director, stockholder, investor, lender, proprietor,
consultant, representative, agent or otherwise, become or be interested in, or
associate with or render assistance to, any Person (other than the Company)
engaged in the ownership, operation and/or management of any amusement park,
theme park, water park, or family entertainment center located within the
Territory. The foregoing provisions shall not prohibit the ownership by Hart of
not more than two percent (2%) of any class of outstanding equity securities
listed for trading on a national securities exchange or publicly traded in the
over-the-counter market of any Person (other than the Company) which engages in
any of such businesses. For the purposes of this Agreement, "Territory" shall
mean any area (i) within a 250 mile radius of the Park or (ii) in the case of
acting as a lender, within the United States.
(b) Hart agrees that he will not, directly or indirectly, during the
Term, for his own benefit or for the benefit of any other Person, solicit the
professional services of any employee, agent or consultant of the Company or any
Subsidiary of the Company or otherwise interfere with the relationship between
the Company or any Subsidiary and any of such Persons.
(c) Hart recognizes and acknowledges that, in connection with his
employment with the Company and KKI, he has had and will continue to have access
to valuable trade secrets and confidential information of KKI, the Company and
its Subsidiaries and Affiliates and that any such confidential information
hereafter made available to Hart will be provided only in connection with the
furtherance of his employment with the Company. Accordingly, Hart agrees that he
will not, directly or indirectly, during the Term or thereafter, use, disclose
or make available to anyone (other than the Company) any confidential
information concerning KKI, the Company and its Subsidiaries or the ownership
and/or operation of the Park (the "Confidential Information"). The Confidential
Information includes, without limitation, the business practices, financial
information, customer and prospective customers names, leads and account
information, suppliers and prospective suppliers names, mailing lists, computer
programs, advertising campaigns (including, without limitation, displays,
drawings, memoranda, designs, styles or devices), employee names, compensation
and benefit information of KKI, the Company or any Subsidiary.
(d) Hart acknowledges and agrees that the restrictive covenants set
forth in this Section 9 are reasonable and valid in geographical and temporal
scope and in all other respects. If one or more of the provisions contained in
this Section 9 (or any portion of any such provision) shall for any reason be
finally held by a court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Section (or any portion of any such
provision), but this Section 9 shall be construed as if such invalid, illegal or
unenforceable provision (or portion thereof) had not been contained in this
Agreement. If, for any reason, any of the restrictions or covenants contained in
this Section 9 is finally
-4-
<PAGE>
held by a court of competent jurisdiction to cover a geographic area or to be
for a length of time that is not permitted by applicable law, or in any way
construed to be too broad or to any extent invalid, such provision shall not be
determined to be null, void or of no effect, but to the extent it is or would be
valid or enforceable under applicable law, it shall be construed and interpreted
to provide for a covenant having the maximum enforceable geographic area, time
period and other provisions (not greater than those contained in this Section 9)
as shall be valid and enforceable under such applicable law. If any court of
competent jurisdiction determines that one or more of the provisions contained
in this Section 9 (or any portion of any such provision) shall for any reason be
invalid, illegal or unenforceable in any respect, such court shall have the
power to modify such provision (or any portion of any such provision), and, in
its modified form, such provision shall then be valid and enforceable.
(e) The parties agree that a violation of the foregoing agreements
not to compete or disclose, or any provision thereof, will cause irreparable
damage to the Company, and the Company shall be entitled (without any
requirement of posting a bond or other security), in addition to any other
rights and remedies which it may have, at law or in equity, to an injunction
enjoining and restraining Hart from doing or continuing to do any such act or
any other violations or threatened violations of this Section 9.
10. Severability. Should any provision of this Agreement be held, by a
court of competent jurisdiction, to be invalid or unenforceable, such invalidity
or unenforceability shall not render the entire Agreement invalid or
unenforceable, and this Agreement and each individual provision hereof shall be
enforceable and valid to the fullest extent permitted by law.
11. Successors and Assigns. (a) This Agreement and all rights under this
Agreement are personal to Hart and shall not be assignable by him. All of Hart's
rights under the Agreement shall inure to the benefit of his heirs, personal
representatives, designees or other legal representatives, as the case may be.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns. Any person succeeding to the
business of the Park by merger, purchase, consolidation or otherwise shall
assume by contract or operation of law the obligations of the Company under this
Agreement.
12. Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the Commonwealth of Kentucky, without regard to the
conflicts of laws rules thereof.
13. Notices. All notices, requests and demands given to or made upon the
respective parties hereto shall be deemed to have been given or made three (3)
business days after the date of mailing when mailed by registered or certified
mail, postage prepaid, or on the date of delivery if delivered by hand, or by
any nationally-recognized overnight delivery service, addressed to the parties
at their addresses set forth below or to such other addresses furnished by
notice given in accordance with this Section 14: (a) if to the
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<PAGE>
Company, 122 East 42nd Street, New York, New York 10168, Attn: Board of
Directors, and (b) if to Hart, 937 Phillips Lane, Louisville, Kentucky 40209.
14. Withholding. All payments required to be made by the Company to Hart
under this Agreement shall be subject to withholding taxes, social security and
other payroll deductions in accordance with the Company's policies applicable to
senior executives of the Company and the provisions of any applicable employee
benefit plan or program of the Company.
15. Complete Understanding. This Agreement supersedes any prior contracts,
understandings, discussions and agreements relating to employment between Hart
and the Company and, except as provided in the Stock Purchase Agreement,
constitutes the complete understanding between the parties with respect to the
subject matter hereof. No statement, representation, warranty or covenant has
been made by either party with respect to the subject matter hereof except as
expressly set forth herein.
16. Modification; Waiver. (a) This Agreement may be amended or waived if,
and only if, such amendment or waiver is in writing and signed, in the case of
an amendment, by the Company and Hart or in the case of a waiver, by the party
against whom the waiver is to be effective. Any such waiver shall be effective
only to the extent specifically set forth in such writing.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege.
17. Mutual Representations. (a) Hart represents and warrants to the
Company that the execution and delivery of this Agreement and the fulfillment of
the terms hereof (i) will not constitute a default under or conflict with any
agreement or other instrument to which he is a party or by which he is bound and
(ii) do not require the consent of any person.
(b) The Company represents and warrants to Hart that this Agreement
has been duly authorized, executed and delivered by the Company and that such
execution and delivery and the fulfillment of the terms hereof (i) will not
constitute a default under or conflict with any agreement or other instrument to
which it is a party or by which it is bound and (ii) do not require the consent
of any person.
(c) Each party hereto represents and warrants to the other that this
Agreement constitutes the valid and binding obligation of such party enforceable
against such party in accordance with its terms.
18. Headings. The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
this Agreement.
-6-
<PAGE>
19. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received counterparts
hereof signed by the other party hereto.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed in its corporate name, and Hart has manually signed his name hereto,
all as of the day and year first above written.
PREMIER PARKS INC.
By: /s/ James F. Dannhauser
---------------------------------
James F. Dannhauser
Chief Financial Officer
/s/ Edward J. Hart
------------------------------------
Edward J. Hart
-7-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 169,151
<SECURITIES> 0
<RECEIVABLES> 15,960
<ALLOWANCES> 0
<INVENTORY> 5,546
<CURRENT-ASSETS> 194,309
<PP&E> 390,359
<DEPRECIATION> 30,342
<TOTAL-ASSETS> 612,267
<CURRENT-LIABILITIES> 22,335
<BONDS> 216,263
0
0
<COMMON> 917
<OTHER-SE> 326,574
<TOTAL-LIABILITY-AND-EQUITY> 612,267
<SALES> 186,746
<TOTAL-REVENUES> 186,746
<CGS> 22,072
<TOTAL-COSTS> 22,072
<OTHER-EXPENSES> 83,418
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,869
<INCOME-PRETAX> 38,655
<INCOME-TAX> 15,462
<INCOME-CONTINUING> 23,193
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,193
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.29
</TABLE>
